UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended January 31, 2009
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ____________ to ____________
DIGITAL VALLEYS CORP.
(Exact name of registrant as specified in charter)
Nevada 333-152798 98-05737383
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1100 DEXTER AVENUE NORTH
SUITE 100
SEATTLE WA 98109
(Address of principal executive offices)
206-273-7892
(Registrant's Telephone Number, including Area Code)
Check whether the issuer (1) filed all reports required to be filed by section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirement for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
As of March 18, 2009, 2,300,000 shares of the issuer's common stock, $0.001 par
value, were outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) 3
Item 2. Management's Discussion and Analysis or Plan of Operation 8
Item 3. Quantitative and Qualitative Disclosures about Market Risk 10
Item 4. Controls and Procedures 10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits 12
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DIGITAL VALLEYS CORP.
(A Development Stage Company)
BALANCE SHEETS
January 31, April 30,
2009 2008
-------- --------
(unaudited)
ASSETS
Current assets
Cash and bank accounts $ 38,640 $ 55,072
-------- --------
Total assets $ 38,640 $ 55,072
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 4,224 $ 4,500
Due to Stockholder 2,571 2,939
-------- --------
Total liabilities 6,795 7,439
-------- --------
Stockholders' equity
Authorized
100,000,000 Common shares with a par value of $0.01 per share
Issued and outstanding 2,300,000 2,300 2,300
Additional paid-in capital 52,700 52,700
Deficit accumulated during the development stage (23,155) (7,367)
-------- --------
Total stockholders' equity 31,845 47,633
-------- --------
Total liabilities and stockholders' equity $ 38,640 $ 55,072
======== ========
The accompanying notes are an integral part of these financial statements.
3
DIGITAL VALLEYS CORP.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(unaudited)
From
Date of Date of
Three months Three months Nine months Incorporation Incorporation
ended ended ended (May 21, 2007) to (May 21, 2007) to
January 31, January 31, January 31, January 31, January 31,
2009 2008 2009 2008 2009
---------- ---------- ---------- ---------- ----------
REVENUE $ -- $ -- $ -- $ -- $ --
---------- ---------- ---------- ---------- ----------
OPERATING EXPENSES
Accounting and legal 1,000 -- 14,500 -- 17,500
General & Administrative 600 -- 1,248 -- 4,088
Bank Fees -- 27 40 27 67
Consulting Fees -- -- -- -- 1,500
---------- ---------- ---------- ---------- ----------
Loss before income taxes (1,600) (27) (15,788) (27) (23,155)
Provision for income taxes -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Net loss $ (1,600) $ (27) $ (15,788) $ (27) $ (23,155)
========== ========== ========== ========== ==========
Basic and diluted loss per
Common share (1)
========== ========== ========== ==========
Weighted average number of
common shares outstanding 1,840,000 1,600,000 1,840,000 1,600,000
========== ========== ========== ==========
----------
(1) less than $0.01
The accompanying notes are an integral part of these financial statements.
4
DIGITAL VALLEYS CORP.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
(unaudited)
Deficit
Accumulated
Common Stock Additional During the Total
--------------------- Paid in Development Stockholders'
Shares Amount Capital Stage Equity
------ ------ ------- ----- ------
Inception, May 21, 2007 -- $ -- $ -- $ -- $ --
Shares issued to founder on
May 21, 2007 @ $0.0125 per share 1,600,000 1,600 18,400 -- 20,000
Private placement on January 31, 2008
@ $0.05 per share 700,000 700 34,300 -- 35,000
Net loss for the year ending
April 30, 2008 -- -- -- (7,367) (7,367)
--------- ------- -------- --------- --------
Balance, April 30, 2008 2,300,000 2,300 52,700 (7,367) 47,633
Net loss for the period ending
January 31, 2009 -- -- -- (15,788) (15,788)
--------- ------- -------- --------- --------
Balance, January 31, 2009 2,300,000 $ 2,300 $ 52,700 $ (23,155) $ 31,845
========= ======= ======== ========= ========
The accompanying notes are an integral part of these financial statements.
