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EX-32.1 - SARBANES-OXLEY 906 CERTIFICATION - CHIEF EXECUTIVE AND CHIEF FINANCIAL OFFICER - Next Galaxy Corp.exh32-1.htm
 
 



 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
x
QUARTERLY REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED FEBRUARY 28, 2014
   
 
OR
   
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
Commission file number 000-54093
 
 
WILESS CONTROLS INC.
 (Formerly known as Montreal Services Company)
(Exact name of registrant as specified in its charter)
 
 
NEVADA
(State or other jurisdiction of incorporation or organization)
 
 
3450 St. Denis
Suite 202
Montreal, Quebec
Canada H2X 3L3
 (Address of principal executive offices, including zip code.)
 
 
(514) 904-2333
(Registrant’s telephone number, including area code)
 
 
Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 last 90 days.  
 YES x     NO o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   YES x     NO o
 
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,” “non-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
x
 
(Do not check if smaller reporting company)
     
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   YES o     NO x
 
APPLICABLE ONLY TO CORPORATE ISSUERS:
 
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:  As of April 14, 2014, the Issuer had 66,146,442 shares of Common Stock, par value $0.00001, outstanding.
 
 


 
 
 
 

 
 
 
 
 
PART I – FINANCIAL INFORMATION
 
ITEM 1.           FINANCIAL STATEMENTS
 
 
 
WILESS CONTROLS INC
(A Development Stage Company)
(Formerly known as iMETRIK M2M SOLUTIONS INC)
BALANCE SHEETS
Unaudited
 
   
February 28,
2014
   
May 31,
2013
 
             
ASSETS
           
             
CURRENT ASSETS
           
Cash
  $ 5,537     $ 2,178  
Inventories
    -       21,740  
                 
TOTAL CURRENT ASSETS AND TOTAL ASSETS
  $ 5,537     $ 23,918  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
               
                 
CURRENT LIABILITIES:
               
                 
                 
Note payable-stockholders (note 6)
    876,943       711,760  
Note payable (note 5)
    85,500       34,380  
Derivative liabilities (note 7)
    69,957       141,706  
Accrued expenses and other current liabilities - related party      80,764        52,205  
Accrued expenses and other current liabilities (note 4)
    329,370       231,782  
                 
TOTAL CURRENT LIABILITIES AND TOTAL LIABILITIES
  $ 1,442,534     $ 1,171,833  
                 
STOCKHOLDERS’ DEFICIENCY
               
Common stock
500,000,000 shares authorized, par value $0.00001, 66,146,442 and 64,700,659 respectively issued and outstanding
  $ 661     $ 647  
Additional paid in capital
    1,039,147       1,027,161  
Accumulated Deficit
    (81,158 )     (81,158 )
Deficit Accumulated during development stage
    (2,395,647 )     (2,094,565 )
                 
TOTAL STOCKHOLDERS’ DEFICIENCY
  $ (1,436,997 )   $ (1,147,915 )
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
  $ 5,537     $ 23,918  
 
 
 
 
See notes to financial statements
 
F-1
 
 
 
- 2 -

 

 
WILESS CONTROLS INC
(Formerly known as iMETRIK M2M SOLUTIONS INC.)
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(unaudited)
 
   
Nine Months
   
Nine Months
   
Three Months
   
Three Months
   
Beginning of
development stage
(September 1,
 
   
ended
   
ended
   
ended
   
ended
   
2010) to
 
   
February 28,
   
February 28,
   
February 28,
   
February 28,
   
February 28,
 
   
2014
   
2013
   
2014
   
2013
   
2014
 
                               
SALES 
  $ -     $ -     $ -     $ -     $ 12,800  
                                         
Cost of sales
    -       -       -       -       17,845  
                                         
Gross deficit
    -       -       -       -       5,045  
                                         
COSTS AND EXPENSES: 
                                       
      -       -       -       -          
Selling, general and administrative 
    185,461       312,406       56,305       103,759       1,170,130  
                                         
Research and Development
    33,735       141,945       -       42,266       477,841  
                                         
