Notes
to Financial Statements
For
the Years Ended October 31, 2016 and 2015
NOTE
1 – NATURE OF OPERATIONS
Description
of Business and History
The
Company was incorporated on October 26, 2009 in the State of Nevada. The Company originally engaged in the development of a website
and also the design and development of a catalogue to sell over the counter and prescription medications, and supplements. In
2012, the Company undertook a change in focus to the natural resources sector where it was engaged in the acquisition and exploration
of base metals and mineral mining properties.
On
April 5, 2016, the Company completed the purchase of Viva Entertainment Group, Inc. (“Viva Entertainment”), a Delaware
corporation, from EMS Find, Inc. (“EMS”) pursuant to a stock purchase agreement. Viva Entertainment’s Chief
Executive Officer, Johnny Falcones, was appointed as the Company’s sole director, President and Chief Executive Officer
to manage the development and marketing of Viva Entertainment’s over the top (IPTV/OTT) application for connected TV’s,
desktop computers, tablets, and smart phones.
Pursuant
to the stock purchase agreement, the Company and EMS agreed to transfer control of Viva Entertainment to the Company through the
purchase of all outstanding shares of stock of Viva Entertainment by the Company in exchange for the issuance to EMS of a 10%
promissory note in the principal amount of $100,000, due six months from the Closing (the “EMS Note”), and the issuance
of 22,000,000 shares of common stock to Johnny Falcones. For accounting purposes, the transaction was treated as a reverse merger
since the acquired entity now forms the basis for operations and the transaction resulted in a change in control, with the acquired
company electing to become the successor issuer for reporting purposes. The accompanying financial statements have been prepared
to reflect the assets, liabilities and operations of Viva Entertainment Group, Inc. exclusive of Black River Petroleum since all
predecessor operations were discontinued. As part of the transaction, stock payable and amounts due to former officers were forgiven,
with the balances recorded as Contributed Capital. For equity purposes, additional paid-in capital and retained deficit shown
are those of Viva, exclusive of Black River Petroleum.
In
management’s opinion, all adjustments necessary for a fair statement of the results for the presented periods have been
made. All adjustments made were of a normal recurring nature.
Viva
Entertainment Group Inc. (F/K/A Black River Petroleum Corp.) (the “Company”) develops and markets Viva Entertainment’s
over the top (IPTV/OTT) application for connected TV’s, desktop computers, tablets, and smart phones. The Company is based
in Briarwood, New York.
The
company chose October 31
st
as its fiscal year end.
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles
generally accepted in the United States for interim information Regulation S-K. Accordingly, they do not include all of the information
and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In
the opinion of management, all adjustments consisting of a normal and recurring nature considered necessary for a fair presentation
have been included.
Use
of Estimates
The
preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and
the reported amounts of net revenue and expenses in the reporting period. We regularly evaluate our estimates and assumptions
related to the useful life and recoverability of long-lived assets, stock-based compensation and deferred income tax asset valuation
allowances. We base our estimates and assumptions on current facts, historical experience and various other factors that we believe
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 us may differ materially and adversely from our estimates. To the extent there are material differences between
our estimates and the actual results, our future results of operations will be affected.
Cash
and Cash Equivalents
The
Company considers all highly liquid instruments with original maturities of three months or less when acquired, to be cash equivalents.
As of October 31, 2016 and October 31, 2015, the company had no cash equivalents.
Income
Taxes
The
Company accounts for income taxes under the provisions issued by the FASB which requires recognition of deferred tax liabilities
and assets for the expected future tax consequences of events that have been included in the consolidated financial statements
or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial
statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are
expected to reverse. The Company computes tax asset benefits for net operating losses carried forward. The potential benefit of
net operating losses has not been recognized in these financial statements because the Company cannot be assured it is more likely
than not it will utilize the net operating losses carried forward in future years.
Loss
Per Common Share
The
Company reports net loss per share in accordance with provisions of the FASB. The provisions require dual presentation
of basic and diluted loss per share. Basic net loss per share excludes the impact of common stock equivalents. Diluted net loss
per share utilizes the average market price per share when applying the treasury stock method in determining common stock equivalents.
As of October 31, 2016 and 2015, there were no dilutive common stock equivalents outstanding.
