As filed with the Securities and Exchange
Commission on February 12, 2016
Registration No. ___________
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
ZONZIA MEDIA, INC.
(Exact name of registrant in its charter)
Nevada |
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2741 |
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84-0871427 |
(State or other Jurisdiction of |
|
(Primary Standard Industrial |
|
(I.R.S. Employer |
Incorporation or Organization) |
|
Classification Code Number) |
|
Identification No.) |
ZONZIA MEDIA, INC.
2580 Anthem Village Drive, Suite B-7
Henderson, NV 89074
(702) 707-3974
(Address and telephone number of principal
executive offices and principal place of business)
Stanley L. Teeple
2580 Anthem Village Drive, Suite B-7
Henderson, NV 89074
(702) 707-3974
(Name, address and telephone number of
agent for service)
With a copy to
Barnett & Linn
Attention: William B. Barnett, Esq.
23564 Calabasas Road, Ste. 205, Calabasas, CA
91302
Approximate date of proposed sale to the public:
From time to time after this Registration Statement becomes effective.
If
any securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the
following box: x
If
this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the
following box and list the Securities Act registration statement number of the earlier effective registration statement for the
same offering. o
If
this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If
this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If
delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. o
Indicate by a 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. (Check One)
Large Accelerated Filer o |
Accelerated Filer o |
Non-accelerated Filer o |
Smaller Reporting Company x |
CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities To Be Registered | |
Amount To Be Registered (1) (2) | | |
Proposed Maximum Offering Price Per Share (3) | | |
Proposed Maximum Aggregate Offering Price | | |
Amount Of Registration Fee (4) | |
Common Stock, $0.001 par value per share for sale by Selling Stockholders | |
| 64,468,344 | | |
$ | 0.06 | (2) | |
$ | 3,868,101 | | |
$ | 389.52 | |
_______________
(1) |
We are registering a total of 101,135,010 shares of our common stock of which 34,468,343 shares are being registered for resale that have been issued to the Selling Stockholders named in this registration statement and 30,000,000 shares that we will sell to Kodiak Capital Group, LLC pursuant to an Investment Agreement entered into on February 10, 2016, which sales shall have an aggregate initial offering price not to exceed $2,000,000. In the event the maximum aggregate offering price is reached, any remaining unsold shares shall be removed from registration. The proposed maximum offering price per share will be determined by the registrant in connection with the issuance of the securities registered hereunder. |
(2) |
Pursuant to Rule 416 of the Securities Act, this registration statement also registers such additional shares of common stock as may become issuable to prevent dilution as a result of stock splits, stock dividends or similar transactions. |
(3) |
This represents a price that is calculated in accordance with Rule 457(c) of the Securities Act of 1933 solely for the purpose of computing the amount of the registration fee. Our common stock is not traded on a national exchange, but is traded as of the date of this prospectus on the OTCQB marketplace. The offering price is based on the average of the bid and ask price of our common stock on that market on February 10, 2016. |
(4) |
On May 29, 2015 the
Registrant filed a Form S-1 registration statement (File No. 333-204570) and paid a registration fee of $3,353.15. The
registration statement was withdrawn by filing a Form RW on December 17, 2015. In accordance with Rule 457(p) under the
Securities Act of 1933, we request that the fees paid to the SEC in connection with the prior filing be credited to the
Registrant’s account to offset against the filing fees for this registration statement. |
The registrant hereby amends this registration
statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment
which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange
Commission, acting pursuant to said Section 8(a), may determine.
SUBJECT TO COMPLETION,
DATED FEBRUARY 12, 2016
The information in
this prospectus is not complete and may be changed. The selling stockholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these
securities and is not soliciting an offer to buy these securities in any state where the sale is
not permitted.
PROSPECTUS
ZONZIA
MEDIA, INC.
64,468,344 SHARES OF COMMON STOCK
This prospectus relates to the offer and
sale, from time to time, of up to 64,468,344 shares of the common stock of Zonzia Media, Inc., a Nevada corporation (“Zonzia,”
“the Company,” “we,” “us,” and “our,”), by the selling stockholders named in this
prospectus in the section “Selling Stockholders,” whom we refer to in this document as the “selling stockholders.”
Of the shares of common stock being offered by the selling stockholders, 30,000,000 may be issued pursuant to the equity purchase
agreement that we entered into with Kodiak Capital Group, LLC (“Kodiak Capital”), which we refer to in this prospectus
as the “Purchase Agreement.” Please refer to the section of this prospectus entitled “The Equity Purchase Transaction”
for a description of the Purchase Agreement and the section entitled “Selling Stockholders” for additional information
regarding the selling stockholders. Kodiak Capital is sometimes referred to herein as the “Equity Purchaser”.
We are not selling any shares of common
stock in this offering. We, therefore, will not receive any proceeds from the sale of the shares by the selling stockholders. We
will, however, receive proceeds from the sale of securities pursuant to our exercise of the put right under the Purchase Agreement.
The Equity Purchaser is an “underwriter”
within the meaning of the Section 2(a)(11) of the Securities Act of 1933, as amended. The other selling stockholder may be deemed
to be "underwriters" within the meaning of the Securities Act of 1933, as amended.
The selling stockholders may sell common
stock from time to time in the principal market on which the stock will be traded at the prevailing market price or in negotiated
transactions. See “Plan of Distribution” for more information about how the selling stockholders may sell the shares
of common stock being registered pursuant to this prospectus. The selling stockholders have informed us that they do not have any
agreement or understanding, directly or indirectly, with any person to distribute the common stock.
We have paid and will pay the expenses
incurred in registering the shares, including legal and accounting fees. See “Plan of Distribution.”
Our common stock is currently quoted on
the OTCQB market under the symbol “ZONX. On February 10, 2016, the last quoted sale price of our common stock as reported
on the OTCQB was $0.06 per share.
An investment in our common stock is
speculative and involves a high degree of risk. Investors should carefully consider the risk factors and other uncertainties described
in this prospectus before purchasing our common stock. See “Risk Factors” beginning on page 6.
NEITHER THE SECURITIES AND EXCHANGE
COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS
IS TRUTHFUL, ACCURATE, OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is February
__, 2016
TABLE OF CONTENTS
Page No.
Cautionary Statement Regarding Forward-Looking Statements |
1 |
Prospectus Summary |
2 |
Risk Factors |
6 |
Market and Other Data |
14 |
Use of Proceeds |
15 |
Market For Our Common Stock and Other Related Stockholder Matters |
16 |
Dilution |
18 |
Our Business |
19 |
Description of Properties |
28 |
Legal Proceedings |
28 |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
29 |
Directors and Executive Officers |
39 |
Executive Compensation |
45 |
Certain Relationships and Related Transactions, and Director Independence |
50 |
Security Ownership of Certain Beneficial Owners and Management |
52 |
The Equity Purchase Transaction |
53 |
Selling Stockholders |
55 |
Plan of Distribution |
58 |
Description of Registrant’s Securities |
60 |
Shares Eligible For Future Sale |
62 |
Legal Matters |
63 |
Experts |
63 |
Change in Accountants |
63 |
Where You Can Find More Information |
64 |
Index to Financial Statements |
F-1 |
AVAILABLE INFORMATION
This prospectus constitutes
a part of a registration statement on Form S-1 (together with all amendments and exhibits thereto, the “Registration Statement”)
filed by us with the SEC under the Securities Act of 1933, as amended (the “Securities Act”). As permitted by the rules
and regulations of the SEC, this prospectus omits certain information contained in the Registration Statement, and reference is
made to the Registration Statement and related exhibits for further information with respect to Zonzia Media, Inc. and the securities
offered hereby. With regard to any statements contained herein concerning the provisions of any document filed as an exhibit to
the Registration Statement or otherwise filed with the SEC, in each instance reference is made to the copy of such document so
filed. Each such statement is qualified in its entirety by such reference.
Unless otherwise
specified, the information in this prospectus is set forth as of February 12, 2016, and we anticipate that changes in our
affairs will occur after such date. We have not authorized any person to give any information or to make any representations,
other than as contained in this prospectus, in connection with the offer contained in this prospectus. If any person gives
you any information or makes representations in connection with this offer, do not rely on it as information we have
authorized. This prospectus is not an offer to sell our common stock in any state or other jurisdiction to any person to whom
it is unlawful to make such offer.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
All statements other than statements of historical
facts included or incorporated by reference in this report, including, without limitation, statements regarding our future financial
position and capital needs, business strategy, projected product development, budgets, projected revenues, projected costs and
plans and objectives of management for future operations, are forward-looking statements. Forward-looking statements generally
can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,”
“intend,” “project,” “estimate,” “anticipate,” or “believe” or the
negative thereof or any variation thereon or similar terminology.
Such forward-looking statements are made based
on management's beliefs, as well as assumptions made by, and information currently available to, management. Although we believe
that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations
will prove to have been correct. Such statements are not guarantees of future performance or events and are subject to known and
unknown risks and uncertainties that could cause the Company's actual results, events or financial positions to differ materially
from those included within the forward-looking statements. Important factors that could cause actual results to differ materially
from our expectations include, but are not limited to:
| · | future financial and operating results,
including projections of sales, revenue, income, expenditures, liquidity, and other financial items; |
| · | our ability to develop relationships with
new customers and maintain or improve existing customer relationships; |
| · | development of new products, brands and
marketing strategies; |
| · | current or future revenue and revenue
projections; |
| · | management’s goals and plans for
future operations; |
| · | our ability to improve operational efficiencies,
manage costs and business risks and improve or maintain profitability; |
| · | growth, expansion, diversification and
acquisition strategies, the success of such strategies, and the benefits we believe can be derived from such strategies; |
| · | the outcome of regulatory, tax and litigation
matters; |
| · | overall industry and market performance; |
| · | effects of competition; and |
| · | other assumptions described
in this report or underlying or relating to any forward looking statements. |
Readers are cautioned not to place undue reliance
on these forward-looking statements, which speak only as of the date made. All subsequent written and oral forward-looking statements
attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements.
Except as required by law, we undertake no obligation to disclose any revision to these forward-looking statements to reflect events
or circumstances after the date made, changes in internal estimates or expectations, or the occurrence of unanticipated events.
PROSPECTUS SUMMARY
This summary highlights information contained
elsewhere in this prospectus. Because this is only a summary, it does not contain all of the information that may be important
to you. You should read this entire prospectus and should consider, among other things, the matters set forth under “Risk
Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our
consolidated financial statements and related notes thereto appearing elsewhere in this prospectus before making your investment
decision.
Unless the context otherwise requires, any
reference to “the Company,” “we,” “us,” or, “our” refers to Zonzia Media, Inc.,
a Nevada corporation.
ZONZIA MEDIA, INC.
Zonzia Media, Inc. is a multi-platform entertainment
company focused on delivering compelling, innovative content with the objective of generating advertising revenue and subscription
revenue. We plan to distribute content through three distinct platforms:
|
1) |
Cable television; |
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2) |
Hotel in-room channel; and |
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3) |
Our website Zonzia.com. |
Through an “Over-The-Top” (“OTT”)
software technology, we plan to allow instant access to our available content from internet connected devices including home computers,
tablets, smart phones and other mobile devices. Upon the full launch of all three of our delivery platforms, which is contingent
upon our receipt of adequate funding, we plan to deliver a variety of content including:
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§ |
Original Programming – featuring TV series, mini-series, and documentaries. |
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§ |
Feature Films – full-length feature films from major Hollywood studios and independent production companies. |
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§ |
Television Shows – TV series from major networks and independent production companies. |
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§ |
Concerts, Sports and Live Events – streaming live music concerts, live sports events and other live events. |
Initially, we are distributing licensed content through our cable
television and hotel network distribution platforms.
