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, 2011

      .. TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934

For the transition period from ______ to _______

Commission File Number 333-149000

 

WORDLOGIC CORPORATION

(Exact name of registrant as specified in its charter)

 

Nevada	88-0422023
(State of incorporation)	(I.R.S. Employer Identification No.)

 

1130 West Pender St., Suite 230

Vancouver, BC Canada V6E 2P4

(Address of principal executive offices)

(604) 257-3660

(Registrant’s telephone number)

with a copy to:

Carrillo Huettel & Zouvas, LLP

3033 Fifth Ave. Suite 400

San Diego, CA 92103

Telephone (619) 546-6100

Facsimile (619) 546-6060

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes   X  . No      .

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

(Not required) Yes      . No      .

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	.	Accelerated filer	.
Non-accelerated filer	. (Do not check if a smaller reporting company)	Smaller reporting company	X .

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 

Yes      . No   X  .

As of May 20, 2011, there were 73,562,273 shares of the registrant’s $0.001 par value common stock issued and outstanding.

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WORDLOGIC CORPORATION*

TABLE OF CONTENTS

		Page
PART I.                 FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS	3
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	4
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	7
ITEM 4.	CONTROLS AND PROCEDURES	7
PART II.               OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	8
ITEM 1A.	RISK FACTORS	8
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	8
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	8
ITEM 4.	[REMOVED AND RESERVED]	8
ITEM 5.	OTHER INFORMATION	9
ITEM 6.	EXHIBITS	10

Special Note Regarding Forward-Looking Statements

Information included in this Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). This information may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of WordLogic Corporation (the “Company”), to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that these projections included in these forward-looking statements will come to pass. Actual results of the Company could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Except as required by applicable laws, the Company has no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

*Please note that throughout this Quarterly Report, and unless otherwise noted, the words "we," "our," "us," the "Company," or "WLGC" refers to WordLogic Corporation.

2

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PART I - FINANCIAL INFORMATION

 

ITEM 1.

FINANCIAL STATEMENTS

Index

Unaudited Consolidated Balance Sheets	F-1
Unaudited Consolidated Statements of Operations	F-2
Unaudited Consolidated Statements of Cash Flows	F-3
Unaudited Consolidated Statements of Stockholders’ Deficit	F-4
Notes to the unaudited Consolidated Financial Statements	F-10

3

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WORDLOGIC CORPORATION

(A Development Stage Company)

Consolidated Balance Sheets

(Expressed in US Dollars)

		March 31, 2011		December 31, 2010
		(Unaudited)
Assets
Current Assets
Cash	$	315	$	49,467
Restricted cash (Note 3)		42,262		37,350
Accounts receivable		38		37
HST/GST refund receivable		37,764		20,438
Employee advances		227		221
Prepaid expenses		12,871		12,547
Total Current Assets		93,477		120,060
Property and equipment, net of accumulated depreciation (Note 4)		2,654		2,672
Total Assets	$	96,131	$	122,732
Liabilities and Stockholders’ Deficit
Current Liabilities
Accounts payable and accrued liabilities	$	574,557	$	498,763
Bank loan payable (Note 5)		33,484		35,160
Indebtedness to related parties (Note 6)		218,118		216,685
Accrued interest		33,888		48,350
Notes payable (Note 7)		13,900		53,400
Total Current Liabilities		873,947		852,358
Total Liabilities		873,947		852,358
Stockholders’ Deficit
Common stock, $.001 par value; 100,000,000 shares authorized,  70,731,006 and 67,798,786 shares issued and outstanding at March 31, 2011 and December 31, 2010, respectively (Note 8)		70,731		67,799
Stock Payable		30,000		-
Additional paid-in capital		21,339,193		20,729,373
Accumulated deficit		(2,264,854)		(2,264,854)
Deficit accumulated during development stage		(19,299,294)		(18,627,589)
Accumulated other comprehensive loss		(653,592)		(634,355)
Total Stockholders’ Deficit		(777,816)		(729,626)
Total Liabilities and Stockholders’ Deficit	$	96,131	$	122,732

