Edgar Filing: WORDLOGIC CORP

wl10q.htm

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 September 30, 2008

o 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

(Registrant’s 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 o

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 o Accelerated filer o Non-accelerated filer o 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 o 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. o Yes o No

APPLICABLE ONLY TO CORPORATE ISSUERS:

As of November 12, 2008, the registrant’s outstanding common stock consisted of 30,092,117 shares.

Table of Contents

PART I – FINANCIAL INFORMATION	3
Item 1. Financial Statements	3
Item 2. Management Discussion And Analysis	4
Item 4. Controls And Procedures	9
Item 4T. Controls And Procedures	9
PART II – OTHER INFORMATION	10
Item 1. Legal Proceedings	10
Item 2. Unregistered Sales Of Equity Securities And Use Of Procceds	10
Item 3. Defaults Upon Senior Securities	11
Item 4. Submission Of Matters To A Vote Of Security Holders	11
Item 5. Other Information	11
Item 6. Exhibits	11

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 September 30, 2008 follow. All currency references in this report are in US dollars unless otherwise noted.

WORDLOGIC CORPORATION

(A Development Stage Company)

September 30, 2008

	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

WORDLOGIC CORPORATION

(A Development Stage Company)

Consolidated Balance Sheets

(Expressed in US Dollars)

	September 30, 2008			December 31, 2007
	(Unaudited)
Assets

Current Assets

Cash	$	16,729		$	23,251
Accounts receivable		–			170
Goods and services tax receivable		6,783			38,477
Employee advances		–			2,606
Due from related parties (Note 5)		–			23,708

Total Current Assets		23,512			88,212

Property and equipment (Note 3)		12,784			18,171

Total Assets	$	36,296		$	106,383


Liabilities and Stockholders’ Deficit

Current Liabilities

Bank overdraft	$	316		$	32,328
Accounts payable		172,466			127,466
Line of credit (Note 4)		44,165			14,123
Indebtedness to related parties (Note 5)		35,510			4,447
Accrued liabilities		–			2,660
Accrued interest		256,139			254,758
Note payable to related party		140,951			–
Current portion of notes payable (Note 6)		387,511			100,000

Total Current Liabilities		1,037,058			535,782

Long Term Debt

Notes payable (Note 6)		100,000			735,511

Total Liabilities		1,137,058			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, 29,979,617 and 28,102,617 shares issued and outstanding, respectively (Note 7)		29,980			28,103
Additional paid-in capital		9,427,675			6,077,623
Accumulated deficit		(2,264,854	)		(2,264,854	)
Deficit accumulated during development stage		(7,842,597	)		(4,540,142	)
Accumulated other comprehensive loss		(450,966	)		(465,640	)

Total Stockholders’ Deficit		(1,100,762	)		(1,164,910	)

Total Liabilities and Stockholders’ Deficit	$	36,296		$	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 Months Ended						For the Nine Months Ended
	September 30, 2008			September 30, 2008			September 30, 2007			September 30, 2008			September 30, 2007

Revenues
Product sales	$	16,655		$	371		$	(443	)	$	1,194		$	1,011
Royalty revenue		33,028			119			1,082			1,432			2,301

Total Revenues		49,683			490			639			2,626			3,312

Operating expenses
Rent, related party (Note 5)		474,118			36,154			25,010			109,392			71,425
Selling, general and administrative (Note 5)		7,001,785			916,452			142,316			2,912,964			734,004
Research and development		1,606,710			60,964			70,278			237,894			229,497

Total Operating Expenses		9,082,613			1,013,570			237,604			3,260,250			1,034,926

Loss from Operations		(9,032,930	)		(1,013,080	)		(236,965	)		(3,257,624	)		(1,031,614	)

Other income (expenses)

Interest income		1,760			–			–			–			–
Interest expense:
Related parties		(59,677	)		–			–			(4,871	)		(7,437	)
Amortization of discount on convertible note		(145,243	)		–			–			–			–
Other notes, advances and amounts		(414,008	)		(12,340	)		(24,311	)		(39,960	)		(62,671	)
Gain on derivative liability		142,861			–			–			–			–
Gain on settled payables		64,640			–			–			–			–

Loss Before Income Taxes and Extraordinary Item		(9,442,597	)		(1,025,420	)		(261,276	)		(3,302,455	)		(1,101,722	)

Income tax provision		–			–			–			–			–

Loss Before Extraordinary Item		(9,442,597	)		(1,025,420	)		(261,276	)		(3,302,455	)		(1,101,722	)

