UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended May 31, 2011
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number333-151434
PORTLOGIC SYSTEMS INC.
(Exact name of registrant as specified in its charter)
NEVADA
20-2000407
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
100 King St. W., Suite 5700 Toronto, Ontario, Canada
M5X 1K7
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code
(702) 666-8868
Securities registered under Section 12(b) of the Exchange Act: None.
Securities registered under Section 12(g) of the Exchange Act: None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No X
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No X
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. X Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer (Do not check if a smaller reporting company)
Smaller reporting company X
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes No X
As of August 29, 2011, the registrant had 68,830,474 shares of common stock, par value $0.001, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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PORTLOGIC SYSTEMS INC.
FORM 10-K
For the fiscal year ended May 31, 2011
TABLE OF CONTENTS
PAGE NUMBER
PART I
Item 1.
Business.
5
Item 1A.
Risk Factors.
10
Item 2.
Properties.
15
Item 3.
Legal Proceedings.
15
Item 4.
Submission of Matters to a Vote of Security Holders.
15
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities.
16
Item 6.
Selected Financial Data.
16
Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
17
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk.
21
Item 8.
Financial Statements and Supplementary Data.
22
Item 9.
Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure.
37
Item 9A(T). Controls and Procedures.
37
Item 9B.
Other Information.
38
PART III
Item 10.
Directors, Executive Officers and Corporate Governance.
39
Item 11.
Executive Compensation.
41
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
42
Item 13.
Certain Relationships and Related Transactions, and Director Independence
43
Item 14.
Principal Accountant Fees and Services.
43
PART IV
Item 15.
Exhibits, Financial Statement Schedules.
45
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CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Statements in this annual report on Form 10-K may be "forward-looking statements". Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions, or any other statements relating to our future activities or other future events or conditions. These statements are based on current expectations, estimates, and projections about our business based, in part, on assumptions made by our management. These statements are not guarantees of future performance and involve risks, uncertainties, and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and probably will, differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors, including those described above and those risks discussed from time to time in this annual report on Form 10-K, including the risks described under "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and in other documents we file with the Securities and Exchange Commission.
In addition, such statements could be affected by risks and uncertainties related to our financial condition, factors that affect our industry, market and customer acceptance, competition, government regulations and requirements and pricing, as well as general industry and market conditions and growth rates, and general economic conditions. Any forward-looking statements speak only as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this annual report on Form 10-K, except as required by law.
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PART I
ITEM 1.
Business
GENERAL
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. The address of our principal executive office is 100 King St. West, Suite 5700, Toronto, Ontario, M5X 1K7, Canada. Our telephone number is (702) 666-8868. Our website address iswww.portlogicsystems.com. We have a financial year end of May 31.
We have not been profitable since our inception. We are currently in the development stage and our business comprises developing and licensing portal software products and related services. We have 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 skills. Sale of this product commenced during the 2008 fiscal year. We have no significant assets or financial resources. The limited extent of our assets and revenues, our early stage of development, and our limited operating history make us subject to the risks associated with start-up companies, including potentially negative cash flows. The report of our independent auditors for the fiscal year ended May 31, 2011 states that there is substantial doubt that we will be able to continue as a going concern. If we cannot obtain additional financing, we may cease to exist.
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. Initial operations include: capital formation; organization; website construction; target market identification; research costs; promotional materials costs; and marketing planning. To date, our subsidiary has not had any operations.
Since January 2010, we have expanded the scope of technology offerings to include marketing mobile applications solutions and kiosk hardware and software products. Portlogic’s product offering now include enterprise software solutions which fall into five principal product families: m2Meet, m2Bank, m2Market, m2Ticket, and m2Kiosk.
PRINCIPAL PRODUCTS AND SERVICES
We license portal software products and provide custom software programming services to customers who license our products. Our portal software products are designed to enable customers to administer a ‘portal’ that can be accessed online by other users. A portal is a set of website pages that serve as a starting point for accessing online services pertaining to a specific topic. Each type of portal that we license to our customers has a standard pre-programmed functional framework along with content and appearance customized according to the customer’s particular requirements. Our licensing agreements with customers provide that we retain exclusive ownership rights over the portal software and any related products or features that we license to our customers. Our customers retain ownership rights over any content that they provide to customize their portal.
We host the portal software licensed to our customers on our own servers. Our portal software products include an online administration interface which our customers can use to manage the functionality, appearance, and content of their portal, such as what users are able to see and do when they visit the portal. As a result, customers that license our software can operate their online portal using only a personal computer and internet connection. They do not need to have any programming knowledge, additional software, hosting capabilities, or additional hardware.
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We also offer, in exchange for additional licensing fees, ‘plug-in’ products that can provide additional functions to the basic portal software licensed by our customers. A plug-in is a discrete piece of software that provides a specific feature that our customers can add to their portal that we believe will enhance the experience of users accessing the portal. We either own the plug-ins or license them from third parties. Examples include video chat, instant messaging chat, modules that display automatically updating financial data or news, photo galleries, a payment facility to charge users for access and enable our customers to accept credit card payment.
Currently, we offer one fully developed portal software product. This product is an online social networking system marketed to entrepreneurs who wish to operate their own online social networking or dating business. We market this product through one of our websites, at www.internetdatingsoftware.com.
