Attached files
file | filename |
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EX-32 - EX-32.1 SECTION 906 CERTIFICATION - WORDLOGIC CORP | wordlogic10q033110ex321.htm |
EX-32 - EX-32.2 SECTION 906 CERTIFICATION - WORDLOGIC CORP | wordlogic10q033110ex322.htm |
EX-31 - EX-31.2 SECTION 302 CERTIFICATION - WORDLOGIC CORP | wordlogic10q033110ex312.htm |
EX-10 - EX-10.17 COMMON STOCK PURCHASE AGREEMENT - WORDLOGIC CORP | wordlogic10q033110ex1017.htm |
EX-10 - EX-10.18 SECURITIES PURCHASE AGREEMENT - WORDLOGIC CORP | wordlogic10q033110ex1018.htm |
EX-10 - EX-10.15 PRIVATE PLACEMENT AGREEMENT - WORDLOGIC CORP | wordlogic10q033110ex1015.htm |
EX-10 - EX-10.19 COMMON STOCK PURCHASE AGREEMENT - WORDLOGIC CORP | wordlogic10q033110ex1019.htm |
EX-10 - EX-10.16 SECURITIES PURCHASE AGREEMENT - WORDLOGIC CORP | wordlogic10q033110ex1016.htm |
EX-10 - EX-10.20 CONSULTING AGREEMENT - WORDLOGIC CORP | wordlogic10q033110ex1020.htm |
EX-31 - EX-31.1 SECTION 302 CERTIFICATION - WORDLOGIC CORP | wordlogic10q033110ex311.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X . QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2010
. TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ______ to _______
Commission File Number 333-149000
WORDLOGIC CORPORATION
(Name of small business issuer in its charter)
Nevada |
| 88-0422023 |
(State of incorporation) |
| (I.R.S. Employer Identification No.) |
650 West Georgia Street, Suite 2400
Vancouver, British Columbia, Canada V6B 4N7
(Address of principal executive offices)
604 257 3660
(Registrants telephone number)
with a copy to:
Carrillo Huettel, LLP
3033 Fifth Ave. Suite 201
San Diego, CA 92103
Telephone (619) 399-3090
Facsimile (619) 399-0120
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.
X . Yes . No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. .
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 . Smaller Reporting Company X . |
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
. Yes X . No
As of April 17, 2010, there were 46,436,800 shares of the registrants $.001 par value common stock issued and outstanding.
1
WORDLOGIC CORPORATION *
TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION | 3 | |
ITEM 1. | FINANCIAL STATEMENTS | 4 |
ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 22 |
ITEM 3. | QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK | 29 |
ITEM 4. | CONTROLS AND PROCEDURES | 29 |
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PART II. OTHER INFORMATION | 29 | |
ITEM 1. | LEGAL PROCEEDINGS | 29 |
ITEM 1A. | RISK FACTORS | 29 |
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 30 |
ITEM 3. | DEFAULTS UPON SENIOR SECURITIES | 31 |
ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS | 31 |
ITEM 5. | OTHER INFORMATION | 31 |
ITEM 6. | EXHIBITS | 32 |
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*Please note that throughout this Quarterly Report, except as otherwise indicated by the context, references in this report to Company, WLGC, we, us and our are references to WordLogic Corporation.
2
PART I: FINANCIAL INFORMATION
WORDLOGIC CORPORATION
(A Development Stage Company)
March 31, 2010
Index
Unaudited Consolidated Balance Sheets
4
Unaudited Consolidated Statements of Operations
5
Unaudited Consolidated Statements of Cash Flows
6
Unaudited Consolidated Statements of Stockholders Deficit
7
Notes to the Consolidated Financial Statements
11
3
WORDLOGIC CORPORATION
(A Development Stage Company)
Consolidated Statements of Operations
(Expressed in US Dollars)
|
| March 31, 2010 |
| December 31, 2009 |
|
| (Unaudited) |
|
|
Assets |
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Current Assets |
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Cash | $ | 2,086 | $ | 371 |
Restricted cash (Note 3) |
| 7,165 |
| 21,422 |
Accounts receivable |
| 98 |
| 124 |
Goods and services tax receivable |
| 5,047 |
| 5,851 |
Employee advances |
| 216 |
| 209 |
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Total Current Assets |
| 14,612 |
| 27,977 |
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|
|
Property and equipment, net of accumulated depreciation (Note 4) |
| 7,597 |
| 7,938 |
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Total Assets | $ | 22,209 | $ | 35,915 |
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Liabilities and Stockholders Deficit |
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Current Liabilities |
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Bank overdraft | $ | | $ | 164 |
Accounts payable |
| 864,536 |
| 792,585 |
Bank loan payable (Note 5) |
| 41,824 |
| 43,601 |
Indebtedness to related parties (Note 6) |
| 39,330 |
| 93,584 |
Accrued interest |
| 54,779 |
| 112,653 |
Note payable to related party (Note 6) |
| 147,666 |
| 142,721 |
Current portion of long-term debt (Note 7) |
| |
| 17,511 |
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Total Current Liabilities |
| 1,148,135 |
| 1,202,819 |
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Total Liabilities |
| 1,148,135 |
| 1,202,819 |
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Stockholders Deficit |
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Common stock, $.001 par value; 100,000,000 shares authorized, 43,866,800 and 40,916,384 shares issued and outstanding at March 31, 2010 and December 31, 2009, respectively (Note 8) |
| 43,867 |
| 40,916 |
Additional paid-in capital |
| 15,954,096 |
| 15,428,747 |
Accumulated deficit |
| (2,264,854) |
| (2,264,854) |
Deficit accumulated during development stage |
| (14,296,226) |
| (13,881,778) |
Accumulated other comprehensive loss |
| (562,809) |
| (489,935) |
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Total Stockholders Deficit |
| (1,125,926) |
| (1,166,904) |
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Total Liabilities and Stockholders Deficit | $ | 22,209 | $ | 35,915 |
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4
WORDLOGIC CORPORATION
(A Development Stage Company)
Consolidated Statements of Operations
(Expressed in US Dollars)
|
| Accumulated from May 27, 2003 (Date of Inception) to |
| For the Three Months Ended (Unaudited) | ||
|
| March 31, 2010 (Unaudited) |
| March 31, 2010 |
| March 31, 2009 |
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Revenues |
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Product sales | $ | 21,035 | $ | 376 | $ | 1,192 |
Royalty revenue |
| 32,962 |
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| |
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Total Revenues |
| 53,997 |
| 376 |
| 1,192 |
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Operating expenses |
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Rent, related party (Note 6) |
| 693,736 |
| 39,717 |
| 33,142 |
Selling, general and administrative (Note 6) |
| 11,494,742 |
| 308,937 |
| 685,277 |
Research and development |
| 2,318,371 |
| 45,183 |
| 79,197 |
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Total Operating Expenses |
| 14,506,849 |
| 393,837 |
| 797,616 |
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Loss from Operations |
| (14,452,852) |
| (393,461) |
| (796,424) |
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Other income (expenses) |
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Interest income |
| 1,760 |
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| |
Interest expense: |
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Related parties (Note 6) |
| (75,649) |
| (2,958) |
| (3,541) |
Amortization of discount on convertible note |
| (145,243) |
| |
| |
Other notes, advances and amounts |
| (434,636) |
| (3,642) |
| (2,514) |
Gain on derivative liability |
| 142,861 |
| |
| |
Loss on settled liabilities |
| (932,467) |
| (14,387) |
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Loss Before Extraordinary Item |
| (15,896,226) |
| (414,448) |
| (802,479) |
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Net extraordinary gain on litigation settlement, less applicable income taxes of $nil |
| 1,600,000 |
| |
| |
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Net Loss | $ | (14,296,226) | $ | (414,448) | $ | (802,479) |
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Other Comprehensive Income |
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Net Gain/(Loss) of Foreign Currency Translation |
| (562,809) |
| (72,874) |
| 34,750 |
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Net Comprehensive Income | $ | (14,859,035) | $ | (487,322) | $ | (767,729) |
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Basic and diluted loss per share |
|
| $ | (0.01) | $ | (0.02) |
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Weighted average common shares outstanding |
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| 42,135,383 |
| 34,703,496 |
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5
WORDLOGIC CORPORATION
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Expressed in US Dollars)
6
WORDLOGIC CORPORATION
(A Development Stage Company)
Consolidated Statement of Stockholders Deficit
(Expressed in US Dollars)
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| Deficit Accumulated | Accumulated |
|
| Common Stock | Additional Paid-In | Accumulated | During Development | Other Comprehensive |
| |
| Shares | Par Value | Capital | Deficit | Stage | Loss | Total |
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| $ | $ | $ | $ | $ | $ |
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Balance, May 27, 2003 (inception), prior to reverse merger | 19,016,657 | 19,017 | 1,504,366 | (2,264,854) | | 3,806 | (737,665) |
Reverse merger with The American West.com, Inc. (Note 1) | 2,907,007 | 2,907 | (2,907) | | | | |
Cancelled shares. | (60,000) | (60) | 60 | | | | |
Comprehensive loss: |
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Net loss | | | | | (408,027) | | (408,027) |
Currency translation adjustment | | | | | | (270,371) | (270,371) |
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Balance, December 31, 2003 | 21,863,664 | 21,864 | 1,501,519 | (2,264,854) | (408,027) | (266,565) | (1,416,063) |
Common stock issued in exchange for services and payables | 88,000 | 88 | 47,369 | | | | 47,457 |