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

F-1

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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, 2011 (Unaudited)		March 31, 2011		March 31, 2010
Revenues
Product sales	$	21,691	$	10	$	376
Royalty revenue		32,962		–		–
Total Revenues		54,653		10		376
Operating expenses
Rent, related party (Note 6)		775,307		18,108		39,717
Selling, general and administrative (Note 6)		16,325,553		515,181		308,937
Research and development		2,704,095		137,637		45,183
Total Operating Expenses		19,804,955		670,926		393,837
Loss from Operations		(19,750,302)		(670,916)		(393,461)
Other income (expenses)
Interest income		1,760		–		–
Interest expense:
Related parties (Note 6)		(84,152)		–		(2,958)
Amortization of discount on convertible note		(145,243)		–		–
Other notes, advances and amounts		(436,358)		(789)		(3,642)
Gain on derivative liability		142,861		–		–
Loss on settled liabilities		(627,860)		–		(14,387)
Loss Before Extraordinary Item		(20,899,294)		(671,705)		(414,448)
Net extraordinary gain on litigation settlement, less applicable income taxes of $nil		1,600,000		–		–
Net Loss	$	(19,299,294)	$	(671,705)	$	(414,448)
Other Comprehensive Income
Net Gain/(Loss) of Foreign Currency Translation		(653,591)		(19,236)		(72,874)
Net Comprehensive Income	$	(19,952,885)	$	(690,941)	$	(487,322)
Basic and diluted loss per share			$	(0.01)	$	(0.01)
Weighted average common shares outstanding				69,648,229		42,135,383

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

F-2

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WORDLOGIC CORPORATION

(A Development Stage Company)

Consolidated Statements of Cash Flows

(Expressed in US Dollars)

		Accumulated from May 27, 2003 (Date of Inception) to		For the Three Months Ended (Unaudited)
		March 31, 2011 (Unaudited)		March 31, 2011		March 31, 2010
Cash flows from operating activities:
Net loss	$	(19,299,294)	$	(671,705)	$	(414,448)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		60,946		168		598
Common stock issued for services and payables		422,562		375,105		–
Stock-based compensation		12,047,875		23,897		157,351
Amortization of debt discount		145,243		–		–
Loss on settled liabilities		710,000		17,500		14,387
Gain on derivative liability		(142,861)		–		–
Changes in current assets and liabilities:
Receivables		12,961		(17,327)		830
Employee advances		(15,595)		(6)		(7)
Prepaid expenses		(12,871)		(324)		(164)
Accounts payable and accrued liabilities		689,915		74,393		71,694
Accrued interest payable		64,651		(14,462)		(57,874)
Net cash used in operating activities		(5,316,468)		(213,097)		(227,633)
Cash flows from investing activities:
Purchases of equipment		(26,942)		–		–
Net cash used in investing activities		(26,942)		–		–
Cash flows from financing activities:
Bank Overdraft		1,586		1,586		-
Proceeds from related party advances		1,319,559		1,433		17,680
Repayment of related party advances		(814,215)		–		–
Proceeds from promissory notes issued to related parties		411,509		–		4,945
Repayment of related party promissory notes		(493,941)		–		–
Proceeds from convertible promissory note		933,926		–		–
Repayment of convertible promissory notes		(947,462)		–		–
Proceeds from other promissory note		979,120		3,000		–
Repayment of other promissory notes		(443,220)		-		(17,511)
Payments on capital lease obligation		(12,071)		–		–
Proceeds from line of credit		43,601		–		–
Repayment of line of credit		(10,117)		(1,676)		(1,777)
Proceeds from stock options and warrants exercised		532,915		–		80,000
Proceeds from sale of common shares		4,536,858		183,750		204,628
Net cash provided by financing activities		6,038,048		188,093		287,965
Effect of exchange rate changes on cash		(653,591)		(19,236)		(72,874)
Net change in cash		41,047		(44,240)		(12,542)
Cash, beginning of period		1,530		86,817		21,793
Cash, end of period	$	42,577	$	42,577	$	9,251
Non-Cash Information:
Cashless exercise of warrants	$	88	$	–	$	–
Stock issued to settle notes payable plus accrued interest	$	1,285,453	$	–	$	71,934
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	–	$	–	$	–
Cash paid for interest	$	208,086	$	453	$	1,292

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

F-3

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WORDLOGIC CORPORATION

(A Development Stage Company)

Consolidated Statement of Stockholders’ Deficit

(Expressed in US Dollars)

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

F-4

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WORDLOGIC CORPORATION

(A Development Stage Company)

Consolidated Statement of Stockholders’ Deficit

(Expressed in US Dollars)

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

F-5

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WORDLOGIC CORPORATION

(A Development Stage Company)