We earned revenues from our social networking software system in five primary ways:
1.
We charge a lump sum initial setup fee for each portal that we provide to a customer.
2.
Monthly or annual basic licensing fees, along with variable bandwidth and other fees that we charge to allow end users to access a customer’s portal stored on our server, are payable on an ongoing basis when our customers are licensing one of our portal products.
3.
We charge ongoing licensing fees for any plug-ins that we provide to our customers.
4.
We provide customized programming, graphic design, or other services to assist customers with customizing the appearance or functions of their portal. Fees for customized services are based on a quotation agreed to between us and the customer that sets out the scope of services to be performed.
5.
We offer master licensing agreements with resellers that wish to license our products to their own customers in return for the reseller paying us a fixed fee or proportion of revenues received from their customers.
Since January 2010, we have expanded the scope of technology offerings to include marketing mobile applications solutions and kiosk hardware and software products.
Our 5 divisions are as follows:
1.
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.
2.
m2Bank: (Mobile to Bank) is a financial transactions system that facilitates bill payments, money transfers, and account management.
3.
m2Market: Mobile marketing solutions including a Bluetooth push technology that is used to deliver marketing materials to mobile phones.
4.
m2Ticket: Mobile ticketing sales engine which manages the sale and delivery of tickets through mobile phones for the transportation and entertainment industry.
5.
m2Kiosk: A line of standard and custom kiosks hardware and software which integrates with mobile phone applications in the marketing, financial, and ticketing industries.
OUR BUSINESS STRATEGY
Our business strategy was to offer a product that allows small and midsize businesses to compete in various online markets at comparatively low cost. Packages are customizable and are managed though a backend management administration area. We provide all technical support, including payment and tracking systems, servers, and client support.
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Not all entrepreneurs who start up an online business will succeed, but we believe the ones who do can be expected to become long-term stable income centers for our company. As they develop, they will usually require more customization and may require more plug-ins on their site, all of which we can charge for.
Due to the cost of developing the technology to offer our marketing mobile applications solutions and kiosk hardware and software 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 are not a software company; rather we market mobile, kiosk and other technological solutions.
MARKETS FOR OUR PRINCIPAL PRODUCTS AND SERVICES
We believe our market consists of two groups: portal owners (active domains seeking to maximize the amount of traffic that they attract by adding functions that we can provide), and private entrepreneurs (entrepreneurs interested in developing online businesses from scratch themselves).
We are now trying to bring mobile application solutions to marketing companies that may be interested in our technology partners. We are also directly targeting Telco operators and governmental agencies.
CUSTOMERS
Our target customer base currently has consisted of entrepreneurs interested in creating a portal to complement an existing business or to operate an online social networking business. Because our product offering is delivered online, we are able to serve customers worldwide. However, in order to minimize the costs of translation and compliance with local laws, we are currently focusing on marketing our product to customers located in the United States of America and Canada, which are the jurisdictions our management is most familiar with.
Despite our main web-based community portal products still being under development, starting in September 2007, we began recognizing short-term revenue for providing dating software websites for small customers. For the year ended May 31 2011, we received $3,181 in revenues. For the year ended May 31, 2010, we received $7,841 in revenues. Previously, for the year ended May 31, 2009, we received $42,977 in revenues. And prior to September 2007, we received $23,000 in ancillary revenues from two customers, Metapoint Technologies Corp and JOYN Internet Communities, Inc. for providing website layout and design, as well as software licensing.
Our current revenues for this product offering were evenly supported by our customer base; none of our clients represented major customers as a percentage or dollar amount of total revenues.
We do not have any customers for our mobile application solutions yet but are now focusing on such, which is the reason for our lower revenues for the year ended May 31, 2011.
COMPETITION
With our past product offering, we faced the portal software products industry, which is occupied by a wide variety of businesses, with numerous substitutes for the products and services that we offered. We competed with companies that offer do-it-yourself website design software products, website programmers, software developers, online social networking community service providers, and portal software products dedicated to a specific industry.
Our direct competitors now consist of companies that sell or license mobile marketing solutions.
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The direct competitors that we are aware of are privately held and we do not have access to certain information that would enable us to compare our business with them. Accordingly, it is difficult to determine some aspects of our competitive position. Based on information that is publicly available, we believe that the methods of competition that we use are similar to the methods that most of our direct competitors are using. Like most of our direct competitors, we market ourselves by maintaining a website that describes the features of our product, providing a mechanism to enable customers to order our products and services online, and we bid for key words with search engines to help our company and our products appear prominently in the results of searches made by potential customers. The method that we use to earn revenues also appears to be similar to the method used by most of our direct competitors. This method involves charging low fees for initial setup and ongoing licensing of our basic product and then marketing additional services and products to customers who license a basic product from us. Our fees to provide these additional services and products, including customized programming services and plug-ins, are intended to provide us with a high profit margin.
We offer master licensing agreements with resellers who wish to license our products to their own customers. We are not aware of any competitors marketing their products using master licensing agreements, although this information may not be publicly disclosed. We believe that the master licensing method of marketing our products provides us with a competitive advantage compared to our other direct competitors because under these arrangements our resellers incur the costs of marketing to potential customers and providing customer service on our behalf. The cost of providing the products that are being licensed are primarily fixed and have already been incurred, and resellers may be able to access new niche markets if they have a reputation or specific subject matter expertise that we lack and are viewed favorably by a specific class of potential customers.