Common stock options granted | | | 10,344 | | | | 10,344 |
Comprehensive income: |
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Net income | | | | | 938,596 | | 938,596 |
Currency translation adjustment | | | | | | (97,095) | (97,095) |
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Balance, December 31, 2004 | 21,951,664 | 21,952 | 1,559,232 | (2,264,854) | 530,569 | (363,660) | (516,761) |
Sale of common stock ($0.65/share) | 830,770 | 830 | 539,170 | | | | 540,000 |
Common stock options granted | | | 204,458 | | | | 204,458 |
Comprehensive loss: |
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Net loss | | | | | (1,221,564) | | (1,221,564) |
Currency translation adjustment | | | | | | (2,930) | (2,930) |
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Balance, December 31, 2005 | 22,782,434 | 22,782 | 2,302,860 | (2,264,854) | (690,995) | (366,590) | (996,797) |
Sale of units consisting of one share of common stock and one warrant ($0.60/share) | 570,000 | 570 | 341,430 | | | | 342,000 |
Common stock options exercised ($0.30/share) | 100,000 | 100 | 29,900 | | | | 30,000 |
Common stock options exercised ($0.60/share) | 29,150 | 30 | 17,460 | | | | 17,490 |
Sale of units consisting of one share of common stock and one warrant ($0.50/share) | 1,000,000 | 1,000 | 499,000 | | | | 500,000 |
Common stock options and warrants vested | | | 1,132,512 | | | | 1,132,512 |
Comprehensive loss: |
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Net loss | | | | | (2,214,823) | | (2,214,823) |
Currency translation adjustment | | | | | | 4,940 | 4,940 |
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Balance, December 31, 2006 | 24,481,584 | 24,482 | 4,323,162 | (2,264,854) | (2,905,818) | (361,650) | (1,184,678) |
7
WORDLOGIC CORPORATION
(A Development Stage Company)
Consolidated Statement of Stockholders Deficit
(Expressed in US Dollars)
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Balance, December 31, 2006 (continued) | 24,481,584 | 24,482 | 4,323,162 | (2,264,854) | (2,905,818) | (361,650) | (1,184,678) |
Sale of units consisting of one share of common stock and one warrant ($0.65/share) | 200,000 | 200 | 129,800 | | | | 130,000 |
Sale of units consisting of one share of common stock and one warrant ($0.50/share) | 821,000 | 821 | 409,679 | | | | 410,500 |
Sale of units consisting of one share of common stock and one warrant ($0.40/share) | 75,000 | 75 | 29,925 | | | | 30,000 |
Sale of units consisting of one share of common stock and one warrant ($0.30/share) | 2,377,297 | 2,377 | 710,812 | | | | 713,189 |
Sale of units consisting of one share of common stock and one warrant ($0.25/share) | 40,000 | 40 | 9,960 | | | | 10,000 |
Exercise of warrants ($1.25/share) | 20,000 | 20 | 24,980 | | | | 25,000 |
Common stock options exercised (cashless) | 87,736 | 88 | (88) | | | | |
Common stock options and warrants vested | | | 439,393 | | | | 439,393 |
Comprehensive loss: |
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Net loss | | | | | (1,634,324) | | (1,634,324) |
Currency translation adjustment | | | | | | (103,990) | (103,990) |
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Balance, December 31, 2007 | 28,102,617 | 28,103 | 6,077,623 | (2,264,854) | (4,540,142) | (465,640) | (1,164,910) |
Sale of common stock ($1.00/share) | 100,000 | 100 | 99,900 | | | | 100,000 |
Sale of units consisting of one share of common stock and one-half warrant ($0.60/share) | 800,000 | 800 | 479,200 | | | | 480,000 |
Sale of units consisting of one share of common stock and one-half warrant ($1.00/share) | 50,000 | 50 | 49,950 | | | | 50,000 |
Sale of units consisting of one share of common stock and one warrant ($0.20/share) | 112,500 | 112 | 22,388 | | | | 22,500 |
Sale of units consisting of one share of common stock and one warrant ($0.25/share) | 200,000 | 200 | 49,800 | | | | 50,000 |
Exercise of warrants ($0.50/share) | 125,000 | 125 | 62,375 | | | | 62,500 |
Exercise of warrants ($0.75/share) | 100,000 | 100 | 74,900 | | | | 75,000 |
Common stock options exercised ($0.30/share) | 10,000 | 10 | 2,990 | | | | 3,000 |
Common stock options exercised ($1.00/share) | 192,000 | 192 | 191,808 | | | | 192,000 |
Common stock issued for services ($0.68/share) | 200,000 | 200 | 135,800 | | | | 136,000 |
Common stock issued for services ($0.65/share) | 300,000 | 300 | 194,700 | | | | 195,000 |
Common stock issued in settlement of debt | 3,930,879 | 3,931 | 1,568,421 | | | | 1,572,352 |
Common stock options and warrants vested | | | 2,361,327 | | | | 2,361,327 |
Comprehensive loss: |
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|
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|
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Net loss | | | | | (4,923,057) | | (4,923,057) |
Currency translation adjustment | | | | | | 91,309 | 91,309 |
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Balance, December 31, 2008 | 34,222,996 | 34,223 | 11,371,182 | (2,264,854) | (9,463,199) | (374,331) | (696,979) |
9
WORDLOGIC CORPORATION
(A Development Stage Company)
Consolidated Statement of Stockholders Deficit
(Expressed in US Dollars)
Balance, December 31, 2008 (continued) | 34,222,996 | 34,223 | 11,371,182 | (2,264,854) | (9,463,199) | (374,331) | (696,979) |
Common stock issued for services ($0.30/share) | 200,000 | 200 | 59,800 | | | | 60,000 |
Common stock issued for services ($0.53/share) | 30,500 | 31 | 16,134 | | | | 16,165 |
Common stock issued for services ($0.68/share) | 250,000 | 250 | 169,750 | | | | 170,000 |
Common stock issued for services ($0.40/share) | 300,000 | 300 | 119,700 | | | | 120,000 |
Common stock issued for services ($0.49/share) | 100,000 | 100 | 48,900 | | | | 49,000 |
Common stock issued for services ($0.31/share) | 240,000 | 240 | 74,160 | | | | 74,400 |
Common stock issued for services ($0.45/share) | 300,000 | 300 | 134,700 | | | | 135,000 |
Common stock issued for services ($0.41/share) | 55,000 | 55 | 22,495 | | | | 22,550 |
Common stock issued for services ($0.62/share) | 100,000 | 100 | 61,900 | | | | 62,000 |
Common stock issued for services ($0.43/share) | 30,000 | 30 | 12,870 | | | | 12,900 |
Common stock issued for services ($0.36/share) | 50,000 | 50 | 17,950 | | | | 18,000 |
Common stock issued for services ($0.47/share) | 100,000 | 100 | 46,900 | | | | 47,000 |
Common stock issued for services ($0.44/share) | 50,000 | 50 | 21,950 | | | | 22,000 |
Common stock issued for services ($0.30/share) | 100,000 | 100 | 29,900 | | | | 30,000 |
Common stock issued for services ($0.33/share) | 90,000 | 90 | 29,610 | | | | 29,700 |
Common stock issued for services ($0.35/share) | 120,000 | 120 | 41,880 | | | | 42,000 |
Common stock issued for services ($0.37/share) | 50,000 | 50 | 18,450 | | | | 18,500 |
Common stock issued for services ($0.28/share) | 100,000 | 100 | 27,900 | | | | 28,000 |
Common stock issued for services ($0.26/share) | 127,500 | 127 | 33,023 | | | | 33,150 |
Common stock options exercised ($0.21/share) | 10,000 | 10 | 2,090 | | | | 2,100 |
Common stock issued for services ($0.20/share) | 100,000 | 100 | 19,900 | | | | 20,000 |
Common stock issued for services ($0.22/share) | 40,000 | 40 | 8,760 | | | | 8,800 |
Common stock options exercised ($0.35/share) | 33,333 | 33 | 11,633 | | | | 11,666 |
Common stock options exercised ($0.30/share) | 76,000 | 76 | 22,724 | | | | 22,800 |
Sale of units consisting of one share of common stock and one warrant ($0.20/share) | 175,000 | 175 | 34,825 | | | | 35,000 |
Sale of units consisting of one share of common stock and one warrant ($0.30/share) | 456,055 | 456 | 136,360 | | | | 136,816 |
Sale of common stock ($0.16/share) | 3,025,000 | 3,025 | 480,975 | | | | 484,000 |
Sale of common stock ($0.15/share) | 265,000 | 265 | 39,485 | | | | 39,750 |
Sale of common stock ($0.30/share) | 100,000 | 100 | 29,900 | | | | 30,000 |
Sale of common stock ($0.35/share) | 20,000 | 20 | 6,980 | | | | 7,000 |
Common stock options and warrants vested | | | 2,275,961 | | | | 2,275,961 |
Comprehensive loss: |
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Net loss | | | | | (4,418,579) | | (4,418,579) |
Currency translation adjustment | | | | | | (115,604) | (115,604) |
Comprehensive loss | | | | | | | (4,534,183) |
Balance, December 31, 2009 | 40,916,384 | 40,916 | 15,428,747 | (2,264,854) | (13,881,778) | (489,935) | (1,166,904) |
10
WORDLOGIC CORPORATION
(A Development Stage Company)
Consolidated Statement of Stockholders Deficit
(Expressed in US Dollars)
Comprehensive loss | | | | | | | (4,534,183) |
Balance, December 31, 2009 (continued) | 40,916,384 | 40,916 | 15,428,747 | (2,264,854) | (13,881,778) | (489,935) | (1,166,904) |
Common stock issued for services ($0.25/share) | 10,000 | 10 | 2,490 | | | | 2,500 |
Common stock issued for services ($0.24/share) | 113,750 | 114 | 27,186 | | | | 27,300 |
Common stock issued for services ($0.20/share) | 150,000 | 150 | 29,850 | | | | 30,000 |
Common stock issued for services ($0.18/share) | 62,500 | 63 | 11,187 | | | | 11,250 |
Common stock issued for services ($0.17/share) | 19,412 | 19 | 3,281 | | | | 3,300 |
Common stock issued for services ($0.19/share) | 50,000 | 50 | 9,450 | | | | 9,500 |
Common stock issued in settlement of debt | 479,554 | 480 | 85,841 | | | | 86,321 |
Common stock options exercised ($0.40/share) | 200,000 | 200 | 79,800 | | | | 80,000 |
Sale of units consisting of one share of common stock and one warrant ($0.20/share) | 125,000 | 125 | 24,875 | | | | 25,000 |
Sale of units consisting of one share of common stock and one warrant ($0.10/share) | 1,600,000 | 1,600 | 158,400 | | | | 160,000 |
Sale of common stock ($0.14/share) | 140,200 | 140 | 19,488 | | | | 19,628 |
Common stock options and warrants vested | | | 73,501 | | | | 73,501 |
Comprehensive loss: |
|
|
|
|
|
|
|
Net loss | | | | | (414,448) | | (414,448) |
Currency translation adjustment | | | | | | (72,874) | (72,874) |
|
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|
|
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|
|
Balance, March 31, 2010 | 43,866,800 | 43,867 | 15,954,096 | (2,264,854) | (14,296,226) | (562,809) | (1,125,926) |
11
WORDLOGIC CORPORATION
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in US dollars)
1.
