UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One) | |
[X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended | January 31, 2013 |
| or |
[ ] | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from | | to | |
Commission File Number | 333-169770 |
DEGARO INNOVATIONS CORP. |
(Exact name of registrant as specified in its charter) |
Nevada | | N/A |
(State or other jurisdiction of incorporation or organization) | | (IRS Employer Identification No.) |
Lot 107, Roaring River, Steer Town PO, St. Ann, Jamaica | N/A |
(Address of principal executive offices) | (Zip Code) |
(876) 347-9493 |
(Registrant’s telephone number, including area code) |
N/A |
(Former name, former address and former fiscal year, if changed since last report) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. |
[X] | YES | [ ] | NO |
Indicate by check mark 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 (§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). |
| [X] | YES | [ ] | NO |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. |
Large accelerated filer | [ ] | Accelerated filer | [ ] |
Non-accelerated filer | [ ] | (Do not check if a smaller reporting company) | Smaller reporting company | [X] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act |
| [ ] | YES | [X] | NO |
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. |
| [ ] | YES | [ ] | NO |
APPLICABLE ONLY TO CORPORATE ISSUERS |
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. |
51,155,000 common shares issued and outstanding as of March 18, 2013. |
| | | | | | | | | | | | | | | | | | | | | |
TABLE OF CONTENTS
PART I – FINANCIAL INFORMATION | 3 |
Item 1.Financial Statements | 3 |
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations | 5 |
Item 3.Quantitative and Qualitative Disclosures About Market Risk | 9 |
Item 4.Controls and Procedures | 10 |
PART II – OTHER INFORMATION | 10 |
Item 1.Legal Proceedings | 10 |
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds | 10 |
Item 3.Defaults Upon Senior Securities | 10 |
Item 4.Mine Safety Disclosures | 10 |
Item 5.Other Information | 10 |
Item 6.Exhibits | 11 |
SIGNATURES | 12 |
2
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
These unaudited consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the Securities and Exchange Commission instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended January 31, 2013 are not necessarily indicative of the results that can be expected for the full year.
3
Degaro Innovations Corp.
(A Development Stage Company)
January 31, 2013
| Index |
Consolidated Balance Sheets | F–1 |
| |
Consolidated Statements of Operations | F–2 |
| |
Consolidated Statements of Cash Flows | F–3 |
| |
Notes to the Consolidated Financial Statements | F–4 |
| |
4
Degaro Innovations Corp.
(A Development Stage Company)
Consolidated Balance Sheets
(Expressed in US Dollars)
(unaudited)
| January 31, 2013 | July 31, 2012 |
ASSETS | | |
Current Assets | | |
| | |
Cash | $ 1,542 | $ 1,572 |
Prepaid expense | 240 | – |
| | |
Total Current Assets | 1,782 | 1,572 |
Property and equipment, net | 14,926 | 15,842 |
| | |
Total Assets | $ 16,708 | $ 17,414 |
| | |
LIABILITIES AND STOCKHOLDERS’ DEFICIT | | |
| | |
Current Liabilities | | |
| | |
Accounts payable and accrued liabilities | $ 1,770 | $ 10,231 |
Related party payables | 20,692 | 20,874 |
Loans payable | 68,742 | 42,551 |
Deferred revenue | 3,624 | 3,624 |
| | |
Total Liabilities | 94,828 | 77,280 |
| | |
Contingencies and Commitments | | |
Stockholders’ Deficit | | |
Preferred stock, 100,000,000 shares authorized, US$0.001 par value;no shares issued and outstanding | – | – |
Common stock, 100,000,000 shares authorized, US$0.0001 par value;51,155,000 shares issued and outstanding | 5,116 | 5,116 |
Additional paid-in capital | 49,907 | 47,452 |
Deficit accumulated during the development stage | (133,143) | (112,434) |
| | |
Total Stockholders’ Deficit | (78,120) | (59,866) |
| | |
Total Liabilities and Stockholders’ Deficit | $ 16,708 | $ 17,414 |
| | |
The accompanying notes are an integral part of these consolidated financial statements.
F-1
Degaro Innovations Corp.