Because of our relatively limited revenues and cash, compared to our competitors we have less capacity to perform services for our customers or develop new features for our products. We are unable to incur significant upfront cash expenses to market our products and services. Unlike some of our more established competitors, we do not compete for customers by using high value marketing campaigns or building personal relationships with large business customers. We do, however, compete against larger companies because they advertise and provide their products and services to smaller businesses whom we are capable of providing products and services to and therefore represent potential customers.
We believe that the principal competitive factors in our industry are:
·
value of the products and services provided compared to their price;
·
quality of the products and services;
·
capability to generate revenues by producing add-on products and services to existing customers;
·
reputation for services provided to past customers;
·
brand recognition and size of the firm;
·
ability to provide complete, integrated solutions;
·
speed of development and implementation of solutions;
·
effectiveness of sales and marketing efforts; and
·
financial stability.
We believe that we can currently compete favorably with respect to the first three of these factors. However, given our developmental stage of business, small size, and limited scope of operations, we believe that we are currently at a competitive disadvantage relative to more established competitors with respect to the other factors listed above. Established competitors who have greater access to capital and positive cash flow from revenues may be in a better position to capture a share of the available market.
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We hope to offset the competitive advantages of our established competitors by providing, at relatively low cost, high quality customer service, innovative ideas, and products that have some customization that makes them more appealing to each specific segment of customers. In addition, our lack of affiliation with a larger company such as Google or Yahoo! means that we are not limited in our choice of technology. We are free to select the software or other technology that suits our own or our customers’ needs. As a result, we may be able to offer products and services that are more innovative or appealing to our customers at a lower cost than our competitors. However, we may not be able to compete successfully against our current or future competitors and competition may have a material adverse effect on our business, results of operations, or financial condition.
INTELLECTUAL PROPERTY
As of May 31, 2011, we do not own any patents or trademarks. We are not licensing any product or service from a third party that is material to our business. Depending upon the particular needs and demands of our clients, we may, in the future, seek patents or copyrights for the intellectual material we produce.
Our business plan contemplates that we will market our products and services in part by entering into master licensing agreements with resellers who wish to license our products to their own customers in return for the reseller paying us a fixed fee or proportion of revenues received from their customers. We have also entered into exclusive distribution agreements for our mobile applications solutions and kiosk hardware and software products.
EFFECT OF EXISTING OR PROBABLE GOVERNMENTAL REGULATIONS ON OUR BUSINESS
There are numerous laws and regulations that apply to commerce on the Internet or are of more general application but have an effect on our operations. These include laws and regulations with respect to user privacy, freedom of expression, pricing, characteristics and quality of products and services, taxation, advertising, intellectual property rights, information security, language use, and the convergence of traditional telecommunications services with Internet communications. Due to the increasing popularity of use of the Internet by consumers and businesses, it is possible that additional laws and regulations with respect to the Internet may be adopted at federal, state, provincial, and local levels. There may be additional laws and regulations that will apply to the transaction of business by us that we will need to explore as we enter international markets. We are subject to laws in every jurisdiction in which we conduct business. Currently, we are incorporated in the United States and maintain an office in the Province of Ontario, Canada. Current and future laws and regulations within and outside of the United States may have a material adverse effect on us and our business.
NEW PRODUCT DEVELOPMENT
Using the programming source code of the portal software for our online social networking system, we have been further developing to offer location-based services. We believe this will bring a new customer base for our m2Meet division as well as aid with our m2Market services.
However, due to the cost of developing the technology to offer our marketing mobile applications solutions and kiosk hardware and software 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.
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EMPLOYEES AND CONTRACTORS
As of May 31, 2011 we had two employees, consisting of our two officers, Rafik Jallad and Jueane Thiessen. M. Jallad serves as our Chief Executive Officer. Ms. Thiessen is our Secretary and Treasurer.
We also retain contractors to provide services related to software programming, website hosting, sales, office work, and consulting services as necessary based on the phase of our business plan and available funds.
Our contractors include programmers, website designers, system administrators, business writers, and sales personnel. As of May 31, 2011, our principal contractor has been Euroweb Technologie s.r.o. whom we have agreements with to provide website hosting and system administration services, as well as software programming services. We also use a commissioned salesperson, Jacques Poulin, to help us with sales. We also use a technology sales contractor, mSolutions. As well as these regular contractors, from time to time we have retained contractors for one-off purposes, such as to compose website text according to the needs of our clients.
We plan to continue using our existing network of contractors to assist us with the ongoing development of our business and to retain the services of additional contractors as needed. We believe that our use of contractors to conduct our day-to-day operations and product and service development enables us to react to customer demands without the need to incur large fixed overhead costs. We therefore believe that the use of contractors will help us to maintain low day-to-day costs of business during our development stage, and we expect to be able to quickly expand our operations as the number and size of our customers increase. We believe that our network of contractors is sufficient to support our current levels of business activity, as well as increased levels of activity.
ITEM 1A.
