Quarterly Report (10-q)

Date : 03/28/2016 @ 5:37PM
Source : Edgar (US Regulatory)
Stock : Vizconnect, Inc. (PN) (VIZC)
Quote : 0.0001  0.0 (0.00%) @ 9:21PM

Quarterly Report (10-q)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

x

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

 

For the quarterly period ended September 30, 2015

 

¨

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

 

For the transition period from _______ to _______.

 

Commission File Number: 001-35484

 

VIZCONNECT, INC.

(Exact name of registrant as specified in its charter)

 

Nevada

27-3687123

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

 

136 Dwight Road

Longmeadow, Massachusetts 01106

(Address of principal executive offices (Zip Code)

 

(855) 849-2666

(Registrant's telephone number, including area code)

 

______________________________________________________________

 (Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¨ No x

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

¨

Accelerated filer

¨

Non-accelerated filer

¨

Smaller reporting company

x

(do not check if smaller reporting company)

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

 

As of March 28, 2016, there were 741,424,809 shares of common stock, $0.00001 par value per share, issued and outstanding.

   

 

 

VIZCONNECT, INC.

TABLE OF CONTENTS

FORM 10-Q REPORT

September 30, 2015

 

Page Number

PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements.

4

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations.

20

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

26

Item 4.

Controls and Procedures.

26

PART II - OTHER INFORMATION

Item 1.

Legal Proceedings.

28

Item 1A.

Risk Factors.

28

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

28

Item 3.

Defaults Upon Senior Securities.

29

Item 4.

Mine Safety Disclosures.

29

Item 5.

Other Information.

29

Item 6.

Exhibits.

30

SIGNATURES

31

 

 
2
 

 

CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION

 

This Quarterly Report on Form 10-Q (this "Report") contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as "anticipate," "believe," "estimate," "intend," "could," "should," "would," "may," "seek," "plan," "might," "will," "expect," "predict," "project," "forecast," "potential," "continue" negatives thereof or similar expressions. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about the future and are not guarantees. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance or achievement to be materially different from the results of operations or plans expressed or implied by such forward-looking statements.

 

We cannot predict all of the risks and uncertainties. Accordingly, such information should not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. These forward-looking statements are found at various places throughout this Report and include information concerning possible or assumed future results of our operations, including statements about potential acquisition or merger targets; business strategies; future cash flows; financing plans; plans and objectives of management, any other statements regarding future acquisitions, future cash needs, future operations, business plans and future financial results, and any other statements that are not historical facts.

 

These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report. All subsequent written and oral forward-looking statements concerning other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report.

 

Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.

 

CERTAIN TERMS USED IN THIS REPORT

 

When this report uses the words "we," "us," "our," and the "Company," they refer to the combined business of VizConnect, Inc. and its subsidiary, VizConnect LLC. "SEC" refers to the Securities and Exchange Commission. 
     

 
3
 

 

PART 1 - FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

VIZCONNECT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

As of

 

 

As of

 

 

 

September 30,

 

 

December 31,

 

 

 

2015

 

 

2014

 

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

Cash

 

$ 343

 

 

$ 10,602

 

Prepaid expenses and other current assets

 

 

7,836

 

 

 

754

 

TOTAL CURRENT ASSETS

 

 

8,179

 

 

 

11,356

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment - net

 

 

1,430

 

 

 

1,660

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$ 9,609

 

 

$ 13,016

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

Current portion of convertible notes payable, net of discount of $50,862 and $179,498 at September 30, 2015 and December 31, 2014, respectively

 

$

360,489

 

 

$

202,252

 

Accounts payable

 

 

377,580

 

 

 

370,211

 

Accrued expenses

 

 

915,904

 

 

 

487,716

 

Deferred revenues

 

 

18,000

 

 

 

18,000

 

Notes payable- related party

 

 

24,848

 

 

 

24,848

 

Notes payable

 

 

366,973

 

 

 

366,973

 

Derivative liability

 

 

223,946,744

 

 

 

600,271

 

TOTAL CURRENT LIABILITIES

 

 

226,010,538

 

 

 

2,070,271

 

 

 

 

 

 

 

 

 

 

Convertible notes payable net of discount of $92,230 and $187,064 at September 30, 2015 and December 31, 2014, respectively

 

 

83,560

 

 

 

69,559

 

TOTAL LIABILITIES

 

 

226,094,098

 

 

 

2,139,830

 

 

 

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES (see Note 9)

 

 

 -

 

 

 

 -

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

Preferred Stock Series A: $0.00001 par value, 3 shares authorized, 3 shares issued and outstanding as of

 

 

 

 

 

 

 

 

September 30, 2015, and 0 shares issued and outstanding as of December 31, 2014

 

 

-

 

 

 

-

 

Preferred Stock: $0.00001 par value, 29,999,997 shares authorized, 0 shares issued and outstanding as of

 

 

 

 

 

 

 

 

September 30, 2015 and December 31, 2014

 

 

-

 

 

 

-

 

Preferred Stock Series B: $0.00001 par value, 10,000,000 shares authorized, 14,000 shares issued and outstanding as of

 

 

 

 

 

 

 

 

September 30, 2015 and 0 shares issued and outstanding as of December 31, 2014

 

 

1

 

 

 

-

 

Preferred Stock Series C: $0.00001 par value, 10,000,000 shares authorized, 0 shares issued and outstanding as of

 

 

 

 

 

 

 

 

September 30, 2015 and December 31, 2014

 

 

-

 

 

 

-

 

Common Stock: $0.00001 par value, 5,000,000,000 shares authorized, 1,439,747 shares issued and outstanding

 

 

 

 

 

 

 

 

as of September 30, 2015, and 36,260 shares issued and outstanding as of December 31, 2014

 

 

14

 

 

 

1

 

Additional paid in capital

 

 

2,529,133

 

 

 

2,088,316

 

Comprehensive Gain

 

 

965

 

 

 

974

 

Accumulated deficit

 

 

(228,692,778 )

 

 

(4,294,232 )

VizConnect, Inc. stockholders' deficit

 

 

(226,162,665 )

 

 

(2,204,941 )
 

 

 

 

 

 

 

 

 

Noncontrolling interest

 

 

78,176

 

 

 

78,127

 

Total stockholders' deficit

 

 

(226,084,489 )

 

 

(2,126,814 )
 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

 

$ 9,609

 

 

$ 13,016

 

 

See accompanying notes to the unaudited condensed consolidated financial statements
  

 
4
 

 

VIZCONNECT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

 

 

For the three months      

 

 

For the nine months      

 

 

 

ended      

 

 

ended      

 

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REVENUE

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$ -

 

 

$ 32,623

 

 

$ -

 

 

$ 173,100

 

Total Revenue

 

 

 

 

 

 

32,623

 

 

 

-

 

 

 

173,100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Programming, Hosting & Technology Expense

 

 

-

 

 

 

12,684

 

 

 

893

 

 

 

48,380

 

Professional Fees

 

 

38,591

 

 

 

62,979

 

 

 

57,030

 

 

 

892,172

 

General and Administrative

 

 

135,892

 

 

 

85,141

 

 

 

402,933

 

 

 

1,022,207

 

Selling Expense

 

 

240

 

 

 

(20,289 )

 

 

2,404

 

 

 

27,943

 

Total Operating Expenses

 

 

174,723

 

 

 

140,515

 

 

 

463,260

 

 

 

1,990,702

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss From Operations

 

 

(174,723 )

 

 

(107,892 )

 

 

(463,260 )

 

 

(1,817,602 )
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss on change in fair value of derivative liability

 

 

(223,166,269 )

 

 

(76,114 )

 

 

(223,513,745 )

 

 

(234,274 )

Interest Expense

 

 

(127,027 )

 

 

(213,614 )

 

 

(421,492 )

 

 

(730,658 )
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET LOSS BEFORE INCOME TAX

 

 

(223,468,019 )

 

 

(397,620 )

 

 

(224,398,497 )

 

 

(2,782,534 )
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET LOSS

 

 

(223,468,019 )

 

 

(397,620 )

 

 

(224,398,497 )

 

 