Corporate History
We were originally incorporated in 1981
in the State of Nevada. Our principal executive offices are located at 2580 Anthem Village Drive, Suite B-7, Henderson,
Nevada 89074, and our telephone number at that location is (702) 707-3974. Our website address is www.zonziamedia.com. The information
on our website is not part of this prospectus.
Management
The management of Zonzia Media, Inc. includes:
Name |
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Age |
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Office |
Myles A. Pressey III |
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58 |
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Chairman of the Board and Interim Chief Financial Officer |
Johnathan F. Adair |
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50 |
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Chief Executive Officer |
Stanley L. Teeple |
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63 |
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Chief Compliance Officer |
Steven L. Sanders |
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55 |
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Director |
Philip Fraley |
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33 |
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Director |
Joseph Martin |
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44 |
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Director |
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Advisory Board members: |
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Charles R. Dutton |
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Our Growth Strategy
We are committed to establishing three distinct
distribution platforms for content, as further described below in the section entitled “Business.” As the distribution
platforms become established, we will seek to generate advertising revenue and subscription revenue from distributed content.
Initially, we are distributing content that
we license from our supplier simplyME Distribution across two platforms: the cable television platform and the hotel network platforms.
The Company’s objective is to provide its own content for distribution as it is developed and acquired over time. Initially,
all advertisers on the Zonzia channel have been secured by simplyME Distribution and its outside ad agency.
We are currently focused on the following three
platforms to meet our distribution objectives:
|
1- |
Cable Television Platform |
| · | This platform has launched. It is currently
live in approximately 27 plus million households in the United States through a Channel Distribution Agreement with simplyME Distribution
LLC. |
| · | Our supplier simplyME has agreements with
national cable providers, including Comcast, Dish Network, and Verizon FiOS to distribute Video on Demand (“VOD”) content. |
| · | The business model is to generate advertising
revenue from users viewing content through the cable television platform. |
| · | The growth strategy for this distribution
platform is to both enhance the quality of the channel content and increase the total amount of content over time. |
| · | The Company plans to
use internet marketing, social media, and other advertising to drive traffic to this channel. |
|
2- |
Hotel Network Platform |
| · | The Company has an agreement with Sonifi Solutions, Inc. to provide content to Sonifi’s hotel clients, which include the following, amongst others: |
|
o |
Marriott Hotels |
|
o |
Westin Hotels |
|
o |
Hilton Hotels |
| · | The initial roll-out to approximately
546,000 hotel rooms was launched on August 1, 2015 with licensed content on a Free-To-Guest 4-hour loop linear channel. The initial
roll-out to approximately 405,733 hotel rooms was launched in August 2015 with licensed content on a Free-To-Guest 24/7 linear
channel. Our Free-To-Guest VOD channel also went live in August 2105, with distribution scheduled in approximately 882,000 hotel
rooms. |
| · | The revenue model contemplates Zonzia
paying an advertising agency commission and subsequently sharing the remaining revenue with content providers. |
| · | The growth strategy is
to increase the number of hotel rooms displaying content and to provide compelling content through both our content partners and
eventually, our own original content. |
|
3- |
Website: Zonzia.com Platform |
| · | The website, while up and operating, functions
for now as an informational site for visitors to learn more about the Company and our future offerings. |
| · | Today, a visit to the website shows teasers
of content offerings to come such as photos from the Tribeca Film Festival. |
| · | The Company is in negotiations for original
program offerings with various companies. |
| · | The growth of the business
model will target advertising revenue based upon the number of site visits and subscription revenue based upon the number of subscribers
acquired, both of which are predicated upon the quality of the content. |
The Offering
This prospectus relates to the offer and
sale from time to time of up to 64,468,344 shares of our common stock by the selling stockholders, 34,468,343 shares of which were
issued include: (i) shares that were sold in private placements of our common stock; and (ii) shares to compensate our executives
and our consultants, and (iii) as consideration to extinguish debts and contractual payment obligations of the Company.
Kodiak Capital, one of the selling stockholders
under this prospectus, is offering for sale up to 30,000,000 shares of our common stock. Kodiak Capital is not an affiliate of,
or has any relation to, any of the other selling stockholders named herein. On February 10, 2016, we entered into the Purchase
Agreement with Kodiak Capital. Pursuant to the Purchase Agreements Kodiak Capital has agreed to purchase from us up to an aggregate
of $2 million worth of shares of our common stock from time to time, until December 31, 2016. Also on February 10, 2016, we entered
into a Registration Rights Agreement (the “Registration Rights Agreement”) with the Equity Purchaser, pursuant to which
we have filed with the U.S. Securities and Exchange Commission (the “SEC”) this registration statement that includes
this prospectus to register for resale under the Securities Act of 1933, as amended (the “Securities Act”), the shares
that may be issued to the Equity Purchaser under the Purchase Agreement. In consideration for entering into the Purchase Agreement,
we issued to the Equity Purchaser a Promissory Note having a principal amount of $120,000, which is due and payable on September
30,, 2016.
We do not have the right to commence any
sales to the Equity Purchaser under the Purchase Agreement until the SEC has declared effective the registration statement of which
this prospectus forms a part. Thereafter, we may, from time to time and at our sole discretion, direct the Equity Purchaser to
purchase shares of our common stock, but we would be unable to sell shares to them if such purchase would result in their respective
beneficial ownership equaling more than 9.99% of the outstanding common stock. Except as described in this prospectus, there are
no trading volume requirements or restrictions under the Purchase Agreement, and we will control the timing and amount of any sales
of our common stock to the Equity Purchaser. The purchase price of the shares that may be sold to the Equity Purchaser under the
Purchase Agreement will be equal to 70% of the lowest daily volume weighted average price of the common stock for the five consecutive
trading days immediately following our request for the Equity Purchaser to purchase the shares. We may at any time in our sole
discretion terminate the Purchase Agreement without fee, penalty or cost upon one business day notice. The Equity Purchaser may
not assign or transfer its rights and obligations under the Purchase Agreement.
As of January 31, 2016, there were 234,344,775
shares of our common stock outstanding, of which 88,990,024 shares were held by non-affiliates. Although the Purchase Agreement
provides that we may sell up to $2 million worth of shares of our common stock to Kodiak Capital, only 30,000,000 shares of our
common stock are being offered under this prospectus. If all of the 30,000,000 shares offered by the Equity Purchase under this
prospectus were issued and outstanding as of January 31, 2016, such shares would represent 33.7% of the total number of shares
held by non-affiliates. If we elect to issue and sell more than the 30,000,000 shares offered under this prospectus to the Equity
Purchaser, which we have the right, but not the obligation, to do, we must first register for resale under the Securities Act any
such additional shares, which could cause additional substantial dilution to our stockholders. The number of shares ultimately
offered for resale by the Equity Purchaser is dependent upon the number of shares we sell to them under the Purchase Agreement.
Issuances of our common stock in this
offering will not affect the rights or privileges of our existing stockholders, except that the economic and voting interests
of each of our existing stockholders will be diluted as a result of any such issuance. Although the number of shares of common
stock that our existing stockholders own will not decrease, the shares owned by our existing stockholders will represent a smaller
percentage of our total outstanding shares after any such issuance to the Equity Purchaser.
Offering Summary
Common Stock Offered by Selling Stockholders |
Up to 64,468,344 shares of our
common stock, all of which are being offered for resale by selling stockholders, including 30,000,000 that we may sell to the
Equity Purchaser under the Purchase Agreement.
|
Common Stock Outstanding Prior to the Offering
|
As of the date of this prospectus, there are 234,344,775 shares issued and outstanding. |
Common Stock to be Outstanding After the Offering |
264,344,775 shares to be outstanding
after giving effect to the total issuance of 30,000,000 shares to the Equity Purchaser under the Purchase Agreement.
|
Offering Price Per Share |
The purchase price per share of common
stock being offered to the Equity Purchaser will be set at seventy percent (70%) of the lowest closing bid price of the common
stock during the five consecutive trading days immediately following the date of our notice to the Equity Purchaser of our election
to put shares pursuant to the Purchase Agreement (i.e. 30% discount to market).
The shares being offered by the other
selling stockholders may be offered and sold from time to time at prevailing market prices or privately negotiated prices.
|
Termination of the Offering |
The shares are being offered by the
Equity Purchaser for a period not to exceed December 31, 2016.The shares being offered by the other selling shareholders will conclude
when the selling shareholders have sold all 34,468,343 shares of common stock offered by them.
|
Use of Proceeds |
We will not receive any proceeds from
the sale of the shares of common stock by the selling stockholders in this offering. However, we may receive up to $2 million from
sales of shares to the Equity Purchaser under the Purchase Agreement. Any proceeds that we receive from sales to the Equity Purchaser
under the Purchase Agreement will be used to develop or acquire high quality media content, for advertising and marketing expenses
and for other general corporate purposes. See “Use of Proceeds.”
|
Risk Factors |
An investment in our common stock is highly speculative and involves a high degree of risk. Investors should carefully consider the risk factors and other uncertainties described in this prospectus before purchasing our common stock. See “Risk Factors” beginning on page 6. |
|
|
Fees and Expenses |
We will pay all expenses incident to the registration of such shares, except for sales commissions and other expenses of selling stockholders. |
|
|
RISK FACTORS
An investment in our common stock involves
a high degree of risk. You should carefully consider the following risk factors in addition to other information in this prospectus,
including the financial statements and the related notes thereto, and in our other filings with the SEC before purchasing our common
stock. The risks and uncertainties described below are those that are currently deemed to be material and specific to our Company
and industry. If any of these risks actually occur, our business may be adversely affected, and you may lose all or part of your
investment.
Risks Related to Our Business and Industry
Our sole operation has experienced a
net loss since its inception in May 2014, and because it has a limited operating history, our ability to fully and successfully
develop our business is unknown.
We do not have a significant operating history
with which investors can evaluate its business. We have only generated de minimis click-through revenue and have not fully
launched our content delivery platforms while incurring expenses.
There is a risk that we may not be able to
successfully develop our content and attract customers on favorable terms necessary to realize consistent, meaningful revenues
and profit. For us to achieve success, our services must receive broad market acceptance by consumers. Without this market acceptance,
we will not be able to generate sufficient revenue to continue our business operation, and our business may fail.
Our ability to achieve and maintain profitability
and positive cash flow is dependent upon our ability to generate revenues, manage development costs and expenses and compete successfully
with our direct and indirect competitors.
Based on current plans, we expect to incur
operating losses in future periods. This will happen because there are expenses associated with the development, marketing and
provision of our services. As a result, we may not generate significant net income from operations in the future. Failure to generate
significant net income from operations in the near future may cause us to reduce or cease activities.
Our company’s independent auditors
have expressed substantial doubt about our ability to continue as a going concern.
We have incurred losses and during our short
history we have been in a development phase without material revenues or operational cash flows. Additionally, we currently have
limited viable funding sources to pay our on-going obligations. Next, we do not currently have, and do not expect to have, recurring
revenue generating sources until we fully launch our advertising business while continuing to incur operating expenses. These factors,
along with having no substantial firm funding commitments, result in substantial doubt about our ability to continue as a going
concern. As such, our independent auditors included an explanatory paragraph regarding the substantial doubt about the ability
to continue as a going concern. The financial statements contain additional note disclosures describing the circumstances that
led to the inclusion of the explanatory paragraph.
In the second quarter of 2016, we expect
to generate a significant portion of our near-term revenues from advertising. A reduction in spending from our advertisers or losing
a substantial number of our advertisers will seriously harm our business.
In the near term (the next 12 to 18 months),
we expect nearly all of our revenue will be generated from advertisers. We expect to begin earning advertising revenue in the second/third
quarter of 2016 through advertisements placed with our content and distribution partner simplyME Distribution. We anticipate that
our ability to attract advertisers will be limited. Existing advertisers sourced by simplyME will not continue to do business with
us, if their investment in advertising with us does not generate sales leads, and ultimately customers. They will also cease doing
business with us if we or our distribution partners such as simplyME do not deliver their advertisements in an appropriate and
effective manner. If we are unable to remain competitive and provide value to our advertisers, they may stop placing ads with us,
which would adversely affect our revenues and business.