(A Development Stage Company)
Consolidated Statements of Operations
(Expressed in US Dollars)
(unaudited)
| For the Three Months Ended January 31, 2013 | For the Three Months Ended January 31, 2012 | For the Six Months Ended January 31, 2013 | For the Six Months Ended January 31, 2012 | For the Period From December 8, 2009 (Date of Inception) to January 31, 2013 |
Expenses | | | | | |
| | | | | |
General and administrative | $ 2,205 | $ 7,112 | $ 5,112 | $ 8,311 | $ 31,519 |
Depreciation and amortization | 458 | 457 | 916 | 775 | 3,379 |
Professional fees | 5,060 | 3,557 | 12,226 | 16,520 | 91,516 |
| | | | | |
Total Expenses | 7,723 | 11,126 | 18,254 | 25,606 | 126,414 |
| | | | | |
Interest expense | 1,391 | – | 2,455 | – | 6,729 |
| | | | | |
Net Loss | $ (9,114) | $ (11,126) | $ (20,709) | $ (25,606) | $ (133,143) |
| | | | | |
Net Loss Per Share – Basic and Diluted | $ (0.00) | $ (0.00) | $ (0.00) | $ (0.00) | |
| | | | | |
Weighted Average Common Shares Outstanding – Basic and Diluted | 51,155,000 | 51,155,000 | 51,155,000 | 51,155,000 | |
| | | | | |
| | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
F-2
Degaro Innovations Corp.
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Expressed in US Dollars)
(unaudited)
| For the Six Months Ended January 31, 2013 | For the Six Months Ended January 31, 2012 | For the Period From December 8, 2009 (Date of Inception) to January 31, 2013 |
Cash Flows from Operating Activities | | | |
Net loss | $ (20,709) | $ (25,606) | $ (133,143) |
Adjustments to reconcile net loss to net cash used in operating activities: | | | |
Depreciation and amortization | 916 | 775 | 3,379 |
Imputed interest | 2,455 | – | 6,729 |
Changes in operating assets and liabilities: | | | |
Accounts payable and accrued liabilities | (8,461) | 8,222 | 1,770 |
Prepaid expenses | (240) | – | (240) |
Deferred revenue | – | – | 3,624 |
Net Cash Used In Operating Activities | (26,039) | (16,609) | (117,881) |
| | | |
Cash Flows from Investing Activities | | | |
Purchase of property and equipment | – | (5,935) | (18,305) |
| | | |
Net Cash Used in Investing Activities | – | (5,935) | (18,305) |
| | | |
Cash Flows from Financing Activities | | | |
Related party payables | (182) | 13,339 | 20,692 |
Proceeds from issue of common stock | – | – | 48,294 |
Proceeds from loans payable | 26,191 | 6,421 | 68,742 |
| | | |
Net Cash Provided by Financing Activities | 26,009 | 19,760 | 137,728 |
| | | |
(Decrease) Increase in Cash | (30) | (2,784) | 1,542 |
Cash - Beginning of Period | 1,572 | 4,387 | – |
| | | |
Cash - End of Period | $ 1,542 | $ 1,603 | $ 1,542 |
| | | |
Supplementary Information: | | | |
Interest paid | $ – | $ – | $ – |
Income taxes paid | $ – | $ – | $ – |
| | | |
The accompanying notes are an integral part of these consolidated financial statements.
F-3
Degaro Innovations Corp.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in US Dollars)
1. Nature of Business and Continuance of Operations
Degaro Innovations, Corp. (the “Company”) was incorporated in the State of Nevada on December 8, 2009. The Company’s principal business is to initiate, market, and distribute residential solar panel systems to the Jamaican and Caribbean market. On July 26, 2010, the Company incorporated Degaro Limited, a wholly-owned subsidiary in Jamaica.
These consolidated financial statements have been prepared on a going concern basis, which assumes the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. As at January 31, 2013, the Company has incurred losses totaling $133,143 since inception, and has not yet generated any revenue from operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These consolidated 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.
2. Summary of Significant Accounting Policies
The interim unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States and the rules of the Securities and Exchange Commission for interim financial information. They do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Therefore, these financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto contained in the Company’s latest Annual Report filed with the SEC on Form 10-K for the year ended July 31, 2012. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of its operations for the interim period presented have been reflected herein. The results of operations for the interim periods are not necessarily indicative of the results to be expected for future quarters or the full year. Notes to the unaudited interim consolidated financial statements that would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal year as reported in the Form 10-K have been omitted.
a) Basis of Presentation
These consolidated 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 fiscal year end is July 31.
b) Principal of Consolidation
The consolidated financial statements include the accounts of Degaro Limited, its 100% owned subsidiary. All significant intercompany balances and transactions have been eliminated upon consolidation.
c) Use of Estimates
The preparation of consolidated 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to useful life of long-lived assets and 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.
