UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

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FORM 10-Q

 

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(Mark One)

 

☑     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.

 

For the Quarterly Period Ended April 30, 2015

 

or

 

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

 

Commission File Number: 333-191443

 

CLONE ALGO TECHNOLOGIES INC.

 

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(Exact name of registrant as specified in its charter)

 

Nevada		46-2283813
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

 3753 Howard Hughes Parkway, Suite 200, Las Vegas, NV 89169-0952

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 (Address of principal executive offices)(Zip Code)

 

844-256-6325

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(Registrant’s telephone number, including area code)

 

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 periods 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 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).

 

Yes ☐  No ☑

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer. See definition 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	☐	Smaller reporting company	☑

(Do not check if a smaller reporting company)

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Yes ☐ No ☑

 

As of June 15, 2015, the registrant had 94,157,400 shares of its common stock outstanding.

 

 

 

CLONE ALGO TECHNOLOGIES INC.

 QUARTERLY REPORT ON FORM 10-Q

APRIL 30, 2015

 

TABLE OF CONTENTS

 

		PAGE
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	16
Item 4.	Controls and Procedures	16
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	17
Item 1A.	Risk Factors	17
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	17
Item 3.	Defaults Upon Senior Securities	17
Item 4.	Mine Safety Disclosure	17
Item 5.	Other Information	17
Item 6.	Exhibits	18
SIGNATURES		19

  

 

   

PART I – FINANCIAL INFORMATION

 

Item 1 - Financial Statements

 

CLONE ALGO TECHNOLOGIES INC.

(FORMERLY KNOWN AS TRAVELSAFE, INC.)

CONDENSED BALANCE SHEETS

  

 

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

 

 

   

CLONE ALGO TECHNOLOGIES INC.

(FORMERLY KNOWN AS TRAVELSAFE, INC.)

CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)

   

 

 

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

 

 

 

CLONE ALGO TECHNOLOGIES INC.

(FORMERLY KNOWN AS TRAVELSAFE, INC.)

CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

  

 

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

 

 

 

CLONE ALGO TECHNOLOGIES INC.

(FORMERLY KNOWN AS TRAVELSAFE, INC.)

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

APRIL 30, 2015

  

 

 

CLONE ALGO TECHNOLOGIES INC.

(FORMERLY KNOWN AS TRAVELSAFE, INC.)

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

APRIL 30, 2015

 

   

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

 

The following discussion and analysis of our financial condition and results of operations should be read together with our condensed consolidated financial statements and related notes included under Part I, Item 1 of this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements about our business and operations. Our actual results may differ materially from those we currently anticipate.

 

Plan of Operations

 

We have commenced limited operations and our proposed business plan is not yet fully operational. We are finalizing our business plan and obtained our first two customers in a span of four and one-half months.

 

On September 24, 2014, John Fahlberg (the “Seller”) and Nakul Gupta and Oksana Murarova (the “Purchasers”) entered into and closed a Stock Purchase Agreement (the “Stock Purchase Agreement”), whereby the Purchasers purchased from the Seller an aggregate of 5,000,000 shares of common stock, par value $0.00001 per share (the “Shares”) of the Clone Algo Technologies Inc. (f/k/a) TravelSafe, Inc. (the “Company”) for an aggregate purchase price of $280,000 (the “Purchase Price”). The Shares represented approximately 84% of the issued and outstanding shares of the Company. Prior to the closing of the Stock Purchase Agreement, the Seller was the sole officer and director of the Company, as well as the Company’s majority shareholder.

 

In connection with the closing of the Stock Purchase Agreement, on September 24, 2014, John Fahlberg submitted to the Company a resignation letter pursuant to which he resigned from his position as officer and member of the Board of Directors of the Company. Mr. Fahlberg’s resignation was not a result of any disagreements relating to the Company’s operations, policies or practices. On September 24, 2014, the board of directors of the Company (the “Board”) and the majority stockholders of the Company (the “Shareholders”) accepted the resignation of Mr. Fahlberg and, contemporaneously appointed (i) Nakul Gupta to serve as the Chief Executive Officer, Chief Financial Officer and member of the Board of Directors; and (ii) Oksana Murarova to serve as the Secretary, Treasurer, and member of the Board of Directors. In addition, the Company amended its Articles of Incorporation and (a) changed its name from “TravelSafe, Inc.” to “Clone Algo Technologies Inc.”; (b) increased its authorized number of shares of common stock from 250 million to 3 billion; (c) increased its authorized number of shares of preferred stock from 10 million to 200 million; (d) increased the par value of its shares of common stock from $0.00001 to $0.001; and (e) increased the par value of its shares of preferred stock from $0.00001 to $0.001.