(2,782,534 )
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income (Loss) Attributable to Noncontrolling Interest

 

 

-

 

 

 

(220 )

 

 

49

 

 

 

(5,835 )
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss Attributable to Controlling Interest

 

 

(223,468,019 )

 

 

(397,400 )

 

 

(224,398,546 )

 

 

(2,776,699 )
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign Currency Translation Adjustment

 

 

-

 

 

 

-

 

 

 

9

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive Loss

 

$ (223,468,019 )

 

$ (397,400 )

 

$ (224,398,537 )

 

$ (2,776,699 )
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted loss per common share

 

$ (161.67 )

 

$ (14.89 )

 

$ (322.21 )

 

$ (110.74 )
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted weighted average shares outstanding

 

 

1,382,262

 

 

 

26,681

 

 

 

696,438

 

 

 

25,075

 

 

See accompanying notes to the unaudited condensed consolidated financial statements
  

 
5
 

 

VIZCONNECT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015
(UNAUDITED)

 

 

 

Preferred Stock
Series A

Preferred Stock
Series B

 

Common

Stock

 

Additional
Paid-In

 

Comprehensive

 

Accumulated

 

Noncontrolling

 

Total

 

 

 

Shares

 

Amount

 

Shares

 

Amount

 

Shares

 

Amount

 

Capital

 

Gain

 

Deficit

 

Interest

 

Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending balance, December 31, 2014

 

 

-

 

$ -

 

 

-

 

$ -

 

 

36,260

 

$ 1

 

$ 2,088,316

 

$ 974

 

$ (4,294,232 ) $ 78,127

 

$ (2,126,814 )
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income (Loss)

 

 

 -

 

 

 -

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(224,398,546 )

 

49

 

 

(224,398,497 )
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive Loss

 

 

 -

 

 

 -

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(9 )

 

-

 

 

-

 

 

(9 )
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Comprehensive Loss

 

 

 -

 

 

 -

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(224,398,506 )
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reclassification of derivative liability

 

 

 -

 

 

 -

 

 

-

 

 

-

 

 

-

 

 

-

 

 

243,622

 

 

-

 

 

-

 

 

-

 

 

243,622

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value of Preferred Stock Series A issued to Board of Directors

 

 

3

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value of Common Stock issued to Board of Directors

 

 

 -

 

 

 -

 

 

-

 

 

-

 

 

1,200,000

 

 

12

 

 

29,988

 

 

-

 

 

-

 

 

-

 

 

30,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value of Common Stock issued to consultants

 

 

 -

 

 

 -

 

 

-

 

 

-

 

 

100

 

 

-

 

 

47

 

 

-

 

 

-

 

 

-

 

 

47

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value of Common Stock issued to employee

 

 

 -

 

 

 -

 

 

-

 

 

-

 

 

600

 

 

-

 

 

1,799

 

 

-

 

 

-

 

 

-

 

 

1,799

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes Payable converted to Common Stock

 

 

 -

 

 

 -

 

 

-

 

 

-

 

 

202,787

 

 

1

 

 

130,362

 

 

-

 

 

-

 

 

-

 

 

130,363

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales of Preferred Stock Series B

 

 

 -

 

 

 -

 

 

14,000

 

 

1

 

 

-

 

 

-

 

 

34,999

 

 

-

 

 

-

 

 

-

 

 

35,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending balance, September 30, 2015

 

 

3

 

$ -

 

 

14,000

 

$ 1

 

 

1,439,747

 

$ 14

 

$ 2,529,133

 

$ 965

 

$ (228,692,778 ) $ 78,176

 

$ (226,084,489 )
 

See accompanying notes to the unaudited condensed consolidated financial statements
  

 
6
 

 

VIZCONNECT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

For the nine

 

 

For the nine

 

 

 

months ended

 

 

months ended

 

 

 

September 30,
2015

 

 

September 30,
2014

 

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

$ (224,398,497 )

 

$ (2,782,534 )

Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:

 

 

 

 

 

 

 

 

Depreciation Expense

 

 

230

 

 

 

200

 

Accretion of Prepaid Interest

 

 

-

 

 

 

13,790

 

Amortization of debt discount

 

 

299,820

 

 

 

381,873

 

Loss on change in fair value of derivative liability

 

 

223,513,745

 

 

 

234,274

 

Stock issued for services

 

 

1,846

 

 

 

1,437,126

 

Changes in Operating Assets and Liabilities:

 

 

 

 

 

 

 

 

Prepaid Expenses

 

 

(7,082 )

 

 

10,731

 

Accounts Payable

 

 

7,369

 

 

 

114,128

 

Accrued Expenses

 

 

475,969

 

 

 

79,301

 

Deferred Revenue

 

 

-

 

 

 

(49,747 )

Net Cash Used In Operating Activities

 

 

(106,600 )

 

 

(560,858 )
 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Fixed Asset purchases

 

 

-

 

 

 

(14,325 )

Net Cash Used in Investing Activities

 

 

-

 

 

 

(14,325 )
 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from Notes Payable - related party

 

 

-

 

 

 

5,000

 

Repayment of Notes Payable - related party

 

 

-

 

 

 

(7,500 )

Proceeds from Notes Payable

 

 

61,350

 

 

 

915,705

 

Repayment of Notes Payable

 

 

-

 

 

 

(372,185 )

Proceeds from sale of Preferred Stock

 

 

35,000

 

 

 

-

 

Net Cash Provided by Financing Activities

 

 

96,350

 

 

 

541,020

 

 

 

 

 

 

 

 

 

 

EFFECT OF EXCHANGE RATE ON CASH

 

 

(9 )

 

 

-

 

 

 

 

 

 

 

 

 

 

NET DECREASE IN CASH

 

 

(10,259 )

 

 

(34,163 )

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

 

 

10,602

 

 

 

34,904

 

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

 

$ 343

 

 

$ 741

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

 

 

 

 

 

 

 

 

Cash Paid for Interest

 

$ -

 

 

$ 186,918

 

Cash Paid for Taxes

 

$ -

 

 

$ -

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

During the nine months ended September 30, 2015, the Company reclassified $243,622 of derivative liability into additional paid in capital upon the repayment of notes.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

During the nine months ended September 30, 2015, the Company converted $130,363 of convertible notes and interest to common stock.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

During the nine months ended September 30, 2015, the Company converted $30,000 of accrued officers' salary to 3,000,000,000 shares of Common Stock.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

During the nine months ended September 30, 2015, the Company converted $15,000 of accrued payroll to a convertible note.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

During the nine months ended September 30, 2014, the Company converted $4,842 of interest to principal on notes payable - related party.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

During the nine months ended September 30, 2014, the Company reclassified $263,276 of derivative liability into additional paid in capital upon the repayment of notes.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

During the nine months ended September 30, 2014, the Company converted $142,908 of convertible notes to common stock.

 

 

 

 

 

 

 

 

 

See accompanying notes to the unaudited condensed consolidated financial statements

 

 
7
 

 

VIZCONNECT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2015

(UNAUDITED)

 

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION

 

(A) Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the Securities and Exchange Commission for interim financial information. Accordingly, they do not include all the information necessary for comprehensive presentation of financial position and results of operations. It is management's opinion that all material adjustments (consisting of normal reoccurring adjustments) have been made, which are necessary for a fair financial statement presentation. The results for the interim period are not necessarily indicative of the results expected for the year.  

 

VizConnect, Inc. (the "Company") was setup as a corporation under the laws of the State of Nevada on October 15, 2010. The Company, through its wholly-owned subsidiary, VizConnect LLC, a Massachusetts limited liability company is a holding company which helps companies around the world by providing first class business development consulting. Our growing portfolio encompasses a robust and innovative array of services which include real estate acquisition, equity building, debt removal, revenue generation, and asset acquirement through the issuance of Preferred Stock. Our talented and experienced team is driven to help customers increase value; maximize existing capabilities; improve shareholder performance and profitability; increase cost efficiency; and simplify business strategy. The Company's year-end is December 31. 