F-4
Degaro Innovations Corp.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in US Dollars)
2. Summary of Significant Accounting Policies (continued)
d) Earnings (Loss) Per Share (“EPS”)
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 January 31, 2013, the Company has no potentially dilutive securities outstanding.
e) Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect and that may impact its consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
3. Property and Equipment
Net property and equipment consisted of the following:
| January 31, 2013 | July 31, 2012 |
Cost | $ 18,305 | $ 18,305 |
Accumulated depreciation | (3,379) | (2,463) |
Net carrying value | $ 14,926 | $ 15,842 |
4. Related Party Transactions
Office services are provided without charge by the sole officer and director of the Company. Such costs are immaterial to the consolidated financial statements and accordingly, have not been reflected therein.
As of January 31, 2013, the Company owes the sole director of the Company $20,692 (July 31, 2012 - $20,874) for expenditures paid on behalf of the Company. The amount owed is unsecured, non-interest bearing, and has no specified repayment terms. The amount is accrued in related party payables as of January 31, 2013.
5. Loans Payable
At January 31, 2013, the Company is indebted to two unrelated third parties for $68,742 (July 31, 2012 - $42,551). These loans are non-interest bearing and are due on demand. During the six months ended January 31, 2013, the Company recorded imputed interest of $2,455.
6. Commitments
On January 6, 2011, the Company entered into an exclusive distribution agreement with a distributor. Pursuant to the agreement, the Company shall buy not less than 10 Residential and Commercial Solar Energy Systems prior to July 6, 2011. Exclusivity will become effective after the delivery of the initial sample order in the first month. If 10 solar energy systems have been purchased in this six month period, the exclusivity agreement shall continue for one full year thereafter. If the Company fails to purchase 10 systems in the six month period, the exclusive agreement will be voided but the Company will continue to act as a distributor of systems from the distributor on a non-exclusive basis. As at July 6, 2011, the Company had not purchased 10 systems and the exclusive agreement was voided. The Company will continue to act as a distributor of systems on a non-exclusive basis.
F-5
Degaro Innovations Corp.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in US Dollars)
On March 18, 2011, the Company entered into a purchase and sale agreement with N.A.T. Enterprises (“N.A.T.”) whereby the Company agreed to sell 4 units of solar equipment to N.A.T. for $36,239. Payment of the purchase price shall be made as to ten percent (10%) within 45 days after the execution of the agreement, and ninety percent (90%) of the purchase price within 30 days after delivery of the equipment. On May 20, 2011, the Company received 10% of the purchase price from N.A.T. pursuant to the purchase and sale agreement which is included in deferred revenue. As at January 31, 2013, the solar equipment has not been delivered due to changing requirements by the purchaser and due to the purchaser’s technical specification requirements that may not be able to be achieved by the supplier. The deposit received by the Company is recorded as deferred revenue.
F-6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
FORWARD-LOOKING STATEMENTS
This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our unaudited financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report.
In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars. All references to "US$" refer to United States dollars and all references to "common stock" refer to the common shares in our capital stock.
As used in this quarterly report, the terms "we", "us", "our" and "our company" mean Degaro Innovations Corp. and our wholly-owned subsidiary, Degaro Limited, a Jamaican corporation, unless otherwise indicated.
Overview
We were incorporated on December 8, 2009 under the laws of the State of Nevada. At incorporation, our authorized capital consisted of 100,000,000 shares of common stock with a par value of $0.001 and 100,000,000 shares of preferred stock with a par value of $0.001 per share. Effective January 29, 2010, we amended our articles of incorporation to change the par value of shares of our common stock to $0.0001 per share. As a result, effective January 29, 2010, our authorized capital consisted of 100,000,000 shares of common stock with a par value of $0.0001 per share and 100,000,000 shares of preferred stock with a par value of $0.001.
We have a wholly-owned subsidiary, Degaro Limited, incorporated under the laws of Jamaica on July 26, 2010. Our principal executive offices are located at Lot 107, Roaring River, Steer Town PO, St. Ann, Jamaica. Our telephone number is (876) 347-9493. Our fiscal year end is July 31.
We are a development stage company. We have only recently begun operations, have limited sales and limited revenues, and therefore rely upon the sale of our securities to fund our operations. We have a going concern uncertainty as of the date of our most recent financial statements.