Fair
Value of Financial Instruments
Pursuant
to ASC No. 820, “Fair Value Measurements and Disclosures”, the Company is required to estimate the fair value of all
financial instruments included on its balance sheet as of October 31, 2016 and 2015. The Company’s financial instruments
consist of cash and derivative liabilities. The Company considers the carrying value of such amounts in the financial
statements to approximate their fair value due to the short-term nature of these financial instruments.
The
Company adopted ASC No. 820-10 (ASC 820-10), Fair Value Measurements. ASC 820-10 relates to financial assets and financial
liabilities. ASC 820-10 defines fair value, establishes a framework for measuring fair value in accounting principles generally
accepted in the United States of America (GAAP), and expands disclosures about fair value measurements. The provisions of this
standard apply to other accounting pronouncements that require or permit fair value measurements and are to be applied prospectively
with limited exceptions.
ASC
820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. This standard is now the single source in GAAP for the definition of fair
value, except for the fair value of leased property as defined in SFAS 13. ASC 820-10 establishes a fair value hierarchy that
distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources
(observable inputs) and (2) an entity’s own assumptions, about market participant assumptions, that are developed based
on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad
levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level
1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under ASC 820-10 are
described below:
|
|
•
|
Level
1
|
Unadjusted
quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
|
|
|
•
|
Level
2
|
Inputs
other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly,
including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets
or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability
(e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation
or other means.
|
|
|
•
|
Level
3
|
Inputs
that are both significant to the fair value measurement and unobservable. These inputs rely on management's own assumptions
about the assumptions that market participants would use in pricing the asset or liability. (The unobservable inputs are developed
based on the best information available in the circumstances and July include the Company's own data.)
|
The
following presents the Company's fair value hierarchy for those assets and liabilities measured at fair value on a non-recurring
basis as of October 31, 2016 and 2015:
October
31, 2016:
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Convertible Notes Payable, net
|
|
$
|
367,323
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
367,323
|
|
|
Derivative Liability
|
|
|
1,248,689
|
|
|
|
|
|
|
|
|
|
|
|
1,248,689
|
|
|
Total
|
|
$
|
1,616,012
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,616,012
|
|
October
31, 2015:
|
|
|
|
Level
1
|
|
|
|
Level
2
|
|
|
|
Level
3
|
|
|
|
Total
|
|
|
Convertible
Notes Payable
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Total
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Derivative
Financial Instruments
Fair
value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity
instruments, and measurement of their fair value for accounting purposes. In determining the appropriate fair value, the Company
uses the Multinomial Lattice model. In assessing the convertible debt instruments, management determines if the convertible debt
host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement.
If the instrument is not considered conventional convertible debt, the Company will continue its evaluation process of these instruments
as derivative financial instruments.
Once
determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease
in the fair value being recorded in results of operations as an adjustment to fair value of derivatives. In addition, the fair
value of freestanding derivative instruments such as warrants, are also valued using the Multinomial Lattice model.
Recently
Issued Accounting Standards
In
July 2015, FASB issued ASU No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory” more closely
align the measurement of inventory in GAAP with the measurement of inventory in International Financial Reporting Standards (IFRS).
The amendments in this ASU do not apply to inventory that is measured using last-in, first-out (LIFO) or the retail inventory
method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO)
or average cost. An entity should measure inventory within the scope of this Update at the lower of cost and net realizable value.
Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of
completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail
inventory method. For public business entities, this ASU is effective for fiscal years beginning after December 15, 2016, including
interim periods within those fiscal years. For all other entities, this ASU is effective for fiscal years beginning after December
15, 2016, and interim periods within fiscal years beginning after December 15, 2017. The amendments in this ASU should be applied
prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. We are currently
reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial
condition.
In
August 2015, FASB issued ASU No.2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date”
defers the effective date ASU No. 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities,
and certain employee benefit plans should apply the guidance in Update 2014-09 to annual reporting periods beginning after December
15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual
reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. All other
entities should apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2018, and interim
reporting periods within annual reporting periods beginning after December 15, 2019. All other entities may apply the guidance
in ASU No. 2014-09 earlier as of an annual reporting period beginning after December 15, 2016, including interim reporting periods
within that reporting period. All other entities also may apply the guidance in Update 2014-09 earlier as of an annual reporting
period beginning after December 15, 2016, and interim reporting periods within annual reporting periods beginning one year after
the annual reporting period in which the entity first applies the guidance in ASU No. 2014-09. We are currently reviewing the
provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.
All
other newly issued accounting pronouncements but not yet effective have been deemed either immaterial or not applicable.
