UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

 

Table of Contents

 

PART 1 – FINANCIAL INFORMATION	2
Item 1.       Financial Statements	2
Item 2.       Management's Discussion and Analysis of Financial Condition and Results of Operations	3
Item 3.       Quantitative and Qualitative Disclosures About Market Risks	6
Item 4.       Controls and Procedures	7
PART II - OTHER INFORMATION	7
Item 1.       Legal Proceedings	7
Item 1A.         Risk Factors	7
Item 2.       Unregistered Sales of Equity Securities and Use of Proceeds	8
Item 3.       Defaults Upon Senior Securities	8
Item 4.       Mine Safety Disclosures	8
Item 5.       Other Information	8
Item 6.       Exhibits	8

 

 

PART 1 – FINANCIAL INFORMATION

Item 1.           Financial Statements

Devago Inc.

May 31, 2015

 

Index

Condensed Balance Sheets (unaudited)................................................................................................................................. F–2

 

Condensed Statements of Operations (unaudited)............................................................................................................... F–3

 

Condensed Statement of Cash Flows (unaudited)............................................................................................................... F–4

 

Notes to the Condensed Financial Statements (unaudited)................................................................................................ F–5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

F-1

 

DEVAGO INC.

Condensed Balance Sheets

(Unaudited)

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these financial statements.
F-2

 

 

 

DEVAGO INC.

Condensed Statements of Operations

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these financial statements.
F-3

 

 

 

DEVAGO INC.

Condensed Statement of Cash Flows

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these financial statements.
F-4

 

DEVAGO INC.

Notes to the Condensed Financial Statements

(Unaudited)

 

NOTE 1.           NATURE OF BUSINESS AND CONTINUANCE OF OPERATIONS

 

DEVAGO INC. (“we”, “us”, “our” or the “Company”) was formed on September 8, 2014 in Nevada.  We are a start-up stage company and engaged in the creation of mobile software applications, or “Apps.” Our strategic initiative includes developing and marketing our current mobile application, as well as expanding our mobile application portfolio through the acquisition of third party mobile applications and mobile application development companies.

 

These financial statements have been prepared on a going concern basis which assumes the Company will continue to realize it assets and discharge its liabilities in the normal course of business.  As of May 31, 2015, the Company has incurred losses totaling $25,185 since inception, has not yet generated revenue from operations, and will require additional funds to maintain our operations.   These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they become due. The Company intends to finance operating costs over the next twelve months through continued financial support from its shareholders and private placements of common stock. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

NOTE 2.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

a)      Basis of Presentation

 

These financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States and are expressed in US dollars. The Company’s year-end is November 30.

 

b)      Estimates and Assumptions

 

The preparation of financial statements in conformity with United States generally accepted accounting principles 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 date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

 

c)      Cash and Cash Equivalents

 

The Company considers all highly liquid instruments with maturity of six months or less at the time of issuance to be cash equivalents.

 

      

 

  NOTE 2.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

                d)      Foreign Currency Transactions

 

The Company’s planned operations are outside of the United States, which results in exposure to market risks from changes in foreign currency exchange rates.  The financial risk is the risk to the Company’s operations that arise from fluctuations in foreign exchange rates and the degree of volatility of these rates.  Currently, the Company does not use derivative instruments to reduce its exposure to foreign currency risk.  Nonmonetary assets and liabilities are translated at historical rates and monetary assets and liabilities are translated at exchange rates in effect at the end of the year.  Revenues and expenses are translated at average rates for the year.  Gains and losses from translation of foreign currency financial statements into U.S. dollars are included in current results of operations.

 

                e)      Income Taxes

 

Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company computes tax asset benefits for net operating losses carried forward. The potential benefits of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.

