UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2008
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________To_________________
Commission file number 000-32865
WORDLOGIC CORPORATION
(Exact name of registrant as specified in its charter)
Nevada | 88-0422023 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
650 West Georgia Street, Suite 2400 | |
Vancouver, British Columbia, Canada | V6B 4N7 |
(Address of principal executive offices) | (Zip Code) |
604 257 3660
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was require 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 is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company þ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. ¨Yes ¨No
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of August 14, 2008, the registrants outstanding common stock consisted of 29,479,617 shares.
Table of Contents
1
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The unaudited financial statements of Wordlogic Corporation (the Company, Wordlogic, we, our, us) for the period ended June 30, 2008 follow. All currency references in this report are in US dollars unless otherwise noted.
Index | |
Consolidated Balance Sheets | F-1 |
Consolidated Statements of Operations | F-2 |
Consolidated Statements of Cash Flows | F-3 |
Notes to the Consolidated Financial Statements | F-4 |
2
WORDLOGIC CORPORATION | ||
(A Development Stage Company) | ||
Consolidated Balance Sheets | ||
(Expressed in US Dollars) | ||
June 30, 2008 | December 31, 2007 | |
(Unaudited) | ||
Assets | ||
Current Assets | ||
Cash | $ 21,606 | $ 23,251 |
Accounts receivable | 274 | 170 |
Goods and services tax receivable | 11,710 | 38,477 |
Employee advances | 215 | 2,606 |
Due from related parties (Note 5) | | 23,708 |
Total Current Assets | 33,805 | 88,212 |
Property and equipment (Note 3) | 15,132 | 18,171 |
Total Assets | $ 48,937 | $ 106,383 |
Liabilities and Stockholders Deficit | ||
Current Liabilities | ||
Bank overdraft | $ 11,650 | $ 32,328 |
Accounts payable | 139,836 | 127,466 |
Line of credit (Note 4) | 23,536 | 14,123 |
Indebtedness to related parties (Note 5) | | 4,447 |
Accrued liabilities | 7,309 | 2,660 |
Accrued interest | 269,165 | 254,758 |
Note payable to related party | 147,102 | |
Current portion of note payable (Note 6) | 487,511 | 100,000 |
Total Current Liabilities | 1,086,109 | 535,782 |
Long Term Debt | ||
Notes payable (Note 6) | | 735,511 |
Total Liabilities | 1,086,109 | 1,271,293 |
Going Concern (Note 1) | ||
Commitments (Note 9) | ||
Contingency (Note 10) | ||
Subsequent Events (Note 11) | ||
Stockholders Deficit | ||
Common stock, $.001 par value; 100,000,000 shares authorized, 29,204,617 and 28,102,617 shares issued and outstanding, respectively (Note 7) | 29,205 | 28,103 |
Additional paid-in capital | 8,476,938 | 6,077,623 |
Accumulated deficit | (2,264,854) | (2,264,854) |
Deficit accumulated during development stage | (6,817,177) | (4,540,142) |
Accumulated other comprehensive loss | (461,284) | (465,640) |
Total Stockholders Deficit | (1,037,172) | (1,164,910) |
Total Liabilities and Stockholders Deficit | $ 48,937 | $ 106,383 |
(The accompanying notes are an integral part of the consolidated financial statements.)
F-1
WORDLOGIC CORPORATION | |||||
(A Development Stage Company) | |||||
Consolidated Statements of Operations | |||||
(Expressed in US Dollars) | |||||
(Unaudited) | |||||
Accumulated from | |||||
May 27, 2003 (Date of Inception) to |
For the Three Month Ended | For the Six Months Ended | |||
June 30, 2008 | June 30, 2008 | June 30, 2007 | June 30, 2008 | June 30, 2007 | |
Revenues | |||||
Product sales | $ 16,284 | $ 823 | $ 628 | $ 823 | $ 1,454 |
Royalty revenue | 32,909 | 448 | 504 | 1,313 | 1,219 |
Total Revenues | 49,193 | 1,271 | 1,132 | 2,136 | 2,673 |
Operating expenses | |||||
Rent, related party (Note 5) | 437,964 | 35,959 | 24,139 | 73,238 | 46,415 |
Selling, general and administrative (Note 5) | 6,085,333 | 281,254 | 291,559 | 1,996,512 | 591,688 |
Research and development | 1,545,746 | 81,472 | 60,224 | 176,930 | 159,219 |
Total Operating Expenses | 8,069,043 | 398,685 | 375,922 | 2,246,680 | 797,322 |
Loss from Operations | (8,019,850) | (397,414) | (374,790) | (2,244,544) | (794,649) |
Other income (expenses) | |||||
Interest income | 1,760 | | | | |