In addition, expenditures by advertisers tend
to be cyclical, reflecting overall economic conditions, budgeting and buying patterns. Adverse macroeconomic conditions can also
have a material negative impact on the demand for advertising and cause our advertisers to reduce the amounts they spend on advertising,
which could adversely affect our revenues and business.
We face intense competition. If we do
not continue to innovate and provide content and products that are compelling to users, we may not remain competitive, and our
revenues and operating results could be adversely affected.
Our business is rapidly evolving and intensely
competitive, and is subject to changing technologies, shifting user needs, and frequent introductions of new products and services.
Our ability to compete successfully depends heavily on providing products and services that provide enjoyable experiences and entertain
users. The competitive pressure to innovate encompasses providing a wider range of products and services and relevant and entertaining
content that may not have been a part of previous core business plans.
We have many competitors in different industries,
most of which have stronger brand recognition, longer operating histories, and significantly more financial resources. Our competitors
can use their experience and resources in ways that could affect our competitive position, including by making acquisitions, investing
aggressively in research and development, aggressively initiating intellectual property claims (whether or not meritorious) and
competing aggressively for advertisers and consumers.
Our competitors are constantly developing innovations
content delivery, online advertising, and web-based products and services. The development of new, technologically advanced products
is also a complex and uncertain process requiring high levels of innovation and investment, as well as the accurate anticipation
of technology, market trends and consumer needs. As a result, we may not be able to compete on a timely basis, particularly with
competitors with greater financial resources and longer operating histories. If we are unable to provide quality content using
effective and engaging distribution methods, then we will have difficulty generating user engagement and ultimately, advertising
revenue. If our competitors are more successful than we are in developing compelling content or in attracting and retaining users,
advertisers, and content providers, our revenues and operating results could be adversely affected.
Our business depends on a strong brand.
Failing to maintain and enhance our brand would hurt our ability to expand our base of users, advertisers, and other partners.
We are in the early stages of building a strong
brand identity that will be critical to the success of our business. We believe that the importance of brand recognition remains
crucial due to the relatively low barriers to entry in the internet market. Our brand may be negatively impacted by a number of
factors, including data protection and security issues, service outages, and product malfunctions. Failure to increase, maintain,
and continually enhance our brand, which likely will require us to incur significant, and potentially excessive, expenses will
adversely affect our business in a material manner.
If we fail to attract users to our viewer
and consumer base our revenues, financial results and overall business will be significantly harmed.
Our user base size and our users’ level
of engagement are critical to our success. Our financial performance will be expressly determined by our success in adding, retaining
and engaging active users. If we are unable to attract and publish engaging content, then our active user rate will decline, and
we will be unable to attract advertising and ecommerce customers. If individual consumers across our target audience do not perceive
our products to be compelling, useful, reliable and trustworthy, then we may not be able to attract or retain users or otherwise
maintain or increase the frequency and duration of their engagement. We may not be able to expand our active user base to the
necessary levels needed to generate positive cash flows from operations. Consumer engagement patterns are constantly evolving
and difficult to measure, and if we cannot provide a timely evolution of our brands, then our financial results will be severely
harmed. Any number of factors could potentially negatively affect user retention, growth and engagement, including if:
| · | users increasingly engage with other products
or activities; |
| · | we fail to introduce content and other
video products that users find engaging; |
| · | consumer experience is diminished as a
result of the decisions we make with respect to the frequency, prominence and size of ads that we display or the quality of the
ads displayed; |
| · | we are unable to manage and prioritize
information to ensure users are presented with content that is interesting, useful and relevant to them; |
| · | there are adverse changes in our products
that are mandated by legislation, regulatory authorities or litigation, including settlements or consent decrees; or |
| · | technical or other problems
prevent us from delivering our products in a rapid and reliable manner or otherwise affect the user experience, such as any failure
to prevent spam or similar content. |
Our new products and changes to existing
products could fail to attract or retain users or generate revenue.
Our ability to retain, increase and engage
our user base and to increase our revenue depends heavily on our ability to provide successful new product offerings, such as original
television or other videos, both independently and/or in conjunction with developers or other third parties. Our product reviews
and introductions may include new and unproven products, including with which we have little or no prior experience. If new or
enhanced products fail to engage users, developers or marketers, then we may fail to attract or retain users or to generate sufficient
revenue or operating margin, and our business may be adversely affected.
We prioritize user growth and ultimately
our user’s experience over short-term financial results.
We sometimes make decisions regarding our content
and distribution methods that may reduce our short-term revenue or profitability if we believe that the decisions are consistent
with our mission and benefit the aggregate user experience and will thereby improve our financial performance over the long term.
For example, from time to time we may change the size, frequency or relative prominence of ads in order to improve ad quality and
overall user experience. Similarly, from time to time we may adjust our content or websites to deliver the most relevant content
to our users, which may adversely affect certain advertisers and could reduce their incentive to engage their marketing efforts
on our platforms and those of our brand partners. We also may introduce changes to existing content mixes to attract new targeted
demographics that may direct previous users away from our sites. These decisions may not produce the long-term benefits that we
expect, in which case our user growth and engagement, our relationships with developers and advertisers and our business and results
of operations could be harmed.
Our dependence on a sole back-office
technology partner subjects us to commercial risk.
Currently, all of our advertising sales, support,
revenue generation and tracking and collections efforts are provided by one third party vendor, Kaltura, Inc. If our relationship
with this service provider erodes or is harmed, that would likely result in the interruption of our business plan and likely will
result in adverse impacts on our financial results and future performance.
Our dependence on a sole distribution
partner for current advertisers subjects us to commercial risk.
Currently, all of the advertisers on the Zonzia
channel are sourced through our content supplier and distribution partner, simplyME Distribution LLC, with whom we have a revenue
share arrangement. Since the contracts with advertisers lie with simplyME and/or its advertising firm and we do not have a direct
contractual relationship with these advertisers, our ability to generate advertising revenue would be adversely impacted in the
event that our relationship with simplyME erodes or is harmed.
A variety of new and existing U.S. laws
could subject us to claims or otherwise harm our business.
We are subject to numerous U.S. laws and regulations
covering a wide variety of subject matters. New laws and regulations (or new interpretations of existing laws and regulations)
also may impact our business. The costs of compliance with these laws and regulations are high and are likely to increase in the
future. Any failure on our part to comply with these laws and regulations can result in negative publicity and diversion of management
time and effort and may subject us to significant liabilities and other penalties.
Furthermore, many of these laws were adopted
before the advent of the internet and related technologies and, as a result, do not contemplate or address the unique issues of
the internet and related technologies. The laws that do reference the internet are being interpreted by the courts, but their applicability
and scope remain uncertain. For example, the laws relating to the liability of providers of online services are currently unsettled
within the U.S. Claims may be filed against us under U.S. laws for defamation, invasion of privacy and other tort claims, unlawful
activity, patent, copyright and trademark infringement or other theories based on the nature and content of the materials searched
and the ads posted by our users, our products and services or content generated by our users.
In addition, the Digital Millennium Copyright
Act has provisions that limit, but do not necessarily eliminate, our liability for listing or linking to third-party websites
that include materials that infringe copyrights or other rights, so long as we comply with the statutory requirements of this
act. Any future legislation impacting these safe harbors may adversely impact us. Various U.S. laws restrict the distribution
of materials considered harmful to children and impose additional restrictions on the ability of online services to collect information
from minors. In the area of data protection, many states have passed laws requiring notification to users when there is a security
breach for personal data, such as California’s Information Practices Act.
We may be subject to legal liability
associated with providing online services or content.
We will provide a wide variety of products
that enable users to exchange information and will also allow product and service providers to advertise and engage in various
online activities. The law relating to the liability of providers of these online services and products for activities of their
users is still somewhat unsettled. Claims may be threatened or brought against us for defamation, negligence, breaches of contract,
copyright or trademark infringement, unfair competition, unlawful activity, tort, including personal injury, fraud or other theories
based on the nature and content of information that we publish or to which we provide links or that may be posted online or generated
by us or by third parties, including our users. In addition, we may be subject to domestic or international actions alleging that
certain content we have generated or third-party content that we have made available within our services violates U.S. and non-U.S.
law.
Interruption or failure of our information
technology and communications systems could hurt our ability to effectively provide our products and services, which could damage
our reputation and harm our operating results.
The availability of our products and services
depends on the continuing operation of our information technology and communications systems. Our systems are vulnerable to damage
or interruption from earthquakes, terrorist attacks, floods, fires, power loss, telecommunications failures, computer viruses,
computer denial of service attacks or other attempts to harm our systems.
The occurrence of a natural disaster could
result in lengthy interruptions in our service. In addition, our products and services are highly technical and complex and may
contain errors or vulnerabilities. Any errors or vulnerabilities in our products and services, or damage to or failure of our systems,
could result in interruptions in our services, which could reduce our revenues and profits and damage our brand.
Our operating results may fluctuate,
which makes our results difficult to predict and could cause our results to fall short of expectations.
Our operating results may fluctuate as a result
of a number of factors, many outside of our control, and we have a short operating history. As a result, comparing our operating
results on a period-to-period basis will take time as we build our history and may not be meaningful in any one particular period.
As a result, you should not rely on our past results as an indication of our future performance. Our quarterly, year-to-date and
annual revenues and expenses may differ significantly from our projected rates. Any of these events could cause our stock price
to fall. Each of the risk factors listed in this section in addition to the following factors may affect our operating results:
| · | our ability to continue to attract users
to our distribution platforms; |
| · | our ability to monetize advertising revenue
from distributed content; |
| · | revenue fluctuations caused by changes
in property mix, platform mix and geographical mix; |
| · | the amount and timing of operating costs
and expenses and capital expenditures related to the maintenance and expansion of our businesses, operations and infrastructure; |
| · | our focus on long-term goals over short-term
results; |
| · | our ability to keep our content platforms
operational at a reasonable cost and without service interruptions; and |
| · | because our business
is ever changing and evolving, and because of our lack of long standing historical operating results, predicting our future operating
results is not reliable. In addition, advertising spending has historically been cyclical in nature, reflecting overall economic
conditions, as well as budgeting and buying patterns. |
We rely on highly skilled personnel,
and if we are unable to retain or motivate key personnel, hire qualified personnel or maintain our corporate culture, then we may
not be able to grow effectively.
Our performance largely depends on the talents
and efforts of highly skilled individuals. Our future success depends on our continuing ability to identify, hire, develop, motivate
and retain highly skilled personnel for all areas of our organization. Competition in our industry for qualified employees is
intense. In addition, our compensation arrangements, such as our equity award programs, may not always be successful in attracting
new employees and retaining and motivating our existing employees. Our continued ability to compete effectively depends on our
ability to attract new employees and to retain and motivate our existing employees.
Claims that current or future technologies
used in our products and services infringe or misappropriate the proprietary rights of others could adversely affect our ability
to use those technologies and cause us to incur additional costs.
We could be subject to third party infringement
claims if third parties challenge our use of a particular technology or proprietary information in our sites. Any litigation, regardless
of its outcome, would likely result in the expenditure of significant financial resources and the diversion of management’s
time and resources. In addition, litigation in which we are accused of infringement may cause negative publicity, adversely impact
prospective customers and require us to develop non-infringing technology, make substantial payments to third parties or enter
into royalty or license agreements, which may not be available on acceptable terms or at all.
We may acquire technologies or companies
in the future, and such acquisitions could disrupt our business and dilute our stockholders’ interests.