Risk Factors
Risks Relating To Our Business
The independent accountant’s opinion on the financial statements for the fiscal years ended May 31, 2011 and May 31, 2010, and for the period from inception, June 22, 2004, to May 31, 2011, includes an explanatory paragraph about our ability to continue as a going concern and, if we cannot obtain additional financing, we may have to curtail operations and may ultimately cease to exist.
Our audited financial statements for the periods from June 22, 2004 to May 31, 2011 reflect a cumulative net loss of $827,819. These conditions raise substantial doubt about our ability to continue as a going concern. However, our financial statements do not include any adjustments that might result if we are unable to continue our business. The independent auditor's report for the year ended May 31, 2011 includes an explanatory paragraph to the audit opinion stating that we have a working capital deficiency, an accumulated deficit and operating cash flow deficit that raise substantial doubt about our ability to continue as a going concern. Our continued operations are contingent on our ability to raise additional capital and obtain financing and success in future operations. If we do not acquire sufficient additional funding or alternative sources of capital to meet our working capital, we may have to substantially curtail our operations and business plan. To meet our future obligations, from time to time, we intend to issue debt or shares of our common stock or other equity instruments such as warrants.
We have a limited operating history and may never achieve or sustain profitable operations.
We have a short operating history and have not been profitable since our incorporation in June 2004. Since inception until May 31, 2011, we have derived ancillary revenues by providing website layout and web portal design services, as well as software licensing. Although some of our main web-based community portal products were still being developed, we realized some revenues, starting mostly in September 2007, for providing dating software websites. We have currently changed our business model to mobile solutions applications marketing. Even if we obtain future revenues sufficient to expand operations, increased
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operational or marketing expenses could adversely affect our liquidity. The limited extent of our assets and revenues, our early stage of development, and our limited operating history make us subject to the risks associated with start-up companies, including potentially negative cash flows. We have no significant assets or financial resources. Our lack of operating history makes it very difficult for you to make an investment decision. We may never become profitable. You may lose your entire investment.
We depend on our officers and directors to perform our business activities and our ability to recruit and retain the qualified individuals needed to operate and develop our business is unknown.
We rely on our officers and directors to perform many of our business activities. Currently, our Chief Executive Officer, Rafik Jallad oversees our technology needs. Our Chief Financial Officer, Secretary, and Treasurer, Jueane Thiessen, personally performs most of our accounting and financial management functions, and liases with external contractors who provide additional programming and consulting services. Both Mr. Jallad and Ms. Thiessen are involved in carrying out our sales activities. Our present management structure, although adequate for the early stage of our operations, will likely have to be significantly augmented as our operations expand. Our future success will depend in part on the services of our key personnel and, additionally, on our ability to identify, hire and retain additional qualified personnel. There is intense competition for qualified management, marketing, accounting, and sales personnel in our new business line: marketing mobile application solutions. We may not be able to continue to attract and retain the personnel needed to operate and develop our business. Because we rely on our officers and directors to perform our sales, accounting, and financial management activities, failure to attract and retain key personnel could have a material adverse effect on us.
We have limited cash which we anticipate will be insufficient to fund our plan of operations for the twelve months ending May 31, 2012 and if we are unable to raise additional capital, our business may fail and stockholders may lose their entire investment.
We have limited capital reserves to finance expansion or to protect us from a downturn in business. We currently do not have sufficient cash to fund operations for the twelve months ending May 31, 2012. We will need to raise additional funds to fully fund our operations for the next twelve month period beginning June 1, 2011. Additional financing may come in the form of an offering of common shares, borrowing from a bank or one of our directors, or from revenues generated by new business. If additional shares are issued to raise capital, our existing stockholders will suffer a dilution of their stock ownership and the value of our outstanding shares may fall. If we borrow more money, we will have to pay interest and may also have to agree to restrictions that limit our operating flexibility. We have no commitments for additional financing and there can be no assurance that additional funds will be available when needed, or on terms acceptable to us, if at all. If adequate funds are not available we may be required to change our planned business strategies. If we are unable to obtain adequate financing, we may not be able to successfully develop and market our products and services. As a result, we would need to curtail business operations which would have a material negative effect on operating results, the value of our outstanding stock is likely to fall, and our business may fail causing our stockholders to lose their entire investment.
Our Chief Financial Officer, Secretary, and Treasurer, Jueane Thiessen, also serves as our sole director. This interrelationship may create conflicts of interest that might be detrimental to us.
There are various interrelationships between our officers and directors that may create conflicts of interest that might be detrimental to us. Our sole director, Jueane Thiessen, was our Chief Financial Officer, Secretary, and Treasurer for the year ending May 31, 2011. Our Board of Directors, which appoints our officers, currently consists of a sole director, Ms. Thiessen, giving Ms. Thiessen control of all of the voting power of the Board of Directors. Because Ms. Thiessen is both a director and an officer, there exists a potential conflict of interest regarding the decision to remove our officers or appoint new officers. Mr. Rafik Jallad, as Chief Executive Officer is our only other officer.
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We may be subject to foreign currency fluctuation and such fluctuation may adversely affect our financial position and results.
