NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2016
(Unaudited)
NOTE 1 – INTERIM FINANCIAL STATEMENTS
The accompanying interim unaudited condensed
financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. 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 normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months ended March 31, 2016, are not necessarily indicative of the results that
may be expected for the year ending December 31, 2016. For further information, refer to the financial statements and footnotes
thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015.
The accompanying condensed financial statements
have been prepared in conformity with accounting principles generally accepted in the United States of America which contemplate
continuation of the Company as a going concern.
NOTE 2 – DESCRIPTION OF BUSINESS
Zonzia Media, Inc, initially organized as HDIMAX
Media, Inc., and incorporated in the State of Delaware in May 2014, is a multi-platform entertainment company focused on delivering
compelling content with the objective of generating both advertising and subscription revenue.
Reverse Merger with Indigo-Energy, Inc.
On November 21, 2014, through a wholly-owned
subsidiary of a public shell Company then known as Indigo-Energy, Inc., HDIMAX Acquisition Corporation, a Nevada corporation, was
merged with and into HDIMAX, Inc., a Delaware corporation (“HDIMAX”) (such merger, the “Merger”) pursuant
to the Agreement and Plan of Merger, effective as of September 2, 2014, and as amended effective as of November 20, 2014, by and
among Indigo-Energy, Inc. (our “company” or “we” or “us”), HDIMAX and HDIMAX Acquisition Corporation
(the “Merger Agreement”). HDIMAX was the surviving corporation of the Merger and as such will continue as a wholly-owned
subsidiary of our Company. Upon closing the merger, we changed our name to HDIMAX Media, Inc.
As a result of the Merger, all of HDIMAX’s
common stock was converted into 712,121,205 shares of our Company’s common stock, which represents approximately 94% of the
outstanding shares of our company’s common stock after giving effect to the Merger. The common stock issuance, representing
94% of the outstanding shares of the consolidated Company was accounted for as a reverse capitalization in accordance with accounting
principles generally accepted in the United States (“US GAAP”) and the Rules and Regulations as promulgated by the
United States Securities and Exchanges Commission (“SEC”).
On January
22,
2015, we entered into a Settlement Agreement in which we cancelled all of the 712,121,205 shares of restricted and unregistered
common stock previously issued to effectuate the merger with Rajinder Brar, the previous sole owner of HDIMAX, Inc. In consideration
for the shares being cancelled, Rajinder Brar received 3,000,000 shares of newly restricted common stock after the execution of
the settlement agreement. We forfeited our rights to sell advertising and other products on websites previously controlled by
Mr. Brar and related entities, with the exception of www.hdimax.com. An outline of the significant terms of the Settlement Agreement
includes, but is not limited to, the following:
|
·
|
The 712,121,205 million shares of HDIMAX Media, Inc. (formerly Indigo-Energy) common stock issued to Rajinder Brar, the owner of 100% of the previously outstanding stock of HDIMAX, Inc. immediately preceding the reverse acquisition transaction, were cancelled.
|
|
·
|
Rajinder Brar, Aneliya Vasileva, and Myles Pressey III, previously appointed as the Company’s officers and Board of Directors immediately following the completion of the reverse acquisition, resigned and forfeited future compensation terms associated with any and all previously agreed upon employment agreements, inclusive of the compensation accrued as of December 31, 2014.
|
|
·
|
Mr. James C. Walter Sr. was reappointed to serve as a Director charged with appointing new officers. Mr. Walter Sr. served as the Sole Officer and Director of the Company immediately preceding the completion of the reverse acquisition transaction.
|
|
·
|
The Company’s option agreement to acquire Fashion Style Magazine, Inc., an entity wholly owned by Rajinder Brar, was cancelled.
|
|
·
|
The Omnibus Agreement and License dated November 21, 2014, by and between the Company and Fashion Style Magazine, Inc. was terminated. The brands and assets wholly owned by Rajinder Brar through Fashion Style Magazine, Inc. were intended to be a core portion of the consolidated Company’s business operations subsequent to the completion of the reverse acquisition.
|
|
·
|
The Company forfeited all rights to Frontlinewire.com, a brand and website acquired in the reverse acquisition.
|
|
·
|
The Company maintained all rights to hdimax.com, a brand and website acquired in the reverse acquisition, but agreed to assign those assets back to their original owners by May 1, 2015. We do not intend to further develop or publish content at www.hdimax.com.
|
For additional details, including a copy of
the Settlement Agreement, please see our Current Report on Form 8-K filed on January 28, 2015.