Net extraordinary gain on litigation settlement, less applicable income taxes of $nil		1,600,000			–			–			–			–

Net Loss For The Period		(7,842,597	)		(1,025,420	)		(261,276	)		(3,302,455	)		(1,101,722	)

Other Comprehensive Loss
Foreign currency translation adjustment		(450,966	)		10,318			(35,072	)		14,674			(77,429	)
Comprehensive Loss	$	(8,293,563	)	$	(1,015,102	)	$	(296,348	)	$	(3,287,781	)	$	(1,179,151	)
Basic and diluted loss per share				$	(0.03	)	$	(0.01	)	$	(0.11	)	$	(0.04	)

Weighted average common shares outstanding					29,600,450			25,780,913			28,774,728			24,720,939

(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 Nine Months Ended
	September 30, 2008			September 30, 2008			September 30, 2007

Cash flows from operating activities:
Net loss	$	(7,842,597	)	$	(3,302,455	)	$	(1,101,722	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		52,087			6,226			4,920
Common stock issued for services and payables		47,457			–			–
Stock-based compensation		4,176,061			2,389,419			362,147
Amortization of debt discount		145,243			–			–
Gain on derivative liability		(142,861	)		–			–
Changes in current assets and liabilities:
Receivables		9,227			30,467			(17,009	)
Employee advances		291			2,531			7,342
Bank overdraft		(3,283	)		(31,072	)		(63,068	)
Accounts payable and accrued liabilities		(296,408	)		56,085			13,071
Accrued interest payable		150,373			19,640			53,382

Net cash used in operating activities		(3,704,410	)		(829,159	)		(740,937	)

Cash flows from investing activities:
Purchases of equipment		(26,960	)		(839	)		–

Net cash used in investing activities		(26,960	)		(839	)		–

Cash flows from financing activities:
Proceeds from related party advances		577,680			32,710			94,623
Repayment of related party advances		(565,004	)		23,029			–
Proceeds from promissory notes issued to related parties		408,492			146,983			–
Repayment of related party promissory notes		(493,940	)		–			(11,155	)
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		75,241			32,336			–
Repayment of line of credit		(33,604	)		–			(42,905	)
Proceeds from stock options and warrants exercised		386,390			332,510			121
Proceeds from sale of common shares		3,330,689			630,000			1,293,608

Net cash provided by financing activities		3,827,484			849,568			1,341,012

Effect of exchange rate changes on cash		(80,915	)		(26,092	)		(77,429	)

Net change in cash		15,199			(6,522	)		522,646

Cash, beginning of period		1,530			23,251			14,990

Cash, end of period	$	16,729		$	16,729		$	537,636

Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	–		$	–		$	–

Cash paid for interest	$	197,271		$	3,208		$	16,738

(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 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 September 30, 2008 the Company has a working capital deficiency of $1,013,546 and has incurred losses of $7,842,597 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 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 Company’s 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 Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2007, included in the Company’s 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 Company’s consolidated financial position at September 30, 2008, and the consolidated results of its operations and consolidated cash flows for the nine months ended September 30, 2008 and 2007. The results of operations for the nine months ended September 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.

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)

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.

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 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)	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 Company’s financial statements as of and for the nine month period ended September 30, 2008 reflect the impact of SFAS 123(R). In accordance with the modified prospective transition method, the Company’s financial statements for prior periods do not include the impact of SFAS 123(R).

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.

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 September 30, 2008, there were 9,072,484 vested common stock options and warrants outstanding, which were excluded from the calculation of net loss per share-diluted because they were antidilutive.

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)

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 enterprise’s 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 Company’s 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 SEC’s 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 Company’s 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 entity’s 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 Company’s 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.

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.

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)

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 entity’s 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 period’s financial statements to conform to the current period’s presentation.

3. PROPERTY AND EQUIPMENT

	Cost $		Accumulated Amortization $		September 30, 2008 Net Carrying Amount $		December 31, 2007 Net Carrying Amount $
Office equipment		3,626		3,104		522		660
Computer equipment		132,842		123,069		9,773		13,126
Computer software		6,662		6,252		410		1,760
Furniture and fixtures		14,331		12,252		2,079		2,625
		157,461		144,677		12,784		18,171

Depreciation expense totalled $6,226 and $4,920 for the nine months ended September 30, 2008 and 2007, respectively.

