UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
Form
10-Q
(Mark
One)
☒ QUARTERLY REPORT PURSUANT TO SECTION
13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the quarterly period ended November 30, 2014
or
☐ TRANSITION REPORT PURSUANT TO
SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from ____________ to ____________
Commission
file number 333-151434
PORTLOGIC
SYSTEMS INC.
(Exact
name of registrant as specified in its charter)
NEVADA |
|
20-2000407 |
(State
or other jurisdiction of
incorporation or organization) |
|
(I.R.S.
Employer
Identification No.) |
|
|
|
2
Toronto Street, Suite 422, Toronto, Ontario, Canada |
|
M5C
2B5 |
(Address
of principal executive offices) |
|
(Zip
Code) |
Registrant’s
telephone number, including area code (647) 847-8350
Securities
registered under Section 12(b) of the Exchange Act: None.
Securities
registered under Section 12(g) of the Exchange Act: None.
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.
Yes ☒ No ☐
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 definitions of "large accelerated filer," "accelerated filer," and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ |
Accelerated filer ☐ |
|
|
Non-accelerated filer ☐ (Do
not check if a smaller reporting company) |
Smaller reporting company ☒ |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ☐
No ☒
As of January
15, 2015, the registrant had 206,551,422 shares of common stock, par value $0.001, outstanding.
PORTLOGIC
SYSTEMS INC.
FORM
10-Q
For
the six months ended November 30, 2014
TABLE
OF CONTENTS
|
|
PAGE
NUMBER |
|
|
|
|
PART
I |
|
|
|
|
Item
1. |
Consolidated
Financial Statements. |
4 |
Item
2. |
Management's
Discussion and Analysis of Financial Condition and Results of Operations. |
16 |
Item
3. |
Quantitative
and Qualitative Disclosures About Market Risk. |
19 |
Item
4T. |
Controls
and Procedures. |
19 |
|
|
|
|
PART
II |
|
|
|
|
Item
1. |
Legal
Proceedings. |
21 |
Item
1A. |
Risk
Factors. |
21 |
Item
2. |
Unregistered
Sales of Equity Securities and Use of Proceeds. |
23 |
Item
3. |
Defaults
Upon Senior Securities. |
23 |
Item
4. |
Submission
of Matters to a Vote of Security Holders. |
23 |
Item
5. |
Other
Information. |
23 |
Item
6. |
Exhibits. |
24 |
CAUTIONARY
NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Statements
in this quarterly report on Form 10-Q may be "forward-looking statements". Forward-looking statements include, but are
not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions, or any other statements
relating to our future activities or other future events or conditions. These statements are based on current expectations, estimates,
and projections about our business based, in part, on assumptions made by our management. These statements are not guarantees
of future performance and involve risks, uncertainties, and assumptions that are difficult to predict. Therefore, actual outcomes
and results may, and probably will, differ materially from what is expressed or forecasted in the forward-looking statements due
to numerous factors, including those described above and those risks discussed from time to time in this quarterly report on Form
10-Q, including the risks described under "Risk Factors" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and in other documents we file with the Securities and Exchange Commission.
In
addition, such statements could be affected by risks and uncertainties related to our financial condition, factors that affect
our industry, market and customer acceptance, competition, government regulations and requirements and pricing, as well as general
industry and market conditions and growth rates, and general economic conditions. Any forward-looking statements speak only as
of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect
events or circumstances after the date of this quarterly report on Form 10-Q, except as required by law.
PART
I
Item
1. Financial Statements
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER
30, 2014 (UNAUDITED)
FORMING
A PART OF QUARTERLY REPORT
PURSUANT
TO THE SECURITIES EXCHANGE ACT OF 1934
PORTLOGIC
SYSTEMS INC.
|
Page
# |
|
|
Unaudited
Interim Consolidated Balance Sheets as of November 30, 2014 and May 31, 2014 |
5 |
|
|
Unaudited
Interim Consolidated Statements of Operations for the Six Months Ended November 30, 2014 and November 30, 2013 |
6 |
|
|
Unaudited
Interim Consolidated Statements of Cash Flows for the Six Months Ended
November 30, 2014 and November 30, 2013 |
7 |
|
|
Notes
to Unaudited Interim Consolidated Financial Statements |
8-15 |
PORTLOGIC
SYSTEMS INC.
UNAUDITED
INTERIM CONSOLIDATED BALANCE SHEETS
AS OF
NOVEMBER 30, 2014 AND MAY 31, 2014
(Amounts
expressed in US Dollars)
| |
Nov 30, 2014 | | |
May 31, 2014 | |
ASSETS | |
$ | | |
$ | |
Current | |
| | |
| |
Cash and cash equivalents | |
| 97 | | |
| 4,011 | |
Loan receivable, net of allowance for doubtful accounts of $0 at November 30, 2014 and May 31, 2014 | |
| 7,850 | | |
| 7,850 | |
Accounts receivable | |
| 48,212 | | |
| 59,651 | |
Prepaid expenses and deposits | |
| 6,255 | | |
| 6,255 | |
| |
| 62,414 | | |
| 77,767 | |
| |
| | | |
| | |
TOTAL ASSETS | |
| 62,414 | | |
| 77,767 | |
| |
| | | |
| | |
LIABILITIES | |
| | | |
| | |
Current | |
| | | |
| | |
Accounts payable and accrued liabilities | |
| 373,240 | | |
| 404,726 | |
Short term loans | |
| 23,025 | | |
| 23,025 | |
New convertible loans | |
| 662,936 | | |
| 636,546 | |
Shareholder loan | |
| 19,000 | | |
| 19,000 | |
Other loan | |
| 2,550 | | |
| 2,550 | |
Convertible loan | |
| 7,000 | | |
| 7,000 | |
| |
| 1,087,751 | | |
| 1,092,847 | |
| |
| | | |
| | |
STOCKHOLDERS’ DEFICIENCY | |
| | | |
| | |
Capital stock | |
| | | |
| | |
Preference stock; $0.001 par value; 1,000,000 shares authorized; | |
| | | |
| | |
0 issued and outstanding at November 30, 2014 and May 31, 2014 | |
| - | | |
| - | |
Common stock; $0.001 par value; 225,000,000 shares authorized; | |
| | | |
| | |
206,551,422* issued and outstanding at November 30, 2014 and May 31, 2014 | |
| 206,551 | | |
| 206,551 | |
| |
| | | |
| | |
Additional paid in capital | |
| 190,749 | | |
| 190,749 | |
Accumulated deficit | |
| (1,422,637 | ) | |
| (1,412,380 | ) |
| |
| (1,025,337 | ) | |
| (1,015,080 | ) |
| |
| | | |
| | |
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | |
| 62,414 | | |
| 77,767 | |
* Common
stock figures reflect the 3:1 forward common stock split effective March 30, 2012 on a retroactive basis
The accompanying
notes form an integral part of these unaudited interim consolidated financial statements.
PORTLOGIC
SYSTEMS INC.