Debt conversion inducement expense/gain (note 6)
    -       (8,000 )     -       -       448,748  
Changes in value of derivative liability
    (71,749 )     (67,176 )     (10,120 )     (50,862 )     (126,159 )
Loss on Write-off of Inventory
    21,740       -       21,740       -       21,740  
Interest expense - related party
    62,873       32,660       21,678       13,661       142,005  
Interest expense
    69,022       128,290       7,154       67,193       256,297  
                                         
                                         
TOTAL COSTS AND EXPENSES 
    301,082       540,125       96,757       176,017       2,390,602  
                                         
NET LOSS
    (301,082 )     (540,125 )     (96,757 )     (176,017 )     (2,395,647 )
                                         
Net Loss Per Share 
  $ (0.00 )   $ (0.01 )   $ (0.00 )   $ (0.00 )        
                                         
Average weighted Number of Shares 
    65,900,123       63,106,080       66,146,442       64,700,659          
 
 
 
 
 
 
 
 
 
See notes to financial statements
 
F-2
 
 
 
- 3 -

 
 
 
WILESS CONTROLS INC
(A Development Stage Company)
(Formerly known as iMETRIK M2M SOLUTIONS INC)
STATEMENTS OF CASH FLOWS
(unaudited)
 

   
Nine months
 ended
February 28,
2014
   
Nine months
 ended
February 28,
2013
   
Beginning of
development stage
 (September 1, 2010)
to February 28,
2014
 
 
                 
Cash Flow from Operating activities:
                 
Net loss
  $ (301,082 )   $ (540,125 )   $ (2,395,647 )
 
                       
Adjustment to reconcile net loss to net cash used in operating activities
                       
Debt Conversion Inducement (Gain) Expense
    -       (8,000 )     448,748  
Non-cash interest
    63,120       80,965       196,116  
Gain on changes in fair value of derivative liabililty
    (71,749 )     (67,176 )     (126,159 )
Changes in operating assets and liabilities:
                       
Decrease in account receivable
    -       7,000       600  
Increase in inventories
    -       (66 )     (21,740 )
Loss on Write-off of Inventory
    21,740       -       21,740  
Increase in prepaid expenses and sundry current asset
    -       1,540       -  
Increase in accrued expenses and other current liabilities
    208,370       113,538       656,169  
Net cash used in operating activities
  $ (79,601 )   $ (412,324 )   $ (1,220,173 )
 
                       
Cash Flow from Financing activities:
                       
 
                       
Proceeds of notes payable stockholder
    82,960       184,411       611,676  
Proceeds of notes payable
    -       213,054       553,598  
Net cash provided by financing activities
  $ 82,960     $ 397,465     $ 1,165,274  
                         
(Decrease) in cash
    3,359       (14,859 )     (54,899 )
Cash- beginning of period
    2,178       23,704       60,436  
Cash - end of period
  $ 5,537     $ 8,845     $ 5,537  
                         
Supplemental Disclosure of non-cash financing activities
                       
Conversion of current liabilities to common stock
  $ -     $ -       191,564  
Conversion of notes payable to common stock
  $ 12,000     $ -       87,120  
Debt discount in notes payable
  $ (63,120 )   $ -       (63,120 )
Notes payable stockholders       (82,223      -        (82,223
Non cash component of debt conversion
  $ -     $ (8,000 )     448,748  
 
 
 
 
See notes to financial statements
 
F-3
 
 
 
- 4 -

 
 
 
 
 
 
WILESS CONTROLS INC
(A Development Stage Company)
(Formerly known as iMETRIK M2M SOLUTIONS INC)
NOTES TO FINANCIAL STATEMENTS
 
NOTE 1 – NATURE OF BUSINESS
 
The Company was incorporated under the laws of the State of Nevada on May 6, 2009. The Company’s specific goal was to create a profitable service for placing Canadian citizens in accounting positions with Canadian corporations. On August 5, 2010, we changed our name to iMetrik M2M Solutions Inc. to reflect our new business purpose of bringing solutions to the Machine-to-Machine market (Machine-to-Machine (M2M) refers to technologies that allow both wireless and wired systems to communicate with other devices of the same ability). Initially the Company wants to cover applications for fixed assets.
 