We may acquire additional technologies or
other companies in the future, and we cannot provide assurances that we will be able to successfully integrate their operations
or that the cost savings we anticipate will be fully realized. Entering into an acquisition or investment entails many risks,
any of which could materially harm our business, including:
| · | the diversion of management’s attention
from other business concerns; |
| · | the failure to effectively assimilate
the acquired technology, employees or other assets of the acquired company into our business; |
| · | the loss of key employees from either
our current business or the acquired business; and |
| · | the assumption of significant
liabilities of the acquired company. |
If we complete acquisitions, we may dilute
the ownership of current stockholders. In addition, achieving the expected returns and cost savings from our past and future acquisitions
will depend in part on our ability to integrate the products and services, technologies, research and development programs, operations,
sales and marketing functions, finance, accounting and administrative functions and other personnel of these businesses into our
business in an efficient and effective manner. Any businesses that we acquire may not perform at anticipated levels. If we are
unable to successfully integrate acquired businesses, then our anticipated revenues may be lower, and our operational costs may
be higher.
Our strategy for growth may include joint
ventures, strategic alliances and mergers and acquisitions, which could be difficult to manage.
The successful execution of our growth strategy
will depend on many factors, including identifying suitable companies, negotiating acceptable terms, successfully consummating
the corporate relationships and obtaining the required financing on acceptable terms. We may be exposed to risks that we may incorrectly
assess new businesses and technologies. We could face difficulties and unexpected costs during and after the establishment of corporate
relationships.
Our insurance may not be sufficient.
We will carry insurance that we consider adequate
having regard to the nature of the risks of doing business and costs of coverage. We may not, however, be able to obtain insurance
against certain risks or for certain products or other resources located from time to time in certain areas of the world to the
extent that we may be forced to rely on outside providers. Currently, we are not fully insured against all possible risks, nor
are all such risks insurable. Our insurance coverage may not be adequate.
We do not own all of the intellectual
property that is needed for use of our content storage and distribution plans, and thus rely on contractual rights to use certain
intellectual property that is needed for our content storage and distribution infrastructure.
Pursuant to our agreement with Kaltura, Inc.,
we have the rights to use all software developed for our back-office infrastructure. However, we do not own all of the underlying
intellectual property and thus, rely on our contractual relationship for our ability to use certain intellectual property necessary
to run our business.
We may seek to protect intellectual property
through contracts, including, when possible, confidentiality agreements and inventors’ rights agreements with our business
partners and employees.
We intend to seek to protect intellectual property,
to the extent it is developed over time, in part by confidentiality agreements and, if applicable, inventors’ rights agreements
with strategic partners and employees, although such agreements have not been and may not be put in place in every instance. These
agreements may not adequately protect our trade secrets and other intellectual property or proprietary rights. There is also a
risk that the parties that enter into such agreements with us may breach them, that we will not have adequate remedies for any
breach or that such persons or institutions will assert rights to intellectual property arising out of these relationships.
Our failure to obtain or maintain the
right to use certain intellectual property may negatively affect our business.
Our future success and competitive position
depend in part on our ability to obtain and maintain rights with regard to certain intellectual property used in our solutions.
This may be achieved, in part, by prosecuting claims against others who we believe are infringing our rights and by defending claims
of intellectual property infringement brought by others. While we are not currently engaged in any intellectual property litigation,
in the future we may commence lawsuits against others if we believe that they have infringed our rights, or we may become subject
to lawsuits alleging that we have infringed the intellectual property rights of others. For example, to the extent that we have
previously incorporated third party technology and/or know-how into certain systems for which we do not have sufficient license
rights, we could incur substantial litigation costs, be forced to pay substantial damages or royalties or even be forced to cease
operations in the event that any owner of such technology or know-how were to challenge our subsequent installation of such system
(and any progeny thereof). Our involvement in intellectual property litigation could result in significant expense to us, adversely
affect the development of our waste remediation intellectual property and divert the efforts of our technical and management personnel,
whether or not such litigation is resolved in our favor. In the event of an adverse outcome in any such litigation, we may, among
other things, be required to:
| · | pay substantial damages; |
| · | cease the development, manufacture, use,
sale or importation of machines or systems or components thereof that infringe on other patented intellectual property; |
| · | expend significant resources to develop
or acquire non-infringing intellectual property; |
| · | discontinue processes or systems incorporating
infringing technology; or |
| · | obtain licenses to the
infringing intellectual property. |
Any such development, acquisition or license
could require the expenditure of substantial time and other resources and could have a material adverse effect on our business,
results of operations and financial condition.
Risks Related to our Common Stock
Our executive officers and directors
collectively have the power to control our management and operations, and have a significant majority in voting power on all matters
submitted to the stockholders of the company.
Management and affiliates of our management
currently beneficially own a majority of our outstanding common stock. Consequently, management has the ability to influence control
of the operations of the Company and, acting together, will have the ability to influence or control substantially all matters
submitted to stockholders for approval, including:
| · | Election of our board of directors; |
| · | Amendment to the Company’s Articles
of Incorporation or Bylaws; and |
| · | Adoption of measures
that could delay or prevent a change in control or impede a merger, takeover or other business combination. |
These stockholders have complete control over
our affairs. Accordingly, this concentration of ownership by itself may have the effect of impeding a merger, consolidation, takeover
or other business consolidation, or discouraging a potential acquirer from making a tender offer for the Common Stock.
Our executive officers face a conflict
since they will be seeking to sell shares offered hereunder on behalf of the Company, and may also sell shares that they hold personally
that are registered hereby, since our executive offices are included as selling stockholders herein.
This Registration Statement covers both the
offering of shares of our common stock to the public by the Company and the sale of shares held by selling stockholders, including
some of the Company’s executive officers. Thus, the Company’s executive officers may sell shares they own personally,
and will also be seeking to sell shares of stock offered by the Company. This presents a conflict of interest in that each such
executive officer could be presented an opportunity to sell shares either personally or on behalf of the Company, to a given potential
investor. If an executive officer prioritized the sale of his or her own shares, this could harm the Company.
Our common stock has not been widely
traded, and the price of our common stock may fluctuate substantially.
To date, there has been a limited public market
for shares of our common stock, with limited trading. An active public trading market may not develop or, if developed, may not
be sustained. The current market price of our common stock and any possible subsequent listing on the NASDAQ Market or other securities
exchange, if and when we are successful in doing so, will be affected by a number of factors, including those discussed above.
Future sales of our common stock by existing
stockholders could cause our stock price to decline.
If our existing stockholders sell substantial
amounts of our common stock in the public market, then the market price of our common stock could decrease significantly. The perception
in the public market that our stockholders might sell shares of common stock also could depress the market price of our common
stock. There are approximately 234 million shares of our common stock outstanding, of which approximately 2,055,833 shares are
currently freely tradable. The balance of our shares currently contains certain restrictions on resale. We may in the future issue
and register additional shares of our common stock that might be freely transferable at the time of such transaction.
A decline in the price of shares of our common
stock might impede our ability to raise capital through the issuance of additional shares of our common stock or other equity securities.
We do not expect to pay dividends in
the foreseeable future, and any return on investment may be limited to the value of our common stock.
We do not anticipate paying dividends on our
common stock in the foreseeable future. The payment of dividends on our common stock will depend on our earnings, financial condition,
opportunities to invest in the growth of our business and other business and economic factors affecting us at such time as our
Board of Directors may consider relevant. If we do not pay dividends, then our common stock may be less valuable because a return
on investment will occur only if our stock price increases.
Our charter documents may discourage
or prevent a change in control, even if an acquisition would be beneficial to our stockholders, which could adversely affect our
stock price and prevent attempts by our stockholders to replace or remove our current management.
Our current articles of incorporation and bylaws,
which will remain in effect after the effective date of this Report, contain provisions that could delay or prevent a change in
control of our company or changes in our Board of Directors that our stockholders might consider favorable and limit the price
that certain investors might be willing to pay in the future for our securities. Among other things, these provisions:
| · | Authorize the issuance of preferred stock
that can be designated and issued by our Board of Directors without prior stockholder approval and with rights senior to those
of our common stock. |
| · | Require advance written
notice of stockholder proposals and director nominations to be considered at stockholders’ meetings. |
These and other provisions in our articles
of incorporation and bylaws could make it more difficult for stockholders or potential acquirers to obtain control of our Board
of Directors or to initiate actions that are opposed by our then current Board of Directors, including a merger, tender offer or
proxy contest involving our company. Any delay or prevention of a change in control transaction or changes in our Board of Directors
could cause the market price of our common stock to decline.
We are authorized to issue preferred
stock, which could adversely affect the value of shares of our common stock.
Our articles of incorporation authorize us
to issue up to 2,000,000,000 shares of common stock and 200,000,000 shares of preferred stock, approximately 100,000,000 shares
of which preferred shares are available for future issuance as of the date of this Report. Our Board of Directors could designate
and issue preferred stock, in one or more series, the terms of which may be determined at the time of issuance by our Board of
Directors, without further action by stockholders. Terms of preferred stock could include voting rights, including the right to
vote as a series on particular matters, preferences as to dividends and liquidation, conversion rights, redemption rights and sinking
fund provisions. The designation of preferred stock could have a material adverse effect on the rights of holders of our common
stock and therefore could reduce the value of shares of our common stock. In addition, specific rights granted to future holders
of preferred stock could be used to restrict our ability to merge with, or sell our assets to, a third party. The ability of our
Board of Directors to issue preferred stock could have the effect of rendering more difficult, delaying, discouraging, preventing
or rendering more costly an acquisition of our company or a change in control of our company, thereby preserving control of our
company by current management.
The sale of our common stock to the Equity
Purchasers may cause dilution, and the sale of the shares of common stock acquired by the Equity Purchasers, or the perception
that such sales may occur, could cause the price of our common stock to fall.
On February 10, 2016, we entered into the Purchase
Agreement with the Equity Purchaser. Pursuant the Purchase Agreements the Equity Purchaser has committed to purchase up to an aggregate
of $2 million of our common stock. The shares that may be sold pursuant to the Purchase Agreement in the future may be sold by
us to the Equity Purchaser at our discretion from time to time, commencing after the SEC has declared effective the registration
statement that includes this prospectus until December 31, 2016. The per share purchase price for the shares that we may sell to
the Equity Purchaser under the Purchase Agreement will fluctuate based on the price of our common stock, and will be equal to 70%
of the lowest daily volume weighted average price of the common stock for the five consecutive trading days immediately following
our request for the Equity Purchaser to purchase the shares. Depending on market liquidity at the time, sales of such shares may
cause the trading price of our common stock to fall.
We generally have the right to control the
timing and amount of any sales of our shares to the Equity Purchaser, except that, pursuant to the terms of the Purchase Agreement,
we would be unable to sell shares to the Equity Purchaser if such purchase would result in an Equity Purchaser’s respective
beneficial ownership equaling more than 9.99% of the outstanding common stock. The Equity Purchaser may ultimately purchase all,
some or none of the shares of our common stock that may be sold pursuant to the Purchase Agreement and, after they have acquired
shares, the Equity Purchaser may sell all, some or none of those shares. Therefore, sales to the Equity Purchaser by us could
result in substantial dilution to the interests of other holders of our common stock. Additionally, the sale of a substantial
number of shares of our common stock to the Equity Purchaser, or the anticipation of such sales, could make it more difficult
for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect
sales.
The Equity Purchasers will pay less than the then-prevailing market price for our common stock.
The common stock to be issued to the Equity
Purchaser pursuant to the Purchase Agreement will be purchased at a thirty percent (30%) discount to the lowest daily volume weighted
average price of the common stock for the five consecutive trading days immediately following our request for the Equity Purchaser
to purchase the shares. The Equity Purchaser has a financial incentive to sell our common stock immediately upon receiving the
shares to realize the profit equal to the difference between the discounted price and the market price. If the Equity Purchaser
sells the shares, the price of our common stock could decrease. If our stock price decreases, the Equity Purchaser may have a further
incentive to sell the shares of our common stock that it holds. These sales may have a further impact on our stock price.
