UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A-1
| [X] | QUARTERLY REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED AUGUST 31, 2013 |
| OR | |
| [ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number 000-54093
WILESS CONTROLS INC.
(Exact name of registrant as specified in its charter)
NEVADA
(State or other jurisdiction of incorporation or organization)
3450 St. Denis, Suite 202
Montreal, Quebec
Canada H2X 3L3
(Address of principal executive offices, including zip code.)
(514) 904-2333
(Registrant’s telephone number, including area code)
Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 last 90 days. YES [X] NO [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (SS 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES [X] NO [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer, “accelerated filer,” “non-accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large Accelerated Filer | [ ] | Accelerated Filer | [ ] | ||
| Non-accelerated Filer | [ ] | Smaller Reporting Company | [X] | ||
| (Do not check if smaller reporting company) | |||||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES [ ] NO [X]
APPLICABLE ONLY TO CORPORATE ISSUERS:
The Issuer had 66,146,442 shares of Common Stock, par value $0.00001, outstanding as of August 31, 2013.
REASON FOR AMENDMENT
The sole purpose of this Amendment to the Registrant’s Quarterly Report on Form 10-Q for the period ended August 31, 2013 is to furnish the Interactive Data File exhibits pursuant to Rule 405 of Regulation S-T. No other changes have been made to this Form 10-Q and this Amendment has not been updated to reflect events occurring subsequent to the filing of this Form 10-Q.
| Page | ||
| Financial Information. | 3 | |
Balance Sheet (Unaudited) | F-1 | |
Statements of Operations (Unaudited) | F-2 | |
Statements of Cash Flows (Unaudited) | F-3 | |
Notes to Financial Statements (Unaudited) | F-4 | |
| Management’s Discussion and Analysis of Financial Condition and Results of Operations. | 12 | |
| Quantitative and Qualitative Disclosures About Market Risk. | 15 | |
| Controls and Procedures. | 16 | |
| Risk Factors. | 16 | |
| Exhibits. | 17 | |
| 18 | ||
| 19 | ||
WILESS CONTROLS INC
(A Development Stage Company)
(Formerly known as iMETRIK M2M SOLUTIONS INC)
August 31, 2013 (unaudited) | May 31, 2013 (audited) | |||
| ASSETS | ||||
| CURRENT ASSETS | ||||
| Cash | $ | 2,145 | $ | 2,178 |
| Inventories (note 4) | 21,740 | 21,740 | ||
| TOTAL CURRENT ASSETS AND TOTAL ASSETS | $ | 23,885 | $ | 23,918 |
| LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | ||||
| CURRENT LIABILITIES: | ||||
| Note payable-stockholders (note 7) | 834,737 | 711,760 | ||
| Note payable (note 6) | 51,513 | 34,380 | ||
| Derivative liabilities (note 8) | 106,481 | 141,706 | ||
| Accrued expenses and other current liabilities (note 5) | 282,080 | 283,987 | ||
| TOTAL CURRENT LIABILITIES AND TOTAL LIABILITIES | $ | 1,274,811 | $ | 1,171,833 |
| STOCKHOLDERS’ DEFICIENCY | ||||
Common stock 500,000,000 shares authorized, par value $0.00001, 66,146,442 and 64,700,659 respectively issued and outstanding | $ | 661 | $ | 647 |
| Additional paid in capital | 1,039,147 | 1,027,161 | ||
| Accumulated Deficit | (81,158) | (81,158) | ||
| Deficit Accumulated during development stage | (2,209,576) | (2,094,565) | ||
| TOTAL STOCKHOLDERS’ DEFICIENCY | $ | (1,250,926) | $ | (1,147,915) |
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | $ | 23,885 | $ | 23,918 |
“See notes to financial statements”
F-1
(A Development Stage Company)
(Formerly known as iMETRIK M2M SOLUTIONS INC)
Three months ended August 31, 2013 and 2012 and Period of inception (May 6, 2009)
through August 31, 2013 (unaudited)
Three months ended August 31, 2013 | Three months ended August 31, 2012 | Beginning of development stage (September 1st, 2010) to August 31, 2013 | ||||
| SALES | $ | - | $ | - | $ | 12,800 |
