Vado Corp. - Quarter Report: 2020 August (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended August 31, 2020

☐     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from          to           

COMMISSION FILE NO. 333-222593

VADO CORP.

(Exact name of registrant as specified in its charter)

Nevada

(State or other jurisdiction of incorporation)

30-0968244

(IRS Employer Identification No.)

81 Prospect Street

Brooklyn, NY 11201

Tel: (646) 828-1376

(Address and telephone number of registrant's executive office)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by checkmark whether the issuer: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes ☒   No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒    No ☐

Indicate by check mark whether the registrant is a large accelerated filed, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes ☐ No ☒

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒ No ☐ 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the most practicable date:

VADO CORP.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

VADO CORP.

Condensed Consolidated Balance Sheets

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

VADO CORP.

Condensed Consolidated Statements of Operations (unaudited)

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

VADO CORP.

Condensed Consolidated Statements of Cash Flows (unaudited)

The accompanying notes are an integral part of these financial statements

VADO CORP.

Consolidated Statements of Stockholders’ Equity (deficit)

For the Three and Nine Months Ended August 31, 2020 and 2019

VADO CORP.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED AUGUST 31, 2020 AND 2019

(UNAUDITED)

NOTE 1 – ORGANIZATION AND BUSINESS

Vado Corp. (the “Company”) is a Nevada corporation established on February 10, 2017 and has adopted a November 30 fiscal year end. The Company formerly had operations in the embroidery business in the European Union. With the Change of Control described in the following paragraph, the Company terminated its operations in the embroidery business and wrote off its assets. The Company currently has no operations and is seeking new business opportunities in the United States.

On May 22, 2020, David Lelong purchased from Dusan Konc 2,000,000 shares of Common Stock of the Company and a convertible promissory note with a face value of $29,973 (the “Vado Related Party Note”), payable by the Company and convertible into shares of Common Stock at $0.001 per share, for a total purchase price of $100,000 (the “Change of Control”). The Change of Control was affected pursuant to a Securities Purchase Agreement dated May 22, 2020 (the “Purchase Agreement”) by and among Mr. Lelong as the purchaser, the Company, and Mr. Konc, the Company’s majority shareholder, sole director and officer, as the seller. The Company was a party to the Purchase Agreement for the sole purpose of providing the representations and warranties contained therein. The Vado Related Party Note was cancelled, and a new convertible note in the amount of $29,973 was issued to Mr. Lelong (the “Lelong Related Party Note)”. On May 28, 2020, Mr. Lelong fully converted the Related Party Note into 29,973,000 shares of the Company’s common stock.

The preparation of unaudited condensed consolidated interim financial statements in conformity with accounting principles generally accepted in the United States of America 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The unaudited interim condensed financial statements have been prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally present in the annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations. These unaudited condensed interim financial statements should be read in conjunction with the audited consolidated financial statements and notes for the year ended November 30, 2019. The results of the three months and nine months ended August 31, 2020 are not necessarily indicative of the results to be expected for the full year ending November 30, 2020.

NOTE 2 – GOING CONCERN

The Company’s financial statements as of August 31, 2020 have been prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenue sufficient to cover its operating costs and allow it to continue as a going concern. The Company has an accumulated loss from inception (February 10, 2017) to August 31, 2020 of $(4,321,258). These and other factors raise substantial doubt about the ability of the company to continue as a going concern for a reasonable period of time.

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plan is to obtain such resources for the Company by receiving capital from management and significant shareholders sufficient to meet its minimal operating expenses and to seek third party equity and/or debt financing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. These financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America.

Fair values of financial instruments

The Company adopted Accounting Standards Codification (“ASC”) 820 “Fair Value Measurements,” which defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosures requirements for fair value measures. Current assets and current liabilities qualified as financial instruments and management believes their carrying amounts are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and if applicable, their current interest rate is equivalent to interest rates currently available.  The three levels are defined as follow:

Basic and Diluted Loss Per Share

Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted loss per share gives effect to all dilutive potential common shares outstanding during the period.  Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. The Company's bank accounts are deposited in insured institutions. The funds are insured up to $250,000. At August 31, 2020 the Company's bank deposits did not exceed the insured amounts.

Use of Estimates

Preparing financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Actual results and outcomes may differ from management’s estimates and assumptions.

