UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-K/A




AMENDMENT NO. 1





o ANNUAL REPORT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the fiscal year ended ____________





þ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the transition period from March 1, 2009 to October 31, 2009





Commission file number 000-34297





ON4 COMMUNICATIONS, INC.


(Exact name of registrant as specified in its charter)





DELAWARE

N/A(State or Other Jurisdiction of Incorporation of Organization)

(I.R.S. Employer Identification No.)






10575 N.114THStreet, Suite 103
 Scottsdale, AZ 85259
 (Address of principal executive offices)
  480.244.7755
 (Registrant’s telephone number, including area code)





Securities registered under Section 12(b) of the Exchange Act: None




Securities registered under Section 12(g) of the Exchange Act: Common Stock, $0.0001 par value





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes oNo þ





Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes þ   No o





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yeso   No þ





Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ





Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of “large accelerated filer and “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):





Large accelerated filer o       Accelerated filer o       Non-accelerated filer o       Smaller reporting company þ





Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act)  Yes o  No þ





Aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the average bid and asked price of such common equity as of April 30, 2009:$1,437,965
 (Holdings of 13,072,412 shares of common stock calculated at $0.11 per share).
  As of September 29, 2010the registrant’s outstanding common stock consisted of 64,002,490 shares.







ON4 COMMUNICATIONS, INC.




TABLE OF CONTENTS




EXPLANATORY NOTE
2PART I
2Item 1.  Business
2Item 1A.  Risk Factors
20Item 1B.  Unresolved Staff Comments
20Item 2.  Properties
20Item 3.  Legal Proceedings
20Item 4. Submission of Matters to a Vote of Security Holders
20PART II
21Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
21Item 6.  Selected Financial Data
23Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations
23Item 7A.  Quantitative and Qualitative Disclosures about Market Risk
27Item 8.  Financial Statements and Supplementary Data
27Item 9.  Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
28Item 9A(T).  Controls and Procedures
28Item 9B.  Other Information
29PART III
30Item 10.  Directors, Executive Officers and Corporate Governance
30Item 11.  Executive Compensation
33Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
34Item 13.  Certain Relationships and Related Transactions, and Director Independence
36Item 14.  Principal Accountant Fees and Services
37PART IV
38Item 15.  Exhibits, Financial Statement Schedules
38


1





EXPLANATORY NOTE
 We are filing this amended Annual Report on Form 10-K/A to correct certain typographical errors in our controls and procedures disclosure and our certifications pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.




PART I





Item 1. Business





Forward-Looking Statements





This annual report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.





Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable laws, including the securities laws of the United States, we do not intend to update any of the forward-looking statements so as to conform these statements to actual results.





As used in this annual report, the terms "we", "us", "our", “the Company”, and "On4" means On4 Communications, Inc., unless otherwise indicated.





All dollar amounts refer to US dollars unless otherwise indicated.





Corporate History





We were incorporated on June 4, 2001 as a Delaware company under the name Sound Revolution Inc. On May 1, 2009 we merged with On4 Communications, Inc., an Arizona corporation, incorporated on June 5, 2006.  On August 20, 2009, following the merger, we changed our name to On4 Communications, Inc. Our principal offices are located at Suite 103, 10575 N.114th Street, Scottsdale, Arizona 85259, and our telephone number is (480) 344-7755.





We have three wholly-owned subsidiaries: (i) Charity Tunes Inc., a Delaware company incorporated on June 27, 2005 for the purpose of operating a website for the distribution of music online (“Charity Tunes”); (ii) Sound Revolution Recordings Inc., a British Columbia, Canada company incorporated on June 20, 2001 for the purpose of carrying on music marketing services in British Columbia; and (iii) PetsMobility Inc., a Delaware company incorporated on March 23, 2006 for the purpose of operating the website www.petsmo.com and related business.





Subsequent to the merger, we changed our year end from February 28 to October 31.





We currently carry on business in the fields of digital music distribution and marketing through Charity Tunes. We also carry on the business of providing location-based services, or “LBS”, through PetsMobility Inc. Location-based service is a term used to describe the delivery of information and entertainment content to consumers with mobile devices based on the geographical position of the mobile device. We intend to deliver LBS via two-way communication tracking devices with applications that are able to track people, pets, assets and inventory.





2





Business Development





We are in the development stage and have not generated significant revenues from our business activities, although we have singed contracts for the generation of over $200,000 in revenues through Charity Tunes. As at October 31, 2009, we have a working capital deficit of $2,981,663, and have incurred an accumulated deficit since inception of $11,084,965.  Furthermore, during the year ended October 31, 2009, we recorded sales revenue of $18,746, but had an operating loss of $5,491,863.





The following is a summary of material events in the development of our business during the last fiscal year:





On March 12, 2009 we entered into a merger agreement (the “Merger Agreement”) with On4 Communications, Inc.  (“On4 Communications”) an Arizona incorporated company in the business manufacturing two-way communication and location devices with applications that include tracking people, pets, assets, and inventory, among others.  Our Board of Directors considered the merger to be consistent with the furtherance of our long-term business strategy and in the best interest of the shareholders.





On March 19, 2009 Charity Tunes entered into a promotional opportunity agreement with ConAgra Foods Canada Inc. in relation to POGO On-Pack Music Download Program, whereas Charity Tunes agreed to provide music downloads to ConAgra which will be available for consumers of ConAgra products via PIN codes placed on the packages.





On April 7, 2009 we entered into a second merger agreement with On4 Communications in order to amend certain material terms of the original merger agreement entered into on March 12, 2009.





On April 9, 2009 we dismissed Peterson Sullivan LLP as our independent registered public accountant and engaged Saturna Group Chartered Accountants LLP as our new independent registered public accounting firm. During the fiscal years ended February 28, 2009.





On May 1, 2009 we completed the merger with On4 Communications and have incorporated the business of the former On4 Communications Inc. into our existing business, acquiring all assets and liabilities of On4 Communications by issuing new shares to all former shareholders of On4 Communication on a 1 for 1 basis.





Additionally, and pursuant to the terms of the Merger Agreement, on May 1, 2009 we appointed Cameron Robb as our director, increasing the number of directors sitting on our Board of Directors to three. Prior to the merger, Mr. Robb was a director and the President and Chief Executive Officer of On4 Communications.





On July 2, 2009 we filed a Certificate of Amendment of Certificate of Incorporation with the Delaware Secretary of State to change of our name from “Sound Revolution Inc.” to “On4 Communications, Inc.” The name change came into effect on August 20, 2009 when our trading symbol changed to “ONCI”.





On August 24, 2009 we filed a Statement of Claim in the Court of Queen’s Bench of Alberta to initiate a lawsuit against DeltaTrail Inc. to recover debt in the amount of $1,018,900 plus the interest accrued on that amount pursuant to a Loan Agreement with DataTrail dated October 3, 2007.





On September 14, 2009 we entered into a post merger agreement (the “Post Merger Agreement”) with Penny Green, our director and CEO, Bacchus Filings Inc., a company controlled by Ms. Green, and Bacchus Entertainment Ltd., another company controlled by Ms. Green, to give effect to and amend certain obligations and transactions contemplated by the Merger Agreement.





3





Pursuant to the Post Merger Agreement, Charity Tunes remained our wholly owned subsidiary, Bacchus Filings and Ms. Green relinquished any and all rights they had, jointly or individually, to acquire Charity Tunes on the terms specified in the Merger Agreement, and we released Bacchus Filings and Ms. Green from any obligations they had, jointly or individually, to acquire Charity Tunes.





Pursuant to the Post Merger Agreement, Bacchus Entertainment agreed to cancel 52,180,723 of our common shares and Ms. Green agreed to cancel 43,208 of our common shares upon receipt of $75,000 from us towards an outstanding debt. If Charity Tunes does not generate at least $500,000 in revenue by June 30, 2010, then Bacchus Entertainment and Ms. Green also agreed to forgive, release or forever discharge us from paying all monies owed by us to Bacchus Entertainment or Ms. Green as of September 14, 2009, which were approximately $450,000 at that time.





On September 17, 2009, the Company received resignation form Penny Green as President and Chief Executive Officer, effective September 21, 2009. The resignation is not a result of any disagreements with the Company or any of our operation, policies or practices. Penny Green continues to act as our Chief Financial Officer, Principal Accounting Officer, Secretary, Treasurer and director.





On September 21, 2009, we appointed Cameron Robb as our President and Chief Executive Officer. Cameron Robb is a director and Chairman of the Board of Directors of the Company. He has been acting as a director of the Company since May 1, 2009.





On October 12, 2009, our wholly owned subsidiary company, PetsMobility, Inc., entered into an asset purchase agreement with I Recycle LLC, a Delaware limited liability company, for the acquisition of www.Pets911.com and all intellectual property, software, and business assets associated with operating this website. Pursuant to the terms of the asset purchase agreement, on October 27, 2009, we issued 3,000,000 shares of our common stock to designees of I Recycle LLC in payment of the purchase price under the agreement.





Subsequent Events





On November 27, 2009, our wholly owned subsidiary company, Charity Tunes Inc., entered into a Promotion Agreement with ConAgra Foods Canada Inc. (“ConAgra”). Under the terms of the agreement, ConAgra will purchase pre-paid Charity Tunes music downloads and distribute them to consumers with purchase of certain ConAgra Pogo® frozen food products.





Pursuant to the Promotion Agreement Charity Tunes will supply ConAgra with unique pin codes redeemable for music downloads.  Charity Tunes will also provide customer service and technical support related to the music downloads. In consideration of the music downloads and related support services, ConAgra agreed to pay to Charity Tunes CAD$115,602.12 (approximately USD$108,894) payable in two equal installments on February 28, 2010 and March 31, 2010.





On February 3, 2010 we repaid $75,000 towards debt owed to Penny Green, our Chief Financial Officer and director, and Bacchus Entertainment Ltd., a company controlled and directed by Ms. Green. We made the payment in accordance with the Post Merger Agreement.





On February 3, 2010, pursuant to the Post Merger Agreement, Penny Green and Bacchus Entertainment Ltd. cancelled a total of 52,223,931 shares of our common stock. After the cancellation, there were 47,651,046 shares of our common stock issued and outstanding.





As a result of the cancellation of shares, a change of control occurred, whereupon Penny Green ceased to be the beneficial owner of the majority of issued and outstanding shares of our common stock.





4





Our Products and Services





Charitytunes.com





Through our wholly owned subsidiary Charity Tunes we have developed a website, www.charitytunes.com, through which we sell digital music downloads over the Internet.  www.charitytunes.com allows customers to choose from a selection of charities with whom we have partnered and who receive a percentage of the purchase price of the songs being purchased.





Charity Tunes’ Distribution Methods





Charity Tunes distributes our digital music through an online electronic content delivery and management platform developed by us. We own the copyright in the delivery and management platform, which also incorporates customary third party software, such as Microsoft’s Windows Media Digital Rights Management, which protects and securely delivers content for playback on computers, portable devices, and network devices. Our delivery and management platform has the capacity to handle millions of products, as well as to collect, organize and report information for accounting, marketing and promotional purposes. Key features of the platform include:





●
A web service application programming interface to facilitate the seamless integration of songs with third party web sites





●
Gift functionality





●
The capacity to track affiliate royalty payments on a per-product basis





●
Automated sales reports to track of affiliate commissions





●
Logins for charities and record labels (or other content owners) to track hits, views, preview plays, sales, royalties and donations





●
Automated generation of various “top 10” style lists for songs or other products





●
Capacity to sell digital content by individual song unit, by album,or in pre-set packages (in development)





●
Embedded Flash music player allowing users to preview songs without an external player





●
Scalable capacity to accommodate millions of products, charities and other affiliates





●
Automated content updates and user-friendly content management system





●
Customizable search features linked to a content management database (available with or without content)





●
Customizable support for co-branding, localized and white-labeled sites with a shared product database





In accordance with the Post Merger Agreement, we plan to maintain ownership of Charity Tunes and continue to develop its business.





5





Charity Tunes Competition





We currently have a very small share in the market for the online retail distribution of music in electronic format.  Our online music business faces competition from traditional retail music distributors such as Virgin Megastore as well as other online retailers such as Amazon.com who sell music in physical formats such as compact disc, digital video disc, Blue-ray disc and, to a lesser extent, vinyl records. These retailers may include regional, national and international retail music chains with physical stores, deep-discount retailers, mass merchandisers, consumer electronics outlets, mail order record clubs, small independent operators, and online based music distributors of compact discs, digital video discs and other physical music media.  Many of these competitors have greater financial and other resources than we do. To the extent that consumers choose to purchase media in traditional, non-electronic formats, our potential sales and profits will be reduced.





Our main online music services competitor is  Apple Computer's iTunes Music Store.  We compete for revenues with a wide range of companies who offer user downloads, including broadband Internet service providers such as Yahoo! and MSN, as well as Internet retailers such as Amazon.com, Bestbuy.com, Barnes & Noble, Virgin and Walmart.com.  Finally, we also compete with internet file sharing services where music may be downloaded free of charge, often in contravention of applicable copyright laws.





Many of our music retail competitors have significantly more resources than we do, including greater access to desirable digital music catalogs and the ability to license those catalogs at preferential prices.  Such competitors may therefore be able to offer goods and services at lower prices than we can, and may be better positioned to attract customers than we are, all of which could harm the ability of our online music business to compete effectively in the marketplace.





New Products and Services





Wireless Communications and Location Based Services and Products





On May 1, 2009 we merged with On4 Communications, Inc. and adopted its business. As a result, we now carry on business in the field of wireless communications, offering a suite of complimentary services to telecommunications companies, consumers and businesses.  Our platform is comprised of three core components: Global Positioning System (GPS) device management; Location Based Services (LBS) capabilities; and broadcasting of proprietary and non-proprietary content.





With these three core components, we are capable of delivering comprehensive wireless solutions that can be tailored to address a wide range of markets. Our solution platform integrates a range of location-aware devices such as GPS receivers, and transmits data to a range of devices (e.g. web browsers, instant messages, short message service/email and cell phones). Based on our core LBS platform, we intend to develop various wireless services that deliver dynamic, personalized location-driven information to subscribers. To date, our wireless communications operation has been focused on the development of a two-way waterproof speakerphone GPS assisted tracking device.





We have established domestic and international relationships with Original Equipment Manufacturers (OEMs), carriers and other industry leading companies in the LBS market space which will assist us in entering our targeted market segments. Our patent pending hardware, combined with the integrated suite of products in concert with our strategic partnerships will help us in facilitating the co-branding, distribution and marketing with telecommunication companies, wireless carriers, national retailers, major consumer brand companies and mass media, and will align our sales and marketing efforts with established sales channels.





LBS Industry Overview





The primary economic catalyst behind LBS is the desire of wireless/cellular service carriers to grow both average revenue per user (ARPU) and the number of subscribers in their core cellular markets. As a result, wireless carriers and their partners are developing many new products, services and business models which are based on providing location information. The value to the end user is not only the actual location service, but also the information which the carrier can send to the end user in relation to where they are located.


By employing GPS and existing land-based cellular (mobile phone) infrastructure, wireless carriers are able to provide location information and related entertainment services to end users through a variety of wireless mobile devices. As a result, consumers now have access a variety of personalized location services ranging from basic self-positioning functions to locating nearby business, services and amenities.





6





Examples of the various location-enabled applications now available include those designed to allow corporate managers and business owners to monitor employees, dispatch personnel based on location information, and generate a wide range of reports that include detailed location related information. The value in these applications is their ability to assess and improve employee productivity, optimize the use of human resources and other assets, and optimize critical management and customer service response times.





The International Telecommunications Union estimates that as of December 2007, there were 255 million wireless subscribers in the U.S, and the market for wireless data services exceeded $23 billion.  Our management believes that this profound acceptance of wireless products by the public has generated unprecedented opportunities for manufacturers and retailers to influence consumers on a consistent basis.  The future of the wireless location-based-services market will be one where the importance of pure location driven service will become secondary in importance, in as much as the location-based-services platform will be the basis upon which valuable data and information will be delivered to the end user or consumer.





Neutral Architecture:





With the LBS industry rapidly evolving in terms of technology, we believe that the only way for a services provider to be successful is by embracing this diverse environment rather than attempting to pick an individual winning technology or single carrier. This neutral or “agnostic” approach to technology requires the functional system to be an order of magnitude more intelligent than a system where a single choice is made. However, once architected and constructed property, the system can evolve gracefully because it was designed to do so accordingly. New devices, network connections and application technology can be integrated with a minimal amount of effort, speeding the time-to-market for new innovative products and services. This approach has been specified with all infrastructure partners we are working with.