UNAUDITED
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED NOVEMBER 30, 2014 AND 2013
(Amounts
expressed in US Dollars)
| |
For the Six Months | | |
For the Three Months | |
| |
Ended November 30 | | |
Ended November 30 | |
| |
2014 | | |
2013 | | |
2014 | | |
2013 | |
| |
$ | | |
$ | | |
$ | | |
$ | |
Gross Margin (Loss) | |
| | |
| | |
| | |
| |
Revenue | |
| 122,768 | | |
| 603,227 | | |
| - | | |
| 40,616 | |
Cost of goods sold | |
| 106,946 | | |
| 603,199 | | |
| - | | |
| 43,670 | |
| |
| 15,822 | | |
| 28 | | |
| - | | |
| (3,054 | ) |
| |
| | | |
| | | |
| | | |
| | |
Expenses | |
| | | |
| | | |
| | | |
| | |
Selling and administrative | |
| 26,079 | | |
| 95,594 | | |
| 14,064 | | |
| 47,874 | |
Depreciation | |
| - | | |
| 190 | | |
| - | | |
| 74 | |
| |
| 26,079 | | |
| 95,784 | | |
| 14,064 | | |
| 47,948 | |
| |
| | | |
| | | |
| | | |
| | |
Net Loss for the period | |
| (10,257 | ) | |
| (95,756 | ) | |
| (14,064 | ) | |
| (51,002 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net Loss per share for the period | |
| | | |
| | | |
| | | |
| | |
Basic and fully diluted | |
| (0.0000 | ) | |
| (0.0005 | ) | |
| (0.0001 | ) | |
| (0.0002 | ) |
| |
| | | |
| | | |
| | | |
| | |
Weighted average number of shares outstanding | |
| | | |
| | | |
| | | |
| | |
Basic and fully diluted | |
| 206,551,442 | * | |
| 206,551,442 | * | |
| 206,551,442 | * | |
| 206,551,442 | * |
* Reflects
the 3:1 forward common stock split effective March 30, 2012 on a retroactive basis.
The accompanying
notes form an integral part of these unaudited interim financial statements.
PORTLOGIC
SYSTEMS INC.
UNAUDITED
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED NOVEMBER 30, 2014 AND 2013
(Amounts
expressed in US Dollars)
| |
For the six months ended
Nov 30, 2014 | | |
For the six months ended
Nov 30, 2013 | |
| |
$ | | |
$ | |
Cash Flows from Operating Activities | |
| | |
| |
Net Loss | |
| (10,257 | ) | |
| (95,756 | ) |
Adjustments made to reconcile net loss to net cash from
operating activities | |
| | | |
| | |
Depreciation of equipment | |
| - | | |
| 190 | |
Changes in operating assets and liabilities | |
| | | |
| | |
Decrease (increase) in accounts and other receivables | |
| 11,439 | | |
| (5,537 | ) |
Increase (decrease) in accounts payable and accrued liabilities | |
| (31,486 | ) | |
| 68,995 | |
Cash flows used in operating activities | |
| (30,304 | ) | |
| (32,108 | ) |
| |
| | | |
| | |
Cash Flows from Investing Activities | |
| | | |
| | |
Purchase of equipment | |
| - | | |
| - | |
Cash flows used in investing activities | |
| - | | |
| - | |
| |
| | | |
| | |
Cash Flows from Financing Activities | |
| | | |
| | |
Proceeds from issuance of short term loans | |
| | | |
| 23,025 | |
Proceeds from new convertible loans | |
| 26,390 | | |
| | |
Proceeds from shareholder loan | |
| - | | |
| 4,351 | |
Proceeds from issuance of other loan | |
| - | | |
| 2,500 | |
Cash flows provided by financing activities | |
| 26,390 | | |
| 29,876 | |
Increase (decrease) in cash and cash equivalents | |
| (3,914 | ) | |
| (2.232 | ) |
Cash and cash equivalents, beginning of period | |
| 4,011 | | |
| 2,270 | |
Cash and cash equivalents, end of period | |
| 97 | | |
| 38 | |
The accompanying
notes form an integral part of these unaudited interim consolidated financial statements.
PORTLOGIC
SYSTEMS INC.
NOTES
TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER
30, 2014
(Amounts
expressed in US Dollars)
NOTE
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
Portlogic
Systems Inc. (“Portlogic”) was incorporated under the laws of the State of Nevada on June 22, 2004. On June 5, 2008,
Portlogic filed a Form S-1 Registration Statement under the United States Securities Act of 1933. It became effective June 24,
2008.
Portlogic
is a Toronto, Canada based development stage company with enterprise mobile marketing applications solutions, kiosk hardware and
software products which fall into six principal product families: m2Meet, m2Bank, m2Market, m2Ticket, m2Kiosk, and m2Workflow.
Prior to January 2010. Portlogic created and licensed online interactive community portal software systems and developed a series
of web-based community portal products.
On
September 16, 2009, Portlogic incorporated a wholly-owned subsidiary, Sunlogic Energy Corporation in Panama City, Republic of
Panama for the purpose of looking at solar and alternative green energy software and products. Initial operations include: capital
formation; organization; website construction; target market identification; research costs; promotional materials costs; and
marketing planning. Sunlogic Energy Corporation is still incorporated as a subsidiary but its operations are on hold.
On
June 18, 2012, Portlogic incorporated a wholly owned subsidiary, VOIP 1, Inc. under the laws of the State of Nevada. VOIP 1, Inc.
specializes in data and voice telecommunications technologies. VOIP 1 began earning revenues in September 2012.
The
accompanying unaudited interim consolidated financial statements include Portlogic and its subsidiary (herein after referred to
collectively as the “Company”). All intercompany balances and transactions have been eliminated on consolidation.
The
unaudited interim consolidated financial statements have been prepared in accordance with Securities and Exchange Commission requirements
for interim financial statements. Therefore, they do not include all of the information and footnotes required in accordance with
United States Generally Accepted Accounting Principles (“GAAP”) for complete financial statements. The unaudited interim
consolidated financial statements should be read in conjunction with the Form 10-K for the year ended May 31, 2014.
The
unaudited interim consolidated financial statements present the balance sheet, statements of operations, and cash flows of the
Company. The unaudited interim consolidated financial statements have been prepared by management in accordance with GAAP.
NOTE
2. GOING CONCERN
The
unaudited interim consolidated financial statements are presented on a going concern basis which contemplates the realization
of assets and discharge of obligations in the normal course of business as they come due. No adjustments have been made
to assets or liabilities in these unaudited interim consolidated financial statements should the Company not be able to continue
normal business operations.
The
Company has incurred losses from inception and, during the six month period ended November 30, 2014, the Company utilized $30,304
(November 30, 2013 - $32,108) of cash in operations. At November 30, 2014, the Company reported a deficit of $1,422,637 and continues
to expend cash in amounts that exceed revenues. These conditions cast substantial doubt on the ability of the Company to continue
as a going concern and meet its obligations as they come due. Management is considering various alternatives and is pursuing raising
additional capital resources. Nevertheless, there can be no assurance that these initiatives if undertaken will be successful.
PORTLOGIC
SYSTEMS INC.