 

                f)       Revenue Recognition

 

Sales are recorded when products are shipped to customers. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. No provision for discounts or rebates to customers, estimated returns and allowances or other adjustments were recognized during the period ended May 31, 2015. In instances where products are configured to customer requirements, revenue is recorded upon the successful completion of the Company’s final test procedures and the customer’s acceptance. The Company has not made any sales as at May 31, 2015.

 

                g)      Website

 

Website is carried at cost, with amortization provided on a straight-line basis over its estimated useful lives of seven years. Total amortization of $675 was booked for the three month period ended May 31, 2015.

 

h)            Earnings (Loss) Per Common Share

 

Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. At May 31, 2015, the Company has no potentially dilutive securities outstanding.

 

i)      Stock-Based Compensation

 

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.  We did not grant any stock options during the period ended May 31, 2015.

 

 

 

 

 

NOTE 2.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

  

j)        Income Taxes

 

The Company accounts for income taxes using the asset and liability method. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

 

k)        Subsequent Events

 

The Company’s management reviewed all material events from November 30, 2014 through the issuance date of these financial statements for disclosure consideration.

 

l)      New Accounting Pronouncements

 

In June 2014, the FASB issued ASU 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. ASU 2014-10 eliminates the distinction of a development stage entity and certain related disclosure requirements, including the elimination of inception-to date information on the statements of operations, cash flows and stockholders’ equity. The amendments in ASU 2014-10 will be effective prospectively for annual reporting periods beginning after December 15, 2014, and interim periods within those annual periods, however early adoption is permitted. The Company evaluated and adopted ASU 2014-10 for the reporting period ended May 31, 2015. 

 

NOTE 3.               CONDENSED FINANCIAL STATEMENTS

 

The accompanying financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial positions, results of operations, and cash flows on May 31, 2015, and for all periods presented herein, have been made.

 

Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted.  It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s November 30, 2014 audited financial statements.  The results of operations for the six months ended May 31, 2015 are not necessarily indicative of the operating results for the full year.

 

NOTE 4.               RELATED PARTY TRANSACTIONS

 

On February 5, 2015, the Company entered into a promissory note with its sole officer and director for $15,000. The note accrues interest at 8% annually and is due on demand.

 

 

 

 

 

F-7

 

NOTE 5.           STOCKHOLDERS’ EQUITY

 

a)      The Company’s authorized capital consists of 100,000,000 shares of common stock with a par value of $0.00001 and 100,000,000 shares of preferred stock with a par value of $0.00001.

 

b)      At inception on September 8, 2014, 20,000,000 shares of common stock were issued to the sole director of the Company at $0.001 per share for cash proceeds of $20,000.

 

c)     As at May 31, 2015, the Company issued a total of 23,960,004 shares of common shares at $0.007 per share for a total of $27,567.

 

NOTE 6.         SUBSEQUENT EVENTS

 

On June 1, 2015, the Company closed it public offering by issuing a total of 24,082,004 shares of its common stock at $0.007 per share for a total of $28,416.

 

 

 

 

  

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

F-8

 

Item 2.       Management's Discussion and Analysis of Financial Condition and Results of Operations

 

Forward Looking Statements

 

The information set forth in this Management's Discussion and Analysis of Financial Condition and Results of  Operations (“MD&A”) contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, including, among others (i) expected changes in our revenue and profitability, (ii) prospective business opportunities and (iii) our strategy for financing our business. Forward-looking statements are statements other than historical information or statements of current condition. Some forward-looking statements may be identified by use of terms such as “believes”, “anticipates”, “intends” or “expects”. These forward-looking statements relate to our plans, liquidity, ability to complete financing and purchase capital expenditures, growth of our business including entering into future agreements with companies, and plans to successfully develop and obtain approval to market our product. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.

 

Although we believe that our expectations with respect to the forward-looking statements are based upon reasonable assumptions within the bounds of our knowledge of our business and operations, in light of the risks and uncertainties inherent in all future projections, the inclusion of forward-looking statements in this Quarterly Report should not be regarded as a representation by us or any other person that our objectives or plans will be achieved.