From inception, our management has devoted a significant amount of time to the development of our business. In furtherance of our planned business, our management investigated the market demand for solar power in the Jamaican and Caribbean markets, raised seed capital, investigated various suppliers of solar power equipment, decided on a supplier of solar power equipment and recently purchased a complete 1.5KW solar system for demonstration purposes.
11
Our Current Business
We intend to market, and distribute solar panel power generation systems for household application in the Jamaican and Caribbean market. We anticipate that our products will be designed and assembled in Pingshan District in Shenzhen, Guangdong Province, China by Shenzhen Commonpraise Solar Co., Ltd., where various types of solar products, including solar water heaters, residential and commercial powered-systems, LED products, and solar powered streetlights are manufactured. However, we are continuously seeking other manufacturers and suppliers of solar panel power generation systems in order to offer our customers the most current technology at the most competitive prices.
On January 6, 2011, we entered into an exclusive distribution agreement with Shenzhen Commonpraise Solar Co., Ltd. for the distribution of Shenzhen Commonpraise products in Jamaica. Pursuant to the agreement, we were to purchase not less than 10 industrial or commercial solar energy systems from Shenzhen Commonpraise within a six month period following the date of the agreement. Exclusivity under the agreement would be effective for the initial 6-month period following our purchase of a solar energy system of not less than 2 KW. If we were successful in meeting the 10 system quota, the exclusive distribution arrangement would be extended for an additional 12-month period. If we are not successful, we would revert back to a non-exclusive distribution arrangement with Shenzhen Commonpraise. On July 6, 2011, our company had not purchased 10 systems and the exclusive agreement was voided. Our company will continue to act as a distributor of systems on a non-exclusive basis.
Prior to the distribution agreement we purchased a 1.5KW system from Shenzhen Commonpraise for testing, marketing and display purposes.
Once this unit is installed and fully functioning, we anticipate that we will engage two sales staff to aid with establishing relationships with retailers and distributors. We finished the installation process and we plan to hire the required staff by June 30, 2014, but this is dependent on financial resources available to us. There can be no assurance that we will be able to raise sufficient capital to be able to hire any employees. We anticipate that these individuals will be trained to target and market solar systems to developers of industrial, commercial and residential developments.
In connection with our proposed installation business, we intend to concentrate on serving the solar power needs of residential and small commercial customers who may or may not desire to be tied to the electric power grid. We believe the solar power industry is at an early stage of its growth and is highly fragmented with many smaller companies. The prospects for long-term worldwide demand for solar power have attracted a multitude of design/integration companies in our market segment. We expect consolidation in the design/integration segment of the industry based mostly on branding, development of new technology and business process improvements. Our principal objective is to be among the leaders in the marketing, sales, and distribution of solar panels.
Accordingly, we anticipate that our growth strategy will primarily include:
- Providing solutions for solar rooftop installations of solar panels for residential facilities;
- Commercializing solar module installation technology optimized for residential markets;
- Reducing installation costs and improving the aesthetics of solar systems compared to standard commercially available solar equipment;
- Promoting and enhancing brand name and reputation;
- Developing and utilizing a process-driven approach to sell and install solar power systems in the Jamaican market; and
- Capitalizing on the fact we are not a manufacturer, but rather a supplier of solutions using the best technology available given our finances. By consistently reappraising the markets and supplying state of the art solar cell technology, we expect that we will be able to select the best solution for any particular project.
12
On March 18, 2011, we entered into a purchase and sale agreement with N.A.T. Enterprise whereby N.A.T. has agreed to acquire three of our 750W and one of our 2.0KW solar power systems for a total purchase price of $36,238.50. Pursuant to the agreement, N.A.T. paid 10% of the purchase price within 45 days of the execution of the agreement and will pay the remaining 90% within 30 days after delivery of the ordered equipment. On May 20, 2011, we received 10% of the purchase price from N.A.T. pursuant to the purchase and sale agreement. As of December 12, 2012, the solar equipment had not been delivered due to the changing requirements by the purchaser and due to the purchaser’s technical specification requirements which may not be able to be achieved by this particular supplier. We sourced the products we are selling to N.A.T. from Shenzhen Commonpraise Solar Co. In addition, we have sourced an alternative solar system equipment provider: US Solar Institute, a US company located in Fort Lauderdale, Florida. As of October 28, 2011, we purchased from US Solar Institute a 2,500W grid solar system which includes, aninverter with internal DC disconnect, and panels. It is anticipated that we will take delivery of this system by the end of June 30, 2013. The delay in delivery is a result of not receiving some key components for parts manufactured in Europe and the customer continues to change its requirements. Once these parts are received by our supplier we should then receive our 2,500W grid solar system if these parts continue to have delays we will seek a refund and seek alternative solar system suppliers.
