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 February 28, 2015

 

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 April 14, 2015, the registrant had 275,402 shares of common stock, par value $0.001, outstanding.

 

 

 

PORTLOGIC SYSTEMS INC.

 

FORM 10-Q

For the nine months ended February 28, 2015

 

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

 

FEBRUARY 28, 2015 (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 February 28, 2015 and May 31, 2014	5
Unaudited Interim Consolidated Statements of Operations for the Nine Months Ended February 28, 2015 and February 28, 2014	6
Unaudited Interim Consolidated Statements of Cash Flows for the Nine Months Ended February 28, 2015 and February 28, 2014	7
Notes to Unaudited Interim Consolidated Financial Statements	8-15

 

 

PORTLOGIC SYSTEMS INC.
UNAUDITED INTERIM CONSOLIDATED BALANCE SHEETS
AS OF FEBRUARY 28, 2015 AND MAY 31, 2014
(Amounts expressed in US Dollars)
		Feb 28, 2015				May 31, 2014
ASSETS		$				$
Current
Cash and cash equivalents			5,071				4,011
Loan receivable, net of allowance for doubtful accounts of $0 at February 28, 2015 and May 31, 2014			7,850				7,850
Accounts receivable			48,212				59,651
Prepaid expenses and deposits			6,255				6,255
			67,388				77,767
TOTAL ASSETS			67,388				77,767
LIABILITIES
Current
Accounts payable and accrued liabilities			380,123				404,726
Short term loans			23,025				23,025
New convertible loans			662,936				636,546
Shareholder loan			33,435				19,000
Other loan			2,550				2,550
Convertible loan			7,000				7,000
			1,109,069				1,092,847
STOCKHOLDERS’ DEFICIENCY
Capital stock
Preference stock; $0.001 par value; 1,000,000 shares authorized;
0 issued and outstanding at February 28, 2015 and May 31, 2014			-				-
Common stock; $0.001 par value; 225,000,000 shares authorized;
206,551,422* issued and outstanding at February 28, 2015 and May 31, 2014			206,551				206,551
Additional paid in capital			190,749				190,749
Accumulated deficit			(1,438,981	)			(1,412,380	)
			(1,041,681	)			(1,015,080	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY			67,388				77,767

 

* Common stock figures reflect the 3:1 forward common stock split effective March 30, 2012 on a retroactive basis but does not reflect the 1:750 reverse common stock split effective March 16, 2015.

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 NINE MONTHS ENDED FEBRUARY 28, 2015 AND 2014
(Amounts expressed in US Dollars)
		For the Nine Months								For the Three Months
		Ended February 28								Ended February 28
		2015				2014				2015				2014
		$				$				$				$
Gross Margin (Loss)
Revenue			122,768				639,881				-				36,653
Cost of goods sold			106,946				642,758				-				39,559
			15,822				(2,877	)			-				(2,906	)
Expenses
Selling and administrative			42,423				139,973				16,344				44,378
Depreciation			-				265				-				74
			42,423				140,238				16,344				44,452
Net Loss for the period			(26,601	)			(143,115	)			(16,344	)			(47,358	)
Net Loss per share for the period
Basic and fully diluted			(0.0001	)			(0.0007	)			(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 but does not reflect the 1:750 reverse common stock split effective March 16, 2015

 

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 NINE MONTHS ENDED FEBRUARY 28, 2015 AND 2014
(Amounts expressed in US Dollars)
		For the nine months ended Feb 28, 2015				For the nine months ended Feb 28, 2014
		$				$
Cash Flows from Operating Activities
Net Loss		(26,601)				(143,115)
Adjustments made to reconcile net loss to net cash from operating activities
Depreciation of equipment			-				265
Changes in operating assets and liabilities
Decrease (increase) in accounts and other receivables			11,439				(11,358	)
Increase (decrease) in accounts payable and accrued liabilities			(24,603	)			95,912
Cash flows used in operating activities			(39,765	)			(58,296	)
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
Assignment of notes payable							(391,486	)
Assignment of new loan							(200,060	)
Proceeds from new convertible loans			26,390				636,546
Proceeds from/payments toward shareholder loan			14,435				(2,436	)
Proceeds from issuance of other loan			-				2,500
Cash flows provided by financing activities			40,825				68,089
Increase (decrease) in cash and cash equivalents			1,060				9,793
Cash and cash equivalents, beginning of period			4,011				2,270
Cash and cash equivalents, end of period			5,071				12,063

 

The accompanying notes form an integral part of these unaudited interim consolidated financial statements.