 

We assume no obligation to update these forward-looking statements to reflect actual results or changes in factors or assumptions affecting forward-looking statements.

 

Our revenues and results of operations could differ materially from those projected in the forward-looking statements as a result of numerous factors, including, but not limited to, the following: the risk of significant natural disaster, the inability of the our company to insure against certain risks, inflationary and deflationary conditions and cycles, currency exchange rates, and changing government regulations domestically and internationally affecting our products and businesses.

 

You should read the following discussion and analysis in conjunction with the Financial Statements and Notes attached hereto, and the other financial data appearing elsewhere in this Quarterly Report.

   

US Dollars are denoted herein by “USD”, "$" and "dollars".

 

Overview

 

We are a development stage company and engaged in the creation of mobile software applications, or “Apps.” Our strategic initiative includes developing and marketing our own mobile applications, as well as expanding our mobile application portfolio through the acquisition of third party mobile applications and mobile application development companies.

 

Currently, we have no fully-developed revenue generating mobile applications. We intend to build a harmonious portfolio of apps that will service a wide range of industries and consumers. We currently have one application (Hotchek) in our portfolio.  Hotchek is a multi-use customizable application designed to enable users to easily engage their network audience with the use of highly interactive polls and surveys.

 

3

 

 

Hotchek is currently in its final stages of development. Our development team for the project is our officer and director, Jose Armando Acosta Crespo, and Softaddicts, a Florida based company that provides web and software development solutions. To date, we have paid Softaddicts $15,000 to help develop the Hotcheck application.  This money was used to provide the following services:

 

1)       Application and form design;

2)       Database design and architecture;

3)       Programmatic code to connect the forms to the database; and

4)       Compile iOS and Android applications.

 

There were no statements of work in connection the above services.

 

Mr. Crespo oversaw the development work by Softaddicts, made modifications as needed and tested the source imagery and marketing content for the messaging. The services provided by Softaddicts and Mr. Crespo resulted in a working prototype of the application and information page about its functions.  This information page is found at http://wwha.softaddicts.com/public-campaigns. Our sole officer and director loaned us $15,000 to pay Softaddicts under an 8% demand promissory note dated February 5, 2015. 

 

Under a Development Agreement dated February 5, 2015, we have outsourced more work in connection with the development for Hotchek to Softaddicts.  The agreement with Softaddicts may be terminated upon 15 days’ notice. We are obligated to compensate Softaddicts at an hourly rate of $45 per hour for its work on the project.  

 

We have planned for three releases associated with the Hotchek app, with the following features and costs:

 

1)       Currently we are in development of release one where we are approximately 70% complete on the prototype. Release one should be completed within 60-90 days at a budget of $10,000. Softaddicts will start the completion of release one as soon as we fund the $10,000. The $10,000 will be a retainer against the hourly rate of $45 under the agreement with Softaddicts. The $10,000 will be in addition to the $15,000 we already paid to Softaddicts.

2)       Release two will require an additional $15,000 and take 30-60 additional days to complete.  The time necessary to complete release two may coincide with the time to complete release one.

3)       Release three will be based on the feedback from customers using released versions of release one and two. The time period and budget is unknown until we receive feedback and have a better understanding of the amount of development work required.

 

We expect to complete releases one and two of the Hotchek app and have it ready for commercial sale by summer 2015.

 

We plan to derive revenue by way of the sale and licensing of our developed and acquired mobile applications, as well as sale of in-app advertising.

 

Plan of Operation

 

We anticipate that we will meet our ongoing cash requirements through equity or debt financing.  We estimate that our expenses over the next 12 months will be approximately $105,000 as described in the table below.  These estimates may change significantly depending on the nature of our future business activities and our ability to raise capital from shareholders or other sources.