Buy vs. Build:





Our approach to building our solution will be a thorough buy vs. build analysis on every component. When a class of components has become an industry commodity, there is no need or advantage to re-designing it. When a component is not a commodity, is highly strategic to own and is cost effective to build, we intend develop and operate such a proprietary component. Using this approach we intend to leverage outsourced vendors for the bulk of our infrastructure needs and focus our internal resources on marketing, sales and distribution.





We have engaged a number of strategic vendors who already posses, support and distribute the required services to other LBS providers. Some of the vendors we have engaged include: Qualcomm Chipset Division, Qualcomm QES, WaveMarket, DataTrail Inc., Networks In Motion (NIM), Aria Systems and OpenSource Inc. to name a few. One strategic relationship that will be extremely critical and valuable will be the growing relationship with Qualcomm. In this relationship we have been identified as a launch partner for the new InGeo device technology from Qualcomm. The InGeo reference design represents the latest generation of devices that provide a complete tracking solution for non-cell phone personal location devices and services, enabling enhanced GPS performance, improved battery management and lower device costs. In addition, we are working with Qualcomm and a Qualcomm certified contract manufacturer to build a custom version of the InGeo device that is waterproof and robust enough for the pet market and other environmentally challenging markets.





Principal Products/Services





We intend to offer next generation location based products and services with a unique business model encompassing media content distribution, which ultimately would deliver an end to end consumer and enterprise solution to a rapidly growing location based services market by the first quarter of 2009. Our multimedia content development and aggregation system will deliver voice, video and data over most standards of both wired and wireless networks worldwide. Our innovative patent pending device and proprietary content, PetsCell and PetsMo, are a dynamic, software controlled wireless device and community based web portal built to disseminate the full line of PetsMobility products and services.





7





PetsCell





We have developed a remotely controlled waterproof mobile communication device, comprised of:





●
Two way waterproof speaker/microphone


●
Incoming number protection


●
One button call back


●
A global positioning device component


●
Detachable faceplate for use in multiple verticals


●
Three programmable buttons


●
Programmable indicator lights





The objective of the design was to come up with a product which would have uses in multiple consumer and enterprise verticals and to avoid the need for different hardware and circuit boards. It was decided to design one unit which could be used in a number of conditions and applications and would share the same basic platform architecture.





The device has been specifically designed to enable it to be used in numerous defined verticals. More specifically, the device can be used for child safety, parental supervision, personal protection, Alzheimer patients, law enforcement, animal tracking identification and property assets tracking markets. The PetsCell, model TX200, has not as yet been sold into the market place. It is Federal Communications Commission (FCC) approved and has “Safe for Network Certification” on both the TELUS and Sprint Networks.





Location Based Services Platform





Our platform allows our partners to tailor the functionality of the embedded applications to suit the unique requirements of their target markets. A web-based platform is very easy to adapt to unique market requirements. It is possible to use as-is or to employ components of the total solution to provide customized solutions. The LBS platform is highly configurable and scalable with an in-house mapping engine. Software installation is not required on the user’s machines as all that is required is a standard web browser to access the application.





Digital media





Under the PetsMobility brand, we have developed an integrated menu of proprietary web based digital content specifically for the pet market. We have already created proprietary content that will facilitate the interaction between retailers and consumers that will take the form of a weekly cartoon panel entitled, “Life's Ruff” and is currently available on the www.petsMo.com website and streamed to handsets.





PetsMo Rex-messages





Weekly pet tips delivered through text based messaging or video, as well as all wallpapers and animated ringtones can be streamed to the consumer’s personal digital assistant (PDA).





8





Consumer Products – Pet Lifeline





In addition to devices with LBS capabilities and digital media content, we have also developed pet related consumer products. PET LifelineTM is safety identification assurance for pet owners and provides the critical link of communication to ensure consumers’ pets are cared for by designated guardians during an emergency or an unfortunate event that leaves them incapable of providing for the pet.





PET LifelineTM identifies the pet owner and ensures their pets are not forgotten or stranded during an emergency.  We believe that the PET LifelineTM is the only national product of its kind that has the ability to protect pets in every city, and home in North America. The PET LifelineTM call center is monitored 24 hours a day 7 days a week with access throughout North America as well as notification access worldwide via the PET LifelineTM web site. Each card has a unique registered serial number that links all of the consumer’s identification to the secure and confidential PET LifelineTM database which contains all the contact information of the people the consumer has entrusted to care for their pets. The Pet Lifeline card is fully developed and ready to be sold to both pet and non-pet retailers. The retail cost is $19.99. Currently, the Pet Lifeline is being marketed to seven resellers ranging from pet groomers, animal shelters and pet retail stores. Presently, there are 124 test case subscribers in the Pet Lifeline database.





PetsMo – Web Site/Data Management





Through PetsMobility, we have built a fully interactive community based website, www.petsmo.com. The PetsMo website isfully functional and contains both proprietary and non-proprietary content. The site features celebritypets, pets of the week, veterinary clinics, pet grooming, dog walking parks and member chat forums.PetsMobility has initiated a soft launch of the site but anticipates launching the PetsMo website by introducing itin 10 to 15 major North American cities. There will be city specific content from the respective cities at roll-out.The next generation upgrades will consist of virtual dog walking as well as other innovative pet related activities,services and products.





Manufacturing





Our manufacturing partners have established relationships with code division multiple access (CDMA) and global system for mobile communications (GSM) wireless carriers both in North America and abroad. We has chosen to focus on the CDMA wireless carriers for two key reasons; the superiority of their digital networks (coverage and the technical capabilities) of the Qualcomm GPS CDMA technology.





Market





The future of the wireless LBS market will be one where the importance of pure "locates" will become secondary in importance in as much as the LBS platform will be the basis upon which usable data and information will be delivered to the end user or consumer specific segment. A 2008 research study by ABI Research, identified that the top 5 largest LBS segments both in 2006 and in 2013 will be: personal navigation, enterprise, family tracker, information (points of interest), and friend finder. Personal navigation services are projected to reach 82 million worldwide subscribers, with information services projected to reach 48 million worldwide subscribers. Enterprise and personal navigation are projected to be the highest revenue generating sectors from a revenue perspective, with the enterprise segment projected to reach sales of $6.5 billion annually and the personal navigation segment, $4.3 billion annually.





9





LBS Market Enabling Developments





Over the past two years, significant market enabling developments have occurred:





1. The arrival of highly accurate, reliable, cost effective, tracking devices that have achieved critical battery life and form factor (size & weight) thresholds. In additional, due to the physical size and performance of the devices, they are now being produced by a growing number of manufactures (both small & large). It has also become a priority for the wireless carriers to certify these devices for the rapidly growing LBS and Telematic marketplaces.





2. Wireless carriers are now providing lower cost data-only plans. There is a major change in carrier pricing as they acknowledge the significance and future revenue importance of data only devices in the LBS and integrated telecommunications and computer/information system markets. This is a result of next generation digital networks that improve the network capacity for data.





3. The acceptance of Fortune 1000 companies for the use of the internet-based third party hosted corporate solutions. Whether contracted payroll, sales force management, and now asset management, large corporate are accepting this as standard practice and necessary competitive practice.





4. Overall solution cost of ownership reduction as a result of the combined impact of the market drivers above has made LBS solutions available to a wider market. LBS solutions provide asset security and improved logistics that now has a much more tangible return on investment.





5. LBS technologies are able to support security based applications for government, corporate and personal markets.





6. Growing consumer awareness and demand for LBS solutions





7. With the above market drivers in place and consistent technology, performance and economic improvements as per standard technology and market evolution it can be definitively stated that the true commercial age of wireless LBS has arrived.





Key Market Drivers





There are a number of key factors dictating the deployment, acceptance and use of LBS based products and services by both the consumer and enterprise segments. The key market drivers are privacy protection, social government, technology and economic.





1. Privacy Protection





Privacy based issues or, security and privacy based issues, are one major impediment in preventing widespread use and/or acceptance of LBS based products and services. From both a consumer and LBS provider's perspective, the critical issues facing the LBS market revolve around security and privacy. Consumers currently consider location information to be highly sensitive, and are very wary of a “Big Brother” or “Orwellian” products initiated by large corporations. Successfully addressing the consumer’s privacy concerns will allow for accelerated growth and market acceptance.





10





2. Social





Technology often runs well ahead of consumer acceptance. As there is more widespread penetration of LBS information into mainstream use, familiarity with LBS will increase. Services such as Google maps all work toward alleviating consumer anxiety as there is an ever increasing visibility of LBS information in everyday life through news programs.





3. Social Government





Governments' increasing willingness to mandate the use of and public supply of LBS information is a key driver of mobile LBS. Mobile operators are increasingly required to comply with legal regulations to provide caller location information to emergency services. This has been particularly the case in the U.S., Europe, and Japan. Government sites, web portals, etc. have to some extent paved the way for more innovative (mobile) LBS globally.





4. Technology





Prior to any product gaining widespread acceptance the design and engineering underlying it must produce a cost effective easy to use device/solution for the end-users. Just as internet usage dramatically increased once the 56K download speed was surpassed, so too, is it with mobile LBS. Broadband can now support many more LBS applications. Initial consumer acceptance of early renditions of LBS products and services was hindered by the unsophisticated nature of the product offering; specifically, cost of service and the limited performance of the devices.





In general there has been a vast improvement in mobile technology such as longer battery life, accompanied with larger screens, color graphics and the overall maturation of geo-spatial technology and delivery platforms. As mobile technology continues to improve, the demand and uptake by consumers will increase.





5. Economic





The variety of LBS devices and customer market specific solutions, in conjunction with new carrier data services are driving the LBS market. Carriers are endeavoring to increase the subscribed units in service and LBS applications are an ideal way to achieve this objective.





LBS applications cover nearly every attractive wireless demographic market, including: parents, teenagers, singles, college students, online communities, business executives, and entrepreneurs. This also includes businesses that significantly depend on mobile voice and/or data communications to operate their business, such as companies with significant field employee organizations, and businesses dependent on knowing the location of their assets at any moment, such as interstate highway trucking.





11





Consumer Segment





The key driver of mobile wireless applications and LBS products is the ever increasing number of cell phones in the marketplace. On a global basis all GPS handsets manufactured since 2005 are done so with full LBS capability and as a consequence, global shipments of GPS handsets are projected to increase with an estimated 198 million units annually in 2007 to over 618 million units annually in 2013 (ABI Research, 2008). The cumulative total of GPS enabled handsets shipped during this 2007 to 2013 period will exceed 3 billion units.





There are four basic reasons consumers are increasingly purchasing wireless phones:




●
wireless prices continue to decline,


●
the number of minutes in landline service plans continue to increase,


●
wireless carriers are bundling large increments of evening, weekend local and long distance calling into consumer calling plans at little to no additional cost,


●
wireless carriers continue to improve the available geographic coverage with continued network build-outs.





With mobile carriers creating innovative pricing packages to drive demand in the mobile wireless consumer and enterprise segments the end result is that there will continue to be an increase not only in wireless subscribers, but in wireless usage in general. Traditional wire line subscribers are increasingly migrating to mobile cell phones in increasing numbers, thereby increasing the number of cell phones in the market place.





In addition to the increasing number of overall mobile subscribers, there is also a trend towards an increase in the number of minutes used per wireless subscriber on a year over year basis. The Cellular Telecommunications and Internet Association (CTIA), which is the international association for the wireless industry reported that mobile data usage, such as text and multimedia messaging, mobile web, and downloads, have increased substantively since 1995.




Dec-07
Dec-05
Dec-00
Dec-95Minutes of use
2.1T
1.5T
533.8B
431.9MMonthly SMS messages
48.1B
9.8
14.4M
N/AAnnualized yearly SMS messages
363B
81B
N/A
N/ACell sites
213,199
183,689
104,288
22,663





K=Thousand  M=Million  B=Billion  T=Trillion  (CTIA Market Facts)





The underlying theme is that wireless communication is so pervasive because, culturally, it is now seen as a standard and acceptable way to communicate in most environments. The almost seamless interaction between the Internet and the mobile consumer has created growth opportunities in emerging verticals and for products that were not accessible to vendors a few years ago. For the first time, manufacturers and retailers have the ability to “touch” and influence consumers on a daily or even hourly basis. The consumer demand for mobile wireless products will continue to increase as device form factors improve, usage costs decrease and user interface enhancements continue.





12





A 2006 survey of cell phone users in the U.S. conducted by the Pew Internet and American Life Project found that there is still plenty of room in the U.S. market for the sale of advanced cell phone services. Their survey showed that only 4% of cell phone users had employed their phones to access mobile maps while 47% said they would like to do so. Likewise, only 8% said they had used cell phones to send and receive email (24% would like to do so) and only 14% had used them to access the Internet (16% would like to do so). Cell phone usage has changed


considerably since 2006. Recent data from the CTIA clearly demonstrates that minutes used and monthly SMS messages sent, annualized for all U.S. subscribers show substantive increases from 2005 to 2008.





One-third of all wireless subscribers state that their primary or only reason for having wireless service is for personal security both at home and away. This would entail security for: families, parents, seniors, singles, kids, teens and latch-key/school monitoring.





Shipments for portable devices with LBS capabilities have also increased. Total global shipments of mobile GPS navigation devices in 2007 were up 132% from 2006 (the LBS-zone). Navigational assistance was the first LBS segment to gain widespread market acceptance and have high commercial uptake. With the success of navigational assistance, other LBS segments are expected to follow a similar market acceptance trend.





Consumer friendly devices enabled for location-based services that are integrated with stable, accurate, broadly implemented handset-based (e.g. assisted GPS) location technologies, will allow for the facilitation of a strategic trend towards client-based mobile applications. Improvements to network-based infrastructures have greatly enhanced network transmission capabilities for data exchange and this has led to an increase in mobile subscribers over the last 3-4 years.





The total addressable worldwide market of location-enabled subscribers in 2008 is projected to increase by 168% with revenues increasing 169%. Worldwide subscribers will rise from 16 million in 2007 to 43.2 million in 2008 and revenues are expected to increase from $485 million in 2007 to over $1.3 billion in 2008. The uptake of LBS services in the market place has been slower than was originally anticipated but the market now seems poised to grow quite quickly. (Gartner Research, 2008).





Enterprise Segment





Current versions of location-enabled applications are giving managers the ability to track time spent on jobs, to dispatch based on location, and to generate a range of reports that include location information. The readily identifiable business value is coming from applications targeted at improving employee productivity, eliminating paper-based data collection and associated errors and delays, and increasing utilization of assets while decreasing service response times.





The wireless and LBS markets already have what they need from an infrastructure perspective to be successful in terms of widespread usage and acceptance of the products and services from both a consumer and enterprise perspective. There is a regulatory environment which at worst is neutral for LBS services and in fact can be seen as being very positive in some areas such as regulation concerning security services related to lone-workers.





Market Growth





The composition of usage both in wireline and wireless will continue to shift towards greater acceptance by consumers for data/infotainment to be delivered to their handsets. The widespread cultural acceptance of wireless communication will result is a robust environment for wireless and LBS opportunities for the foreseeable future in both the consumer and enterprise segments. Industry statistics corroborate analyst’s projection for increased cell phone usage well beyond 2009.





13





Marketing Plan and Strategies





Target Markets





While the design, robustness and the underlying technology for the PetsCell enables the device and LBS platform to be used in almost all identifiable verticals, from an operational and strategic point of view it is unlikely that we would be able to successfully roll out the application in numerous verticals simultaneously. We have segmented the potential applications of the technology into an enterprise segment and a consumer segment which are divided into sub segments under both the enterprise and consumer markets.





Enterprise Segment





Industry:
Maintenance
Government:
PoliceTransportation

MedicalDelivery

EducationSecurity

MilitaryInvestigation

Search & RescueEvent





Business breakdown by employment in specific industries (U.S. Bureau of Labor Statistics):





●
2.4 million are employed in agriculture, forestry, fishing, hunting and mining.


●
9.1 million are employed in construction.


●
17 million are employed manufacturing.


●
6.8 million are employed in transportation, warehousing and utilities.


●
12.4 million are employed in professional, scientific, management, administrative and waste management services.





These include fleet management/dispatch, workforce and sales force management and a variety of public sector location applications.





Consumer Segment





Personal Assets:
AutoRecreational VehiclesAll Terrain VehiclesMarine (personal water craft)SecurityKids/TeensPets




14




Current studies all support the notion that one of the underlying primary drivers for the demand for LBS is safety. Consumers view wireless LBS as a means of alleviating concerns about safety either at home or away. It is estimated that on a national basis parents or primary care givers will on average contact law enforcement authorities over 2,100 times per day regarding the disappearance of a missing child (Missing Child World Press 2008).