NOTES
TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER
30, 2014
(Amounts
expressed in US Dollars)
NOTE
2. GOING CONCERN (cont’d)
The
Company has shifted its focus to specializing in mobile applications solutions marketing, and data and telecommunications technology.
The Company also develops a series of web-based community portal products as well as a series of off-the-shelf template based
websites. The Company’s continuance as a going concern is dependent on the commercialization of more of the Company’s
products and the achievement of profitable operations as well as the success of the Company in raising additional long-term financing
through debt or equity offerings. In the event that the Company is not successful in these efforts, the assets may not be realized
or liabilities discharged at their carrying amounts, and differences from the carrying amounts reported in these consolidated
financial statements could be material.
NOTE
3. SIGNIFICANT ACCOUNTING POLICIES
The
interim consolidated financial information is unaudited. In the opinion of management, all adjustments necessary to present fairly
the consolidated financial position as of November 30, 2014 and the results of operations, and cash flows presented herein have
been included in the unaudited interim consolidated financial statements. All such adjustments are of a normal and recurring nature.
Interim results are not necessarily indicative of results of operations for the full year.
Accounting
Estimates
The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect
the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the period. Financial statement items subject to significant
judgment include the expected life of equipment, the net realizable value of accounts receivable, the completeness of expense
accruals, as well as income taxes and loss contingencies. Actual results may differ from those estimates.
Cash
and Cash Equivalents
Cash
equivalents comprise highly liquid instruments with a maturity of three months or less when purchased. As at November 30, 2014,
cash equivalents amounted to $Nil (May 31, 2014 - $Nil).
Asset
Impairment
Long-lived
assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.
An impairment loss would be recognized when the carrying amount of an asset exceeds the estimated undiscounted future cash flows
that are expected to result from the use of the asset and its eventual disposition.
Advertising
Costs
Advertising
costs are expensed as incurred and included as part of selling and administrative expenses. Advertising costs amounted to $Nil
for the six month period ended November 30, 2014 (November 30, 2013 - $768).
Revenue
Recognition
The
Company recognizes revenue at the point of passage to the customer of title and risk of loss when there is persuasive evidence
of an arrangement, the sales price is determinable, and collection of the resulting receivable is reasonably assured.
Service
revenues are generally recognized at the time of performance. Revenues billed in advance under contracts are deferred and recognized
over the corresponding service periods.
PORTLOGIC
SYSTEMS INC.
NOTES
TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER
30, 2014
(Amounts
expressed in US Dollars)
NOTE
3. SIGNIFICANT ACCOUNTING POLICIES (cont’d)
Foreign
Currency Translation
The
Company maintains its accounting records in US dollars, which is its functional and reporting currency. At the transaction date,
each asset, liability, revenue and expense denominated in a foreign currency is translated into the functional currency by the
use of the exchange rate in effect at that date. At the period end, monetary assets and liabilities denominated in a foreign currency
are translated into the functional currency by using the exchange rate in effect at that date. The resulting foreign exchange
gains and losses are included in operations. Foreign exchange loss amounted to $Nil for the six month period ended November 30,
2014 (November 30, 2013 - loss of $31).
Income
Taxes
The
Company accounts for its income taxes in accordance with ASC 740, “Income Taxes”, which requires recognition of deferred
tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases and tax credit carryforwards. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized
in operations in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in
the opinion of management, it is more likely than not that the deferred tax assets will not be realized.
Earnings
(Loss) per Share
The
Company reports earnings (loss) per share in accordance with ASC 260, "Earnings per Share." Basic earnings (loss) per
share is computed by dividing income (loss) available to common stockholders by the weighted average number of common shares available.
Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased
to include the number of additional common shares that would have been outstanding if the potential common shares had been issued
and if the additional common shares were dilutive. Diluted earnings (loss) per share has not been presented since the effect of
the assumed conversion of the convertible loan into common shares would have an anti-dilutive effect.
Comprehensive
Income
The
Company has adopted ASC 220, "Comprehensive Income," which establishes standards for reporting and the display of comprehensive
income, its components and accumulated balances. Comprehensive income is defined to include all changes in equity except those
resulting from investments by owners or distributions to owners. Among other disclosures, the standard requires that all items
that are required to be recognized under the current accounting standards as a component of comprehensive income be reported in
a financial statement that is displayed with the same prominence as other financial statements. Comprehensive income would be
displayed in the statement of shareholders' equity and in the balance sheet as a component of shareholders' equity (deficiency).
The Company had no other comprehensive income (loss) for the six month periods ended November 30, 2014 and November 30, 2013.
As such, net loss is equivalent to total comprehensive loss.
Financial
Instruments and Risk Concentrations
The
Company’s financial instruments comprise cash and cash equivalents, loan receivables, accounts payable and accrued liabilities,
notes payable and convertible loan. Unless otherwise indicated, the fair value of financial assets and financial liabilities approximate
their recorded values due to their short-terms to maturity. The Company determines the fair value of its long-term financial instruments
based on quoted market values or discounted cash flow analyses.
PORTLOGIC
SYSTEMS INC.
NOTES
TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER
30, 2014
(Amounts
expressed in US Dollars)
NOTE
3. SIGNIFICANT ACCOUNTING POLICIES (cont’d)
Financial
Instruments and Risk Concentrations (cont’d)
Financial
instruments that may potentially subject the Company to concentrations of credit risk comprise primarily cash and cash equivalents
and accounts receivable. Cash and cash equivalents comprise deposits with major commercial banks and/or checking account balances.
With respect to accounts receivable, the Company performs periodic credit evaluations of the financial condition of its customers
and typically does not require collateral from them. Allowances are maintained for potential credit losses consistent with the
credit risk of specific customers and other information. Unless otherwise noted, it is management's opinion that the Company is
not exposed to significant interest or currency risks in respect of its financial instruments.
Leases
Leases
entered into by the Company as a lessee are classified as capital or operating leases. Leases that transfer substantially the
entire risks and benefits incidental to ownership are classified as capital leases. At the inception of a capital lease, an asset
and an obligation are recorded at an amount equal to the lesser of the present value of the minimum lease payments and the asset’s
fair market value at the beginning of each lease. Rental payments under operating leases are expensed as incurred.
Stock-Based
Compensation
The
Company has adopted SFAS 123 (Revised), “Share Based Payment,” which requires the Company to measure the cost of employee
and non-employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award.
That cost will be recognized over the period during which an employee or a non-employee is required to provide service in exchange
for the award-the requisite service period. No compensation cost is recognized for equity instruments for which employees do not
render the requisite service. The grant-date fair value of employee and non-employee share options and similar instruments will
be estimated using option-pricing models adjusted for the unique characteristics of those instruments.
NOTE
4. FAIR VALUE MEASUREMENTS
Beginning
June 1, 2008, the Company partially applied accounting standard, “Fair Value Measurements,” codified as ASC 820. The
standard defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.
The standard defines fair value as the price that would be received upon sale of an asset or paid upon transfer of a liability
in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market
for that asset or liability. The fair value, in this context, should be calculated based on assumptions that market participants
would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities
should include consideration of non-performance risk including our own credit risk.