 

On October 29, 2013, the Company formed a majority owned subsidiary to conduct business solely in Canada. The majority owned subsidiary is included in the consolidated financial statements of the Company at its formation. The non-controlling interest investors have contributed $100,000 into the subsidiary, which represents 20% ownership. The Company owns the remaining 80% of the subsidiary. 

 

On April 22, 2015, the Company filed a Certificate of Amendment to the Articles of Incorporation in the state of Nevada to increase the authorized shares of Common Stock and Preferred Stock to 5,000,000,000 and 50,000,000, respectively. The Company reduced the par value per share of Common and Preferred Stock from $0.001 to $0.00001 per share.

 

On May 20, 2015, the Company issued 1,200,000 shares of Common Stock to its board of directors converting $30,000 of Accrued Payroll. 

 

On September 24, 2015, the Company initiated a 1-for-2500 Reverse Stock split; every 2500 shares of issued and outstanding common stock were converted into one share of issued and outstanding common stock. If that number falls below 100, the share amount will be rounded up to 100. All share and per share amounts have been retroactively adjusted in the accompanying financial statements.

 

On October 1, 2015, the Company issued 600,000,000 shares of Common Stock to its board of directors converting $6,000 of Accrued Payroll. 

  

(B) Principal of Consolidation

 

The accompanying 2015 and 2014 unaudited condensed consolidated financial statements include the accounts of VizConnect, Inc., VizConnect LLC and its 80% owned-subsidiary, VizConnect Canada from the date of incorporation (October 29, 2013).

 

(C) Use of Estimates

 

In preparing financial statements in conformity with generally accepted accounting principles, management is 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 expenses during the reported period. Actual results could differ from those estimates. Significant estimates include the calculation of deferred revenue during the period and determinations of fair values of certain financial instruments. 
  

 
8
 

 

VIZCONNECT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2015

(UNAUDITED)

 

(D) Cash and Cash Equivalents

 

The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. At September 30, 2015 and December 31, 2014, the Company had no cash equivalents.

 

(E) Income Taxes

 

The Company accounts for income taxes in accordance with FASB ASC 740 " Accounting for Income Taxes ". Under this approach, deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and their liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts expected to be realized.

 

(F) Software Development Costs

 

We expense software development costs to be marketed to external users with a useful life of less than one year, before technological feasibility of such products is reached. We have determined that technological feasibility is reached shortly before the release of those products and as a result, the development costs incurred after the establishment of technological feasibility and before the release of those products were not material, and accordingly, were expensed as incurred. Software development costs totaled $893 and $48,380 for the nine months ended September 30, 2015 and 2014, respectively. 

 

(G) Business Segments

 

The Company operates in one segment and therefore segment information is not presented.

 

(H) Revenue Recognition

 

The Company recognizes revenue on arrangements in accordance with FASB ASC No. 605, " Revenue Recognition ". In all cases, revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured. 

 

The Company recognizes revenue from monthly subscriptions fees in the month in which services are provided. Because a portion of the fees are earned over a month period, any fees collected in which the services are not provided are recorded as deferred revenue.

 

The Company recognizes revenue from set up fees at the time the initial set up is complete and the fees are earned.

 

The Company recognizes revenue from distributor membership fees monthly over the one year membership period. Any fees collected in which the services are not provided are recorded as deferred revenue. 
  

 
9
 

 

VIZCONNECT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2015

(UNAUDITED)

 

(I) Selling Expenses

 

The Company incurs selling expenses under a "multi-level" compensation plan, which includes commissions for subscription sales made and bonuses for assisting associated distributors in closing initial subscription sales. Commissions are earned from direct sales as well as the sales made through the sales network they have developed. Accrued commissions payable was $21,640 as of September 30, 2015 and December 31, 2014.

 

(J) Concentrations

 

As of September 30, 2015 and 2014, respectively, the Company has no customers whose sales account for more than 10% of total sales.

 

(K) Property and Equipment

 

Property and equipment is recorded at cost. Additions and betterments are capitalized; maintenance and repairs are expensed as incurred. Depreciation is calculated using the straight-line method over the asset's estimated useful life, which is 5 years for furniture. Gains and losses on disposal are charged to operations.

 

(L) Fair Value Measurements

 

The Company's capital structure includes the use of convertible debt features that are classified as derivative financial instruments. Derivative financial instruments are recognized as either assets or liabilities and are measured at fair value in accordance with FASB ASC 815 " Derivatives and Hedging ". ASC 815 requires that changes in fair value of derivative financial instruments with no hedging designation be recognized as gains (losses) in the earnings statement. Fair value measurement and disclosures are determined in accordance with FASB ASC 820 " Fair Value Measurements and Disclosures ".

 

FASB ASC 820 establishes a framework for measuring fair value by creating a hierarchy for observable independent market inputs and unobservable market assumptions and expands disclosures about fair value measurements. Considerable judgment may be required in interpreting market data used to develop the estimates of fair value. Accordingly, the estimates present herein are not necessarily indicative of the amounts that could be realized in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value.

 

The following inputs are used in the valuation of the financial assets and liabilities.

 

Level 1 - Inputs represent unadjusted quoted prices for identical assets and liabilities exchanged in active markets.

 

Level 2 - Inputs include directly or indirectly observable inputs other than Level 1 inputs such as quoted prices for similar assets or liabilities exchanged in active or inactive markets; quoted prices for identical assets or liabilities exchanged in inactive markets; other inputs that are considered in fair value determinations of the assets or liabilities, such as interest rates or yield curves that are observable at commonly quoted intervals, volatilities, repayment speeds, loss severities, credit risks and default rates; and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

 

Level 3 - Inputs include unobservable inputs used in the measurement of assets and liabilities. Management is required to use its own assumptions regarding unobservable inputs, because there is little, if any, market activity in the assets or liabilities or related observable inputs that can be corroborated at the measurement date. Measurements of non-exchange traded derivative contract assets and liabilities are primarily based on valuation models, discounted cash flow models or other valuation techniques that are believed to be used by market participants. Unobservable inputs require management to make certain projections and assumptions about the information that would be used by market participants in pricing assets and liabilities. 
  

 
10
 

 

VIZCONNECT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2015

(UNAUDITED)

 

The fair values of financial instruments that include cash and amounts due to related parties were estimated to approximate their carrying values due to the immediate or relatively short maturity of these instruments.

 

The Company's operations and financing activities are conducted primarily in United States dollars, and as a result are not subject to significant exposure to market risks from changes in foreign currency rates. Management has determined that the Company is not exposed to significant credit risk.

 

The following is a summary of liabilities measured at fair value on a recurring basis at September 30, 2015:

 

Description

 

Total Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Derivatives:

 

 

 

 

 

 

 

 

 

 

 

 

Conversion Feature Liability

 

$ 223,946,744

 

 

 

-

 

 

 

-

 

 

$ 223,946,744

 

Total derivatives

 

$ 223,946,744

 

 

 

-

 

 

 

-

 

 

$ 223,946,744

 

 

The following is a summary of liabilities measured at fair value on a recurring basis at December 31, 2014:

 

Description

 

Total Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Derivatives:

 

 

 

 

 

 

 

 

 

 

 

 

Conversion Feature Liability

 

$ 600,271

 

 

 

-

 

 

 

-

 

 

$ 600,271

 

Total derivatives

 

$ 600,271

 

 

 

-

 

 

 

-

 

 

$ 600,271

 

 

The changes in derivatives measured at fair value for which, the Company has used Level 3 inputs to determine fair value at September 30, 2015 are as follows:

 

 

 

For the nine months ended

September 30,
2015

 

Beginning of the year

 

$ 600,271

 

Additional loans

 

 

76,350

 

Loss on change in fair value

 

 

223,513,745

 

Settlements

 

 

(243,622 )

End of the quarter

 

$ 223,946,744

 

 

The following is a description of the valuation methodology used for liabilities measured at fair value.

 

Conversion feature liability - The fair value of the derivative instrument was estimated using the Black Scholes option pricing model. (See Note 6) 
  

 
11
 

 

VIZCONNECT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2015

(UNAUDITED)

 

(M) Re-classifications

 

Certain amounts from prior periods have been reclassified to conform to the current period presentation. These reclassifications had no impact on the Company's net loss or cash flows.