5
DIGITAL VALLEYS CORP.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(unaudited)
From
Date of Date of
Nine months Incorporation Incorporation
ended (May 21, 2007) to (May 21, 2007) to
January 31, January 31, January 31,
2009 2008 2009
-------- -------- --------
OPERATING ACTIVITIES
Net loss for the period $(15,788) $ (27) $(23,155)
Adjustments to reconcile net (loss) to net
cash (used in) operating activities:
Increase (Decrease) in accrued liabilities (276) -- 4,224
Increase (Decrease) in due to stockholder (368) 100 2,571
-------- -------- --------
Net cash used in operating activities (16,432) 73 (16,360)
-------- -------- --------
INVESTING ACTIVITIES
Net cash used in operating activities -- -- --
-------- -------- --------
FINANCING ACTIVITIES
Proceeds from issuance of common stock -- 20,000 55,000
-------- -------- --------
Cash from financing activities -- 20,000 55,000
-------- -------- --------
Change in cash during the period (16,432) 20,073 38,640
Cash, beginning of the period 55,072 -- --
-------- -------- --------
Cash, end of the period $ 38,640 $ 20,073 $ 38,640
======== ======== ========
Supplemental disclosure with respect to cash flows:
Cash paid for income taxes $ -- $ -- $ --
Cash paid for interest $ -- $ -- $ --
Non cash activities:
Stock issued for services $ -- $ -- $ --
Stock issued for accounts payable $ -- $ -- $ --
Stock issued for notes payable and interest $ -- $ -- $ --
Stock issued for convertible debentures and interest $ -- $ -- $ --
Convertible debentures issued for services $ -- $ -- $ --
Warrants issued $ -- $ -- $ --
Note payable issued for finance charges $ -- $ -- $ --
Forgiveness of note payable and accrued interest $ -- $ -- $ --
Stock issued for penalty on default of convertible debenture $ -- $ -- $ --
The accompanying notes are an integral part of these financial statements.
6
Digital Valleys Corp.
(A Development Stage Company)
Notes to Financial Statements
January 31, 2009
NOTE 1 - CONDENSED FINANCIAL STATEMENTS
The accompanying financial statements have been prepared by the Company without
audit. In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations, and cash flows at January 31, 2009, and for all periods
presented herein, have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted. It is suggested
that these condensed financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's April 30, 2008
audited financial statements. The results of operations for the periods ended
January 31, 2009 and 2008 are not necessarily indicative of the operating
results for the full years.
NOTE 2 - GOING CONCERN
The Company's financial statements are prepared using generally accepted
accounting principles in the United States of America applicable to a going
concern which contemplates the realization of assets and liquidation of
liabilities in the normal course of business. The Company has not yet
established an ongoing source of revenues sufficient to cover its operating
costs and allow it to continue as a going concern. The ability of the Company to
continue as a going concern is dependent on the Company obtaining adequate
capital to fund operating losses until it becomes profitable. If the Company is
unable to obtain adequate capital, it could be forced to cease operations.
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
equity and/or debt financing. However management cannot provide any assurances
that the Company will be successful in accomplishing any of its plans.
The ability of the Company to continue as a going concern is dependent upon its
ability to successfully accomplish the plans described in the preceding
paragraph and eventually secure other sources of financing and attain profitable
operations. The accompanying financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a going concern.
NOTE 3 - DUE TO STOCKHOLDER
As at January 31, 2009, there is a balance owing to a stockholder of the Company
in the amount of $2,571. The amount owing to stockholder is unsecured,
non-interest bearing and has no specific terms of repayment.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This report on Form 10-Q contains forward-looking statements that involve risks
and uncertainties. You should not place undue reliance on these forward-looking
statements. Our actual results could differ materially from those anticipated in
the forward-looking statements for many reasons, including the risks described
in this report, our Registration Statement on Form S-1 and other filings we make
from time to time with the Securities and Exchange Commission. Although we
believe the expectations reflected in the forward-looking statements are
reasonable, they relate only to events as of the date on which the statements
are made. We do not intend to update any of the forward-looking statements after
the date of this report to conform these statements to actual results or to
changes in our expectations, except as required by law.
This discussion and analysis should be read in conjunction with the unaudited
interim financial statements and notes thereto included in this Report and the
audited financials in our Registration Statement on Form S-1 filed with the
Securities and Exchange Commission.
OVERVIEW
We are a development stage company with limited operations and no revenues from
our business activities. Our auditors have issued a going concern opinion. This
means that our registered independent auditors believe there is substantial
doubt that we can continue as an on-going business for the next twelve months.