Our common stock is deemed to be a “penny
stock,” which may make it more difficult for investors to sell their shares due to suitability requirements.
Our common stock is deemed to be a “penny
stock” as that term is defined in Rule 3a51-1 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”). This classification reduces the potential market for our common stock by reducing the number of potential investors.
This would be detrimental to the development of active trading in our common stock and make it more difficult for investors in
our common stock to sell shares to third parties or to otherwise dispose of them. This also could cause our stock price to decline
or impede any increase in price. Penny stocks are stocks:
| · | with a price of less than $4.00 per share; |
| · | that are not traded on a “recognized”
national exchange; or |
| · | in issuers with net tangible
assets less than $2 million (if the issuer has been in continuous operation for at least three years) or $10 million (if the issuer
has been in continuous operation for less than three years), or with average revenues of less than $6 million for the last three
years. |
Broker-dealers dealing in penny stocks are
required to provide potential investors with a document disclosing the risks of penny stocks. Moreover, broker-dealers are required
to determine whether an investment in a penny stock is a suitable investment for a prospective investor. Many broker-dealers will
not offer penny stocks to their clients. Moreover, many investors are disinclined to purchase penny stocks.
If we raise additional funds through
the issuance of equity or convertible debt securities, your ownership will be diluted.
If we raise additional funds through the issuance
of equity or convertible debt securities, the percentage ownership held by existing stockholders will be reduced, and new securities
may contain certain rights, preferences or privileges that are senior to those of our common stock. Furthermore, any additional
equity financing may be dilutive to stockholders, and debt financing, if available, may involve restrictive covenants, which may
limit our operating flexibility with respect to certain business matters.
Grants of stock options and other rights
to our employees may dilute your stock ownership.
We plan to attract and retain employees in
part by offering stock options and other purchase rights for a significant number of shares of our common stock. We intend to grant
stock options to certain officers and directors of our company. The issuance of shares of common stock pursuant to such stock options,
and stock options issued in the future, will have the effect of reducing the percentage of ownership in our company of our then
existing stockholders.
FINRA sales practice requirements also
may limit a stockholder’s ability to buy and sell our stock.
In addition to the “penny stock”
rules described above, the Financial Industry Regulatory Authority (known as “FINRA”) has adopted rules that
require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment
is suitable for that customer. Before recommending speculative low priced securities to their non-institutional customers, broker-dealers
must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives
and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low
priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers
to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse
effect on the market for our shares.
MARKET AND OTHER DATA
The industry and market data contained in this
prospectus are based on independent industry publications, reports by market research firms or other published independent sources
and, in each case, are believed by us to be reliable and accurate. However, industry and market data is subject to change and cannot
always be verified with complete certainty due to limits on the availability and reliability of raw data, the voluntary nature
of the data gathering process and other limitations and uncertainties inherent in any statistical survey. In addition, consumption
patterns and customer preferences can and do change. The industry and market data sources upon which we relied are publicly available
and were not prepared for our benefit or paid for by us.
USE OF PROCEEDS
This prospectus relates to shares of our common
stock that may be offered and sold from time to time by the selling stockholders. We will not receive any proceeds upon the sale
of shares by the selling stockholders in this offering. However, we may receive gross proceeds of up to $2 million under the Purchase
Agreement with the Equity Purchaser, assuming that we sell the full amount of our common stock that we have the right, but not
the obligation, to sell to the Equity Purchaser under those agreements. See “Plan of Distribution” elsewhere in this
prospectus for more information.
We currently expect to use the net proceeds
from the sale of shares to the Equity Purchaser under the Purchase Agreement to develop or acquire high quality media content,
for advertising and marketing expenses and for other general corporate purposes. We will have broad discretion in determining how
we will allocate the proceeds from any sales to the Equity Purchaser.
Even if we sell $2 million worth of shares
of our common stock to the Equity Purchaser pursuant to the Purchase Agreement, we will need to obtain additional financing in
the future in order to fully fund all of our planned operations, including attracting and retaining highly talented professionals.
We may seek additional capital in the private and/or public equity markets, pursue government contracts and grants as well as business
development activities to continue our operations, respond to competitive pressures, develop new products and services, and
to support new strategic partnerships. We are evaluating additional equity financing opportunities on an ongoing basis and
may execute them when appropriate. However, there can be no assurances that we can consummate such a transaction, or consummate
a transaction at favorable pricing.
MARKET PRICE FOR OUR COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
(a) Market Information.
Our shares of common stock are not traded
on a national exchange; rather, they are traded on the OTCQB marketplace under the symbol “ZONX”. At February 10,
2016, the closing bid price for one share of our common stock was $0.06. The following table sets forth, for the periods indicated,
the high and low trade prices for our common stock as reported on the on the OTCQB marketplace. During 2012 and 2013, our common
stock did not trade above $0.01.
On November 21, 2014, we completed a 1 for
44 reverse split of our common stock. The following reverse split adjusted table reflects the high and low quarterly quotations
or traded prices. (Source: www.otcmarkets.com).
Quarterly Period |
|
High |
|
|
Low |
|
|
|
|
|
|
|
|
|
|
2016 |
|
|
|
|
|
|
|
|
First Quarter (to February 10, 2016) |
|
$ |
0.07 |
|
|
$ |
0.03 |
|
|
|
|
|
|
|
|
|
|
2015 |
|
|
|
|
|
|
|
|
First Quarter |
|
$ |
0.44 |
|
|
$ |
0.05 |
|
Second Quarter |
|
$ |
0.34 |
|
|
$ |
0.11 |
|
Third Quarter |
|
$ |
0.22 |
|
|
$ |
0.10 |
|
Fourth Quarter |
|
$ |
0.13 |
|
|
$ |
0.03 |
|
|
|
|
|
|
|
|
|
|
2014 |
|
|
|
|
|
|
|
|
First Quarter |
|
$ |
0.18 |
|
|
$ |
0.02 |
|
Second Quarter |
|
$ |
0.66 |
|
|
$ |
0.05 |
|
Third Quarter |
|
$ |
0.44 |
|
|
$ |
0.03 |
|
Fourth Quarter |
|
$ |
0.93 |
|
|
$ |
0.07 |
|
Trading in stocks quoted on the OTCQB marketplace
is often thin and is characterized by wide fluctuations in trading prices due to many factors that may have little to do with a
company’s operations or business prospects. We cannot assure you that there will be a market for our common stock in the
future.
Our transfer agent is Continental Stock Transfer
& Trust Company with an office at 17 Battery Place, 8th Floor, New York, New York 10004.
(b) Holders.
At January 31, 2015, there were 1,076
stockholders of record of our company’s common stock. Company stockholders who hold their shares in electronic format in
U.S. brokerage accounts are not deemed to be separate stockholders, as such shares are held of record by CEDE and Co., which is
counted by our company’s transfer agent as a single stockholder of record. As of January 31, 2015, there were 234,344,775
shares of our company’s common stock issued and outstanding and no shares of our preferred stock issued and outstanding.
(c) Dividends.
During the most recent fiscal year, we did
not declare or pay cash dividends. Our company does not intend to pay cash dividends on its common stock in the foreseeable future.
We anticipate retaining earnings (if any) for investing in our business and increasing our working capital. We are not subject
to restrictions respecting the payment of dividends, except that they may not be paid to render us insolvent.
(d) Securities Authorized for Issuance under
Equity Compensation Plans.
We have one equity compensation plan, our company’s
2007 Stock Option Plan. See “Executive Compensation—2007 Stock Option Plan.” Set forth in the table below are
(a) the number of shares of our common stock to be issued upon the exercise of outstanding options, (b) the weighted-average exercise
price of the outstanding options and (c) other than shares of our common stock to be issued upon the exercise of the outstanding
options, the number of shares of our common stock remaining available for future issuance under our company’s 2007 Stock
Option Plan as of December 31, 2015.
The following table summarizes certain information
regarding our 2007 Stock Option Plan as of December 31, 2015
Equity Compensation Plan Information
|
|
Number of securities to be issued upon exercise of outstanding options, |
|
Weighted-average exercise price of outstanding options, |
|
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in |
Plan category |
|
warrants and rights |
|
warrants and rights |
|
column (a)) |
|
|
(a) |
|
(b) |
|
(c) |
Equity compensation plans approved by security holders |
|
568,182 |
|
$6.60 |
|
340,909 |
Equity compensation plans not approved by security holders |
|
871,591 |
|
$0.88 |
|
N/A |
Total |
|
1,439,773 |
|
|
|
340,909 |
The above table has been adjusted to reflect
retrospective application of our 1-for-44 reverse stock split, effective November 12, 2014.
2007 Stock Option Plan
Before December 31, 2011, we issued options
to both employees and non-employees under our 2007 Stock Option Plan, which reserved 909,091 shares of common stock pursuant to
the issuance of stock options under the Plan. As of December 31, 2015, we had 568,182 shares of common stock subject to outstanding
common stock options with a weighted average exercise price of $6.60. As of December 31, 340,909 shares of common stock were available
for future award grants under the 2007 Stock Option Plan.
In addition, we issued warrants to employees
and non-employees not reserved under a formal Plan. As of December 31, 2015, we had 3,000,000 warrants outstanding with a weighted
average exercise price of $0.22. All numbers relating to the 2007 Stock Option Plan have been adjusted to reflect the retrospective
application of our 1-for-44 reverse stock split effective November 12, 2014.
DILUTION
Investors who purchase our common stock will
be diluted to the extent of the difference between the public offering price per share of our common stock and the pro forma as
adjusted net tangible book value per share of our common stock immediately after this offering. Net tangible book value per share
is determined by dividing our total tangible assets less total liabilities by the number of outstanding shares of our common stock.
As of September 30, 2015, we had a negative net tangible book value of $(2,889,233), or approximately $(0.013) per share of common
stock.
Dilution in net tangible book value
per share represents the difference between the assumed offering price per share of common stock of $0.06 (the closing price
of our common stock on February 10, 2016) and the pro forma as adjusted net tangible book value per share of common stock
immediately after the sale of the 30,000,000 shares of common stock being registered for resale to the Equity Purchaser under
the Purchase Agreement. Therefore, after giving effect to our assumed receipt of $2,000,000 in estimated net proceeds from
the issuance of 30,000,000 shares of common stock under the Purchase Agreement (which is the number of shares being
registered for resale to the Equity Purchaser hereunder) and registered in this offering (assuming a purchase price of $0.06
per share, 70% of the closing price of the common stock and assuming such sale was made on September 30, 2015, and after
deducting estimated offering commissions and expenses payable by us), our pro forma as adjusted net tangible book value as of
September 30, 2015 would have been $(889,000), or $0.003 per share. This would represent an immediate decrease in the net
tangible book value of $0.01 per share to existing shareholders attributable to this offering. The following table
illustrates this per share dilution:
Assumed offering price per share of common stock |
|
|
|
|
|
$ |
0.06 |
|
Net tangible book value per share as of September 30, 2015 |
|
$ |
(0.013 |
) |
|
|
|
|
Decrease in as adjusted net tangible book value per share attributable to the sale of shares under the Purchase Agreement |
|
|
0.003 |
|
|
|
|
|
Pro forma net tangible book value per share after the sale of shares under the Purchase Agreement |
|
|
|
|
|
|
(0.03 |
) |
Dilution per share to new investors |
|
|
|
|
|
$ |
0.03 |
|
To the extent that we sell more or less
than $2,000,000 worth of shares under the Purchase Agreement, or to the extent that some or all sales are made at prices
lower than or in excess of the assumed price per share of $0.06, then the dilution reflected in the table above will
differ. The above table is based on 229,249,597 shares of our common stock outstanding as of September 30, 2015, adjusted for
the assumed sale of $2,000,000 in shares to the Equity Purchaser under the Purchase Agreement at the assumed purchase price
described above and after deducting estimated offering commissions and expenses payable by us.