The accompanying unaudited financial statements presented herein have been prepared in accordance with the instructions to Form 10-Q and do not include all the information and note disclosures required by accounting principles generally accepted in the United States. The financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2013 filed with the Securities and Exchange Commission (the “SEC”).
 
In the opinion of management, this interim information includes all material adjustments, which are of a normal and recurring nature, necessary for fair presentation.
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. Actual results could differ from those estimates. Estimates that are particularly susceptible to change include assumptions used in determining the fair value of securities owned and non-readily marketable securities.
 
The results of operations for the nine months ended February 28, 2014 are not necessarily indicative of the results to be expected for the entire year or for any other period.
 
 
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
CASH AND CASH EQUIVALENTS
 
The Company cash balances accounts at institution are insured by the Federal Deposit Insurance Corporation up to $250,000. The Company’s accounts at these institutions may, at times, exceed the federally insured limits. The Company has not experienced any losses in such accounts.
 
We consider all short-term highly liquid investments with an original maturity at the date of purchase of three months or less to be cash equivalents.
 
DEVELOPMENT STAGE COMPANY
 
The Company was an active business from 2009 through August 31, 2010 and was involved in placing Canadian citizens in accounting positions with Canadian corporations. Commencing September 2010, the Company was looking for new business and commenced the Machine-to-Machine market (Machine-to-Machine (M2M) business solutions. The Company currently has operations and no revenues and, in accordance with the relevant authoritive guidance is considered a Development Stage Enterprise. As a development stage enterprise, the Company discloses the deficit accumulated during the development stage and the cumulative statements of operations and cash flows from September 1, 2010 to the current balance sheet date.
 
 
F-4
 
 
 
- 5 -

 
 
 
 
 
 
FAIR VALUE MEASUREMENTS
 
The Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.
 
The estimated fair value of certain financial instruments, including cash and cash equivalents, prepaid expenses, notes payable, and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.
 
ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
 
*           level l - quoted prices in active markets for Identical assets or liabilities
*           level 2 - quoted prices for similar assets and liabilities in active markets or inputs that are observable
*           level 3 - inputs that are unobservable (for example cash flow modeling inputs based on assumptions)
 
The Company’s derivative liability, classified as a level 3 liability, is the only financial liability measured at fair value on a recurring basis.
 
DERIVATIVE LIABILITIES
 
Our derivative financial instruments consist of embedded derivatives related to the convertible debt, warrants and beneficial conversion features embedded within our convertible debt. The accounting treatment of derivative financial instruments requires that we record the derivatives and related warrants at their fair values as of the inception date of the debt agreements and at fair value as of each subsequent balance sheet date. Any change in fair value was recorded as non-operating, non-cash income or expense at each balance sheet date. If the fair value of the derivatives was higher at the subsequent balance sheet date, we recorded a non-operating, non-cash charge. If the fair value of the derivatives was lower at the subsequent balance sheet date, we recorded non-operating, non-cash income.
 
INVENTORIES
 
Inventories consisting of electronic parts and components are stated at the lower of cost or market. The cost of work in process and finished goods includes materials, direct labor, variable costs and overhead and full absorption of fixed manufacturing overhead.  The company periodically reviews the value of items in inventory and provides write-downs or write-offs of inventory based on its assessment of market conditions.  In the current quarter, the company experienced total write-offs of $21,740.
 
INCOME TAXES
 
The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. 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 the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.
 
 
 
 
F-5

 
- 6 -

 

 
 
ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. We have no material uncertain tax positions for any of the reporting periods presented.
 
USE OF ESTIMATES
 
The preparation of the financial statements in conformity with Generally Accepted Accounting Principles (“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 dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. These estimates and assumptions include derivative financial instruments issued in financing transactions, the collectability of accounts receivable and deferred taxes and related valuation allowances. We re-evaluate all of our accounting estimates at least quarterly based on these conditions and record adjustments when necessary.
 
LOSS PER COMMON SHARE
 
The basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding.
 
Diluted net loss per common share is computed by dividing the net loss, adjusted on an “as if converted” basis, by the weighted average number of common shares outstanding plus potential dilutive securities.
 