NATURE OF OPERATIONS AND CONTINUANCE OF BUSINESS
a)
Nature of Operations
WordLogic Corporation (the Company or WLC), formerly TheAmericanWest.com, Inc., was incorporated under the laws of the State of Nevada on March 30, 1999. The Companys primary business is the development and commercialization of data entry software for handheld computing devices. Its headquarters is located in Vancouver, BC, Canada.
b)
Reverse Merger
On March 11, 2003, WLC entered into an Agreement and Plan of Merger (the Agreement) with WordLogic Corporation-private company (WCPC), a British Columbia, Canada corporation. On May 27, 2003, WLC issued 19,016,658 shares of its common stock in exchange for all 19,016,658 outstanding common shares of WCPC, and the two companies merged. This merger has been treated as a recapitalization of WCPC, with WLC the legal surviving entity. Since WLC had, prior to the recapitalization, minimal assets and no operations, the recapitalization has been accounted for as the sale of 2,907,006 shares of WCPCs common stock for the net assets of WLC. Following the closing, WLC remained the surviving corporation with 21,923,664 common shares outstanding, of which the former shareholders of WCPC owned approximately 86.74%.
In connection with the closing of the Agreement, WLC changed its name to WordLogic Corporation (formerly TheAmericanWest.com, Inc.) and changed its OTCBB symbol under which its common stock trades on the Over-The-Counter Bulletin Board to WLGC. WLCs directors resigned their positions and the executive officers of WCPC were appointed to fill the vacancies created by the resignations, which resulted in a change in control.
c)
Going Concern
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statements, the Company has incurred recurring losses, has used significant cash in support of its operating activities and, based upon current operating levels, requires additional capital or significant reconfiguration of its operations to sustain its operations for the foreseeable future. At March 31, 2010 the Company has a working capital deficiency of $1,133,523 and has incurred losses of $14,296,226 since inception. These factors, among others, raise significant doubt regarding the Companys ability to continue as a going concern.
The financial statements do not include any adjustments relating to the recoverability of assets and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Companys continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis and ultimately to attain profitability. The Companys management intends to satisfy cash requirements with working capital acquired in exchange for debt and/or common stock. There is no assurance the cash infusions will continue in the future or that the Company will achieve profitable operations.
The Companys future success will be dependent upon its ability to create and provide effective and competitive software products that meet customers changing requirements; including the effective use of leading technologies to continue to enhance its current products and to influence and respond to emerging industry standards and other technological changes on a timely and cost-effective basis.
d)
Development Stage
Following its reverse merger on May 27, 2003, the Company entered the development stage and became a development stage enterprise.
12
WORDLOGIC CORPORATION
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in US dollars)
1.
NATURE OF OPERATIONS AND CONTINUANCE OF BUSINESS (continued)
e)
Basis of Presentation
These consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in US dollars. These financial statements include the accounts of the Company and its wholly-owned subsidiary 602531 British Columbia Ltd. (the Subsidiary), an entity incorporated under the laws of the Province of British Columbia, Canada. The Subsidiary does not have any operations. All significant intercompany balances and transactions have been eliminated in consolidation. The Companys fiscal year-end is December 31.
f)
Interim Financial Statements
The interim unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions for Securities and Exchange Commission (SEC) Form 10-Q. They do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Therefore, these financial statements should be read in conjunction with the Companys audited consolidated financial statements and notes thereto for the year ended December 31, 2009, included in the Companys Annual Report on Form 10-K filed on April 15, 2010 with the SEC.
The consolidated financial statements included herein are unaudited; however, they contain all normal recurring accruals and adjustments that, in the opinion of management, are necessary to present fairly the Companys consolidated financial position at March 31, 2010, and the consolidated results of its operations and consolidated cash flows for the three months ended March 31, 2010 and 2009. The results of operations for the three months ended March 31, 2010 are not necessarily indicative of the results to be expected for future quarters or the full year.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a)
Use of Estimates
The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net revenue and expenses in the reporting period. We regularly evaluate our estimates and assumptions related to the useful life and recoverability of long-lived assets, stock-based compensation and deferred income tax asset valuation allowances. We base our estimates and assumptions on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by us may differ materially and adversely from our estimates. To the extent there are material differences between our estimates and the actual results, our future results of operations will be affected.
b)
Cash and Cash Equivalents
The Company considers all highly liquid instruments with original maturities of three months or less when acquired, to be cash equivalents. We had no cash equivalents at March 31, 2010 or December 31, 2009.
c)
Allowance for Doubtful Accounts
The Company considers its receivables to be fully collectible; accordingly, no allowance for doubtful accounts is required. The Company recognizes an allowance for doubtful accounts on specific accounts identified at risk based on the age of the outstanding receivable and the inability or unwillingness of its customers to make the required payments.
13
WORDLOGIC CORPORATION
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in US dollars)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
d)
Property and Equipment
Property and equipment are stated at cost and are amortized over their estimated useful lives as follows:
Asset |
| Method |
| Rate |
|
|
|
|
|
Computer equipment |
| Straight-line |
| 33.3% |
Computer software |
| Straight-line |
| 100.0% |
Furniture and fixtures |
| Declining balance |
| 20.0% |
Other equipment |
| Declining balance |
| 20.0% |
Amortization is recorded at one-half of the normal rate in the year of acquisition. We have compared the depreciation taken using the declining balance method to the straight-line method and have determined the difference to be immaterial for the three months ended March 31, 2010 and 2009.
Upon retirement or disposition of equipment, the cost and accumulated amortization are removed from the accounts and any resulting gain or loss is reflected in operations. Repairs and maintenance are charged to expense as incurred and expenditures for additions and improvements are capitalized.
e)
Impairment of Long-Lived Assets
The Company evaluates the carrying value of its long-lived assets under the provisions issued by the FASB which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted future cash flows estimated to be generated by those assets are less than the assets carrying amount. If such assets are impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying value or fair value, less costs to sell.
f)
Software Development Costs
Software development costs are recorded in accordance with the provisions issued by the FASB as follows. Costs incurred to establish the technological feasibility of computer software to be sold, leased, or otherwise marketed are expensed as incurred as research and development costs. Once technological feasibility is established, the cost of producing product masters for the software is capitalized. Capitalization of the software development costs ceases and amortization of the capitalized costs commences when the product is available for general release to customers. Capitalized costs are amortized based on the greater of (a) the ratio of current gross revenues to the total current and anticipated future gross revenues, or (b) the straight-line method over the remaining estimated economic life of the product.
g)
Research and Development
Expenditures relating to the development of new products and processes, including significant improvements to existing products, are charged to operations as incurred.
h)
Income Taxes
The Company accounts for income taxes under the provisions issued by the FASB which requires recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company computes tax asset benefits for net operating losses carried forward. The potential benefit of net operating losses has not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.