Consolidated Statement of Stockholders’ Deficit

(Expressed in US Dollars)

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

F-6

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WORDLOGIC CORPORATION

(A Development Stage Company)

Consolidated Statement of Stockholders’ Deficit

(Expressed in US Dollars)

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

F-7

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WORDLOGIC CORPORATION

(A Development Stage Company)

Consolidated Statement of Stockholders’ Deficit

(Expressed in US Dollars)

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

F-8

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WORDLOGIC CORPORATION

(A Development Stage Company)

Consolidated Statement of Stockholders’ Deficit

(Expressed in US Dollars)

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

F-9

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WORDLOGIC CORPORATION

(A Development Stage Company)

Notes to the Consolidated Financial Statements (Unaudited)

1.

NATURE OF OPERATIONS AND CONTINUANCE OF BUSINESS

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 Company’s primary business is the development and commercialization of data entry software for handheld computing devices. Its headquarters is located in Vancouver, BC, Canada.

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 WCPC’s 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”. WLC’s 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.

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, 2011 the Company has a working capital deficiency of $780,469 and has incurred losses of $19,299,294 since inception. These factors, among others, raise significant doubt regarding the Company’s 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 Company’s 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 Company’s 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 Company’s 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.

Development Stage

Following its reverse merger on May 27, 2003, the Company entered the development stage and became a development stage enterprise.

F-10

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WORDLOGIC CORPORATION

(A Development Stage Company)

Notes to the Consolidated Financial Statements (Unaudited)

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a)

Basis of Presentation

These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in U.S. dollars. The Company’s fiscal year-end is December 31.

b)

Basis of Consolidation

The consolidated financial statements include the accounts of WordLogic Corporation 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.

c)

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.

d)

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.  The Company had no cash equivalents at March 31, 2011 or December 31, 2010.

e)

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.

f)

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, 2011 and 2010.

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.

F-11

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WORDLOGIC CORPORATION

(A Development Stage Company)

Notes to the Consolidated Financial Statements (Unaudited)

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

g)

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.

h)

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.

i)

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.

j)

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.

k)

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 collectibility is reasonably assured, which is usually on receipt of royalty payments.

l)

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 management’s 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 Company’s operations are in Canada, which results in exposure to market risks from changes in foreign currency rates. The financial risk to the Company’s 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.

F-12

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WORDLOGIC CORPORATION

(A Development Stage Company)

Notes to the Consolidated Financial Statements (Unaudited)

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

m)

Foreign Currency Translation

The Company’s 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 Company’s 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.    

n)  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. In March 2005, the Securities and Exchange Commission issued Staff Accounting Bulletin 107 (“SAB 107”) relating to this standard. The Company has applied the provisions of SAB 107 in its adoption of this standard. The Company adopted the FASB standard using the modified prospective transition method, which requires the application of the accounting standard as of the beginning in 2006. The Company’s financial statements as of and for the year ended December 31, 2007 reflect the impact of this standard. In accordance with the modified prospective transition method, the Company’s financial statements for prior periods do not include the impact of this standard.

The Company’s determination of estimated fair value of share-based awards utilizes the Black-Scholes option-pricing model. The Black-Scholes model is affected by the Company’s stock price as well as assumptions regarding certain highly complex and subjective variables. These variables include, but are not limited to the Company’s expected stock price volatility over the term of the awards and actual and projected employee stock option exercise behaviours.

o)  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, 2011, there were 16,046,517 vested common stock options and warrants outstanding, which were excluded from the calculation of net loss per share-diluted because they were antidilutive.

p)  Comprehensive Income (Loss)

The Company reports its comprehensive income (loss) in accordance with provisions of the FASB.  For the three month periods ended March 31, 2011 and 2010, the Company’s only component of comprehensive loss was foreign currency translation adjustments.

q)  Advertising Costs

Advertising costs are charged to operations as incurred.

F-13

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WORDLOGIC CORPORATION

(A Development Stage Company)

Notes to the Consolidated Financial Statements (Unaudited)

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

r)  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.

s)  Reclassifications

Certain reclassifications have been made to the prior period’s financial statements to conform to the current period’s presentation.

3.

RESTRICTED CASH

As of March 31, 2011 and December 31, 2010 we had restricted cash balances of $42,262 and $37,350, respectively.  This cash was held in trust by our attorneys for the payment of future legal invoices.