 

On September 29, 2014, the Company and an entity Strategyland Research Limited (Strategyland) entered into an Intellectual Property Transfer Agreement (the “Agreement”). Pursuant to the Agreement, Strategyland sold all of its rights, title and interest in and to the following assets, intellectual properties and rights: (a) the BookSmooth Trademark and the BookSmooth Domain Name; (b) all of the goodwill related to the Strategyland’s rights, title and interest to the BookSmooth Trademark and the BookSmooth Domain Name; (c) the BookSmooth Mobile APP complete with manuals; and (d) the BookSmooth Mobile APP Source codes (collectively, the “Intellectual Property”). Strategyland paid a cash consideration of $176,000 to the Company in consideration for the purchase of 88 million shares of Company’s common stock and sale of the Intellectual Property. The shares represent approximately 93.67% of the total issued and outstanding shares of the Company. This resulted in a change of control of the Company with Strategyland become the majority shareholder of the Company.

 

On September 29, 2014, the Company entered into a one year agreement with Tradeology Ltd. (“Tradeology”) for Tradeology to provide technical services and support for maintaining its intellectual property platform and computer servers. The agreement is effective October 1, 2014, and is renewable for an additional year unless either party gives a written notice to the other party not to renew the agreement at least sixty days prior to the renewal date. Pursuant to the terms of the agreement, the Company agreed to pay $400,000 annually for maintaining its intellectual property platform and computer servers. During the nine months ended April 30, 2015, the Company has paid $220,000 of the $400,000 towards maintaining its intellectual property platform and computer servers. Mr. Niraj Goel owns more than 50% of Tradeology and Strategyland and is a member of Strategyland’s board of directors.

 

 

 

Clone Algo Technologies Inc. is a technology company specializing in developing algorithms based on artificial intelligence and operates social investment networks. We have started development of a mobile application for a franchisee system and technology based on artificial intelligence for powering boutique health resorts & spas. The mobile application will be downloaded by the clients from App store or android store. The health resorts & spas will pay a monthly subscription fee for the technology which the health spa customers will use. This technology will take approximately one year to develop, test and commercially launch.

 

The Company is also developing and plans on launching a mobile application called “YAY.” This APP will eventually allow users to: 1) make free phone calls to other users; 2) chat and send photos for free to other users; 3) get pre-approved for loans; 4) share pictures and videos on our social networking service; 5) sell items to other users; 6) sell items on a wholesale basis to other users who are retailers; 7) reserve hotel rooms and travel packages; and 8) obtain discounts from our partners.

 

Our development efforts have been focused primarily on the development and marketing of our business model. In addition, to date we have limited operating history for investors to evaluate the potential of our business development. As such, we have not built our customer base or our brand name.

 

Results of Operation

 

We have commenced our operations during the three months and nine months ended April 30, 2015. During the time we have recorded $50,000 and $305,000 in revenues for developing software applications for our two customers during this period as compared to $0 in revenues for the comparable periods in 2014.  We recorded maintenance cost of our intellectual property infrastructure and computer servers as cost of sales of $100,000 and $233,333 for the three months and nine months ended April 30, 2015 as compared to $0 for the comparable periods in 2014.

 

Our total operating expenses for the three months and nine months ended April 30, 2015 and 2014 were $471,567 and $599,346 as compared to $18,349 and $70,897 for the comparable periods in 2014. We recorded $11,709 and $102,954 for legal, accounting and consulting fees for the three months and nine months ended April 30, 2015 as compared to $13,568 and $56,152 for the comparable periods in 2014. The Company had a change in control during the quarter ended October 31, 2014. As a result, the Company incurred increased legal, accounting and consulting expenses during the three months and nine months ended April 30, 2015 as compared to the comparable periods in 2014. General and administrative expenses (“G&A”) included (a) expenses relating to transfer agents fees and edgar filings of $3,822 and $16,810 for the three months and nine months ended April 30, 2015 as compared to $5,766 and $13,623 for the same comparable periods in 2014, and (b) travel, other G&A and officer compensation expenses were $6,036 and $17,873 for the three months and nine months ended April 30, 2015 as compared to $4,781 and $14,745 for the same comparable periods in 2014. The Company recorded imputed officer’s compensation of $4,500 and $13,500 for the three months and nine months ended April 30, 2014 whereas, no officer’s compensation expense was recorded in comparable periods in 2015.