We do not anticipate that we will generate significant revenues until we have
developed our online help desk customer support system to assist service
companies in improving their customer relationship management. Accordingly, we
must raise cash from sources other than our operations in order to implement our
sales and marketing plan.
In our management's opinion this is a good time to develop an online help desk
customer support system to assist service companies in improving their customer
relationship management. However, if we are unable to procure the necessary
funding to complete our website development and market our online help desk
customer support system, or if we are unable to generate revenues in the future
for any reason, or if we are unable to make a reasonable profit in the future,
we may have to suspend or cease operations unless we are able to raise
additional capital. At the present time, we have not made any arrangements to
raise additional cash.
PLAN OF OPERATION
Our specific goal is to develop an online help desk customer support system to
assist service companies in improving their customer relationship management. We
expect our system to be used by organizations interested in improving their
customer relationship management by automating their customer support and by
establishing a centralized help desk. We plan for our software product to be
capable of providing a generic solution across a broad range of industries.
The company has completed its corporate website and has begun development of its
software product. We expect to have this accomplished by end of the next
quarter.
RESULTS OF OPERATIONS
NET INCOME (LOSS)
Our net loss for the three-month period and nine month period ended January 31,
2009, was $1,600 and $15,788, respectively. During the period from May 21, 2007
(date of inception), through January 31, 2009, we incurred a net loss of
$23,155. This loss consisted primarily of incorporation costs, legal and
accounting fees, consulting fees, website hosting costs, and administrative
expenses. Since inception, we have sold 2,300,000 shares of common stock.
8
EXPENSES
Our expenses for the three month period and nine month period ended January 31,
2009, were $1,600 and $15,788, respectively. During the period from May 21, 2007
(date of inception), through January 31, 2009, we incurred expenses of $23,155.
These expenses were comprised primarily of general and administrative, and legal
and accounting expenses, as well as banking fees.
LIQUIDITY AND CAPITAL RESOURCES
Our balance sheet as of January 31, 2009, reflects assets of $38,640. Cash and
cash equivalents from inception to date have been insufficient to provide the
working capital necessary to operate to date.
We anticipate generating losses and, therefore, may be unable to continue
operations in the future. If we require additional capital, we would have to
issue debt or equity or enter into a strategic arrangement with a third party.
There can be no assurance that additional capital will be available to us. We
currently have no agreements, arrangements, or understandings with any person to
obtain funds through bank loans, lines of credit, or any other sources.
GOING CONCERN CONSIDERATION
Our registered independent auditors included an explanatory paragraph in their
report on our financial statements as of and for the period ended April 30,
2008, regarding concerns about our ability to continue as a going concern. Our
interim financial statements as of and for the period ended January 31, 2009,
contain additional note disclosures describing the circumstances that lead to
this disclosure by our registered independent auditors.
Due to this doubt about our ability to continue as a going concern, management
is open to new business opportunities which may prove more profitable to our
shareholders. Historically, we have been able to raise a limited amount of
capital through private placements of our equity stock, but we are uncertain
about our continued ability to raise funds privately. Further, we believe that
our company may have difficulties raising capital until we locate a prospective
business opportunity through which we can pursue our plan of operation. If we
are unable to secure adequate capital to continue our acquisition efforts, our
business may fail and our stockholders may lose some or all of their investment.
Should our original business plan fail, we anticipate that the selection of a
business opportunity in which to participate will be complex and without
certainty of success. Management believes that there are numerous firms in
various industries seeking the perceived benefits of being a publicly registered
corporation. Business opportunities may be available in many different
industries and at various stages of development, all of which will make the task
of comparative investigation and analysis of such business opportunities
extremely difficult and complex. We can provide no assurance that we will be
able to locate compatible business opportunities.
PURCHASE OR SALE OF EQUIPMENT
We do not expect to purchase or sell any plant or significant equipment.
REVENUES
We had no revenues for the period from May 21, 2007 (date of inception) through
January 31, 2009.
OFF-BALANCE SHEET ARRANGEMENTS
We have no off-balance sheet arrangements.