F-14

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WORDLOGIC CORPORATION

(A Development Stage Company)

Notes to the Consolidated Financial Statements (Unaudited)

4.

PROPERTY AND EQUIPMENT

	Cost $	Accumulated Depreciation as of March 31, 2011 $	Net Carrying Amount as of March 31, 2011 $	Net Carrying Amount as of December 31, 2010 $
Office equipment	3,980	3,652	328	337
Computer equipment	145,810	144,790	1,020	995
Computer software	7,313	7,313	-	-
Furniture and fixtures	15,730	14,424	1,306	1,340
	172,833	170,179	2,654	2,672

Depreciation expense totalled $168 and $598 for the three months ended March 31, 2011 and 2010, respectively.

5.

BANK LOAN PAYABLE

Represents a loan from the Royal Bank of Canada, repayable upon demand, requiring monthly blended payments of CDN$835 (US$840) 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$50,270).  The loan is secured by a personal guarantee of an officer of the Company.  The balance at March 31, 2011 is $33,484.

6.

RELATED PARTY TRANSACTIONS AND BALANCES

The Company incurred the following related party transactions:

a)

The Company entered into an agreement with a private company controlled by a director to rent office premises requiring monthly lease payments of $CAD 13,846, which expired June 30, 2010. Office rent incurred by the Company with this private company totalled $nil and $39,717 ($CAD 41,539) for the three months ended March 31, 2011 and 2010, respectively.

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 30,000, expiring December 31, 2011. Management fees incurred by the Company totalled $91,779 ($CAD 90,000) and $147,807 ($CAD 50,000) for the three months ended March 31, 2011 and 2010, respectively.  As at March 31, 2011 the amount owed to this private company totalled $181,342.

c)

During the year ended December 31, 2008, the Company received proceeds of $150,810 ($CAD150,000) from a director on an unsecured promissory note.  During the year ended December 31, 2010, the Company settled the loan through the issuance of shares of its common stock. The note bears interest at 8% per annum, matures December 31, 2010 and includes $150,810 ($CAD 150,000) of principal and all related accrued interest.  Accrued interest payable on the note totalled $32,784 ($CAD 31,786) at March 31, 2011. Interest expense on the note during the three months ended March 31, 2011 and 2010 totalled nil and $2,959 ($CAD 3,006), respectively.

d)

During the three months ended March 31, 2011, the Company incurred accounting fees of $12,237 with a private company of which an officer is also an officer.  As at March 31, 2011, the amount owing to this private company totalled $36,776.

e)

During the three months ended March 31, 2011, the Company incurred $48,949 with an officer for wages and salaries.

F-15

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WORDLOGIC CORPORATION

(A Development Stage Company)

Notes to the Consolidated Financial Statements (Unaudited)

7.

NOTES PAYABLE

Promissory Notes

During the year ended December 31, 2010, the Company received proceeds of $20,400 on an unsecured promissory note and repaid $9,500, leaving a balance owing of $10,900 at December 31, 2010.  During the three months ended March 31, 2011, the Company received further proceeds of $3,000, leaving a balance owing of $13,900 at March 31, 2011. The note bears interest at 10% per annum, which totalled $1,104, which remained outstanding at March 31, 2011.

Interest expense on the note during the three months ended March 31, 2011 and 2010 totalled $336 and $nil, respectively.

During the year ended December 31, 2010, the Company received proceeds of $42,500 on an unsecured promissory note, which remained outstanding at December 31, 2010.  During the three months ended March 31, 2011, the Company settled the loan through the issuance of shares of its common stock. The note bears interest at 10% per annum, with no interest outstanding at March 31, 2011.

Interest expense on the note during the three months ended March 31, 2011 and 2010 totalled $nil and $nil, respectively.

8.