We are currently located in Canada and pay most of our expenses in United States dollars. However, our target market is global. Almost all of our technology suppliers are based in Europe. We may enter into contracts that require customers to pay us in currencies other than United States dollars. Therefore, our potential operations make us subject to foreign currency fluctuation. We do not make investments that offset the risk of adverse foreign currency fluctuations and we may suffer increased expenses and overall losses as a result.
We do not own patents on our products and, if other companies copy our products, our revenues may decline which may result in a decrease in our stock price.
We do not own patents on our products we have developed and we do not currently intend to file for patent protection on those products. Therefore, another company could recreate our products and could compete against us, which would adversely affect our revenues.
We do not carry any insurance and we may be subject to significant lawsuits which could substantially increase our expenses.
We do not carry any insurance. There are a number of occurrences that could adversely affect our financial condition. These include damage to our assets, financial records, or other property by fire or water, as well as any successful lawsuits against us involving recovery of damages arising out of our contractual, legal, or other duties. Should such an uninsured loss occur, our costs may substantially increase which would lower our overall profitability, if any.
Amendments to telecommunications regulations could have a material adverse effect on our business by increasing the cost of our operations or the costs that customers must incur to use our products and services.
We use telecommunications services to deliver our online software licensing and programming services to customers. In addition, our customers typically require telecommunications systems to use our products and services. The telecommunications industry is subject to regulatory control. Any amendments to current regulations in any jurisdiction where we operate or where our customers conduct business could have a material adverse effect on our business, results of operations, and prospects. If amendments to regulations increase the cost of using telecommunications services, our operating expenses may increase. Additionally, if regulatory amendments increase the cost that our customers must incur to use our services, we may experience difficulty attracting new customers or retaining existing customers.
Equipment loss or malfunctions and telecommunication service interruptions or delays may adversely affect our ability to provide our products and services.
Our business is highly dependent on our computer and telecommunications equipment and software systems for the operation and quality of our services. The temporary or permanent loss of all or a portion of these systems, including as a result of physical damage or operating malfunction, or significant replacement delays, could have a materially adverse effect on our business, financial condition, and results of operations. Any interruptions, delays or capacity problems experienced on the Internet or with telephone services could adversely affect our ability to provide our products and services.
Substantially all of our revenue has been derived from short-term contract engagements. If these customers do not enter into additional contracts with us, you may lose your entire investment because we may be unable to obtain new revenues that generate sufficient cash to meet our obligations.
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Our contracts with our current customers are short-term in nature and there is no guarantee that we will enter into new contracts and receive additional revenues from these customers in the future. We anticipate that we will rely on a small number of short-term engagements and customers for at least the next 12 months. Our existing customers and/or new customers may not provide us with sufficient levels of revenue to generate profits or even to sustain operations. We may not be able to replace the revenues generated by any existing customer that chooses not to enter into additional contract engagements with us.
Risks Relating To Our Stock
"Penny Stock" rules may make buying or selling our securities difficult which may make our stock less liquid and make it harder for investors to buy and sell our shares.
Trading in our securities is subject to the SEC's "penny stock" rules and we anticipate that trading in our securities will continue to be subject to the penny stock rules for the foreseeable future. The SEC has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. These rules require that any broker-dealer who recommends our securities to persons other than prior customers and accredited investors must, prior to the sale, make a special written suitability determination for the purchaser and receive the purchaser's written agreement to execute the transaction. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated with trading in the penny stock market. In addition, broker-dealers must disclose commissions payable to both the broker-dealer and the registered representative and current quotations for the securities they offer. The additional burdens imposed upon broker-dealers by these requirements may discourage broker-dealers from recommending transactions in our securities, which could severely limit the liquidity of our securities and consequently adversely affect the market price for our securities.
Existing and prospective shareholders may experience significant dilution if we enter into a business combination with a private concern or public company and issue securities to shareholders of such private company.
Our business plan contemplates that we may acquire other companies or assets. As a result, we may enter into a business combination with a private concern or public company that, depending on the terms of merger or acquisition, may result in us issuing securities to shareholders of any such private company. The issuance of previously authorized and unissued shares of common stock would result in reduction in percentage of shares owned by our present and prospective shareholders and may result in a change in control or management of our Company.
One of our shareholders, Fern Fair, controls 52.3% of our shares of common stock as of May 31, 2011, and she may not vote her shares in a manner that benefits minority shareholders.
One of our shareholders, Fern Fair, owns a significant percentage of our voting stock. As a result, Ms. Fair is able to significantly influence all matters requiring approval by shareholders, including the election of directors and the approval of significant corporate transactions. This concentration of ownership may also have the effect of delaying, deterring, or preventing a change in control and may make some transactions more difficult or impossible to complete without the support of Ms. Fair. In addition, Ms. Fair may not have an interest in fully promoting the sale of our common stock if such sales would reduce the opportunity for her to sell her own shares at any time in the future.
Our common stock has experienced in the past, and is expected to experience in the future, significant price and volume volatility, which substantially increases the risk that our stockholders may not be able to sell their shares at or above the price that they paid for the shares.
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Because of the limited trading market for our common stock, and because of the possible price volatility, you may not be able to sell your shares of common stock when you desire to do so. From June 1, 2010 and through May 31, 2011, our common stock was sold and purchased at prices that ranged from a high of $0.71 to a low of $0.57 per share. An inability for our stockholders to sell their shares in a rapidly declining market as a result of the illiquidity in our stock may substantially increase their risk of loss because the price for our common stock may suffer greater declines due to its price volatility.