Interest expense: | |||||
Related parties | (59,677) | | (4,462) | (4,871) | (7,437) |
Amortization of discount on convertible note | (145,243) | | | | |
Other notes, advances and amounts | (401,668) | (13,111) | (22,491) | (27,620) | (38,360) |
Gain on derivative liability | 142,861 | | | | |
Gain on settled payables | 64,640 | | | | |
Loss Before Income Taxes and Extraordinary Item | (8,417,177) | (410,525) | (401,743) | (2,277,035) | (840,446) |
Income tax provision | | | | | |
Loss Before Extraordinary Item | (8,417,177) | (410,525) | (401,743) | (2,277,035) | (840,446) |
Net extraordinary gain on litigation settlement, less applicable income taxes of $nil | 1,600,000 | | | | |
Net Loss For The Period | (6,817,177) | (410,525) | (401,743) | (2,277,035) | (840,446) |
Other Comprehensive Loss | |||||
Foreign currency translation adjustment | (461,284) | (4,684) | (37,603) | 4,356 | (42,357) |
Comprehensive Loss | $ (7,278,461) | $ (415,209) | $ (439,346) | $ (2,272,679) | $ (882,803) |
Basic and diluted loss per share | $ (0.01) | $ (0.02) | $ (0.08) | $ (0.03) | |
Weighted average common shares outstanding | 29,204,617 | 24,619,084 | 28,555,331 | 24,520,870 |
(The accompanying notes are an integral part of the consolidated financial statements.)
F-2
WORDLOGIC CORPORATION | |||
(A Development Stage Company) | |||
Consolidated Statements of Cash Flows | |||
(Expressed in US Dollars) | |||
(Unaudited) | |||
Accumulated from | |||
May 27, 2003 | |||
(Date of Inception) to | For the Six Months Ended | ||
June 30, 2008 | June 30, 2008 | June 30, 2007 | |
Cash flows from operating activities: | |||
Net loss | $ (6,817,177) | $ (2,277,035) | $ (840,446) |
Adjustments to reconcile net loss to net cash used in | |||
operating activities: | |||
Depreciation and amortization | 49,751 | 3,890 | 3,198 |
Common stock issued for services and payables | 47,457 | | |
Stock-based compensation | 3,437,049 | 1,650,407 | 339,348 |
Amortization of debt discount | 145,243 | | |
Gain on derivative liability | (142,861) | | |
Changes in current assets and liabilities: | |||
Receivables | 4,701 | 25,941 | (7,971) |
Employee advances | 111 | 2,351 | 4,931 |
Bank overdraft | 7,737 | (20,052) | (63,068) |
Accounts payable and accrued liabilities | (328,926) | 23,567 | 152,475 |
Accrued interest payable | 152,534 | 21,801 | 43,173 |
Net cash used in operating activities | (3,444,381) | (569,130) | (368,360) |
Cash flows from investing activities: | |||
Purchases of equipment | (26,972) | (851) | |
Net cash used in investing activities | (26,972) | (851) | |
Cash flows from financing activities: | |||
Proceeds from related party advances | 540,587 | | 178,222 |
Repayment of related party advances | (564,666) | 18,984 | |
Proceeds from promissory notes issued to related parties | 410,650 | 149,141 | 141,837 |
Repayment of related party promissory notes | (493,940) | | |
Advances to related parties | (23,708) | | |
Proceeds from convertible promissory note | 933,926 | | |
Repayment of convertible promissory notes | (947,462) | | |
Proceeds from other promissory note | 913,220 | | 6,720 |
Repayment of other promissory notes | (722,076) | (348,000) | |
Payments on capital lease obligation | (12,360) | | |
Proceeds from line of credit | 52,847 | 9,942 | |
Repayment of line of credit | (33,604) | | (1,607) |
Proceeds from stock options and warrants exercised | 173,880 | 120,000 | |
Proceeds from sale of common shares | 3,330,679 | 629,990 | 72,540 |
Net cash provided by financing activities | 3,557,973 | 580,057 | 397,712 |
Effect of exchange rate changes on cash | (66,544) | (11,721) | (42,357) |
Net change in cash | 20,076 | (1,645) | (13,005) |
Cash, beginning of period | 1,530 | 23,251 | 14,990 |
Cash, end of period | $ 21,606 | $ 21,606 | $ 1,985 |
Supplemental disclosure of cash flow information: | |||
Cash paid for income taxes | $ | $ | $ |
Cash paid for interest | $ 196,247 | $ 2,184 | $ 3,036 |
(The accompanying notes are an integral part of the consolidated financial statements.)
F-3
WORDLOGIC CORPORATION
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in US dollars)
(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 Companys 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 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.