The National Center for Missing and Exploited Children (NCMEC) reports that 74% of abducted children who are murdered are dead within three hours of the abduction. These figures indicate the strong market need for a method of quickly and reliably locating missing children. This so-far untapped market is quite large. According to the National Center for Education Statistics, in the U.S. alone there are:





●
33 million children in elementary school (grades 1-8)


●
4 million children in kindergarten


●
4.6 million children in nursery/preschool





Though the market potential for kid/teen monitoring is substantive, we believe that there will be a significant push back from parent organizations as well as resistance from kids/teens in general to be tracked 24/7. Most of the concerns will revolve around privacy issues. Child tracking however, if properly implemented in specific situations, would alleviate many of the privacy issues and still be acceptable from a business perspective. We have the potential to sell tracking units and services for over 60,492,447 children under the age of 14.





Another potentially lucrative market segment is the pet segment. The pet industry is massive and continues to show substantive year over year gains. In 1994, spending in the pet industry in the U.S. alone was $17 billion. By 2007 the figure was $41.2 billion and is expected to exceed $43 billion in 2008. To place the magnitude of this dollar amount into perspective, in 2003 consumers in the U.S. spent $20 billion on toys, $24 billion on candy and $32 billion on pet related products. (American Pet Products Manufacturers Association).





The medical market is another vertical which we plan to enter. Our devices are ideally suited for this segment. As an example of the revenue potential in the medical market, Alzheimer’s patients are estimated to number 4.5 million people. Of note, the median family income for this segment is greater than $51,000 yearly. There are an estimated 5.2 million people in the United States afflicted with Alzheimer’s (Alzheimer’s Association, Alzheimer’s Fact and Figures 2008).





Target Market Strategy





For any company in an emerging market the key is to build product and brand awareness and to gain market share as quickly as possible. We will sell our device through joint venture partnerships and original equipment manufacturers into both consumer and enterprise verticals where their device is applicable. Pets are big business and are increasingly becoming nearer and dearer to their owner's hearts and purse strings, and are often considered an integral part of the family. In 2003 pet grooming, boarding and training was a $16 billion industry. By 2008, this is expected to reach an estimated $22.2 billion. America's number one U.S. pet retailer, PetSmart, will double the number of its Petshotels and Petco is launching a pets hospitality concept. (American Pet Products Manufacturers Association)





We intend to access this market with a complete all encompassing product offering. Operating under our trademarked brand name of “PetsMobillty,” we intend to provide “Innovative Products and Services for People and Pets on the Go.” In keeping with this corporate edict, PetsMobility's will provide a fully integrated suite of products that will support their flagship product, the PetsCell, as well as provide significant revenue streams. PetsMobility expects to derive  their revenue from three core products: The PetsCell, the two way waterproof voice enabled GPS pet tracking device PetsMo, an online interactive community for pet lovers and their Pets e-media division, “Ruff Entertainment” that will stream proprietary pet related information and entertainment to handsets and laptops via a wireless format.





Distribution





We intend to sell our products domestically through direct and indirect sales channels and specialty markets. Our initial sales and distribution strategy is to establish product awareness and build volume through a distribution strategy comprised of a combination of direct and indirect channels. Ongoing inquiries from consumers interested in purchasing the product directly from the U.S. and traffic to the web site provide strong evidence of the underlying consumer interest in acquiring the product. Capitalizing on this awareness, we have been able to build traffic on our web site and our partnership with affinity groups. We believe a concerted Internet based marketing effort will work in harmony with traditional bricks and mortar sales channels in a cost effective way of establishing us in the market. Direct-to-consumer distribution channels include: e-commerce, telesales, partner programs, and possibly our own kiosks located in high traffic retail locations.





15





Retail Sales Channel





To achieve our volume and awareness goals, our sales efforts are focused on gaining distribution through national consumer stores and various security companies, as well as regional and local retailers. We intend that the PetsCell will be distributed through strategic partners focused in the pet industry. To date we have significant interest from most of the major nationally recognized pet retailers including Pet Smart and Pet Mod. We will also look to big box retail stores such as Best Buy, Circuit City, RadioShack, Staples, Wal-Mart, and Target as potential sales channels.





Additional Sales Channels and Direct to Enterprise





To build market share and profitability, we plan to augment our sales efforts with additional channels, including OEM, government, and business-to-business channels. We believe these broad distribution channels, along with the retail and the direct-to-consumer channels will create opportunities for us to pursue a diverse range of consumers throughout the United States and abroad.





Order Fulfillment and Provisioning





Order fulfillment is a critical component of the sales and distribution process. We intend to outsource the order fulfillment for the PetsCell. Pet Lifeline will be processed by us directly. The key components to the order fulfillment are as follows:





1. Inventory Management





2. Order Management - accept and process sales orders that originate from the designated sales channels.





3. Warehouse Management





4. Distribution Management





5. Returns and Repair Management





Device provisioning will be outsourced and handled either by our manufacturing partner or by a third party entity that specializes in the provisioning of mobile wireless handsets.





Channel Market to OEM’s





We will focus our efforts to partner with Original Equipment Manufacturers of nationwide cellular providers and computer manufacturers. We will emphasize our products’ potential as an additional source of revenue for them, both at the front end for product sales, and in the case of cellular providers, with recurring monthly revenues; this should make our product a desirable addition to their product lines. By solidifying these partnership agreements, we will also enable cross-marketing back into the consumer market through their sales forces' efforts and their advertising, increasing our sales efforts nationwide. We believe that once partnered with these companies, our channel market partners (resellers) will advertise our devices and services as new products in their traditional outlets, primarily print advertising and in-house point of sale material, in order to increase mutual sales and brand awareness, benefiting both organizations.





16





Business Market





We will be marketing to businesses through traditional sales efforts, such as advertising in trade publications and establishing a presence at select trade shows geared towards businesses in our market segment. For the larger companies we will target, we will offer the free use of a limited number of our products for a limited time, to establish their impact in controlling costs of outside fleets and personnel, in order to penetrate and gain market share in this segment. We believe once senior management of these businesses feel more in control of the whereabouts of their outside concerns (personnel and vehicles, deliveries, packages, equipment, etc.) they will understand that they can, in essence, manage their outside logistics from the comfort of their office more efficiently than through traditional methods.





The success of our corporate strategy, through our PetsMobility brand, is predicated on our ability to either develop and launch our own proprietary products, or to work in conjunction with existing telecommunications carriers and retail manufacturers on a partnership or joint venture basis. We will look to a royalty share revenue model in these instances to facilitate this deployment of pet related communication products and services.





Competition





The wireless location-based services market is a new industry that is quickly becoming highly competitive. In the pet vertical market there are companies that are currently operating in this vertical who claim to provide pet tracking related solutions. Companies such as Zoombak, PetSafe, Global PetFinder, and Pocket Finder, are all GSM based. The PetsMobility Pet Cell family of products will have the latest generation of CDMA gpsOne® advanced location technology.





PetsMobility Competitive Advantage





PetsMobility has a competitive advantage over existing pet tracking solutions from a number of perspectives. Firstly, there is the technological advantage. Presently, there does not exist another company in this vertical with the technology that PetsMobility will be bringing to the market place. PetsMobility's research and development partner has taken this technology and improved upon it such that the PetsMobility tracking solution has been optimized as the most cost effective solution based on quality and consistency of locates versus price.





We have not undertaken an independent third party study of the market acceptance of the product; however, two recent entrants into the pet tracking vertical demonstrate that consumers are willing to spend money on tracking devices for their pets. Zoombak’s has recently placed orders for their GSM product with PetsMart, who currently operate almost 1000 stores across North America. Further, Rocky Mountain Tracking recently released a pet tracking device which retails for $649 which exceeds the project cost of our device by 160%. We intend that our product(s) will be superior to these offerings in terms of price, functionality and robustness.





PetsMobility will deliver more consistent quality locates across a broader spectrum of conditions than the technology that is currently in the market place. We believe that we hold a distinct competitive advantage over all identified potential direct competitors. In addition to our superior performance and features, only the PetsCell is designed to have the combination of enhanced assisted GPS (gpsOne) technology, removable rechargeable battery and is waterproof.





Secondly, PetsMobility is proposing a much more complete solution for pet lovers than what is currently available in the market place. The pet market is an extremely dedicated and loyal consumer segment. As such, it is necessary to position PetsMobility as being much more than a technology company and to create a marketing continuum for the pet consumer. By positioning PetsMobility as a company that is all about “Innovative Products and Services for Pets and People on the Go,” it is possible to leverage the bond which exists between owners and pets and truly differentiate PetsMobility from its competitors on a number of different levels.





17





Pets911.Com




On October 27, 2009, we closed on the acquisition of Pet911.com and all of its assets. This 12-year old business is an online pet portal that specializes in the retrieval of lost pets, pet adoption and all aspects of animal welfare. It provides information and services to the animal welfare community and the public, using alerting technology to inform citizens of urgent news about lost pets in their area, as well as offering a toll-free phone number (1888-Pets911) that enables people to access information on lost animals or to report animal cruelty. Pets911.com has several trademark and patent applications pending approval and holds over 50 domain names associated with www.Pets911.com domain.




Since the acquisition, our pet focused PetsMobility has worked diligently to evolve the Pets911.com business, leveraging its extensive relationships in the animal welfare community (14,000 rescue organizations) to untap unique revenue opportunities. In December 2009, we announced a Letter of Intent to work with Tuttidare, Inc., to be the exclusive marketing partner of the animal vertical on philanthropic social networking site.




Under the terms of the agreement, PetsMobilityTM will have the exclusive marketing rights on Tuttidare's Social Networking site, Philanthropic Donation Management and Auction service for all animal related activities. The Tuttidare platform enables individuals, corporations or groups of like minded individuals to match their interests to the charitable organizations of their choice. This vertical market will be branded the “Pets911 Animal Zone” and will encompass all animal related causes - companion, exotic, circus, racing, big game, equine as well as all farm animals.





Future Developments





As the product development cycle for technology products may take upwards of one year, it is imperative that new products are initiated well before existing products reach obsolescence. We have already commenced the planning of a second-generation product. Working closely with a major U.S. chip manufacturer, this new product is technologically superior to the first generation PetsCell.




General




Subsidiaries




We currently have three wholly owned subsidiaries. The first, Sound Revolution Recordings Inc., is a company incorporated in British Columbia for the purposes of carrying on business in British Columbia. The second, Charity Tunes Inc, is a company incorporated in Delaware for the purpose of distributing music and other media online.  The third, PetsMobility Inc., is a company incorporated in Delaware for the purposes operating the websites www.petsmo.com and www.Pets911, and developing and marketing the PetsCellTM TX200 and Pets911.




Intellectual Property




We own the copyright in the content of the websites www.soundrevolution.net, www.charitytunes.com, www. petsmo.com, www. Petlifeline.com, www.on4communications.com and www.Pets911.com.  We also own all the copyright and common law trademark rights in our logos for Charity Tunes, On4 Communications, PetsMobility, PetLifeline and Pets911.




We also own the intellectual property described in the following trademark and patent applications:




1.
Patent application 2,475,823 titled “pet communication system”, filed in Canada on July 16, 2004 and laid open for public inspection on January 16, 2006.





2.
Patent application CA2005/001122 titled “mobile communication system and device”, filed under the Patent Cooperation Treaty on July 18, 2005 claiming priority to Canadian application 2,475,823.





3.
Patent application 2005263147 titled “mobile communication system and device”, filed in Australia claiming priority to the PCT application (national phase entry on February 2, 2007).




18




4.
Patent application 553247 titled “mobile communication system and device”, filed in New Zealand claiming priority to the PCT application (national phase entry on February 2, 2007).





5.
Patent application EP20050767052 titled “mobile communication system and device”, filed in the European Union claiming priority to the PCT application (national phase entry on May 25, 2007).





6.
Trademark application 78603402 for “ON4” and design, filed in the United States on April 6, 2005, and published for opposition on October 9, 2007.





7.
Trademark application 1,380,123 for “PETSMOBILITY”, filed in Canada on January 14, 2008 and formalized on January 29, 2008.





8.
Trademark application 1,380,122 for “PETSCELL”,filed in Canada on January 14, 2008 and formalized on January 29, 2008.





9.
Trademark application 1,380,124 for “PAWTRAX”, filed in Canada on January 14, 2008 and formalized on January 29, 2008.





10.
Trademark application 1,380,126 for “MINDWARE”, filed in Canada on January 14, 2008 and formalized on January 29, 2008.





11.
Trademark application 1,380,125 for “PETSMO”, filed in Canada on January 14, 2008 and formalized on January 29, 2008.





However,there can be no assurances that we will obtain any intellectual property protection as a result of prosecuting these applications or that any of these applications will be granted by the applicable intellectual property office. No patent applications have yet been granted so there is currently no patent protection. None of the trademark applications have yet been granted so no registered trademark protection is currently available.





Government Regulations




Laws and regulations directly applicable to Internet communications, commerce and advertising are becoming more prevalent. In addition to recent laws enacted by the United States Congress regulating children’s privacy, copyrights and taxation, we are and will continue to be subject to rules and regulations around the world which affect the business of the Internet.  Also, because we carry on business in Canada, it is subject to laws regarding employment, taxes and other regulatory issues for its Canadian operations. The European Union recently enacted its own privacy regulations that may result in limits on the collection and use of certain user information. The laws governing the Internet, however, remain largely unsettled, even in areas where there has been some legislative action. It may take years to determine whether and how existing laws such as those governing intellectual property, privacy, libel and commerce will prompt calls for more stringent consumer protection laws, both in the United States and abroad, that may impose additional burdens on companies conducting business on the Internet. Furthermore, the Federal Trade Commission recently investigated the disclosure of personal identifying information obtained from individuals by Internet companies.




Evolving areas of law that are relevant to our business include privacy law, proposed encryption laws, website content regulation and sales and use tax. For example, changes in copyright law could require us to change the manner in which we conduct business or increase our costs of doing business. Because of this rapidly evolving and uncertain regulatory environment, we cannot predict how these laws and regulations may affect our business. In addition, these uncertainties make it difficult to ensure compliance with the laws and regulations governing the Internet. These laws and regulations could harm us by subjecting us to liability or forcing us to change the way in which we do business.




We will also be subject to law and regulation related to the telecommunications industry.  The telecommunications industry is highly regulated, and the regulatory environment in which we intend to operate is subject to change. In accordance with Federal Communication Commission (“FCC”) rules and regulations, wireless transceiver and cellular handset products are required to be certified by the FCC and comparable authorities in foreign countries where they are sold. If we sell our anticipated products in Europe, we will be required to comply with relevant directives of the European Commission. A delay in receiving required certifications for our new products or enhancements to our products, or a loss of certification for our intended products may adversely affect our business.




19





Employees and Consultants




As of February 5, 2010, we employ consultants in the area of management, sales, marketing, accounting, product and business development and legal services.





Item 1A. Risk Factors





Not required for smaller reporting companies.





Item 1B. Unresolved Staff Comments





None.





Item 2. Properties





Our principal office is located at 10575 N.114th Street, Suite 103, Scottsdale, Arizona 85259.





We also have an operations office in Phoenix, Arizona, and an operations and product development facility in Richmond, British Columbia. Both facilities are leased.





The space in these locations is provided to us at no cost by our shareholders.





Item 3. Legal Proceedings





McCann Family Holding Corporation (“McCann”) filed a lawsuit against us for the repayment of the promissory notes dated May 7, 2008 and May 22, 2008, totaling $334,152 (CDN$360,000). We have defended the lawsuit on the basis that the funds were not due because they were in fact advanced to and utilized by a company related to McCann, even though we executed the promissory notes. McCann has applied to the courts for a summary judgment and we are opposing that application.





On August 24, 2009 we filed a Statement of Claim in the Court of Queen’s Bench of Alberta to initiate a lawsuit against DataTrail Inc.  In the Statement of Claim, we seek the following from DataTrail:





o
judgment for debt in the amount of CDN$1,044,218 (approximately, US$993,748);





o
interest on that amount pursuant to the terms of a Loan Agreement with DataTrail dated October 3, 2007;





o
an order for specific performance directing that DataTrail provide a Security Agreement to On4 pursuant to the terms of the Loan Agreement, and specifically in respect of certain intellectual property rights owned by DataTrail;





o
an interim and permanent injunction preventing DataTrail from dealing in any way with such intellectual property rights;





o
indemnity in respect of any amount we are adjudged to be liable for in an action instituted by the McCann Family Holding Corporation against us on October 30, 2008; and





o
costs.





We know of no other pending or active material legal proceedings to which we are a party and we are not aware of any legal proceedings contemplated by any governmental authority against us.





Item 4. Submission of Matters to a Vote of Security Holders





On April 10, 2009 the respective shareholders of Sound Revolution Inc., our predecessor, and On4 Communications, Inc. approved the amended merger agreement between the two companies entered into on April 7, 2009.





20





PART II





Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.