In
addition to defining fair value, the standard expands the disclosure requirements around fair value and establishes a fair value
hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used
in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels
which are determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels
are:
● |
Level
1 |
Quoted
prices (unadjusted) in active markets for identical assets or liabilities; |
● |
Level 2 |
Inputs other than
quoted prices included within Level 1 that are either directly or indirectly observable; |
● |
Level 3 |
Assets or liabilities
for which fair value is based on valuation models with significant unobservable pricing inputs and which result in the use
of management estimates. |
|
|
|
PORTLOGIC
SYSTEMS INC.
NOTES
TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER
30, 2014
(Amounts
expressed in US Dollars)
NOTE
4. FAIR VALUE MEASUREMENTS (cont’d)
Fair Value Measurements Using | |
Assets/Liabilities | |
| |
Level 1 | | |
Level 2 | | |
Level3 | | |
At Fair Value | |
Asset | |
| | |
| | |
| | |
| |
Cash and cash equivalents | |
$ | 97 | | |
$ | - | | |
| - | | |
$ | 97 | |
Loan receivable | |
| - | | |
| - | | |
$ | 7,850 | | |
$ | 7,850 | |
Liability | |
| | | |
| | | |
| | | |
| | |
Short term loans | |
| - | | |
| - | | |
$ | 23,025 | | |
$ | 23,025 | |
New convertible loans | |
| - | | |
| - | | |
$ | 662,936 | | |
$ | 662,936 | |
Shareholder loan | |
| - | | |
| - | | |
$ | 19,000 | | |
$ | 19,000 | |
Other loan | |
| - | | |
| - | | |
$ | 2,550 | | |
$ | 2,550 | |
Convertible loan | |
| - | | |
| - | | |
$ | 7,000 | | |
$ | 7,000 | |
NOTE
5. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
| |
November 30, 2014 | | |
May 31,
2014 | |
| |
$ | | |
$ | |
Cost of goods sold & Telecom | |
| - | | |
| 26,953 | |
Audit and review | |
| 12,400 | | |
| 14,800 | |
Bookkeeping and accounting | |
| 157,912 | | |
| 165,312 | |
Legal | |
| - | | |
| - | |
Consulting | |
| 37,000 | | |
| 37,000 | |
IT | |
| 48,000 | | |
| 48,000 | |
Other | |
| 1,096 | | |
| 6,040 | |
Interest payable | |
| 116.832 | | |
| 106,621 | |
| |
| 373,240 | | |
| 404,726 | |
NOTE
6. SHORT TERM LOANS
In
the year ended May 31, 2014, the Company received short-term loans from two separate parties to help meet cash flow needs for
operations. These are short term loans that the Company has already started repaying in installments. The aggregate balance payable
on these short term loans is $23,025 as of November 30, 2014 (May 31, 2014 - $23,025).
NOTE
7. ASSIGNMENT AND NEW CONVERTIBLE LOANS
On
December 31, 2013, the Board of Directors approved to amend existing Notes Payable and New Loan to provide for conversion and
assignment of outstanding amounts due and owing into shares of the Company’s common stock at $0.001 per share. In addition
to the loan amounts assigned over, the Company borrowed $45,000 on December 3, 2013. Therefore in aggregate, the total balance
payable on this convertible loan is $636,546 as of November 30, 2014 (May 31, 2014 - $636,546).
On
September 4, 2014, the Company borrowed $12,390, structured as a convertible loan, from a third party to help meet cash flow needs
for operations. On November 20, 2014, a further $4,200 was borrowed. Therefore the total balance payable on this convertible loan
is $16,590 as of November 30, 2014.
PORTLOGIC
SYSTEMS INC.
NOTES
TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER
30, 2014
(Amounts
expressed in US Dollars)
NOTE
7. ASSIGNMENT AND NEW CONVERTIBLE LOANS (cont’d)
On
October 16, 2014, the Company borrowed $9,800, structured as a convertible loan, from a different third party to help meet cash
flow needs for operations. The total balance payable on this convertible loan is $9,800 as of November 30, 2014.
NOTE
8. SHAREHOLDER LOAN
A
shareholder of the Company has advanced amounts to the Company as required to help meet cash flow needs for operations. The total
balance payable to the shareholder as of November 30, 2014 is $19,000 (May 31, 2014 - $19,000).
NOTE
9. CONVERTIBLE LOAN
A
convertible debenture, issued March 11, 2005, was unsecured, matured March 11, 2012 and carried interest at a rate of 10% per
annum. The instrument is convertible at the option of the holder into common shares of the Company at a rate of $0.05 per share,
and may be redeemed at any time prior to maturity at the option of the holder, should certain conditions prevail. The holder of
the debenture has signed agreements waiving interest accrued from March 11, 2005 through to March 10, 2014. This convertible debenture
has not been repaid and is due on March 10, 2015.
Interest
expense on all the above loans of the Company has been calculated to November 30, 2014 and amounted to $10,211 for the six months
ended November 30, 2014 (November 30, 2013 - $17,359) and is included in selling and administrative expense. As at November 30,
2014, accrued interest of $116,832 (May 31, 2014 - $106,621) is included in accounts payable and accrued liabilities.
NOTE
10. STOCK TRANSACTIONS *
Transactions,
other than employees’ stock issuance, are in accordance with paragraph 8 of SFAS 123 “Share Based Payment”.
Thus issuances shall be accounted for on the fair value of the consideration received. Transactions with employees’ stock
issuance are in accordance with paragraphs (16-44) of SFAS 123. These issuances shall be accounted for based on the fair value
of the consideration received or the fair value of the equity instruments issued, or whichever is more readily determinable.
In
January 2005, the Company issued a total of 17,700,000* shares of common stock to nine individuals for cash in the amount of $0.0005
per share for a total of $2,950.
On
February 7, 2005, the Company issued a total of 600,000* shares of common stock to one individual for cash in the amount of $0.001
per share for a total of $200.
On
May 26, 2005, the Company issued a total of 9,000,000* shares of common stock to one individual for cash in the amount of $0.001
per share for a total of $3,000.
In
July 2005, the Company issued a total of 151,650,000* shares of common stock to nine individuals for cash in the amount of $0.001
per share for a total of $50,550.
On September
14, 2005, the Company issued a total of 7,500,000* shares of common stock to one director for cash in the amount of $0.001 per
share for a total of $2,500.
On
October 31, 2005, the Company issued a total of 13,440,000* shares of common stock in the amount of $0.025 per share for a total
of $112,000, which was the fair value of the stock on date of issuance, in consideration for the purchase of source code software.
A further $40,000 in cash was also paid as consideration for this asset purchase agreement.
PORTLOGIC
SYSTEMS INC.
NOTES
TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER
30, 2014
(Amounts
expressed in US Dollars)
NOTE
10. STOCK TRANSACTIONS ** (cont’d)
In
April 2006, the Company issued a total of 180,000* shares of common stock to three individuals for cash in the amount of $0.025
per share for a total of $1,500.
In
May 2006, the Company issued a total of 1,440,000* shares of common stock to five individuals for cash in the amount of $0.025
per share for a total of $12,000.