 

(N) Loss per Share

 

The Company computes net loss per share in accordance with FASB ASC 260 " Earnings per Share ". ASC 260 requires presentation of both basic and diluted earnings per share ("EPS") on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, using the treasury stock method, and convertible preferred stock, using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive.

 

The following summarizes potential anti-dilutive shares:

 

 

 

September 30,
2015

 

 

September 30,
2014

 

(number of shares)

 

 

 

 

 

 

Convertible notes

 

 

2,499,889,723

 

 

 

33,533,720

 

Total

 

 

2,499,889,723

 

 

 

33,533,720

 

 

(O) Recent Account Pronouncements

 

In April 2015, FASB issued Accounting Standards Update ("ASU") No. 2015-03, " Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs" , is to simplify presentation of debt issuance costs by requiring that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The ASU does not affect the recognition and measurement guidance for debt issuance costs. For public companies, the ASU is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early application is permitted. 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 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-15 on "Presentation of Financial Statements Going Concern (Subtopic 205-40) - Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern" . Currently, there is no guidance in U.S. GAAP about management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern or to provide related footnote disclosures. The amendments in this Update provide that guidance. In doing so, the amendments are intended to reduce diversity in the timing and content of footnote disclosures. The amendments require management to assess an entity's ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management's plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management's plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this Update are effective for public and non-public entities for annual periods ending after December 15, 2016. Early adoption is permitted. 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. 
  

 
12
 

 

VIZCONNECT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2015

(UNAUDITED)

 

NOTE 2. GOING CONCERN

 

The Company had a net loss of $224,398,546 attributable to common stockholders for the nine months ended September 30, 2015, an accumulated deficit of $228,692,778 and a working capital deficit of $226,002,359 as of September 30, 2015. This raises substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company's ability to raise additional capital through the implementation of its business plan which encompasses a robust and innovative array of services which include real estate acquisition, equity building, debt removal, revenue generation, and asset acquirement through the issuance of Preferred Stock. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

Management believes that actions presently being taken to obtain additional funding through implementing its strategic plans, marketing strategy and sales incentives to expand operations will provide the opportunity for the Company to continue as a going concern.

 

NOTE 3. NOTES PAYABLE-RELATED PARTY

 

During 2011, the Company entered into two notes payable for a total of $22,500. The Notes have an interest rate of 10%, are unsecured, and due March 15, 2012. On February 14, 2014, these Notes plus accrued interest were converted into a new Note due on November 14, 2014 with an interest rate of 15% and premium interest of 20% beginning November 14, 2014. During the year ended December 31, 2014, $7,500 was repaid. The Company also converted $4,848 of interest to principal on the Notes. During 2014, the Company entered into two notes payable for a total of $5,000 with no interest, are unsecured, and due on demand. As of September 30, 2015 and December 31, 2014, the total amount outstanding is $24,848. Accrued interest totaled $7,243 and $3,475 as of September 30, 2015 and December 31, 2014, respectively. The maturity date has been extended to August 31, 2015 and is in default. On September 1, 2015, the Company entered into a convertible note financing transaction with an employee converting $15,000 of Accrued Payroll. This note matures on demand. It bears interest at 10% per annum. The note is convertible into Common Stock at the lender's option with a conversion rate equal to $0.00001 per share, unless otherwise modified by mutual agreement between the Parties.

 

NOTE 4. NOTES PAYABLE

 

During 2011, the Company entered into a note payable for $15,000. The Note has an interest rate of 2% monthly, is unsecured, and due on demand. As of September 30, 2015 and December 31, 2014, the total amount outstanding is $13,000. Accrued interest totaled $13,180 and $10,840 as of September 30, 2015 and December 31, 2014, respectively.

 

In January, 2014, the Company entered into two notes payable for a total of $20,000. The Notes have an interest rate of 15% per year, are unsecured, have maturity dates that have been extended to May 31, 2015 and are in default. 

 

In February, 2014, the Company entered into a note payable for $10,000. The Note has an interest rate of 15% per year, is unsecured, the maturity date has been extended to May 31, 2015 and is in default.

 

In March, 2014, the Company entered into a note payable for $60,000. The Note has a lump sum interest payment due of $4,000, is unsecured, the maturity date has been extended to May 31, 2015 and is in default.

 

On March 26, 2014, the Company entered into a note payable for $100,000. The Note had an interest rate of 10%, increasing to 20% beginning January 1, 2015, with a late payment premium of 22% on the principal and interest. A lump sum of $10,000 is due upon repayment, and is unsecured. In the second quarter of 2014, the Company accreted $10,000 of the original issuance discount. As of September 30, 2015 and December 31, 2014, the total amount outstanding is $67,671. Accrued interest totaled $23,377 and $0 as of September 30, 2015 and December 31, 2014, respectively. The Note was in default as of March 31, 2015 for which the note holder has commenced legal proceedings for $675,000 plus interest and attorneys' fees. 
  

 
13
 

 

VIZCONNECT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2015

(UNAUDITED)

 

On May 15, 2014, the Company entered into a note payable for $100,000. The Note has an interest rate of 10% with a lump sum of $20,000 due upon repayment, and is unsecured. In the second and third quarters of 2014, the Company accreted $20,000 of the original issuance discount. As of September 30, 2015 and December 31, 2014, the total amount outstanding is $96,302. Accrued interest totaled $7,303 and $0 as of September 30, 2015 and December 31, 2014, respectively. The Note was in default as of March 31, 2015 for which the note holder has commenced legal proceedings. 

 

On July 17, 2014, the Company entered into a $75,000 Note with an interest rate of 15%. The Note was in default as of June 30, 2015. 

 

On October 21, 2014, the Company entered into two notes payable for a total of $20,000. The Notes have lump sum interest payments due totaling $6,667, and are unsecured. The maturity dates have been extended to August 31, 2015 and are in default.

 

On December 4, 2014, the Company entered into a note payable for $5,000. The Note has a lump sum interest payment due of $2,000, is unsecured, the maturity date has been extended to May 31, 2015 and is in default.

 

NOTE 5. CONVERTIBLE NOTES PAYABLE 

 

During 2013, the Company received various unsecured convertible loans totaling $215,250 and converted loans payable in the amount of $310,000 to convertible notes payable of which $186,710 were converted to common stock in 2014. These notes have interest rates of 8% and 12% per year and mature on February 6, 2018 and March 1, 2018. During 2013, the Company repaid one convertible note payable in the amount of $42,500. During the first quarter of 2014, the Company received $133,000 of convertible notes payable, one for $75,000 with a discount of $25,000 for a term of three months, and one for $58,000 with an interest rate of 8% per year for a term of eight months. During the first quarter of 2014, the Company repaid loans of $42,500, $59,000 and $32,750 less $9,208 of discount. During the second quarter of 2014, the Company repaid a loan of $42,500. During the third quarter of 2014, the Company received $355,583 of convertible notes payable, one for $55,833 with an interest rate of 12% for a term of two years, one for $78,750 with an interest rate of 8% for a term of one year, one for $68,000 with an interest rate of 8% for a term of nine months, one for $53,000 with an interest rate of 8% for a term of nine months, and two $50,000 notes with interest rates of 12% for terms of six months. During the third quarter of 2014, the Company repaid loans of $58,000 and $75,000. During the fourth quarter of 2014, the Company received $107,000 of convertible notes payable, one for $25,000 with an interest rate of 8% for a term of one year, one for $57,000 with an interest rate of 10% for a term of one year, and one for $25,000 with an interest rate of 12% for a term of six months. During the first quarter of 2015, the Company issued 57,767 shares of common stock pursuant to the conversion of $110,308 of Convertible Notes and interest. During the second quarter of 2015, the Company received $3,350 of a convertible note payable with an interest rate of 10% due on demand and $54,500 of convertible preferred stock notes payable with an interest rate of 12%. During the third quarter of 2015, the Company received $18,500 of convertible notes payable with interest rates of 10% and due on demand. During the third quarter of 2015, the Company issued 145,020 shares of common stock pursuant to the conversion of $ 20,055 of Convertible Notes and interest.