On March 9, 2015 we changed our name to Zonzia
Media, Inc. and we are developing a new multi-platform entertainment distribution channel with the goal of being a unique hybrid
of a linear channel, a video-on-demand channel and an over-the-top channel. Our technology will allow our viewers instant access
to our available content on most internet connected devices.
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
The accompanying financial statements have
been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States
of America (“US GAAP”) and have been presented on a going concern basis, which contemplates the realization of assets
and satisfaction of liabilities in the normal course of business.
Use of Estimates
In preparing financial statements in conformity
with generally accepted accounting principles, we are required to make estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues
and expenditures during the reported periods. Actual results could differ materially from those estimates.
Cash and Cash Equivalents
We consider all highly liquid instruments with
an original maturity of 90 days or less at the time of purchase to be cash equivalents.
Fair Value Measurements
The fair value of a financial instrument
is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. Financial assets are marked to bid prices and financial
liabilities are marked to offer prices. The fair value should be calculated based on assumptions that market
participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair
value of liabilities should include consideration of non-performance risk, including the party’s own credit risk.
Fair value measurements do not include transaction
costs. A fair value hierarchy is used to prioritize the quality and reliability of the information used to determine fair
values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair
value measurement. The fair value hierarchy is defined into the following three categories:
Level 1: Quoted market
prices in active markets for identical assets or liabilities.
Level 2: Observable market-based
inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs
that are not corroborated by market data.
Income Taxes
Deferred taxes are provided on an asset and
liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carry forwards
and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the difference between
the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when,
in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Net Income/(Loss) Per Common Share
Income/ (loss) per share of common stock is
calculated by dividing the net income/ (loss) by the weighted average number of shares of common stock outstanding during the period.
The Company has no potentially dilutive securities for the three months ended March 31, 2016 and 2015. Accordingly, basic and dilutive
income (loss) per common share are the same.
Advertising Costs
The Company expenses advertising costs when
incurred. Advertising costs incurred amount to $0 and $0 for the three months ended March 31, 2016 and 2015, respectively.
Embedded Conversion Features and Other Equity-linked
Instruments
The Company classifies all of its common stock
purchase warrants and other derivative financial instruments as equity if the contracts (1) require physical settlement or net-share
settlement or (2) give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share
settlement). The Company classifies as assets or liabilities any contracts that (1) require net-cash settlement (including a requirement
to net cash settle the contract if an event occurs and if that event is outside the control of the Company), (2) give the counterparty
a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement), or (3) contracts that contain
reset provisions. The Company assesses classification of its equity-linked instruments at each reporting date to determine whether
a change in classification between equity and liabilities (assets) is required.
Recently Issued Accounting Pronouncements
In June 2009, the FASB established the Accounting
Standards Codification (“Codification” or “ASC”) as the source of authoritative accounting principles recognized
by the FASB to be applied by nongovernmental entities in the preparation of financial statements in accordance with generally accepted
accounting principles in the United States (“GAAP”). Rules and interpretive releases of the Securities and Exchange
Commission (“SEC”) issued under authority of federal securities laws are also sources of GAAP for SEC registrants.
Existing GAAP was not intended to be changed as a result of the Codification, and accordingly the change did not impact our
financial statements. The ASC does change the way the guidance is organized and presented.
We reviewed all other recently issued accounting pronouncements
and determined that the updates below could have an effect on the Company’s financial statements:
FASB Account Standards Update, No. 2014-15,
Going Concern, dated August 2014 says, in connection with preparing financial statements for each annual and interim reporting
period, an entity’s management should evaluate whether there are conditions or events, considered in the aggregate, that
raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the
financial statements are issued (or within one year after the date that the financial statements are available to be issued when
applicable).
Management’s evaluation should be based
on relevant conditions and events that are known and reasonably knowable at the date that the financial statements are issued (or
at the date that the financial statements are available to be issued when applicable).
The amendments in this update are effective
for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application
is permitted. The Company has not chosen early adoption.
FASB Account Standards Update, No. 2014-09,
Revenue from Contracts with Customers, dated May 2014 says, an entity should recognize revenue to depict the transfer of promised
goods and services to customers in an amount that reflects the consideration to which the entity expects to entitled in exchange
for those goods and services.