| Cost of sales | - | - | 17,845 | |||
| Gross deficit | - | - | 5,045 | |||
| COSTS AND EXPENSES (INCOME): | - | |||||
| Selling, general and administrative | 65,320 | 112,337 | 1,049,989 | |||
| Research and Development | 33,735 | 56,708 | 477,841 | |||
Debt conversion inducement expense (income) (note 6) | - | (8,000) | 448,748 | |||
| Changes in fair value of derivative liability | (35,225) | (6,407) | (89,635) | |||
| Interest related party | 9,332 | 5,720 | 54,466 | |||
| Interest | 41,849 | 34,711 | 263,122 | |||
| TOTAL COSTS AND EXPENSES | 115,011 | 195,069 | 2,204,531 | |||
| NET LOSS | $ | (115,011) | $ | (195,069) | $ | (2,209,576) |
| Net Loss Per Share | $ | (0.00) | $ | (0.00) | $ | N/A |
| Average weighted Number of Shares | 65,407,486 | 62,382,477 | N/A |
“See notes to financial statements”
F-2
WILESS CONTROLS INC
(A Development Stage Company)
(Formerly known as iMETRIK M2M SOLUTIONS INC)
Three months ended August 31, 2013 and August 31, 2012 and Period of inception (May 6, 2009)
through August 31, 2013 (unaudited)
Three months ended August 31, 2013 | Three months ended August 31, 2012 | Beginning of development stage (September 1st, 2010) to August 31, 2013 | ||||
| Cash Flow from Operating activities: | ||||||
| Net loss | $ | (115,011) | $ | (195,069) | $ | (2,209,576) |
Adjustment to reconcile net loss to net cash used in operating activities | ||||||
| Debt Conversion Inducement (Income) Expense | - | (8,000) | 448,748 | |||
| Non-cash Interest expense | 29,133 | 29,662 | 162,129 | |||
| Gain on change in fair value of derivatives | (35,225) | (6,407) | (89,635) | |||
| Changes in operating assets and liabilities: | ||||||
| Account receivable | - | - | 600 | |||
| Inventories | - | - | (21,740) | |||
| Increase in prepaid expenses | - | 1,540 | - | |||
Increase in accrued expenses and other current liabilities | 80,316 | 65,630 | 528,115 | |||
| Net cash used in operating activities | $ | (40,787) | $ | (112,644) | $ | (1,181,359) |
| Cash Flow from Financing activities: | ||||||
| Proceeds of notes payable stockholder | 40,754 | 27,088 | 569,470 | |||
| Proceeds of notes payable | - | 65,000 | 553,598 | |||
| Net cash provided by financing activities | $ | 40,754 | $ | 92,088 | $ | 1,123,068 |
| (Decrease) in cash | (33) | (20,556) | (58,291) | |||
| Cash- beginning of period | 2,178 | 23,704 | 60,436 | |||
| Cash - end of period | $ | 2,145 | $ | 3,148 | $ | 2,145 |
| Supplemental Disclosure of non-cash financing activities | ||||||
| Conversion of current liabilities to common stock | $ | - | $ | - | 191,564 | |
| Conversion of notes payable to common stock | $ | 12,000 | $ | - | 87,120 | |
| Debt discount in notes payable | $ | (29,133) | $ | - | (29,133) | |
| Non cash component of debt conversion | $ | - | $ | (8,000) | 448,748 |
“See notes to financial statements”
F-3
WILESS CONTROLS INC
(A Development Stage Company)
(Formerly known as iMETRIK M2M SOLUTIONS INC)
NOTE 1 – NATURE OF BUSINESS
The Company was incorporated under the laws of the State of Nevada on May 6, 2009. The Company’s specific goal was to create a profitable service for placing Canadian citizens in accounting positions with Canadian corporations. On August 5, 2010, we changed our name to iMetrik M2M Solutions Inc. to reflect our new business purpose of bringing solutions to the Machine-to-Machine market (Machine-to-Machine (M2M) refers to technologies that allow both wireless and wired systems to communicate with other devices of the same ability). Initially the Company wants to cover applications for fixed assets.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
The Company cash balances accounts at institution are insured by the Federal Deposit Insurance Corporation up to $250,000. The Company’s accounts at these institutions may, at times, exceed the federally insured limits. The Company has not experienced any losses in such accounts.