COMMON STOCK

a)

In January 2011, the Company issued 10,000 shares of its common stock at $0.30 per share for services rendered by a consultant valued at $3,000 based on the price on the date of grant.

b)

Also in January 2011, the Company conducted private placement offerings whereby it issued 570,000 units at a price of $0.15 per share for total proceeds of $85,500. 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 $0.25 per share.

c)

Also in January 2011, the Company issued 390,000 shares of its common stock at $0.265 per share for services rendered by consultants valued at $103,350 based on the price on the date of grant.  140,000 of these shares were issued to an officer of the Company.

d)

Also in January 2011, the Company issued 200,000 shares of its common stock at $0.25 per share for services rendered by a consultant valued at $50,000 based on the price on the date of grant.

e)

Also in January 2011, the Company issued 100,000 shares of its common stock registered on a Form S-8 at $0.26 per share for services rendered by an officer valued at $26,000 based on the price on the date of grant.

f)

Also in January 2011, the Company issued 150,000 shares of its common stock at $0.21 per share for services rendered by consultants valued at $31,500 based on the price on the date of grant.

g)

In February 2011, the Company conducted private placement offerings whereby it issued 600,000 units at a price of $0.10 per share 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 $0.25 per share.

h)

Also in February 2011, the Company issued 85,000 shares of its common stock at $0.20 per share for services rendered by consultants valued at $17,000 based on the price on the date of grant.

i)

Also in February 2011, the Company issued 97,220 shares of its common stock at $0.25 per share for services rendered by an officer valued at $24,305 based on the price on the date of grant.  

j)

In March 2011, 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.

k)

Also in March 2011, the Company settled $42,500 of an outstanding promissory note through the issuance of 300,000 shares of the Company's common stock at Shares issued was value at FMV of $0.20 which resulted in loss of conversion of $17,500.

F-16

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WORDLOGIC CORPORATION

(A Development Stage Company)

Notes to the Consolidated Financial Statements (Unaudited)

8.

COMMON STOCK (continued)

l)

Also in March 2011, the Company issued 40,000 shares of its common stock at $0.22 per share for services rendered by a consultant valued at $8,800 based on the price on the date of grant.

m)

Also in March 2011, the Company issued 575,000 shares of its common stock at $0.19 per share for services rendered by consultants valued at $109,250 based on the price on the date of grant.

n)

Also in March 2011, the Company conducted a private placement offering whereby it issued 55,000 units at a price of $0.15 per share for total proceeds of $8,250. 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 $0.25 per share.

The following table summarizes the continuity of the Company’s share purchase warrants:

	Number of Warrants		Weighted average exercise price $		Weighted average remaining contractual life (in years)
Balance, December 31, 2009	1,768,555		0.72		0.83
Issued	1,834,000		0.16		1.12
Exercised	–		–		–
Expired/Cancelled	(1,025,000)		–		–
Balance, December 31, 2010	2,577,555		0.20		2.14
Issued	1,225,000		0.25		1.87
Exercised	–		–		–
Expired/Cancelled	–		–		–
Outstanding, March 31, 2011	3,802,555		0.22		2.05

F-17

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WORDLOGIC CORPORATION

(A Development Stage Company)

Notes to the Consolidated Financial Statements (Unaudited)

9.

STOCK-BASED COMPENSATION

The Company has, since incorporation, 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.

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 Company’s common stock, to be registered on Form S-8, to the Company’s employees, executives and consultants.  On May 14, the Company adopted the 2010 Share Incentive Plan on Form S-8 under which the Company is authorized to issue up to 10,000,000 registered shares of its common stock to qualified persons.

The Company did not grant any options during the three months ended March 31, 2011.

The total intrinsic value of stock options exercised during the three months ended March 31, 2011 and 2010 were $nil and $nil respectively.

The following table summarizes the continuity of the Company’s stock options:

	Number of Options	Weighted Average Exercise Price	Weighted-Average Remaining Contractual Term (years)	Aggregate Intrinsic Value
Outstanding, December 31, 2010	16,496,517	$ 0.48
Granted	–	–
Exercised	–	–
Expired/Cancelled	(150,000)	$ 0.50
Outstanding, March 31, 2011	16,346,517	$ 0.49	2.17	$nil
Exercisable, March 31, 2011	16,046,517	$0.50	2.21	$nil

A summary of the status of the Company’s nonvested shares as of March 31, 2011, and changes during the three months ended March 31, 2011, is presented below:

Nonvested shares	Number of Shares	Weighted Average Grant Date Fair Value
Nonvested at January 1, 2011	420,000	$0.20
Granted	–	–
Vested	(120,000)	$0.20
Nonvested at March 31, 2011	300,000	$0.20

As at March 31, 2011 there was $59,747 total unrecognized compensation cost related to nonvested share-based compensation arrangements. That cost is expected to be recognized over a weighted average period of 1.50 years.

10.

SUBSEQUENT EVENTS

Subsequent to March 31, 2011, we issued 2,831,267 shares of our common stock in the aggregate for consulting services and to settle outstanding debt.

