The accompanying notes are an integral part of these financial statement.
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
FOR YEARS ENDED NOVEMBER 30, 2022 AND NOVEMBER 30, 2021
(AUDITED)
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 to acquire a target company in a reverse merger.
Following its decision not to proceed with a transaction with a target company in June 2021, the Company resumed its efforts to seek a reverse merger candidate. Towards that goal, on June 17, 2022, we executed a non-binding Term Sheet with a digital advertising company (the “Target”). The Term Sheet required the Share Exchange Agreement to be executed by July 30, 2022. Although it was not, we are continuing to pursue the acquisition under which the shareholders of the Target would receive approximately 95.28% of our outstanding common stock. In addition, the Term Sheet envisions one or more investors investing $1,500,000 and receiving convertible preferred stock, convertible into approximately 0.47% of our outstanding common stock. No definitive agreement has been executed, and no assurances can be given that the Company or the Target will proceed with the transaction. If consummated, the transaction will be dilutive to our shareholders. It is subject to a number of contingencies including execution of a definitive agreement, an audit of the Target Company, and financing. See Note 6 – “Subsequent Events.”
On May 22, 2020, David Lelong purchased from Dusan Konc 6,000,000 shares of Common Stock of the Company and a convertible promissory note with a face value of $29,973 (the “Konc 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 Konc 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 89,919,000 shares of the Company’s common stock.
NOTE 2 – GOING CONCERN
The Company’s financial statements as of November 30, 2022 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 adequate ongoing source of revenues 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 November 30, 2022 of $362,454. These factors among others 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 obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking 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 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:
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Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
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Level 2 — inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.
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Level 3 — inputs to the valuation methodology are unobservable and significant to the fair value.
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For certain financial instruments, the carrying amounts reported in the balance sheets for cash and current liabilities, including loans payable, each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest.
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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. At November 30, 2022 and 2021, a total of 3,400,000 and 3,000,000 shares of common stock, respectively, were excluded from the calculation of fully-diluted loss per share because the effect would have been 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 November 30, 2022, 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.
Forward Stock Split
On February 12, 2021, the Company approved a 3-for-1 forward split of the Company’s common stock (the “Forward Split”), and increased the number of shares of common stock authorized from 75,000,000 to 490,000,000. Except as otherwise indicated, all share and per-share information in these financial statements have been restated to adjust for the effect of the forward split. The Company had 33,328,500 shares of common stock outstanding immediately before the Forward Split, and 99,985,500 shares of common stock outstanding immediately after the Forward Split, an increase of 66,657,000 shares. See note 4.
Stock-Based Compensation
As of November 30, 2022, the Company has not issued any stock-based payments to its employees.
Stock-based compensation is 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
In August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40)”. This ASU reduces the number of accounting models for convertible debt instruments and convertible Preferred Stock, as well as amend the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. In addition, this ASU improves and amends the related EPS guidance. This standard is effective for us on January 1, 2022, including interim periods within such fiscal year. Adoption is either a modified retrospective method or a fully retrospective method of transition. We have elected to early adopt ASU 2020-06 effective December 1, 2021. Adoption of ASU 2020-06 resulted in recording no dividends in connection with the beneficial conversion feature associated with the sale of 20,000 shares of Series A Preferred Stock during the year ended November 30, 2022 compared to dividends of approximately $40,000 had we not adopted ASU 2020-06.
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.
Subsequent Events
The Company evaluates events that have occurred after the balance sheet date but before the consolidated financial statements are issued. Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the consolidated financial statements, except as disclosed.
NOTE 4 – CAPITAL STOCK
On February 12, 2021, the Company’s Board of Directors approved a change to the Company’s Articles of Incorporation increasing the number of shares of common stock authorized from 75,000,000 to 490,000,000. Also on February 12, 2021, the Company’s Board of Directors approved a 3-for-1 forward split of the Company’s common stock outstanding. The Company had 33,328,500 shares of common stock outstanding immediately before the Forward Split, and 99,985,500 shares of common stock outstanding immediately after the Forward Split, an increase of 66,657,000 shares.