We consider all short-term highly liquid investments with an original maturity at the date of purchase of three months or less to be cash equivalents.
DEVELOPMENT STAGE COMPANY
The Company was an active business from 2009 through August 31, 2010 and was involved in placing Canadian citizens in accounting positions with Canadian corporations. Commencing September 2010, the Company was looking for new business and commenced the Machine-to-Machine market (Machine-to-Machine (M2M) business solutions. The Company currently has operations and no revenues and, in accordance with the relevant authoritive guidance is considered a Development Stage Enterprise. As a development stage enterprise, the Company discloses the deficit accumulated during the development stage and the cumulative statements of operations and cash flows from September 1, 2010 to the current balance sheet date.
FAIR VALUE MEASUREMENTS
The Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.
The estimated fair value of certain financial instruments, including cash and cash equivalents, prepaid expenses, notes payable, and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.
ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
F-4
| * | level l - quoted prices in active markets for Identical assets or liabilities |
| * | level 2 - quoted prices for similar assets and liabilities in active markets or inputs that are observable |
| * | level 3 - inputs that are unobservable (for example cash flow modeling inputs based on assumptions) |
The Company’s derivative liability, classified as a level 3 liability, is the only financial liability measured at fair value on a recurring basis.
DERIVATIVE LIABILITIES
Our derivative financial instruments consist of embedded derivatives related to the convertible debt, warrants and beneficial conversion features embedded within our convertible debt. The accounting treatment of derivative financial instruments requires that we record the derivatives and related warrants at their fair values as of the inception date of the debt agreements and at fair value as of each subsequent balance sheet date. Any change in fair value was recorded as non-operating, non-cash income or expense at each balance sheet date. If the fair value of the derivatives was higher at the subsequent balance sheet date, we recorded a non-operating, non-cash charge. If the fair value of the derivatives was lower at the subsequent balance sheet date, we recorded non-operating, non-cash income.
INVENTORIES
Inventories consisting of electronic parts and components are stated at the lower of cost or market. The cost of work in process and finished goods includes materials, direct labor, variable costs and overhead and full absorption of fixed manufacturing overhead.
INCOME TAXES
The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.
ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. We have no material uncertain tax positions for any of the reporting periods presented.
USE OF ESTIMATES
The preparation of the financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. These estimates and assumptions include derivative financial instruments issued in financing transactions, the collectability of accounts receivable and deferred taxes and related valuation allowances. We re-evaluate all of our accounting estimates at least quarterly based on these conditions and record adjustments when necessary.
F-5
REVENUE RECOGNITION
The Company’s business plan is to sell wireless devices. The wireless devices are manufactured for the Company by a third-party in United States. Revenue is recognized at the time of shipment and when title changes hands to the buyer.
LOSS PER COMMON SHARE
The basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding.
Diluted net loss per common share is computed by dividing the net loss, adjusted on an “as if converted” basis, by the weighted average number of common shares outstanding plus potential dilutive securities.
STOCK BASED COMPENSATION
The Company accounts for stock options and similar equity instruments issued in accordance with ASC 718. Accordingly, compensation costs attributable to stock options or similar equity instruments granted are measured at the fair value at the grant date, and expensed over the expected vesting period. Transactions in which goods or services are received in exchange for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. ASC 718 requires excess tax benefits be reported as a financing cash inflow rather than as a reduction of taxes paid.
ORGANIZATIONAL COSTS
Organizational costs, which relate to the Company start-up organization, are expenses as incurred. Such costs are included in selling, general and administrative costs.
RESEARCH AND DEVELOPMENT
Research and development costs are charged to expense as incurred.