NOTE
3 -INCOME TAXES
Deferred
income taxes arise from temporary differences resulting from income and expense items reported for financial accounting and tax
purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets
and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability
are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse.
The Company does not have any uncertain tax positions.
The
Company currently has net operating loss carryforwards aggregating $2,116,676 (2015: $0), which expire through 2031. The deferred
tax asset related to the carryforwards has been fully reserved.
The
Company has deferred income tax assets, which have been fully reserved, as follows as of October 31, 2016 and 2015:
|
|
|
2016
|
|
2015
|
|
Deferred
tax assets
|
|
$
|
740,837
|
|
|
$
|
—
|
|
|
Valuation
allowance for deferred tax assets
|
|
|
(740,837
|
)
|
|
|
—
|
|
|
Net
deferred tax assets
|
|
$
|
—
|
|
|
$
|
—
|
|
NOTE
4 – RELATED PARTY TRANSACTIONS
In
connection with the acquisition of Viva Entertainment and the resignation of our former officers and directors, the
Company received forgiveness of stock payable of $3,390,000 and amounts due to former CEO of $132,854. These amounts were
written off prior to closing and have therefore not been included in the Statement of Equity. However, the former CEO funded
additional $30,000 to the Company for working capital during the year ended October 31, 2016.
The
detail composition of the $148,242 in accrued wages with related parties as of October 31, 2016 is as follows: Johnny
Falcones $50,681, Alberto Gomez $63,781 and John Sepulveda $33,780. This accrual covered services rendered by the employees for the period from April, 2016 through October 31, 2016
less payments made to such employees during the period.
We issued to Edwin Batiz 2,500,000
restricted common shares, upon the execution of this agreement, as fully paid and non-assessable shares restricted common stock
for services rendered to us under this agreement.
The detail composition of the
$512,400 in stock payable with related parties as of October 31, 2016 is as follows: Johnny Falcones $487,200, Alberto Gomez $16,800
and John Sepulveda $8,400. This stock payable is due to unissued shares earned on the employment agreements during the year ended
October 31, 2016.
In addition, John Sepulveda funded
$10,000 to the Company for working capital during the year ended October 31, 2016.
The $1,500 of donated capital
was a pre-reverse merger item from the company’s CEO for services and payment of incorporation fees.
NOTE
5 – SOFTWARE
In
accordance with FASB ASC 210-10-05-3, the Company has established a technological feasibility date, the software development costs
have been analyzed and it has been determined that all software development costs were incurred subsequent to the feasibility
date. The useful life of capitalized software costs has been assumed to be 3 years. Total software development costs were $68,553
and the appropriate amortization has been taken, also in accordance with FASB ASC 210-10-05-3.
Capitalized
Software was comprised of the following amounts as of October 31, 2016 and 2015, respectively.
|
|
|
|
October
31, 2016
|
|
|
|
October
31, 2015
|
|
|
Software costs
|
|
|
$68,
553
|
|
|
$
|
—
|
|
|
Accumulate
amortization
|
|
|
(7,131
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
software Costs, net accumulated amortization
|
|
$
|
61,422
|
|
|
$
|
—
|
|
The
above mentioned software was purchased during the year ending October 31, 2016 by way of a series of payments made to a
software developer called Axor. The beta stage software is for development of over the top technology, abbreviated as OTT in
the industry, to air wireless live television, movies, on demand content and radio. Revenues will start immediately after
finishing the transfer of movies and networks to the system which is expected in the upcoming quarter. No impairment was
recorded during the year ended October 31, 2016 as the product has been completed but has not yet launched to the customer as
of October 31, 2016.
The
Company has an arrangement with Axor for $4,000 in monthly payments. At October 31, 2016, $17,075 is due to Axor. No future monthly
commitments exist under the month-to-month arrangement.