In
June 2006, the Company issued a total of 180,000* shares of common stock to three individuals for cash in the amount of $0.025
per share for a total of $1,500.
On
July 22, 2006, the Company issued a total of 60,000* shares of common stock to one individual for cash in the amount of $0.025
per share for a total of $500.
On
December 22, 2006, the Company issued a total of 180,000* shares of common stock to one individual for cash in the amount of $0.025
per share for a total of $1,500.
On
February 22, 2007, the Company issued a total of 799,998* shares of common stock to one individual for cash in the amount of $0.075
per share for a total of $20,000.
In
May 2007, the Company issued a total of 3,589,998* shares of common stock to three individuals for cash in the amount of $0.1416
per share for a total of $169,500.
On
January 10, 2008, the Company issued a total of 171,426* shares of common stock to one individuals for cash in the amount of $0.175
per share for a total of $10,000.
On
April 11, 2012, the Company issued a total of 30,000 shares of common stock to a director in return for services. The market value
of shares on the date of issuance was $0.16 per share.
On
April 11, 2012, the Company issued a total of 30,000 shares of common stock to another director in return for services. The market
value of shares on the date of issuance was $0.16 per share.
As
of November 30, 2014, the Company had 206,551,422* share of common stock issued and outstanding.
*
After giving retroactive effect of 2:1 stock split effective January 20, 2010 and 3:1 forward common stock split effective March
30, 2012
NOTE
11. STOCKHOLDERS’ DEFICIENCY
The
stockholders' deficiency section of the Company contains the following classes of capital stock as of November 30, 2014 and May
31, 2014: *
Preferred
stock: $0.001 par value: 1,000,000 shares authorized and 0 shares issued and outstanding.
Common
stock, $0.001 par value; 225,000,000 shares authorized and 206,551,422* shares issued and outstanding.
*
After giving retroactive effect of 2:1 stock split effective January 20, 2010 and 3:1 forward common stock split effective March
30, 2012
PORTLOGIC
SYSTEMS INC.
NOTES
TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER
30, 2014
(Amounts
expressed in US Dollars)
NOTE
12. COMMITMENTS AND RELATED PARTY TRANSACTIONS
| a) | On
June 25, 2008, the Company advanced $9,807 to UOMO Media Inc. (“UOMO”). The
director of the Company is also a director of UOMO. This advance was paid back to the
Company on February 19, 2010. In April and May 2010, the Company advanced a total amount
of $13,500 as a temporary loan again. In June 2010, a further $1,600 was advanced totaling
the temporary loan to $15,100. In August 2011, a payment of $1,624 was applied against
this loan. On September 11, 2011, a payment of $490 was applied against this loan. In
December 2011, payments of $4,043 were further applied against this loan. On October
1, 2012, $1,094 was repaid. As at November 30, 2014, $7,850 remains receivable from UOMO
(May 31, 2014 – $7,850). |
| b) | On
May 1, 2007, an independent contractor agreement was entered into under which compensation
of $3,000 per month was to be paid to perform services as an officer to October 31, 2007.
New agreements have been entered into with this contractor from November 1, 2007 to October
31, 2008 at $3,000 per month. The agreement was continued on a month-to-month basis.
On June 30, 2012, the Company entered into a new agreement with the independent contractor
under which compensation of $3,000 per month would be paid from July 1, 2012 to November
30, 2012. Then compensation of $10,000 per month would be paid from December 1, 2012
through to June 30, 2014. The officer has waived the compensation for the final month
of the term. Until the Company begins earning profits, the officer will accrue $1,200
per quarter to provide services. Therefore the related service fee for the six months
ended November 30, 2014 amounted to $2,400 (November 30, 2014 - $60,000). |
| c) | On
March 10, 2014, a former officer issued a promissory note to the Company, in consideration
of a loan of $150,000 for funds advanced, over a term of two years. Proceeds from any
repayment of the promissory note will be credited against start-up costs of our telecommunications
operations. |
NOTE
13. SUBSEQUENT EVENTS
The
Company evaluated all events or transactions that occurred after November 30, 2014 up through the date these financial statements
were available for issuance. During this period, the Company did not have any material recognizable subsequent events.
Item
2. Management's Discussion and Analysis of Financial Condition and Results of Operations
INTRODUCTION
The
following management discussion and analysis compares our results of operations for the six months ended November 30, 2014 to
the same period in 2013. This management discussion and analysis should be read in conjunction with our unaudited interim
consolidated financial statements and the related notes thereto included elsewhere in this quarterly report for the three months
ended August 31, 2014.
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This
quarterly report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. You should not place undue
reliance on these forward-looking statements. Our actual results could differ materially from those anticipated in the forward-looking
statements for many reasons, including the risks described in this report and other reports we file with the U.S. Securities and
Exchange Commission. Although we believe the expectations reflected in the forward-looking statements are
reasonable, they relate only to events as of the date on which the statements are made. We do not intend to
update any of the forward-looking statements after the date of this report to conform these statements to actual results or to
changes in our expectations, except as required by law.
OVERVIEW
We
incorporated on June 22, 2004 as Portlogic Systems Inc. under the laws of the State of Nevada. On June 5, 2008, the Company filed
a Form S-1 Registration Statement under the United States Securities Act of 1933. It became effective June 24, 2008. We have a
financial year end of May 31.
We
offer enterprise mobile marketing applications solutions, kiosk hardware and software products. Our 6 divisions are as follows:
| 1. | m2Meet:
A community networking software solution. Currently being developed from our proprietary
web based source code. Internet and mobile users with similar interests will use m2Meet
to socially network and connect using location based technology such as GPS. |
| 2. | m2Bank:
(Mobile to Bank) is a financial transactions system that facilitates bill payments, money
transfers, and account management. |
| 3. | m2Market:
Mobile marketing solutions including a Bluetooth push technology that is used to deliver
marketing materials to mobile phones. |
| 4. | m2Ticket:
Mobile ticketing sales engine which manages the sale and delivery of tickets through
mobile phones for the transportation and entertainment industry. |
| 5. | m2Kiosk:
A line of standard and custom kiosks hardware and software which integrates with mobile
phone applications in the marketing, financial, and ticketing industries. |
| 6. | m2Workflow:
Customer relations management (CRM) on mobile phones for service industries. |
Due
to the cost of developing the technology to offer such products we have decided to offer many of our products by bundling technology
from third party suppliers. Agreements can include but are not limited to licensing agreements, reseller agreements, partnership
agreements, memoranda of understanding, and software development agreements. We have also developed a product that we license
to our customers to enable them to operate their own online social networking portal without requiring any technical programming
or website design skills.
On
June 18, 2012, we incorporated a wholly-owned subsidiary, VOIP 1, Inc. under the laws of the State of Nevada. VOIP 1, Inc. specializes
in data and voice telecommunications technologies. VOIP 1 began earning revenues in September 2012.
On
September 16, 2009, we incorporated a wholly-owned subsidiary, Sunlogic Energy Corporation in Panama City, Republic of Panama
for the purpose of looking at solar and alternative green energy software and products. To date, our subsidiary has not had any
operations.