 

Software development expenses for the three months and nine months ended April 30, 2015 were $450,000 and $462,120 as compared to $0 for the comparable periods in 2014. On February 20, 2015, we entered into an outsourcing agreement with a third party consultant to develop custom software for mobile applications (iOS and Android) for health resorts and wellness technology for a fixed fee of $1,200,000, invoiced to the Company at the monthly rate of $150,000. For the three months and nine months ended April 30, 2015, the Company recorded software development expense of $450,000 and $462,120 towards the development of custom software applications for its two customers.

 

We recorded a realized loss on investments of $17,221 and $13,743 for the three months and nine months ended April 30, 2015. The Company realized a loss in using its own developed algorithms by investing in foreign currency transactions. The Company did not invest in forex transactions in the comparable periods in 2014.

 

We reported a net loss of $538,782 and $541,405 from our operations for the three months and nine months ended April 30, 2015 as compared to a loss of $18,349 and $70,897 for the same comparable periods in 2014. 

  

Liquidity and Capital Resources

 

Cash and cash equivalents were $2,079,707 at April 30, 2015 as compared to $16,224 at July 31, 2014. The Company recorded $165,000 in accounts receivables and $5,975 in prepaid assets at April 30, 2015.

 

 

 

Management expects the Company’s expenses will continue to increase during the foreseeable future as a result of increased operational expenses and the development of additional software APPs. The Company anticipates earning revenues over the next twelve months from software development of customized applications, however, it may be dependent on the proceeds from future debt or equity investments to sustain its operations and implement its business plan. If the Company is unable to raise sufficient capital, it will be required to delay or forego some portion of its business plan, which may have an effect on its anticipated results from operations and financial condition. There is no assurance that the Company will be able to obtain necessary amounts of capital or that its estimates of capital requirements will prove to be accurate.

    

The Company presently does not have any significant credit available, bank financing or other external sources of liquidity. Its current operations and capital raise have been a source of liquidity, however, the Company will need to obtain additional capital in order to expand its operations and continue being profitable. In order to obtain capital, the Company may need to sell additional shares of its common stock or borrow funds from private lenders. There can be no assurance that it will be successful in obtaining additional funding.

 

To the extent that the Company has raised additional capital through the sale of equity, the issuance of such securities may result in dilution to existing stockholders. If additional funds are raised through the issuance of debt securities, these securities may have rights, preferences and privileges senior to holders of common stock and the terms of such debt could impose restrictions on the Company’s operations. Regardless of whether the cash assets prove to be inadequate to meet the Company’s operational needs, it may seek to compensate providers of services by issuance of stock in lieu of cash, which may also result in dilution to existing shareholders. Even if the Company is able to raise the funds required, it is possible that it could incur unexpected costs and expenses, fail to collect significant amounts owed, or experience unexpected cash requirements that would force the Company to seek alternative financing.

 

Management has been successful in the past in raising capital, however, no assurance can be given that these sources of financing will continue to be available to us and/or that demand for our equity/debt instruments will be sufficient to meet our capital needs, or that financing will be available on terms favorable to us. If funding is insufficient at any time in the future, the Company may not be able to take advantage of business opportunities or respond to competitive pressures, or may be required to reduce the scope of its planned service development and marketing efforts, any of which could have a negative impact on our business and operating results.

 

The following detailed information summarizes the key components of our cash flows for the nine months ended April 30, 2015. To date, we have financed our growth from our operations and through the sale of our stock. Our primary use of cash has been for legal, accounting and consulting fees, payment of infrastructure maintenance fees and payment of software development fees. The following trends are reasonably likely to result in a material decrease in our liquidity over the near to long term:

 

1.

An increase in working capital requirements to finance additional product development,

2.

Addition of administrative and sales personnel as the business grows,

3.

Increases in advertising, public relations and sales promotions for existing and new brands as the company expands within existing markets or enters new markets, and

4.

The cost of being a public company.

 

Operating Activities

 

Net cash flows used in operating activities was $252,646 for the nine months period ended April 30, 2015 which resulted primarily due to our increase in accounts receivable of $165,000, increase in prepaid expenses and prepaid infrastructure expense of $1,208, increase in accounts payable of $34,967 and an increase in accrued liability of $420,000. 

  

 

Financing Activities

 

Net cash provided by financing activities was $2,316,129 for the nine months period ended April 30, 2015 primarily due to contributed capital by a former officer of $3,475 and cash received from sales of stock of $2,317,000 which was offset by cash used to pay a loan from a related party of $4,346.