14
WORDLOGIC CORPORATION
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in US dollars)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
i)
Revenue Recognition
The Company recognizes revenue related to sales and licensing of data entry software in accordance with standards issued by the FASB; accordingly revenue will only be recognized when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed, and collectability is reasonably assured.
The Company earns revenue from the sale of its software products and from royalties earned on software licensing agreements. Revenue from the sale of software products is recognized at the point of delivery, which occurs when customers either download the software or are shipped software products. Royalty revenue is recognized in accordance with the terms of licensing agreements and when collectability is reasonably assured, which is usually on receipt of royalty payments.
j)
Financial Instruments
The fair values of cash, accounts receivable, accounts payable, line of credit, bank overdraft, and related party balances approximate their carrying values due to the immediate or short-term maturity of these financial instruments. The long-term notes payable bear interest at rates that in managements opinion approximate the current interest rates available to the Company for notes with the same maturity dates and therefore their fair value is estimated to approximate their carrying value.
The Companys operations are in Canada, which results in exposure to market risks from changes in foreign currency rates. The financial risk to the Companys operations results from fluctuations in foreign exchange rates and the degree of volatility of these rates. Currently, the Company does not use derivative instruments to reduce its exposure to foreign currency risk.
k)
Foreign Currency Translation
The Companys functional currency is the Canadian dollar and these financial statements have been translated into U.S. dollars in accordance with standards issued by the FASB. The Canadian dollar based accounts of the Companys foreign operations have been translated into United States dollars using the current rate method. Assets and liabilities of those operations are translated into U.S. dollars using exchange rates as of the balance sheet date; income and expenses are translated using the weighted average exchange rates for the reporting period. Translation adjustments are recorded as accumulated other comprehensive income (loss), a separate component of shareholders equity.
l)
Stock-based Compensation
On January 1, 2006, the Company adopted standards issued by the FASB, which requires the measurement and recognition of compensation expense for all share-based awards made to employees and directors, including employee stock options and shares issued through its employee stock purchase plan, based on estimated fair values.
The Companys determination of estimated fair value of share-based awards utilizes the Black-Scholes option-pricing model. The Black-Scholes model is affected by the Companys stock price as well as assumptions regarding certain highly complex and subjective variables. These variables include, but are not limited to the Companys expected stock price volatility over the term of the awards and actual and projected employee stock option exercise behaviors.
15
WORDLOGIC CORPORATION
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in US dollars)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
m)
Loss per Common Share
The Company reports net loss per share in accordance with provisions of the FASB. The provisions require dual presentation of basic and diluted loss per share. Basic net loss per share excludes the impact of common stock equivalents. Diluted net loss per share utilizes the average market price per share when applying the treasury stock method in determining common stock equivalents. As of March 31, 2010, there were 11,431,517 vested common stock options and warrants outstanding, which were excluded from the calculation of net loss per share-diluted because they were antidilutive.
n)
Comprehensive Income (Loss)
The Company reports its comprehensive income (loss) in accordance with provisions of the FASB. For the three months ended March 31, 2010 and 2009, the Companys only component of comprehensive loss was foreign currency translation adjustments.
o)
Advertising Costs
Advertising costs are charged to operations as incurred.
p)
Recent Accounting Pronouncements
In January 2010, the FASB issued Accounting Standards Update 2010-02, Consolidation (Topic 810): Accounting and Reporting for Decreases in Ownership of a Subsidiary. This amendment to Topic 810 clarifies, but does not change, the scope of current US GAAP. It clarifies the decrease in ownership provisions of Subtopic 810-10 and removes the potential conflict between guidance in that Subtopic and asset derecognition and gain or loss recognition guidance that may exist in other US GAAP. An entity will be required to follow the amended guidance beginning in the period that it first adopts FAS 160 (now included in Subtopic 810-10). For those entities that have already adopted FAS 160, the amendments are effective at the beginning of the first interim or annual reporting period ending on or after December 15, 2009. The amendments should be applied retrospectively to the first period that an entity adopted FAS 160. The Company does not expect the provisions of ASU 2010-02 to have a material effect on the financial position, results of operations or cash flows of the Company.
In January 2010, the FASB issued Accounting Standards Update 2010-01, Equity (Topic 505): Accounting for Distributions to Shareholders with Components of Stock and Cash (A Consensus of the FASB Emerging Issues Task Force). This amendment to Topic 505 clarifies the stock portion of a distribution to shareholders that allows them to elect to receive cash or stock with a limit on the amount of cash that will be distributed is not a stock dividend for purposes of applying Topics 505 and 260. Effective for interim and annual periods ending on or after December 15, 2009, and would be applied on a retrospective basis. The Company does not expect the provisions of ASU 2010-01 to have a material effect on the financial position, results of operations or cash flows of the Company.
In December 2009, the FASB issued Accounting Standards Update 2009-17, Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities. This Accounting Standards Update amends the FASB Accounting Standards Codification for Statement 167. The Company does not expect the provisions of ASU 2009-17 to have a material effect on the financial position, results of operations or cash flows of the Company.
In December 2009, the FASB issued Accounting Standards Update 2009-16, Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets. This Accounting Standards Update amends the FASB Accounting Standards Codification for Statement 166. The Company does not expect the provisions of ASU 2009-16 to have a material effect on the financial position, results of operations or cash flows of the Company.
In October 2009, the FASB issued Accounting Standards Update 2009-15, Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance or Other Financing. This Accounting Standards Update amends the FASB Accounting Standard Codification for EITF 09-1. The Company does not expect the provisions of ASU 2009-15 to have a material effect on the financial position, results of operations or cash flows of the Company.
16
WORDLOGIC CORPORATION
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in US dollars)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
q)
Reclassifications
Certain reclassifications have been made to the prior periods financial statements to conform to the current periods presentation.
3.
RESTRICTED CASH
As of March 31, 2010 we had a restricted cash balance of $7,165. This cash was held in trust by our attorneys for the payment of future legal invoices.
4.
PROPERTY AND EQUIPMENT
| Cost $ | Accumulated Amortization as of March 31, 2010 $ | Net Carrying Amount as of March 31, 2010 $ | Net Carrying Amount as of December 31, 2009 $ |
Office equipment | 3,799 | 3,408 | 391 | 398 |
Computer equipment | 139,171 | 133,523 | 5,648 | 5,955 |
Computer software | 6,980 | 6,980 | - | - |
Furniture and fixtures | 15,014 | 13,456 | 1,558 | 1,585 |
|
|
|
|
|
| 164,964 | 157,367 | 7,597 | 7,938 |
Depreciation expense totalled $598 and $728 for the three months ended March 31, 2010 and 2009, respectively.
5.
BANK LOAN PAYABLE
Represents a loan from the Royal Bank of Canada in the amount of $41,824 repayable upon demand, requiring monthly blended payments of CDN$835 (US$742) including principal and interest at 4.25% per annum. Proceeds of the loan were used to fully repay and discharge a line of credit in the amount of CDN$50,000 (US$47,574). The loan is secured by a personal guarantee of an officer of the Company.
6.
RELATED PARTY TRANSACTIONS AND BALANCES
The Company incurred the following related party transactions:
a)
The Company has entered into an agreement with a private company controlled by a director to rent office premises requiring monthly lease payments of $CAD 13,846, expiring February 28, 2011. Office rent incurred by the Company totalled $39,717 ($CAD 41,539) for the three months ended March 31, 2010.
As of March 31, 2010, the Companys future minimum lease payments under non-cancellable operating leases are as follows:
Twelve months ended December 31, 2010 | $ | 158,865 |
Twelve months ended December 31, 2011 |
| 26,477 |
Total | $ | 185,342 |
b)
The Company has entered into an agreement with a private company controlled by a director to provide management services requiring monthly payments of $CAD 16,667, expiring June 1, 2010. Management fees incurred by the Company totalled $47,807 ($CAD 50,000) for the three months ended March 31, 2010. As of March 31, 2010 the amount owed to this private company totalled $23,575 for outstanding rent, management fees and advances.
17
WORDLOGIC CORPORATION
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in US dollars)
6.
RELATED PARTY TRANSACTIONS AND BALANCES (Continued)
c)
During the year ended December 31, 2008, the Company received proceeds of $147,666 ($CAD150,000) from a former director on an unsecured promissory note. The note bears interest at 8% per annum, matures June 30, 2010, and includes $147,666 ($CAD 150,000) of principal and all related accrued interest. Accrued interest payable on the note totalled $25,536 ($CAD 25,940) at March 31, 2010. Interest expense on the note during the three months ended March 31, 2010 totalled $2,959 ($CAD 3,006).
d)
During the three months ended March 31, 2010, the Company incurred accounting fees of $nil with a private company controlled by an officer for accounting services. As of March 31, 2010, the amount owed to this private company totalled $15,755 for services related to the year ended December 31, 2009.
e)
During the three months ended March 31, 2010, the Company incurred $22,497 with a former director for wages and salaries.
7.
NOTES PAYABLE
Promissory Note
During the year ended December 31, 2006, the Company received proceeds of $436,500 on an unsecured promissory note and repaid $17,709. During the year ended December 31, 2007 an additional $6,720 was advanced and $60,000 was repaid. During the year ended December 31, 2008 the Company repaid $348,000. No amounts were repaid during the year ended December 31, 2009. The note bears interest at 8% per annum. The loan, together with accrued interest of $54,422 was paid during the three month period ended March 31, 2010, leaving no balance owing.