Stock-Based Compensation

As of August 31, 2020, the Company has not issued any stock-based payments to its employees.

Stock-based compensation will be accounted for at fair value in accordance with ASC 718, when applicable.  To date, the Company has not adopted a stock option plan and has not granted any stock options.

Income Taxes

The Company follows the liability method of accounting for income taxes.  Under this method, deferred income tax assets and liabilities are recognized for the estimated tax consequences attributable to differences between the financial statement carrying values and their respective income tax basis (temporary differences).  The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

New Accounting Pronouncements

Revenue Recognition

We adopted ASC Topic 606, “Revenue from Contracts with Customers”, and all related interpretations for recognition of our revenue from tours and consulting services. Previously we recorded revenue based on ASC Topic 605. Adoption of new accounting standard did not have any material impact on our reported revenue.

Revenue is recognized when the following criteria are met:

- Identification of the contract or contracts with the customer; 

- Identification of the performance obligations in the contract(s); 

- Determination of the transaction price; 

- Allocation of the transaction price to the performance obligations in the contract(s); and 

- Recognition of revenue when, or as, we satisfy performance obligations. 

The Company has evaluated all the recent accounting pronouncements and determined that there are no other accounting pronouncements that will have a material effect on the Company’s financial statements.

Property and Equipment

Property and equipment are stated at cost and depreciated on the straight-line method over the estimated life of the asset, which is three years. The company purchased a computer for $1,250 on December 4, 2017.

On April 21, 2018, the Company purchased an embroidery machine for $15,000. This equipment is stated at cost and depreciated on the straight-line method over the estimated life of the asset, which is five years. During the nine months ended August 31, 2020, the Company recorded an impairment charge in the amount of $9,415 to its embroidery machine and an additional $314 to its computer software. At August 31, 2020, the book value of long term assets on the Company’s balance sheet was $0.

NOTE 4 – LOAN FROM RELATED PARTIES

From February 10, 2017 to May 22, 2020, Mr. Dusan Konc, the Company’s former sole officer and director, had contributed cash in the amount of $29,973 to support the Company’s operations. These transactions were recorded as a related party note payable to Mr. Konc (the “Konc Related Party Note”). At May 22, 2020, the principal amount due under the Konc Related Party Note was $29,973. On May 22, 2020, Mr. David Lelong purchased the Konc Related Party Note from Mr. Konc, the Konc Related Party Note was cancelled, and the Company issued a new convertible note payable to Mr. Lelong in the amount of $29,973 (the “Lelong Related Party Note”). The Lelong Related Party Note bears interest at the rate of 12% per year, and was convertible into the Company’s common stock at the rate of $0.001 per share. During the three months ended May 31, 2020, the Company accrued interest in the amount of $59 on the Lelong Related Party Note. On May 28, 2020, Mr. Lelong converted the entire principal amount of $29,973 due under the Lelong Related Party Note into 29,973,000 shares of the Company’s common stock. At August 31, 2020, principal and accrued interest due under the Lelong Related Party Note were $0 and $59, respectively.

NOTE 5 – CAPITAL STOCK

The Company has 75,000,000 shares of common stock authorized with a par value of $0.001 per share, and 10,000,000 shares of preferred stock authorized with a par value $0.001 per share.

Common Stock

On May 28, 2020, the Company issued 29,973,000 shares of common stock pursuant to the conversion of the Lelong Related Party Note. See note 4. At August 31, 2020, the Company had 33,328,500 shares of common stock and 100,000 shares of preferred stock issued and outstanding.

Preferred Stock

On June 10, 2020 the Company amended its Articles of Incorporation to authorize up to 10,000,000 shares of “blank check” preferred stock, with such designations, powers, preferences, rights, limitations, and restrictions as may be determined by resolution of the Board of Directors of the Company, and on June 12, 2020, the Company filed the Certificate of Designation of Preferences, Rights And Limitations for its newly designated Series A Convertible Preferred Stock, par value $0.001 per share (the “Series A”).

On June 26, 2020, Vado Corp. entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an accredited investor pursuant to which the Company sold to the purchaser 100,000 shares of the Company’s Series A, at a purchase price of $2.00 per share (the “Offering”). The Company received $200,000 in gross proceeds from the Offering, before deducting legal fees and related offering expenses. Each share of the Series A is convertible into 20 shares of the Company’s common stock, par value $0.001 per share. The Company utilized the intrinsic value method to determine the fair value of the beneficial conversion feature associated with this transaction, and charged the amount of $4,200,000 to interest expense during the three months ended August 31, 2020.