NOTE
6 – CONVERTIBLE NOTES PAYABLE
|
|
|
Principal
Balance
|
|
Loan
Discount
|
|
Accrued
interest
|
|
Total
|
|
October 31, 2015
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Issued
in the year
|
|
$
|
975,100
|
|
|
$
|
(975,100
|
)
|
|
|
—
|
|
|
|
—
|
|
|
Converted into shares
of common stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Amortization of
debt discount
|
|
|
—
|
|
|
|
367,323
|
|
|
|
—
|
|
|
|
367,323
|
|
|
Interest
accrued
|
|
|
—
|
|
|
|
—
|
|
|
|
43,426
|
|
|
|
—
|
|
|
April
30, 2016
|
|
$
|
975,100
|
|
|
$
|
(607,777
|
)
|
|
|
43,426
|
|
|
$
|
367,323
|
|
The
Company evaluated the terms of the conversion features of its convertible debentures in accordance with ASC Topic No. 815 - 40,
Derivatives and Hedging - Contracts in Entity's Own Stock
and determined they are indexed to the Company's common stock
and the conversion features meet the definition of a liability, and therefore bifurcated the conversion features and accounted
for them as a separate derivative liability.
Between
April 6, 2016 and October 31, 2016, the Company issued convertible promissory notes totaling $975,100. The notes bear interest
at rates between 0-12% per annum and become due and payable one year from the date of issuance. The Company received cash proceeds
of $652,100, net of original issuance discounts of $44,500 which included payments to various vendors. The debt discount was recorded
as a reduction (contra-liability) of the convertible debenture and amortized over the life of the convertible debenture. All principal
and accrued interest on the Notes is convertible at any time into shares of the Company's common stock at the election of the
holder at a conversion price for each share of Common Stock between 50-55%
of the lowest reported trading price of the
Company’s common stock for the twenty prior
trading days including the day upon which the conversion notice is received
by the Company or its transfer agent. The Company has the right to prepay the Notes during the first six months following the
date of issuance with premium between 135-150% of all amounts owed, including default interest, depending upon when the prepayment
is effectuated. The Notes may not be redeemed after 180 days. Accrued interest and interest expense is $37,727 and $0 as of October
31, 2016 and October 31, 2015, respectively.
On
April 6, 2016, the Company issued a convertible promissory note for $145,000 to Essex Global Investments. The note bears interest
at the rate of 10% per annum and becomes due and payable March 30, 2017. The Company received proceeds of $135,000, net of original
issuance discounts of $10,000 which included prepaid interest and legal expenses. The debt discount was recorded as a reduction
(contra-liability) of the convertible debenture and amortized over the life of the convertible debenture. The Company has the
right to prepay the Note during the first six months following the date of issuance with a premium of up to 135% of all amounts
owed, including default interest, depending upon when the prepayment is effectuated.
On
May 23, 2016, the Company issued a convertible promissory note in the amount of $50,000 to GreenTree Financial Group, Inc. The
note bears interest at a rate of 12% per annum and becomes due and payable six months from the date of issuance. The Company received
SEC compliance services in the amount of $50,000 in exchange for the note. All principal and accrued interest on the note is convertible
at any time into shares of the Company's common stock at the election of the holder at a conversion price for each share of common
stock of 50%
of the lowest reported trading price of the Company’s common stock for the lowest of the three
prior
trading days including the day upon which the conversion notice is received by the Company or its transfer agent.
The Company has the right to prepay this note during the first six months following the date of issuance with premium of 120%
of all amounts owed, including default interest, depending upon when the prepayment is effectuated. The note may not be redeemed
after 180 days.
On
May 3, 2016, the Company issued a convertible promissory note in the amount of $78,750 to LG Capital Funding, LLC. The note bears
interest at a rate of 10% per annum and becomes due and payable one year from the date of issuance. The Company received capital
in the amount of $78,750 in exchange for the note. All principal and accrued interest on the note is convertible at any time into
shares of the Company's common stock at the election of the holder at a conversion price for each share of common stock at 50%
of
the lowest reported trading price of the Company’s common stock for the twenty prior
trading days including
the day upon which the conversion notice is received by the Company or its transfer agent. The Company has the right to prepay
the note during the first six months following the date of issuance with a premium between 125-150% of the amount owed, including
default interest, depending upon when the prepayment is effectuated. The note may not be redeemed after 180 days.
On
May 3, 2016, the Company issued a convertible promissory note in the amount of $78,750 to Cerberus Finance Group Ltd. The note
bears interest at a rate of 10% per annum and becomes due and payable six months from the date of issuance. The Company received
capital in the amount of $78,750 in exchange for the note. All principal and accrued interest on the note is convertible at any
time into shares of the Company's common stock at the election of the holder at a conversion price for each share of common stock
at 50%
of the lowest reported trading price of the Company’s common stock for the twenty prior
trading
days including the day upon which the conversion notice is received by the Company or its transfer agent. The Company has the
right to prepay the note during the first six months following the date of issuance with a premium between 125-150% of the amount
owed, including default interest, depending upon when the prepayment is effectuated. The note may not be redeemed after 180 days.