The Company has 490,000,000 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
The Company had 99,985,500 shares of common stock, par value $0.001, outstanding at November 30, 2022 and 2021.
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 September 28, 2021, Vado Corp. entered into a Securities Purchase Agreement with an accredited investor pursuant to which the Company sold to the purchaser 50,000 shares of the Company’s Series A Convertible Preferred Stock, at a purchase price of $2.00 per share (the “Offering”). The Company received $100,000 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 beneficial conversion feature associated with the Series A was considered a dividend to the Preferred A shareholders. The Company utilized the intrinsic value method to determine the fair value of the beneficial conversion feature associated with this transaction. The value of the beneficial conversion features was capped at the amount of proceeds received, or $100,000; the Company recorded a dividend on the Series A in the amount of $100,000 during the year ended November 30, 2021.
On November 22, 2022, Vado Corp. entered into a Securities Purchase Agreement with an accredited investor pursuant to which the Company sold to the purchaser 20,000 shares of the Company’s Series A Convertible Preferred Stock, at a purchase price of $2.00 per share (the “Offering”). The Company received $40,000 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 had 170,000 and 150,000 shares of Series A Preferred Stock, par value $0.001, outstanding at November 30, 2022 and 2021, respectively. Each share of the Series A Preferred Stock is convertible into 20 shares of the Company’s common stock.
NOTE 5 – RELATED PARTY TRANSACTIONS
Consulting Agreement
On June 1, 2020, the Company entered into a consulting agreement with Accelerated Online Inc. (“Accelerated Online”, the “2020 Accelerated Online Agreement”), an entity wholly-owned by David Lelong. Pursuant to the 2020 Accelerated Online Agreement, Accelerated Online provided executive management and business development services to the Company for a fee of $15,000 per month.
On January 4, 2021, the Company entered into a new agreement for professional services with Accelerated Online (the “2021 Accelerated Online Agreement”), which replaced the 2020 Accelerated Online Agreement. Pursuant to the 2021 Accelerated Online Agreement, Accelerated Online provides executive management and business development services to the Company for a fee of $7,500 per month, with interest payable at the rate of 1.5% per month on any unpaid balance.
Effective June 1, 2021, the 2021 Accelerated Online Agreement was terminated. No additional interest was incurred on the unpaid balance. During the year ended November 30, 2021, the Company charged to operations the amount of $52,500 for consulting fees and $1,125 for accrued interest pursuant to the Accelerated Online Agreements; $15,000 of the consulting fees were paid, and the balance of the consulting fees in the amount of $37,500 and the accrued interest of $1,125 were recorded as due to related party. On August 16, 2022, consulting fees due to Accelerated Online in the amount of $37,500 and accrued interest of $1,125 were forgiven, resulting in a gain on forgiveness of debt in the amount of $38,625. As of November 30, 2022 and 2021, the amount due to related party was $0 and $38,625, respectively.
NOTE 6 – SUBSEQUENT EVENTS
In accordance with FASB ASC Topic 855 “Subsequent Events,” the Company has analyzed its operations through the date the financial statements were issued and noted no items requiring disclosure other than as disclosed below.
In the furtherance of our search for an acquisition target, on January 30, 2023 we entered into a Share Exchange Agreement (the “Exchange Agreement”) with Socialcom, Inc, d/b/a AudienceX, a California corporation (“aX”) and the shareholders of aX signatory thereto who collectively own 19,363,959 shares of aX common stock, or approximately 96.6% of the outstanding shares of aX common stock. On February 17, 2023, we and the other parties amended and restated the Exchange Agreement. The Exchange Agreement as amended and restated provides that, upon the terms and subject to the conditions set forth therein, the Company will issue the aX shareholders signatory thereto a total of 169,434,641 shares of the Company’s common stock, representing approximately 96% of the shares of the Company’s common stock to be outstanding after giving effect to the issuance, in exchange for all of the shares of aX common stock held by such aX shareholders (the “Exchange”). The closing of the Exchange (the “Closing”) is conditioned upon aX shareholders collectively owning at least 19,363,959 shares of aX common stock executing the Exchange Agreement.