Principal Products
Initially we intend to market and distribute solar home systems within the range of 750W to 4KW. These products have a wide range of power and can be used to power all electrical products in the home, depending on the devices used and amount of time the devices are used.
We expect that all of our systems will include all parts for installation, including solar panels, batteries, controller, inverter, and cables.
We anticipate that each of our proposed systems can be independent systems (off-grid) or can be hybrid systems. Our proposed hybrid systems would allow for the solar panel to connect to a grid, but still use the power from the solar panels. When the battery runs dry from the energy from the solar cells, the residence can tap into grid system for alternative power. This way, the home will always have the use of electricity even when there may be no sun for longs periods of time. The cost of converting an independent system into a hybrid system is minimal.
Results of Operations for the Three and Six Months Ended January 31, 2013 and 2012 and the period from Inception (December 8, 2009) to January 31, 2013
We have not earned any revenues from inception through the period ending January 31, 2013.
| | Three Months Ended January 31, | | | Three Months Ended January 31, | | | Six
Months Ended January 31, | | | Six
Months Ended January 31, | | | December 8, 2009 (Inception) through January 31, |
| | 2013 | | | 2012 | | | 2013 | | | 2012 | | | 2013 |
Revenues | $ | Nil | | $ | Nil | | $ | Nil | | $ | Nil | | $ | Nil |
Expenses | $ | 7,723 | | $ | 11,126 | | $ | 18,254 | | $ | 25,606 | | $ | 126,414 |
Interest expense | $ | 1,391 | | $ | Nil | | $ | 2,455 | | $ | Nil | | $ | 6,729 |
Net Loss | $ | (9,114) | | $ | (11,126) | | $ | (20,709) | | $ | (25,606) | | $ | (133,143) |
We incurred a net loss in the amount of $9,114 for the three months ended January 31, 2013 compared to $11,126 for the three months ended January 31, 2012 and a net loss in the amount of $20,709 for the six months ended January 31, 2012 compared to $25,606 for the six months ended January 31, 2012. We incurred a net loss of $133,143 from our inception on December 8, 2009 to January 31, 2013.
13
Our operating expenses incurred for the three months ended January 31, 2013 included $2,205 for general and administrative expenses, $458 in depreciation and amortization and $5,060 in professional fees compared to the three months ended January 31, 2012 of $7,112 for general and administrative expenses, $457 in depreciation and amortization and $3,557 in professional fees.
Our operating expenses incurred for the six months ended January 31, 2013 included $5,112 for general and administrative expenses, $916 in depreciation and amortization and $12,226 in professional fees compared to the six months ended January 31, 2012 of $8,311 for general and administrative expenses, $775 in depreciation and amortization and $16,520 in professional fees.
Our operating expenses from our inception on December 8, 2009 to January 31, 2013 were $31,519 for general and administrative expenses, $3,379 in depreciation and amortization and $91,516 in professional fees.
Liquidity and Capital Resources
Working Capital | | | | | |
| | January 31, 2013 | | | July 31, 2012 |
Current Assets | $ | 1,782 | | $ | 1,572 |
Current Liabilities | $ | 94,828 | | $ | 77,280 |
Working Capital | $ | (93,046) | | $ | (75,708) |
Cash Flow |
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|
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|
|
| | Six
Months Ended January 31, 2013 | | | Six
Months Ended January 31, 2012 | | | December 8, 2009 (Inception) to January 31, 2013 |
|
|
Net Cash Provided by (Used in) Operating Activities | $ | (26,039) | | $ | (16,609) | | $ | (117,881) |
Net Cash Provided by (Used In) Investing Activities | $ | Nil | | $ | (5,935) | | $ | (18,305) |
Net Cash Provided by Financing Activities | $ | 26,009 | | $ | 19,760 | | $ | 137,728 |
Net Increase (Decrease) In Cash During The Period | $ | (30) | | $ | (2,784) | | $ | 1,542 |
We have not attained profitable operations and are dependent upon obtaining financing to pursue our business plan over the next twelve months. If we do not generate revenue sufficient to sustain operations, we may not be able to continue as a going concern.