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 June 30, 2008 the Company has a working capital deficiency of $1,052,304 and has incurred losses of $6,817,177 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.
Development Stage
Following its reverse merger on May 27, 2003, the Company entered the development stage and became a development stage enterprise in accordance with Statement of Financial Accounting Standard (SFAS) No. 7, Accounting and Reporting by Development Stage Enterprises.
F-4
WORDLOGIC CORPORATION
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in US dollars)
(Unaudited)
1. NATURE OF OPERATIONS AND CONTINUANCE OF BUSINESS (continued)
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.
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, 2007, included in the Companys Annual Report on Form 10-KSB filed on April 4, 2008 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 June 30, 2008, and the consolidated results of its operations and consolidated cash flows for the three months ended June 30, 2008 and 2007. The results of operations for the six months ended June 30, 2008 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.
c) 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.
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-5
WORDLOGIC CORPORATION
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in US dollars)
(Unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
d) Revenue Recognition
The Company recognizes revenue related to sales and licensing of data entry software in accordance with Statement of Position No. 97-2, Software Revenue Recognition (SOP 97-2), as amended by Statement of Position No. 98-9, Software Revenue Recognition with Respect to Certain Arrangements. Pursuant to SOP 97-2 and Staff Accounting Bulletin No. 104 Revenue Recognition, revenue will only be recognized when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed, and collectibility 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.
e) 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.
f) Stock-based Compensation
On January 1, 2006, the Company adopted SFAS 123 (revised 2004), Share-Based Payment (SFAS 123(R)), 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 SFAS 123(R). The Company has applied the provisions of SAB 107 in its adoption of SFAS 123(R). The Company adopted SFAS 123(R) using the modified prospective transition method, which requires the application of the accounting standard as of the beginning in 2006. The Companys financial statements as of and for the six month period ended June 30, 2008 reflect the impact of SFAS 123(R). In accordance with the modified prospective transition method, the Companys financial statements for prior periods do not include the impact of SFAS 123(R).
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 behaviours.
F-6
WORDLOGIC CORPORATION
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in US dollars)
(Unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
g) Loss per Common Share
The Company reports net loss per share in accordance with SFAS No. 128, Earnings per share. SFAS No. 128 requires 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 June 30, 2008, there were 9,335,483 vested common stock options and warrants outstanding, which were excluded from the calculation of net loss per share-diluted because they were antidilutive.
h) Recent Accounting Pronouncements
Recently Issued Accounting Pronouncements
In May 2008, the Financial Accounting Standards Board (FASB) issued SFAS No. 163, Accounting for Financial Guarantee Insurance Contracts An interpretation of FASB Statement No. 60. SFAS 163 requires that an insurance enterprise recognize a claim liability prior to an event of default when there is evidence that credit deterioration has occurred in an insured financial obligation. It also clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium revenue and claim liabilities, and requires expanded disclosures about financial guarantee insurance contracts. It is effective for financial statements issued for fiscal years beginning after December 15, 2008, except for some disclosures about the insurance enterprises risk-management activities. SFAS 163 requires that disclosures about the risk-management activities of the insurance enterprise be effective for the first period beginning after issuance. Except for those disclosures, earlier application is not permitted. The adoption of this statement is not expected to have a material effect on the Companys consolidated financial statements.
In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles. SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States. It is effective 60 days following the SECs approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The adoption of this statement is not expected to have a material effect on the Companys consolidated financial statements.
In March 2008, the Financial Accounting Standards Board (FASB) issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities an amendment to FASB Statement No. 133. SFAS No. 161 is intended to improve financial standards for derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's financial position, financial performance, and cash flows. Entities are required to provide enhanced disclosures about: (a) how and why an entity uses derivative instruments; (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations; and (c) how derivative instruments and related hedged items affect an entitys financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years beginning after November 15, 2008, with early adoption encouraged. The Company is currently evaluating the impact of SFAS No. 161 on its financial statements, and the adoption of this statement is not expected to have a material effect on the Companys financial statements.
In December 2007, the FASB issued SFAS No. 141R, Business Combinations. This statement replaces SFAS 141 and defines the acquirer in a business combination as the entity that obtains control of one or more businesses in a business combination and establishes the acquisition date as the date that the acquirer achieves control. SFAS 141R requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date. SFAS 141R also requires the acquirer to recognize contingent consideration at the acquisition date, measured at its fair value at that date. This statement is effective for fiscal years and interim periods within those fiscal years, beginning on or after December 15, 2008 and earlier adoption is prohibited. The adoption of this statement is not expected to have a material effect on the Company's consolidated financial statements.