Market Information





Our common stock is not traded on any exchange. Our common stock is quoted on the OTC Bulletin Board under the symbol “ONCI.OB”. Our common stock began being quoted on the OTC Bulletin Board on June 23, 2005. Trading in stocks quoted on the OTC Bulletin Board is often thin and is characterized by wide fluctuations in trading prices due to many factors that may have little to do with a company's operations or business prospects. We cannot assure you that there will be a market for our common stock in the future.





OTC Bulletin Board securities are not listed or traded on the floor of an organized national or regional stock exchange. Instead, OTC Bulletin Board securities transactions are conducted through a telephone and computer network connecting dealers in stocks. OTC Bulletin Board issuers are traditionally smaller companies that do not meet the financial and other listing requirements of a regional or national stock exchange.





Holders





As of February 5, 2010, there were 115 holders of record of our common stock. There are also stockholders holding stock in street name.





Dividends





Historically, we have not paid dividends on shares of our common stock and we do not expect to declare or pay dividends on shares of our common stock for the foreseeable future. We intend to retain earnings, if any, to finance the development and expansion of our business. Our future dividend policy will be subject to the discretion of our Board of Directors and will depend upon our future earnings, if any, our financial condition, and other factors deemed relevant by the Board.





Equity Compensation Plans





As of October 31, 2009 and February 5, 2010 we did not have any equity compensation plans.





Recent Sales of Unregistered Securities





From March 1, 2009 to October 31, 2009, we made the following sales of unregistered securities that have not been previously disclosed:





●
During the year ended October 31, 2009, we issued 100,000 shares at a fair value of $50,000 to our former Chief Financial Officer, Troy Rice pursuant to a consulting agreement, dated September 8, 2008. These shares were issued without a prospectus pursuant to exemption from registration in Section 4(2) of the Securities Act of 1933.




●
On October 27, 2009, we issued 3,000,000 shares of our common stock to four U.S. designees as consideration in acquisition of www.Pets911.com and associated business assets, pursuant to an Asset Purchase Agreement between our subsidiary, PetsMobility, Inc. and I Recycle LLC, dated October 12, 2009. These shares were issued without a prospectus in reliance upon Section 4(2) of the Securities Act of 1933.





21




●
On September 10, 2009, we entered into an investor relations consulting agreement with Bullzano Media Inc. and agreed to issue 20,000 shares of our common stock in consideration for services provided by Bullzano Media Inc. As of February 5, 2010, the shares remained unissued. These shares will be issued in reliance on Regulation S of the Securities Act of 1933.





●
On July 24, 2009, we issued 661,410 units at a price of $0.20 per unit to four non-U.S. investors for total proceeds of $132,282. Each unit consists of one common share and one half warrant to purchase a common share. The warrants have an exercise price of $0.90 and expire on July 24, 2011. These units were issued without a prospectus in reliance upon Regulation S of the Securities Act of 1933.





●
On May 1, 2009, pursuant to the terms of the Merger Agreement signed on April 7, 2009, we issued 27,955,089 shares of our common stock to the former shareholders of On4 Communications, Inc. We completed these offerings of our securities pursuant to Rule 903 of Regulation S and the exemption from registration requirements provided by Section 4(2) of the 1933 Securities Act of 1933, as amended.





●
In May 2009, we issued 333,888 to our preferred shareholders to settle the dividend payable on their preferred shares of $83,472. Consequently, we converted 2,000,000 shares of preferred stock into shares of our common stock at a rate of two common shares for each preferred share.  These issuances of shares of our common stock were pursuant to exemption from registration in Regulation S of the Securities Act of 1933.





●
On April 30, 2009, we issued 35,000,000 shares to Bacchus Entertainment Ltd., a company controlled and directed by our CFO and director, Penny Green. The issuance was effected pursuant to a debt conversion agreement between us and Bacchus Entertainment Ltd., entered into on April 30, 2009 for conversion of $35,000 of the loan owed to the company into shares of our common stock.  The issuance of our shares was made pursuant to exemption from registration in Regulation S of the Securities Act of 1933.





●
On April 30, 2009, we entered into a convertible note agreement with our Chief Financial Officer and director, Penny Green in the sum of $120,000. Interest, calculated at 20% per annum, shall accrue only after seven months have passed since the execution of the convertible note. Amounts due under the note shall be convertible into shares of our common stock at a price of $0.10 per share.





●
On March 12, 2009, we issued 20,000,000 shares to Bacchus Entertainment Ltd., a company controlled and directed by our CFO and director, Penny Green. The issuance was effected pursuant to a debt conversion agreement between us and Bacchus Entertainment Ltd., entered on March 12, 2009 for conversion of $20,000 of the loan owed to the company into shares of our common stock. The issuance of our shares was made pursuant to exemption from registration in Regulation S of the Securities Act of 1933.





●
On March 12, 2009, we issued 13,000,000 shares at a price of $0.001 per share to three non-US investors and four US investors for total proceeds of $13,000. These shares were issued without a prospectus in reliance upon Section 4(2) and Regulation S of the Securities Act of 1933.





Our reliance upon the exemption under Section 4(2) of the Securities Act of 1933 was based on the fact that the issuance of these shares did not involve a “public offering.” Each offering was not a "public offering" as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of securities offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, the investors had the necessary investment intent as required by Section 4(2) since they agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the Securities Act. This restriction ensures that these shares would not be immediately redistributed into the market and therefore not be part of a "public offering." The investors negotiated the terms of the transactions directly with our executive officers. No general solicitation was used, no commission or other remuneration was paid in connection with these transactions, and no underwriter participated. Based on an analysis of the above factors, these transactions were effected in reliance on the exemption from registration provided in Section 4(2) of the Securities Act for transactions not involving any public offering.





Our reliance upon the exemption under of Regulation S of the Securities Act was based on the fact that the sale of the securities was completed in an "offshore transaction", as defined in Rule 902(h) of Regulation S. We did not engage in any directed selling efforts, as defined in Regulation S, in the US in connection with the sale of the securities. Each investor was not a US person, as defined in Regulation S, and was not acquiring the securities for the account or benefit of a US person.





Additionally, the investors were given adequate access to sufficient information about us to make an informed investment decision.  None of the securities were sold through an underwriter and accordingly, there were no underwriting discounts or commissions involved.


22





Use of Proceeds from Sale of Registered Securities





We did not receive any proceeds from the sale of registered securities during the fiscal year ended October 31, 2009.





Item 6. Selected Financial Data





Not applicable.





Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation





Safe Harbor





This Annual Report on Form 10-K contains forward-looking statements that involve risks and uncertainties. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology including, "could" "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential" and the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.  While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested in this Annual Report.





Results of Operations





Revenues





During the year ended October 31, 2009 we generated nominal revenues of $18,746 compared to no revenues for the period ended October 31, 2008. From our inception on June 4, 2001 to October 31, 2009 we generated nominal revenues of $18,746. As of October 31, 2009 we had total assets of $1,342,613 and total current liabilities of $3,085,611.  We anticipate that we will incur substantial losses for the foreseeable future.





Expenses





During the fiscal year ended October 31, 2009, we incurred total operating expenses of $5,507,260 including $2,050,401 in impairment of goodwill, $2,312,141 in impairment of intangible assets, $478,999 in consulting fees, $284,096 in management fees, $158,947 in general and administrative expenses, $104,702 in professional fees, and $54,687 in advertising and marketing.





This compares to our total expenses of $1,947,344 incurred during the fiscal year ended October 31, 2008 which included $376,989 in consulting fees, $319,000 in management fees, $531,420 in general and administrative expenses, $214,983 in professional fees, and $100,424 in advertising and marketing. We recorded no impairment expense during the fiscal year ended October 31, 2008.





The significant increase in our total expenses in fiscal 2009 resulted primarily from the purchase adjustments to the fair market value of our common shares issued to the shareholders of On4 Communications in relation to the merger transaction, and subsequent allocation of the excess of the purchase consideration over the fair value of our assets and liabilities to goodwill. Impairment of intangible assets resulting from our acquisition of Pets911.com also significantly contributed to the sharp rise in our total expenditures for the year ended October 31, 2009 as compared to October 31, 2008.





23





From our inception on June 4, 2001 to October 31, 2009 we incurred operating total expenses of $9,912,829, including $2,050,401 in impairment of goodwill, $2,871,524 in impairment of intangible assets, $1,666,678 in consulting fees, $988,596 in management fees, $990,484 in general and administrative expenses, $431,572 in professional fees, $388,982 in research and development, and $225,580 in advertising and marketing.





Our general and administrative expenses include fees for telephone service, courier service, postage, office supplies, banking, and website, server and software maintenance.





Net Loss





During the fiscal year ended October 31, 2009 we incurred a net loss of $5,420,719 compared to our net loss of $3,115,418 for the period ended October 31, 2008.  From our inception on June 4, 2001 to February 28, 2009 we incurred a net loss of $11,001,493.  Our net loss was mostly funded by a combination of private placements and shareholder loans.





Liquidity and Capital Resources





As of October 31, 2009 we had $473 in cash, $103,948 in current assets, $3,085,611 in current liabilities and a working capital deficit of $2,981,663.  This compares to $152,777 in cash, $163,610 in current assets, $1,724,147 in current liabilities and working capital deficit of $1,560,537 for the fiscal year ended October 31, 2008.





As of October 31, 2009 we had an accumulated deficit of $11,084,965, an increase of $5,420,719 from our deficit of $5,664,246 accumulated as of October 31, 2008.





From our inception on June 4, 2001 to October 31, 2009 we spent $2,647,409 on operating activities including $1,466,431 spent during fiscal 2008 and $269,322 spent during fiscal 2009. Improvement in our cash used for operating activities is attributed to the fact that we have longer lead time in repayment to our creditors and related parties as we generated less cashflows from our financing activities to support our operating activities and obligations.





From our inception on June 4, 2001 to October 31, 2009 we received $4,599,189 from financing activities, including $2,338,670 received in fiscal 2008 and $79,282 received in fiscal 2009. The decrease in financing activities is the result of a reduction in proceeds.





From our inception on October 30, 2006 to October 31, 2009 we spent $1,987,520 on investing activities. For the fiscal year ended October 31, 2009 we received $1,523 from investing activities, whereas we spent $750,733 on investing activities for the fiscal year ended October 31, 2008.




We do not anticipate any significant changes in our level of activity. We have not been able to reach the break-even point since our inception and have had to rely on outside capital resources. We do not anticipate making any significant revenues for the next year.




24




Our planned operation and exploration expenditures over the next 12 months (Beginning February 1, 2010) are summarized as follows:





Description
PotentialCompletion Date
EstimatedExpenses

($)General and administrative expenses
12 months
250,000Research and Development
12 months
100,000Sales and Marketing
12 months
200,000Accounting and Legal
12 months
150,000Unallocated Working Capital
12 months
100,000Debt Repayment
12 months
900,000Total

1,700,000





Our general and administrative expenses for the year will consist primarily of telephone service, courier service, postage, office supplies, banking, and website, server and software maintenance.





Based on our planned expenditures, we require additional funds of approximately $1,700,000 to proceed with our business plan over the next 12 months. If we secure less than the full amount of financing that we require, we will be forced to proceed with an alternative business plan based on our available financial resources.





We anticipate that we will incur substantial losses for the foreseeable future. Even if we carry out our planned business activities this does not guarantee that we will generate future sales or revenues.





Even though we plan to raise capital through equity or debt financing, we believe that the latter may not be a viable alternative for funding our operations as we do not have tangible assets to secure any such financing. We anticipate that any additional funding will be in the form of equity financing from the sale of our common stock. However, we do not have any financing arranged and we cannot provide any assurance that we will be able to raise sufficient funds from the sale of our common stock to finance our operations or planned exploration activities. In the absence of such financing, we will not be able to purchase non-operated working interests in existing wells or carry out exploration programs on any acquired properties. Even if we are successful in obtaining equity financing to fund our operations and exploration activities, there is no assurance that we will obtain the amount necessary to pursue the advanced exploration of any acquired properties following the completion of preliminary exploration. If we do not continue to obtain financing, we may be forced to abandon our business plan or our property interests.





Modifications to our current plans will be based on many factors, including the results of product research and development, the assessment of market research, food production costs, and the amount of available capital. Further, the extent to which we carry out our business plan is dependent upon the amount of financing available to us.





We may also consider entering into joint ventures or other strategic arrangements to provide the required funding to pursue our business plan. If we enter into a joint venture arrangement, we would likely have to assign a percentage of our interest in any revenues or future proprietary products to our joint venture partner(s). The assignment of this interest would be conditional upon the contribution of capital by the joint venture partner(s) to enable the advancement of our business activities. There is no assurance that any third party would enter into a joint venture agreement with us in order to fund our business.





We intend to raise the balance of our cash requirements for the next 12 months (approximately $1,700,000) from private placements or a registered public offering (either self-underwritten or through a broker-dealer). If we are unsuccessful in raising enough money through future capital-raising efforts, we may review other financing possibilities such as bank loans. At this time we do not have a commitment from any broker-dealer to provide us with financing. There is no assurance that any financing will be available to us or if available, on terms that will be acceptable to us. We intend to negotiate with our management and consultants to pay parts of their salaries and fees with stock and stock options instead of cash.




25





Going Concern





We have generated only nominal revenues and are dependent upon obtaining outside financing to carry out our operations and pursue any product development, production or sales. If we are unable to raise equity or secure alternative financing, we may not be able to continue our operations and our business plan may fail.





If our operations and cash flow improve, management believes that we can continue to operate. However, no assurance can be given that management's actions will result in profitable operations or an improvement in our liquidity situation. The threat of our ability to continue as a going concern will cease to exist only when our revenues have reached a level able to sustain our business operations.





Off-Balance Sheet Arrangements





We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.





Critical Accounting Policies





Our financial statements are affected by the accounting policies used and the estimates and assumptions made by management during their preparation. A complete summary of these policies is included in Note 1 of the notes to our financial statements. We have identified below the accounting policies that are of particular importance in the presentation of our financial position, results of operations and cash flows, and which require the application of significant judgment by management.





Revenue Recognition and Cost of Revenue





The Company recognizes revenue from the online sale music in accordance with ASC 605 Revenue Recognition. Revenue consists of the sale of music and is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the product is shipped, and collectibility is reasonably assured.





Goodwill





In accordance with ASC 350, Intangibles – Goodwill and Other, goodwill is required to be tested for impairment on an annual basis, or more frequently if certain indicators arise, using the guidance specifically provided.





Management reviews goodwill at least annually, and on an interim basis when conditions require, evaluates events or changes in circumstances that may indicate impairment in the carrying amount of such assets. An impairment loss is recognized in the statement of operations in the period that the related asset is deemed to be impaired.





26





Stock Based Compensation





The Company records stock-based compensation in accordance with ASC 718, Compensation – Stock Based Compensation, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.





Inflation





The amounts presented in the financial statements do not provide for the effect of inflation on our operations or financial position. The net operating losses shown would be greater than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments.





Item 7A. Quantitative and Qualitative Disclosures about Market Risk





Not required.





Item 8. Financial Statements and Supplementary Data




On4 Communications, Inc.


(A Development Stage Company)


October 31, 2009




Report of Independent Registered Public Accounting Firm
F-1Consolidated Balance Sheets
F-2Consolidated Statements of Operations
F-3Consolidated Statements of Stockholders’ Equity (Deficit)
F-4Consolidated Statements of Cash Flows
F-5Notes to the Consolidated Financial Statements
F-6


27




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To the Board of Directors and Shareholders of


On4 Communications Inc.


(A Development Stage Company)





We have audited the accompanying consolidated balance sheets of On4 Communications Inc. (A Development Stage Company) as of October 31, 2009 and 2008, and the related consolidated statements of operations, cash flows and stockholders’ equity (deficit) for the years then ended and accumulated from June 5, 2006 (Date of Inception) to October 31, 2009. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.





We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.





In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of October 31, 2009 and 2008, and the results of its operations and its cash flows for the years then ended and accumulated from June 5, 2006 (Date of Inception) to October 31, 2009, in conformity with accounting principles generally accepted in the United States.





The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has not generated any revenue, has a working capital deficit, and has incurred operating losses since inception. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also discussed in Note 1 to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.





/s/ Saturna Group LLP


Saturna Group LLP


Chartered Accountants




Vancouver, British Columbia


February 15, 2010




F-1





On4 Communications, Inc.


(formerly Sound Revolution Inc.)