NOTE 6 – RELATED PARTY TRANSACTIONS

Note Payable

Since February 10, 2017 (Inception) through May 22, 2020, Mr. Dusan Konc, the Company’s former sole officer and director, loaned the Company $29,973 to pay for incorporation costs and operating expenses. On May 22, 2020, Mr. David Lelong purchased the Konc Related Party Note from Mr. Konc, the Konc Related Party Note was cancelled, and the Company issued a new convertible note payable to Mr. Lelong in the amount of $29,973.

During the three and nine months ended August 31, 2020, we incurred an interest expense in the amount of $$0 and $59, respectively, compared to $0 during the three and nine months ended August 31, 2019.

Consulting Agreement

On June 1, 2020, the Company entered into a consulting agreement with Accelerated Online Inc. (“Accelerated Online”, the “Accelerated Online Agreement”), an entity wholly-owned by David Lelong.  Pursuant to the Accelerated Online Agreement, Accelerated Online will provide executive management and business development services to the Company for a fee of $15,000 per month.  During the three months ended August 31, 2020, the Company charged to operations an amount of $45,000 in connection with the Accelerated Online Agreement.

NOTE 7 – SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the date the financial statements were available to be issued.  As of the date of this filing, no subsequent events impacting the financial statements as of August 31, 2020 were identified.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

Cautionary Note Regarding Forward Looking Statements

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding management’s future plans for the Company, our liquidity and ability to raise capital, our business strategy and our future operations. All statements other than statements of historical facts contained in this report, including statements regarding our future financial position, liquidity, working capital sources, business strategy and plans and objectives of management for future operations, are forward-looking statements. The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “will,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements. 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.

The results anticipated by any or all of these forward-looking statements might not occur. Important factors, uncertainties and risks that may cause actual results to differ materially from these forward-looking statements include the ongoing impact of the coronavirus pandemic and its negative effect on the U.S. and global economies and our lack of an operating history and revenue. Further information on the risk factors affecting our business is contained in “Risk Factors” of this Report and our quarterly report on Form 10-Q for the fiscal quarter ended May 31, 2020. We undertake no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise.

Description of Business 

Vado Corp. was incorporated in the State of Nevada on February 10, 2017 and established a fiscal year end of November 30. We have not generated  material revenues, have minimal assets and have incurred losses since inception. We were formed to engage in the embroidery business, but in connection with the Change of Control described in the following paragraph, the Company has terminated its plans in the embroidery business and wrote off its assets. Since the Change of Control, we commenced  seeking new business opportunities in the United States. Among other things, we may acquire an ongoing business in a reverse merger.

On May 22, 2020, David Lelong purchased from Dusan Konc 2,000,000 shares of Common Stock of the Company and a convertible promissory note with a face value of $29,973, payable by the Company and convertible into shares of Common Stock at $0.001 per share for a total purchase price of $100,000 (the “Change of Control”). The Change of Control was affected pursuant to a Securities Purchase Agreement dated May 22, 2020 (the “Purchase Agreement”) by and among Mr. Lelong as the purchaser, the Company, and Mr. Konc, the Company’s then majority shareholder, sole director and officer, as the seller. On May 28, 2020, Mr. Lelong executed the conversion of the Related Party Note into 29,973,000 shares of the Company’s common stock and became the owner of the vast majority of the Company’s outstanding common stock.

Plan of Operation

The Company has no operations or revenue as of the date of this report. We have terminated our operations in the embroidery business, and are currently in the process of developing a business plan. Management intends to explore and identify viable business opportunities within the U.S. including seeking to acquire a business in a reverse merger. Our Chief Executive Officer has a history of successfully achieving that goal, although no assurances can be given that he can achieve this.  Our ability to effectively identify, develop and implement a viable plan for our business may be hindered by risks and uncertainties which are beyond our control, including without limitation, the continued negative effects of the coronavirus pandemic on the U.S. and global economies. For more information about the risk of coronavirus on our business, see “Risk Factors” contained in our quarterly report on Form 10-Q for the fiscal quarter ended May 31, 2020.