To achieve that core principle, an entity should
apply the following steps:
|
·
|
Identify the contract(s) with a customer.
|
|
·
|
Identify the performance obligations in
the contract.
|
|
·
|
Determine the transaction price.
|
|
·
|
Allocate the transaction price to the
performance obligations in the contract.
|
|
·
|
Recognize revenue when (or as) the entity
satisfies a performance obligation.
|
For a public entity, the amendments in this
Update are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting
period. Early application is not permitted.
Going Concern
Since our inception on May 24, 2014, we have
generated immaterial revenues resulting in the incurrence of net losses through March 31, 2016. This has further led to negative
working capital, all which results in substantial doubt about the Company’s ability to continue as a going concern.
Our management, Board, and Advisory Board has
focused its efforts and our limited resources on raising additional capital through debt or equity offerings at terms not detrimental
to our planned future operations. As of the date of this report we do not have any firm funding commitments.
NOTE 4 – RELATED PARTY TRANSACTIONS
During the year-ended December 31, 2015 we
settled prior obligations due to a related party totaling $340,163 via the issuance of 7,500,000 shares of restricted and unregistered
shares of common stock. The settled obligation also represents that balance outstanding as of December 31, 2014.
During the year-ended December 31, 2015 a total
of four of our Officers agreed to waive all or portions of their base salaries or previously accrued bonuses earned during the
year ended December 31, 2014 and through December 31, 2015 totaling $388,988. Since we consider our Officers related parties we
have determined the bonus and salary forgiveness was in the nature of a capital contribution and no gain was recognized in the
accompanying statements of operations.
We issued a Director 250,000 shares of restricted
and unregistered shares of common stock for cash proceeds totaling $25,000 in January 2015.
As part of the Settlement Agreement we entered
into on January 22, 2015 we cancelled restricted stock award grants to two of our former officers. Since we did not replace a cancelled
award totaling 52,500,000 shares of restricted and unregistered shares of common stock, and effectively repurchased the award for
no consideration as assumed by the application of accounting principles generally accepted in the United States, the unrecognized
grant-date fair value of the award totaling $9,975,000 was recognized during the year-ended December 31, 2015. Additionally, we
cancelled a restricted stock award granted to our current Chief Executive Officer totaling 67,500,000 shares and replaced the award
with the grant of 125,000,000 shares of restricted and unregistered shares as part of a new employment agreement on January 29,
2015. The total compensation cost recognized during the year-ended December 31, 2015 associated with the cancellation and replacement
of this restricted stock award was $47,500,000.
During the year-ended December 31, 2015 we
issued 2,000,000 shares of unregistered and restricted common stock to an affiliate for consulting services valued at $680,000.
A promissory note in the amount of $35,000 was issued to the same affiliate of the company, for cash proceeds of $35,000 in April
2015. As additional consideration on the promissory note, this same affiliate received 215,000 shares of unregistered and restricted
common stock valued at $32,039. Upon renewal of this promissory note in May 2015 this affiliate received 100,000 shares of unregistered
and restricted common stock valued at $17,260.
Employment Agreement Amendment
On May 15, 2015, we amended our Chairman and
Chief Business Development Office, Mr. Myles Pressey III’s, employment agreement. Mr. Pressey III was originally going to
be granted 25,000,000 shares of fully vested restricted and unregistered shares of common stock on January 29, 2016 whereas the
amendment calls for Mr. Pressey III to receive up to 62,500,000 shares of restricted and unregistered common stock subject to the
achievement of performance benchmarks set by the Board of Directors. The modification of Mr. Pressey III’s equity award resulted
in the recognition of compensation totaling $10,262,819 during the year-ended December 31, 2015.
NOTE 5 – STOCKHOLDERS’ EQUITY
The following provides information for the
shares of restricted and unregistered shares of common stock that we issued (or cancelled) from January 1, 2016 through the date
of this report:
In January 2016 we issued 500,000 shares of
restricted and unregistered shares of common stock for cash proceed of $15,000.
In January 2016 we issued a total of 2,500,000
shares of restricted and unregistered shares of common stock as compensation to our officers, valued at $142,250.
In February 2016, a convertible note holder
converted $4,275 of principal for 250,000 shares of the Company’s common stock.
In February 2016, a convertible note holder
converted $58,482, total principal and interest for 3,744,015 of the Company’s common stock.
In February 2016 we issued 75,000 shares of
restricted and unregistered shares of common stock to a Director for services totaling $7,410.
In February 2016 we entered in a $50,000 web
development services agreement that included the issuance of 603,449 shares of restricted and unregistered shares of common stock
for website development services totaling $34,879.
In February 2016 we issued 100,000 shares of
restricted and unregistered shares of common stock for consulting services totaling $5,690.