F-18

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ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION

FORWARD-LOOKING STATEMENTS

This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains forward-looking statements that involve known and unknown risks, significant uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, or implied, by those forward-looking statements.  You can identify forward-looking statements by the use of the words may, will, should, could, expects, plans, anticipates, believes, estimates, predicts, intends, potential, proposed, or continue or the negative of those terms.  These statements are only predictions. In evaluating these statements, you should consider various factors which may cause our actual results to differ materially from any forward-looking statements.  Although we believe that the exceptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.  Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements.  We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

RESULTS OF OPERATIONS

Working Capital

	March 31,	March 31,
	2011	2010
Current Assets	$93,477	$14,612
Current Liabilities	$873,946	$1,148,135
Working Capital (Deficit)	$(780,469)	$(1,133,523)

Cash Flows

	March 31, 2011	March 31, 2010
Cash Flows from (used in) Operating Activities	$(211,511)	$(227,633)
Cash Flows from (used in) Financing Activities	$186,507	$287,965
Net Increase (decrease) in Cash During Period	$(44,240)	$(12,542)

Operating Revenues

Operating revenues for the period ended March 31, 2011 was $10 and is comprised of product sales totaling $10.

Operating revenues for the period ended March 31, 2010 was $376 and is comprised of product sales totaling $376.

Operating Expenses and Net Loss

Operating expenses for the period ended March 31, 2011 was $670,926 and is comprised of $18,108 in rent, $515,181 in selling, general and administrative and $137,637 in research and development.

Operating expenses for the period ended March 31, 2010 was $393,837 and is comprised of $39,717 in rent, $308,937 in selling, general and administrative and $45,183 in research and development.

Net loss for the period ended March 31, 2011 was $671,705 and is comprised of $670,916 loss from operations and $789 in interest expense.  

Net loss for the period ended March 31, 2010 was $414,448 and is comprised of $393,461 loss from operations and $6,600 in interest expense and $14,387 loss on settled liabilities.

4

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Liquidity and Capital Resources

As at March 31, 2011, the Company’s cash and current asset balance was $93,477 compared to $14,612 as at March 31, 2010. The increase in current assets of $78,865 is attributed to an increase of $35,097 in restricted cash, an increase of $32,717 in HST/GST refund receivable and an increase in prepaid expenses of $12,871 net of a decrease in cash of $1,771 and other current assets of $49.  

As at March 31, 2011, the Company had current and total liabilities of $873,946 compared with current and total liabilities of $1,148,135 as at March 31, 2010. The decrease in total liabilities was primarily attributed to a decreases in accounts payable and accrued liabilities, bank loan payable and accrued interest, net of increases in bank overdraft, indebtedness to related parties and notes payable.

As at March 31, 2011, the Company had a working capital deficit of $780,469 compared with a working capital deficit of $1,133,523 as at March 31, 2010.  The decrease in working capital deficit was primarily attributed to an increase in restricted cash and a reduction in accounts payable and accrued liabilities.

Cashflow from Operating Activities

During the period ended March 31, 2011, the Company used $211,511 of cash for operating activities compared to the use of $227,633 of cash for operating activities during the period ended March 31, 2010. The change in net cash used in operating activities is primarily attributed to an increase in stock based related compensation. 

Cashflow from Financing Activities

During the period ended March 31, 2011, the Company received $144,007 of cash from financing activities compared to $287,965 for the period ended March 31, 2010.  The change in cash flows from financing activities is primarily attributed to a decrease in proceeds from sale of common stock and repayment of promissory notes.

Quarterly Developments

None.

Subsequent Developments

On April 5, 2011, the United States Patent and Trademark Office issued Patent No.  7,921,361 to the Company entitled, “Data Entry for Personal Computing Devices”.  The patent covers predictive text entry into an electronic device by presenting a list of completion candidates relating to textual characters as they are entered by a user.

Going Concern

We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive acquisitions and activities. For these reasons, our auditors stated in their report on our audited financial statements that they have substantial doubt that we will be able to continue as a going concern without further financing.

Off-Balance Sheet Arrangements

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

Future Financings

We will continue to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund our operations and other activities.