NEW ACCOUNTING PRONOUNCEMENTS
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that may have an impact on the Company’s accounting and reporting. The Company believes that such recently issued accounting pronouncements and other authoritative guidance for which the effective date is in the future either will not have an impact on its accounting or reporting or that such impact will not be material to its financial position, results of operations and cash flows when implemented.
NOTE 3--GOING CONCERN
The Company’s financial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities and commitments in the normal course of business. Since our inception in 2009, we have generated losses from operations and we anticipate that we will continue to generate losses from operations for the foreseeable future. During the three months ended August 31, 2013 the Company has incurred losses of $115,011. The Company has negative working capital of $1,250,926 and a stockholders’ deficiency of $1,250,926 at August 31, 2013. These factors among others raise substantial doubt about the Company’s ability to continue as a going concern.
Management’s plans for the Company’s continued existence include selling additional stock and borrowing additional funds to pay overhead expenses.
F-6
The Company’s future success is dependent upon its ability to achieve profitable operations, generate cash from operating activities and obtain additional financing. There is no assurance that the Company will be able to generate sufficient cash from operations, sell additional shares of common stock or borrow additional funds.
The Company’s inability to obtain additional cash could have a material adverse effect on its financial position, results of operations and its ability to continue in existence. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 4 – INVENTORIES
Inventories consist of the following at:
August 2013 | May 2013 | |||
| Work-in-process | $ | 21,740 | $ | 21,740 |
| $ | 21,740 | $ | 21,740 |
NOTE 5--ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses consisted of the following at:
August 2013 | May 2013 | |||
| Accrued interest | $ | 36,488 | $ | 24,021 |
| Accrued interest related party | 61,537 | 52,205 | ||
| Accrued compensation | 48,000 | 24,000 | ||
| Accrued operating expenses | 136,055 | 183,760 | ||
| $ | 282,080 | $ | 283,986 |
NOTE 6 – NOTES PAYABLE
In 2013, the Company received loans from Asher Enterprises Inc. in the amount of $147,500. The amount owed to Asher Enterprises Inc. at August 31, 2013, is shown net of the remaining debt discount of $33,987 resulting in a balance of $51,513.The loans are convertible, over a one year period, into restricted common shares at a fixed price. The price of the shares is equal to 55% of the market price of the shares at the date of the execution of the conversion. This loan bears interest at 8% per annum and is payable on demand.
On July 17, 2013 Asher Enterprises Inc. converted loans of $12,000 into 1,445,783 shares of the Company. The fair value of the shares was equal to $0.0083 per share and the market price was $0.016.
| 2013 | ||
| Convertible debts | $ | 85,500 |
| Debt discount | (33,987) | |
| Net convertible debt | $ | 51,513 |
F-7
NOTE 7 – NOTES PAYABLE – STOCKHOLDERS’
During the quarter ended August 31, 2013, the Company received additional loans from Michel St-Pierre in the amount of $14,735. In 2013, the Company received additional loans from Michel St-Pierre in the amount of $151,202. At August 31, 2013, the loans amounted to $381,198. These loans carry an interest of 10% and are payable on demand.
On September 1, 2012, the Company signed an agreement with a shareholder to convert an account payable into a note payable. The amount owed to the shareholder at May 31, 2013 is $158,819. This note bears interest at 10% per annum and is payable on demand.
During the quarter ended August 31, 2013, the Company received additional loans from Capex Investments Limited, a shareholder, in the amount of $13,000. In 2013, the Company received additional loans from Capex Investments Limited in the amount of $118,615. The amount owed to Capex Investments Limited at August 31, 2013 is $249,780. These loans carry an interest of 10% and are payable on demand.