Interest expense on the note during the three months ended March 31, 2010 totalled $nil.
8.
COMMON STOCK
a)
In January 2010, the Company issued 10,000 shares of its common stock at $0.25 per share for services rendered by a consultant valued at $2,500 based on the price on the date of grant.
b)
Also in January 2010, the Company conducted a private placement offering whereby it issued 125,000 shares of its common stock at a price of $0.20 per share for total proceeds of $25,000.
c)
Also in January 2010, the Company issued 100,000 shares of its common stock at $0.24 per share for services rendered by consultants valued at $24,000 based on the price on the date of grant.
d)
Also in January 2010, the Company settled outstanding promissory notes and accrued interest totalling $71,934 through the issuance of 479,554 shares of the Company's common stock at a price recorded at the market price on the date of grant, being $0.18 per share. Accordingly, we recorded a loss on settlement for the difference in the fair value of the shares issued and the debt extinguished.
e)
Also in January 2010, the Company issued 40,000 shares of its common stock at $0.20 per share for services rendered by consultants valued at $8,000 based on the price on the date of grant. 30,000 of these shares were issued to a close relative of an officer of the Company.
f)
Also in January 2010, the Company issued 19,412 shares of its common stock at $0.17 per share for services rendered by a consultant valued at $3,300 based on the price on the date of grant.
g)
Also in January 2010, the Company issued 13,750 shares of its common stock at $0.24 per share for services rendered by a consultant valued at $3,300 based on the price on the date of grant.
h)
In February 2010, the Company issued 110,000 shares of its common stock at $0.20 per share for services rendered by consultants valued at $22,000 based on the price on the date of grant.
i)
Also in February 2010, the Company issued 62,500 shares of its common stock registered on a Form S-8 at $0.18 per share for services rendered by consultants valued at $11,250 based on the price on the date of grant.
18
WORDLOGIC CORPORATION
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in US dollars)
8.
COMMON STOCK (Continued)
j)
Also in February 2010, the Company issued 40,000 shares of its common stock at $0.19 per share for services rendered by consultants valued at $7,600 based on the price on the date of grant. 30,000 of these shares were
issued to a close relative of an officer of the Company.
k)
In March 2010, the Company issued 10,000 shares of its common stock at $0.19 per share for services rendered by a consultant valued at $1,900 based on the price on the date of grant.
l)
Also in March 2010, the Company issued 200,000 shares of its common stock at $0.40 per share related to the exercise of stock options to a consultant for total proceeds of $80,000.
m)
Also in March 2010, the Company conducted a private placement offering whereby it issued 140,200 shares of its common stock at $0.14 per share for total proceeds of $19,628.
n)
Also in March 2010, the Company conducted a private placement offering whereby it issued 1,000,000 units at a price of $0.10 per unit for total proceeds of $100,000. Each unit consisted of one share of the Company's common stock and one warrant to purchase an additional 1/2 share of common stock, exercisable at $0.15 per share.
o)
Also in March 2010, the Company conducted a private placement offering whereby it issued 600,000 units at a price of $0.10 per unit for total proceeds of $60,000. Each unit consisted of one share of the Company's common stock and one warrant to purchase an additional share of common stock, exercisable at $0.15 per share.
The following table summaries the continuity of the Companys share purchase warrants:
| Number of Warrants |
| Weighted average exercise price $ |
| Weighted average remaining contractual life (in years) |
Balance, December 31, 2008 | 5,835,797 |
| 1.00 |
| 1.00 |
Issued | 631,055 |
| 0.68 |
| 1.29 |
Exercised | |
| |
| |
Expired/Cancelled | (4,698,297) |
| 1.07 |
| |
|
|
|
|
|
|
Balance, December 31, 2009 | 1,768,555 |
| 0.72 |
| 0.55 |
Issued | 1,100,000 |
| 0.15 |
| 2.00 |
Exercised | |
| |
| |
Expired/Cancelled | (25,000) |
| 2.00 |
| |
|
|
|
|
|
|
Outstanding, March 31, 2010 | 2,843,555 |
| 0.49 |
| 2.09 |
9.
STOCK-BASED COMPENSATION
The Company adopted two stock option plans. The first plan is dated February 15, 2001, amended on October 15, 2009, under which the Company is authorized to grant options to acquire up to a total of 6,000,000 shares of common stock. The second plan is dated February 15, 2005, under which the Company is authorized to grant options to acquire up to a total of 3,000,000 shares of common stock. Pursuant to the stock option plans, options granted are subject to vesting terms which range from immediate vesting to various stages over a period of one year including monthly vesting, at the sole discretion of the Board of Directors. Stock options remaining for future grants: 933,000 and 985,000, respectively under each plan, for a total remaining of 1,918,000 as at March 31, 2010.
During the year ended December 31, 2008, the Company adopted the 2008 Stock Compensation Plan and the 2008 Equity Incentive Plan, under which the Company is authorized to issue up to 500,000 and 2,000,000 shares, respectively, of the Companys common stock, to be registered on Form S-8, to the Companys employees, executives and consultants. As at March 31, 2010, shares remaining to be issued under each plan were nil and 1,419,500 respectively.
19
WORDLOGIC CORPORATION
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in US dollars)
On March 26, 2010, the Company granted options to purchase a total of 500,000 shares of the Companys common stock to a consultant. The options carry an exercise price of $0.15 per share and vested immediately. The options expire March 26, 2012. The fair value for options granted was estimated at the date of grant using the Black-Scholes option-pricing model and the weighted average fair value of stock options granted was $0.07. During the three months ended March 31, 2010, the Company recorded stock-based compensation of $35,948 as a general and administrative expense in connection with these options.
The weighted average assumptions used are as follows:
| Three Month Period Ended | |
| March 31, 2010 | March 31, 2009 |
|
|
|
Expected dividend yield | 0% | 0% |
Risk-free interest rate | 1.04% | 2.38% |
Expected volatility | 114.00% | 130.11% |
Expected option life (in years) | 2.00 | 4.29 |
The total intrinsic value of stock options exercised during the three months ended March 31, 2010 was $nil.
The following table summarizes the continuity of the Companys stock options:
| Number of Options | Weighted Average Exercise Price | Weighted-Average Remaining Contractual Term (years) | Aggregate Intrinsic Value |
|
|
|
|
|
Outstanding, December 31, 2009 | 11,911,517 | $ 0.56 |
|
|
|
|
|
|
|
Granted | 500,000 | $ 0.15 |
|
|
Exercised | (200,000) | |
|
|
Expired/Cancelled | | |
|
|
|
|
|
|
|
Outstanding, March 31, 2010 | 12,211,517 | $ 0.55 | 2.70 | $nil |
|
|
|
|
|
Exercisable, March 31, 2010 | 11,431,517 | $0.51 | 2.77 | $nil |
A summary of the status of the Companys nonvested shares as of March 31, 2010, and changes during the three months ended March 31, 2010 is presented below:
Nonvested shares |
|
| Number of Shares | Weighted Average Grant Date Fair Value |
|
|
|
|
|
Nonvested at January 1, 2010 |
|
| 960,000 | $0.20 |
Granted |
|
| 500,000 | $0.07 |
Vested |
|
| (680,000) | $0.11 |
|
|
|
|
|
Nonvested at March 31, 2010 |
|
| 780,000 | $0.20 |
As at March 31, 2010, there was $155,344 total unrecognized compensation cost related to nonvested share-based compensation arrangements. That cost is expected to be recognized over a weighted average period of 2.50 years.
20
WORDLOGIC CORPORATION
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in US dollars)
10.
SUBSEQUENT EVENTS
On April 1, 2010, the Company issued 10,000 shares of its common stock at $0.13 per share for services rendered by consultant valued at $1,300 based on the price on the date of grant.
On April 1, 2010, the Company entered into an agreement with a consultant, whereby the consultant is to be issued a total of 4,300,000 shares of its common stock throughout the term of the contract. The Company has already issued 1,400,000 shares at $0.08 per share and 500,000 shares at $0.13 per share for services rendered by the consultant valued at $177,000 based on the price on the date of grant.
On April 30, 2010, the Company issued 100,000 shares of its common stock at $0.18 per share for services rendered by consultants valued at $18,000 based on the price on the date of grant.
On May 1, 2010, the Company issued 10,000 shares of its common stock at $0.18 per share for services rendered by consultant valued at $1,800 based on the price on the date of grant.
On May 3, 2010, the Company issued 400,000 shares of its common stock at $0.10 per share for total proceeds of $40,000.
On May 13, 2010, the Company issued 150,000 shares of its common stock at $0.10 per share for total proceeds of $15,000.
Subsequent events have been reviewed through the date of this report, May 17, 2010.
21
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act) and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). These forward-looking statements are not historical facts but rather are based on current expectations, estimates and projections. We may use words such as anticipate, expect, intend, plan, believe, foresee, estimate and variations of these words and similar expressions to identify forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted. You should read this report completely and with the understanding that actual future results may be materially different from what we expect. The forward looking statements included in this report are made as of the date of this report and should be evaluated with consideration of any changes occurring after the date of this Report. We will not update forward-looking statements even though our situation may change in the future and we assume no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
GENERAL
WordLogic Corporation was incorporated in the State of Nevada on June 8, 2001 under the name The American West. On March 11, 2003, The American West entered into an Agreement and Plan of Merger with WordLogic Corporation, a Nevada corporation. The parties closed the Agreement on May 27, 2003.