 

The Company is in default on two convertible notes payable dated July 17, 2014 due January 17, 2015 and dated August 25, 2014 due February 25, 2015 for which the note holder has commenced legal proceedings for $100,000 plus accrued interest and attorneys' fees.

 

The convertible notes payable can be converted following a holding period provided in the respective promissory notes. The conversion into shares of Common Stock is based upon either i.) the lowest closing price of our stock during certain number of trading days prior to the conversion date, subject to conversion price discounts that vary from 50% to 60% discount, or ii.) conversion prices ranging from $.00001 to $0.14 per share. In addition, these notes include price protection terms, which would reset the per-share purchase price if the Company were obligated to convert other liabilities at a lower per share purchase price. The convertible Preferred Stock notes payable can be converted following a holding period into shares of Series B Preferred Stock at $2.50 per share. Each share of Series B Preferred Stock can be converted into shares of Common Stock at par value of $.00001 per share. 
  

 
14
 

 

VIZCONNECT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2015

(UNAUDITED)

 

The following is a summary of the unsecured convertible loans: 

 

Origination Date

 

Maturity Date

 

Interest Rate

 

 

Principal

September 30,
2015

 

 

Current Portion

 

 

Long-term

 

February 2013

 

February 2018

 

 

8 %

 

$ 125,790

 

 

$ -

 

 

$ 125,790

 

May 2013

 

March 2018

 

 

12 %

 

 

20,000

 

 

 

-

 

 

 

20,000

 

June 2013

 

March 2018

 

 

12 %

 

 

30,000

 

 

 

-

 

 

 

30,000

 

July 2014

 

June 2016

 

 

12 %

 

 

23,873

 

 

 

23,873

 

 

 

-

 

July 2014

 

July 2015

 

 

8 %

 

 

77,725

 

 

 

77,725

 

 

 

-

 

July 2014

 

January 2015

 

 

12 %

 

 

23,403

 

 

 

23,403

 

 

 

-

 

August 2014

 

February 2015

 

 

12 %

 

 

50,000

 

 

 

50,000

 

 

 

 -

 

September 2014

 

June 2015

 

 

8 %

 

 

53,000

 

 

 

53,000

 

 

 

 -

 

October 2014

 

September 2015

 

 

8 %

 

 

25,000

 

 

 

25,000

 

 

 

 -

 

November 2014

 

November 2015

 

 

10 %

 

 

57,000

 

 

 

57,000

 

 

 

 -

 

December 2014

 

June 2016

 

 

12 %

 

 

25,000

 

 

 

25,000

 

 

 

 -

 

April 2015

 

October 2015

 

 

12 %

 

 

15,000

 

 

 

15,000

 

 

 

 -

 

May 2015

 

On demand

 

 

10 %

 

 

3,350

 

 

 

3,350

 

 

 

 -

 

May 2015

 

November 2015

 

 

12 %

 

 

37,000

 

 

 

37,000

 

 

 

 -

 

June 2015

 

December 2015

 

 

12 %

 

 

2,500

 

 

 

2,500

 

 

 

 -

 

July 2015

 

On demand

 

 

10 %

 

 

3,500

 

 

 

3,500

 

 

 

 -

 

September 2015

 

On demand

 

 

10 %

 

 

15,000

 

 

 

15,000

 

 

 

 -

 

Discount notes payable

 

 

 

 

 

 

 

 

(143,092 )

 

 

(50,862 )

 

 

(92,230 )
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

$ 444,049

 

 

$ 360,489

 

 

$ 83,560

 

 

In Summary, during the first nine months ended September 30, 2015 and for the year ended December 31, 2014, the Company received $61,350 and $996,973 of notes payable, respectively, including convertible notes payable; the notes received during the first nine months ended September 30, 2015 have maturity terms ranging from on demand to six months and interest rates from 10% to 12%. The Notes contain various conversion rates and prepayment penalties. For the nine months ended September 30, 2015 and the year ended December 31, 2014, the Company has repaid $0 and $430,778 of principal, respectively, and all of the notes have been retired.

 

Interest and amortization of debt discount recognized for the nine month periods ended September 30, 2015 and September 30, 2014 were $421,492 and $730,658 respectively.

 

NOTE 6. DERIVATIVES

 

The company has a balance of convertible notes totaling $587,141 with certain investors. The notes can be converted following a holding period provided in the promissory note agreement, and at a set price per share, subject to certain re-set provision. This includes price protection terms, which would reset the per-share purchase price if the Company were obligated to convert other convertible liabilities at a lower per share purchase price.

 

The derivative liability is recorded at fair value on the Company's financial statements, and any changes in their fair value are included in the consolidated statement of operations as a non-cash item. 
  

 
15
 

 

VIZCONNECT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2015
(UNAUDITED)

 

The derivative liability is revalued and reported at fair value of $223,946,744 and $600,271 as of September 30, 2015 and December 31, 2014 respectively.

 

The fair value of the convertible notes was estimated using the Black Scholes option pricing model with the following assumptions for the nine months ended September 30, 2015.

 

Risk free interest rate

.01% and .78% based on expected life

 

Dividend yield

0%

 

Expected volatility

441%

 

Expected life (range in years)

.01 to 2.42

 

NOTE 7. STOCKHOLDERS' EQUITY

 

In the first quarter of 2015, the Company issued 57,767 shares of common stock pursuant to the conversion of $110,308 Convertible Notes and interest. 

 

The Company is required to reserve 24,281 shares of common stock under the convertible note agreements. 

 

On February 10, 2015, the board of directors of the Company authorized a Certificate of Designation of Preferences, Rights and Limitations of Series A Preferred Stock, designating three (3) shares of a new series of preferred stock, par value $0.001 per share, as "Series A Preferred Stock" all of which were issued to our three officers, valued at $0. The Certificate of Designation was filed as an amendment to the Company's Articles of Incorporation with the State of Nevada on February 10, 2015. Holder(s) of outstanding shares of Series A Preferred Stock shall be entitled to the number of votes equal to the total number of Company's common stock outstanding as of the record date for the determination of stockholders entitled to vote at each meeting of stockholders of the Company and entitled to vote on all matters submitted or required to be submitted to a vote of the stockholders of the Company. The Certificate was approved by our board and did not require shareholder vote. The Series A Preferred Stock did not have a dividend rate or liquidation preference, and were not convertible into shares of common stock. On the same date, the Company issued one share of Series A Preferred Stock to each of the Company's three Directors. 

 

On February 26, 2015, the Company issued 600 shares of Common Stock to an employee with a fair value of $1,799.

 

On May 20, 2015, the Company issued 1,200,000 shares of Common Stock to its board of directors converting $30,000 of Accrued Payroll. 

 

On May 14, 2014, the Company entered into a one year consulting agreement for 200 shares of common stock of which 50 vest per quarter. The Company expensed the fair value of $47 and $10,715 related to the portions earned through September 30, 2015 and December 31, 2014, respectively.  
  

 
16
 

 

VIZCONNECT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2015

(UNAUDITED)

 

On May 18, 2015, the board of directors of the Company authorized a Certificate of Designation of Preferences, Rights and Limitations of Series C Preferred Stock, designating 10,000,000 shares of a new series of preferred stock, par value $0.00001 per share, as "Series C Preferred Stock." The Certificate of Designation was filed as an amendment to the Company's Articles of Incorporation with the State of Nevada on May 18, 2015. 

 

On March 24, 2015, the Company filed a Certificate of Amendment to the Articles of Incorporation in the state of Nevada to increase the authorized shares of Common Stock to 2,000,000,000 having a par value of $0.001. 

 

On May 29, 2015, the board of directors of the Company authorized a Certificate of Designation of Preferences, Rights and Limitations of Series B Preferred Stock, designating 10,000,000 shares of a new series of preferred stock, par value $0.00001 per share, as "Series B Preferred Stock." The Certificate of Designation was filed as an amendment to the Company's Articles of Incorporation with the State of Nevada on May 29, 2015. Holder(s) of the Series B Preferred Stock shall be entitled, among others, conversion rights that may convert each share of Series B Preferred Stock into the number of shares of Company's common stock equal to the price of the Series B Preferred Stock divided by the par value of the Series B Preferred Stock and voting rights equal to ten votes for each share held for any election or matter before the shareholders of the Company.