Under the Exchange Agreement, in connection with and subject to the Exchange, the Company agreed, among other things, to the following covenants and closing conditions: (i) enter into an agreement with David Lelong, the sole officer and director and majority shareholder of the Company, for the cancellation of 93 million shares of common stock held by him at the Closing, (ii) issue 22,793,540 options to purchase common stock of the Company to aX directors, officers, employees and consultants under a newly adopted equity incentive plan of the Company in exchange for the cancellation of 2,604,976 outstanding aX stock options held by such persons, and (iii) execute a binding agreement for a financing resulting in gross proceeds to the Company of $1,500,000. In the furtherance of the foregoing, Mr. Lelong, in his capacity as the sole member of the Board of Directors and majority shareholder of the Company, approved and adopted the 2023 Equity Incentive Plan of the Company, under which the Company is authorized to grant and issue up to 30 million shares of common stock and common stock equivalents to the Company’s directors, officers, employees and consultants for services rendered or to be rendered by such persons.
In addition, on January 30, 2023 in connection with the Exchange Agreement, the Company entered into a Stock Purchase Agreement (the “SPA”) and an Investor Rights Agreement (the “IRA”) with an accredited investor (the “Investor”), which is also an aX shareholder, as well as a subsequent amendment and restatements to those agreements on February 17, 2023, pursuant to which the Company agreed to sell the Investor up to 50,000 shares of the Company’s Series A Convertible Preferred Stock (the “Series A”), which subject to beneficial ownership limitations is convertible into up to 1,000,000 shares of the Company’s common stock, at a purchase price of $30 per share of Series A in two equal tranches, with the first tranche closing simultaneously with the Closing of the Exchange and the second tranche closing on the 90th day after the Closing. Under the IRA the Company agreed to register for resale by the Investor the shares of the Company’s common stock issued or issuable to the Investor under the Series A and the Exchange Agreement on a registration statement to be filed with the Securities and Exchange Commission (the “SEC”). Under the IRA, at any time after 180 days following the Closing, the Investor may request the Company to prepare a registration statement on Form S-1 (or Form S-3, if available to the Company at such time) and the Company will be obligated to file such registration statement with the SEC within 120 days after such request, and to use its commercially reasonable efforts to cause the registration statement to be declared effective by the SEC as soon as practicable thereafter, subject to certain exceptions and limitations.
Subject to the terms of the Exchange Agreement, the Closing of the Exchange is scheduled to take place on or before February 24, 2023, subject to the satisfaction or waiver of the conditions to Closing set forth in the Exchange Agreement. If the conditions to Closing have not been satisfied by that deadline, the Company and aX may extend the Closing to a later date by mutual agreement. Effective at the Closing, the number of directors of the Company will be fixed at three, and Jason Wulfsohn and Reeve Benaron will be appointed to serve on the Board of Directors. Upon or immediately prior to the Closing, David Lelong shall have tendered his resignation as the sole officer of the Company, and the Company’s Board of Directors will appoint Jason Wulfsohn and Ryan Carhart as the Company’s Chief Executive Officer and Chief Financial Officer, respectively, effective upon the Closing. Immediately following the Closing, the aX shareholders who executed the Exchange Agreement as of that time will collectively own approximately 96% of the issued and outstanding shares of the Company’s common stock, and aX will continue as a subsidiary of the Company. aX is a digital marketing and services company focused on delivering integrated advertising and technology performance solutions to independent agencies and brands through its omnichannel trading desk platform.