(A Development Stage Company)


Consolidated Balance Sheets


(Expressed in US Dollars)





October 31,2009

$


October 31,2008

$ASSETSCurrent AssetsCash


473



152,777Accounts receivable


64,737



–Prepaid expenses and deposits


38,738



10,833Total Current Assets


103,948



163,610Goodwill (Note 3)


1,163,884



–Intangible assets (Note 4)


66,779



73,838Website development costs (Note 4)


–



197,141Property and equipment (Note 5)


8,002



15,862Total Assets


1,342,613



450,451LIABILITIES AND STOCKHOLDERS’ DEFICITCurrent LiabilitiesAccounts payable


533,273



195,838Accrued liabilities


17,299



6,304Accrued interest payable (Notes 6(c) and 7)


141,307



37,418Deferred revenue (Note 11(c))


90,385



–Due to related parties (Note 6)


1,303,492



646,691Notes payable (Note 7)


881,637



754,424Convertible note payable to related party (Note 6(e))


118,218



–Preferred stock dividend payable (Note 8)


–



83,472Total Current Liabilities


3,085,611



1,724,147Due to related parties (Note 6)


–



262,565Total Liabilities


3,085,611



1,986,712Nature of Operations and Continuance of Business (Note 1)Commitments (Note 11)Contingent Liability (Note 12)Stockholders’ DeficitPreferred stock: 10,000,000 shares authorized, non-voting, no par value;

No shares (October 31, 2008 - 2,000,000 shares) issued and outstanding


–



1,000,000Common stock:  100,000,000 shares authorized, 0.0001 par value;

99,874,977 shares (October 31, 2008 - 23,521,201) issued and outstanding


9,987



2,388,985Additional paid-in capital


9,261,980



739,000Common stock issuable


70,000



–Deficit accumulated during the development stage


(11,084,965
)


(5,664,246
)Total Stockholders’ Deficit


(1,742,998
)


(1,536,261
)Total Liabilities and Stockholders’ Deficit


1,342,613



450,451





(The accompanying notes are an integral part of these consolidated financial statements)




F-2




On4 Communications Inc.


(formerly Sound Revolution, Inc.)


(A Development Stage Company)


Consolidated Statements of Operations


(Expressed in US Dollars)





For the YearEnded

October 31,2009

$


For the YearEnded

October 31,2008

$


Accumulated From

June 5, 2006

(Date of Inception)

to October 31,2009

$Revenue


18,746



–



18,746Cost of sales


3,349







3,349Gross margin


15,397







15,397ExpensesAdvertising and marketing


54,687



100,424



225,580Amortization of intangible assets


7,059



4,125



11,184Amortization of property and equipment


14,066



11,214



38,578Consulting fees (Note 6(c))


478,999



376,989



1,666,678Foreign exchange loss


41,426



178,281



219,734General and administrative


158,947



531,420



990,484Impairment of goodwill (Note 3)


2,050,401



–



2,050,401Impairment of intangible assets (Note 4)


2,312,141



–



2,871,524Management fees (Note 6(b))


284,096



319,000



988,596Payroll


432



29,084



29,516Professional fees


104,702



214,983



431,572Research and development


304



181,824



388,982Total Expenses


5,507,260



1,947,344



9,912,829Operating Loss


(5,491,863
)


(1,947,344
)


(9,897,432
)Other Income (Expense)Gain on settlement of debt


185,145



–



185,145Interest and other income


224



60,409



63,066Interest expense


(114,225
)


(115,421
)


(238,090
)Write-off of note receivable


–



(1,113,062
)


(1,114,182
)71,144



(1,168,074
)


(1,104,061
)Net Loss


(5,420,719
)


(3,115,418
)


(11,001,493
)Net Loss Per Share – Basic and Diluted


(0.14
)


(0.14
)Weighted Average Shares Outstanding


40,056,000



22,852,000




(The accompanying notes are an integral part of these consolidated financial statements)




F-3




On4 Communications Inc.


(formerly Sound Revolution, Inc.)


(A Development Stage Company)


Consolidated Statements of Stockholders’ Equity (Deficit)


For the Period from June 5, 2006 (Date of Inception) to October 31, 2009


DeficitAccumulatedAdditional


Share


During thePreferred Stock


Common Stock


Paid-in


Subscriptions


DevelopmentShares

#


Amount

$


Shares

#


Amount

$


Capital

$


Receivable

$


Stage

$


Total

$Balance – June 5, 2006 (Date of Inception)


–



–



–



–



–



–



–



–Issuance of common stock for cash at $0.0001 per share


–



–



10,000,000



1,000



–



(1,000
)


–



–Issuance of common stock for cash at $0.07 per share


–



–



10,000,000



700,000



–



(25,000
)


–



675,000Net loss for the period










–



–



–



–



(282,206
)


(282,206
)Balance – October 31, 2006


–



–



20,000,000



701,000



–



(26,000
)


(282,206
)


392,794Issuance of 2,000,000 Series A Preferred Shares at $0.50 per share


2,000,000



1,000,000



–



–



–



–



–



1,000,000Stock subscriptions received


–



–



–



–



–



25,120



–



25,120Issuance of common stock at $0.50 per share


–



–



500,000



250,000



–



–



–



250,000Issuance of common stock to subsidiary


–



–



1



–



–



–



–



–Fair value of share purchase warrants issued


–



–



–



–



497,980



–



–



497,980Fair value of stock options granted


–



–



–



–



108,710



–



–



108,710Cumulative preferred dividends


–



–



–



–



–



–



(48,472
)


(48,472
)Net loss for the year










–



–



–



–



(2,183,150
)


(2,183,150
)Balance – October 31, 2007


2,000,000



1,000,000



20,500,001



951,000



606,690



(880
)


(2,513,828
)


42,982Issuance of common stock at $0.50 per share


–



–



3,021,200



1,516,000



–



–



–



1,516,000Stock subscriptions received


–



–



–



–



–



880



–



880Share issuance costs


–



–



–



(78,015
)


–



–



–



(78,015
)Fair value of share purchase warrants issued


–



–



–



–



29,350



–



–



29,350Fair value of stock options granted


–



–



–



–



102,960



–



–



102,960Cumulative preferred dividends


–



–



–



–



–



–



(35,000
)


(35,000
)Net loss for the year


–



–



–



–



–



–



(3,115,418
)


(3,115,418
)Balance – October 31, 2008


2,000,000



1,000,000



23,521,201



2,388,985



739,000



–



(5,664,246
)


(1,536,261
)




(The accompanying notes are an integral part of these consolidated financial statements)




F-4





On4 Communications Inc.


(formerly Sound Revolution, Inc.)


(A Development Stage Company)


Consolidated Statements of Stockholders’ Equity (Deficit)


For the Period from June 5, 2006 (Date of Inception) to October 31, 2009




DeficitAccumulatedAdditional


Common


During thePreferred Stock


Common Stock


Paid-in


Stock


DevelopmentShares

#


Amount

$


Shares

#


Amount

$


Capital

$


Issuable

$


Stage

$


Total

$Balance – October 31, 2008


2,000,000



1,000,000



23,521,201



2,388,985



739,000



–



(5,664,246
)


(1,536,261
)Issuance of common stock for services at $0.50 per share


–



–



100,000



50,000



–



–



–



50,000Stock-based compensation


–



–



–



–



94,539



–



–



94,539Common shares issued upon conversion of preferred stock


(2,000,000
)


(1,000,000
)


4,000,000



1,000,000



–



–



–



–Common shares issued upon conversion of preferred dividend payable


–



–



333,888



83,472



–



–



–



83,472To record acquisition of Sound Revolution


–



–



68,258,478



2,796



2,658,893



–



–



2,661,689To record par value adjustment


–



–







(3,515,632
)


3,515,632



–



–



–Stock subscriptions received


–



–



661,410



66



132,216



–



–



132,282Share issuance costs


–



–



–



–



(8,000
)


–



–



(8,000
)Issuance of common stock for acquisition


–



–



3,000,000



300



2,129,700



–



–



2,130,000Common stock issuable for services


–



–



–



–



–



70,000



–



70,000Net loss for the year


–



–



–



–



–



–



(5,420,719
)


(5,420,719
)Balance – October 31, 2009


–



–



99,874,977



9,987



9,261,980



70,000



(11,084,965
)


(1,742,998
)











(The accompanying notes are an integral part of these consolidated financial statements)




F-5





On4 Communications Inc.


(Formerly Sound Revolution, Inc.)


(A Development Stage Company)


Consolidated Statements of Cash Flows


(Expressed in US Dollars)




For the Year Ended

October 31,2009

$


For the Year Ended

October 31,2008

$


Accumulated From

June 5, 2006

(Date of Inception)

to October 31,2009

$Operating ActivitiesNet loss


(5,420,719
)


(3,115,418
)


(11,001,493
)Adjustments to reconcile net loss to net cash used in operating activities:Accretion of discount on convertible debt


10,218



–



10,218Amortization of property and equipment


14,066



11,214



38,578Amortization of intangible assets


7,059



4,125



11,184Gain on settlement of debt


(185,145
)


–



(185,145
)Impairment of goodwill


2,050,401



–



2,050,401Impairment of intangible assets


2,312,141



–



2,871,524Issuance of notes payable for services and penalties


–



90,402



90,402Issuance of shares for services


120,000



–



120,000Stock-based compensation


94,539



132,310



833,539Write-off of notes receivable


–



1,113,062



1,114,182Changes in operating assets and liabilities:Accounts receivable


(64,737
)


–



(64,737
)Prepaid expenses and deposits


(19,541
)


15,067



(30,374
)Accounts payable and accrued liabilities


378,903



130,960



593,045Accrued interest payable


116,338



37,418



153,756Deferred revenue


90,385



–



90,385Due to related parties


226,770



114,429



657,126Net Cash Used In Operating Activities


(269,322
)


(1,466,431
)


(2,647,409
)Investing ActivitiesAcquisition of intangible assets


–



(40,259
)


(834,487
)Cash acquired upon acquisition


1,523



–



1,523Acquisition of property and equipment


–



(6,630
)


(40,374
)Advances for note receivable


–



(703,844
)


(1,114,182
)Net Cash Provided by (Used In) Investing Activities


1,523



(750,733
)


(1,987,520
)Financing ActivitiesProceeds from issuance of common stock


132,282



1,438,865



2,521,267Proceeds from issuance of preferred stock


–



–



1,000,000Proceeds from notes payable


–



652,022



652,022Repayment of notes payable


–



–



(81,250
)Proceeds from related parties


–



247,783



560,150Repayments to related parties


(45,000
)


–



(45,000
)Share issuance costs


(8,000
)


–



(8,000
)Net Cash Provided By Financing Activities


79,282



2,338,670



4,599,189Effects of exchange rate changes on cash


36,213



–



36,213Increase (Decrease) in Cash


(152,304
)


121,506



473Cash - Beginning of Period


152,777



31,271



–Cash - End of Period


473



152,777



473Supplemental DisclosuresInterest paid


–



–



1,250Income taxes paid


–



–



–





(The accompanying notes are an integral part of these consolidated financial statements)




F-6





On4 Communications Inc.


(formerly Sound Revolution Inc.)


(A Development Stage Company)


Notes to the Consolidated Financial Statements


October 31, 2009


(Expressed in US dollars)





1. Nature of Operations and Continuance of Business




Sound Revolution Inc. (the "Company"), was incorporated on June 4, 2001 under the laws of the State of Delaware and on July 2, 2009 changed its name to On4 Communications, Inc. On May 1, 2009, the Company merged with On4 Communications, Inc. (“On4”), an Arizona corporation incorporated on June 5, 2006. Pursuant to the terms of the merger agreement, the Company acquired all assets and liabilities of On4 by issuing new shares to all former shareholders of On4 on a 1 to 1 basis. The Company issued 27,955,089 common shares to the former shareholders of On4.  On4 was a private operating company, and the Company was a public company with an operating business. The merger was accounted for as a “reverse merger” using the purchase method of accounting, with the former shareholders of On4 controlling 68% of the issued and outstanding common shares of the Company after the closing of the transaction. Accordingly, On4 is deemed to be the acquirer for accounting purposes and the consolidated financial statements are presented as a continuation of On4 and include the results of operations of On4 since incorporation on June 5, 2006, and the results of operations of the Company since the date of acquisition on May 1, 2009. On4 is in the business of manufacturing two-way communication and location devices with applications that include tracking people, pets, assets, and inventory, among others. The Company has three wholly-owned subsidiaries: (i) Sound Revolution Recordings Inc., which was incorporated in British Columbia, Canada on June 20, 2001, for the purpose of carrying on music marketing services in British Columbia, (ii) Charity Tunes Inc., which was incorporated in the State of Delaware on June 27, 2005, for the purpose of operating a website for the distribution of songs online; and (iii) PetsMobility Inc., which was incorporated in the state of Delaware on March 23, 2006 for the purposes operating the website www.petsmo.com and related business. The Company is a Development Stage Company, as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915, Development Stage Entities, and has not yet generated significant revenues from their intended business activities. Refer to Note 3.




Going Concern




These consolidated financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated significant revenues since inception and is unlikely to generate significant revenue or earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. As at October 31, 2009, the Company has a working capital deficiency of $2,981,663, and has accumulated losses totaling $11,084,965 since inception. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern




The Company will need additional working capital to continue or to be successful in any future business activities. Therefore, continuation of the Company as a going concern is dependent upon obtaining the additional working capital necessary to accomplish its objective. Management plans to seek debt or equity financing, or a combination of both, to raise the necessary working capital.




2. Summary of Significant Accounting Principles




Basis of Presentation and Principles of Consolidation




These consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States and are presented in US dollars, unless otherwise noted, and include the accounts of the Company and its subsidiaries, Sound Revolution Recordings Inc., Charity Tunes Inc., and Petsmobility Inc. All inter-company accounts and transactions have been eliminated. The Company’s fiscal year end is October 31.




Estimates




The preparation of financial statements in conformity with US generally accepted accounting principles (“US GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the useful life and recoverability of long-lived assets, stock-based compensation and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.




F-7





On4 Communications Inc.


(formerly Sound Revolution Inc.)


(A Development Stage Company)


Notes to the Consolidated Financial Statements


October 31, 2009


(Expressed in US dollars)





2.Summary of Significant Accounting Principles(continued)




Cash and Cash Equivalents




The Company considers all highly liquid instruments with maturity dates of three months or less at the time of issuance to be cash equivalents




Property and Equipment




Property and equipment, consisting primarily of computer and office equipment, is stated at cost and is amortized using the straight-line method over the estimated lives of the related assets of three and five years, respectively.




Intangible Assets




Intangible assets consist of patents and trademarks related to the TX200 mobile communication device, and the assets acquired from Pets911.com described in Note 4. Intangible assets acquired are initially recognized and measured at cost and have an estimated useful life of ten years. Impairment tests are conducted annually or more frequently if events or changes in circumstances indicate that the asset may be impaired. The impairment test compares the carrying amount of the intangible asset with its fair value, and an impairment loss is recognized in income for the excess, if any. The amortization methods and estimated useful lives of intangible assets and goodwill are reviewed annually.




Goodwill




In accordance with ASC 350, Intangibles – Goodwill and Other, goodwill is required to be tested for impairment on an annual basis, or more frequently if certain indicators arise, using the guidance specifically provided.




Management reviews goodwill at least annually, and on an interim basis when conditions require, evaluates events or changes in circumstances that may indicate impairment in the carrying amount of such assets. An impairment loss is recognized in the statement of operations in the period that the related asset is deemed to be impaired.




Website Development Costs




Website development costs consist of costs incurred to develop internet web sites to promote, advertise, and earn revenue with respect to the Company’s business operations. Costs are capitalized in accordance with ASC 350-50, Web Site Development Costs, and are amortized on a straight-line basis over the estimated useful life of three years commencing when the internet web site has been completed.




Impairment of Long-Lived Assets




In accordance with ASC 360, Property Plant and Equipment, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.




Research and Development Expenses




Research and development costs are expensed as incurred.




Advertising Costs




The Company expenses advertising costs as incurred. For the year ended October 31, 2009, advertising costs were $54,687 (2008 - $100,424).




Revenue Recognition and Cost of Revenue




The Company recognizes revenue from the online sale music in accordance with ASC 605 Revenue Recognition. Revenue consists of the sale of music and is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the product is shipped, and collectibility is reasonably assured.




F-8
 
 
 On4 Communications Inc.


(formerly Sound Revolution Inc.)


(A Development Stage Company)


Notes to the Consolidated Financial Statements


October 31, 2009


(Expressed in US dollars)




2.Summary of Significant Accounting Principles (continued)




Earnings Per Share




The Company computes net loss per share in accordance with ASC 260, Earnings per Share,which requires presentation of both basic and diluted earnings per share (EPS) on the face of the consolidated statements of operations. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.




Foreign Currency Translation




The Company’s functional currency and its reporting currency is the United States dollar and foreign currency transactions are primarily undertaken in Canadian dollars. Monetary balance sheet items expressed in foreign currencies are translated into US dollars at the exchange rates in effect at the balance sheet date. Non-monetary assets and liabilities are translated at historical rates. Revenues and expenses are translated at average rates for the period, except for amortization, which is translated on the same basis as the related asset. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income.