 

As a result of the above activities, the Company recorded a net increase in cash of $2,063,483 for the nine months ended April 30, 2015. As reflected in the unaudited condensed financial statements, the Company has a working capital of $1,795,265 as of April 30, 2015 and has available cash of $2,079,707 as of April 30, 2015.  

 

Off Balance Sheet Arrangements

 

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, sales or expenses, results of operations, liquidity or capital expenditures, or capital resources that are material to an investment in our securities.

 

Critical Accounting Policies and Significant Judgments and Estimates

 

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements which we have prepared in accordance with U.S. generally accepted accounting principles. In preparing our financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We have identified the following accounting policies that we believe require application of management’s most subjective judgments, often requiring the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Our actual results could differ from these estimates and such differences could be material.

 

While our significant accounting policies are described in more detail in Note 2 of our financial statements for the period ended April 30, 2015, we believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our financial statements.

 

Cash and Cash Equivalents 

For purposes of reporting within the statement of cash flows, the Company considers all cash on hand, cash held at brokerage account, cash accounts not subject to withdrawal restrictions or penalties, and all highly liquid debt instruments purchased with a maturity of three months or less to be cash and cash equivalents.

 

Revenue Recognition

The Company recognizes revenues when persuasive evidence of an arrangement exists; delivery has occurred; price is fixed or determinable; and collectability of the related receivable is reasonably assured. The Company closely follows the provisions of Financial Accounting Standards Board Accounting Standards Codification (ASC) 605 “Revenue Recognition”, which includes the guidelines of Staff Accounting Bulletin No. 104 as described above.   

 

 

 

 

  

Earnings (Loss) Per Common Share

The Company computes net earnings (loss) per share in accordance with ASC 260, “Earnings per Share”. ASC 260 requires presentation of both basic and diluted net earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing earnings (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.

 

Income Taxes 

The Company accounts for income taxes under ASC Topic 740, Income Taxes (“ASC Topic 740”). Under ASC Topic 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC Topic 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 

Internal Revenue Code Section 382 ("Section 382") imposes limitations on the availability of a company's net operating losses after certain ownership changes occur. The Section 382 limitation is based upon certain conclusions pertaining to the dates of ownership changes and the value of the Company on the dates of the ownership changes. It was determined that an ownership change occurred in September 2014. The amount of the Company's net operating losses incurred prior to the ownership change is limited based on the value of the Company on the date of the ownership change. Management has not determined the amount of net operating losses generated prior to the ownership change available to offset taxable income subsequent to the ownership change.

 

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

Not applicable because we are a smaller reporting company.

 

Item 4. Controls and Procedures

 

Disclosure Controls and Procedures

 

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) (the Company’s principal financial and accounting officer), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures are not effective as of April 30, 2015 to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure for the reason described below. 

 

Because of our limited operations and a small number of employees, we lack segregation of duties in our normal day to day functions. In addition, we lack a formal audit committee with a financial expert. As we grow and expand our operations we will engage additional employees and experts as needed. However, there can be no assurance that our operations will expand. 

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting that occurred during the period covered by this report 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

 

From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.

 

 Item 1A. Risk Factors

 

Not required for smaller reporting companies.

 

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.

 

 

  

Item 6. Exhibits

 

Exhibit No.		Description
3.1		Certificate of Amendment to Articles of Incorporation (1).
10.1		Stock Purchase Agreement, dated September 23, 2014 by and among John Fahlberg, Nakul Gupta, and Oksana Murarova (2).
10.2		Intellectual Property Transfer Agreement, dated September 29, 2014 (3).
31.1		Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Schema
101.CAL		XBRL Taxonomy Calculation Linkbase
101.DEF		XBRL Taxonomy Definition Linkbase
101.LAB		XBRL Taxonomy Label Linkbase
101.PRE		XBRL Taxonomy Presentation Linkbase

 

In accordance with SEC Release 33-8238, Exhibit 32.1 is being furnished and not filed.

 

(1) Incorporated by reference to Exhibit 3.1 to the Current Report to Form 8-K filed with the SEC on September 30, 2014.

 

(2) Incorporated by reference to Exhibit 10.1 to the Current Report to Form 8-K filed with the SEC on September 30, 2014.

 

(3) Incorporated by reference to Exhibit 10.1 to the Current Report to Form 8-K filed with the SEC on November 12, 2014.

 

 

 

SIGNATURES

 

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

 

 

Date: June 15, 2015

 

Clone Algo Technologies Inc.
/s/ Nakul Gupta
Name: Nakul Gupta
Chief Executive Officer and Chief Financial Officer
(Duly Authorized Officer, Principal Executive Officer and Principal Financial Officer)

 

 

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