Off Balance Sheet Arrangements
We have no 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 is material to stockholders.
Going Concern
The accompanying financial statements have been prepared assuming that our company will continue as a going concern. As discussed in the notes to the financial statements, we have no established source of revenue. Our auditors have expressed substantial doubt about our ability to continue as a going concern. Without realization of additional capital, it would be unlikely for us to continue as a going concern. The financial statements do not include any adjustments that might result from this uncertainty.
14
Our activities to date have been supported by equity financing. We have sustained losses in all previous reporting periods with an inception to date loss of $133,143 as of January 31, 103. Management continues to seek funding from our shareholders and other qualified investors to pursue our business plan. In the alternative, we may be amenable to a sale, merger or other acquisition in the event such transaction is deemed by management to be in the best interests of the shareholders.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States of America. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our financial statements is critical to an understanding of our financial statements.
Basis of Presentation
These consolidated financial statements of our company have been prepared in accordance with generally accepted accounting principles in the United States and are expressed in US dollars. Our company’s fiscal year end is July 31.
Principal of Consolidation
The consolidated financial statements include the accounts of Degaro Limited, its 100% owned subsidiary. All significant intercompany balances and transactions have been eliminated upon consolidation.
Use of Estimates
The preparation of consolidated 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Our company regularly evaluates estimates and assumptions related to useful life of long-lived assets and deferred income tax asset valuation allowances. Our 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 our company may differ materially and adversely from our company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
Earnings (Loss) Per Share (“EPS”)
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 January 31, 2013, our company has no potentially dilutive securities outstanding.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a "smaller reporting company", we are not required to provide the information required by this Item.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under theSecurities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our president (our principal executive officer, principal financial officer and principle accounting officer) to allow for timely decisions regarding required disclosure.
As of the end of our quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our president (our principal executive officer, principal financial officer and principle accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our president (our principal executive officer, principal financial officer and principle accounting officer) concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this quarterly report.
Changes in Internal Control over Financial Reporting
During the period covered by this report, there were no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
We know of no 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 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
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Item 6. Exhibits
Exhibit No. | Description |
(3) | (i) Articles of Incorporation; (ii) By-laws |
3.1 | Articles of Incorporation of Degaro Innovations Corp. (Incorporated by reference to our Registration Statement on Form S-1 filed on October 5, 2010) |
3.2 | Certificate of Amendment filed with the Nevada Secretary of State on January 29, 2010. (Incorporated by reference to our Registration Statement on Form S-1 filed on October 5, 2010) |
3.3 | Bylaws of Degaro Innovations Corp. (Incorporated by reference to our Registration Statement on Form S-1 filed on October 5, 2010) |
3.4 | Certificate of Incorporation of Degaro Limited (Incorporated by reference to our Registration Statement on Form S-1 filed on October 5, 2010) |
(10) | Material Contracts |
10.1 | Exclusive Distribution Agreement with Shenzhen Commonpraise Co., Ltd. dated January 6, 2011. (Incorporated by reference to our Registration Statement on Form S-1/A filed on January 25, 2011). |
10.2 | Purchase and Sale Agreement with N.A.T. Enterprise (Incorporated by reference to our Registration Statement on Form S-1 filed on May 24, 2011) |
(21) | Subsidiaries of the Registrant |
21.1 | Degaro Limited, a Jamaica corporation |
(31) | Rule 13a-14(a) / 15d-14(a) Certifications |
31.1* | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer |
(32) | Section 1350 Certifications |
32.1* | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer |
101** | Interactive Data Files |
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE | XBRL Instance Document
XBRL Taxonomy Extension Schema Document
XBRL Taxonomy Extension Calculation Linkbase Document
XBRL Taxonomy Extension Definition Linkbase Document
XBRL Taxonomy Extension Label Linkbase Document
XBRL Taxonomy Extension Presentation Linkbase Document |
* Filed herewith
** Furnished herewith. Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of any registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise are not subject to liability under those sections.
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SIGNATURES
In accordance with the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| DEGARO INNOVATIONS CORP. |
| (Registrant) |
| |
| |
Date: March 18, 2013 | /s/ SHERYL BRISCOE |
| Sheryl Briscoe |
| President, Secretary, Treasurer and Director |
| (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) |
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