WordLogic Corporation, based out of Vancouver, British Columbia is a developer of predictive text-entry software. Our company has technology that delivers advanced predictive text solutions designed to accelerate the entry of text and information into personal computing devices. Our target computing devices include handheld personal digital assistants (PDAs), smart phones, global positioning system (GPS), laptops, Tablet PCs, and conventional desktop computers. The WordLogic Predictive KeyboardTM software provides a fast entry system that adapts to a users vocabulary and tendencies to predict the next most common letters, words, or phrases. This software incorporates a customizable dictionary, thesaurus, spellchecker, calculator, multi-lingual symbol capability and fast access to internet sites from within common software applications. In addition, this software incorporates internet search engines by which a user can highlight a word, press the search key and get the Merriam Webster Dictionary definition of the word.
The shares of our common stock have traded on the Over-the-Counter Bulletin Board under the symbols TAWS.OB since April 14, 2003 and WLGC.OB since May 27, 2003.
CURRENT BUSINESS OPERATIONS
Description of Business
On January 9, 2007 we developed a new text entry/text messaging input solution for cell phones utilizing our patent pending prediction engine. This new solution for cell phones is more efficient, user friendly and provides a more compelling text entry interface for users than our existing solutions. In addition, the functionality and configuration of the technology can be expanded and/or modified to suit a user's or manufacturers' specific needs.
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On March 15, 2007 we entered into a worldwide non-exclusive license with Cre8txt Limited of Bolton, United Kingdom. Cre8txt has developed a keyboard which utilizes the skills of people who already use SMS (Short Message Service) texting on mobile phones. Texting has become popular in Europe, North America and Asia. Text message specific abbreviations have been developed which allow certain, experienced users to actually type text faster using a numerical keyboard layout rather than using a traditional computer QWERTY keyboard. The Cre8txt keyboard is similar to a mobile phone keypad, and will utilize the WordLogic(TM) predictive text technology. The WordLogic Prediction Engine is a powerful software tool which will predict text selected from a database of frequently used words, and will also be capable of translating SMS Text language into full text. On July 5, 2007 we delivered the first 1,000 units of our software to Cre8txt Limited of Bolton, UK.
On November 6, 2007 we were granted, through our subsidiary 602531 British Columbia Ltd., U.S. Patent No. 7,293,231, titled Data Entry for Personal Computing Devices, from the U.S. Patent and Trademark Office. On January 9, 2008 we were granted our second European patent. European Patent No. 1356368 was granted to us by the European Patent Office for the invention: Data Entry Method and System For Personal Computer, And Corresponding Computer Readable Medium. As of March 31, 2009 our patent pending application number 11/133,770 is in a position of allowance with the US Patent Office. We are now waiting until this patent is granted and expecting new developments with 3 additional patents currently in review at various patent offices.
On September 30, 2008 we retained Mr. James P. Yano as our Chief Operations Officer. Mr. Yano has agreed to develop our business model and expand our distribution channels, commercialization opportunities and a marketing strategy for our predictive text input technology. Mr. Yano has over 10 years experience in sales and marketing. In that time he has served in various executive and managerial positions with companies specializing in software and scientific equipment. From 2001 to 2005, Mr. Yano served as a Marketing Manager with Agilent Technologies Inc., a $6 billion scientific instruments/analysis equipment maker. During this time, Mr. Yano organized product development, strategized new product concepts, executed the introduction of new products onto the market and exceeded sales forecasts. From 2005 to the present, Mr. Yano has been working as Vice President of Marketing and International Channels with Aspectrics, Inc, a process instrument manufacturer. Mr. Yano once again identified new products and market opportunities and commercialized the companys concepts through the development of relationships with manufacturers and distribution agents.
In January 2010, we were granted an allowance by the United States Patent and Trademark Office (USPTO) for our third patent (Application No. 11/133 770), covering multiple database searches on any keyboard-based computing device. The patent Notice of Allowability covers claim numbers 81, 104-110, 112, 123, 128-134 and 136-147 and reinforces the claims established in our existing patent. This includes searches through such data sources as thesauruses, encyclopedias, databases and the use of web and mobile services on such devices as personal computers, servers, PDAs, smartphones and netbooks.
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Quarterly Developments
On January 11, 2010 the Company entered into a Debt Settlement Agreement with Richard Kozukan regarding the repayment of that certain loan made to the Company pursuant to a loan agreement with Richard Kozukan dated June 15, 2006. Pursuant to the Debt Settlement Agreement, the Company agreed to issue to Richard Kozukan 479,554 common shares in the Registrants capital stock at the price of $0.18 per share for a total value of approximately $86,320, representing $71,933 of principal and interest due and outstanding pursuant to the loan agreement and a loss of $14,387 on settlement for the difference in the fair value of the shares issued and the debt extinguished.
On March 12, 2010, the Company accepted the resignation of Peter Knaven as the Director of the Company, such resignation was effective immediately. There were no disagreements between Mr. Knaven and our Board of Directors regarding any business practices or procedures.
Marketing
Our services are promoted by Mr. Evanshen. He will discuss our services with contacts he has established. We also anticipate utilizing several other marketing activities in our attempt to make our services known to corporations and attract clientele. These marketing activities will be designed to inform potential clients about the benefits of using our services and will include the following: development and distribution of marketing literature; direct mail and email; advertising; promotion of our web site; and industry analyst relations.
Insurance
We do not maintain any insurance and do not intend to maintain insurance in the future. Because we do not have any insurance, if we are made a party to a liability action, we may not have sufficient funds to defend the litigation. If that occurs a judgment could be rendered against us that could cause us to cease operations.
Offices
Our offices are currently located at Suite 2400 on 650 West Georgia Street, Vancouver, BC V6B 4N7, and our telephone number is (604) 257-3600. As of the date of this filing, we have not sought to move or change our office site. We rent, on a monthly basis, approximately 3,561 square feet of industrial/office space for $12,182 per month. The space we lease is utilized for general office purposes. It is our belief that the space is adequate for our immediate needs. Additional space may be required as we expand our operations. We do not foresee any significant difficulties in obtaining any required additional space. We do not own any real estate.
Employees; Identification of Certain Significant Employees
As of March 22, 2010, we employed 3 full-time employees and no part-time employees. None of our employees is subject to a collective bargaining agreement and we believe that relations with our employees are very good. We also frequently use third party consultants to assist in the completion of various projects. Third parties are instrumental to keep the development of projects on time and on budget.
Government Regulation
Because we sell products through the Internet, we may be subject to rules and regulations around the world which affect business transacted on the Internet. The laws and regulations that govern our Internet commerce change rapidly. Also, because we carry on business in Canada, we are subject to laws regarding employment, taxes and other regulatory issues for our Canadian operations. The following laws and regulations applicable to Internet commerce and intellectual properties are relevant to our business:
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Intellectual Property.
Copyrighted material that we develop, as well as our trade mark and patents are important to our business prospects. On October 21, 2003 we received trademark approval for the mark WordLogic under Reg. No. 2,774,468 pending in the United States. A similar trademark application has been approved and registered in Canada under TMA576,700. To date, we have received two European patents. On November 6, 2007 we received approval for pioneer Patent No. 7293231 titled "Data Entry for Personal Computing Devices" from the U.S. Patent and Trademark Office. We also have six additional patent applications pending in the U.S. Patent and Trademark Office in connection with U.S. Patent No. 7,293,231 However, these actions may be inadequate. We principally rely upon trademark, copyright, patent, trade secret and contract law to protect our proprietary rights. We generally intend to enter into confidentiality agreements, work-made-for-hire contracts and intellectual property licenses with our employees, consultants and corporate partners, respectively, as part of our efforts to control access to and distribution of our products, content and other proprietary information.
Privacy Law.
The state of privacy law is unsettled, and rapidly changing. Current and proposed federal, state and foreign privacy regulations and other laws restricting the collection, use and disclosure of personal information could limit our ability to use the information in our databases to generate revenues. In late 1998, COPPA was enacted, mandating that measures be taken to safeguard minors under the age of 13. The FTC promulgated regulations implementing COPPA on October 21, 1999, which became effective on April 21, 2000. The principal COPPA requirement is that individually identifiable information about minors under the age of 13 not be collected, used or displayed without first obtaining informed parental consent that is verifiable in light of present technology.
The FTC final regulations create a sliding scale of permissible methods for obtaining such consent. Consent for internal use of the individually identifiable information of children under the age of 13 can be obtained through e-mail plus an additional safeguard, such as confirming consent with a delayed e-mail, telephone call, or letter. Obtaining verifiable consent from a childs parent to share that childs information with a third party or enable the child to publicly distribute the information by, for example, allowing unrestricted access to a chat room or message board is significantly more burdensome. While the temporary sliding scale implementation was due to expire on April 21, 2002, on October 31, 2001, the FTC extended the implementation period through April 21, 2005. On April 21, 2005 the sliding scale mechanism was extended indefinitely.