Comprehensive Income




ASC 220, Comprehensive Income, establishes standards for the reporting and display of comprehensive loss and its components in the consolidated financial statements. As at October 31, 2009 and 2008, the Company had no items representing comprehensive loss.




Stock-based Compensation




The Company records stock-based compensation in accordance with ASC 718, Compensation – Stock Based Compensation, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.




Income Taxes




The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, Accounting for Income Taxes. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.




The Company files federal income tax returns in the United States.  The Company may be subject to a reassessment of federal taxes by tax authorities for a period of three years from the date of the original notice of assessment in respect of any particular taxation year. In certain circumstances, the federal statute of limitations can reach beyond the standard three year period. The statute of limitations in the United States for income tax assessment varies from state to state. Tax authorities have not audited any of the Company’s income tax returns.




The Company recognizes interest and penalties related to uncertain tax positions in tax expense. During the years ended October 31, 2009 and 2008, there were no charges for interest or penalties.




F-9





On4 Communications Inc.


(formerly Sound Revolution Inc.)


(A Development Stage Company)


Notes to the Consolidated Financial Statements


October 31, 2009


(Expressed in US dollars)





2.Summary of Significant Accounting Principles(continued)




Financial Instruments and Fair Value Measures




ASC 820, Fair Value Measurements, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:




Level 1




Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.




Level 2




Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.




Level 3




Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.




Our financial instruments consist principally of cash, accounts receivable, accounts payable, accrued liabilities, accrued interest payable, deferred revenue, amounts due to a related party, and notes payable. Pursuant to ASC 820, the fair value of our cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. We believe that the recorded values of all of our other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.




Recent Accounting Pronouncements




In May 2009, FASB issued ASC 855, Subsequent Events, which establishes general standards of for the evaluation, recognition and disclosure of events and transactions that occur after the balance sheet date. Although there is new terminology, the standard is based on the same principles as those that currently exist in the auditing standards. The standard, which includes a new required disclosure of the date through which an entity has evaluated subsequent events, is effective for interim or annual periods ending after June 15, 2009.  The adoption of ASC 855 did not have a material effect on the Company’s financial statements. Refer to Note 14.




In June 2009, the FASB issued guidance now codified as ASC 105, Generally Accepted Accounting Principles as the single source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP, aside from those issued by the SEC. ASC 105 does not change current U.S. GAAP, but is intended to simplify user access to all authoritative U.S. GAAP by providing all authoritative literature related to a particular topic in one place.  The adoption of ASC 105 did not have a material impact on the Company’s financial statements, but did eliminate all references to pre-codification standards




In August 2009, FASB issued an amendment to the accounting standards related to the measurement of liabilities that are recognized or disclosed at fair value on a recurring basis. This standard clarifies how a company should measure the fair value of liabilities and that restrictions preventing the transfer of a liability should not be considered as a factor in the measurement of liabilities within the scope of this standard. This standard is effective for the Company on October 1, 2009. The adoption of this amendment did not have a material effect on the Company’s financial statements.




In October 2009, FASB issued an amendment to the accounting standards related to the accounting for revenue in arrangements with multiple deliverables including how the arrangement consideration is allocated among delivered and undelivered items of the arrangement. Among the amendments, this standard eliminated the use of the residual method for allocating arrangement considerations and requires an entity to allocate the overall consideration to each deliverable based on an estimated selling price of each individual deliverable in the arrangement in the absence of having vendor-specific objective evidence or other third party evidence of fair value of the undelivered items. This standard also provides further guidance on how to determine a separate unit of accounting in a multiple-deliverable revenue arrangement and expands the disclosure requirements about the judgments made in applying the estimated selling price method and how those judgments affect the timing or amount of revenue recognition. This standard, for which the Company is currently assessing the impact, will become effective on January 1, 2011.




F-10





On4 Communications Inc.


(formerly Sound Revolution Inc.)


(A Development Stage Company)


Notes to the Consolidated Financial Statements


October 31, 2009


(Expressed in US dollars)




2.Summary of Significant Accounting Principles(continued)




Recent Accounting Pronouncements (continued)




In October 2009, the FASB issued an amendment to the accounting standards related to certain revenue arrangements that include software elements. This standard clarifies the existing accounting guidance such that tangible products that contain both software and non-software components that function together to deliver the product’s essential functionality, shall be excluded from the scope of the software revenue recognition accounting standards. Accordingly, sales of these products may fall within the scope of other revenue recognition standards or may now be within the scope of this standard and may require an allocation of the arrangement consideration for each element of the arrangement. This standard, for which the Company is currently assessing the impact, will become effective on January 1, 2011.




In January 2010, the FASB issued an amendment to ASC 505, Equity, where entities that declare dividends to shareholders that may be paid in cash or shares at the election of the shareholders are considered to be a share issuance that is reflected prospectively in EPS, and is not accounted for as a stock dividend.  This standard is effective for interim and annual periods ending on or after December 15, 2009 and is to be applied on a retrospective basis.  The adoption of this standard is not expected to have a significant impact on the Company’s consolidated financial statements.




In January 2010, the FASB issued an amendment to ASC 820, Fair Value Measurements and Disclosure, to require reporting entities to separately disclose the amounts and business rationale for significant transfers in and out of Level 1 and Level 2 fair value measurements and separately present information regarding purchase, sale, issuance, and settlement of Level 3 fair value measures on a gross basis.  This standard, for which the Company is currently assessing the impact, is effective for interim and annual reporting periods beginning after December 15, 2009 with the exception of disclosures regarding the purchase, sale, issuance, and settlement of Level 3 fair value measures which are effective for fiscal years beginning after December 15, 2010.




The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.





3. Merger Transaction




On May 1, 2009, the Company completed a merger with On4.  Pursuant to the terms of the merger agreement, the Company acquired all assets and liabilities of On4 by issuing new shares to all former shareholders of On4 on a 1 to 1 basis. The Company issued 27,955,089 common shares to the former shareholders of On4. On4 was a private operating company, and the Company was a public company with an operating business. The merger is accounted for as a “reverse merger” using the purchase method of accounting, with the former shareholders of On4 controlling 68% of the issued and outstanding common shares of the Company after the closing of the transaction. Accordingly, On4 is deemed to be the acquirer for accounting purposes and the financial statements are presented as a continuation of On4 and include the results of operations of On4 since incorporation on June 5, 2006, and the results of operations of the Company since the date of acquisition on May 1, 2009.




Material terms of the merger agreement were as follows:




Prior to the merger closing:




●
The Company entered into a convertible note (the “Note”) in the amount of $120,000 with Penny Green, the majority shareholder, CEO, a director and the sole officer of the Company, which is convertible into common stock at $0.10 per share at the option of the holder, and which is due in seven months. Refer to Note 6(e).




●
The Company converted debt of $35,000 owed to Bacchus Entertainment Ltd., a company owned and controlled by Penny Green, into 35,000,000 shares of common stock at a price of $0.001 per share.




●
The Company is to transfer all of its assets and debts, other than the Note and any debt owing to Penny Green or Bacchus Entertainment Ltd., to its wholly owned subsidiary, Charity Tunes. At October 31, 2009, the transfer to Charity Tunes had not occurred.




Upon the merger closing:




●
The Company shall raise a minimum of $150,000 through a direct offering of units registered on a Form S-1 at a price to be determined, with each unit comprised of one common share and one half warrant to purchase one common share at a price of $1.00 for a period of 12 months. At October 31, 2009, the Company had not yet raised $150,000.




●
All notes payable by On4 in excess of $100,000 shall be converted to equity at a price to be mutually agreed on by On4 and the specific creditor or receive a repayment extension of no less than six months and with an annual interest rate not to exceed 12%. At October 31, 2009, none of the notes had been converted.





F-11





On4 Communications Inc.


(formerly Sound Revolution Inc.)


(A Development Stage Company)


Notes to the Consolidated Financial Statements


October 31, 2009


(Expressed in US dollars)





3. Merger Transaction (continued)




After raising a minimum of $150,000:




●
$150,000 shall be repaid to Penny Green towards the outstanding loans owed to her, or companies controlled by her. (Not yet completed). Upon receipt of the $150,000 payment:




●
Charity Tunes shall be sold to Bacchus Filings Inc., a company controlled by Penny Green, in consideration for which Bacchus Filings Inc. shall assume the entire amount of loan owing to Penny Green or Bacchus Entertainment Ltd., exclusive of the Note (amended below).;




●
Penny Green, and all companies controlled by Penny Green, will cancel all but 236,066 of the Company’s shares owned by them (amended below).




The Company’s common shares issued to the On4 shareholders were determined to have a fair value of $2,661,689. After reflecting the purchase adjustments, the excess of the purchase consideration over the fair values of the Company’s assets and liabilities of $3,214,285 as at May 1, 2009, has been allocated to goodwill.  As at October 31, 2009, the Company recorded impairment on goodwill of $2,050,401, resulting in a book value of goodwill of $1,163,884




On September 14, 2009, the Company entered into a post merger agreement with Penny Green, an officer and director of the Company, and Bacchus Entertainment Ltd. and Bacchus Filings Inc., both companies controlled by Penny Green, pursuant to which the parties agreed to amend the post merger obligations of the Company contemplated by the merger agreement dated April 7, 2009.  Pursuant to the post merger agreement, the parties agreed that Charity Tunes Inc., currently a wholly owned subsidiary of the Company, shall not be sold to Bacchus Filings Inc. Further Penny Green and Bacchus Entertainment Ltd. agreed to cancel a total of 52,223,931 common shares in the Company upon repayment of $75,000 of debt owed to them by the Company (refer to Note 14).  In addition, if Charity Tunes does not generate $500,000 of revenue by June 30, 2010 all amounts owed to Penny Green and Bacchus Filings shall be forgiven.




4. Intangible Assets and Website Development




Cost

$


Accumulated

Amortization

$


Impairment

$


October 31,2009

Net Carrying

Value

$


October 31,2008

Net Carrying

Value

$Patents


58,262



11,184



–



47,078



54,137Trademarks


19,701



–



–



19,701



19,701Pets911.com


2,115,000



–



2,115,000



–



–2,192,963



11,184



2,115,000



66,779



73,838Website Development


197,141



–



197,141



–



197,1412,390,104



11,184



2,312,141



66,779



270,979




On October 12, 2009, the Company entered into an asset purchase agreement to acquire Pets911.com and all intellectual property, software and business assets associated with operating the website.  Pursuant to the terms of the agreement the Company issued 3,000,000 shares of its common stock.  The Company recorded the fair value of the shares of $2,115,000 as intangible assets.




The following table summarizes the expected amortization on the patents over the next five years:




2010

$
6,9542011


6,9542012


6,9542013


6,9542014


6,954$
34,770




F-12




On4 Communications Inc.


(formerly Sound Revolution Inc.)


(A Development Stage Company)


Notes to the Consolidated Financial Statements


October 31, 2009


(Expressed in US dollars)




5.  Property and Equipment




Cost

$


Accumulated

Amortization

$


October 31,2009

Net Carrying

Value

$


October 31,2008

Net Carrying

Value

$Computer equipment


32,053



25,326



6,727



6,894Office equipment


25,067



23,792



1,275



8,96857,120



49,118



8,002



15,862




6.  Related Party Transactions




a)
As at October 31, 2009, the Company owed $426,908 (2008 - $426,908) to On4 Canada Inc., the parent company, for advances of operating funds and services provided. This amount owing is unsecured, non-interest bearing and due on demand.




b)
As at October 31, 2009, the Company owed $324,307 (2008 - $219,783) to management and directors for consulting services. The amounts owing are unsecured, non-interest bearing, and due on demand.




c)
As at October 31, 2009, the Company owed $187,565 (2008 - $262,565) to management and directors of the Company for advance of operating funds and services provided on behalf of the Company. The amounts owing are unsecured, bear interest at 10% per annum, and payable on January 31, 2010. As at October 31, 2009, accrued interest of $37,446 (2008 - $25,611) is included in accrued interest payable.




d)
As at October 31, 2009, the Company has notes payable of $364,712 (2008 - $Nil) to a related party that was bearing interest at 10% per annum. Interest was charged and was payable quarterly on any outstanding balance beginning on September 1, 2004 to February 29, 2008 (prior to that date the borrowings from the related parties were non-interest bearing). Commencing March 1, 2008, the notes are non-interest bearing, unsecured and are payable on demand.




e)
On July 31, 2009, the Company issued a convertible note to a related party to secure $120,000 of amounts owed.  The note is non-interest bearing until maturity seven months after issuance. If the note is not repaid upon the maturity date, it bears interest at a rate of 20%, with interest accruing monthly. The note may be converted at any time into shares of the Company’s common stock at a price of $0.10 per share, at the option of the holder.




In accordance with ASC 470-20,Debt with Conversion and Other Options, the Company recognized the intrinsic value of the embedded beneficial conversion feature of $12,000 as additional paid-in capital and an equivalent discount which will be charged to operations over the term of the convertible debenture. The Company records accretion expense over the term of the convertible note up to its face value of $120,000. As at October 31, 2009, $10,218 had been accreted increasing the carrying value of the convertible note to $118,218.




f)
On August 31, 2004, the Company entered into an agreement with its current director and chief financial officer, Penny Green, and Bacchus Entertainment Ltd., a company 100% owned by Penny Green, whereby the net amount of monies borrowed by the Company from Penny Green or Bacchus Entertainment would all convert to a loan payable by the Company to Bacchus Entertainment and that Bacchus Entertainment would make further loans to the Company from time to time with interest accruing at the annual rate of 10% up to an aggregate of $70,000. On November 30, 2004, pursuant an addendum, the parties agreed that interest on the loan monies would accrue quarterly and would be due within 45 days of the end of each quarter. On January 1, 2007, the loan agreement was again amended so that additional amounts loaned to the Company by Penny Green or Bacchus Entertainment would be subject to the loan agreement and so monthly payments will not be required until September 1, 2007. On June 30, 2007, this agreement was further amended to extend the payment period to January 1, 2008. On January 1, 2008, this agreement was further amended to waive the January 1, 2008 payment deadline and to make payment due on demand. On May 30, 2008, the amounts due to related parties were consolidated into one and are now due to Penny Green. Starting March 1, 2008, these amounts are non-interest bearing, unsecured and due on demand.





F-13





On4 Communications Inc.


(formerly Sound Revolution Inc.)


(A Development Stage Company)


Notes to the Consolidated Financial Statements


October 31, 2009


(Expressed in US dollars)




7.  Notes Payable




October 31,2009

$


October 31,2008

$Bling Capital Corp., unsecured, non-interest bearing, and due on demand.


24,985



24,985McCann Family Holding Corporation, unsecured, due interest at 13% per annum, and due on demand. Original principal of $278,460 (Cdn$300,000) plus $55,692 (Cdn$60,000) of non-payment penalties for failure to

repay the debt at due date.


334,152



297,939Scottsdale Investment Corporation, unsecured, due interest at 12% per annum, and due on demand.


400,000



400,000Ed Aaronson, unsecured, due interest at 10% per annum, and due on demand.


115,000



24,000Troy Rice, unsecured, due interest at 10% per annum, and due on demand.


7,500



7,500881,637



754,424





As at October 31, 2009, accrued interest of $103,861 (2008 - $11,807) is included in accrued interest payable.




8.  Share Capital




October 31, 2009




At October 31, 2009, the Company has agreed to issue 220,000 common shares for consulting services with a fair value of $70,000.




During the year ended October 31, 2009, the Company issued 661,410 units at $0.20 per share for cash proceeds of $132,282.  Each unit will consist of one common share and one half share purchase warrant exercisable at $0.90 per share up to July 24, 2011. In connection with the issuance, the Company paid finders’ fees of $8,000.




On October 12, 2009, the Company issued 3,000,000 common shares at a fair value of $2,130,000 for the acquisition of assets of Pets911.com and acquisition costs of $15,000.  Refer to Note 4.




In May 2009, the Company converted 2,000,000 preferred shares into 4,000,000 common shares of the Company at a rate of two common shares for each preferred share.




In May 2009, the Company issued 68,258,478 common shares with a fair value of $2,661,689 for the acquisition of Sound Revolution Inc.  Refer to Note 3.




In April 2009, the Company issued 333,888 common shares to the preferred shareholders to settle the dividend payable of $83,472.




In March 2009, the Company issued 100,000 shares of common stock at a fair value of $50,000 to the Company’s Chief Financial Officer pursuant to a consulting agreement.




October 31, 2008




On March 7, 2008, the Company issued 3,021,200 common shares at $0.50 per share for proceeds of $1,516,000.  The Company incurred share issuance costs of $78,015 relating to this private placement.




On February 7, 2008, the Company issued 1 common share to its subsidiary, PetsMobility Inc.




Dividends




During the year ended October 31, 2009, the Company issued 333,888 common shares to the preferred shareholders to settle the dividend payable of $83,472.