The price of our common stock that will prevail in the market may be higher or lower than the price that our stockholders pay. Certain factors, some of which are beyond our control, that may cause our share price to fluctuate significantly include, but are not limited to, the following:
·
Variations in our quarterly operating results;
·
Development of a market in general for our products and services;
·
Changes in market valuations of similar companies;
·
Announcement by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;
·
Loss of a major customer or failure to complete significant transactions;
·
Additions or departures of key personnel; and
·
Fluctuations in stock market price and volume.
Additionally, in recent years the stock market in general, and stocks quoted on the Over-The-Counter, or OTC, Bulletin Board in particular, have experienced significant price and volume fluctuations. In some cases, these fluctuations are unrelated or disproportionate to the operating performance of the underlying companies. These market and industry factors may materially and adversely affect our stock price, regardless of our operating performance.
Over the past few months, there have been periods of significant increases in trading volume of our common stock during which the price of our stock has both increased and decreased. The historical trading of our common stock is not necessarily an indicator of how it will trade in the future and our trading price as of the date of this annual report does not necessarily portend what the trading price of our common stock might be in the future.
Moreover, class action litigation has often been brought against companies following periods of volatility in the market price of the common stock of those companies. If we become involved in this type of litigation in the future, it could result in substantial costs and diversion of management attention and resources, which could have a further negative effect on investments in our stock.
Our directors have the right to authorize the issuance of preferred stock and additional shares of our common stock.
Our directors, within the limitations and restrictions contained in our articles of incorporation and without further action by our stockholders, have the authority to issue shares of preferred stock from time to time in one or more series and to fix the number of shares and the relative rights, conversion rights, voting rights, and terms of redemption, liquidation preferences and any other preferences, special rights and qualifications of any such series. We have no intention of issuing preferred stock at the present time. Any issuance of preferred stock could adversely affect the rights of holders of our common stock.
Should we issue additional shares of our common stock at a later time, the ownership interest of each of our current stockholders would be proportionally reduced. Our stockholders do not have any preemptive right to acquire additional shares of our common stock, or any of our other securities.
If we fail to remain current on our reporting requirements, we could be removed from the OTC Bulletin Board which would limit the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.
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Companies trading on the OTC Bulletin Board, such as us, must be reporting issuers under Section 12 of the Exchange Act, and must be current in their reports under Section 13, in order to maintain price quotation privileges on the OTC Bulletin Board. If we fail to remain current on our reporting requirements, we could be removed from the OTC Bulletin Board. As a result, the market liquidity for our securities could be severely adversely affected by limiting the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.
As a result of being a public company, we will incur increased costs that will adversely affect our liquidity and increase the risk that we will become insolvent.
As a public company, we will incur significant legal, accounting, and other expenses that we did not incur as a private company associated with public company reporting requirements. We also anticipate that we will incur costs associated with recently adopted corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002, as well as new rules implemented by the Securities and Exchange Commission. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. We are currently evaluating and monitoring developments with respect to these new rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. The costs that we will incur as a result of being a public company will adversely affect our already limited liquidity, making it difficult for us to proceed with our business development plans and increasing the risk that we will become insolvent. We may never become profitable. You may lose your entire investment.
Item 2.
Properties
Our business operations are conducted from our principal executive offices at 100 King St. West, Suite 5700, Toronto, Ontario, Canada, M5X 1K7, which we have leased from The Intelligent Office beginning March 14, 2007, and have renewed for four additional one-year periods. Because our business model currently relies on retaining diverse contractors to help us develop our products and perform our operations, we believe that we can accommodate growth with little or no requirements for additional capital for infrastructure.
Item 3.
Legal Proceedings
We may be involved from time to time in ordinary litigation, negotiation and settlement matters that will not have a material effect on our operations or finances. We are not aware of any pending or threatened litigation against us or our officers and directors in their capacity as such that could have a material impact on our operations or finances.
Item 4.
Submission of Matters to a Vote of Security Holders
During the fourth quarter of our fiscal year ended May 31, 2011, no matter was submitted to a vote of security holders through the solicitation of proxies or otherwise.
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PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock is quoted on the OTC Bulletin Board under the symbol "PGSY.OB." Our stock was not actively traded until March 1, 2010.
The following table sets forth, for the quarterly periods indicated, the range of high and low bid prices of our common stock as reported on the OTC Bulletin Board since our stock became actively traded. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
| | | |
For the Fiscal Year Ended May 31, 2011 | High |
| Low |
Quarter ended May 31, 2011 | $ 0.64 |
| $ 0.60 |
Quarter ended February 28, 2011 | $ 0.70 |
| $ 0.64 |
Quarter ended November 30, 2010 | $ 0.70 |
| $ 0.57 |
Quarter ended August 31, 2010 | $ 0.71 |
| $ 0.69 |
|
|
|
|
For the Fiscal Year Ended May 31, 2010 |
|
|
|
Quarter ended May 31, 2010 | $ 0.71 |
| $ 0.55 |
Quarter ended February 28, 2010 | N/A |
| N/A |
Quarter ended November 30, 2009 | N/A |
| N/A |
Quarter ended August 31, 2009 | N/A |
| N/A |
DIVIDENDS
To date we have not paid any dividends on our common stock and do not expect to declare or pay any dividends on our common stock in the foreseeable future. Payment of any dividends will depend upon our future earnings, if any, our financial condition, and other factors as deemed relevant by the board of directors.