4. LINE OF CREDIT

The Company has a CDN$50,000 (US$46,984) line of credit at September 30, 2008 of which CDN$3,000 (US$2,819) was unused at September 30, 2008. The interest rate on the credit line is 2% over the Royal Bank prime rate. Interest payments are due monthly. An officer of the Company has personally guaranteed the line of credit.

5. RELATED PARTY TRANSACTIONS AND BALANCES

The Company incurred the following related party transactions:

a) During the nine month period ended September 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 nine month period ended September 30, 2008, the Company incurred $109,392 in rent to a private company controlled by a director, of which $32,345 is owing at September 30, 2008.

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 (continued)

c) During the nine month period ended September 30, 2008, the Company incurred and paid management fees of $146,982 ($CAD 150,000) to a private company controlled by a director.

d) During the nine month period ended September 30, 2008, the Company received proceeds of $140,951 ($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 nine month period ended September 30, 2008, the repayment period of the note was extended to November 30, 2008. Accrued interest payable on the note totalled $4,698 ($CAD 5,000) at September 30, 2008.

e) During the nine month period ended September 30, 2008, the Company paid $63 to a director for operating expenses incurred in the year ended December 31, 2007.

f) During the nine month period ended September 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 nine month period ended September 30, 2008, the Company incurred $29,032 in accounting fees with this private company, of which $3,165 is owing at September 30, 2008.

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 nine month period ended September 30, 2008, the Company advanced a further $241, increasing the balance to $1,192, all of which was repaid leaving no balance outstanding at September 30, 2008.

h) Included in selling, general and administration expenses is $4,767 paid to a director for out-of-pocket expenses.

6. NOTES PAYABLE

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 September 30, 2008. Subsequent to September 30, 2008, the repayment period of the $100,000 note was extended to November 6, 2010 (see also Note 11). Accrued interest payable on the notes totalled $119,632 at September 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 nine month period ended September 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 $52,668 at September 30, 2008.

Interest expense on the notes during the nine month period ended September 30, 2008 totalled $33,439.

Maturities

Aggregate maturities required on long-term debt at September 30, 2008, are as follows:

2009	$387,511
2010	$100,000

F-9

WORDLOGIC CORPORATION

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in US dollars)

(Unaudited)

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.

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 Company’s 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.

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 Company’s common stock and one warrant to purchase an additional share of common stock, exercisable at $1.00 per share.

h)	In July 2008, the Company issued 150,000 shares of its common stock at $1.00 per share related to the exercise of stock options to a director, for total proceeds of $150,000.

i)	In August 2008, the Company issued 125,000 shares of its common stock at $0.50 per share related to the exercise of warrants, for total proceeds of $62,500.

j)	Also in August 2008, the Company issued 300,000 shares of its common stock registered on a Form S-8 at $0.65 per share for services rendered by a consultant for total consideration of $195,000.

k)	In September 2008, the Company issued 200,000 shares of its common stock registered on a Form S-8 at $0.68 per share for services rendered by a consultant for total consideration of $136,000.

The following table summaries 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, 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	(225,000)	0.61	–
Expired/Cancelled	(140,000)	0.75	–
Outstanding, September 30, 2008	5,523,297	1.06	1.18

F-10

WORDLOGIC CORPORATION

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in US dollars)

(Unaudited)

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: 2,733,000 and 1,335,000, respectively under each plan, for a total remaining of 4,068,000 as at September 30, 2008.

On January 3, 2008, the Company granted options to purchase a total of 1,000,000 shares of the Company’s 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 nine month period ended September 30, 2008, the Company recorded stock-based compensation of $1,465,239 as a general and administrative expense in connection with these options.

On March 20, 2008, the Company granted options to purchase a total of 100,000 shares of the Company’s 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 nine month period ended September 30, 2008, the Company recorded stock-based compensation of $65,733 as a general and administrative expense in connection with these options.

On August 18, 2008, the Company granted options to purchase a total of 250,000 shares of the Company’s common stock to a director. The options carry an exercise price of $0.80 per share and vested immediately. The options expire on August 18, 2013. During the nine month period ended September 30, 2008, the Company recorded stock-based compensation of $171,224 as a general and administrative expense in connection with these options.

Also on August 18, 2008, the Company granted options to purchase a total of 215,000 shares of the Company’s common stock to a consultant. The options carry an exercise price of $0.80 per share and vested immediately. The options expire August 18, 2010. During the nine month period ended September 30, 2008, the Company recorded stock-based compensation of $120,953 as a general and administrative expense in connection with these options.