F-14





On4 Communications Inc.


(formerly Sound Revolution Inc.)


(A Development Stage Company)


Notes to the Consolidated Financial Statements


October 31, 2009


(Expressed in US dollars)




9. Share Purchase Warrants




In February 2009, the Company issued 78,000 share purchase warrants to consultants of the Company for services provided. Each warrant allows the warrant holder to purchase one share of common stock of the Company at $0.50 per share for a period of five years from the date of issuance.




In July 2009, the Company issued 330,705 share purchase warrants as part of a private placement.  Each warrant allows the warrant holder to purchase one share of common stock of the Company at $0.90 per share for a period of two years from the date of issuance.




Number of Warrants


Exercise PriceBalance – October 31, 2007


1,300,000



0.50Issued


78,000



0.50Balance – October 31, 2008


1,378,000


$
0.50Issued


408,705


$
0.82Balance – October 31, 2009


1,786,705


$
0.57




During the year ended October 31, 2009, the Company recorded stock-based compensation expense of $29,350 (2008 - $29,350) relating to the fair value of share purchase warrants using the Black-Scholes Option Pricing Model and the following assumptions:




2009Expected Dividend Yield


0.00
%Risk-free Rate


2.50
%Expected Life of the Warrant

5 yearsVolatility


100
%




As at October 31, 2009, the following share purchase warrants were outstanding:




Number of Warrants
Exercise Price
Expiry Date1,300,000
$0.50
July 23, 201278,000
$0.50
February 28, 201378,000
$0.50
February 28, 2013330,705
$0.90
July 24, 20111,786,705




F-15


On4 Communications Inc.
 (formerly Sound Revolution Inc.)
 (A Development Stage Company)
 Notes to the Consolidated Financial Statements
 October 31, 2009
 (Expressed in US dollars)




10.  Stock Options




During the year ended October 31, 2008, the Company granted 500,000 options, of which 200,000 options vested immediately, 150,000 options vested on December 18, 2008, and 150,000 options were to vest on December 18, 2009. In November 2008 the final tranche of 150,000 unvested options were forfeited. The fair value of the options was estimated at the date of grant using the Black-Scholes option pricing model using the following weighted average assumptions: risk-free interest rate of 4.14%, expected volatility of 100%, an expected option life of 10 years and no expected dividends. The weighted average fair value of options granted was $0.43 per option. During the year ended October 31, 2009, stock-based compensation expense of $65,189 was charged to operations.





The following table summarizes stock option plan activities:




Number ofOptions

WeightedAverage

Exercise Price

$

WeightedAverage

RemainingContractual

Life (years)

AggregateIntrinsic

Value

$Balance – October 31, 2007


275,000


0.50Granted


500,000


1.00Balance – October 31, 2008


775,000


0.82




–Forfeited


(150,000
)

1.00Balance – October 31, 2009


625,000


0.78

7.96


–





Additional information regarding stock options as of October 31, 2009, is as follows:




Number ofOptions
ExercisePrice

$
Expiry Date275,000
0.50
July 23, 2017350,000
1.00
December 18, 2017625,000




A summary of the status of the Company’s non-vested stock options as of October 31, 2009 are presented below:




Stock Options

#


Weighted Average

Grant Date

Fair Value

$Non-vested, October 31, 2007


50,000



0.50Granted


500,000



1.00Vested


(250,000
)


0.90Non-vested, October 31, 2008


300,000



1.00Forfeited


(150,000
)


1.00Vested


(150,000
)


1.00Non-vested, October 31, 2009


–



–





As of October 31, 2009, the Company had $Nil of unrecognized compensation expense relating to unvested options.




F-16





On4 Communications Inc.
 (formerly Sound Revolution Inc.)
 (A Development Stage Company)
 Notes to the Consolidated Financial Statements
 October 31, 2009
 (Expressed in US dollars)


11.  Commitments




a)
On January 3, 2008, the Company through its wholly owned subsidiary Charity Tunes Inc., entered into an Agency and Promotion agreement (the “Agreement”) with World Wildlife Fund Canada (“WWF-Canada”) to raise money and awareness of WWF-Canada’s cause through the participation in promotional programs with Charity Tunes. The term of the agreement is one year, extended from year to year with a termination notice of 30 days prior to the end of a term by either party.




The Company will collect an amount equal to a minimum of 10% of the purchase price of a song or other digital content or products sold in its website for which purchasers select WWF-Canada as the recipient of the donation. Donations collected will be forwarded to WWF-Canada every calendar quarter if donations owed by Charity Tunes are at least $100.




b)
On October 10, 2007, the Company entered into an amendment agreement with Puretracks Inc. (“Puretracks”), whereby the Company agreed to pay to Puretracks, effective as of August 29, 2007, CDN$0.09 per track and CDN$1.08 per album download from the Company’s Charity Tunes website in Canada and $0.08 per track and $0.96 per album downloaded from the Company’s Charity Tunes website in the United States.




c)
On June 29, 2009, the Company’s subsidiary Charity Tunes, entered into a promotional agreement. Pursuant to the agreement the Company shall make its music catalogue available as a promotion from approximately October 1, 2009 to March 31, 2010 in exchange for $108,702 (Cdn $117,605).  As at October 31, 2009, the Company had received $55,430 (Cdn $57,801) and included $90,385 (Cdn $97,788) as deferred revenue.




d)
On September 10, 2009, the Company entered into a consulting agreement with a consultant who will provide consulting services for $4,622 (Cdn $5,000) and 10,000 shares of common stock per month for a term of two months.  As at October 31, 2009, the fair value of 20,000 shares of $9,000 was included in common stock issuable.




e)
The Company rents facilities from other entities. Rent expense for these facilities for the year ended October 31, 2009 and 2008 was $68,857 and $74,731 respectively. The facility leases expire within the next year.




As of October 31, 2009, approximate future minimum lease payment required under non-cancelable operating leases is as follows for the fiscal years ended:




2010 $59,185





12.  Contingent Liability




McCann Family Holding Corporation (“McCann”) filed a lawsuit against the Company for the repayment of the promissory notes dated May 7 and May 22, 2008. The Company has defended the lawsuit on the basis that the funds were not due because they were in fact advanced to and utilized by a company related to McCann, even though the Company executed the promissory notes. McCann has applied to the courts for a summary judgement and the Company is opposing that application. The promissory notes are included in current liabilities as disclosed in Note 7.




F-17




On4 Communications Inc.


(formerly Sound Revolution Inc.)


(A Development Stage Company)


Notes to the Consolidated Financial Statements


October 31, 2009


(Expressed in US dollars)




13.  Income Taxes




The Company has $5,464,789 of net operating losses carried forward to offset taxable income in future years which expire commencing in fiscal 2026. The income tax benefit differs from the amount computed by applying the federal income tax rate of 34% to net loss before income taxes for the years ended October 31, 2009 and 2008, respectively, as a result of the following:




2009

$



2008

$Net loss before taxes


(5,420,719
)


(3,115,418
)Statutory rate


34
%


34
%Expected tax recovery


1,843,045



1,059,242Permanent differences


(1,493,921
)


(383,656
)Change in valuation allowance


(349,124
)


(675,586
)Income tax provision


–



–




The significant components of deferred income tax assets and liabilities as at October 31, 2009 and 2008, after applying enacted corporate income tax rates, are as follows:





2009

$



2008

$Net operating losses carried forward


1,858,029



1,508,905Valuation allowance


(1,858,029
)


(1,508,905
)Net deferred tax asset


–



–




The Company has incurred operating losses of $5,464,789 which, if unutilized, will expire through to 2029. Future tax benefits, which may arise as a result of these losses, have not been recognized in these consolidated financial statements, and have been offset by a valuation allowance. The following table lists the fiscal year in which the loss was incurred and the expiration date of the operating:




Period Incurred

Net OperatingLoss

$

Expiry Date2006

282,206

20262007

2,168,732

20272008

1,987,017

20282009

1,026,834

20295,464,789




14.  Subsequent Events




In accordance with ASC 855, Subsequent Events, the Company has evaluated subsequent events through February 16, 2010, the date the financial statements were available to be issued. During this period, the Company did not have any material recognizable subsequent events, except as disclosed below.




a)
On November 27, 2009, the Company’s subsidiary, Charity Tunes, entered into a promotional agreement with ConAgra Foods Canada Inc (“Con Agra”). Pursuant to the agreement, the Company shall make its music catalogue available as a promotion from approximately February 28, 2010 to September 30, 2010 in exchange for $106,851 (Cdn $115,602).




b)
On February 3, 2010, the Company paid $75,000 of outstanding debt owing to the Company’s Chief Financial Officer and Director.  Pursuant to the merger agreement as disclosed in Note 3, the Company’s Chief Financial Officer and a related party to the Chief Financial Officer cancelled 52,223,931 common shares of the Company.




F-18




Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure





The accounting firm of Peterson Sullivan LLP, Certified Public Accountants, audited our financial statements for the years ended February 28, 2007 and February 29, 2008.  On April 9, 2009 we dismissed Peterson Sullivan and engaged Saturna Group Chartered Accountants LLP as our new independent registered public accounting firm.  During the fiscal years ended February 29, 2008 and February 28, 2009 and through April 9, 2009, there have been no disagreements with Peterson Sullivan LLP on any mater of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements if not resolved to the satisfaction of Peterson Sullivan LLP would have caused it to make reference thereto in connection with its report on the financial statements for such years.





There have been no changes in or disagreements with our accounting firm on accounting and financial disclosure.





Item 9A(T). Controls and Procedures





Evaluation of Disclosure Controls and Procedures





We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.





We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of October 31, 2009. Based on the evaluation of these disclosure controls and procedures, and in light of the material weaknesses found in our internal controls over financial reporting, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective.





Management Report





Our management is responsible for establishing and maintaining effective internal control over financial reporting.  Under the supervision of our executive officers, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of October 31, 2009 using the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).




A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. In our assessment of the effectiveness of internal control over financial reporting as of October 31, 2009, we determined that there were significant deficiencies that constituted material weaknesses, as described below.





1.
Certain entity level controls establishing a “tone at the top” were considered material weaknesses. We do not have a majority of independent directors and our audit committee is comprised of a sole member, who is an executive officer. There is no policy on fraud.  A whistleblower policy is not necessary given the small size of the organization. There is no code of ethics.2.
There is a lack of monitoring of internal control as the company is in the development stage and has limited resources.3.
There is no segregation of duties as we have no employees. The potential for management override exists as our sole officer oversees all aspects of our operations. The lack of independent directors exercising an oversight role further increases the risk of management override.4.
During our audit, there were a significant number of audit adjustments noted, which indicates a material weakness in our financial reporting process and maintenance of our general ledger.




28




Management is currently evaluating remediation plans for the above control deficiencies.





In light of the existence of these control deficiencies, management concluded that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis by our internal controls.





As a result, management has concluded that we did not maintain effective internal control over financial reporting as of October 31, 2009 based on criteria established in Internal Control—Integrated Frameworkissued by COSO.





Saturna Group Chartered Accountants LLP, an independent registered accountant, was not required to and has not issued a report concerning the effectiveness of our internal control over financial reporting as of October 31, 2009.




Changes in Internal Controls





On September 30, 2009, we established an audit committee for the purpose of overseeing our accounting and financial reporting process and audits of our financial statements. Penny Green, our Chief Financial Officer and director, was appointed as a sole member of the audit committee. The audit committee is governed by an audit committee charter, which can be found in Exhibit 99.1 of this form.





During the quarter ended October 31, 2009 there were no other changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.





Item 9B. Other Information





None.




29





PART III





Item 10. Directors, Executive Officers and Corporate Governance.





Directors and Officers





Our bylaws allow the number of directors to be fixed by the Board of Directors. Our Board of Directors has fixed the number of directors at three.





Our current directors and officers are as follows:





Name
Age
PositionCameron Robb
39
Director, President, Chief Executive OfficerPenny Green
38
Director, Chief Financial Officer, Principal Accounting Officer, Secretary and TreasurerCatherine LeBlanc
39
Director





Our current directors will serve as such until our next annual shareholder meeting or until their successors are appointed. Our current executive officers hold their positions at the will of our Board of Directors. There are no arrangements, agreements or understandings between non-management security holders and management under which non-management security holders may directly or indirectly participate in or influence the management of our affairs.





Cameron Robb, President, Chief Executive Officer, Director




Cameron Robb co-founded PetsMobility in June 2004 and On4 Communications, Inc. in June 2006. He has been acting Chief Executive Officer and a Director of both organizations since their inceptions. Mr. Robb operated an executive management consultancy through which he advised private and public companies on matters such as venture capital and finance, international sales, and marketing. His clients represented diverse industries such as entertainment, technology, energy, and consumer products. He was President and CEO and co-founder of Wooket Graphics, Inc, a North American entertainment and licensing company. Currently, in addition to his work with On4 and PetsMobility, Mr. Robb serves as an Advisory Board Member for the Canada Arizona Business Council, Firstar Sports, Inc, and serves as a Board Member on For The Earth Corporation. He is also a mentor to Arizona State University students in the Technopolis Program, established to help ASU become a more responsive and entrepreneurial university.





Penny Green,Chief Financial Officer, Principal Accounting Officer, Secretary and Treasurer




Penny Green is the founder of Charity Tunes Inc. and Sound Revolution Inc., our predecessor, and served as our President and Chief Executive Officer from June 5, 2001 to March 15, 2004, from May 30, 2005 to March 30, 2007, and from September 8, 2008 to September 15, 2008, and again from February 9, 2009 to September 21, 2009.  She also served as the Company’s Secretary from June 5, 2001 to March 15, 2004 and from June 15, 2004 to September 15, 2008, as well as its Treasurer and a director from June 5, 2001 to September 15, 2008.  In addition, Ms. Green acted as the Company’s Chief Financial Officer from August 11, 2004 to September 15, 2008 and its Chairman from March 15, 2004 to September 15, 2008. On February 9, 2009, Ms. Green was reappointed as the Chief Financial Officer, Secretary and Treasurer and has remained in those positions today.





Ms. Green has been the managing attorney of the law firm Bacchus Law Corporation for the past 12 years.  She has been practicing law for more than 14 years, and founded the firm approximately 12 years ago. She is called as an attorney is the State of Washington and the Province of British Columbia, and is a member of the Washington State Bar Association, the American Bar Association, the Law Society of British Columbia and the Canadian Bar Association.





30





Catherine LeBlanc,Director





Catherine LeBlanc has over 10 years of business experience focused in the area of human resources management, including strategic business partnering, organizational effectiveness and labor relations. She presently serves as a human resources manager for Transcontinental Inc., North America’s sixth largest printer, a position she has held since 2006. From 2003 through 2005, Ms. LeBlanc was a human resources manager for Teletech, a company providing international customer management, business-process and database-marketing solutions. She has also held positions at Bombardier Aerospace and Molson Inc. Ms. LeBlanc’s experience includes collective bargaining and project management. She is an active member of the Human Resources Professional Association of Ontario.




Other than as disclosed above, our directors currently do not serve on the boards of other public companies.




Significant Employees




There are no individuals other than our executive officers who make a significant contribution to our business.





Family Relationships




There are no family relationships among our officers or directors.





Legal Proceedings





None of our directors, executive officers, promoters or control persons has been involved in any of the following events during the past five years:





o
any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;





o
any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offences);





o
being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or





o
being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.





Section 16(a) Beneficial Ownership Compliance Reporting





Section 16(a) of the Securities Exchange Act of 1934 requires a company’s directors and officers, and persons who own more than ten-percent (10%) of the company’s common stock, to file with the Securities and Exchange Commission reports of ownership on Form 3 and reports of change in ownership on Forms 4 and 5. Such officers, directors and ten-percent stockholders are also required to furnish the company with copies of all Section 16(a) reports they file. Based solely on our review of the copies of such forms received by us and on written representations from certain reporting persons, we believe that all Section 16(a) reports applicable to our officers, directors and ten-percent stockholders with respect to the fiscal year ended October 31, 2009 were filed, except that some reports were filed late.





31





Code of Ethics





We have not yet adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions because we have not yet finalized the content of such a code. Companies whose equity securities are quoted on the OTC Bulletin Board are not currently required to implement a code of ethics.





Director Nominees





As of February 5, 2010 there have been no material changes to the procedures by which security holders may recommend nominees to our Board of Directors.