 

 

PORTLOGIC SYSTEMS INC.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2015

(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 nine month period ended February 28, 2015, the Company utilized $39,765 (February 28, 2014 - $58,296) of cash in operations. At February 28, 2015, the Company reported a deficit of $1,438,981 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

FEBRUARY 28, 2015

(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 February 28, 2015 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 February 28, 2015, 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 nine month period ended February 28, 2015 (February 28, 2014 - $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

FEBRUARY 28, 2015

(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 nine month period ended February 28, 2015 (February 28, 2014 - 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 nine month periods ended February 28, 2015 and February 28, 2014. 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

FEBRUARY 28, 2015

(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

FEBRUARY 28, 2015

(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		$	5,071			$	-				-			$	5,071
Loan receivable			-				-			$	7,850			$	7,850
Liability
Short term loans			-				-			$	23,025			$	23,025
New convertible loans			-				-			$	662,936			$	662,936
Shareholder loan			-				-			$	33,435			$	33,435
Other loan			-				-			$	2,550			$	2,550
Convertible loan			-				-			$	7,000			$	7,000

 

NOTE 5. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

 

		February 28, 2015				May 31, 2014
		$				$
Cost of goods sold & Telecom			-				26,953
Audit and review			12,400				14,800
Bookkeeping and accounting			159,112				165,312
Legal			-				-
Consulting			37,000				37,000
IT			48,000				48,000
Other			1,713				6,040
Interest payable			121,898				106,621
			380,123				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 February 28, 2015 (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 February 28, 2015 (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 February 28, 2015.

 

 

PORTLOGIC SYSTEMS INC.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2015

(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 February 28, 2015.

 

Therefore total convertible loans as of February 28, 2015 is $662,936 (May 31, 2014 - $636,546)

 

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 February 28, 2015 is $33,435 (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, 2015. This convertible debenture has not been repaid and is due on March 10, 2016.

 

Interest expense on all the above loans of the Company has been calculated to February 28, 2015 and amounted to $15,277 for the nine months ended February 28, 2015 (February 28, 2014 - $23,703) and is included in selling and administrative expense. As at February 28, 2015, accrued interest of $121,898 (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

FEBRUARY 28, 2015

(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 February 28, 2015, 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 but does not reflect the 1:750 reverse common stock split effective March 16, 2015

 

NOTE 11. STOCKHOLDERS’ DEFICIENCY

 

The stockholders' deficiency section of the Company contains the following classes of capital stock as of February 28, 2015 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 but does not reflect the 1:750 reverse common stock split effective March 16, 2015

 

 

PORTLOGIC SYSTEMS INC.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2015

(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 February 28, 2015, $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 nine months ended February 28, 2015 amounted to $3,600 (February 28, 2014 - $90,000).

 

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

 

On March 16, 2015, the Company effected a common stock reverse split 1:750. The principal effect of the reverse stock split will be that each 750 shares of common stock issued and outstanding will automatically be combined into and become one new share of common stock. In lieu of issuing fractional shares, the Company will round up each fractional share to the nearest whole post-split share. The reverse stock split will not change the terms of the Company’s common stock. After the reverse stock split, the par value of common stock will remain unchanged at $0.001 per share and shares of common stock will have the same voting and dividend rights and will be identical in all other respects to the common stock currently authorized. Each stockholder’s percentage ownership of the new common stock will not be altered except for the effect of eliminating fractional shares.