F-7
WORDLOGIC CORPORATION
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in US dollars)
(Unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements Liabilities an Amendment of ARB No. 51. This statement amends ARB 51 to establish accounting and reporting standards for the Noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. This statement is effective for fiscal years and interim periods within those fiscal years, beginning on or after December 15, 2008 and earlier adoption is prohibited. The adoption of this statement is not expected to have a material effect on the Company's consolidated financial statements.
Recently Adopted Accounting Pronouncements
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities Including an Amendment of FASB Statement No. 115. This statement permits entities to choose to measure many financial instruments and certain other items at fair value. Most of the provisions of SFAS No. 159 apply only to entities that elect the fair value option. However, the amendment to SFAS No. 115 Accounting for Certain Investments in Debt and Equity Securities applies to all entities with available-for-sale and trading securities. SFAS No. 159 is effective as of the beginning of an entitys first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provision of SFAS No. 157, Fair Value Measurements. The adoption of this statement did not have a material effect on the Company's consolidated financial statements.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. The objective of SFAS No. 157 is to increase consistency and comparability in fair value measurements and to expand disclosures about fair value measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements and does not require any new fair value measurements. The provisions of SFAS No. 157 are effective for fair value measurements made in fiscal years beginning after November 15, 2007. The adoption of this statement did not have a material effect on the Company's consolidated financial statements.
i) Reclassifications
Certain reclassifications have been made to the prior periods financial statements to conform to the current periods presentation.
3. PROPERTY AND EQUIPMENT
Accumulated | June 30, 2008 | December 31, 2007 | ||
Cost | Amortization | Net Carrying Amount | Net Carrying Amount | |
$ | $ | $ | $ | |
Office equipment | 3,784 | 3,207 | 577 | 660 |
Computer equipment | 138,640 | 127,237 | 11,403 | 13,126 |
Computer software | 6,953 | 6,097 | 856 | 1,760 |
Furniture and fixtures | 14,956 | 12,660 | 2,296 | 2,625 |
164,333 | 149,201 | 15,132 | 18,171 |
Depreciation expense totalled $3,890 and $3,198 for the six months ended June 30, 2008 and 2007, respectively.
4. LINE OF CREDIT
The Company has a CDN$50,000 (US$49,034) line of credit at June 30, 2008 of which CDN$26,000 (US$25,498) was unused at June 30, 2008. The interest rate on the credit line is 2% over the Royal Bank prime rate. Interest payments are due monthly. An officer has personally guaranteed the line of credit.
F-8
WORDLOGIC CORPORATION
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in US dollars)
(Unaudited)
5. RELATED PARTY TRANSACTIONS AND BALANCES
The Company incurred the following related party transactions:
a) During the six month period ended June 30, 2008, the Company repaid the $22,757 advanced in error to a private company controlled by a director in the year ended December 31, 2007.
b) During the six month period ended June 30, 2008, the Company incurred and paid $73,238 in rent to a private company controlled by a director.
c) During the six month period ended June 30, 2008, the Company incurred and paid management fees of $99,427 ($CAD 100,000) to a private company controlled by a director.
d) During the six month period ended June 30, 2008, the Company received proceeds of $149,140 ($CAD 150,000) from a director on an unsecured promissory note, having a face value of $CAD 150,000 plus interest of $CAD 5,000, maturing on April 30, 2008. During the six month period ended June 30, 2008, the repayment period of the note was extended to August 31, 2008. Accrued interest payable on the note totalled $4,903 ($CAD 5,000) at June 30, 2008.
e) During the six month period ended June 30, 2008, the Company paid $63 to a director for operating expenses incurred in the year ended December 31, 2007.
f) During the six month period ended June 30, 2008, the Company paid $4,384 to a private company controlled by an officer for accounting services incurred in the year ended December 31, 2007. During the six month period ended June 30, 2008, the Company incurred $26,269 in accounting fees with this private company.
g) During the year ended December 31, 2007, the Company advanced $951 to a corporation having former management in common with the Company. During the six month period ended June 30, 2008, the Company advanced a further $241, increasing the balance to $1,192, all of which was repaid leaving no balance outstanding at June 30, 2008.
h) Included in selling, general and administration expenses is $7,185 paid to a director for out-of-pocket expenses.
Promissory Notes
During the year ended December 31, 2005, the Company received proceeds of $370,000 on two unsecured promissory notes. The notes bear interest at 8% per annum. The first note matured on March 1, 2007 and includes $240,000 of principal and all related accrued interest. The second note matured on May 11, 2007 and includes $130,000 of principal and all related accrued interest. On June 1, 2007 both notes were renewed for an additional 24 months beyond their initial maturity. During the year ended December 31, 2006, the Company received proceeds of $100,000 on a third unsecured promissory note, also bearing interest at 8% per annum, maturing October 12, 2008. No amounts were repaid as of June 30, 2008. Accrued interest payable on the notes totalled $110,155 at June 30, 2008.