We do not have a nominating committee. Our Board of Directors selects individuals to stand for election as members of the Board. Since the Board of Directors does not include a majority of independent directors, the decision of the Board as to director nominees is made by persons who have an interest in the outcome of the determination. The Board will consider candidates for directors proposed by security holders, although no formal procedures for submitting candidates have been adopted. Unless otherwise determined, not less than 90 days prior to the next annual meeting of the Board of Directors at which the slate of Board nominees is adopted, the Board will accept written submissions of proposed nominees that include the name, address and telephone number of the proposed nominee; a brief statement of the nominee’s qualifications to serve as a director; and a statement as to why the security holder submitting the proposed nominee believes that the nomination would be in the best interests of security holders. If the proposed nominee is not the same person as the stockholder submitting the name of the nominee, a letter from the nominee agreeing to the submission of his or her name for consideration should be provided at the time of submission. The letter should be accompanied by a résumé supporting the nominee's qualifications to serve on the Board of Directors, as well as a list of references.





The Board identifies director nominees through a combination of referrals from different people, including management, existing Board members and security holders. Once a candidate has been identified, the Board reviews the individual's experience and background and may discuss the proposed nominee with the source of the recommendation. If the Board believes it to be appropriate, Board members may meet with the proposed nominee before making a final determination whether to include the proposed nominee as a member of management's slate of director nominees submitted to security holders for election to the Board.





Among the factors that the Board considers when evaluating proposed nominees are their knowledge of and experience in business matters, finance, capital markets and mergers and acquisitions. The Board may request additional information from any candidate prior to reaching a determination. The Board is under no obligation to formally respond to all recommendations, although as a matter of practice, it will endeavor to do so.





Audit Committee





On September 30, 2009, we implemented an audit committee comprised of our Chief Financial Officer and director, Penny Green, in accordance with the requirements of the British Columbia Instrument 51-509 Issuers Quoted in the U.S. Over-the-Counter Marketsand National Instrument 52-110 Audit Committees. The audit committee adopted an audit committee charter governing the duties of the audit committee, which is included as an exhibit under Item 15 of this form.





32





Item 11. Executive Compensation.





The following Summary Compensation Table sets forth the total annual compensation paid or accrued by us to or for the account of the Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”). None of our other executive officers received compensation in excess of $100,000 during the fiscal year ended October 31, 2009.





Summary Compensation





Nameand Principal

Position
Fiscal

Year
Salary

($)
Bonus

($)
Stock

Awards

($)
Option

Awards

($)
Non-Equity

Incentive

Plan

Compensa-tion

($)
Non-qualified

Deferred

Compensa-tion

Earnings

($)
All

Other

Compensa-

tion

($)
Total

($)Cameron Robb (3) President, Chief Executive Officer (1)
2009
120,000
0
0
0
0
0
0
120,0002008
120,000
0
0
0
0
0
0
120,000Penny Green

Chief Executive

Officer, Principal Accounting Officer, Secretary, Treasurer and Director (2)
2009
0
0
0
0
0
0
0
02008
0
0
0
0
0
0
0
0Catherine LeBlanc(3)
2009
0
0
0
0
0
0
0
02008
0
0
0
0
0
0
0
0Troy Rice(4)
2009
50,000
0
11,000
0
0
0
0
61,0002008
30,000
0
50,000
0
0
0
0
80,000Robin Ram(5)
2009
25,000
0
0
0
0
0
0
25,0002008
63,500
19,600
22,500
10,622
0
0
0
116,222 (6)





(1)
Cameron Robb serves as our President and Chief Executive Officer from September 21, 2009 to present.





(2)
Penny Green served as President and Chief Executive Officer of Sound Revolution from June 4, 2001 to March 15, 2004, from June 1, 2005 to March 30, 2007, from September 8, 2008 to September 15, 2008 and again from February 9, 2009 to September 21, 2009.  Ms. Green also served as Secretary, Treasurer and Director of Sound Revolution from June 4, 2001 to September 14, 2008, again from February 9, 2009 to present.  Ms Green has also held the title of Chief Financial Officer from August 11, 2004 to September 14, 2008, and from February 9, 2009 to present, and principal accounting officer from February 9, 2009 to present.





(3)
Catherine LeBlanc served as our President, Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, Secretary and Treasurer from September 15, 2008 to February 9, 2009.  Ms. LeBlanc has also served as a Director of Sound Revolution since September 15, 2008.





(4)
Troy Rice acted as our Chief Financial Officer from September 5, 2008 to May 1, 2009.





(5)
Mr. Ram was appointed as chief operating officer and chief marketing officer of Sound Revolution on June 19, 2006 and December 1, 2006, respectively, which post he held until March 30, 2007. From March 30, 2007 to September 8, 2008, Mr. Ram served as our President and Chief Executive Officer. Mr. Ram has also served as a Director of Sound Revolution from June 26, 2006 to September 8, 2008.





(6)
Represents management fees paid to Mr. Ram for his services as Chief Operating Officer and Chief Marketing Officer of Sound Revolution and, subsequent to March 30, 2007, for services as our President and Chief Executive Officer.




33




Pension, Retirement or Similar Benefit Plans





There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. We have no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of the Board of Directors or a committee thereof.





Compensation Committee





We currently do not have a compensation committee of the Board of Directors. The Board of Directors as a whole determines executive compensation.





Compensation of Directors





We do not pay members of the Board of Directors any fees for attendance at the Board meetings or similar remuneration or reimburse them for any out-of-pocket expenses incurred by them in connection with our business.





Compensation Committee Report





Our Principal Executive and Financial Officer reviewed the Compensation Discussion and Analysis and the requirements pertaining to this item. She has determined that no disclosure is necessary as we have not adopted any compensation programs and we have approved that a statement to that effect be disclosed in this Form 10-K.





Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.





Neither we nor our wholly owned subsidiary have any compensation plans or individual compensation arrangements under which our securities are authorized for issuance to either employees or non-employees.





The following table sets forth the ownership, as of February 5, 2010, of our common stock by each of our directors, by all of our executive officers and directors as a group and by each person known to us who is the beneficial owner of more than 5% of any class of our securities. As of February 5, 2010, there were 47,651,046 shares of our common stock issued and outstanding. All persons named have sole or shared voting and investment control with respect to the shares, except as otherwise noted. The number of shares described below includes shares which the beneficial owner described has the right to acquire within 60 days of the date of this annual report.




34





Title of Class
Name and Address ofBeneficial Owner
Amount andNature of

BeneficialOwnership
Percent ofClass (6)EXECUTIVE OFFICERS AND DIRECTORS AS A GROUPCommon
Cameron Robb (1)

15615 N.71st Street

Scottsdale, Arizona

USA  85254
15,850,000(2)
33.29%Common
Catherine LeBlanc (3)

7 Vancouver Street, Suite 207

Barrie, Ontario

Canada  L4M 4M1
0
0%Common
Penny Green (4)

1820- 925 West Georgia Street

Vancouver, British Columbia

Canada  V6C 3L2
2,414,035 (5)
5.07%All Executive Officers and Directors as a Group
18,264,035
38.33%5% BENEFICIAL OWNERSCommon
On4 Communications, Inc.(6)
15,850,000
33.29%Common
Bacchus Entertainment Ltd.(6)
2,414,035
5.07%All 5% Beneficial Owners
18,264,035
38.33%





(1)
Cameron Robb is our President, Chief Executive Officer, and Director.





(2)
Includes 15,850,000 shares of our common stock held by On4 Communications, Inc. (Canada), a Canadian federal corporation (“On4 Canada”) over which Mr. Robb and Gord Jessop share voting and dispositive control. However, of the 15,850,000 shares, 4,336,001 shares are beneficially owned by Gord Jessop and 4,010,499 are beneficially owned by other shareholders.  On4 Canada is currently completing a reorganization to transfer legal title to the beneficial owners of the shares





(3)
Catherine LeBlanc is our Director.





(4)
Penny Green is our Chief Financial Officer, Principal Accounting Officer, Secretary, Treasurer and Director.





(5)
Includes 2,414,035 shares of our common stock held by Bacchus Entertainment Ltd., a company over which Ms. Green exercises voting and dispositive control.





(6)
Calculated based on issued and outstanding shares of 47,651,046 as of February 5, 2010.




35




Changes in Control





On February 3, 2010, pursuant to the Post Merger Agreement, Penny Green, our director and officer, and Bacchus Entertainment Ltd., a company controlled by her, cancelled a total of 52,223,931 shares of our common stock. As a result of the cancellation of shares, a change of control occurred, whereupon Penny Green ceased to be the beneficial owner of the majority of issued and outstanding shares of our common stock.





Currently, On4 Canada is our largest shareholder, holding 15,850,000 shares of our common stock, of which 4,336,001 shares are held beneficially by Gord Jessop and 4,010,499 are beneficially owned by other shareholders. On4 Canada is currently completing a reorganization to transfer legal title to beneficial owners of shares.





There are currently no other arrangements or agreements which would result in a change of control of us.





Item 13. Certain Relationships and Related Transactions, and Director Independence





At October 31, 2009, we owed $127,409 to Cameron Robb, our President, CEO and Director, for his consulting services. This amount is unsecured, non-interest bearing, and due on demand. We also owed $67,065.03 to Mr. Robb for advances of operating funds and services provided. The loan is unsecured and accrues interest at 10% per annum, the total amount of the loan being due on January 31, 2010. As at October 31, 2009, we have recorded accrued interest of $13,212.22.





At October 31, 2009, we owed $332,308 to Penny Green, our Chief Financial Officer and Director. Our subsidiary, Charity Tunes owes Ms Green $32,404. All amounts was unsecured, non-interest bearing, and was due on demand.





At October 31, 2009, we owed $196,898 plus interest to Gordon Jessop for his consulting services. At October 31, 2009, Mr. Jessop exercised direction and control over On4 Communications Inc., a company which holds over 5% of our issued and outstanding shares (On4 Canada). The amount owing is unsecured, non-interest bearing, and is due on demand.





At October 31, 2009, we further owed $120,500 to Mr. Jessop for advance of operating funds and services provided to us. The amounts owing are unsecured, due interest at 10% per annum, and due on January 31, 2010. As at October 31, 2009, we have recorded accrued interest of $24,233.40.





At October 31, 2009, we owed $323,476 to On4 Canada for advances of operating funds. In addition, our subsidiary, PetsMobility, owed $103,432 to On4 Canada. These amounts owing are unsecured, non-interest bearing and due on demand.





On April 7, 2009, we (then Sound Revolution Inc.) entered into the Merger Agreement with On4 Communications, Inc., an Arizona corporation, to effect a merger of the two companies by a share exchange on one-for-one basis. Pursuant to the Merger Agreement, as a condition precedent, we entered into a debt conversion agreement and a convertible note agreement with Penny Green, as described further in paragraphs below. We further transferred all of our assets and debts, other then the amounts owing to Penny Green and Bacchus Entertainment Ltd., to our wholly owned subsidiary, Charity Tunes Inc. We undertook to raise a minimum of US$150,000 through direct offering of our units, comprising of one common share and one half warrant, upon the Merger closing. The raised funds were to be used to repay the outstanding loans owed to Penny Green or companies controlled by her.





On April 30, 2009, we entered into a debt conversion agreement (the “Debt Conversion Agreement”) with Bacchus Entertainment Ltd. to convert $35,000 of the debt owed by us to Bacchus Entertainment Ltd. in accordance with loan agreement dated August 31, 2004 and amended as of January 1, 2007 and January 1, 2008, into shares of our common stock at the price of $0.001 per share for an aggregate total of 35,000,000 shares.





On July 31, 2009, we issued a convertible note to Penny Green to secure $120,000 of amounts owed to her. The note is non-interest bearing until maturity seven months after issuance. If the note is not paid upon the maturity date, it bears interest at a rate of 20% accruing on a monthly basis. The note may be converted at any time into shares of the Company’s common stock at a price of $0.10 per share, at the option of the holder.





36





On September 14, 2009, we entered into the Post Merger Agreement with Penny Green, Bacchus Entertainment Ltd. and Bacchus Filings Inc, dated September 14, 2009 which replaced the loan repayment and share cancellation obligations for Penny Green and her affiliated companies pursuant to the Merger Agreement. Pursuant to the terms of the Post Merger Agreement, once we paid a minimum of $75,000 to Penny Green or Bacchus Entertainment Ltd. towards the debt of $450,000 owed them, the would cancel 52,223,931 shares of our common stock and no further cancellations would be due.  Further, Bacchus Filings Inc. and Penny Green agreed to relinquish all rights they had to acquire Charity Tunes. If Charity Tunes does not generate at least $500,000 in revenue by June 30, 2010, then Bacchus Entertainment and Ms. Green also agreed to forgive, release or forever discharge us from paying all monies owed by us to Bacchus Entertainment or Ms. Green as of September 14, 2009.  On February 3, 2010, we paid $75,000 to Penny Green and 52,223,931 shares were cancelled.





Other than as described above in the sections “Executive Compensation” and “Security Ownership of Certain Beneficial Owners and Management”, we have not entered into any transactions with our officers, directors, persons nominated for these positions, beneficial owners of 5% or more of our common stock or family members of these persons, wherein the amount involved in the transaction or a series of similar transactions exceeded the lesser of $120,000 or 1% of the average of our total assets for the last fiscal years.


Director Independence


The OTC Bulletin Board on which our common stock is quoted on does not have any director independence requirements. However, we currently use NASDAQ’s general definition for determining director independence, which states that “independent director” means a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship, that, in the opinion of the company’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of the director. Currently, none of our directors meet this definition of independence.





Item 14. Principal Accounting Fees and Services





Audit, Audit-Related and Non-Audit Fees





The following table sets forth the fees for professional audit services and the fees billed for other services rendered by our former auditors, Peterson Sullivan, LP, and our current auditors, Saturna Group Chartered Accountants LLP, in connection with the audit of our financial statements for the years ended February 28, 2008 and 2009, transitional period ended October 31, 2009 and any other fees billed for services rendered by our auditors during these periods.





AUDIT, AUDIT-RELATED AND NON-AUDIT FEESDescription of Service

Year Ended

October 31, 2009

($)


Year Ended

February 28, 2009

($)


Year Ended

February 29, 2008

($)Audit fees


27,500



19,400



27,000Audit-related fees


-



-



-Tax fees


-



-



-All other fees


-



-



-Total


27,500



19,400



27,000




Audit Committee Approval





Our audit committee pre-approved all audit related services for the year ended October 31, 2009.




37




Part IV





Item 15. Exhibits, Financial Statement Schedules





The financial statement schedules are omitted because they are inapplicable or the requested information is shown in our financial statements or related notes thereto.





Exhibits




ExhibitNumber
ExhibitDescription99.1
Audit Committee Charter, dated September 30, 2009 (1)3.1
Certificate of Merger filed with the Delaware Secretary of State dated May 1, 2009 incorporated by reference as Exhibit 3.1 of our Current Report on Form 8-K filed on May 7, 20093.2
Certificate of Amendment filed with the Delaware Secretary of State on July 2, 2009 incorporated by reference as Exhibit 3.1 of our Current Report on Form 8-K filed on July 27, 200910.1
Merger Agreement between the Company and On4 Communications, Inc. dated March 12, 2009 incorporated by reference as Exhibit 10.1 of our Current Report on Form 8-K filed on April 16, 200910.2
Debt Conversion Agreement with Bacchus Entertainment Ltd. dated March 12, 2009 (1)10.3
Merger Agreement with On4 Communications, Inc. dated April 7, 2009 incorporated by reference as Exhibit 10.1 of our Current Report on Form 8-K filed on April 13, 200910.4
Convertible Note Agreement with Bacchus Entertainment Ltd. dated April 30, 2009 incorporated by reference as Exhibit 10.2 of our Current Report on Form 8-K filed on May 7, 200910.5
Debt Conversion Agreement with Bacchus Entertainment Ltd. dated April 30, 2009 incorporated by reference as Exhibit 10.3 of our Current Report on Form 8-K filed on May 7, 200910.6
Promotion Agreement between Charity Tunes Inc. and ConAgra Foods Canada Inc. dated June 29, 2009 incorporated by reference as Exhibit 10.1 of our Current Report on Form 8-K filed on July 2, 200910.7
Post Merger Agreement with Penny Green, Bacchus Entertainment Ltd. and Bacchus Filings Ind. dated September 14, 2009 incorporated by reference as Exhibit 10.2 of our Quarterly Report on Form 10-K filed on September 18, 200931.1
Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
Certification of the Principal Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 200231.2
Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.2
Certification of the Principal Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002




(1)      Included as an exhibit to our Annual Report on Form 10-K filed on February 16, 2010.




38





SIGNATURES





Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this Annual Report to be signed on its behalf by the undersigned thereunto duly authorized.




ON4 COMMUNICATIONS, INC.Date:  September 29, 2010
By:
/s/ Cameron RobbCameron RobbPresident, Chief Executive Officer, Director





Pursuant to the requirements of the Exchange Act, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.








Signature
Title
Date/s/Cameron Robb
President, Chief Executive Officer, Director
September 29, 2010Cameron Robb/s/Penny Green
Chief Financial Officer, Principal Accounting Officer,
September 29, 2010Penny Green
Secretary,Treasurer, Director
  40