In February 2016 we issued 150,000 shares of
restricted and unregistered shares of common stock for consulting services totaling $8,535.
In February 2016 we issued 35,000 shares of
restricted and unregistered shares of common stock for consulting services totaling $1,992.
In February 2016 we issued 2,898,551 shares
of restricted and unregistered shares of common stock for cash totaling $100,000.
In February 2016 we obtained a $250,000 promissory
note with a 15% interest rate due on June 2016 and this transaction also included issuance of 100,000 shares of restricted and
unregistered shares of common stock as in incentive totaling $9,880.
In February 2016 we issued 1,428,575 shares
of restricted and unregistered shares of common stock as a $59,000 payment for a $209,000 balance owed to one of our service providers.
In February 2016 we issued 340,136 shares of
restricted and unregistered shares of common stock for cash totaling $25,000.
In February 2016 we issued 136,054 shares of
restricted and unregistered shares of common stock for cash totaling $10,000.
In March 2016, a convertible note holder converted
$5,000 of principal and $202 of interest for 193,010 of the Company’s common stock.
In March 2016, a convertible note holder converted
$9,000 of principal and $414 of interest for 570,560 shares of the Company’s common stock.
In March 2016, a convertible note holder converted
$5,400 of principal for 300,000 shares of the Company’s common stock.
In March 2016, we issued 450,000 shares
of restricted and unregistered common stock to 3 directors for services rendered totaling $36,000.
Warrants
During the period ended March 31, 2016 we issued
warrants to certain investors as part of the private placements of our restricted and unregistered common stock.
The following table presents
a summary of our warrant activity:
|
|
As of March 31, 2016
|
|
|
|
Shares
|
|
|
Weighted Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Term
(years)
|
|
|
Aggregate
Intrinsic
Value
|
|
Outstanding, December 31, 2015
|
|
|
3,871,591
|
|
|
|
0.37
|
|
|
|
2.52
|
|
|
$
|
–
|
|
Warrants granted
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Warrants exercised
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Warrants expired, cancelled, forfeited
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding and exercisable at March 31, 2016
|
|
|
3,871,591
|
|
|
|
0.37
|
|
|
|
2.52
|
|
|
$
|
–
|
|
As of March 31, 2016 and December 31, 2015
all outstanding warrants were fully vested. Of the outstanding warrants, 862,500 are contingently exercisable only in the event
that other equity-linked instruments are exercised.
Options
In August 2015, outstanding options and warrants
with an aggregate fair value of $493,161 were reclassified from equity to derivative liability.
As of March 31, 2016 and 2015 the Company
had 568,162 stock options outstanding. During the periods presented there were no options granted, exercised, cancelled, or forfeited,
correspondingly, no additional compensation expense was recognized for the periods presented. All options outstanding are exercisable
and do not have any intrinsic value as of March 31, 2016 and 2015 and are set to expire in October of 2017. At March 31, 2016
the weighted average exercise price of the outstanding options was $6.60 with a weighted average remaining term of 1.59 years.
NOTE 6 – CONVERTIBLE NOTES PAYABLE
The Company has entered into various convertible
debt financing transactions with third party investors (“Investors”). As of March 31, 2016 the Company issued convertible
notes to Investors in the aggregate principal amount of $258,850. The notes are unsecured, and provide for the conversion of all
principal and interest outstanding under the notes into shares of the Company’s common stock beginning six months after the
issuance date of the respective notes (“conversion date”) at conversion rates of 55%-60% of the lowest listed market
price of the Company’s common stock for the previous twenty to twenty-five trading days immediately prior to the conversion
date.
The conversion price of the notes are subject
to adjustment in the event of stock splits, dividends, distributions and similar adjustments to our capital stock. The number of
shares of common stock subject to the Notes may be adjusted in the event of mergers, distributions, a sale of substantially all
of the Company’s assets, tender offers and dilutive issuances.
The Company has determined the resetting terms
of the conversion rates are separable into two elements:
i) Fixed Conversion Rate element –
since a fixed minimum
discount to the listed market price ranging from forty to forty-five percent of any listed market price has been determined to
be a predominant element of the conversion feature, we determined the fixed conversion element results in a fixed value of common
stock to the Investor at any conversion date; and
ii) Variable Conversion Rate element –
the volatility in our listed
market prices and wide ranging bid and ask spreads on a daily basis results in an additional variable amount of common stock value
being received by the Investors upon conversion. The fixed conversion element, resulting in the determination of stock settled
debt, is recognized as a debt discount at intrinsic value on the issuance date and is not re-valued in the subsequent periods.