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 six month period ended June 30, 2008, the Company repaid $348,000, leaving a balance outstanding of $17,511. The note bears interest at 8% per annum and matures on June 15, 2009. Accrued interest payable on the note totalled $52,315 at June 30, 2008.
Interest expense on the notes during the six month period ended June 30, 2008 totalled $23,609.
F-9
WORDLOGIC CORPORATION
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in US dollars)
(Unaudited)
Maturities
Aggregate maturities required on long-term debt at June 30, 2008, are as follows:
Within one year of June 30, 2008 $487,511
7. COMMON STOCK
a) | In January 2008, the Company issued 100,000 shares of its common stock at a price of $1.00 per share for total proceeds of $100,000. |
b) | Also in January 2008, the Company issued 42,000 shares of its common stock at $1.00 per share related to the exercise of stock options to a director, for total proceeds of $42,000. |
c) | In February 2008, the Company issued 25,000 shares of its common stock at $0.75 per share related to the exercise of warrants, for total proceeds of $18,750. |
d) | In March 2008, the Company issued 75,000 shares of its common stock at $0.75 per share related to the exercise of warrants, for total proceeds of $56,250. |
e) | Also in March 2008, the Company conducted a private placement offering whereby it sold 50,000 units at a price of $1.00 per unit for total proceeds of $50,000. Each unit consisted of one share of the Companys common stock and one half warrant to purchase an additional share of common stock, exercisable at $2.00 per share. |
f) | Also in March 2008, the Company issued 10,000 shares of its common stock at $0.30 per share related to the exercise of stock options to an employee, for total proceeds of $3,000. |
g) | In April 2008, the Company conducted a private placement offering whereby it sold 800,000 units at a price of $0.60 per unit for total proceeds of $480,000. Each unit consisted of one share of the Companys common stock and one warrant to purchase an additional share of common stock, exercisable at $1.00 per share. |
The following table summaries the continuity of the Companys share purchase warrants:
Weighted average | Weighted average | ||
Number of Warrants | exercise price | remaining contractual life | |
$ | (in years) | ||
Balance, December 31, 2006 | 2,400,770 | 1.25 | 0.17 |
Issued | 3,513,297 | 0.95 | 1.09 |
Exercised | (20,000) | 1.25 | 1.28 |
Expired/Cancelled | (830,770) | 1.25 | 0.99 |
Balance, December 31, 2007 | 5,063,297 | 1.04 | 0.99 |
Issued | 825,000 | 1.03 | 1.79 |
Exercised | (100,000) | 0.75 | |
Expired/Cancelled | (50,000) | 0.75 | |
Outstanding, June 30, 2008 | 5,738,297 | 1.05 | 1.14 |
8. STOCK-BASED COMPENSATION
The Company adopted two stock option plans. The first plan is dated February 15, 2001, under which the Company is authorized to grant options to acquire up to a total of 4,000,000 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: 1,975,000 and 1,800,000, respectively under each plan, for a total remaining of 3,775,000 as at June 30, 2008.
On January 3, 2008, the Company granted options to purchase a total of 1,000,000 shares of the Companys common stock to a director. The options carry an exercise price of $1.00 per share and vested immediately. The options expire January 3, 2013. During the six month period ended June 30, 2008, the Company recorded stock-based compensation of $1,650,407 as general and administrative expense in connection with these options.
F-10
WORDLOGIC CORPORATION
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in US dollars)
(Unaudited)
8. STOCK-BASED COMPENSATION (continued)
On March 20, 2008, the Company granted options to purchase a total of 100,000 shares of the Companys common stock to a consultant. The options carry an exercise price of $0.50 per share and vested immediately. The options expire March 20, 2013. During the six month period ended June 30, 2008, the Company recorded stock-based compensation of $65,733 as general and administrative expense in connection with these options.
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 $1.40.
The weighted average assumptions used are as follows:
Six Month Period Ended | ||
June 30, 2008 | June 30, 2007 | |
Expected dividend yield | 0% | 0% |
Risk-free interest rate | 3.18% | 4.75% |
Expected volatility | 124.09% | 214.33% |
Expected option life (in years) | 5.00 | 3.50 |
The total intrinsic value of stock options exercised during the six month period ended June 30, 2008 was $25,500.