In 2013, the Company received loans from DT Crystal in the amount of $44,940. The amount owed to DT Crystal August 31, 2013 is $44,940.
| 2013 | ||
| Michel St-Pierre | $ | 381,198 |
| Shareholder | 158,819 | |
| Capex Investments Limited | 249,780 | |
| DT Crystal | 44,940 | |
| Total | $ | 834,737 |
NOTE 8 – DERIVATIVE LIABILITIES
From January 20 to February 28, 2013, the Company issued a drawdown convertible promissory notes (“the drawdown notes”) to an investor, in the aggregate amount of $70,000, at an interest rate of eight percent (8%) per annum. The drawdown notes can be prepaid upon five days notice, is payable nine months following its issuance, and all or a portion of the principal and interest is convertible upon demand into fully paid and non-assessable shares of the Company’s common stock at 55% of the average of the lowest three trading prices of the Company’s common stock during the ten trading day period ending on the latest complete trading day period to the conversion date. The conversion options were recorded as a discount on notes payable of $70,000 were valued using the Black- Scholes Method using a risk free rate of 0.14%, volatility rate of 151.00%, and a forfeiture rate of 0%.and expensed over the nine months life of the of the drawdown notes. Interest expense of $17,349 was recorded in 2013 related to this conversion options. Additional interest expense of $2,969 was accrued as of August 31, 2013 related to the eight percent (8%) per annum payable under the drawdown note.
On May 4, 2013, the Company issued a drawdown convertible promissory note (“the drawdown note”) to an investor, in the principal amount of $27,500, at an interest rate of eight percent (8%) per annum. The drawdown note can be prepaid upon five days notice, is payable nine months following its issuance on February 4, 2014, and all or a portion of the principal and interest is convertible upon demand into fully paid and non-assessable shares of the Company’s common stock at 55% of the average of the lowest three trading prices of the Company’s common stock during the ten trading day period ending on the latest complete trading day period to the conversion date. The Company requested $27,500 and received proceeds in the amount of $27,500 from the drawdown note on May 4, 2012. The conversion option was recorded as a discount on notes payable of $27,500 was valued using the Black- Scholes Method using a risk free rate of 2.00%, volatility rate of 311.00%, and a forfeiture rate of 0%.and expensed over the nine months life of the of the drawdown note. Interest expense of $16,001 was recorded in 2013 related to this conversion option. Additional interest expense of $642 was accrued as of August 31, 2013 related to the eight percent (8%) per annum payable under the drawdown note.
F-8
NOTE 9 -CAPITAL STOCK
The company is authorized to issue 500,000,000 shares of common stock (par value $0.00001) of which 66,146,442 were issued and outstanding as of August 31, 2013.
On July 17, 2013 Asher Enterprises Inc. converted loans of $12,000 into 1,445,783 shares of the Company.
NOTE 10 -INCOME TAXES
Components of deferred tax assets and liabilities at August 31, 2013 are as follows:
| 2013 | ||
| Deferred tax asset | $ | 628,225 |
| Valuation allowance | (628,225) | |
| Net deferred tax asset | $ | 0 |
Income taxes are provided for using the liability method of accounting in accordance with the Income Taxes Topic of the FASB ASC. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized and when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The computation of limitations relating to the amount of such tax assets, and the determination of appropriate valuation allowances relating to the realizing of such assets, are inherently complex and require the exercise of judgment. As additional information becomes available, we continually assess the carrying value of our net deferred tax assets.
NOTE 11 -COMMITMENTS AND CONTINGENCIES
The Company does not have any commitments nor contingencies.
NOTE 12 -RELATED PARTY TRANSACTIONS
See Note 7 regarding Notes Payable to related parties.
NOTE 13 – SUBSEQUENT EVENTS
Management evaluated all activity of the Company through the issue date of the Financial Statements and noted there were no material subsequent events as of that date.
F-9
| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION. |
The following discussion of the financial condition and results of our operations should be read in conjunction with the financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q for the period ended August 31, 2013 (this “Report”). This Report contains certain forward-looking statements and our future operating results could differ materially from those discussed herein. Certain statements contained in this report, including, without limitation, “believes”, “anticipates,” “expects” and the like, constitute “forward-looking statements”. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. We disclaims any obligation to update any such factors or to announce publicly the results of any revisions of the forward-looking statements contained or incorporated by reference herein to reflect future events or developments.
During the past few months, we have hired independent contractors that have worked on developing M2M systems to serve major clients that are counting on us to open new markets for them in wireless M2M, the “Internet of Things”.