STOCK BASED COMPENSATION
 
The Company accounts for stock options and similar equity instruments issued in accordance with ASC 718. Accordingly, compensation costs attributable to stock options or similar equity instruments granted are measured at the fair value at the grant date, and expensed over the expected vesting period. Transactions in which goods or services are received in exchange 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 instruments issued, whichever is more reliably measurable. ASC 718 requires excess tax benefits be reported as a financing cash inflow rather than as a reduction of taxes paid.
 
RESEARCH AND DEVELOPMENT
 
Research and development costs are charged to expense as incurred.
 
NEW ACCOUNTING PRONOUNCEMENTS
 
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that may have an impact on the Company’s accounting and reporting. The Company believes that such recently issued accounting pronouncements and other authoritative guidance for which the effective date is in the future either will not have an impact on its accounting or reporting or that such impact will not be material to its financial position, results of operations and cash flows when implemented.
 
NOTE 3 – GOING CONCERN
 
The Company’s financial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities and commitments in the normal course of business. Since our inception in 2009, we have generated minimal revenue and generated losses from operations and we anticipate that we will continue to generate losses from operations for the foreseeable future. During the nine months ended February 28, 2014 the Company has incurred a net loss of $301,082. The Company has negative working capital of $1,436,997 and a stockholders’ deficiency of $1,436,997 at February 28, 2014. These factors among others raise substantial doubt about the Company’s ability to continue as a going concern.
 
 
 
 
 
F-6
 
 
 
- 7 -

 
 
 
Management’s plans for the Company’s continued existence include selling additional stock and borrowing additional funds to pay overhead expenses.
 
The Company’s future success is dependent upon its ability to achieve profitable operations, generate cash from operating activities and obtain additional financing. There is no assurance that the Company will be able to generate sufficient cash from operations, sell additional shares of common stock or borrow additional funds.
 
The Company’s inability to obtain additional cash could have a material adverse effect on its financial position, results of operations and its ability to continue in existence. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
 
NOTE 4 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
 
Accrued expenses consisted of the following at:
 
   
February
2014
 
May
2013
 
       
Accrued interest
$
63,465
$
24,021
Accrued interest  related party
 
80,764
 
52,205
Accrued compensation
 
144,000
 
24,000
Accrued operating expenses
 
121,905
 
183,760
 
$
410,134
$
283,986
 
 
NOTE 5 – NOTES PAYABLE
 
During the year ended May 31, 2013, the Company received the proceeds of various loans which are convertible into shares of the Company's common stock at a discount of 50% of the market price of the common shares of the Company at the time of conversion and bear interest at 8% per annum.  The amounts received during the year ended May 31, 2013 were $147,500.
 
The convertible feature of these loans, due to their potential settlement in an indeterminable number of shares of the Company’s common stock has been identified as a derivative.  The derivative component is fair valued at the date of issuance of the obligation and this amount is allocated between the derivative and the underlying obligation.  The difference is recorded as a debt discount and amortized over the life of the debt.
 
During these same periods, convertible debts were converted into common shares of the Company.  During the period ended February 28, 2014 and the year ended May 31, 2013, total loan conversions of $12,000 and $12,000 were made into 1,445,783 and 1,818,182 shares respectively.
 
A summary of the amounts outstanding as of February 28, 2014 and May 31, 2013 is as follows:
 
   
Loans
   
Debt discount
   
Balance
   
Balance
 
   
2014
   
2014
   
February 28, 2014
   
May 31, 2013
 
                         
Asher Enterprises Inc
  $ 85,500     $ -     $ 85,500     $ 97,500  
 
 
 
F-7

 
- 8 -

 

NOTE 6 – NOTES PAYABLE – STOCKHOLDERS’
 
During the quarter ended February 28, 2014, the Company received additional loans from Michel St-Pierre in the amount of $5,438. In 2013, the Company received additional loans from Michel St-Pierre in the amount of $156,640. At February 28, 2014, the loans amounted to $389,084. These loans carry an interest of 10% and are payable on demand.
 
During the quarter ended February 28, 2014, the Company received additional loans from a shareholder in the amount of $1,815. The amount owed to the shareholder at February 28, 2014 is $164,140. This note bears interest at 10% per annum and is payable on demand.
 