On August 19, 2008, the Company adopted the 2008 Stock Compensation Plan, under which the Company is authorized to issue up to 500,000 shares of the Company’s common stock, to be registered on Form S-8, to the Company’s employees, executives and consultants. As at September 30, 2008, there were no shares remaining to be issued under the Stock Compensation Plan.

On September 8, 2008, the Company granted options to purchase a total of 100,000 shares of the Company’s common stock to a consultant. The options carry an exercise price of $0.90 per share and vested immediately. The options expire September 8, 2010. During the nine month period ended September 30, 2008, the Company recorded stock-based compensation of $63,739 as a 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 $1.14.

The weighted average assumptions used are as follows:

	Nine Month Period Ended
	September 30, 2008			September 30, 2007
Expected dividend yield		0	%		0	%
Risk-free interest rate		3.00	%		4.75	%
Expected volatility		128.60	%		214.33	%
Expected option life (in years)		4.43			3.50

The total intrinsic value of stock options exercised during the nine month period ended September 30, 2008 was $123,000.

F-11

WORDLOGIC CORPORATION

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in US dollars)

(Unaudited)

8.	STOCK-BASED COMPENSATION (Continued)

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, 2007		4,835,850		$	1.04
Granted		1,665,000		$	0.91
Exercised		(202,000	)	$	0.52
Expired/Cancelled		(2,548,000	)	$	1.42
Outstanding, September 30, 2008		3,750,850		$	0.80		3.30	$nil
Exercisable, September 30, 2008		3,549,187		$	0.73		3.53	$nil

A summary of the status of the Company’s nonvested shares as of September 30, 2008, and changes during the nine month period ended September 30, 2008, is presented below:

Nonvested shares	Number of Shares	Weighted Average Grant Date Fair Value
Nonvested at January 1, 2008	503,333	$0.85
Granted	1,665,000	$1.14
Vested	(1,966,670)	$1.06
Nonvested at September 30, 2008	201,663	$ 0.46

As at September 30, 2008, there was $92,569 total unrecognized compensation cost related to nonvested share-based compensation arrangements. That cost is expected to be recognized over a weighted average period of 0.61 years.

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 on 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 subsequently expired on October 29, 2008.

c)	The Company has entered into an agreement, effective August 21, 2007, with a company to provide investor relations services requiring monthly payments of $CAD 6,000. The agreement expired on August 21, 2008.

F-12

WORDLOGIC CORPORATION

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in US dollars)

(Unaudited)

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 Company’s 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

In October 2008, the Company conducted a private placement offering whereby it sold 37,500 units at a price of $0.20 per unit for total proceeds of $7,500. 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 $0.50 per share for a period of 24 months.

In October 2008, the Company entered into an agreement, effective October 1, 2008, with an individual to provide services in the capacity of Chief Operating Officer requiring monthly payments of $18,000 and options to purchase a total of 1,500,000 shares of the Company’s common stock. The options carry an exercise price of $0.80 per share and contain cashless exercise provisions. The options vest monthly at 40,000 per month with any remainder vesting on September 30, 2011. The options expire 24 months after vesting. All vested and unvested options will expire upon termination of the agreement by either party on 7 days written notice. The agreement expires on September 30, 2011.

c)	In October 2008, the Company extended the maturity date on the $100,000 promissory note referred to in Note 6 to November 6, 2010.

In October 2008, the Company conducted a private placement offering whereby it sold 75,000 units at a price of $0.20 per unit for total proceeds of $15,000. 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 $0.50 per share for a period of 24 months.

e)	On October 15, 2008, the Company adopted the 2008 Equity Incentive Plan, under which the Company is authorized to issue up to 2,000,000 shares of the Company’s common stock, to be registered on Form S-8, to the Company’s employees, executives and consultants.

F-13

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 user’s vocabulary and tendencies to predict the next most common letters, words, or phrases. This software incorporates a customizable dictionary, thesaurus, spellchecker, calculator, multi-lingual symbol capability and fast access to internet sites from within common software applications. In addition, this software incorporates internet search engines by which a user can highlight a word, press the search key and get the Merriam Webster Dictionary definition of the word.

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.

