Management's Discussion and Analysis of Financial Condition and Results of Operations
(Edgar Glimpses Via Acquire Media NewsEdge) INTRODUCTION
The following management discussion and analysis compares our results of
operations for the three months ended August 31, 2013 to the same period in
2012. This management discussion and analysis should be read in conjunction with
our unaudited interim consolidated financial statements and the related notes
thereto included elsewhere in this quarterly report for the three months ended
August 31, 2013.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q contains forward-looking statements that
involve risks and uncertainties. You should not place undue reliance on these
forward-looking statements. Our actual results could differ materially from
those anticipated in the forward-looking statements for many reasons, including
the risks described in this report and other reports we file with the U.S.
Securities and Exchange Commission. Although we believe the expectations
reflected in the forward-looking statements are reasonable, they relate only to
events as of the date on which the statements are made. We do not intend to
update any of the forward-looking statements after the date of this report to
conform these statements to actual results or to changes in our expectations,
except as required by law.
We incorporated on June 22, 2004 as Portlogic Systems Inc. under the laws of the
State of Nevada. On June 5, 2008, the Company filed a Form S-1 Registration
Statement under the United States Securities Act of 1933. It became effective
June 24, 2008. We have a financial year end of May 31.
We offer marketing mobile applications solutions and kiosk hardware and software
products. Our 5 divisions are as follows:
m2Meet: A community networking software solution. Currently being developed from
our proprietary web based source code. Internet and mobile users with similar
interests will use m2Meet to socially network and connect using location based
technology such as GPS.
m2Bank: (Mobile to Bank) is a financial transactions system that facilitates
bill payments, money transfers, and account management.
m2Market: Mobile marketing solutions including a bluetooth push technology that
is used to deliver marketing materials to mobile phones.
m2Ticket: Mobile ticketing sales engine which manages the sale and delivery of
tickets through mobile phones for the transportation and entertainment industry.
m2Kiosk: A line of standard and custom kiosks hardware and software which
integrates with mobile phone applications in the marketing, financial, and
Due to the cost of developing the technology to offer such products we have
decided to offer many of our products by bundling technology from third party
suppliers. Agreements can include but are not limited to licensing agreements,
reseller agreements, partnership agreements, memoranda of understanding, and
software development agreements. We have also developed a product that we
license to our customers to enable them to operate their own online social
networking portal without requiring any technical programming or website design
On September 16, 2009, we incorporated a wholly-owned subsidiary, Sunlogic
Energy Corporation in Panama City, Republic of Panama for the purpose of looking
at solar and alternative green energy software and products. To date, our
subsidiary has not had any operations.
On June 18, 2012, we incorporated a wholly-owned subsidiary, VOIP 1, Inc. under
the laws of the State of Nevada. VOIP 1, Inc. specializes in data and voice
- 18 -
CRITICAL ACCOUNTING POLICIES
Management's Discussion and Analysis of Financial Condition and Results of
Operations is based upon our unaudited interim consolidated financial
statements, which have been prepared in accordance with Securities and Exchange
Commission requirements for interim financial statements. Therefore, they do not
include all of the information and footnotes required in accordance with United
States Generally Accepted Accounting Principles ("GAAP") for complete financial
statements. The unaudited interim consolidated financial statements should be
read in conjunction with the Form 10-K for the year ended May 31, 2013.
The preparation of these unaudited interim consolidated financial statements
requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenue and expenses, and related disclosure of contingent
assets and liabilities. On an on-going basis, we evaluate our estimates,
including those related to the reported amounts of revenues and expenses, bad
debt, investments, intangible assets, income taxes, and contingencies and
litigation. We base our estimates on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results could differ from these estimates under different assumptions or
conditions. We consider the following accounting policies to be critical because
the nature of the estimates or assumptions is material due to the levels of
subjectivity and judgment necessary to account for highly uncertain matters or
the susceptibility of such matters to change or because the impact of the
estimates and assumptions on financial condition or operating performance is
CASH AND CASH EQUIVALENTS
Our cash equivalents comprise highly liquid instruments with a maturity of three
months or less when purchased. As at August 31, 2013, cash equivalents amounted
to $Nil (May 31, 2013 - $Nil).
We recognize revenue at the point of passage to the customer of title and risk
of loss when there is persuasive evidence of an arrangement, the sales price is
determinable, and collection of the resulting receivable is reasonably assured.
We recognize service revenues at the time of performance. Revenues billed in
advance under contracts are deferred and recognized over the corresponding
FOREIGN CURRENCY TRANSLATION
We maintain our accounting records in US dollars, which is our functional and
reporting currency. At the transaction date, each asset, liability, revenue and
expense denominated in a foreign currency is translated into the functional
currency by the use of the exchange rate in effect at that date. At the period
end, monetary assets and liabilities denominated in a foreign currency are
translated into the functional currency by using the exchange rate in effect at
that date. The resulting foreign exchange gains and losses are included in
operations. Foreign exchange loss amounted to $9 for the three month period
ended August 31, 2013 (August 31, 2012 - loss of $4).