On
June 3, 2016, the Company issued a convertible promissory note in the amount of $78,750 to LG Capital Funding, LLC. The note bears
interest at a rate of 10% per annum and becomes due and payable six months from the date of issuance. The Company received capital
in the amount of $78,750 in exchange for the note. All principal and accrued interest on the note is convertible at any time into
shares of the Company's common stock at the election of the holder at a conversion price for each share of common stock at 50%
of
the lowest reported trading price of the Company’s common stock for the twenty prior
trading days including
the day upon which the conversion notice is received by the Company or its transfer agent. The Company does not have the right
to prepay the note.
On June 8, 2016, the Company issued a convertible promissory note in the amount of $78,750 to Cerberus Finance
Group Ltd. The note bears interest at a rate of 10% per annum and becomes due and payable one year from the date of issuance.
The Company received capital in the amount of $78,750 in exchange for the note. All principal and accrued interest on the note
is convertible at any time into shares of the Company's common stock at the election of the holder at a conversion price for each
share of common stock at 50%
of the lowest reported trading price of the Company’s common stock for the twenty
prior
trading days including the day upon which the conversion notice is received by the Company or its transfer agent.
The Company does not have the right to prepay the note.
On
July 1, 2016, the Company entered into a Loan Agreement with Greentree Financial Group, Inc., and issued a 12% Convertible Promissory
Note pursuant thereto. The note was in a principal amount of $50,000, and is convertible a price equal to fifty percent (50%)
of the Volume Weighted Average Price (“VWAP”) for the five day period prior to the conversion date. The note further
states that no amount of the note may be converted in an amount that would result in the beneficial ownership of greater than
4.99% of the common stock immediately after giving effect to the conversion, with the exception that the limitation may be increased
to 9.99% with 61 days prior notice. The Company believes that the amount of shares registered underlying the note is sufficient
for conversion of the note.
On
July 1, 2016, the Company entered into a Loan Agreement with Collision Capital, LLC, and issued a 12% Convertible Promissory Note
pursuant thereto. The note was in a principal amount of $110,000, and is convertible a price equal to fifty percent (50%) of the
Volume Weighted Average Price (“VWAP”) for the five day period prior to the conversion date. The note further states
that no amount of the note may be converted in an amount that would result in the beneficial ownership of greater than 4.99% of
the common stock immediately after giving effect to the conversion, with the exception that the limitation may be increased to
9.99% with 61 days prior notice. The Company believes that the amount of shares registered underlying the note is sufficient for
conversion of the note.
On July 19, 2016, the Company
issued a convertible promissory note in the amount of $37,100 to Essex Global Investment Corp. The note bears interest at a rate
of 10% per annum and becomes due and payable one year from the date of issuance. The Company received capital in the amount of
$35,000, net of an original issuance discount of $2,100 which included prepaid interest and legal expenses. The debt discount
was recorded as a reduction (contra-liability) of the convertible debenture and amortized over the life of the convertible debenture.
All principal and accrued interest on the note is convertible at any time into shares of the Company's common stock at the election
of the holder at a conversion price for each share of common stock at 60%
of the lowest reported trading price of
the Company’s common stock for the twenty prior
trading days including the day upon which the conversion notice
is received by the Company or its transfer agent. The Company has the right to prepay the above seven notes during the first six
months following the date of issuance with premium between 115-120% of all amounts owed, including default interest, depending
upon when the prepayment is effectuated. The note may not be redeemed after 180 days.
On
August 1, 2016, the Company issued a convertible promissory note to Robert Rico in the aggregate principal face amount of $25,000,
pursuant to a consulting agreement dated August 1
st
, 2016 for services rendered
.
The note can be converted into common shares of the Company’s common stock at the request of the holder after six months
at a discount of 40% off the lowest preceding 20-day trading price at the time of conversion.
On
August 1, 2016, the Company issued a convertible promissory note to DBL Group, Inc. in the aggregate principal face amount of
$25,000, pursuant to a consulting agreement dated August 1, 2016 for services rendered
.
The note can be converted into common shares of the Company’s common stock at the request of the holder after six months
at a discount of 40% off the lowest preceding 20-day trading price at the time of conversion.