5

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Critical Accounting Policies

Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

 

We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in the notes to our financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

Recently Issued Accounting Pronouncements

In March 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2010-11 (“ASU No. 2010-11”), “Derivatives and Hedging (Topic 815): Scope Exception Related to Embedded Credit Derivatives.” The amendments in this Update are effective for each reporting entity at the beginning of its first fiscal quarter beginning after June 15, 2010. Early adoption is permitted at the beginning of each entity’s first fiscal quarter beginning after issuance of this Update. The Company’s adoption of provisions of ASU No. 2010-11 did not have a material effect on the financial position, results of operations or cash flows of the Company.

In February 2010, the FASB issued ASU 2010-10 (“ASU No. 2010-10”), “Consolidation (Topic 810): Amendments for Certain Investment Funds.” The amendments in this Update are effective as of the beginning of a reporting entity’s first annual period that begins after November 15, 2009 and for interim periods within that first reporting period. Early application is not permitted. The Company’s adoption of provisions of ASU No. 2010-10 did not have a material effect on the financial position, results of operations or cash flows of the Company.

In February 2010, the FASB issued ASU 2010-09 (“ASU No. 2010-09”), “Subsequent Events (ASC Topic 855): Amendments to Certain Recognition and Disclosure Requirements.”  ASU No. 2010-09 requires an entity that is an SEC filer to evaluate subsequent events through the date that the financial statements are issued and removes the requirement for an SEC filer to disclose a date, in both issued and revised financial statements, through which the filer had evaluated subsequent events. The Company’s adoption of provisions of ASU No. 2010-09 did not have a material effect on the financial position, results of operations or cash flows of the Company.

In January 2010, the FASB issued ASU 2010-06 (“ASU No. 2010-06”), “Improving Disclosures about Fair Value Measurements.” ASU No. 2010-06 amends FASB Accounting Standards Codification (“ASC”) 820 and clarifies and provides additional disclosure requirements related to recurring and non-recurring fair value measurements and employers’ disclosures about postretirement benefit plan assets. This ASU is effective for interim and annual reporting periods beginning after December 15, 2009. The Company’s adoption of provisions of ASU No. 2010-06 did not have a material effect on the financial position, results of operations or cash flows of the Company.

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

In January 2010, the FASB issued an amendment to ASC Topic 820, “Fair Value Measurements and Disclosure”, to require reporting entities to separately disclose the amounts and business rationale for significant transfers in and out of Level 1 and Level 2 fair value measurements and separately present information regarding purchase, sale, issuance, and settlement of Level 3 fair value measures on a gross basis. This standard, for which the Company is currently assessing the impact, is effective for interim and annual reporting periods beginning after December 15, 2009 with the exception of disclosures regarding the purchase, sale, issuance, and settlement of Level 3 fair value measures which are effective for fiscal years beginning after December 15, 2010. The Company’s adoption of the amendment to ASC Topic 820 did not have a material effect on the financial position, results of operations or cash flows of the Company.

6

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

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

Management’s 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 Chief 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 Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of March 31, 2011, due to the material weaknesses resulting from the Board of Directors not currently having any independent members, no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K, and controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements. Please refer to our Annual Report on Form 10-K as filed with the SEC on April 15, 2011, for a complete discussion relating to the foregoing evaluation of Disclosures and Procedures.

 

Changes in Internal Control over Financial Reporting

 

Our management has also evaluated our internal control over financial reporting, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of our last evaluation.

 

The Company is not required by current SEC rules to include, and does not include, an auditor's attestation report. The Company's registered public accounting firm has not attested to Management's reports on the Company's internal control over financial reporting.

7

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PART II - OTHER INFORMATION

ITEM 1. 

LEGAL PROCEEDINGS

We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which our director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

ITEM 1A.

RISK FACTORS

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

ITEM 2. 

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

See notes to financial statements included herewith.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.  

[REMOVED AND RESERVED]

ITEM 5.

OTHER INFORMATION

None.

8

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ITEM 6.

EXHIBITS

9

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

WORDLOGIC CORPORATION

Dated:  May 23, 2011

/s/ Franklin Evanshen

By: Franklin Evanshen

Its: President & Chief Executive Officer

Dated:  May 23, 2011

/s/ Darrin McCormack

By: Darrin McCormack

Its:  Chief Financial Officer & Principal Accounting Officer

Pursuant to the requirement of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

Dated:  May 23, 2011

/s/ Franklin Evanshen

By: Franklin Evanshen

Its:  Director

Dated:  May 23, 2011

/s/ T. Allen Rose

By: T. Allen Rose

Its:  Director

10