 

On April 22, 2015, the Company filed a Certificate of Amendment to the Articles of Incorporation in the state of Nevada to increase the authorized shares of Common Stock and Preferred Stock to 5,000,000,000 and 50,000,000, respectively. The Company reduced the par value per share of Common and Preferred Stock from $0.001 to $0.00001 per share. All share and per share amounts have been retroactively restated in the financial statements.

 

In the third quarter of 2015, the Company issued 14,000 shares of preferred stock Series B purchased at $2.50 per share totaling $35,000.

 

In the third quarter of 2015, the Company issued 145,020 shares of common stock pursuant to the conversion of $20,055 Convertible Notes and interest. 

 

Additional paid in capital was increased by $243,622 for the nine months ended September 30, 2015 and $268,717 for the year ended December 31, 2014 for the fair value of Derivative Liability associated with the conversions and repayments of Convertible Notes.

 

On September 24, 2015, the Company initiated a 1-for-2500 Reverse Stock split; every 2500 shares of issued and outstanding common stock were converted into one share of issued and outstanding common stock. If that number falls below 100, the share amount will be rounded up to 100. All shares issued and per share amounts have been retroactively restated in the financial statements. 
  

 
17
 

 

VIZCONNECT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2015

(UNAUDITED)
 

NOTE 8. RELATED PARTY TRANSACTIONS

 

During 2011, the Company entered into two notes payable for a total of $22,500. The Notes have an interest rate of 10%, are unsecured, and due March 15, 2012. On February 14, 2014, these Notes plus accrued interest were converted into a new Note due on November 14, 2014 with an interest rate of 15% and premium interest of 20% beginning November 14, 2014. During the year ended December 31, 2014, $7,500 was repaid. The Company also converted $4,848 of interest to principal on the Notes. During 2014, the Company entered into two notes payable for a total of $5,000 with no interest, are unsecured, and due on demand. As of September 30, 2015 and December 31, 2014, the total amount outstanding is $24,848. Accrued interest totaled $7,243 and $3,475 as of September 30, 2015 and December 31, 2014, respectively. The maturity date has been extended to August 31, 2015 and is in default.

 

The Company incurred software development expenses during 2013 and 2012 from a company owned by an officer. As of September 30, 2015 and December 31, 2014, the total amount owed to the related vendor is $42,500 and is recorded in accounts payable. 

 

As of September 30, 2015 and December 31, 2014, commissions were owed to a company owned by the spouses of the officers. The commissions owed to this related party were $4,184 as of September 30, 2015 and December 31, 2014. The total commissions earned during 2014 were $2,821. 

 

On February 10, 2015, the Company issued one share of Series A Preferred Stock to each member of its board of directors as incentive to continue to assist and provide services to the Company. Holders of the outstanding shares of Series A Preferred Stock shall be entitled to the number of votes equal to the total number of Company's common stock outstanding as of the record date for the determination of stockholders entitled to vote at each meeting of stockholders of the Company and entitled to vote on all matters submitted or required to be submitted to a vote of the stockholders of the Company. 

 

On May 20, 2015, the Company issued 1,200,000 shares of Common Stock to its board of directors converting $30,000 of Accrued Payroll. 

 

On September 1, 2015, the Company entered into a convertible note financing transaction with an employee converting $15,000 of Accrued Payroll. This note matures on demand. It bears interest at 10% per annum. The note is convertible into Common Stock at the lender's option with a conversion rate equal to $0.00001 per share, unless otherwise modified by mutual agreement between the Parties.

 

On October 1, 2015, the Company issued 600,000,000 shares of Common Stock to its board of directors converting $6,000 of Accrued Payroll. 

 

NOTE 9. COMMITMENTS AND CONTINGENCIES

 

Litigation

 

On August 25, 2015, a noteholder filed a complaint against the Company in the District Court of Dallas County, Texas, alleging breach of contract for failure to pay outstanding notes. On August 27, 2015, a noteholder filed a complaint against the Company in the Supreme Court of New York, County of Suffolk, alleging breach of contract for failure to pay an outstanding note. We are currently working with the noteholders to end the litigation amicably.

 

 
18
 

 

VIZCONNECT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2015

(UNAUDITED)

 

NOTE 10. SUBSEQUENT EVENTS 

 

On October 1, 2015, the Company issued 600,000,000 shares of Common Stock to its board of directors converting $6,000 of Accrued Payroll. 

 

On October 13, 2015 and October 22, 2015, the Company exchanged a $10,000 Promissory Note to a $5,000 Convertible Note and two $2,500 Convertible Notes, respectively. The Notes have interest rates of 15% and are due on demand. On October 13, 2015, the Company issued 30,000,000 shares of Common Stock pursuant to the conversion of $750 Convertible Notes and on October 22, 2015, the Company issued 100,000,000 shares of Common Stock pursuant to the conversion of the two $2,500 Convertible Notes.

 

On October 28, 2015, the Company issued 1,565,878 shares of Common Stock pursuant to the conversion of $1,907 Convertible Notes and interest. 

 

On October 29, 2015, the Company issued 4,761,904 shares of Common Stock pursuant to the conversion of $5,000 Convertible Notes. 

 

On November 18, 2015, the Company issued 3,636,364 shares of Common Stock pursuant to the conversion of $3,000 Convertible Notes.

 

In the fourth quarter of 2015, the Company issued 40,000 shares of Preferred Stock Series B purchased at $2.50 per share totaling $100,000.

 

On January 6, 2016, the Company entered into a Promissory Note Receivable for $25,000 with a related party. The Note will be repaid in ten equal installments of principal, has an interest rate of 14%, is unsecured, with Accrued Interest due on the maturity date of December 6, 2016. 
  

 
19
 

 

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

 

The following discussion provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto contained elsewhere in this Report. The following discussion and analysis contains forward-looking statements, which involve risks and uncertainties. Our actual results may differ significantly from the results, expectations and plans discussed in these forward-looking statements.

 

Overview

 

The Company was incorporated in the State of Nevada on October 15, 2010. The Company, through its wholly-owned subsidiary, VizConnect LLC, a Massachusetts limited liability company is a holding company which helps companies around the world by providing first class business development consulting. Our growing portfolio encompasses a robust and innovative array of services which include real estate acquisition, equity building, debt removal, revenue generation, and asset acquirement through the issuance of Preferred Stock. Our talented and experienced team is driven to help customers increase value; maximize existing capabilities; improve shareholder performance and profitability; increase cost efficiency; and simplify business strategy.

 

On October 29, 2013, the Company formed a majority owned subsidiary to conduct business solely in Canada. The majority owned subsidiary is included in the consolidated financial statements of the Company at its formation. The non-controlling interest investors have contributed $100,000 into the subsidiary, which represents 20% ownership. The Company owns the remaining 80% of the subsidiary.

 

On February 10, 2015, the Company issued one share of Series A Preferred Stock to each member of its board of directors, or three (3) shares in total, as incentive to continue to assist and provide services to the Company. Holder(s) of outstanding shares of Series A Preferred Stock shall be entitled to the number of votes equal to the total number of Company's common stock outstanding as of the record date for the determination of stockholders entitled to vote at each meeting of stockholders of the Company and entitled to vote on all matters submitted or required to be submitted to a vote of the stockholders of the Company. 

 

On April 22, 2015, the Company filed a Certificate of Amendment to the Articles of Incorporation in the state of Nevada to increase the authorized shares of Common Stock and Preferred Stock to 5,000,000,000 and 50,000,000, respectively. The Company reduced the par value per share of Common and Preferred Stock from $0.001 to $0.00001 per share.

 

On May 20, 2015, the Company issued 1,200,000 shares of Common Stock to its board of directors converting $30,000 of Accrued Payroll. 

 

On September 24, 2015, the Company initiated a 1-for-2500 Reverse Stock split; every 2500 shares of issued and outstanding common stock were converted into one share of issued and outstanding common stock. If that number falls below 100, the share amount will be rounded up to 100. All shares issued and per share amounts have been retroactively restated in the financial statements.