To the extent that we issue
additional shares of common stock in the future, there may be further dilution to investors participating in this offering. In
addition, we may choose to raise additional capital because of market conditions or strategic considerations, even if we believe
that we have sufficient funds for our current or future operating plans. If we raise additional capital through the sale of equity
or convertible debt securities, the issuance of these securities could result in further dilution to our shareholders.
The number of shares of
our common stock reflected in the discussion and calculations for the figures appearing in the table above is based on 229,249,597
shares of our common stock outstanding as of September 30, 2015 and excludes, as of that date:
| · | 568,182 shares issuable upon exercise of outstanding options with a weighted average exercise
price of $6.60; |
| · | 3,871,591 shares issuable upon exercise of outstanding warrants with a weighted average
exercise price of $0.37. |
BUSINESS
Overview
Zonzia Media, Inc. is a multi-platform entertainment
company focused on delivering compelling, innovative content with the objective of generating both advertising revenue and subscription
revenue. We plan to distribute content through three distinct platforms:
|
1) |
Cable
television platform; |
|
2) |
Hotel
in-room channel platform; and |
|
3) |
our
website Zonzia.com platform |
Through an “Over-The-Top” (“OTT”)
software technology we plan to allow instant access to our available content from internet connected devices including home computers,
tablets, smart phones and other mobile devices. Upon the full launch of all three of our delivery platforms, which is contingent
upon the receipt of adequate funding, we plan to deliver a variety of content including:
|
§ |
Original Programming – featuring TV series, mini-series, and documentaries. |
|
§ |
Feature Films – full-length feature films from major Hollywood studios and independent production companies. |
|
§ |
Television Shows – TV series from major networks and independent production companies. |
|
§ |
Concerts, Sports and Live Events – streaming live music concerts, live sports events and other live events. |
When referring to our company and using phrases
such as “we” and “us,” our intent is to refer to Zonzia Media, Inc. (formerly Indigo-Energy, Inc. and HDIMAX
Media, Inc.).
We were originally incorporated in 1981 in
the State of Nevada. Our principal executive offices are located at 74 N. Pecos Road, Suite D, Henderson, Nevada 89074, and our
telephone number at that location is (702) 463-8528. Our website address is www.zonzia.com. The information on our website is not
part of this prospectus.
Zonzia Media
We are a new multi-platform entertainment distribution
business with the goal of using the following three distribution platforms described below to generate advertising revenue. Initially,
we are distributing content that we license from our supplier simplyME Distribution across two platforms: the cable television
platform and the hotel network platforms. The Company’s objective is to provide its own original content for distribution
as it develops and acquires the content over time, eventually across all three platforms.
Platform #1-Cable Television
| · | This platform has launched. A Zonzia VOD
channel is currently live in approximately 27 million households in the United States through a Channel Distribution Agreement
with simplyME Distribution LLC. |
| · | Our supplier simplyME has agreements with
national cable providers Comcast, Dish Network and Verizon FiOS to distribute VOD content. Initially, we are licensing
this content from simplyME. |
| · | The business model is to generate advertising
dollars from users viewing distributed content through simplyME’s cable providers. As of September 30, 2015, we had not yet
generated advertising revenue, but expect to report advertising revenue for the fourth quarter of 2015. |
| · | The growth strategy is to enhance the
quality of the VOD channel content and to increase the total amount of VOD content thereby generating increased advertising revenue. |
| · | The Company plans to use internet marketing,
social media, and other advertising to drive traffic to this channel. |
| · | Pursuant to an addendum
to our Channel Distribution Agreement with simplyME, we have secured an additional channel, to be named “ZonziaKidz,”
with its launch expected by mid 2016. |
We are teaming up with simplyME Distribution
to provide programming, which is supported by national branded advertisers, to cable households through cable television providers
Comcast, Dish Network and Verizon FiOS. The contractual relationship with these providers lies with simplyME. We currently have
30 hours of programming and are in the process of ramping up our programming efforts which we anticipate will expand to approximately
90 hours of content sometime in the second or third quarter of 2016.
simplyME, our distribution and content supplier,
has secured advertisers in support of the initial programming, and we are working together with simplyME to secure additional advertisers
in the coming months. With the current advertisers on the Zonzia VOD channel provided through simplyME and its advertising firm,
Zonzia believes it will report revenue in the first quarter of 2016.
Description of Channel Distribution Agreement with simplyME
On February 9, 2015, Zonzia Media, Inc. (the
“Company”) entered into a Channel Distribution Agreement with simplyME Distribution (“simplyME”), whereby
simplyME agreed to transmit or otherwise distribute the Company’s content to end users across cable, satellite, IPTV, Internet,
mobile and television platforms. Under this agreement, simplyME agreed to use its contracts with providers to place the Company’s
content across on-demand platforms which include: Verizon FiOS, Verizon Wireless, DISH Network, DISH Hopper, Comcast, XBOX and
a sub-channel to be named by the Company. In exchange for these distribution services, the Company agreed to pay simplyME a distribution
fee due 30 days before launch, with an ongoing monthly fee. The parties agreed to split evenly advertising revenue under the agreement.
The agreement has an initial term of two years and may be renewed thereafter. A copy of this Channel Distribution Agreement is
filed as an exhibit to the registration statement of which this prospectus is a part.
Addendum Regarding Content License
On July 31, 2015, the Company and simplyME
entered into an addendum to the Channel Distribution Agreement, whereby simplyME extended media license rights to the Company with
respect to specific content, as partial consideration for the revenue-sharing arrangement that is in place between the Companies
under the Channel Distribution Agreement. The term for this addendum is up to two years. simplyME represents and warrants in the
addendum that it has the right to license or sublicense, as applicable, the content being licensed to the Company pursuant to the
Addendum.
The following table summarizes programming
licensed to the Company under the Addendum, which is the content initially being broadcast under the Channel Distribution Agreement
and related Addendum:
Series Title |
|
Show Length |
|
Genre |
|
Episodes |
|
Target Audience Age |
|
|
|
|
|
|
|
|
|
Roll In The City |
|
0:30:00 |
|
Celebrity Lifestyle |
|
|
|
25-45 |
|
|
|
|
|
|
|
|
|
What’s The 411 |
|
0:30:00 |
|
Celebrity News |
|
10 |
|
35-55 |
|
|
|
|
|
|
|
|
|
Urban Rajah |
|
0:05:00 |
|
Food |
|
25 |
|
20-45 |
|
|
|
|
|
|
|
|
|
Hot Kitchen |
|
1:00:00 |
|
Cooking |
|
30 |
|
16-55 |
ZonziaKidz
On June 30, 2015, we entered into an addendum
to our Channel Distribution Agreement with simplyME Distribution to secure an additional cable channel through simplyME, which
we plan to dedicate to children’s programming. To secure this channel, we agreed to commence making monthly payments on
November 1, 2015, with the launch of ZonziaKidz expected to occur in 2016. A copy of this Addendum to the Channel Distribution
Agreement is filed as an exhibit to the registration statement of which this prospectus is a part.
Description of the Revenue Model for Cable Television
Advertisers are provided access to our VOD
channel content offerings via our agreement with simplyME Distribution. Advertisers secured by simplyME pay us on the number of
times one of our shows is viewed. The benchmark metric for this calculation is known as CPM (cost per thousand views). Our CPM
is tracked and reported by the cable provider such as Comcast and Verizon, which we have the right to audit. Once the CPM is calculated,
simplyME invoices the advertisers, provides Zonzia with the breakout and audit trail, and wires funds into Zonzia’s bank
account. The usual and customary receivable timetable is net 60 days from national advertising agencies, and net 30 days when dealing
directly with the advertising companies.
Platform #2- Hotel Network
| · | The Company has an agreement with Sonifi
Solutions, Inc. to provide Zonzia content to hotel rooms across the U.S. A copy of this Agreement is listed as an exhibit
to the registration statement of which this prospectus is a part. |
| · | The initial roll-out to approximately
546,000 hotel rooms was launched on August 1, 2015 with licensed content on a Free-To-Guest 4-hour loop linear channel. The initial
roll-out to approximately 405,733 hotel rooms was launched in August 2015 with licensed content on a Free-To-Guest 24/7 linear
channel. Our Free-To-Guest VOD channel also went live in August 2105, with distribution scheduled in approximately 882,000 hotel
rooms. |
| · | The revenue model contemplates Zonzia
paying an advertising agency commission and subsequently sharing the remaining revenue with content providers. |
| · | The growth strategy is
to increase the number of hotel rooms displaying our content and to provide compelling content through both our content partners
and our own original content. |
Description of the agreement with Sonifi
Solutions, Inc. for Hotel Channel Distribution
On July 9, 2015, we entered into a Submission/Insertion
Order Agreement with Sonifi Solutions, Inc. Pursuant to the agreement, commencing July 15, 2015, Sonifi agrees to make audio-video
content, provided by the Company, available in hotel rooms on both a looping, free-to-guest linear channel and on a free-to-guest
Video-on-Demand (“VOD”) basis. Submissions for distribution on either the linear basis or VOD basis will be scheduled
monthly. The agreement provides that initially, submissions offered on a linear basis will be distributed to a minimum of 450,000
hotel guest rooms that are served by Sonifi and through Sonifi’s mobile applications. Sonifi has agreed to use commercially
reasonable efforts to distribute VOD submissions to approximately 900,000 guest rooms at Sonifi-served hotels under the Agreement.
The Submission/Insertion Order agreement with Sonifi was put in place between the parties to solidify the relationship and set
the main business terms in advance of the actual launch.
Payments to Sonifi for the linear based and
VOD based submissions are structured as follows: for the first twelve months of the term, the Company shall pay Sonifi the greater
of $55,000 or fifty percent (50%) of the Company’s gross advertising sales (net of any ad agency commission) per month, subject
to a $140,000 monthly cap. For the second twelve months, the Company shall pay Sonifi the greater of $70,000 or fifty percent (50%)
of the Company’s gross advertising sales (net of any ad agency commission) per month, subject to the same monthly cap. Thereafter
for the remainder of the initial term, the Company would pay $110,000 per month. The agreement has an initial term ending in June
2018, subject to earlier termination rights in accordance with the agreement.
Launch of Hotel Network Distribution
On August 1, 2015, distribution under the Sonifi
Solutions Hotel Network platform was launched, with initial linear based distribution to approximately 546,000 scheduled hotel
guest rooms under the channel name “ZONZIA PREMIERE.” This initial distribution was significantly broader than the
450,000 hotel rooms contemplated by the agreement. Sonifi has confirmed that this Zonzia channel is available in the majority of
hotels served by Sonifi Solutions.
In August 2015, the Video-On-Demand (VOD)
distribution was launched under the agreement with Sonifi, with distribution scheduled in approximately 882,000 hotel rooms. With
respect to both the Linear and VOD distributions, launch numbers are based on rooms that were scheduled to receive the ZONZIA
PREMIERE content as of the launch; definitive counts of rooms in which the content was actually available and played/viewed will
be available on a historical basis. The Company has been advised by Sonifi that definitive room counts may deviate from scheduled
room number counts by up to approximately 10%.
Description of License Agreement
with Sonifi Solutions, Inc.
In connection with the launch of the Zonzia
Premiere channel on the Hotel Network, on August 1, 2015, the Company entered into a License Agreement with Sonifi Solutions, Inc.,
whereby the Company granted Sonifi a non-exclusive, non-assignable, royalty free right and license to receive, transmit and distribute
through third parties, general entertainment programming provided by the Company. This allows Sonifi to distribute the content
through its in-guest room satellite-delivered television programming and/or interactive hotel entertainment platform. The territory
covered by the license includes the United States and the Caribbean. During the term, Sonifi shall earn a monthly distribution
fee of $0.22 for each guest room that subscribes to the distributed programming as of the end of the month. The agreement has a
term of two years, unless terminated earlier in accordance with the agreement.