Liquidity and Capital Resources

As of September 30, 2008, we had cash of $16,729 and a working capital deficiency of $1,013,546. As at September 30, 2008 our accumulated deficit was $7,842,597. For the three months ended September 30, 2008 our net loss was $1,025,420 compared to $261,276 for the same period in 2007. For the nine months ended September 30, 2008 our net loss was $3,302,455 compared to $1,101,722 for the same period in 2007. The large increase in net loss was due to an increase in selling, general and administrative expense, including an increase in the issuance of stock based compensation to our consultants.

Our loss was funded by a combination of shareholder loans, sales of our securities and borrowing from our line of credit. During the nine months ended September 30, 2008, we raised $849,568 through these financing activities, including $332,510 from the exercise of stock options and warrants, and $630,000 from the sale of our common shares. Our cash position decreased by $6,522.

We used net cash of $829,159 in operating activities for the nine months ended September 30, 2008 compared to net cash of $740,937 in operating activities for the same period in 2007. We used $839 in investing activities for the nine months ended September 30, 2008 compared to no such expenditures during the same period in 2007. The effect of exchange rates on cash was to decrease our cash position by $26,092 for the nine months ended September 30, 2008 compared to a decrease of $77,429 for the nine months ended September 30, 2007.

We entered into a consulting agreement with James P. Yano to serve as our Chief Operating Officer effective October 1, 2008 until September 30, 2011. Under the agreement, Mr. Yano will provide us with management services, develop our business model, expand our distribution channels and commercialization opportunities, and revamp our marketing strategy for our predictive text input technology for a further 12 months in exchange for a monthly salary of $18,000 and a one time grant of options to purchase 1,500,000 shares of our common stock which carry the following conditions:

·	The Options will vest at a rate of 40,000 per month, with any remainder vesting on September 30, 2011.

·	The Options are exercisable at $0.80 per share and contain cashless exercise provisions.

·	Vested Options will expire 24 months after vesting. All Options, whether vested or unvested, will expire upon the delivery of notice of the termination of the Consulting Agreement.

During the nine months ended September 30, 2008 our monthly cash requirement to sustain our operations was approximately $92,129, compared to approximately $82,326 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 November 2008 as set out in the table below.

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.

We intend to meet the balance of our cash requirements for the next 12 months through a combination of debt financing and equity financing by way of private placements. We are actively 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.

Results of Operations for the three months ended September 30, 2008 compared to the three months ended September 30, 2007 and from inception to September 30, 2008.

Revenues

We generated $490 in total revenues for the three months ended September 30, 2008 compared to $639 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 September 30, 2008 we have generated total revenues of $49,683 in product sales and royalty payments.

Net Loss

We incurred a net loss of $1,025,420 for the three months ended September 30, 2008, compared to a net loss of $261,276 for the same period in 2007. From inception on May 27, 2003 to September 30, 2008, we have incurred a net loss of $7,842,597.

Our basic and diluted loss per share was $0.03 for the three months ended September 30, 2008, and $0.01 for the same period in 2007.

Expenses

Our total operating expenses increased from $237,604 to $1,013,570 for the three months ended September 30, 2008 compared to the same period in 2007.This large increase was primarily due to increased selling, general and administrative expenses, including an increase in stock based compensation issued during the three months ended September 30, 2008. Since our inception on May 27, 2003 to June 30, 2008, we incurred total operating expenses of $9,082,613.

Our rent expenses increased $11,144 from $25,010 to $36,154 for the three months ended September 30, 2008 compared to the same period in 2007. This increase was mainly due to an increase in the monthly lease rate to rent 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 increased $774,136 from $142,316 to $916,452 for the three months ended September 30, 2008 compared to the same period in 2007. The reason for the increase was due stock based compensation being issued during the three months ended September 30, 2008. From our inception on May 27, 2003 until June 30, 2008 we have spent a total of $7,001,785 on selling, general and administrative expenses.

We incurred $60,964 in research and development expenses for the three months ended September 30, 2008 compared to $70,278 for the three months ended September 30, 2007. Since our inception on May 27, 2003 until September 30, 2008 we have spent $1,606,710 on research and development. Going forward, we anticipate that we will spend approximately $350,000 on research and development during the next 12 months.

Results of Operations for the nine months ended September 30, 2008 compared to the nine months ended September 30, 2007

Revenues

We generated $2,626 in revenues for the nine months ended September 30, 2008 compared to $3,312 for the same period in 2007 in product sales and royalty payments.

Net Loss

We incurred a net loss of $3,302,455 for the nine months ended September 30, 2008, compared to a net loss of $1,101,722 for the same period in 2007. The large increase in net loss was due to an increase in stock based compensation during the period in 2008.