They have evaluated, implemented and are presently testing a functional prototype solution that enables the integration of 3rd party USB device into cellular gateway to connect through Wiless-M2M platform.
On July 7, 2011, we nominated Jonathan Barratt Chief Technical Officer (CTO) of the company, and as such he will oversee all technical developments for Wiless Controls, as well as keep a close relationship with the clients to guarantee the development and delivery of all product lines. We also nominated, Medhat Mahmoud as VP Technology and Strategy.
On July 26, 2011, we completed the development of our game changing Cellular Gateway. The Company is ready to introduce the market to its technology platform, one which opens up new possibilities in the Machine to Machine world by offering a plug and play system for deploying an entirely wireless M2M solution in a single step.
On July 26, 2011, iMetrik M2M and Monnit Corporation announced a partnership that will enable them to offer the Machine-To-Machine (M2M) market a plug-and-play, end-to-end, cellular enabled wireless sensing solution.
Using Monnit’s wireless sensors and iMonnit web application, and Wiless Controls Cellular Gateway with global connectivity, users will benefit from a system that eliminates development time and reduces installation to an absolute minimum. The system will comprise Monnit’s battery operated low-cost wireless sensors collecting information, transmitted wirelessly through the Wiless Controls Cellular Gateway via the iMetrik global GSM network and iMonnit web application. Once installed, a user can access the sensor data, and monitor any asset from anywhere at any time through a computer or smart phone with Internet access.
On October 11, 2011, we announced that after months of development, and following a successful demonstration of the system at Metropolitan’s head offices in Chicago, Metropolitan chosen Wiless Controls to monitor all sump pumps it sells in the US.
On February 28, 2012, after a year of development and months of testing, our Cellular Gateway passed all tests for functionality and reliability of hardware and connectivity, and is now ready to be commercialized. We have been working with Monnit Corporation to create what would be the first truly end-to-end “plug and play” wireless M2M system. By combining Monnit’s sensors with our Cellular Gateway and Global Network, integrators and users will no longer have to source the many components and services necessary to monitor and control their assets or systems.
On May 22, 2012, we announced we had commenced commercial shipments of our Cellular Gateway in North America to two major distributors in the United States.
On August 31, 2012, we announced the successful FCC certifications of our Cellular Gateway. These certifications guarantee consumers that the product conforms to essential requirements of performance and safety, following the industry standards. The FCC certification is applicable on products sold in the United States. Manufacturers and suppliers of radio and telecoms equipment wishing to gain access to the US market must obtain the necessary grant (approval) from the Federal Communications Commission (FCC).
For the Three Month Period ended August 31, 2013
Overview
We recorded net losses of $115,011 for the three month period ended August 31, 2013 as compared to net losses of $195,069 for the comparable period of 2012.
Development Stage Expenditures
Development stage expenditures for the three month period ended August 31, 2013, were 11,371 in professional fees, $48,000 in salaries and $33,735 in research and development. This is compared to development stage expenditures for the three month period ended August 31, 2012, were $60,387 in professional fees, $48,000 in salaries and $56,708 in research and development. The decrease in development stage expenditures resulted from the decrease of research and development expenses and professional fees expense.
Sales
For the three month period ended August 31, 2013 we had gross revenues of $0. This compared to gross revenues of $0 for the same period of 2012. We are not generating revenues on sale of equipment due to the testing of our production device done on sight under various environmental conditions.
Total Cost and Expenses
For the three month period ended August 31, 2013, we incurred total costs and expenses of $115,011. This compared to $195,069 for last year, a decrease of 41% from the same period of 2012. The decrease in total cost and expenses resulted from the decrease of research and development expenses and professional fees expense.
Selling, General and Administration
For the three month period ended August 31, 2013, we incurred selling, general and administration expenses of $65,320 and $112,337 for last year, a decrease of 42% from the three month period last year. The decrease resulted from the professional fees expense.
We calculate interest in accordance with the respective note payable, note payable stockholders and Derivative liabilities. For the three month period ended August 31, 2013, we incurred $51,181 compared to $40,431 for last year. The increase of 27% was caused by interest expense on increased borrowings and interest expense recorded upon issuance of convertible debt in which the debt discount related to the conversion feature recorded as a derivative exceed the face value of the note.