HOLDERS
As of May 31, 2011, we had approximately 40 holders of record of our common equity.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
We do not have any compensation plan under which equity securities are authorized for issuance.
Item 6.
Selected Financial Data
Smaller reporting companies are not required to provide the information required by this Item.
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Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
INTRODUCTION
The following discussion and analysis compares our results of operations for the twelve months ended May 31, 2011 to the same period in 2010. This discussion and analysis should be read in conjunction with our financial statements and the related notes thereto included elsewhere in this annual report for the year ended May 31, 2011. This annual report contains certain forward-looking statements and our future operation results could differ materially from those discussed herein.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This annual report on Form 10-K 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.
OVERVIEW
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 are currently in the development stage and our business comprises developing and licensing portal software products and related services. We have 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 skills. We are further developing our product to include location based services. Currently, we have shifted our focus and our primary target market consists of marketing agencies with a need for mobile application solutions.
Since January 2010, we have expanded the scope of technology offerings to include marketing mobile applications solutions and kiosk hardware and software products. Portlogic’s product offering now include enterprise software solutions which fall into five principal product families: m2Meet, m2Bank, m2Market, m2Ticket, and m2Kiosk.
We have a financial year end of May 31.
CRITICAL ACCOUNTING POLICIES
Management's Discussion and Analysis of Financial Condition and Results of Operations is based upon our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these 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
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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 material.
CASH AND CASH EQUIVALENTS
Cash equivalents comprise highly liquid instruments with a maturity of three months or less when purchased. As at May 31, 2011, cash equivalents amounted to $7,575 (May 31, 2010 - $8,007).
SOURCE CODE
We have capitalized the costs of acquiring computer source code in accordance with the provisions of the Accounting Standards Codification (“ASC”) in ASC 985-20, “Costs of Software to Be Sold, Leased, or Marketed.” At each reporting period end, we analyze the realizability of our recorded software assets under the provisions of that statement. We recognize an impairment loss when and to the extent that the carrying amount of the software exceeds the estimated undiscounted future cash flows that are expected to result from the use of the asset and its eventual disposition. Since the source code has started to generate positive cash flows and is still being used for development, no impairment loss has been recognized. Amortization is provided using the straight-line method over the asset's estimated useful life, three years. As of May 31, 2011, the source code has been fully amortized.
REVENUE RECOGNITION
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 service periods.
FOREIGN CURRENCY TRANSLATION
We maintain our accounting records in US dollars, which is its 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, we translate monetary assets and liabilities denominated in a foreign currency 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 $2,746 for the year end May 31, 2011 (May 31, 2010 – $3,581).
RECENT ACCOUNTING PRONOUNCEMENTS ADOPTED
In April 2010, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU” or “Update”) No. 2010–17, “Revenue Recognition - Milestone Method.” The objective of this Update is to provide guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research or development transactions. The amendments in this Update are effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Early adoption is permitted. The Company does not anticipate that the adoption of this pronouncement will have a significant effect on its unaudited interim consolidated financial statements.
In February 2010, FASB issued ASU No. 2010-09, “Subsequent Events” (Topic 855) Amendments to Certain Recognition and Disclosure Requirements (“ASU 2010-09”). ASU 2010-09 amends disclosure requirements within Subtopic 855-10. An entity that is an SEC filer is not required to disclose the date through which subsequent events have been evaluated. This change alleviates potential conflicts between
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Subtopic 855-10 and the SEC’s requirements. ASU 2010-09 is effective for interim and annual periods ending after June 15, 2010. The adoption of this standard did not have a material impact on the Company’s unaudited interim consolidated financial statements.
In January 2010, the FASB issued ASU No. 2010-06, “Improving Disclosures about Fair Value Measurements” (“ASU 2010-06”) (codified within ASC 820 Fair Value Measurements and Disclosures). ASU 2010-06 improves disclosures originally required under SFAS No. 157. ASU 2010-06 is effective for interim and annual periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those years. The adoption of the guidance did not have a material effect on the Company's unaudited interim consolidated financial position, results of operations, cash flows or related disclosures.
In October 2009, the FASB issued ASU No. 2009-13, “Multiple Deliverable Revenue Arrangements,” a consensus of the FASB Emerging Issues Task Force (“ASU 2009-13”) (codified within ASC Topic 605). ASU 2009-13 addresses the accounting for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than as a combined unit. ASU 2009-13 is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with early adoption permitted. The Company is currently assessing the impact of ASU 2009-13 on its unaudited interim consolidated financial position, results of operations and cash flows.
RESULTS OF OPERATIONS
COMPARISON OF RESULTS FOR THE YEARS ENDED MAY 31, 2011 and MAY 31, 2010
REVENUE
For the fiscal year ended May 31, 2011, we recognized $3,181 in revenue. For the fiscal year ended May 31, 2010, we recognized $7,841 in revenue. The decrease in revenue for the current year was due to focus of management on finding revenue streams for our other solutions offerings with the change of our business model. However, all revenues in both fiscal years were from dating revenues only derived from our propriety source code, which has now been fully amortized.