Our basic and diluted loss per share was $0.11 for the nine months ended September 30, 2008, and $0.04 for the same period in 2007.

Expenses

Our total operating expenses increased from $1,034,926 to $3,260,250 for the nine months ended September 30, 2008 compared to the same period in 2007. This increase in expenses is due partly to the increase in stock based compensation issued within the period in 2008.

Our rent expenses increased by $37,967 from $71,425 to $109,392 for the nine months ended September 30, 2008 compared to the same period in 2007. This increase was mainly due to an increase in the monthly lease rate to rent our office.

Our selling, general, and administrative expenses increased by $2,178,960 from $734,004 to $2,912,964 for the nine months ended September 30, 2008 compared to the same period in 2007. This increase was once again due mostly to the issuance of stock based compensation during the period in 2008.

We incurred $237,894 in research and development expenses for the nine months ended September 30, 2008 compared to $229,497 for the nine months ended September 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.

Off-Balance Sheet Arrangements

As of September 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

Disclosure Controls

We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2008. Based on the evaluation of these disclosure controls and procedures, and in light of the material weaknesses in our internal control over financial reporting identified in our Annual Report on Form 10-K for the year ended December 31, 2007, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are not effective.

Changes in internal controls

We have not yet implemented any of the recommended changes to internal control over financial reporting listed in our Annual Report on Form 10-K for the year ended December 31, 2007. As such, there were no changes in our internal control over financial reporting, as defined in Rule 13a-15(f) promulgated under the Exchange Act, during the quarter ended September 30, 2008, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 4T. CONTROLS AND PROCEDURES

N/A

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We filed a patent infringement lawsuit against Mercedes-Benz USA in the US District Court, District of Oregon for infringement of our patents, which are legally held by our subsidiary, 602531 BC Ltd., and we are seeking damages for patent infringement related to the use of car navigation systems in certain models of vehicles. We will also seek a threefold increase in damages and injunctive relief to prevent further infringement of our patents by Mercedes-Benz USA. The outcome of this matter is currently uncertain.

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 September 30, 2008, we have issued the following securities pursuant to exemptions from registration requirements:

In August 2008, we issued 125,000 shares of our common stock to a US investor pursuant to the exercise of warrants at an exercise price of $0.50 per share for proceeds of $62,500. These shares were issued without a prospectus pursuant to Section 4(2) of the Securities Act.

In September 2008, as compensation for investor relations services, we issued options to purchase 100,000 shares of our common stock at an exercise price of $0.90 per share, with a vesting date of September 8, 2008. The options expire on September 8, 2010 and were granted without a prospectus pursuant to Section 4(2) of the Securities Act.

Our reliance upon the exemption under Section 4(2) of the Securities Act was based on the fact that the issuance of the securities did not involve a “public offering”. Each offering was not a "public offering" as defined in Section 4(2) due to the number of persons involved in the deal, the size of the offering, the manner of the offering and the number of securities offered. We did not undertake an offering in which we sold a high number of shares to a significant number of investors. In addition, the investors had the necessary investment intent as required by Section 4(2) since they agreed to and received a share certificate bearing a legend stating that the shares are restricted pursuant to Rule 144 under the Securities Act. This restriction ensures that these shares will not be immediately redistributed into the market and will therefore not be part of a "public offering". The investors negotiated the terms of the transactions directly with our executive officers. No general solicitation was used, no commission or other remuneration was paid in connection with these transactions, and no underwriter participated. Based on an analysis of the above factors, these transactions were effected in reliance on the exemption from registration provided in Section 4(2) of the Securities Act for transactions not involving any public offering.

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.

ITEM 6. EXHIBITS

Exhibit Number	Exhibit Description
10.1	Promissory Note Extension Agreement with Peter Knaven dated August 31, 2008
10.2	Consulting Agreement with William Pipkin dated September 12, 2008
10.3	Consulting Agreement with James P. Yano dated September 30, 2008 (1)
31.1	Certification of the Chief Executive Officer Pursuant to Rule 13a-14 or 15d-14 of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of the Chief Financial Officer Pursuant to Rule 13a-14 or 15d-14 of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(1) Included as an exhibit to our Form 8-K filed on October 7, 2008

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: November 13, 2008	Frank R. Evanshen
	Director, President, Chief Executive Officer

	/s/ Darrin McCormack
Date: November 13, 2008	Darrin McCormack
	Chief Financial Officer (Principal Financial and Accounting Officer)