Liquidity and Capital Resources
At August 31, 2013, we had $2,145 in cash, as opposed to $2,178 in cash at May 31, 2013. Total cash requirements for operations for the three month period ended August 31, 2013 was $40,787. As a result of its new business plan, management estimates that cash requirements through the end of the fiscal year ended May 31, 2014 will be between $500,000 thousand to $2,000,000 thousand. As of the date of this Report, we do not have available resources sufficient to cover the expected cash requirements through the end of the second quarter of 2014 or the balance of the year. As a result, there is substantial doubt that we can continue as an ongoing business without obtaining additional financing. Management’s plans for maintaining our operations and continued existence include selling additional equity securities and borrowing additional funds to pay operational expenses. There is no assurance we will be able to generate sufficient cash from operations, sell additional shares of Common Stock or borrow additional funds. Our inability to obtain additional cash could have a material adverse effect on our financial position, results of operations and our ability to continue our existence. If our losses continue and we are unable to secure additional financing, we may ultimately be required to seek protection from creditors under applicable bankruptcy laws.
We had total assets of $23,885 as of August 31, 2013. This was a decrease of $33, or 0.1%, as compared to total assets of $23,918 as of May 31, 2013. The decrease was primarily attributable to current operations expenses.
We had total current liabilities of $1,274,811 as of August 31, 2013. This was an increase of $102,978, or 8.8%, as compared to current liabilities of $1,171,833 as of May 31, 2013. The net increase was attributable to loans stockholders and note payable.
For the three month period ended August 31, 2013, the Company received additional loans from Michel St-Pierre, a shareholder, in the amount of $14,735. In 2013, the Company received loans of $151,202. At August 31, 2013, the loans amounted to $381,198. These loans carry an interest of 10% and are payable on demand.
Our financial condition raises substantial doubt about our ability to continue as a going concern. Management’s plan for our continued existence includes selling additional stock through private placements and borrowing additional funds to pay overhead expenses while maintaining marketing efforts to raise our sales volume. Our future success is dependent upon our ability to achieve profitable operations, generate cash from operating activities and obtain additional financing. There is no assurance that we will be able to generate sufficient cash from operations, sell additional shares of common stock or borrow additional funds. Our inability to obtain additional cash could have a material adverse effect on our financial position, results of operations and our ability to continue as a going concern.
This section includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this Memorandum. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions.
We have only had operating losses which raise substantial doubts about our viability to continue our business and our auditors have issued an opinion expressing the uncertainty of our Company to continue as a going concern. If we are not able to continue operations, investors could lose their entire investment in our Company. Presently, the monthly negative cash flow amounts to $25,000 and our available cash cannot sustain current operations for more than one month. In order to continue our operations, we want to sell additional shares of common stock or borrow additional funds and generate sufficient cash from operations to support our company for the next twelve months.
Off-Balance Sheet Arrangements
We are not a party to any off-balance sheet arrangements.
We have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 4. CONTROLS AND PROCEDURES.
Limitations on the Effectiveness of Controls
Our management, including our CEO and CFO, does not expect that our Disclosure Controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management or board override of the control.
The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
As of August 31, 2013, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses. The matter involving internal controls and procedures that our management considered to be a material weakness under the standards of the Public Company Accounting Oversight Board was the lack of a functioning audit committee, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures. The aforementioned material weaknesses were identified by our management in connection with the review of our financial statements for the period ended August 31, 2013.
Management believes that the material weakness set forth above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.