The variable conversion element is classified as a derivative liability and is revalued on an on-going basis.
Convertible notes payable consist of the following:
|
|
As of March 31, 2016
|
|
|
|
Face Value of Note
|
|
|
Intrinsic Value of Fixed Conversion Element
|
|
|
Unamortized Discount
|
|
|
Net Balance
|
|
JMJ Financial: 12% Convertible note due August 24, 2017
|
|
$
|
47,100
|
|
|
$
|
37,500
|
|
|
$
|
(31,137
|
)
|
|
$
|
53,463
|
|
LG Capital Funding, LLC; 8% Convertible note due August 21, 2016
|
|
|
13,500
|
|
|
|
22,091
|
|
|
|
(10,194
|
)
|
|
|
25,397
|
|
St George Investment, LLC; 8% Convertible note due September 9, 2016
|
|
|
32,000
|
|
|
|
26,182
|
|
|
|
(13,539
|
)
|
|
|
44,643
|
|
Carebourn Capital, LP; 12% Convertible note due July 5, 2016
|
|
|
87,500
|
|
|
|
87,500
|
|
|
|
(37,763
|
)
|
|
|
137,237
|
|
LG Capital Funding, LLC; 8% Convertible note due October 9, 2016
|
|
|
78,750
|
|
|
|
78,750
|
|
|
|
(48,147
|
)
|
|
|
109,353
|
|
Total Convertible Notes
|
|
$
|
258,850
|
|
|
$
|
252,023
|
|
|
$
|
(140,780
|
)
|
|
$
|
370,093
|
|
During the three months ended March 31, 2016
the Company recognized discount accretion totaling $88,061 included in interest expense in the accompanying results of operations.
Since the Company has determined the convertible notes will be stock settled, beginning six months after the date of each issuance,
all of the convertible notes payable have been classified as current in the accompanying balance sheet.
NOTE 7 – EMBEDDED DEBT CONVERSION FEATURES AND OTHER EQUITY-LINKED
INSTRUMENTS
The Company accounts for variable conversion
elements embedded in its convertible instruments that meet the definition of a derivative as liabilities. The variable conversion
elements are re-measured at fair value with the changes in the value reported as a component of other income (expense) in the accompanying
results of operations. The Company estimates the fair value of the variable conversion element using a Black-Scholes Merton Pricing
model based on the variable number of additional shares of common stock the Company is required to issue upon conversion.
The Company periodically, or when specific
transactions occur that may have material impacts on the presentation of the financial statements, reviews it outstanding equity
and equity-linked instruments to determine the appropriate classification in the accompanying balance sheet, equity or liability
(asset). During the year ended December 31, 2015 the company reclassified all of its previously outstanding options and warrants
from equity to liability. The determination to reclassify the previously outstanding options and warrants resulted from the issuance
of convertible notes payable that are potentially convertible into an unlimited number shares of common stock.
The Company measures and re-measures the fair
value of the instruments not classified as permanent equity using a Black Scholes Merton pricing model. The following assumptions
were used to estimate the fair value of the Company’s derivative liabilities:
Expected volatility
|
302.83%
|
Expected term (years)
|
.15 to 2.25
|
Dividend yield
|
0.0%
|
Discount Rate
|
0.21%
|
During the period-ended March 31, 2016 the
Company recognized a derivative liability, and corresponding finance fee, with an initial fair value totaling $148,755 associated
with the variable conversion element embedded in the convertible notes payable. Finance fees are included as a component of interest
expense in the accompanying results of operations.
In August 2015, outstanding options and warrants
with an aggregate fair value of $135,197 were reclassified from equity to derivative liability.
As of March 31, 2016 the Company had derivative
liability obligations with an aggregate fair value totaling $370,041. During the three months-ended March 31, 2016 the Company
recognized a gain on the change in the fair value of derivative liabilities totaling $294,385 included as a component of other
income (expense) in the accompanying statements of operations.
Financial liabilities measured at fair value
on a recurring basis are summarized below:
|
|
Fair value measurements
|
|
|
|
March 31, 2016
|
|
|
Quoted prices in
active markets for
unobservable
identical assets
(Level 1)
|
|
|
Significant
other
inputs
(Level 2)
|
|
|
Significant
observable inputs
(Level 3)
|
|
Derivative liability
|
|
$
|
370,041
|
|
|
|
–
|
|
|
|
–
|
|
|
$
|
370,041
|
|
The derivative liabilities are measured at
fair value using a Black Sholes Merton Pricing Model. The model is based on assumptions including quoted market prices and estimated
volatility factors based on historical quoted market prices for the Company’s common stock, and are classified within Level
3 of the valuation hierarchy.
