Item 4.02 Non-Reliance on Previously Issued Financial Statements or a Related
Audit Report or Completed Interim Review.
On November 16, 2020, the Board of Directors (the "Board") of Vado Corp. (the
"Company") determined in consultation with AJ Robbins CPA, LLC, the Company's
independent registered public accounting firm, that the Company's unaudited
condensed consolidated interim financial statements for the fiscal quarter ended
August 31, 2020 (the "Financial Statements") should no longer be relied upon.
The Financial Statements, which were included in the Company's quarterly report
on Form 10-Q for the fiscal quarter ended August 31, 2020 as filed with the U.S.
Securities and Exchange Commission on October 8, 2020 (the "Quarterly Report"),
contained material errors. The Board concluded that adjustments to the Financial
Statements are required and that the Company will need to restate the Financial
Statements by filing an amendment to the Quarterly Report.
Specifically, as described in "Note 5 - Capital Stock" of the Financial
Statements, on June 26, 2020 the Company consummated a sale to an accredited
investor of 100,000 shares of the Company's Series A Preferred Stock at a
purchase price of $2.00 per share, which resulted in $200,000 in gross proceeds
to the Company. As disclosed in Note 5, 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 fiscal quarter
ended August 31, 2020. The Company has determined and verified with its
independent registered public accounting firm that the accounting treatment of
the beneficial conversion feature was in error, and is presently in the process
of preparing an amendment to the Quarterly Report to correct this error in the
Financial Statements. Pursuant to ASC 470-20-30-8, the beneficial conversion
feature associated with the Series A Preferred Stock is capped at the amount of
funds received, or $200,000. Pursuant to EITF 98-5, paragraph 8, this amount is
considered analogous to a dividend, and is recognized as a return to the
preferred shareholders.
The Company plans to file the amendment to the Quarterly Report to correct the
errors described in this current report on Form 8-K as soon as practicable, and
prior to the filing of the Company's annual report on Form 10-K for the fiscal
year ending November 30, 2020.
The Company's Board and Chief Executive Officer has discussed the foregoing
matters disclosed in this Item 4.02 with the Company's independent registered
public accounting firm.
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