The FTC has required that parental consent for such higher risk activities be verified by more secure methods than e-mail, such as a credit card in connection with a transaction, print-and-sign forms, toll-free numbers staffed by trained operators, or digital signatures. Complying with the new requirements is costly and may dissuade some of our customers from using our products. While we will attempt to be fully compliant with the FTC requirements, our efforts may not be entirely successful. In addition, at times we rely upon outside vendors to maintain data-collection software, and there can be no assurance that they will at all times comply with our instructions to comply with COPPA. If our methods of complying with COPPA are inadequate, we may face litigation with the FTC or individuals, which would adversely affect our business.
Moreover, we have posted a privacy policy pertaining to all users and visitors to our web site. By doing so, we will subject ourselves to the jurisdiction of the FTC. Should any of our business practices be found to differ from our privacy policy, we could be subject to sanctions and penalties from the FTC. It is also possible that users or visitors could try to recover damages in a civil action as well.
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The European Union recently enacted its own privacy regulations that may result in limits on the collection and use of certain user information. The laws governing the Internet, however, remain largely unsettled, even in areas where there has been some legislative action. It may take years to determine whether and how existing laws such as those governing intellectual property, privacy, libel and commerce may prompt calls for more stringent consumer protection laws, both in the United States and abroad, that may impose additional burdens on companies conducting business on the Internet. Furthermore, the Federal Trade Commission has recently investigated the disclosure of personal identifying information obtained from individuals by Internet companies. Evolving areas of law that are relevant to our business include privacy law, regulation on what websites contain, and sales and use tax. Because of this rapidly evolving and uncertain regulatory environment, we cannot predict how these laws and regulations might affect our business. In addition, these uncertainties make it difficult to ensure compliance with the laws and regulations governing the Internet. These laws and regulations could harm us by subjecting us to liability or forcing us to change how we do business.
Conformance to E-Commerce Statutory Requirements for Formation of Contracts.
We intend to conduct e-commerce on our web sites, and through affiliated web sites. The applicable law on online formation of contracts has been unsettled and is evolving. On June 30, 2000, the federal government enacted the E-Sign statute, which in limited cases permits online formation of contracts. Similarly, on January 1, 2000, California adopted a standard version of the Uniform Electronic Transactions Act (UETA), which also permits electronic signatures and record-keeping for certain types of contracts. We attempt to comply with these laws, but there is no guarantee that we will be successful. Judicial interpretation of the applicability of these laws could result in customer contracts being set aside or modified. In that case, our e-commerce revenue could be materially adversely affected.
Sales Tax.
The tax treatment of goods sold over the Internet is currently unsettled. A number of proposals have been made at the state and local level that would impose additional taxes on the sale of goods through the Internet. Such proposals, if adopted, could substantially impair the growth of electronic commerce and could adversely affect our opportunity to derive financial benefit from electronic commerce. While the Internet Tax Freedom Act (ITFA) has placed a moratorium on new state and local taxes on Internet commerce, the tax moratorium expired on November 1, 2003 and has not been re-enacted. On November 1, 2007, the "Internet Tax Freedom Act Amendment Acts of 2007" was signed into law. It extends the prohibitions against multiple and discriminatory taxes on electronic commerce until November 1, 2014.
Environmental Law.
To the extent which environmental compliance may be necessary, we do not anticipate any significant compliance expense.
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RESULTS OF OPERATIONS
Working Capital
|
|
|
| March 31, | December 31, |
| 2010 | 2009 |
Current Assets | $14,612 | $27,977 |
Current Liabilities | $1,148,135 | $1,202,819 |
Working Capital (Deficit) | $(1,133,523) | $(1,174,842) |
Cash Flows
|
|
|
| Three months Ended | Three months Ended |
| March 31, 2010 | March 31, 2009 |
Cash Flows from (used in) Operating Activities | $(227,633) | $(213,532) |
Cash Flows from (used in) Financing Activities | $287,965 | $176,559 |
Net Increase (decrease) in Cash During Period | $(12,542) | $(2,223) |
Operating Revenues
We generated $376 in revenues fro the three months ended March 31, 2010 compared to $1,192 for the same period in 2009. As we are a development stage company, our revenue streams are not established and thus our product sales are unstable. Since inception on May 27, 2003 to march 31, 2010 we have generated total revenues of $53,997 in product sales and royalty payments..
Operating Expenses and Net Loss
Operating expenses for the three months ended March 31, 2010 was $393,837 compared with $797,616 for the three months ended March 31, 2009. The decrease of $403,779 was primarily attributed to a reduction in stock based payments to consultants.
Net loss for the three months ended March 31, 2010 was $414,448 compared with $802,479 for the three months ended March 31, 2009. The overall decrease in net loss of $388,031 was primarily attributed to a reduction in stock based payments to consultants and a reduction in expenses related to research and development.
Liquidity and Capital Resources
As at March 31, 2010, the Companys cash balance was $9,251 compared to $21,793 as at December 31, 2009 and its total assets were $22,209 compared with $35,915 as at December 31, 2009. The decrease in total assets is primarily attributed to a decrease in restricted cash, held in trust by our attorneys for the payment of future legal invoices.
As at March 31, 2010, the Company had total liabilities of $1,148,135 compared with total liabilities of $1,202,819 as at December 31, 2009. The overall decrease in total liabilities was attributed to increases in accounts payable and accrued liabilities of $71,951 as the Company did not have sufficient cash flow to settle obligations. The increase was offset by the settlement of related party debt of $54,254 and the settlement of $71,934 of promissory notes and interest payable with the issuance of common shares.
As at March 31, 2010, the Company had a working capital deficit of $1,133,523 compared with a working capital deficit of $1,174,842 as at December 31, 2009. The decrease in working capital deficit was attributed to the increase in accounts payable and accrued liabilities of $71,951 due to the lack of sufficient cash flow to pay its obligations, a reduction on restricted cash held for the prepayment of professional services of $14,257 and offset by settlement of related party debt of $54,254 and promissory notes and interest payable of $71,934 with the issuance of common shares.
Cashflow from Operating Activities
During the three months ended March 31, 2010, the Company used $227,633 of cash for operating activities compared to the use of $213,532 of cash for operating activities during the three months ended March 31, 2009
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Cashflow from Investing Activities
During the three months ended March 31, 2010 and 2009, the Company did not have any cash transactions related to investing activities.
Cashflow from Financing Activities
During the three months ended March 31, 2010, the Company received $287,965 of cash from financing activities compared to $176,559 for the three months ended March 31, 2009. The increase in cash flows provided from financing activities is based on the fact that the Company received $204,628 of financing from a third-party and $17,680 from related parties to settle outstanding obligations of the Company during the day-to-day operations as compared to only $182,074 in 2009.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our investors.
Critical Accounting Policies
Use of Estimates
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 amounts reported in the financial statements and accompanying notes for the reporting period. Significant areas requiring the use of management estimates relate to the valuation of its mineral leases and claims and our ability to obtain final government permission to complete the project.
Stock-Based Compensation
The Company records stock-based compensation in accordance with ASC 718, Compensation Stock Compensation, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.
Recent Accounting Pronouncements
In January 2010, the FASB issued Accounting Standards Update 2010-02, Consolidation (Topic 810): Accounting and Reporting for Decreases in Ownership of a Subsidiary. This amendment to Topic 810 clarifies, but does not change, the scope of current US GAAP. It clarifies the decrease in ownership provisions of Subtopic 810-10 and removes the potential conflict between guidance in that Subtopic and asset derecognition and gain or loss recognition guidance that may exist in other US GAAP. An entity will be required to follow the amended guidance beginning in the period that it first adopts FAS 160 (now included in Subtopic 810-10). For those entities that have already adopted FAS 160, the amendments are effective at the beginning of the first interim or annual reporting period ending on or after December 15, 2009. The amendments should be applied retrospectively to the first period that an entity adopted FAS 160. The Company does not expect the provisions of ASU 2010-02 to have a material effect on the financial position, results of operations or cash flows of the Company.
In January 2010, the FASB issued Accounting Standards Update 2010-01, Equity (Topic 505): Accounting for Distributions to Shareholders with Components of Stock and Cash (A Consensus of the FASB Emerging Issues Task Force). This amendment to Topic 505 clarifies the stock portion of a distribution to shareholders that allows them to elect to receive cash or stock with a limit on the amount of cash that will be distributed is not a stock dividend for purposes of applying Topics 505 and 260. Effective for interim and annual periods ending on or after December 15, 2009, and would be applied on a retrospective basis. The Company does not expect the provisions of ASU 2010-01 to have a material effect on the financial position, results of operations or cash flows of the Company.
In December 2009, the FASB issued Accounting Standards Update 2009-17, Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities. This Accounting Standards Update amends the FASB Accounting Standards Codification for Statement 167. The Company does not expect the provisions of ASU 2009-17 to have a material effect on the financial position, results of operations or cash flows of the Company.
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In December 2009, the FASB issued Accounting Standards Update 2009-16, Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets. This Accounting Standards Update amends the FASB Accounting Standards Codification for Statement 166. The Company does not expect the provisions of ASU 2009-16 to have a material effect on the financial position, results of operations or cash flows of the Company.