During the quarter ended February 28, 2014, the Company received additional loans from Capex Investments Limited, a shareholder, in the amount of $18,000. In 2013, the Company received additional loans from Capex Investments Limited in the amount of $118,615. The amount owed to Capex Investments Limited at February 28, 2014 is $278,779. These loans carry an interest of 10% and are payable on demand.
 
In 2013, the Company received loans from DT Crystal in the amount of $44,940. The amount owed to DT Crystal February 28, 2014 is $44,940. These loans carry an interest of 10% and are payable on demand.
 
 
NOTE 7 – DERIVATIVE LIABILITIES
 
During the period ended February 28, 2014 and the year ended May 31, 2013 the Company recorded various derivative liabilities associated with the convertible debts disclosed in Note 5. The Company computes the value of the derivative liability at the issuance of the related obligation using the Black Scholes Method using a risk free rate of 0.14%, volatility rates of 311.00% and a forfeiture rate of 0.00%.  The derivative liability at February 28, 2014 and May 31, 2013 is as follows:
May
   
February 28,
2014
   
May 31,
2013
 
             
Conversion feature
  $ 69,957     $ 141,706  
 
 
NOTE 8 – CAPITAL STOCK
 
The company is authorized to issue 500,000,000 shares of common stock (par value $0.00001) of which 66,146,442 were issued and outstanding as of February 28, 2014.
 
On July 17, 2013, the note holder converted loans of $12,000 into 1,445,783 shares of common stock of the Company.
 
 
NOTE 9 – INCOME TAXES
 
Components of deferred tax assets at February 28, 2014 is as follows:
 
 Deferred tax asset-net operating loss carryforward
  $ 622,799  
 Valuation allowance
    (622,799 )
 Net deferred tax asset
  $ 0  
 
 
 
F-8
 
 
- 9 -

 
 
 
 
Income taxes are provided for using the liability method of accounting in accordance with the Income Taxes Topic of the FASB ASC. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized and when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The computation of limitations relating to the amount of such tax assets, and the determination of appropriate valuation allowances relating to the realizing of such assets, are inherently complex and require the exercise of judgment. As additional information becomes available, we continually assess the carrying value of our net deferred tax assets.
 
 
NOTE 10 – COMMITMENTS AND CONTINGENCIES
 
The Company does not have any commitments nor contingencies.
 
 
NOTE 11 – RELATED PARTY TRANSACTIONS
 
See Note 6 regarding Notes Payable to related parties.
 
 
NOTE 12 – SUBSEQUENT EVENTS
 
Management evaluated all activity of the Company through the issue date of the Financial Statements and noted there were no material subsequent events as of that date.
 
 
 
 
 
 
 
 
 
 
 
 
 
F-9
 
- 10 -

 
 
 
 
 
 
ITEM 2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.
 
    The following discussion of the financial condition and results of our operations should be read in conjunction with the financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q for the period ended February 28, 2014 (this “Report”). This Report contains certain forward-looking statements and our future operating results could differ materially from those discussed herein. Certain statements contained in this report, including, without limitation, “believes”, “anticipates,” “expects” and the like, constitute “forward-looking statements”. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. We disclaims any obligation to update any such factors or to announce publicly the results of any revisions of the forward-looking statements contained or incorporated by reference herein to reflect future events or developments.
 
Results of Operations
 
During the past few months, we have hired independent contractors that have worked on developing M2M systems to serve major clients that are counting on us to open new markets for them in wireless M2M, the "Internet of Things".
 
They have evaluated, implemented and are presently testing a functional prototype solution that enables the integration of 3rd party USB device into cellular gateway to connect through Wiless-M2M platform.
 
On July 7, 2011, we nominated Jonathan Barratt Chief Technical Officer (CTO) of the company, and as such he will oversee all technical developments for Wiless Controls, as well as keep a close relationship with the clients to guarantee the development and delivery of all product lines. We also nominated, Medhat Mahmoud as VP Technology and Strategy.
 
On July 26, 2011, we completed the development of our game changing Cellular Gateway. The Company is ready to introduce the market to its technology platform, one which opens up new possibilities in the Machine to Machine world by offering a plug and play system for deploying an entirely wireless M2M solution in a single step.
 