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RESULTS OF OPERATIONS
COMPARISON OF RESULTS FOR THE THREE MONTHS ENDED AUGUST 31, 2013 AND AUGUST 31,
For the three months ended August 31, 2013, we recognized $562,611 in revenue
from our Voip 1 telecommunications operations. For the three months ended August
31, 2012, we recognized $5 in revenue from interest income on our short term
deposits only as we had just begun our telecommunications operations in August
2012. We have not yet begun to generate revenues from our mobile marketing
COST OF GOODS SOLD
We incurred $559,529 in cost of goods sold against our telecommunications
operations for the three months ended August 31, 2013. We incurred $Nil in cost
of goods sold for the three months ended August 31, 2012.
During the three months ended August 31, 2013, we incurred total expenses of
$47,836 comprised of selling and administrative expense of $47,720 and
depreciation of $116. During the three months ended August 31, 2012, we incurred
total expenses of $91,497 comprised of selling and administrative expense of
$91,299 and depreciation of $198. Higher expenses for the three month period
ended August 31, 2012 were incurred all around with the creation and start up
operations of our subsidiary, Voip 1, Inc. The largest expenses for both periods
pertained mostly to consulting and professional fees. The largest difference
between the two periods resulted from consulting fees of $50,367 in the three
months ended August 31, 2012 due to the appointment of our new Chief Executive
Officer as well as consultants for our new operations versus $Nil in the current
period ended August 31, 2013. In the prior period ended August 31, 2012, we also
incurred a one time billing system fee of $5,000, licensing fees totaling $2,550
due to our new operations which were not incurred in the current period ended
August 31, 2013. As well $2,400 in directors' fees were incurred in the prior
period from our previous directors; we have not extended their terms into the
current period. The generally higher expenses in the three month period ended
August 31, 2012 was partly offset by the accounting expense of $30,000 in the
current three month period ended August 31, 2013 vs. $9,000 in the prior period
due to increased operations.
During the three months ended August 31, 2013, we incurred a net loss of $44,754
compared with a net loss of $91,492 for the three months ended August 31, 2012.
The large decrease in net loss was due entirely to revenues earned from our Voip
1 telecommunications operations as well as lower overall selling and
administrative expense as one time start-up costs had already been incurred in
the previous period.
LIQUIDITY AND CAPITAL RESOURCES
As part of our expansion of operations, on June 18, 2012, we incorporated a
wholly-owned subsidiary, VOIP 1, Inc. VOIP 1, Inc. specializes in data and voice
telecommunications technologies. We have just begun to have an adequate source
of reliable, long-term revenue to fund operations. However, we have no
significant assets or financial resources. The amount of working capital that we
will require depends on several factors, including without limitation, the
extent and timing of sales of our products and related services, future costs of
development, the timing and costs associated with the expansion of our customer
support capabilities, and our operating results.
As of August 31, 2013, we had cash and cash equivalents of $313. We had total
current assets of $67,563.
We anticipate that we will require $350,000 in total, over the next nine months,
to adequately fund the growth of our operations. We need to be assured that we
have strong presentation support, an organized implementation strategy and
ongoing technical support. As we sign more clients and technology partners with
proven large scale application experience, we will begin to hire project
managers and begin marketing our solutions to even more targeted potential
- 20 -Any additional cash revenues that we generate from our operations will ease the
burden on our cash and enable us to finance operations beyond the next nine
months. If we generate no cash revenues other than the $313 that we had
available as of August 31, 2013, we will need to raise additional funds during
the next nine months. Potential sources of such working capital could include
senior debt facilities, new lines of credit, bank financings or additional sales
of our securities. If we raise funds through the sale of our securities, the
common stock currently outstanding would be diluted. There is a risk that such
additional financing may not be available, or may not be available on acceptable
terms, and the inability to obtain additional financing or generate sufficient
cash from operations could require us to reduce or eliminate expenditures for
capital equipment, production, or marketing of our products, or otherwise
curtail or discontinue our operations, which could have a material adverse
effect on our business, financial condition and results of operations.
Our unaudited interim consolidated financial statements have been prepared on a
continuing operation basis, which contemplates the realization of assets and the
settlement of liabilities and commitments in the normal course of business.
As of August 31, 2013, our total assets were $67,761, our total liabilities were
$968,452, and stockholders' deficiency was $900,691.
There are no subsequent events.
OFF-BALANCE SHEET TRANSACTION
We currently have no off-balance sheet arrangements that have or are reasonably
likely to have a current or future material effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources.
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