This periodic report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only the management’s report in this quarterly report.
| - | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; |
| - | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and |
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting during the quarter ended August 31, 2013 that has affected, or is reasonably likely to affect, our internal control over financial reporting.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
The following documents are included herein:
| Exhibit | Incorporated by reference | Filed | |||
| Number | Document Description | Form | Date | Number | herewith |
| 3.1 | Articles of Incorporation, as amended. | S-1 | 6/19/09 | 3.1 | |
| 3.2 | Bylaws. | S-1 | 6/19/09 | 3.2 | |
| 10.1 | Consulting Agreement – Michel St-Pierre. | 10-K | 8/19/11 | 10.1 | |
| 10.2 | Consulting Agreement – Jean-Paul Langlais. | 10-K | 8/19/11 | 10.2 | |
| 10.3 | Manufacturing Agreement with SMT Hautes Technologies. | 10-Q | 1/14/12 | 10.3 | |
| 10.4 | Non-Circumvention, Non-Disclosure, Brokerage, and Working Agreement with Monnit Corp. | 10-K | 8/29/12 | 10.4 | |
| 10.5 | License Agreement With iMetrik Global Inc. | 10-K | 8/29/12 | 10.5 | |
| 14.1 | Code of Ethics. | 10-K | 8/20/10 | 14.1 | |
| 31.1 | Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes- Oxley Act of 2002. | X | |||
| 32.1 | Certification pursuant to Section 906 of the Sarbanes- Oxley Act of 2002 for the Chief Executive Officer and Chief Financial Officer. | X | |||
| 99.1 | Audit Committee Charter. | 10-K | 8/20/10 | 99.2 | |
| 99.2 | Disclosure Committee Charter. | 10-K | 8/20/10 | 99.3 | |
| 101.INS | XBRL Instance Document. | X | |||
| 101.SCH | XBRL Taxonomy Extension – Schema. | X | |||
| 101.CAL | XBRL Taxonomy Extension – Calculations. | X | |||
| 101.DEF | XBRL Taxonomy Extension – Definitions. | X | |||
| 101.LAB | XBRL Taxonomy Extension – Labels. | X | |||
| 101.PRE | XBRL Taxonomy Extension – Presentation. | X | |||
Pursuant to the requirements of the Securities Exchange Act of 1934, this amended report has been signed below by the following person on behalf of the Registrant and in the capacities on this 14th day of January, 2014.
| WILESS CONTROLS INC. | ||
| BY: | MICHEL ST-PIERRE | |
| Michel St-Pierre | ||
President, Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer, Secretary, Treasurer and sole member of the Board of Directors | ||
| Exhibit | Incorporated by reference | Filed | |||
| Number | Document Description | Form | Date | Number | herewith |
| 3.1 | Articles of Incorporation, as amended. | S-1 | 6/19/09 | 3.1 | |
| 3.2 | Bylaws. | S-1 | 6/19/09 | 3.2 | |
| 10.1 | Consulting Agreement – Michel St-Pierre. | 10-K | 8/19/11 | 10.1 | |
| 10.2 | Consulting Agreement – Jean-Paul Langlais. | 10-K | 8/19/11 | 10.2 | |
| 10.3 | Manufacturing Agreement with SMT Hautes Technologies. | 10-Q | 1/14/12 | 10.3 | |
| 10.4 | Non-Circumvention, Non-Disclosure, Brokerage, and Working Agreement with Monnit Corp. | 10-K | 8/29/12 | 10.4 | |
| 10.5 | License Agreement With iMetrik Global Inc. | 10-K | 8/29/12 | 10.5 | |
| 14.1 | Code of Ethics. | 10-K | 8/20/10 | 14.1 | |
| 31.1 | Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | X | |||
| 32.1 | Certification pursuant to Section 906 of the Sarbanes- Oxley Act of 2002 for the Chief Executive Officer and Chief Financial Officer. | X | |||
| 99.1 | Audit Committee Charter. | 10-K | 8/20/10 | 99.2 | |
| 99.2 | Disclosure Committee Charter. | 10-K | 8/20/10 | 99.3 | |
| 101.INS | XBRL Instance Document. | X | |||
| 101.SCH | XBRL Taxonomy Extension – Schema. | X | |||
| 101.CAL | XBRL Taxonomy Extension – Calculations. | X | |||
| 101.DEF | XBRL Taxonomy Extension – Definitions. | X | |||
| 101.LAB | XBRL Taxonomy Extension – Labels. | X | |||
| 101.PRE | XBRL Taxonomy Extension – Presentation. | X | |||
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