Description of Content Offerings per the
Agreement with Sonifi Solutions Inc.
The following table summarizes the programming
that is initially available through the Sonifi Solutions, Inc. agreement at the time of its launch on August 1, 2015. Similar to
the content being distributed through the Cable television distribution platform, all initial content that is being distributed
through the Hotel Network distribution platform is content that is being licensed from simplyME pursuant to the Addendum to Distribution
Channel Agreement described above. The Company has the right to broadcast content supplied by simplyME for a period of two years,
during which time the Company plans to acquire its own content.
SERIES TITLE |
|
GENRE |
|
EPISODES |
|
AUDIENCE |
|
|
|
|
|
|
|
Profiles |
|
Celebrity |
|
300 |
|
25-55 |
|
|
|
|
|
|
|
Runway France |
|
Fashion |
|
10 |
|
20-45 |
|
|
|
|
|
|
|
Nightclub Ratings |
|
Nightlife |
|
10 |
|
18-34 |
|
|
|
|
|
|
|
The Art of Fighting |
|
Martial Arts |
|
9 |
|
18-45 |
|
|
|
|
|
|
|
Music Confidential |
|
Music |
|
13 |
|
18-34 |
|
|
|
|
|
|
|
Game News Update |
|
Video Games |
|
13 |
|
16-34 |
|
|
|
|
|
|
|
John Legend Documentary |
|
Documentary |
|
1 |
|
16-35 |
|
|
|
|
|
|
|
Pharrell Williams Documentary |
|
Documentary |
|
1 |
|
16-35 |
Description of the Revenue Model for the Hotel Channel
The Hotel Channel platform model is very similar
to the Cable Channel platform model in that we will secure advertisers for our Linear and VOD channel offerings. Advertisers will
be solicited and contracted by simplyME distribution and its outside ad agency. We anticipate that advertisers will pay us on the
number of times one of our shows is viewed. The benchmark metric for this calculation is known as CPM (cost per thousand views).
Our Hotel Channel CPMs will be tracked and reported by Sonifi. Based on the tracking report simplyME and the advertising agency
will invoice the advertisers and will subsequently collect payments. Once they receive payments from the advertisers, simplyME
and the advertising agency will wire the funds to Zonzia’s bank account. The usual and customary receivable timetable is
net 60 days from national advertising agencies, and net 30 days when dealing directly with the advertising companies.
Platform #3- Website: Zonzia.com
| · | The website, while up and operating, functions
for now as an informational site for visitors to learn more about the Company and our future offerings. |
| · | Today, a visit to the website shows teasers
of content offerings to come, such as photos from the Tribeca Film Festival. |
| · | The Company is in negotiations for original
program offerings with various companies and is working on preparing to launch a fully operational, ad revenue and subscription
revenue generating model. |
| · | The growth of the business
model will be advertising revenue based upon the number of site visits and subscriber revenue based on the number of subscribers
signing up to the site, both of which are predicated upon the quality of the content. |
Description of the Revenue Model for the Zonzia Website
Advertisers will be provided access to our
internet website to compliment the content offerings. Our intent is that advertisers for our website will be solicited and contracted
by an outside advertising agency. Advertisers would then pay us on the number of times our web pages are viewed. The benchmark
metric for this calculation is known as CPM (cost per thousand views). The CPM for our website will be calculated and reported
by a third party vendor, Kaltura, Inc., who is also our website and infrastructure provider. Once the tracking report has been
issued and the CPMs calculated, an ad agency (to be selected) will invoice the advertisers, collect the payments and wire the funds
into Zonzia’s bank account. The usual and customary receivable timetable is net 60 days from national advertising agencies,
and net 30 days when dealing directly with the advertising companies.
Through our multi-platform distribution channel
agreement with simplyME Distribution LLC, we have access to Flipps.com which is a mobile app provider platform that gives us access
to and the ability to connect on any internet connected television and smart-televisions, including:
|
§ |
Samsung |
|
§ |
Sony |
|
§ |
Panasonic |
|
§ |
Phillips |
|
§ |
Sharp |
|
§ |
Xbox One |
|
§ |
Xbox 360 |
|
§ |
Dish Hopper |
|
§ |
Apple TV |
|
§ |
Chromecast |
|
§ |
ROKU |
A user may simply download the Flipps App on an iPhone or Android
device, and then enjoy full access to the then-available Zonzia content.
Additionally, over time we plan to give our
viewers access to social media pages, behind the scenes access, games, and more. We also anticipate providing our viewers with
the opportunity to receive instant coupons from our participating advertisers.
Offerings Under Development
Our strategy involves our continued effort
to develop the following core offerings. Please see “Management’s Discussion & Analysis – Plan of Operations”
for more information.
Zonzia (Over-The-Top) Channel
We plan to make our content readily available
on computers, tablets, mobile devices and other internet connected devices. Our content will be posted on www.zonzia.com. Over-The-Top
(OTT) refers to any content not delivered as specifically programmed linear channels from the pay TV operator, which may encompass
even on-demand content provided as TV Everywhere by the pay TV operator. Further, OTT has the component of running on the "open
internet" or an unmanaged network.
We anticipate that our Video on Demand (VOD)
and Subscription Video on Demand (SVOD) offerings will include full length feature films, TV series, documentaries, live events
and general programming. We are cross-soliciting film, TV and live event promoters, offering them a number of favorable deal options
which will allow them to have direct access to our targeted demographics including charging them up-front production fees and entering
into revenue sharing deals. By matching video and live event producers and promoters with our advertising customers, advertisers
will have the ability to produce and embed user-targeted commercials in our VOD and SVOD offerings. Our intention is that by providing
entertaining content to an expanding end user base, our brand awareness will increase, enabling us to develop strong relationships
and retention rates with our advertisers, ecommerce and other brand partners.
In addition to being able to deliver innovative
and entertaining content across all of our delivery platforms, our overall success is heavily dependent on our ability to develop
nationwide brand recognition which is intended to result in a significant viewer and ultimately consumer base. Our brand recognition
and viewer base is expected to drive rapid expansion of individual consumer impressions that are essential in the development
and effectiveness of our advertising program offerings. Since we generate advertising revenue from the number of user impressions
we achieve, our content and other product offerings must be attractive to our individual users.
Viewer Subscriptions
As we launch our delivery platforms, particularly
our website and mobile applications, our content and accompanying interactive services may be initially available for free for
limited periods in order to aggressively increase our brand awareness and consumer base.
As our brand awareness and consumer base gains
momentum, we will launch a targeted subscription campaign drive which we anticipate will begin in the second and third quarters
of 2016. Subsequent to the initial launch and trial period, we expect to begin charging subscribers a monthly fee of $4.99 per
month. Our content offerings may include concerts and sporting events.
Advertising
To date, our advertising relationships have
evolved through our agreement with simplyME Distribution LLC. That agreement contemplates that advertisers may advertise through
video, sponsorship and/or banner advertising slots. Under our agreement with simplyME, we will evenly split all net advertising
revenue generated pursuant to that agreement with simplyME. The core revenue model for monetizing the three platforms, is advertising
driven. Advertisers pay on a Cost Per Thousand Impression (CPM) basis. For example, if our CPM rate was at $30 and our platforms
are visited (tuned on or turned on) for a viewership of 10 million views, that would equate to $300,000 in revenue. If a consumer,
or hotel patron is tuned to our channel and particular advertising is shown while the event or programming is being viewed, then
the views are recorded, verified, and the advertiser is invoiced at the CPM rate.
We intend to use advertising as a means of
generating revenue by engaging users on all of our Platforms, including our website, www.zonzia.com, mobile applications, and VOD
and other channel offerings.
Our advertising program, which will provide
our customers many different options, is designed to maximize relevance to search queries and web content. Our advertising options,
which will be specifically co-designed by our sales and marketing team, will allow our customers to create targeted ads to appear
beside related search results or web content on our websites and include:
| · | Display Advertising – This
includes banner ads and consists of text and graphics based ads that appear next to content relevant to the various product offerings.
We will offer these banner ads in several sizes, allowing for each to contain logos, pictures, other graphics and video. |
| · | Display Advertorials – Display
advertorials are advertisements in the form of editorial content and designed to provide consumers additional insights to our customers’
products or services. Advertorials are generally limited to 500 words and may be created by our content development team or may
be provided directly by the customer or the customer’s representative. Advertorials are believed to be the most cost-effective
digital advertising, based on their high search engine optimization. |
| · | Native Advertising – Native
advertising programs are designed to specifically match content and advertising directed at smaller, targeted groups of users based
on specific interests. |
| · | Video Advertising
– Similar to television commercials widely seen on network TV, video advertisements will run throughout some of our streaming
video offerings. |
Sales and Support
Our sales support, billing systems, customer
tracking and revenue collection efforts are provided by a third party vendor, Kaltura, Inc., who is also our website and infrastructure
provider.
Pursuant to a Master License and Professional
Services Agreement between the Company and Kaltura, Inc., Kaltura, Inc. develops and maintains software systems and platforms for
the Company, which are used for content distribution, sales support, billing and revenue collection. The agreement contemplates
a total of $702,000 in payments being made over a one-year period. Under the agreement, the Company has a royalty-free, non-transferable
right to use the software developed by Kaltura, Inc., and Kaltura, Inc. retains rights with regard to techniques, know-how, and
source code developed in the course of the engagement. Kaltura, Inc. provides a limited warranty with regard to its work during
the term of the engagement. A copy of this Master License and Professional Services Agreement is filed as an exhibit to the registration
statement of which this prospectus is a part.
We are targeting developing and growing our
sales and support infrastructure in-house as cash flow and talent become available. When we are in a position to perform these
functions internally, we expect to initially operate from leased offices in Los Angeles and New York City.
Marketing
In line with our overall business plan, we
are focusing on the continued growth and recognition of our brands through providing meaningful content and high-quality products
and consumer experience. Our marketing, promotional and public relations activities will be designed to promote our brand image
and differentiate it from competitors. In doing so, we believe our viewer base, and ultimately our consumer base, will grow rapidly
and provide our customers with increasing impressions, allowing for maximization of advertising efforts.
Investor Relations
We engaged Benchmark Advisory Partners LLC
of Del Mar, California as our investor relations firm pursuant to a Consulting Agreement dated May 5, 2015. The term of the Consulting
Agreement was six months, and we paid this consultant a one-time fee of 500,000 shares of restricted stock upon signing the agreement.
A copy of this Consulting Agreement is filed as an exhibit to the registration statement of which this prospectus is a part. Subsequently,
the engagement was terminated by the Company August 1, 2015.
Information Technology and Intellectual
Property
We have engaged Kaltura, Inc. to build the
infrastructure to support our content delivery platforms, pursuant to the Master License and Professional Services Agreement described
above. We have, and expect to continue to invest heavily in this infrastructure on an on-going basis.
Intellectual property rights involving our
technology platforms are important to the future success of our Company. As a result, we consider the acquisition and maintenance
of certain protectable and enforceable rights in patent, trademark, copyright, trade dress, trade secret and know how in those
technology platforms to be important to the future growth of our Company, and in that regard we intend to continue to maintain
and to formalize on a going forward basis, rights in our service marks, our trademarks, our copyrighted materials and content,
our website and mobile applications, our domain names and our patentable business methods, as needed. With respect to our trade
secrets and know how in our technology platforms, we have and will continue to maintain a regimen of entering into protective confidentiality
and intellectual property license agreements with our employees, our customers, our partners and other third parties to protect
our confidential technology and business information.