Liquidity and Capital Resources

Cash Flows used by Operating Activities:

For the nine months ended August 31, 2020, net cash flows used in operating activities was $68,785. Net cash flows used in operating activities was $31,169 for the nine months ended August 31, 2019.

Cash Flows from Financing Activities:

For the nine months ended August 31, 2020, net cash flows from financing activities was $207,620, consisting of $196,216 net proceeds from the sale of 100,000 shares of Series A Preferred Stock, and $8,638 received from a related party; cash flows from financing activities were $4,000 during the nine months ended August 31, 2019, consisting of proceeds of a loan from a related party.

Once we have developed and begun to implement our business plan, management intends to fund our working capital requirements through a combination of our existing funds and future issuances of debt or equity securities. Our working capital requirements are expected to increase in line with the implementation of a business plan and commencement of operations.

Based upon our current operations, we have sufficient working capital to fund our operations over the next 12 months. If we are able to close a reverse merger, it is likely we will need capital as a condition of closing that acquisition. Because of the uncertainties, we cannot be certain as to how much capital we need to raise or the type of securities we will be required to issue. In connection with a reverse merger, we will be required to issue a controlling block of our securities to the target’s shareholders which will be very dilutive. 

Additional issuances of equity or convertible debt securities will result in dilution to our current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations.

We anticipate that we will incur operating losses in the next 12 months. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development.  Such risks for us include, but are not limited to, an evolving and unpredictable business model; recognition of revenue sources; and the management of growth. To address these risks, we must, among other things, develop, implement and successfully execute our business and marketing strategy, respond to competitive developments, and attract, retain and motivate qualified personnel.  There can be no assurance that we will be successful in addressing such risks, and the failure to do so could have a material adverse effect on our business prospects, financial condition and results of operations.

Off-Balance Sheet Arrangements

As of the date of this Quarterly Report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Going Concern

The independent registered public accounting firm auditors' report accompanying our November 30, 2019 financial statements contained an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The financial statements have been prepared "assuming that we will continue as a going concern," which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our disclosure controls and procedures are designed to ensure that information required to be disclosed in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Mr. David Lelong, our principal executive officer and principal financial officer has reviewed the effectiveness of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 Rules 13(a)-15(e) and 15(d)-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q and has concluded that our disclosure controls and procedures are not effective to ensure that material information relating to the Company is recorded, processed, summarized, and reported in a timely manner, for the following reasons:

We plan to rectify these weaknesses by implementing an independent board of directors and hiring additional accounting personnel at such time as we complete a reverse merger.

Changes in Internal Controls over Financial Reporting

There have been no changes in the Company's internal control over financial reporting during the three-month period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Management is not aware of any legal proceedings contemplated by any governmental authority or any other party involving us or our properties. As of the date of this Quarterly Report, no director, officer or affiliate is (i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceedings. Management is not aware of any other legal proceedings pending or that have been threatened against us or our properties.

ITEM 1A. RISK FACTORS

Due to recent changes to Rule 15c2-11 under the Securities Exchange Act of 1934, our common stock may become subject to limitations or reductions on stock price, liquidity or volume.

On September 16, 2020, the SEC adopted amendments to Rule 15c2-11 under the Securities Exchange Act of 1934 9the “Exchange Act”). This Rule applies to broker-dealers who quote securities listed on over-the-counter markets such as our common stock. The Rule as amended prohibits broker-dealers from publishing quotations on OTC markets for an issuer’s securities unless they are based on current publicly available information about the issuer. When it becomes effective, the amended Rule will also limit the Rule’s “piggyback” exception, which allows broker-dealers to publish quotations for a security in reliance on the quotations of a broker-dealer that initially performed the information review required by the Rule, to issuers with current publicly available information or issuers that are up-to-date in their Exchange Act reports. As of this date, we are uncertain as what actual effect the Rule may have on us.

The Rule changes could harm the liquidity and/or market price of our common stock by either preventing our shares from being quoted or driving up our costs of compliance. Because we are a voluntary filer under Section 15(d) of the Exchange Act and not a public reporting company, the practical impact of these changes is to require us to maintain a level of periodic disclosure we are not presently required to maintain, which would cause us to incur material additional expenses. Further, if we cannot or do not provide or maintain current public information about our company, our stockholders may face difficulties in selling their shares of our common stock at desired prices, quantities or times, or at all, as a result of the amendments to the Rule.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

All recent unregistered sales of securities have been previously reported.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.