The following table summarizes the continuity of the Companys stock options:
Weighted-Average | ||||
Weighted Average | Remaining | Aggregate | ||
Number of Options | Exercise Price | Contractual Term (years) | Intrinsic Value | |
Outstanding, December 31, 2007 | 4,835,850 | $ 1.04 | ||
Granted | 1,100,000 | $ 0.95 | ||
Exercised | (52,000) | $ 0.87 | ||
Expired/Cancelled | (1,990,000) | $ 1.53 | ||
Outstanding, June 30, 2008 | 3,893,850 | $ 0.76 | 3.06 | $1,518,602 |
Exercisable, June 30, 2008 | 3,597,186 | $ 0.77 | 3.08 | $1,366,931 |
A summary of the status of the Companys nonvested shares as of June 30, 2008, and changes during the six month period ended June 30, 2008, is presented below:
Weighted Average | ||
Number of | Grant Date | |
Nonvested shares | Shares | Fair Value |
Nonvested at January 1, 2008 | 503,333 | $0.85 |
Granted | 1,100,000 | $1.40 |
Vested | (1,306,669) | $1.28 |
Nonvested at June 30, 2008 | 296,664 | $ 0.62 |
As at June 30, 2008, there was $183,956 total unrecognized compensation cost related to nonvested share-based compensation arrangements. That cost is expected to be recognized over a weighted average period of 0.84 years.
F-11
WORDLOGIC CORPORATION
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in US dollars)
(Unaudited)
9. COMMITMENTS
In addition to commitments referenced to elsewhere in the notes to the financial statements, the Company has the following commitments:
a) | The Company has entered into an agreement, effective June 1, 2008, with a director to provide services in the capacity of Chief Executive Officer requiring monthly payments of $CAD 16,667. The agreement expires June 1, 2009. |
b) | The Company has entered into an agreement, effective October 29, 2007 with an individual to provide investor relations services requiring monthly payments of $CAD 5,000. The agreement was terminated with mutual consent on May 31, 2008. |
c) | The Company has entered into a one year agreement, effective August 21, 2007, with a company to provide investor relations services requiring monthly payments of $CAD 6,000. The agreement expires on August 31, 2008. |
10. CONTINGENCY
The Company filed a patent infringement lawsuit against Mercedes-Benz USA in US District Court, District of Oregon. The Company through its wholly owned subsidiary 602531 British Columbia Ltd., which holds the Companys patent and patent pending portfolio, will be seeking damages for patent infringement related to the use of car navigation systems in certain vehicle models. The Company will also seek treble damages and injunctive relief to prevent further infringement. The outcome of this matter is not currently determinable.
11. SUBSEQUENT EVENTS
a) | In July 2008, the Company issued 150,000 shares of its common stock at $1.00 per share in exercise of stock options to a director, for total proceeds of $150,000. |
b) | In August 2008, the Company issued 125,000 shares of its common stock at $0.50 per share in exercise of warrants for total proceeds of $62,500. |
F-12
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements
This report on Form 10-Q contains certain forward-looking statements. All statements other than statements of historical fact are forward-looking statements for purposes of these provisions, including any projections of earnings, revenues, or other financial items; any statements of the plans, strategies, and objectives of management for future operation; any statements concerning proposed new products, services, or developments; any statements regarding future economic conditions or performance; statements of belief; and any statement of assumptions underlying any of the foregoing. Such forward-looking statements are subject to inherent risks and uncertainties, and actual results could differ materially from those anticipated by the forward-looking statements.
These forward-looking statements involve significant risks and uncertainties, including, but not limited to, the following: competition, promotional costs, and risk of declining revenues. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of a number of factors. These forward-looking statements are made as of the date of this filing, and we assume no obligation to update such forward-looking statements. The following discusses our financial condition and results of operations based upon our consolidated financial statements which have been prepared in conformity with accounting principles generally accepted in the United States. It should be read in conjunction with our financial statements and the notes thereto included elsewhere herein.
Business Overview
We are a software company with a 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, multilingual 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.
Our principal offices are located at 650 West Georgia Street, Suite 2400, Vancouver, British Columbia, Canada. Our fiscal year end is December 31. We have one wholly-owned subsidiary, 602531 British Columbia Ltd., which holds our intellectual properties including our patents and trademarks. Our common stock is quoted on the OTC Bulletin Board under the symbol WLGC.OB. We maintain a website at www.wordlogic.com.
3
Liquidity and Capital Resources
As of June 30, 2008, we had cash of $21,606 and a working capital deficiency of $1,052,304. As at June 30, 2008 our accumulated deficit was $6,817,177. For the three months ended June 30, 2008 our net loss was $410,525 compared to $401,743 during the same period in 2007. For the six months ended June 30, 2008 our net loss was $2,277,035 compared to $840,446 for the same period in 2007. The large increase in net loss was due to an increase in stock based compensation including an issuance of 1,000,000 options to buy shares of our common stock issued to our President.
Our loss was funded by proceeds from shareholder loans and sales of our securities. During the six months ended June 30, 2008, we raised $580,057 through financing activities and our cash position decreased by $1,645, mainly due to the cash provided by proceeds from sales of our securities and our regular expenses.