On July 26, 2011, iMetrik M2M and Monnit Corporation announced a partnership that will enable them to offer the Machine-To-Machine (M2M) market a plug-and-play, end-to-end, cellular enabled wireless sensing solution.
 
 global connectivity, users will benefit from a system that eliminates development time and reduces installation to an absolute minimum. The system will comprise Monnit’s battery operated low-cost wireless sensors collecting information, transmitted wirelessly through the Wiless Controls Cellular Gateway via the iMetrik global GSM network and iMonnit web application. Once installed, a user can access the sensor data, and monitor any asset from anywhere at any time through a computer or smart phone with Internet access.
 
On October 11, 2011, we announced that after months of development, and following a successful demonstration of the system at Metropolitan’s head offices in Chicago, Metropolitan chosen Wiless Controls to monitor all sump pumps it sells in the US.
 
 

 
 
- 11 -

 
 

 
On February 28, 2012, after a year of development and months of testing, our Cellular Gateway passed all tests for functionality and reliability of hardware and connectivity, and is now ready to be commercialized. We have been working with Monnit Corporation to create what would be the first truly end-to-end “plug and play” wireless M2M system. By combining Monnit’s sensors with our Cellular Gateway and Global Network, integrators and users will no longer have to source the many components and services necessary to monitor and control their assets or systems.
 
On May 22, 2012, we announced we had commenced commercial shipments of our Cellular Gateway in North America to two major distributors in the United States.
 
On August 31, 2012, we announced the successful FCC certifications of our Cellular Gateway. These certifications guarantee consumers that the product conforms to essential requirements of performance and safety, following the industry standards. The FCC certification is applicable on products sold in the United States. Manufacturers and suppliers of radio and telecoms equipment wishing to gain access to the US market must obtain the necessary grant (approval) from the Federal Communications Commission (FCC).
 
For the Three and Nine Month Periods ended February 28, 2014
 
Overview
 
We recorded net losses of $96,757 and $301,082 for the three and nine month periods ended February 28, 2014 as compared to net losses of $176,017 and $540,125 for the comparable periods of 2013.
 
Development Stage Expenditures
 
Development stage expenditures for the nine month period ended February 28, 2014, were 31,007 in professional fees, $144,000 in salaries and $33,735 in research and development. This is compared to development stage expenditures for the nine month period ended February 28, 2013, were $152,427 in professional fees, $144,000 in salaries and $141,945 in research and development. The decrease in development stage expenditures resulted from the decrease of research and development expenses and professional fees expense.
 
Sales
 
For the three and nine month periods ended February 28, 2014, we had gross revenues of $0. This compared to gross revenues of $0 for the same period of 2013. We are not generating revenues on sale of equipment due to the testing of our production device done on sight under various environmental conditions.
 
Total Cost and Expenses
 
For the three and nine month periods ended February 28, 2014, we incurred total costs and expenses of $96,757 and $301,082, a decrease of 45% and 44% from the same periods of 2013. The decrease in total cost and expenses for the three month and six month periods resulted from research and development and professional fees.
 
Selling, General and Administration
 
For the three and nine month periods ended February 28, 2014, we incurred selling, general and administration expenses of $56,305 and $185,461 , a decrease of 46% from the three month period last year and a decrease of 41% for the nine month period in 2013. The decrease resulted from the professional fees expense.
 
 
 
 
- 12 -

 
 
 
 
Interest
 
We calculate interest in accordance with the respective note payable, note payable stockholders and Derivative liabilities. For the three and nine month periods ended February 28, 2014, we incurred $28,832 and $131,895. This compared to $80,854 and $160,950for the same periods of the previous year. The decrease of 64% from the three month period last year and an increase of 18% for the nine month period in 2013 was caused by interest expense on increased borrowings and interest expense recorded upon issuance of convertible debt in which the debt discount related to the conversion feature recorded as a derivative exceed the face value of the note.
 