CRITICAL
ACCOUNTING POLICIES
Management's
Discussion and Analysis of Financial Condition and Results of Operations is based upon our unaudited interim consolidated financial
statements, which have been prepared in accordance with Securities and Exchange Commission requirements for interim financial
statements. Therefore, they do not include all of the information and footnotes required in accordance with United States Generally
Accepted Accounting Principles (“GAAP”) for complete financial statements. The unaudited interim consolidated financial
statements should be read in conjunction with the Form 10-K for the year ended May 31, 2014.
The
preparation of these unaudited interim consolidated financial statements requires us to make estimates and judgments that affect
the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities.
On an on-going basis, we evaluate our estimates, including those related to the reported amounts of revenues and expenses, bad
debt, investments, intangible assets, income taxes, and contingencies and litigation. We base our estimates on historical experience
and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis
for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual
results could differ from these estimates under different assumptions or conditions. We consider the following accounting policies
to be critical because the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment necessary
to account for highly uncertain matters or the susceptibility of such matters to change or because the impact of the estimates
and assumptions on financial condition or operating performance is material.
CASH
AND CASH EQUIVALENTS
Our
cash equivalents comprise highly liquid instruments with a maturity of three months or less when purchased. As at November 30,
2014, cash equivalents amounted to $Nil (May 31, 2014 - $Nil).
REVENUE
RECOGNITION
We
recognize revenue at the point of passage to the customer of title and risk of loss when there is persuasive evidence of an arrangement,
the sales price is determinable, and collection of the resulting receivable is reasonably assured.
We
recognize service revenues at the time of performance. Revenues billed in advance under contracts are deferred and recognized
over the corresponding service periods.
FOREIGN
CURRENCY TRANSLATION
We
maintain our accounting records in US dollars, which is our functional and reporting currency. At the transaction date, each asset,
liability, revenue and expense denominated in a foreign currency is translated into the functional currency by the use of the
exchange rate in effect at that date. At the period end, monetary assets and liabilities denominated in a foreign currency are
translated into the functional currency by using the exchange rate in effect at that date. The resulting foreign exchange
gains and losses are included in operations. Foreign exchange loss amounted to $Nil for the six month period ended November 30,
2014 (November 30, 2013 - loss of $31).
RESULTS
OF OPERATIONS
COMPARISON
OF RESULTS FOR THE SIX MONTHS ENDED NOVEMBER 30, 2014 AND NOVEMBER 30, 2013
REVENUE
For
the six months ended November 30, 2014, we recognized $122,768 in revenue from our Voip 1 telecommunications operations. For the
six months ended November 30, 2013, we recognized $603,227 in revenue. We have not yet begun to generate revenues from our mobile
marketing offerings.
COST OF
GOODS SOLD
We
incurred $106,946 in cost of goods sold against our telecommunications operations for the six months ended November 30, 2014.
We incurred $603,199 in cost of goods sold for the six months ended November 30, 2013.
EXPENSES
During
the six months ended November 30, 2014, we incurred total expenses of $26,079 comprised of selling and administrative expense.
During the six months ended November 30, 2013, we incurred total expenses of $95,784 comprised of selling and administrative expense
of $95,594 and depreciation of $190. Higher expenses for the six month period ended November 30, 2013 resulted almost entirely
to the higher accounting expense of $60,000 vs. $2,400 in the six month period ended November 30, 2014 due to the end of the Chief
Financial Officer’s consulting agreement. As well, interest expense was higher in the prior six month period ended November
30, 2013 coming in at $17,359 vs. $10,211 due to refinancing of loans in the current six month period ended November 30, 2014.
NET
INCOME/LOSS
During
the six months ended November 30, 2014, we incurred net loss of $10,257 compared with a net loss of $95,756 for the six months
ended November 30, 2013. The combination of higher net profit from our telecommunications operations, even with decreased activity,
and much lower accounting expense in the current period ended November 30, 2014 vs. the prior period resulted in the lower net
loss in the current period.
LIQUIDITY
AND CAPITAL RESOURCES
As
part of our expansion of operations, on June 18, 2012, we incorporated a wholly-owned subsidiary, VOIP 1, Inc. VOIP 1, Inc. specializes
in data and voice telecommunications technologies. Because of the success we have had with our operations, we have been focusing
on this business line as our main operations.
We
have begun to have an adequate source of reliable, long-term revenue to fund operations. However, we have no significant assets
or financial resources. The amount of working capital that we will require depends on several factors, including without limitation,
the extent and timing of sales of our products and related services, future costs of development, the timing and costs associated
with the expansion of our customer support capabilities, and our operating results.
As
of November 30, 2014, we had cash and cash equivalents of $97. We had total current assets of $62,414.
We
anticipate that we will require $350,000 in total, over the next six months, to adequately fund the growth of our operations.
We need to be assured that we have strong presentation support, an organized implementation strategy and ongoing technical support.
As we sign more clients and technology partners with proven large scale application experience, we will begin to hire project
managers and begin marketing our solutions to even more targeted potential clients.
Any
additional cash revenues that we generate from our operations will ease the burden on our cash and enable us to finance operations
beyond the next six months. If we generate no cash revenues other than the $97 that we had available as of November 30, 2014,
we will need to raise additional funds during the next six months. Potential sources of such working capital could include senior
debt facilities, new lines of credit, bank financings or additional sales of our securities. If we raise funds through the sale
of our securities, the common stock currently outstanding would be diluted. There is a risk that such additional financing may
not be available, or may not be available on acceptable terms, and the inability to obtain additional financing or generate sufficient
cash from operations could require us to reduce or eliminate expenditures for capital equipment, production, or marketing of our
products, or otherwise curtail or discontinue our operations, which could have a material adverse effect on our business, financial
condition and results of operations.
Our
unaudited interim consolidated financial statements have been prepared on a continuing operation basis, which contemplates the
realization of assets and the settlement of liabilities and commitments in the normal course of business.
As
of November 30, 2014, our total assets were $62,414, our total liabilities were $1,087,751, and stockholders’ deficiency
was $1,025,337.
SUBSEQUENT
EVENTS
We
have evaluated all events or transactions that occurred after November 30, 2014 up through the date these financial statements
were available for issuance. During this period, we did not have any material recognizable subsequent events.
OFF-BALANCE
SHEET TRANSACTION
We
currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect
on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures
or capital resources.
Item
3. Quantitative and Qualitative Disclosures About Market Risk
Smaller
reporting companies are not required to provide the information required by this Item.
Item
4T. Controls and Procedures.
Evaluation
of Disclosure Controls and Procedures
Our
management evaluated, with the participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness
of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”)) as of the end of the period covered by this quarterly report on Form 10-Q. Based
on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures
can be relied upon to ensure that information we are required to disclose in reports that we file or submit under the Securities
Exchange Act of 1934 (i) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange
Commission rules and forms, and (ii) is accumulated and communicated to our management, including our Chief Executive Officer
and Chief Financial Officer, as appropriate, to allow timely decisions regarding required reasonable assurance that such information
is accumulated and communicated to our management. Our disclosure controls and procedures are designed to provide reasonable assurance
that such information is accumulated and communicated to our management. Our disclosure controls and procedures include components
of our internal control over financial reporting. Management's assessment of the effectiveness of our internal control over financial
reporting is expressed at the level of reasonable assurance that the control system, no matter how well designed and operated,
can provide only reasonable, but not absolute, assurance that the control system's objectives will be met.