 

On October 1, 2015, the Company issued 600,000,000 shares of Common Stock to its board of directors converting $6,000 of Accrued Payroll.  
  

 
20
 

 

Result of Operations

 

The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements and notes thereto included elsewhere in this Form 10-Q. 

 

Three Months Ended September 30, 2015 Compared with Three Months Ended September 30, 2014

 

Revenue:

 

Revenue for the three-month period ending September 30, 2015 was $0, compared with $32,623 for the three-month period ending September 30, 2014, reflecting a decrease of 100%. The decrease in revenues was attributable to the reduction in revenue from subscription and distributor membership fees with the unwinding of the network marketing model.

 

Operating Expenses:

 

Operating expenses for the three-month period ending September 30, 2015 were $174,723 compared with $140,515 for the three-month period ending September 30, 2014, reflecting an increase of 24%. The increase in operating expenses was primarily attributable to an increase in Accrued Payroll to retain our officers which has remained unpaid.

 

Loss from Operations:

 

We incurred losses from operations totaling $174,723 for the three-month period ending September 30, 2015, compared to losses from operations totaling $107,892 for the three-month period ending September 30, 2014, reflecting an increase of 62%. The increase in losses from operations was primarily attributable to a decrease in revenues due to the reduction in revenue from subscription and distributor membership fees with the unwinding of the network marketing model and due to the increase in Accrued Payroll to retain our officers. 
  

 
21
 

 

Other Expense: 

 

The Company had other expenses for the three-month period ending September 30, 2015 in the amount of $223,293,296 compared to other expenses of $289,728 for the three-month period ending September 30, 2014. This is comprised of a loss on the change in the market value of a derivative liability of $223,166,269 for the three-month period ending September 30, 2015, compared with a loss of $76,114 for the three-month period ending September 30, 2014, reflecting an increase of 293,100% and interest expense of $127,027, compared with $213,614 for the three-month period ending September 30, 2014, reflecting a decrease of 41%. The company has derivative losses in the three-month periods ending September 30, 2015 and September 30, 2014 associated with the fair market value on the company's financial derivatives.

 

Net loss:

 

We incurred a net loss of $223,468,019 attributable to common stockholders for the three-month period ending September 30, 2015, compared to a net loss of $397,400, for the three-month period ending September 30, 2014. The increase in loss was primarily attributable to a decrease in revenues due to the reduction in revenue from subscription and distributor membership fees with the unwinding of the network marketing model, the increase in Accrued Payroll to retain our officers and the increase in derivative losses associated with the fair market value on the company's financial derivatives.

 

Nine Months Ended September 30, 2015 Compared with Nine Months Ended September 30, 2014

 

Revenue:

 

Revenue for the nine-month period ending September 30, 2015 was $0, compared with $173,100 for the nine-month period ending September 30, 2014, reflecting a decrease of 100%. The decrease in revenues was attributable to the reduction in revenue from subscription and distributor membership fees with the unwinding of the network marketing model.

 

Operating Expenses:

 

Operating expenses for the nine-month period ending September 30, 2015 were $463,260 compared with $1,990,702 for the nine-month period ending September 30, 2014, reflecting a decrease of 77%. The decrease in operating expenses was primarily attributable to a decrease in professional fees due to our need in 2014 for experts specializing in advertising, promotion, and creating brand awareness not utilized in the third quarter 2015 and the decrease in general and administrative expenses primarily attributable to the issuance of common stock to the board of directors for services in 2014. Additionally, the Company did not incur sales commissions and software service fees in the third quarter 2015 corresponding to the reduction in the network marketing revenues.

 

Loss from Operations:

 

We incurred losses from operations totaling $463,260 for the nine-month period ending September 30, 2015, compared to losses from operations totaling $1,817,602 for the nine-month period ending September 30, 2014, reflecting a decrease of 75%. The decrease in losses from operations was primarily attributable to a decrease in professional fees due to our need in 2014 for experts specializing in advertising, promotion, and creating brand awareness not utilized in the third quarter 2015 and the decrease in general and administrative expenses primarily attributable to the issuance of common stock to the board of directors for services in 2014. Additionally, the Company did not incur sales commissions and software service fees in the third quarter 2015 corresponding to the reduction in the network marketing revenues.  
  

 
22
 

 

Other Expense: 

 

The Company had other expenses for the nine-month period ending September 30, 2015 in the amount of $223,935,237 compared to other expenses of $964,932 for the nine-month period ending September 30, 2014. This is comprised of a loss on the change in the market value of a derivative liability of $223,513,745 for the nine-month period ending September 30, 2015, compared with a loss of $234,274 for the nine-month period ending September 30, 2014, reflecting an increase of 95,307% and interest expense of $421,492, compared with $730,658 for the nine-month period ending September 30, 2014, reflecting a decrease of 42%. The company has derivative losses in the nine-month periods ending September 30, 2015 and September 30, 2014 associated with the fair market value on the company's financial derivatives.

 

Net loss:

 

We incurred a net loss of $224,398,546 attributable to common stockholders for the nine-month period ending September 30, 2015, compared to a net loss of $2,776,699, for the nine-month period ending September 30, 2014. The increase in loss was primarily attributable to the increase in derivative losses associated with the fair market value on the company's financial derivatives.

 

Plan of Operations

 

VizConnect is a holding company which helps companies around the world by providing first class business development consulting. Our growing portfolio encompasses a robust and innovative array of services which include real estate acquisition, equity building, debt removal, revenue generation, and asset acquirement through the issuance of Preferred Stock. Our talented and experienced team is driven to help customers increase value; maximize existing capabilities; improve shareholder performance and profitability; increase cost efficiency; and simplify business strategy.

 

Management has embarked upon a multi-step plan to build net equity and increase par value for stockholders by restructuring some key elements in the Company's finances through asset acquisition, debt reduction and overall increases in value.

 

Liquidity and Capital Resources 

 

 

 

For the Nine Months
Ended September 30,

 

 

 

2015

 

 

2014

 

Net Cash Used in Operating Activities

 

$ (106,600 )

 

$ (560,858 )

Net Cash From Investing Activities 

 

$ -

 

 

$ (14,325 )

Net Cash Provided by Financing Activities 

 

$ 96,350

 

 

$ 541,020

 

 

 
23
 

 

Net cash used in operations was $106,600 for the nine months ended September 30, 2015 compared to $560,858 for the nine months ended September 30, 2014. This decrease was primarily attributable to an increase in Accrued Expenses and a decrease in Operating Expenses.

 

Net cash used in investing activities was $0 for the nine months ended September 30, 2015 compared to $14,325 for the nine months ended September 30, 2014 attributable to the purchase of fixed assets. 

 

Net cash provided by financing activities for the nine months ended September 30, 2015 was $96,350 compared to $541,020 for the nine months ended September 30, 2014. 

 

We have substantial capital resource requirements and have incurred significant losses since inception. Our cash and cash equivalents is $343, and we have a working capital deficit of $226,002,359 as of September 30, 2015. Despite capital contributions and both related party and third party loan commitments, we may experience cash flow shortages that can slow our expected growth. We have primarily financed our activities from loans and sale of Preferred Stock from related and third parties. A significant portion of the funds raised from loans and sale of Preferred Stock from related and third parties have been and will be used to cover working capital needs such as office expenses and various professional fees.

 

Our cash flow requirements during this period have been met by contributions of capital and debt financing. We anticipate that financing will be required until such time as we are able to generate adequate cash flow from operations to support both our cash needs for normal operations, and to support the cash needs for our investment into additional resources and assets to support our growth. Currently we cannot determine when either will occur and as such we will need to obtain financing to cover our costs for the foreseeable future. We continue to seek financing sources, such as those described herein below, as well as others, in order to continue funding normal operations. However, no assurance can be given that these sources of financing will continue to be available. If we are unable to generate profits, or unable to obtain additional funds for its working capital needs, we may have to curtail normal operations, or cease operations completely.