COST OF GOODS SOLD
We incurred $38,000 in cost of goods sold for the fiscal year ended May 31, 2011. For the fiscal year ended May 31 2010, we incurred $50,666 in cost of goods sold. For both years, cost of goods was made up entirely of amortization of our source code, which we include in cost of sales. The work completed to earn revenue in both twelve month periods was provided in-house using our source code. Amortization of our source code commenced March 1, 2008 when it became apparent that the source code was being used to generate revenue, and ended February 28, 2011. As of May 31, 2011, the source code has been fully amortized.
EXPENSES
During the year ended May 31, 2011, we incurred total expenses of $173,260 comprised of selling and administrative expense of $170,830 and depreciation of $2,430; compared with total expenses of $173,548 comprised of selling and administrative expense of $171,478 and depreciation of $2,070 for the year ended May 31, 2010. The largest expense for both years pertained to consulting and professional fees. Expenses incurred during both years remained virtually the same with the exception of higher legal expense of $6,030 in 2011 vs. $2,621 in 2010 and significantly higher interest expense during the year ended May 31, 2011 due to larger loans drawn from the available notes payable; $17,204 in 2011 vs. $8,130 in 2010. This was offset by significantly higher audit fees for the year ended May 31, 2010 of $38,500 compared to $24,977 for the year ended May 31, 2011 due to change of registered certified auditor.
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NET INCOME/LOSS
During the year ended May 31, 2011, we incurred a net loss of $208,079 compared with a net loss of $216,373 for the year ended May 31, 2010. While revenues were slightly lower for the year ended May 31, 2011 as we concentrated on our new business model, cost of goods sold, made up entirely of amortization of our source code, became fully amortized at the end of the third quarter of the year ended May 31, 2011 resulting in lower net loss for that year.
LIQUIDITY AND CAPITAL RESOURCES
We do not yet have an adequate source of reliable, long-term revenue to fund operations. The Company is in the development stage and is in the process of developing our web-based community portal product as well as trying to launch our new business model of marketing mobile application solutions. Revenues for our community portal product commenced during the 2008 fiscal year. We have not realized any revenues for our mobile solutions as we are currently signing up technology partners. 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 May 31, 2011, we had cash and cash equivalents of $10,607. We had total current assets of $31,962.
In order to ensure we continue to generate cash revenues, during the next twelve months, we have expanded the scope of technology offerings to include marketing mobile applications solutions and kiosk hardware and software products. As we have been recognizing revenues during this time, we intend to continue further product development of our social networking portal software. Our proprietary web based community software will be further developed for mobile use in our m2Meet division. However, our product offering now includes enterprise software solutions which fall into five principal product families: m2Meet, m2Bank, m2Market, m2Ticket, and m2Kiosk as follows:
1.
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.
2.
m2Bank: (Mobile to Bank) is a financial transactions system that facilitates bill payments, money transfers, and account management.
3.
m2Market: Mobile marketing solutions including a Bluetooth push technology that is used to deliver marketing materials to mobile phones.
4.
m2Ticket: Mobile ticketing sales engine which manages the sale and delivery of tickets through mobile phones for the transportation and entertainment industry.
5.
m2Kiosk: A line of standard and custom kiosks hardware and software which integrates with mobile phone applications in the marketing, financial, and ticketing industries.
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 anticipate that we will require $500,000 in total, over the next twelve months, to fund the start up of each of these divisions. We anticipate launching each division, individually, as technology solutions providers are in place. We need to be assured that we have strong presentation support, an organized implementation strategy and ongoing technical support. As we have now signed technology partners with proven large scale application experience, we will begin to hire project managers and begin marketing our solutions to targeted potential clients.
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 12 months. If we generate no cash revenues other than the $10,607 that we had available as of May 31, 2011, we will need to raise additional funds during the next 12 months. Potential sources of such working capital could include senior debt facilities, new lines of credit,
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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.
On August 26, 2009, we issued a note payable in consideration of a draw down unsecured loan up to an aggregate of $300,000 over a term of one year. Interest is payable at the prime rate plus 2%. Principal and interest are now due on August 26, 2012 unless demanded earlier.
As of May 31, 2011 we borrowed $277,000 against the total $300,000 available to be drawn down.
Prior to this, on July 18, 2008, we had issued a note payable in consideration of a draw down unsecured loan up to an aggregate of $100,000 over a term of one year. We have borrowed $80,000 against this loan.
Our 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 May 31, 2011, our total assets were $34,699, our total liabilities were $440,119, and stockholders’ deficiency was $474,818.
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.
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Smaller reporting companies are not required to provide the information required by this Item.
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Item 8.
Financial Statements and Supplementary Data
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2011 AND 2010, AND THE PERIOD FROM
JUNE 22, 2004 (INCEPTION) TO MAY 31, 2011
FORMING A PART OF ANNUAL REPORT
PURSUANT TO THE SECURITIES EXCHANGE ACT OF 1934
PORTLOGIC SYSTEMS INC.
(A Development Stage Company)