 

 

 

 

 

 

We were not able to raise the full $105,000 from our initial offering. We will scale back our business development in line with the available capital.  Our primary priority will be to retain our reporting status with the SEC, which we have sufficient capital to cover at this time.  We are currently looking to secure additional financing to focus on the development of our website, product development and sales and marketing activities. 

 

As at May 31, 2015, the Company issued a total of 23,960,004 shares of common shares at $0.007 per share for a total of $27,567.

 

On June 1, 2015, the Company closed it public offering by issuing a total of 24,082,004 shares of its common stock at $0.007 per share for a total of $28,416.

 

Results of Operations – For the Three and Six Months Period Ended May 31, 2015

 

We have not earned any revenues from inception through May 31, 2015.

 

 

We incurred a net loss in the amount of $8,415 and $20,185 for the three and six month period ended May 31, 2015, respectively.

 

Our operating expenses for the three and six month period ended May 31, 2015, included $1,250 and $5,250 in accounting fees, $2,250 and 2,250 in consulting fees, $3,735 and 11,428 in legal fees, and $179 and $0 in professional fees, as well as $675 and $0 in amortization expenses, respectively.

 

We also incurred $303 and 378 in interest expenses for the three and six month period ended May 31, 2015, respectively.

  

Liquidity and Capital

 

 

 

 

  

As of May 31, 2015, we had working capital of $8,057, $27,541 in current assets and $19,484 in current liabilities. We used a total of $15,026 in operating activities, $15,000 in investing activities and raised $27,567 through financing activities for the six month period ended May 31, 2015.

 

Critical Accounting Policies

 

Use of Estimates

 

The preparation of financial statements in conformity with United States generally accepted accounting principles 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 date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We regularly evaluate estimates and assumptions related to deferred income tax asset valuation allowances. We base our estimates and assumptions on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by us may differ materially and adversely from our estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

 

Revenue Recognition

 

Revenue from the sale of goods is recognized when the following conditions are satisfied:

 

· The Company has transferred to the buyer the significant risks and rewards of ownership of the goods;

· The Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

· The amount of revenue can be measured reliably;

· It is probable that the economic benefits associated with the transaction will flow to the entity; and

· The costs incurred or to be incurred in respect of the transaction can be measured reliably.

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements.

Item 3.           Quantitative and Qualitative Disclosures About Market Risks

  

As a “smaller reporting company”, we are not required to provide the information required by this Item.

 

6

 

Item 4.           Controls and Procedures

 

Disclosure Controls and Procedures

 

 We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of May 31, 2015. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of May 31, 2015, our disclosure controls and procedures were not effective due to the presence of material weaknesses in internal control over financial reporting.

 

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following material weaknesses which have caused management to conclude that, as of May 31, 2015, our disclosure controls and procedures were not effective: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.

 

Remediation Plan to Address the Material Weaknesses in Internal Control over Financial Reporting

 

Our company plans to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes during our fiscal year ending December 31, 2015: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting during the six months ended May 31, 2015 that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting. 

PART II - OTHER INFORMATION

Item 1.           Legal Proceedings
   

From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are not aware of any material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

Item 1A.        Risk Factors
   

As a “smaller reporting company”, we are not required to provide the information required by this Item.

 

 

Item 2.           Unregistered Sales of Equity Securities and Use of Proceeds

On March 30, 2015, our registration statement on Form S-1 (File No. 333-201319) was declared effective by the Securities and Exchange Commission for our initial public offering pursuant to which we sold an aggregate of 24,082,004 shares of our common stock at $0.007 per share for a total of $28,416. There has been no material change in the planned use of proceeds from our initial public offering as described in our final prospectus filed with the Securities and Exchange Commission on March 17, 2015 pursuant to Rule 424(b).

Item 3.           Defaults Upon Senior Securities
     

None.

Item 4.           Mine Safety Disclosures
    

Not applicable.

Item 5.           Other Information
 

None.

Item 6.           Exhibits 
   

 

 

 

 

 

8

 

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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