 

During the first nine months ending September 30, 2015 and for the year ending December 31, 2014, the Company received $61,350 and $996,973 of notes payable, respectively, including convertible notes payable, with maturity terms ranging from one month to two years and interest rates from 8% to 15%. The Notes contain various conversion rates and prepayment penalties. For the nine months ending September 30, 2015 and the year ending December 31, 2014, the Company has repaid $0 and $430,778 of principal, respectively.

 

In the fourth quarter of 2015, the Company issued 40,000 shares of Preferred Stock Series B purchased at $2.50 per share totaling $100,000.

 

Going Concern

 

The Company had a net loss of $224,398,546 attributable to common stockholders for the nine months ended September 30, 2015, an accumulated deficit of $228,692,778 and a working capital deficit of $226,002,359 as of September 30, 2015. This raises substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company's ability to raise additional capital through the implementation of its business plan which encompasses a robust and innovative array of services which include real estate acquisition, equity building, debt removal, revenue generation, and asset acquirement through the issuance of Preferred Stock. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

Management believes that actions presently being taken to obtain additional funding through implementing its strategic plans, marketing strategy and sales incentives to expand operations will provide the opportunity for the Company to continue as a going concern.

 

Critical Accounting Policies and Estimates

 

Use of Estimates

 

In preparing financial statements in conformity with generally accepted accounting principles, management is 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 expenses during the reported period. Actual results could differ from those estimates. 
  

 
24
 

 

Software Development Costs

 

We expense software development costs to be marketed to external users with a useful life of less than one year, before technological feasibility of such products is reached. We have determined that technological feasibility is reached shortly before the release of those products and as a result, the development costs incurred after the establishment of technological feasibility and before the release of those products were not material, and accordingly, were expensed as incurred. Software development costs totaled $893 and $48,380 for the nine months ended September 30, 2015 and 2014, respectively. 

 

Revenue Recognition

 

The Company will recognize revenue on arrangements in accordance with FASB ASC Topic 605, "Revenue Recognition". In all cases, revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured. The Company recognizes revenue from monthly subscriptions fees in the month in which services are used. Because a portion of the fees are earned over a month period, any fees collect in which the services are not provided are recorded as deferred revenue. The Company recognizes revenue from set up fees at the time the initial set up is complete and the fees are earned. The Company recognizes revenue from distributor membership fees monthly over the one year membership period. Any fees collected in which the services are not provided are recorded as deferred revenue.

 

Recent Accounting Pronouncements

 

In April 2015, FASB issued Accounting Standards Update ("ASU") No. 2015-03, " Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs" , is to simplify presentation of debt issuance costs by requiring that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The ASU does not affect the recognition and measurement guidance for debt issuance costs. For public companies, the ASU is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early application is permitted. 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 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-15 on "Presentation of Financial Statements Going Concern (Subtopic 205-40) - Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern" . Currently, there is no guidance in U.S. GAAP about management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern or to provide related footnote disclosures. The amendments in this Update provide that guidance. In doing so, the amendments are intended to reduce diversity in the timing and content of footnote disclosures. The amendments require management to assess an entity's ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management's plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management's plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this Update are effective for public and non-public entities for annual periods ending after December 15, 2016. Early adoption is permitted. 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. 
  

 
25
 

 

Off-balance Sheet Commitments and Arrangements

 

We have no off-balance sheet transactions, arrangements, obligations (including contingent obligations), or other relationships with unconsolidated entities or other persons that have, or may have, a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

We are a Smaller Reporting Company and are not required to provide the information under this item.

 

Item 4. Controls and Procedures.

 

Disclosure of controls and procedures.

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports, filed under the Securities Exchange Act of 1934, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. In addition, the design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, a control may become inadequate because of changes in conditions or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. 
  

 
26
 

 

As required by the SEC Rule 13a-15(b), we carried out an evaluation under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. In making this assessment, management used the criteria set forth in the "Internal Control-Integrated Framework" (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO Framework). Based on its evaluation under the COSO Framework, and as a result of the material weakness described below, management concluded that, as of September 30, 2015, the Company's internal control over financial reporting was not effective.

 

Based on the foregoing, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses described below. 

 

In light of the material weaknesses described below, we performed additional analysis and other post-closing procedures to ensure our financial statements were prepared in accordance with generally accepted accounting principles. Accordingly, we believe that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.

 

A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 2) or combination of control deficiencies that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Management has identified the following two material weaknesses which have caused management to conclude that as of September 30, 2015 our disclosure controls and procedures were not effective at the reasonable assurance level:

 

1.

We do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act which is applicable to us for the three-months ended September 30, 2015. Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.

 

2.

We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.

 

To address these material weaknesses, management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented.

 

Changes in internal controls over financial reporting.

 

There has been no change in our internal control over financial reporting that occurred during the fiscal quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 
  

 
27
 

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

On August 25, 2015, a noteholder filed a complaint against the Company in the District Court of Dallas County, Texas, alleging breach of contract for failure to pay outstanding notes. On August 27, 2015, a noteholder filed a complaint against the Company in the Supreme Court of New York, County of Suffolk, alleging breach of contract for failure to pay an outstanding note. We are currently working with the noteholders to end the litigation amicably.

  

Item 1A. Risk Factors.

 

We are a Smaller Reporting Company and are not required to provide the information under this item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 

 

On July 7, 2015, we entered into a convertible note financing transaction for the principal amount of $3,500. This note is due on demand. It bears interest at 10% per annum. The note is convertible into Common Stock at the lender's option with a conversion rate equal to $0.00001 per share, unless otherwise modified by mutual agreement between the Parties, which would result in an additional issuance of 350,000,000 shares of Common Stock.

 

On September 1, 2015, we entered into a convertible note financing transaction for the principal amount of $15,000. This note matures on demand. It bears interest at 10% per annum. The note is convertible into Common Stock at the lender's option with a conversion rate equal to $0.00001 per share, unless otherwise modified by mutual agreement between the Parties, which would result in an additional issuance of 1,500,000,000 shares of Common Stock. 

 

On August 5, 2015, the Company issued 77,100 shares of Common Stock pursuant to the conversion of $11,565 Convertible Notes and interest. 

 

On August 6, 2015, the Company issued 67,920 shares of Common Stock pursuant to the conversion of $8,490 Convertible Notes.

 

The Shares were issued in reliance on exemptions from registration under Section 4(2) of the Securities Act of 1933, as amended (the "Act"). These transactions qualified for exemption from registration because among other things, the transactions did not involve a public offering, each investor was an accredited investor and/or qualified institutional buyer, each investor had access to information about the Company and their investment, each investor took the securities for investment and not resale, and the Company took appropriate measures to restrict the transfer of the securities. 
  

 
28
 

 

Item 3. Defaults Upon Senior Securities.

 

As of March 31, 2015, Notes totaling $238,973 were in default, and as of May 31, 2015 and August 31, 2015 an additional $95,000 and $44,848, respectively were in default. The Company defaulted on Convertible Notes of $23,403 due January 17, 2015, $8,845 due April 21, 2015, $50,000 due February 25, 2015, $53,000 due June 10, 2015, and $78,750 due July 3, 2015. The Company is in default on repayment terms and has received notice from two noteholders that they have commenced legal proceedings.

 

Item 4. Mine Safety Disclosures.

 

Not applicable

 

Item 5. Other Information.

 

None. 
  

 
29
 

 

Item 6. Exhibits

 

Exhibit Number

Exhibit Title

 

31.1*

Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

32.1+

Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

101.INS

XBRL Instance Document

 

101.SCH

XBRL Taxonomy Schema

 

101.CAL

XBRL Taxonomy Calculation Linkbase

 

101.DEF

XBRL Taxonomy Definition Linkbase

 

101.LAB

XBRL Taxonomy Label Linkbase

 

101.PRE

XBRL Taxonomy Presentation Linkbase

_________________

* Filed herewith.

 

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

 
30
 

 

SIGNATURES

 

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

 

VizConnect, Inc.

Dated: March 28, 2016

By:

/s/ Paul Cooleen

Paul Cooleen

President, Chief Executive Officer and Chief Financial Officer

(Principal Executive Officer and Principal Financial and Accounting Officer)

 

 

31


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