Liquidity and Capital Resources
 
At February 28, 2014, we had $5,537 in cash, as opposed to $2,178 in cash at May 31, 2013. Total cash requirements for operations for the nine month period ended February 28, 2014 was $79,601. As a result of its new business plan, management estimates that cash requirements through the end of the fiscal year ended May 31, 2014 will be between $500,000 thousand to $2,000,000 thousand. As of the date of this Report, we do not have available resources sufficient to cover the expected cash requirements through the end of the third quarter of 2014 or the balance of the year.  As a result, there is substantial doubt that we can continue as an ongoing business without obtaining additional financing. Management’s plans for maintaining our operations and continued existence include selling additional equity securities and borrowing additional funds to pay operational expenses. There is no assurance we will be able to generate sufficient cash from operations, sell additional shares of Common Stock or borrow additional funds. Our inability to obtain additional cash could have a material adverse effect on our financial position, results of operations and our ability to continue our existence. If our losses continue and we are unable to secure additional financing, we may ultimately be required to seek protection from creditors under applicable bankruptcy laws.
 
We had total assets of $5,537 as of February 28, 2014. This was a decrease of $18,381, or 77%, as compared to total assets of $23,918 as of May 31, 2013. The decrease was primarily attributable to loss on write-down of inventory.
 
We had total current liabilities of $1,442,534 as of February 28, 2014. This was an increase of $270,701, or 23%, as compared to current liabilities of $1,171,833 as of May 31, 2013. The net increase was attributable to loans stockholders, note payable and accrued expenses.
 
     For the three month period ended February 28, 2014, the Company received additional loans from Michel St-Pierre, a shareholder, in the amount of $5,438. In 2013, the Company received loans of $151,202. At February 28, 2014, the loans amounted to $389,084. These loans carry an interest of 10% and are payable on demand.
 
Our financial condition raises substantial doubt about our ability to continue as a going concern. Management’s plan for our continued existence includes selling additional stock through private placements and borrowing additional funds to pay overhead expenses while maintaining marketing efforts to raise our sales volume. Our future success is dependent upon our ability to achieve profitable operations, generate cash from operating activities and obtain additional financing. There is no assurance that we will be able to generate sufficient cash from operations, sell additional shares of common stock or borrow additional funds. Our inability to obtain additional cash could have a material adverse effect on our financial position, results of operations and our ability to continue as a going concern.
 
 

 
 
- 13 -

 

 
This section includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this Memorandum. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions.
 
We have only had operating losses which raise substantial doubts about our viability to continue our business and our auditors have issued an opinion expressing the uncertainty of our Company to continue as a going concern. If we are not able to continue operations, investors could lose their entire investment in our Company. Presently, the monthly negative cash flow amounts to $25,000 and our available cash cannot sustain current operations for more than one month. In order to continue our operations, we want to sell additional shares of common stock or borrow additional funds and generate sufficient cash from operations to support our company for the next twelve months.
 
Off-Balance Sheet Arrangements
 
We are not a party to any off-balance sheet arrangements.
 
We have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.
 
 
ITEM 3.       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
 
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
 
 
ITEM 4.       CONTROLS AND PROCEDURES.
 
Limitations on the Effectiveness of Controls
 
Our management, including our CEO and CFO, does not expect that our Disclosure Controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management or board override of the control.
 
 
 

 
- 14 -

 
 

 
 
The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. 
 
Management’s Report on Internal Control over Financial Reporting
 
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.
 
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. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
 
As of February 28, 2014, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses. The matter involving internal controls and procedures that our management considered to be a material weakness under the standards of the Public Company Accounting Oversight Board was the lack of a functioning audit committee, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures. The aforementioned material weaknesses were identified by our management in connection with the review of our financial statements for the period ended February 28, 2014.
 
Management believes that the material weakness set forth above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.
 
This periodic 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 temporary rules of the SEC that permit us to provide only the management’s report in this quarterly report.
 
-  
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;
 

 
 
- 15 -

 
 
 
 

 
-  
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
 
Changes in Internal Control over Financial Reporting
 
There was no change in our internal control over financial reporting during the quarter ended February 28, 2014 that has affected, or is reasonably likely to affect, our internal control over financial reporting.
 
 
PART II. OTHER INFORMATION
 
ITEM 1A.        RISK FACTORS.
 
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
 
 
ITEM 6.           EXHIBITS.
 