9
ITEM 3. QUANITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
ITEM 4. CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS AND PROCEDURES:
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting. Internal control over financial reporting is
defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange
Act of 1934 as a process designed by, or under the supervision of, the company's
principal executive and principal financial officers and effected by the
company's board of directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
accounting principles generally accepted in the United States of America and
includes those policies and procedures that:
- Pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of the
assets of the company;
- Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance
with accounting principles generally accepted in the United States of
America and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and
directors of the company; and
- Provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of the company's
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate. All internal control systems,
no matter how well designed, have inherent limitations. Therefore, even those
systems determined to be effective can provide only reasonable assurance with
respect to financial statement preparation and presentation. Because of the
inherent limitations of internal control, there is a risk that material
misstatements may not be prevented or detected on a timely basis by internal
control over financial reporting. However, these inherent limitations are known
features of the financial reporting process. Therefore, it is possible to design
into the process safeguards to reduce, though not eliminate, this risk.
As of January 31, 2009 management assessed the effectiveness of our internal
control over financial reporting based on the criteria for effective internal
control over financial reporting established in Internal Control--Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission ("COSO") and SEC guidance on conducting such assessments. Based on
that evaluation, they concluded that, during the period covered by this report,
such internal controls and procedures were not effective to detect the
inappropriate application of US GAAP rules as more fully described below. This
was due to deficiencies that existed in the design or operation of our internal
controls over financial reporting that adversely affected our internal controls
and that may be considered to be material weaknesses.
The matters involving internal controls and procedures that our management
considered to be material weaknesses under the standards of the Public Company
Accounting Oversight Board were: (1) lack of a functioning audit committee due
to a lack of a majority of independent members and a lack of a majority of
10
outside directors on our board of directors, resulting in ineffective oversight
in the establishment and monitoring of required internal controls and
procedures; (2) inadequate segregation of duties consistent with control
objectives; and (3) ineffective controls over period end financial disclosure
and reporting processes. The aforementioned material weaknesses were identified
by our Chief Executive Officer in connection with the review of our financial
statements as of January 31, 2009.
Management believes that the material weaknesses set forth in items (2) and (3)
above did not have an effect on our financial results. However, management
believes that the lack of a functioning audit committee and the lack of a
majority of outside directors on our board of directors results in ineffective
oversight in the establishment and monitoring of required internal controls and
procedures, which could result in a material misstatement in our financial
statements in future periods.
MANAGEMENT'S REMEDIATION INITIATIVES
In an effort to remediate the identified material weaknesses and other
deficiencies and enhance our internal controls, we have initiated, or plan to
initiate, the following series of measures:
We will create a position to segregate duties consistent with control objectives
and will increase our personnel resources and technical accounting expertise
within the accounting function when funds are available to us. And, we plan to
appoint one or more outside directors to our board of directors who shall be
appointed to an audit committee resulting in a fully functioning audit committee
who will undertake the oversight in the establishment and monitoring of required
internal controls and procedures such as reviewing and approving estimates and
assumptions made by management when funds are available to us.
Management believes that the appointment of one or more outside directors, who
shall be appointed to a fully functioning audit committee, will remedy the lack
of a functioning audit committee and a lack of a majority of outside directors
on our Board.
We anticipate that these initiatives will be at least partially, if not fully,
implemented by July 31, 2009. Additionally, we plan to test our updated controls
and remediate our deficiencies by July 31, 2009.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
There was no change in our internal controls over financial reporting that
occurred during the period covered by this report, which has materially
affected, or is reasonably likely to materially affect, our internal controls
over financial reporting.
11
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We may be involved from time to time in ordinary litigation, negotiation and
settlement matters that will not have a material effect on our operations or
finances. We are not aware of any pending or threatened litigation against us or
our officers and directors in their capacity as such that could have a material
impact on our operations or finances.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS
Exhibit
Number Description
------ -----------
3.1 Articles of Incorporation (included as Exhibit 3.1 to the Form S-1
filed August 6, 2008, and incorporated herein by reference).
3.2 By-laws (included as Exhibit 3.2 to the Form S-1 filed August 6, 2008,
and incorporated herein by reference).
31 Certification of the Chief Executive and Chief Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32 Certification of Officers pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
12
SIGNATURE
In accordance with the requirements of the Securities Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
DIGITAL VALLEYS CORP.
Date: March 23, 2009 By: /s/ Felipe A. Pati
-------------------------------------------------
Name: Felipe A. Pati
Title: President, Treasurer, Secretary, and
Director (Principal Executive and Principal
Financial and Accounting Officer)
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated:
Date: March 23, 2009 By: /s/ Felipe A. Pati
-------------------------------------------------
Name: Felipe A. Pati
Title: President, Treasurer, Secretary, and Director
(Principal Executive and Financial Officer)
13