We used net cash of $569,130 in operating activities for the six months ended June 30, 2008 compared to net cash of $368,360 in operating activities for the same period in 2007. We used $851 in investing activities for the six months ended June 30, 2008 compared no such expenditures during the same period in 2007. The effect of exchange rates on cash was a decrease in cash of $11,721 for the six months ended June, 2008 compared to a decrease in cash of $42,357 for the six months ended June 30, 2007.
On June 1, 2008 we entered into an agreement with MCC Meridian Capital Corp., a company controlled by our President to extend our management agreement with MCC Meridian Capital Corp. Under the agreement MCC Meridian Capital Corp will provide us with management services for a further 12 months in exchange for monthly payments of $16,667.
4
During the six months ended June 30, 2008 our monthly cash requirement was approximately $94,855, compared to approximately $61,393 for the same period in 2007. We expect to require a total of approximately $1,925,000 to fully carry out our business plan over the next twelve months beginning July 2008 as set out in this table:
Description | Estimated Expenses ($) |
Research and development costs for the Wordlogic Predictive KeyboardTM software | 350,000 |
Management fees | 500,000 |
Consulting fees (including legal and auditing fees) | 400,000 |
Rent expenses | 160,000 |
Salaries and other costs associated with third-party contractors | 150,000 |
Marketing expenses | 50,000 |
Travel expenses | 20,000 |
Investor relations expenses | 60,000 |
Accrued interests payable | 95,000 |
Other administrative expenses | 140,000 |
Total | 1,925,000 |
We anticipate that our future revenues will be nominal and that we will not be able to generate enough positive internal operating cash flow to sustain our operations until we can generate substantial revenues, which may take the next few years to fully realize. There is no assurance we will achieve profitable operations. We have historically financed our operations primarily by cash flows generated from the sale of our equity securities and through cash infusions from officers and affiliates in exchange for debt and/or common stock. No officer or affiliate has made any commitment or is obligated to continue to provide cash through loans or purchases of equity.
On February 1, 2008 we entered into a promissory note agreement with Peter Knaven, our Senior Vice President, Chief Technology Officer and director, pursuant to which we received proceeds of $150,000, having a face value of $150,000 plus interest of $5,000, maturing on February 29, 2008. On June 30, 2008, we extended the maturity of this promissory note to August 31, 2008 through an agreement between us and Peter Knaven.
In April 2008, we conducted a private placement offering whereby we sold 800,000 units at a price of $0.60 per unit for total proceeds of $480,000. Each unit consisted of one share of the Companys common stock and one warrant to purchase an additional share of common stock, exercisable at $1.00 per share.
We intend to meet the balance of our cash requirements for the next 12 months through external sources: a combination of debt financing and equity financing through private placements. Currently we are active in contacting broker/dealers in North America and elsewhere regarding possible financing arrangements. However, we currently do not have any arrangements in place for the completion of any further private placement financings and there is no assurance that we will be successful in completing any further private placement financings. If we are unsuccessful in raising enough money through future capital raising efforts, we may review other financing possibilities such as bank loans. If we are unsuccessful in raising enough money, we may not fully carry out our business plan.
5
Results of Operations for the three months ended June 30, 2008 compared to the three months ended June 30, 2007 and from inception to June 30, 2008.
Revenues
We generated $1,271 in revenues for the three months ended June 30, 2008 compared to $1,132 for the same period in 2007. 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 June 30, 2008 we have generated total revenues of $49,193 in product sales and royalty payments.
Net Loss
We incurred a net loss of $410,525 for the three months ended June 30, 2008, compared to a net loss of $401,743 for the same period in 2007. From inception on May 27, 2003 to June 30, 2008, we have incurred a net loss of $6,817,177.
Our basic and diluted loss per share was $0.01 for the three months ended June 30, 2008, and $0.02 for the same period in 2007.
Expenses
Our total operating expenses increased from $375,922 to $398,685 for the three months ended June 30, 2008 compared to the same period in 2007. Our expenses have stayed relatively constant through these two periods. Since our inception on May 27, 2003 to June 30, 2008, we incurred total operating expenses of $8,069,043.
Our rent expenses increased $11,820 from $24,139 to $35,959 for the three months ended June 30, 2008 compared to the same period in 2007. This increase was mainly due to increased rent payments for our office.
Our selling, general and administrative expenses consist of bank charges, travel, meals and entertainment, office maintenance, communication expenses (cellular, internet, fax, and telephone), courier, postage costs, office supplies, salaries, management fees, and legal and auditing consulting fees. Our selling, general, and administrative expenses decreased $10,305 from $291,559 to $281,254 for the three months ended June 30, 2008 compared to the same period in 2007. Since our inception on May 27, 2003 until June 30, 2008 we have spent $6,085,333 on selling, general and administrative expenses.