The following table sets forth a summary of
the changes in the fair value of the Company’s Level 3 financial liabilities that are measured at fair value on a recurring
basis:
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
Beginning Balance
|
|
$
|
664,426
|
|
|
$
|
–
|
|
Aggregate fair value of derivative issued
|
|
|
–
|
|
|
|
148,755
|
|
Liability reclassification for other equity linked instruments
|
|
|
–
|
|
|
|
493,161
|
|
Change in fair value of derivative included in results of operations (gain) loss
|
|
|
(294,385
|
)
|
|
|
22,510
|
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
$
|
370,041
|
|
|
$
|
664,426
|
|
NOTE 8 – ACCRUED EXPENSES
During the period-ended December 31, 2015 our
management, with the assistance of our defense attorney, analyzed the merit and likelihood of an unfavorable outcome in the matter
of
Congoo, LLC v. HDIMAX Max Media, Inc. Civ. Action No. 3:15-cv-01423
. Based on the facts and circumstances, we determined
the likelihood of an unfavorable outcome to be remote. Correspondingly, we reversed the previously accrued obligation of $422,448,
as presented in sales and marketing expense, in the accompanying statement of operations.
NOTE 9 – LICENSED CONTENT
The Company entered into a content licensing
and distribution agreement with an entertainment company in which we will distribute, on our available platforms, the following:
|
i.
|
Fifty-two (52) twenty three minute (0:23) episodes of a series known as “Behind the Velvet Rope”
|
|
ii.
|
Ancillary content including a minimum of ten to twenty event compilations approximately five to seven minutes in length each; and
|
|
iii.
|
Thirty to forty individual interviews approximately one to three minutes in length each.
|
The agreement calls for us to advance $480,000
to the entertainment company to be used for production of the series. After paying the advance, we are entitled to recoup the advanced
amount plus an additional $10,000 (a total of $490,000) after which time the gross revenue generated under the agreement will be
split on a 50/50 basis. The non-refundable advance obligation and capitalized licensed content are presented in accounts payable
and current assets, respectively, in the accompanying balance sheet.
NOTE 10 – COMMITMENTS, CONTINGENCIES
AND UNCERTAINTIES
Operating Lease
The Company is currently obligated under an
operating lease for office space and associated building expenses. The lease expires in January 2017. As of March
31, 2016, future minimum payments for all lease obligations are as follows:
Year
|
|
|
Amount
|
|
2016
|
|
|
3,600
|
|
2017
|
|
|
450
|
|
NOTE 11 – LEGAL
The Company is currently under negotiations
to pay a vendor claim. The possible exposure of the claim ranges from $95,000 to $150,000, the company has accrued $129,187, as
of March 31, 2016.
NOTE 12 – SUBSEQUENT EVENTS
ASC 855-16-50-4 establishes accounting and
disclosure requirements for subsequent events. ASC 855 details the period after the balance sheet date during which we should evaluate
events or transactions that occur for potential recognition or disclosure in the financial statements, the circumstances under
which we should recognize events or transactions occurring after the balance sheet date in its financial statements and the required
disclosures for such events. We have evaluated all subsequent events through the date these consolidated financial statements were
issued, and determined the following are material to disclose:
In April 2016, the Company signed a subscription agreement with
an individual for 588,235 shares of common stock in exchange for $10,000 cash.
In April 2016, the Company signed a subscription agreement with
an individual for 294,118 shares of common stock in exchange for $5,000 cash.
In April 2016, the Company’s Board of Directors authorized
the issuance of 763,258 shares of common stock to a Board Member.
In April 2016, the Company settled a liability and received a release
of any future liability for 150,000 share of its common stock.
In April 2016, the Company issued 100,000 shares of its common stock
in conversion of a promissory note.
In April 2016, the Company issued a 6 month convertible note, with
a face value of $60,500, 12% interest.
In April 2016, the Company amended its equity purchase agreement
with Kodiak Capital Group. The amendment was to update language to support shares issued and outstanding at December 31,
2015.
In May 2016, the Company issued 2,699,357 of its common stock in
a conversion of debt.
In May 2016, the Company issued 1,700,000 shares of its common stock
in a conversion of debt.