 

On March 30, 2015, the Company entered into a Debt Conversion Agreement with the Chief Executive Officer whereby $150,000 of Accounts Payable owed by the Company to the officer was converted to 30,000,000 restricted common stock of the Company.

 

 

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 nine months ended February 28, 2015 to the same period in 2014. 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 nine months ended February 28, 2015.

 

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 February 28, 2015, 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 nine month period ended February 28, 2015 (February 28, 2014 - loss of $31).

 

 

RESULTS OF OPERATIONS

 

COMPARISON OF RESULTS FOR THE NINE MONTHS ENDED FEBRUARY 28, 2015 AND FEBRUARY 28, 2014

 

REVENUE

 

For the nine months ended February 28, 2015, we recognized $122,768 in revenue from our Voip 1 telecommunications operations. For the nine months ended February 28, 2014, we recognized $639,881 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 nine months ended February 28, 2015. We incurred $642,758 in cost of goods sold for the nine months ended February 28, 2014.

 

EXPENSES

 

During the nine months ended February 28, 2015, we incurred total expenses of $42,423 comprised of selling and administrative expense. During the nine months ended February 28, 2014, we incurred total expenses of $140,238 comprised of selling and administrative expense of $139,973 and depreciation of $265. Higher expenses for the nine month period ended February 28, 2014 resulted almost entirely to the higher accounting expense of $90,000 vs. $3,600 in the nine month period ended February 28, 2015 due to the end of the Chief Financial Officer’s consulting agreement. As well, interest expense was higher in the prior nine month period ended February 28, 2014 coming in at $23,703 vs. $15,277 due to refinancing of loans in the current nine month period ended February 28, 2015.

 

NET INCOME/LOSS

 

During the nine months ended February 28, 2015, we incurred net loss of $10,257 compared with a net loss of $95,756 for the nine months ended February 28, 2014. The combination of higher net profit from our telecommunications operations, even with decreased activity, and much lower accounting expense in the current period ended February 28, 2015 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 February 28, 2015, we had cash and cash equivalents of $5,071. We had total current assets of $67,388.

 

We anticipate that we will require $350,000 in total, over the next three 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 three months. If we generate no cash revenues other than the $5,071 that we had available as of February 28, 2015, we will need to raise additional funds during the next three 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 February 28, 2015, our total assets were $67,388, our total liabilities were $1,109,069 and stockholders’ deficiency was $1,041,681.

 

SUBSEQUENT EVENTS

 

On March 16, 2015, we effected a common stock reverse split 1:750. The principal effect of the reverse stock split will be that each 750 shares of common stock issued and outstanding will automatically be combined into and become one new share of common stock. In lieu of issuing fractional shares, we will round up each fractional share to the nearest whole post-split share. The reverse stock split will not change the terms of our common stock. After the reverse stock split, the par value of our common stock will remain unchanged at $0.001 per share and shares of common stock will have the same voting and dividend rights and will be identical in all other respects to the common stock currently authorized. Each stockholder’s percentage ownership of the new common stock will not be altered except for the effect of eliminating fractional shares.

 

On March 30, 2015, we entered into a Debt Conversion Agreement with the Chief Executive Officer whereby $150,000 of Accounts Payable owed by us to the officer was converted to 30,000,000 restricted common stock of the Company.

 

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 February 28, 2015. 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 February 28, 2015 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 three 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 three months ending May 31, 2015. We will need to continue to raise additional funds to fully fund our operations for the next three month period beginning March 1, 2015. 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 third 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
3.1		Certificate of Change – Nevada Secretary of State, dated March 12, 2015 (included as Exhibit 3.1 to the Form 8-K filed March 18, 2015 and incorporated herein by reference).
5.7		Submission of Matters to a Vote of Security Holders, dated February 18, 2015 (included as Form 8-K filed February 23, 2015 and incorporated herein by reference).
10.1		Debt Conversion Agreement between Portlogic Systems Inc. and Jueane Thiessen, dated March 30, 2015 (included as Exhibit 10.1 to the Form 8-K filed March 31, 2015 and incorporated herein by reference).
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	April 14, 2015

 

 

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