We incurred $81,472 in research and development expenses for the three months ended June 30, 2008 compared to $60,224 for the three months ended June 30, 2007. Since our inception on May 27, 2003 until June 30, 2008 we have spent $1,545,746 on research and development. Going forward, we anticipate that we will spend approximately $350,000 on research and development during the next 12 months.
6
Results of Operations for the six months ended June 30, 2008 compared to the six months ended June 30, 2007
Revenues
We generated $2,136 in revenues for the six months ended June 30, 2008 compared to $2,673 for the same period in 2007 in product sales and royalty payments.
Net Loss
We incurred a net loss of $2,277,035 for the six months ended June 30, 2008, compared to a net loss of $840,446 for the same period in 2007. The large increase in net loss was due to an increase in stock based compensation including an issuance of 1,000,000 options to buy shares of our common stock issued to our President.
Our basic and diluted loss per share was $0.08 for the six months ended June 30, 2008, and $0.03 for the same period in 2007.
Expenses
Our total operating expenses increased from $797,322 to $2,246,680 for the six months ended June 30, 2008 compared to the same period in 2007. This increase in expenses is due to the increase in stock based compensation issued within the period in 2008.
Our rent expenses increased $26,823 from $46,415 to $73,238 for the six months ended June 30, 2008 compared to the same period in 2007. This increase was mainly due to increased rent payments for our office.
Our selling, general, and administrative expenses increased $1,404,824 from $591,688 to $1,996,512 for the six months ended June 30, 2008 compared to the same period in 2007. This increase was once again due mostly to the issuance of stock based compensation which included an issuance to our President of 1,000,000 options to buy our common shares.
We incurred $176,930 in research and development expenses for the six months ended June 30, 2008 compared to $159,219 for the six months ended June 30, 2007. Going forward, we anticipate that we will spend approximately $350,000 on research and development during the next 12 months.
Inflation
The amounts presented in the financial statements do not provide for the effect of inflation on our operations or financial position. The net operating losses shown would be greater than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments.
7
Off-Balance Sheet Arrangements
As of June 30, 2008, we had no off-balance sheet transactions that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
ITEM 4. CONTROLS AND PROCEDURES
N/A
ITEM 4T. CONTROLS AND PROCEDURES
Disclosure Controls
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2008. Based on this evaluation, our management has concluded that our disclosure controls and procedures adequately ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. The evaluation did not identify any change in our internal control over financial reporting that occurred during the period ended June 30, 2008 that has materially affected or is reasonably likely to materially affect our internal control over such reporting.
The term "internal control over financial reporting" is defined as a process designed by, or under the supervision of, the registrant's principal executive and principal financial officers, or persons performing similar functions, and effected by the registrant's Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
(1) | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the registrant; |
(2) | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the registrant are being made only in accordance with authorizations of management and directors of the registrant; and |
(3) | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, or use or disposition of the registrant's assets that could have a material effect on the financial statements. |
Changes in internal controls
Subsequent to the date of their evaluation, there were no changes in our internal controls over financial reporting or in other factors that could significantly affect these controls. There were no significant deficiencies or material weaknesses in our internal controls so no corrective actions were taken.
8
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Management is not aware of any legal proceedings contemplated by any governmental authority or any other party against us. None of our directors, officers or affiliates are (i) a party adverse to us in any legal proceedings, or (ii) have an adverse interest to us in any legal proceedings. Management is not aware of any other legal proceedings that have been threatened against us.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCCEDS
For the period ended June 30, 2008, we have issued the following securities pursuant to exemptions from registration requirements:
Our reliance upon the exemption under of Regulation S of the Securities Act was based on the fact that the sale of the securities was completed in an "offshore transaction", as defined in Rule 902(h) of Regulation S. We did not engage in any directed selling efforts, as defined in Regulation S, in the US in connection with the sale of the securities. Each investor was not a US person, as defined in Regulation S, and was not acquiring the securities for the account or benefit of a US person.
Additionally, the investors were given adequate access to sufficient information about us to make an informed investment decision. None of the securities were sold through an underwriter and accordingly, there were no underwriting discounts or commissions involved.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
9
ITEM 6. EXHIBITS
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the Registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned thereunto duly authorized.
Wordlogic Corporation | |
(Registrant) | |
/s/ Frank R. Evanshen | |
Date: August 14, 2008 | Frank R. Evanshen |
Director, President, Chief Executive Officer, | |
/s/ Darrin McCormack | |
Date: August 14, 2008 | Darrin McCormack |
Chief Financial Officer, Principal Accounting Officer |
10