Management’s
Report on Internal Control Over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule
13a-15(f) under the Securities Exchange Act of 1934. We have assessed the effectiveness of those internal controls as of November
30, 2014. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) in Internal Control—Integrated Framework.
Because
of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies and procedures may deteriorate. All internal control systems, no
matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only
reasonable assurance with respect to financial statement
preparation
and presentation.
A
material weakness in internal controls is a deficiency in internal control, or combination of control deficiencies, that adversely
affects a company's ability to initiate, authorize, record, process, or report external financial data reliably in accordance
with accounting principles generally accepted in the United States of America such that there is more than a remote likelihood
that a material misstatement of the company's annual or interim financial statements that is more than inconsequential will not
be prevented or detected. In the course of making our assessment of the effectiveness of internal controls over financial reporting,
we identified a material weakness in our internal control over financial reporting. This material weakness consisted of inadequate
staffing within the accounting operations of our Company. The small number of employees who are responsible for accounting functions
prevents us from segregating duties within our internal control system. The inadequate segregation of duties is a weakness because
it could lead to the untimely identification and resolution of accounting and disclosure matters or could lead to a failure to
perform timely and effective reviews. Due to this material weakness, management could not conclude that its internal control over
financial reporting was effective as of November 30, 2014.
Our
review also indicated the existence of certain high level procedures that might or might not serve to provide compensating control
over these weaknesses. These procedures consisted of analytical review of key operating results by our senior management, including
preparation and review of monthly operating results, comparison of such results to budgets and to historical amounts. In addition,
the board of directors received monthly updates on operations, and on a quarterly basis, reviews, investigates and discusses apparent
inconsistencies and concerns with senior operating management.
Our review also revealed that although a number of controls appeared to exist, and were observed to have been in operation, documentary
evidence that such controls were operating throughout the period was found to be lacking. Such evidence as signatures indicating
that a certain procedure had been carried out and affixing responsibility were lacking in the internal control system.
This
quarterly report does not include an attestation report of our registered public accounting firm regarding internal control over
financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant
to the rules of the Securities and Exchange Commission that permit us to provide only management’s report in this quarterly
report.
Changes
in Internal Control Over Financial Reporting
There
was no change in our internal controls over financial reporting that occurred during the quarter ended November 30, 2014 that
has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
PART
II
Item
1. Legal Proceedings
We
may be involved from time to time in ordinary litigation, negotiation and settlement matters that will not have a material effect
on our operations or finances. We are not aware of any pending or threatened litigation against us or our officers and directors
in their capacity as such that could have a material impact on our operations or finances.
ITEM
1A. Risk Factors
Risks
Relating To Our Business
We
intend to grow our Company by acquisition and have expanded the scope of technology offerings to include marketing mobile applications
solutions, kiosk hardware and software products, and telecommunications operations. If we are not successful, our business will
be harmed.
Our
business strategy includes the attainment of a portion of our growth through our ability to successfully execute our acquisition
model. In order to pursue a growth by acquisition strategy successfully, we must identify suitable candidates for these transactions,
complete these transactions, and manage post-closing issues such as integration of the acquired business into our corporate structure.
Integration issues are complex, time-consuming, and expensive and, without proper planning and implementation, could significantly
disrupt our business. Potential disruptions include diversion of management's attention, loss of key business and/or personnel
from the acquired company, unanticipated events, and legal liabilities. If the business becomes impaired, there could be partial
or full write-offs attributed to the acquisition.
If
we cannot obtain additional financing, we may have to curtail operations and may ultimately cease to exist.
Our
continued operations are contingent on our ability to raise additional capital and obtain financing and success in future operations.
If we do not acquire sufficient additional funding or alternative sources of capital to meet our working capital, we may have
to substantially curtail our operations and business plan. If we do not achieve sufficient revenues to meet our future obligations,
we intend to seek sufficient financial resources by issuing shares of common stock, borrowing cash from a bank or one of our directors,
or a combination of these activities. We may be unable to obtain additional financing using any of these methods. These conditions
raise substantial doubt about our ability to continue as a going concern. However, our unaudited interim consolidated financial
statements do not include any adjustments that might result if we are unable to continue our business.
We
have a limited operating history and may never achieve or sustain profitable operations.
We
have a short operating history and have not been profitable since our incorporation in June 2004. Even if we obtain future revenues
sufficient to expand operations, increased operational or marketing expenses could adversely affect our liquidity. The limited
extent of our assets and revenues, and our limited operating history make us subject to the risks associated with start-up companies,
including potentially negative cash flows. We have no significant assets or financial resources. Our lack of operating history
makes it very difficult for you to make an investment decision. We may never become profitable. You may lose your entire investment.
This is the first quarter we have turned a small Net Income.
We
depend on our officers and directors to perform our business activities and our ability to recruit and retain the qualified individuals
needed to operate and develop our business is unknown.
We
rely on our officers and directors to perform many of our business activities. Currently, our Chief Financial Officer, Secretary,
and Treasurer, Jueane Thiessen, personally performs most of our accounting and financial management functions, and liases with
external contractors who provide additional programming and consulting services. Ms. Thiessen is also involved in carrying out
our sales activities. Our Chief Executive Officer and President, Joseph Putegnat performs most of our management functions, and
also oversees our sales activities. On February 19, 2014, Mr. Putegnat resigned. The resignation was not a result of any disagreement
with the Company and Mr. Putegnat has continued to assist us as we transition. Our present management structure, although adequate
for the early stage of our operations, will likely have to be significantly augmented as our operations expand. Our future success
will depend in part on the services of our key personnel and, additionally, on our ability to identify, hire and retain additional
qualified personnel. There is intense competition for qualified management, marketing, accounting, and sales personnel in our
new business line: marketing mobile application solutions. We may not be able to continue to attract and retain the personnel
needed to operate and develop our business. Because we rely on our officers and directors to perform our sales, accounting, and
financial management activities, failure to attract and retain key personnel could have a material adverse effect on us.
We
have limited cash which we anticipate will be insufficient to fund our plan of operations for the forthcoming next six months
ending May 31, 2015 and if we are unable to raise additional capital, our business may fail and stockholders may lose their entire
investment.
We
have limited capital reserves to finance expansion or to protect us from a downturn in business. We currently do not have sufficient
cash to fund operations for the forthcoming next six months ending May 31, 2015. We will need to continue to raise additional
funds to fully fund our operations for the next nine month period beginning December 1, 2014. Additional financing may come in
the form of an offering of common shares, borrowing from a bank or one of our directors, or from revenues generated by our current
or new business. If additional shares are issued to raise capital, our existing stockholders will suffer a dilution of their stock
ownership and the value of our outstanding shares may fall. If we borrow more money, we will have to pay interest and may also
have to agree to restrictions that limit our operating flexibility. We have no commitments for additional financing and there
can be no assurance that additional funds will be available when needed, or on terms acceptable to us, if at all. If adequate
funds are not available we may be required to change our planned business strategies. If we are unable to obtain adequate financing,
we may not be able to successfully develop and market our products and services. As a result, we would need to curtail business
operations which would have a material negative effect on operating results, the value of our outstanding stock is likely to fall,
and our business may fail causing our stockholders to lose their entire investment.