In October 2009, the FASB issued Accounting Standards Update 2009-15, Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance or Other Financing. This Accounting Standards Update amends the FASB Accounting Standard Codification for EITF 09-1. The Company does not expect the provisions of ASU 2009-15 to have a material effect on the financial position, results of operations or cash flows of the Company.
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
Managements Quarterly Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by our company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management carried out an evaluation under the supervision and with the participation of our Chief Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 ("Exchange Act"). Based upon that evaluation, our Chief Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures were not effective as of March 31, 2010, due to the material weaknesses resulting from not having an independent Audit Committee, not having preventative and detective IT systems in place to prevent and/or detect fraud other than password protection, and not having a segregation of duties between cash management and cash account reconciliations. Please refer to our Annual Report on Form 10-K as filed with the SEC on April 15, 2010, for a complete discussion relating to the foregoing evaluation of Disclosures and Procedures.
Changes in Internal Control Over Financial Reporting
There were no changes in internal controls over financial reporting that occurred during the three months ended March 31, 2010, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
We are not a party to any pending legal proceeding. No federal, state or local governmental agency is presently contemplating any proceeding against the Company. No director, executive officer or affiliate of the Company or owner of record or beneficially of more than five percent of the Company's common stock is a party adverse to the Company or has a material interest adverse to the Company in any proceeding.
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.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
In January 2010, the Company issued 10,000 shares of its restricted common stock at $0.25 per share for services rendered by a consultant valued at $2,500 based on the price on the date of grant.
Also in January 2010, the Company conducted a private placement offering whereby it issued 125,000 shares of its restricted common stock at a price of $0.20 per share for total proceeds of $25,000.
Also in January 2010, the Company issued 100,000 shares of its restricted common stock at $0.24 per share for services rendered by consultants valued at $24,000 based on the price on the date of grant.
Also in January 2010, the Company settled outstanding promissory notes and accrued interest totalling $71,934 through the issuance of 479,554 shares of the Company's common stock at a price recorded at the market price on the date of grant, being $0.18 per share. Accordingly, we recorded a loss on settlement for the difference in the fair value of the shares issued and the debt extinguished.
Also in January 2010, the Company issued 40,000 shares of its common stock at $0.20 per share for services rendered by consultants valued at $8,000 based on the price on the date of grant. 30,000 of these shares were issued to a close relative of an officer of the Company.
Also in January 2010, the Company issued 19,412 shares of its common stock at $0.17 per share for services rendered by a consultant valued at $3,300 based on the price on the date of grant.
Also in January 2010, the Company issued 13,750 shares of its common stock at $0.24 per share for services rendered by a consultant valued at $3,300 based on the price on the date of grant.
In February 2010, the Company issued 110,000 shares of its common stock at $0.20 per share for services rendered by consultants valued at $22,000 based on the price on the date of grant.
Also in February 2010, the Company issued 40,000 shares of its common stock at $0.19 per share for services rendered by consultants valued at $7,600 based on the price on the date of grant. 30,000 of these shares were issued to a close relative of an officer of the Company.
In March 2010, the Company issued 10,000 shares of its common stock at $0.19 per share for services rendered by a consultant valued at $1,900 based on the price on the date of grant.
Also in March 2010, the Company issued 200,000 shares of its common stock at $0.40 per share related to the exercise of stock options to a consultant for total proceeds of $80,000.
Also in March 2010, the Company issued 140,200 shares of its common stock at $0.14 per share in satisfaction of obligations owed by the Company totalling $19,628.
Also in March 2010, the Company conducted a private placement offering whereby it issued 1,000,000 units at a price of $0.10 per unit for total proceeds of $100,000. Each unit consisted of one share of the Company's common stock and one warrant to purchase an additional 1/2 share of common stock, exercisable at $0.15 per share.
Also in March 2010, the Company conducted a private placement offering whereby it issued 600,000 units at a price of $0.10 per unit for total proceeds of $60,000. Each unit consisted of one share of the Company's common stock and one warrant to purchase an additional share of common stock, exercisable at $0.15 per share.
On April 1, 2010, the Company issued 10,000 shares of its common stock at $0.13 per share for services rendered by consultant valued at $1,300 based on the price on the date of grant.
On April 1, 2010, the Company entered into an agreement with a consultant, whereby the consultant is to be issued a total of 4,300,000 shares of its common stock throughout the term of the contract. The Company has already issued 1,400,000 shares at $0.08 per share and 500,000 shares at $0.13 per share for services rendered by the consultant valued at $177,000 based on the price on the date of grant.
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On April 30, 2010, the Company issued 100,000 shares of its common stock at $0.18 per share for services rendered by consultants valued at $18,000 based on the price on the date of grant.
On May 1, 2010, the Company issued 10,000 shares of its common stock at $0.18 per share for services rendered by consultant valued at $1,800 based on the price on the date of grant.
On May 3, 2010, the Company issued 400,000 shares of its common stock at $0.10 in satisfaction of obligations owed by the Company totalling $40,000.
On May 13, 2010, the Company issued 150,000 shares of its common stock at $0.10 in satisfaction of obligations owed by the Company totalling $15,000.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5. OTHER INFORMATION.
None
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ITEM 6. EXHIBITS
The following exhibits are filed with this Quarterly Report on Form 10-Q:
Exhibit |
|
|
Number | Description of Exhibit | Filing |
3.01 | Articles of Incorporation | Incorporated by reference to our Registration Statement Form 10SB12G filed with the SEC on June 8, 2001. |
3.01a | Restated Articles of Incorporation | Incorporated by reference to our Quarterly Report Form 10QSB filed with the SEC on November 1, 2006. |
3.02 | Bylaws | Incorporated by reference to our Registration Statement Form 10SB12G filed with the SEC on May 21, 2003. |
10.02 | Loan Agreement with Peter Knaven | Filed with the SEC on April 4, 2008 as part of our Annual Report on Form 10-K. |
10.03 | Promissory Note to Peter Knaven dated February 1, 2008. | Filed with the SEC on April 4, 2008 as part of our Annual Report on Form 10-K. |
10.04 | Promissory Note Extension Agreement with Peter Knaven dated March 1, 2008. | Filed with the SEC on April 4, 2008 as part of our Annual Report on Form 10-K. |
10.05 | Commercial Lease Renewal Agreement with MCC Meridian Capital Corp. dated March 1, 2008. | Filed with the SEC on April 4, 2008 as part of our Annual Report on Form 10-K. |
10.06 | Promissory Note Extension Agreement with Peter Knaven dated April 30, 2008. | Filed with the SEC on May 14, 2008 as part of our Quarterly Report on Form 10-Q. |
10.07 | Promissory Note Extension Agreement with Peter Knaven dated June 30, 2008. | Filed with the SEC on August 14, 2008 as part of our Quarterly Report on Form 10-Q. |
10.08 | Renewal Agreement with MCC Meridian Capital Corp. dated June 1, 2008. | Filed with the SEC on August 14, 2008 as part of our Quarterly Report on Form 10-Q. |
10.09 | Consulting Agreement between the Company and James P. Yano dated September 30, 2008. | Filed with the SEC on October 17, 2008 as part of our Current Report on Form 8-K. |
10.10 | Promissory Note Extension Agreement with Peter Knaven dated August 31, 2008 | Filed with the SEC on November 14, 2008 as part of our Quarterly Report on Form 10-Q. |
10.11 | Consulting Agreement with William Pipkin dated September 12, 2008. | Filed with the SEC on November 14, 2008 as part of our Quarterly Report on Form 10-Q. |
10.12 | Debt Settlement Agreement with EH & P Investments AG executed on December 17, 2008. | Filed with the SEC on December 22, 2008 as part of our Current Report on Form 8-K. |
10.13 | Promissory Note Extension Agreement with Peter Knaven dated November 30, 2008. | Filed with the SEC on March 3, 2009 as part of our Annual Report on Form 10-K |
10.14 | Debt Settlement Agreement with Richard Kozukan dated January 1, 2010 | Filed with the SEC on February 8, 2010 as part of our Current Report on Form 8-K. |
10.15 | Private Placement Agreement dated January 5, 2010 for the purchase of 125,000 shares at $0.20 | Filed herewith. |
10.16 | Securities Purchase Agreement dated March 29, 2010 for the purchase of 1,000,000 shares at $0.10. | Filed herewith. |
10.17 | Common Stock Purchase Agreement dated March 29, 2010 for the purchase of up to 500,000 shares at $0.15 | Filed herewith. |
10.18 | Securities Purchase Agreement dated March 31, 2010 for the purchase of 600,000 shares at $0.10. | Filed herewith. |
10.19 | Common Stock Purchase Agreement dated March 31, 2010 for the purchase of up to600,000 shares at $0.15 | Filed herewith. |
10.20 | Consulting Agreement dated April 1, 2010 | Filed herewith. |
31.01 | Certification of Principal Executive Officer Pursuant to Rule 13a-14 | Filed herewith. |
31.02 | Certification of Principal Financial Officer Pursuant to Rule 13a-14 | Filed herewith. |
32.01 | CEO and CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act | Filed herewith. |
32.02 | Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | Filed herewith. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
WORDLOGIC CORPORATION.
Dated: May 17, 2010
By:
/s/ Franklin Evanshen
Franklin Evanshen
President and CEO
Dated: May 17, 2010
By:
/s/ Darrin McCormack
Darrin McCormack
CFO
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