The following documents are included herein:
 
Exhibit
 
Incorporated by reference
Filed
Number
Document Description
Form
Date
Number
herewith
 
 
 
 
 
 
  3.1
Articles of Incorporation, as amended.
S-1 06/19/09   3.1  
           
3.2
Bylaws.
S-1
06/19/09
3.2
 
           
4.1
Stock Certificate
S-1
06/19/09
4.1
 
           
10.1
Consulting Agreement – Michel St-Pierre.
10-K
08/19/11
10.1
 
           
10.2
Consulting Agreement – Jean-Paul Langlais.
10-K
08/19/11
10.2
 
           
10.3
Manufacturing Agreement with SMT Hautes Technologies.
10-Q
01/14/12
10.3
 
           
10.4
Partnership Agreement with Monnit Corp.
10-K
08/28/12
10.4
 
           
10.5
License Agreement with iMetrik Global Inc.
10-K
08/28/12
10.5
 
           
10.6
Loan Agreement with Capex Investment Limited
8-K
03/28/14
10.1
 
           
14.1
Code of Ethics
10-K
08/20/10
14.1
 
           
31.1
Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
X
           
32.1
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the Chief Executive Officer and Chief Financial Officer.
     
X
 
 
 
 
 
- 16 -

 
 
 
 
 
           
99.1
Audit Committee Charter
10-K
08/20/10
99.2
 
           
99.2
Disclosure Committee Charter
10-K
08/20/10
99.3
 
           
101.INS
XBRL Instance Document.
     
X
           
101.SCH
XBRL Taxonomy Extension – Schema.
     
X
           
101.CAL
XBRL Taxonomy Extension – Calculations.
     
X
           
101.DEF
XBRL Taxonomy Extension – Definitions.
     
X
           
101.LAB
XBRL Taxonomy Extension – Labels.
     
X
           
101.PRE
XBRL Taxonomy Extension – Presentation.
     
X
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
- 17 -

 

SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report has been signed on behalf by the undersigned thereunto duly authorized, on this 18th day of April, 2014.

 
WILESS CONTROLS INC.
 
   
 
BY:
MICHEL ST-PIERRE
   
Michel St-Pierre
   
President, Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer, Secretary, Treasurer and sole member of the Board of Directors.


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
- 18 -

 

EXHIBIT INDEX
 
Exhibit
 
Incorporated by reference
Filed
Number
Document Description
Form
Date
Number
herewith
 
 
 
 
 
 
3.1
Articles of Incorporation, as amended.
S-1
06/19/09
3.1
 
           
3.2
Bylaws.
S-1
06/19/09
3.2
 
           
4.1
Stock Certificate
S-1
06/19/09
4.1
 
           
10.1
Consulting Agreement – Michel St-Pierre.
10-K
08/19/11
10.1
 
           
10.2
Consulting Agreement – Jean-Paul Langlais.
10-K
08/19/11
10.2
 
           
10.3
Manufacturing Agreement with SMT Hautes Technologies.
10-Q
01/14/12
10.3
 
           
10.4
Partnership Agreement with Monnit Corp.
10-K
08/28/12
10.4
 
           
10.5
License Agreement with iMetrik Global Inc.
10-K
08/28/12
10.5
 
           
10.6
Loan Agreement with Capex Investment Limited
8-K
03/28/14
10.1
 
           
14.1
Code of Ethics
10-K
08/20/10
14.1
 
           
31.1
Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
X
           
32.1
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the Chief Executive Officer and Chief Financial Officer.
     
X
           
99.1
Audit Committee Charter
10-K
08/20/10
99.2
 
           
99.2
Disclosure Committee Charter
10-K
08/20/10
99.3
 
           
101.INS
XBRL Instance Document.
     
X
           
101.SCH
XBRL Taxonomy Extension – Schema.
     
X
           
101.CAL
XBRL Taxonomy Extension – Calculations.
     
X
           
101.DEF
XBRL Taxonomy Extension – Definitions.
     
X
           
101.LAB
XBRL Taxonomy Extension – Labels.
     
X
           
101.PRE
XBRL Taxonomy Extension – Presentation.
     
X
 
 
 
 

 
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