On
August 2, 2016, the Company issued a convertible promissory note to Crossover Promotions in the aggregate principal face amount
of $35,000
,
pursuant
to a consulting agreement dated August 2, 2016 for services rendered
. The note can be converted into common shares of the
Company’s common stock at the request of the holder after six months at a discount of 40% off the lowest preceding 20-day
trading price at the time of conversion.
On
August 4, 2016, the Company entered into a Service Agreement with Greentree Financial Group, Inc., and as payment for those services
issued a 12% Convertible Promissory note thereto. The note was in a principal amount of $25,000, , and is convertible a price
equal to five cents ($.05) per share, or fifty percent (50%) of the Volume Weighted Average Price (“VWAP”) for the
ten day period prior to the conversion date, whichever is lower. The note further states that no amount of the note may be converted
in an amount that would result in the beneficial ownership of greater than 4.99% of the common stock immediately after giving
effect to the conversion, with the exception that the limitation may be increased to 9.99% with 61 days prior notice. The Company
believes that the amount of shares registered underlying the note is sufficient for conversion of the note.
On
August 4, 2016, the Company entered into a Service Agreement with Collision Capital, LLC, and as payment for those services issued
a 12% Convertible Promissory note thereto. The note was in a principal amount of $25,000, , and is convertible a price equal to
five cents ($.05) per share, or fifty percent (50%) of the Volume Weighted Average Price (“VWAP”) for the ten day
period prior to the conversion date, whichever is lower. The note further states that no amount of the note may be converted in
an amount that would result in the beneficial ownership of greater than 4.99% of the common stock immediately after giving effect
to the conversion, with the exception that the limitation may be increased to 9.99% with 61 days prior notice. The Company believes
that the amount of shares registered underlying the note is sufficient for conversion of the note.
On
August 5, 2016, the Company issued a convertible promissory note to Hector Cruz in the aggregate principal face amount of $25,000,
pursuant to a consulting agreement dated August 5, 2016 for services rendered. The note can be converted into common shares of
the Company’s common stock at the request of the holder after six months at a discount of 40% off the lowest preceding 20-day
trading price at the time of conversion.
On
August 17, 2016, the Company issued a convertible promissory note to Mercedes Benites in the aggregate principal face amount of
$13,000, pursuant to a consulting agreement dated August 17, 2016 for services rendered
.
The note can be converted into common shares of the Company’s common stock at the request of the holder after six months
at a discount of 40% off the lowest preceding 20-day trading price at the time of conversion.
On September 7, 2016, the Company
issued a convertible promissory note in the amount of $45,000 to Crown Bridge Partners, LLC. The note bears interest at a rate
of 8% per annum and becomes due and payable one year from the date of issuance. The Company received capital in the amount of
$40,500, net of an original issuance discount of $4,500 which included prepaid interest and legal expenses. The debt discount
was recorded as a reduction (contra-liability) of the convertible debenture and amortized over the life of the convertible debenture.
All principal and accrued interest on the note is convertible at any time into shares of the Company's common stock at the election
of the holder at a conversion price for each share of common stock at 50%
of the lowest reported trading price of
the Company’s common stock for the twenty prior
trading days including the day upon which the conversion notice
is received by the Company or its transfer agent. The Company has the right to prepay the above seven notes during the first six
months following the date of issuance with a premium between 135-150% of all amounts owed, including default interest, depending
upon when the prepayment is effectuated. The note may not be redeemed after 180 days.
On
September 12, 2016, the Company issued a convertible promissory note to Greentree Financial Group, Inc. in the aggregate
principal face amount of $50,000, which is due and payable together with interest at the rate of 12% per annum in September of
2017. The principal and interest may be converted into shares of common stock equal to 50% of the average of the lowest 3 closing
bid prices for the ten prior trading days. Consulting services were rendered subsequent to period end in exchange for the note
pursuant to an agreement in September of 2016.