Our sole
director, Jueane Thiessen, also serves as our sole officer. This interrelationship may create a conflict of interest that might
be detrimental to us.
Currently,
our sole director, Jueane Thiessen, is also our sole officer, serving as our Chief Financial Officer, Treasurer, Secretary, and
acting Chief Executive Officer and President. Up until February 19, 2014, a second director, Joseph Putegnat, served as our Chief
Executive Officer and President. Our board of directors, which appoints our officers, consisted of four persons up until November
23, 2012: Mr. Putegnat, Ms. Thiessen, Mr. Donald Gilpin and Mr. Bruce Maschmeyer. As of December 5, 2012, Mr. Putegnat and Ms.
Thiessen were the only remaining directors; Mr. Gilpin and Mr. Maschmeyer’s service terms have expired. On February 19,
2014, Mr. Putegnat resigned as an officer and a director. Because Ms. Thiessen is the only remaining director and officer, there
exists a potential future conflict of interest regarding the decision to remove our officers or appoint new officers. Our directors
and officers will deal with any such conflicts of interest, should they arise, in accordance with our Corporate Code of Ethics
and applicable corporate law principles.
We
may be subject to foreign currency fluctuation and such fluctuation may adversely affect our financial position and results.
Our
main office is currently located in Canada and we pay most of our expenses in United States dollars. However, our target market
is global. We may enter into contracts that require customers to pay us in currencies other than United States dollars. Therefore,
our potential operations make us subject to foreign currency fluctuation. We do not make investments that offset the risk of adverse
foreign currency fluctuations and we may suffer increased expenses and overall losses as a result.
We
do not own patents on our products and, if other companies copy our products, our revenues may decline which may result in a decrease
in our stock price.
We
do not own patents on our products we have developed and we do not currently intend to file for patent protection on those products.
Therefore, another company could recreate our products and could compete against us, which would adversely affect our revenues.
We
do not carry any insurance and we may be subject to significant lawsuits which could substantially increase our expenses.
We
do not carry any insurance. There are a number of occurrences that could adversely affect our financial condition. These include
damage to our assets, financial records, or other property by fire or water, as well as any successful lawsuits against us involving
recovery of damages arising out of our contractual, legal, or other duties. Should such an uninsured loss occur, our costs may
substantially increase which would lower our overall profitability, if any.
Amendments
to telecommunications regulations could have a material adverse effect on our business by increasing the cost of our operations
or the costs that customers must incur to use our products and services.
We
use telecommunications services to deliver our online software licensing and programming services to customers. In addition, our
customers typically require telecommunications systems to use our products and services. The telecommunications industry is subject
to regulatory control. Any amendments to current regulations in any jurisdiction where we operate or where our customers conduct
business could have a material adverse effect on our business, results of operations, and prospects. If amendments to regulations
increase the cost of using telecommunications services, our operating expenses may increase. Additionally, if regulatory amendments
increase the cost that our customers must incur to use our services, we may experience difficulty attracting new customers or
retaining existing customers.
Equipment
loss or malfunctions and telecommunication service interruptions or delays may adversely affect our ability to provide our products
and services.
Our
business is highly dependent on our computer and telecommunications equipment and software systems for the operation and quality
of our services. The temporary or permanent loss of all or a portion of these systems, including as a result of physical damage
or operating malfunction, or significant replacement delays, could have a materially adverse effect on our business, financial
condition, and results of operations. Any interruptions, delays or capacity problems experienced on the Internet or with telephone
services could adversely affect our ability to provide our products and services.
Item
2. Unregistered Sales of Equity Securities and Use of Proceeds
N/A
Item
3. Defaults Upon Senior Securities
None.
Item
4. Submission of Matters to a Vote of Security Holders
During
the second quarter of our fiscal year ended May 31, 2015, no matter was submitted to a vote of security holders through the solicitation
of proxies or otherwise.
Item
5. Other Information
None.
Item
6. Exhibits
The exhibits
listed below are filed as part of or incorporated by reference in this report.
Exhibit
No. |
|
Identification
of Exhibit |
|
|
|
21.1 |
|
Subsidiaries
of the Registrant (filed herewith). |
|
|
|
31.1 |
|
Certification
of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). |
|
|
|
32.1 |
|
Certification
of Officers pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed
herewith). |
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
|
|
Portlogic
Systems Inc. |
|
|
(Registrant) |
|
|
|
|
By |
/s/
Jueane Thiessen |
|
|
President,
Principal Executive Officer, Principal |
|
|
Accounting
Officer and Treasurer |
|
|
|
|
Date |
January 15, 2015 |
- 24 -
EXHIBIT
21.1
SUBSIDIARIES
OF THE REGISTRANT
As of January
15, 2015, we have two wholly-owned subsidiaries:
Sunlogic
Energy Corporation. This entity is incorporated in Panama City, Republic of Panama.
VOIP
1, Inc. This entity is incorporated under the laws of the State of Nevada.
EXHIBIT
31.1
CERTIFICATION
PURSUANT TO
18 U.S.C. ss 1350, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jueane
Thiessen, certify that:
| 1. | I
have reviewed this Quarterly Report on Form 10-Q of Portlogic Systems Inc.; |
2. |
Based
on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect
to the period covered by this report; |
3. |
Based
on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report; |
4. |
The
registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed
such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated
the effectiveness of the registrant's disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation;
and |
| (d) | Disclosed
in this report any change in the registrant's internal control over financial reporting
that occurred during the registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over financial reporting;
and |
5. |
The
registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons
performing the equivalent functions): |
| (a) | All
significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report financial information;
and |
| (b) | Any
fraud, whether or not material, that involves management or other employees who have
a significant role in the registrant's internal control over financial reporting. |
Date:
January 15, 2015
/s/
Jueane Thiessen |
|
By:
Jueane Thiessen |
|
Principal
Executive Officer, Principal Accounting Officer, Secretary, and Treasurer |
|
EXHIBIT
32.1
CERTIFICATIONS
PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
(18
U.S.C. SECTION 1350)
In
connection with the Quarterly Report of Portlogic Systems Inc. (the “Company”) on Form 10-Q for the six months ended
November 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of
the undersigned officers of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 that:
| i. | The
Report fully complies with the requirements of 13(a) or 15(d) of the Securities Exchange
Act of 1934; and |
| ii. | The
information contained in the Report fairly presents, in all material respects, the financial
condition and Result of operations of the company. |
IN
WITNESS WHEREOF, the undersigned have executed this certification as of the 15th day of January, 2015
/s/ Jueane
Thiessen |
|
By: Jueane
Thiessen |
|
Principal
Executive Officer, Principal Accounting Officer, Treasurer, and Secretary |
|