As
of October 2016, the company issued convertible promissory notes totaling $323,000 as consideration for services contracts to
the following individuals:
|
Name
|
|
Amount
|
|
|
Date
|
|
|
Dbl Group
|
$
|
25,000
|
|
|
August
1, 2016
|
|
|
Robert Rico
|
$
|
25,000
|
|
|
August
1, 2016
|
|
|
Crossover Promotions
|
$
|
35,000
|
|
|
August
2, 2016
|
|
|
Hector Cruz
|
$
|
25,000
|
|
|
August
5, 2016
|
|
|
Mercedes Benites
|
$
|
13,000
|
|
|
August
17, 2016
|
|
|
Greentree Financial
Group, Inc.
|
$
|
50,000
|
|
|
May
23, 2016
|
|
|
Greentree Financial
Group, Inc.
|
$
|
50,000
|
|
|
July
1, 2016
|
|
|
Greentree Financial
Group, Inc.
|
$
|
25,000
|
|
|
August
4, 2016
|
|
|
Greentree Financial
Group, Inc.
|
$
|
50,000
|
|
|
September
12, 2016
|
|
|
Collision Capital LLC
|
$
|
25,000
|
|
|
August
4, 2016
|
|
These
notes bear interest between 0 -12% and are due and payable twelve months from the date of issuance. They can be converted into
common shares of the Company’s common stock at the request of the holder after six months at a discount of 40% off the lowest
preceding 20-day trading price of at the time of conversion.
The
Company valued the conversion features on its convertible debentures at origination at $1,731,426, of which $975,100 was recognized
as a debt discount on the convertible debenture. The balance of $901,326 was recorded as derivative issuance expense. The debt
discount was recorded as reduction (contra-liability) to the convertible debenture and will be amortized over the life of the
convertible debentures. ASC 815 requires assessment of the fair market value of derivative liability at the end of each reporting
period and recognition of any change in the fair market value as other income or expense.
Changes
in Derivative Liabilities were as follows:
|
October 31, 2015
|
|
|
|
Increase
due to new issuances
|
|
$
|
1,731,426
|
|
|
Mark
to Market adjustment
|
|
|
(428,737
|
)
|
|
October
31, 2016
|
|
$
|
1,248,689
|
|
NOTE
7 – NOTES PAYABLE
Pursuant
to the Stock Purchase Agreement, the Company issued to EMS a promissory note in the principal amount of $100,000, due six months
from the Closing, which represents the purchase price paid by the Company for Viva Entertainment. The note bears interest at the
rate of 10% per annum. Accrued interest and interest expense is $5,699 and $0 as of October 31, 2016 and October 31, 2015, respectively.
In
August 2016, the Company received a $10,000 short term working capital loan from one of its officers. The loan is due on
demand. In October 2016, the Company paid $2,500 as a one time interest payment on the loan, interest and accrued interest
is $169.
NOTE
8 – GOING CONCERN
The
losses, negative cash flows from operations, accumulated deficit and negative working capital deficiency sustained by the Company
raise substantial doubt about the Company's ability to continue as a going concern. These financial statements do not include
any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities
that might be necessary in the event the Company cannot continue in existence.
NOTE 9
– COMMON STOCK
During
the year ended October 31, 2016, the Company had the following common stock transactions, 33,085,629 shares issued to various
individuals for consulting services previously rendered with a total value of $2,743,585 using the closing stock price on the
date of the service agreement. These were common shares issued for services that occurred between April and October of 2016.
On
April 6, 2016, 2,000,000 shares issued as part of loan origination fees valued at $100,000 valued by using the stock date on the
debt issuance date. The remaining balance was discounted by $45,000 due to the beneficial conversion feature.
On
April 5, 2016, the resignation of our former officers and directors, the Company received forgiveness of stock payable of $3,390,000
and amounts due to former CEO of $132,854.
On
April 6, 2016, 22,000,000 common shares issued for the reverse merger to current President, Johnny
Falcones.
The
$1,500 of donated capital was a pre-reverse merger item from the company’s CEO for services and payment of incorporation
fees.
June
10, 2016, 150,000 shares were cancelled from a person named Tim Cognat because he was paid in cash for services performed and
the shares were subsequently cancelled.
Each
of these issuances was made pursuant to an exemption from registration under Rule 144 of the Securities Act of 1933.
We issue to Edwin Batiz 2,500,000
restricted common shares, upon the execution of his employment agreement, as fully paid and non-assessable shares restricted common
stock for services rendered to us under this agreement. These shares are included in the shares issued for services mentioned above.
The detail composition of the $512,400
in stock payable with related parties as of October 31, 2016 is as follows: Johnny Falcones $487,200, Alberto Gomez $16,800 and
John Sepulveda $8,400. This stock payable is due to unissued shares earned on the employment agreements during the year ended October
31, 2016.
NOTE 10 – SUBSEQUENT EVENTS
Subsequent to October 31, 2016, the Company issued a
total of 65,894,047 shares of restricted common stock to several individuals for services rendered and on the conversion of notes
payable.