As of the date of this report the Company has
filed Trademark Applications with the United States Patent and Trademark Office (USPTO) for:
|
§ |
ZONZIAKIDZ |
Serial Number 86656259 |
|
§ |
ZONZIA |
Serial Number 86656246 |
|
§ |
Zonzia |
Serial Number 86656250 |
|
§ |
ON (stylized) |
Serial Number 86656262 |
|
§ |
On (stylized) |
Serial Number 86656267 |
Content Strategy
We have expended significant financial and
other Company resources in developing our content strategy and expect to continue to do so on an on-going basis. Our overall strategy
is to provide, together with our business partners, a generous mix of established video libraries consisting of well-known movies,
television shows, historical sporting events, documentaries and docu-movies; as well as original productions and co-productions
which will be contingent upon acquiring adequate funding.
The competition for well-known and highly-rated
programming across all genres is intense, and most of our competitors consist of large companies with well established brands and
significantly greater resources.
Our point of differentiation from our competitors,
which we hope to establish as we develop and acquire content, is that we plan to make available a channel within a channel concept.
The consumer would pay the basic subscription price to access our general content and then will be able to add niche premium content
via sub-channels at an additional price. For example:
|
1- |
A specific sporting broadcast
and news channel |
|
2- |
A specific entertainment venue
or concert series channel |
|
3- |
A specific children program channel |
While the Company is still a development company
and has not yet acquired all of the content offerings described above, the Company believes its concept for a branded layered channel
is compelling. Ultimately, the vision is that a user could go to the Zonzia Channel and access kids, sports, or entertainment sub-channels,
all within the Zonzia network.
Our business model and content strategy is
also based around the need to sell advertising.
Video
We believe the growing demand for streaming
entertainment, increasingly available on mobile devices and tablets, is evident from the increasing development activity from major
cable networks, film and production studios, and sports leagues to name a few. Companies like Netflix, one of the first and most
well-known brands streaming digital content, have experienced extreme success in rapidly building their brands and market share
while monetizing that success by requiring users to pay fees. We believe that our business model and content strategy allows us
to provide users a unique and entertaining streaming digital experience for certain of our products.
We anticipate that our streaming platforms
will allow aspiring film and television directors and producers to showcase their accomplishments in addition to showings of other
first run movies and live streaming concerts and sporting events. We anticipate that our movies, short films and television shows
will include various genres, such as documentaries, docu-series, biopics and children’s programming. Our strategy and safety
policies strictly prohibit the streaming of adult entertainment and any form of pornography.
We also are seeking commercial arrangements
with concert and sporting event promoters in which we would charge them a production fee to reach the targeted demographics that
our website, mobile applications, and other distribution channels provide. Additionally, our officers have relationships with a
significant number of freelance video contributors.
Competition
The digital broadcasting industry is intensely
competitive and many of our competitors are well established internet companies, ecommerce and search engine companies, television
networks and conglomerates. Many of these competitors have significantly greater financial resources and may prove to be more attractive
to our content providers and developers.
Our business is characterized by rapid change
and converging, as well as new and disruptive, technologies. We face formidable competition in every aspect of our business, particularly
from companies that seek to connect people with information on the web and provide them with relevant advertising. Our advertising
business faces competition from:
| · | Various types of search engines, ecommerce
websites, news-based content providers and other media and entertainment based sites. Many of these sites have more established
brands and possess significant financial resources causing significant barriers to entry. |
| · | Other forms of advertising, such as television,
radio, newspapers, magazines, billboards and yellow pages, for ad dollars. Our advertisers typically advertise in multiple media,
both online and offline. |
| · | Providers of online products
and services. Our online products and services compete directly with new and established companies, which offer communication,
information and entertainment services integrated into their products or media properties. |
Currently we have programming as described
in the Business section available through our Zonzia Cable television platform and our Hotel Network distribution platforms. Our
point of differentiation from our competitors, which we hope to establish as we develop and acquire content, is that we plan to
make available a channel within a channel concept. The consumer would pay the basic subscription price to access our general content
and then will be able to add niche premium content via sub-channels at an additional price, as described above in more detail under
“Business -- Content Strategy.”
Employees
We presently have three full-time corporate
officers including: Myles A. Pressey III -- Chairman of the Board and Interim Chief Financial Officer, Johnathan F. Adair -- Chief
Executive Officer, and Stanley L. Teeple -- Chief Compliance Officer/ Secretary.
Our operations are overseen directly by our
corporate officers. Our officers oversee all responsibilities in the areas of corporate administration, business development and
research. The Company contemplates engaging a full-time Chief Content Officer as business and cash flow allow for the expansion.
We intend to expand our current sales and marketing
teams; administrative teams; and content and business development teams. Competition for qualified personnel in our industry is
intense.
Seasonality
We do not expect seasonality to have a material
impact on our business.
Research and Development
We do not expect to incur material research
and development costs for the next 12 months.
Government Regulation
We are subject to numerous domestic and foreign
laws and regulations covering a wide variety of subject matter. New laws and regulations (or new interpretations of existing laws
and regulations) also may impact our business. The costs of compliance with these laws and regulations are high and are likely
to increase in the future. Any failure on our part to comply with these laws may subject us to liabilities and other penalties.
Corporate History
Zonzia Media, Inc. was originally incorporated
in 1981 in the State of Nevada. In December 2005, following a recapitalization that resulted in a change of control, Indigo was
an independent energy company that engaged primarily in the exploration of natural gas and oil in the Appalachian Basin in Pennsylvania,
West Virginia, Illinois, and Kentucky through December 2010. These activities were carried out on leased properties,
some of which were proven, primarily through the entry into joint venture and other operating agreements.
In December 2010, the Company’s management
was notified by a representative of the New Jersey Attorney General’s Office (“NJAG”) that they were pursuing
a civil action against Everett Charles Ford Miller (“Everett Miller”) and related entities alleging violations of securities
laws amongst others. At the time of the civil action, Everett Miller was a Board Member of the Company, a significant shareholder,
and a significant note holder. On December 17, 2010, the Company was named as a nominal defendant in the civil complaint as a result
of Carr Miller Capital’s significant investment in the Company. At the time, and through the date of this filing,
there have been no allegations of wrongdoing on the Company’s part but the complaint does state that the Company was unjustly
enriched by the actions of Carr Miller Capital. The Company had no knowledge of any wrongdoing alleged to have been
committed by Everett Miller and a release from the NJAG was ultimately obtained on July 29, 2013.
On July 29, 2013, a group of large equity and
debt holders formed a new entity, New Hope Partners, LLC, and entered into a settlement agreement with the receiver to effectively
purchase a majority interest in the Company. The closing of the transaction between the receiver and New Hope Partners resulted
in a change of control of the Company (for more detail, including the settlement agreement, see Current Report on Form 8-K filed
August 5, 2013).
Subsequent to New Hope Partners obtaining a
controlling interest in the second half of 2013, the Company’s primary focus was on organizational efforts, settling previously
outstanding obligations on the best terms possible, and re-establishing its regulatory compliance. On May 12, 2014 the Company
filed its annual report on Form 10-K for the fiscal year ended December 31, 2013 and believes it has subsequently been current
with its periodic filing requirements under the Exchange Act of 1934. Additionally and as further discussed below, the Company
settled over $12 million of previously accrued liabilities primarily through the issuance of shares of restricted common stock
during the first half of 2014.
Since entering into a plan of merger on May
25, 2014, as amended on September 2, 2014 and November 20, 2014, the Company has been engaged in the digital publishing and broadcasting
business. In this regard, the Company completed a merger with HDIMAX, Inc., a private operating company, on November 21, 2014 and
changed its name to HDIMAX Media, Inc.
On January 22, 2015, the Company entered into
a Settlement Agreement with the former owner of HDIMAX, Inc. effectively and substantively cancelling the merger. For additional
details, including a copy of the Settlement Agreement, please see our Current Report on Form 8-K filed on January 29, 2015.
On March 9, 2015 the Company changed its name
to Zonzia Media, Inc. and its ticker symbol changed to “ZONX”. The Company is aggressively developing its digital content
and multi-platform entertainment distribution channels.
Where You Can Find More Information
We file annual, quarterly and other requisite
filings with the U.S. Securities and Exchange Commission (the “SEC”). Members of the public may read and copy materials
that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Members
of the public may obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
The SEC also maintains an internet site that contains reports, proxy and information statements and other information regarding
issuers that file electronically with the SEC. That site is located at http://www.sec.gov.
You also may request a copy of our filings,
at no cost, by writing or telephoning us at:
Zonzia Media, Inc.
2580 Anthem Village Drive, Suite B-7
Henderson, Nevada 89074
Telephone: (702) 707-3974
Attention: Investor Relations
Consequence of Delays
The timing and successful execution of our
overall business strategy is dependent upon our current ability to raise additional capital at terms favorable to us. If outside
funds are not obtained through the sale of securities or other financing arrangements, the Company’s revenues will be limited.
DESCRIPTION OF PROPERIES
As of December 31, 2015, the Company did not
have any owned or leased property.
LEGAL PROCEEDINGS
Congoo, LLC v. HDIMAX Max Media, Inc. Civ.
Action No. 3:15-cv-01423
The Plaintiff’s in the case provide online
advertising opportunities for a fee. The Plaintiff alleged the Company owes them in excess of $422,000 based on an agreement, dated
prior to our merger, with an entity controlled by our former Chairman and Chief Executive Officer. The plaintiff alleges that the
entity with the prior agreement merged into our Company and changed the name. We are contesting the claim and have filed an initial
response on March 23, 2015.
On April 24, 2015 the Plaintiff’s attorney
notified the district court judge requesting our adjournment from participation in the complaint and that we may be entitled to
a dismissal.
From time to time, we are involved in lawsuits,
claims, investigations and proceedings that arise in the ordinary course of business. There are no matters pending that we expect
to have a material adverse impact on our business, results of operations, financial condition or cash flows.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion of our financial
condition and results of operations should be read in conjunction with (i) our audited financial statements for the period from
May 24, 2014 (inception) through December 31, 2014 and (ii) the unaudited financial statements for the period ended September 30,
2015 that appear elsewhere in this registration statement.
This registration statement contains certain
forward-looking statements and our future operating results could differ materially from those discussed herein. Certain statements
contained in this discussion, including, without limitation, statements containing the words “believes”, “anticipates,”
“expects” and the like, constitute “forward-looking statements” within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). However,
as we will issue “penny stock,” as such term is defined in Rule 3a51-1 promulgated under the Exchange Act, we are ineligible
to rely on these safe harbor provisions. Such forward-looking statements involve known and unknown risks, uncertainties and other
factors which may cause our actual results, performance or achievements to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned not to
place undue reliance on such forward-looking statements. We disclaim any obligation to update any such factors or to announce publicly
the results of any revisions of the forward-looking statements contained herein to reflect future events or developments. For
information regarding risk factors that could have a material adverse effect on our business, refer to the Risk Factors section
of this prospectus beginning on page 6.
Overview
Zonzia Media, Inc. is a multi-platform entertainment
company focused on delivering compelling, innovative content with the objective of generating advertising revenue and subscription
revenue. We plan to distribute content through three distinct platforms:
|
1) |
Cable Television Platform; |
|
2) |
Hotel in-room channel
Platform; and |
|
3) |
Our website Zonzia.com
Platform |
Through our (Over-The-Top) (OTT) software technology,
we plan to allow instant access to our available content from internet connected devices including home computers, tablets, smart
phones and other mobile devices. Upon the full launch of all three of our delivery platforms, which is contingent upon our receipt
of adequate funding, we plan to deliver variety of content including:
|
§ |
Original Programming – featuring TV series, mini-series, and documentaries. |
|
§ |
Feature Films – full-length feature films from major Hollywood studios and independent production companies. |
|
§ |
Television Shows – TV series from major networks and independent production companies. |
|
§ |
Concerts, Sports and Live Events – streaming live music concerts, live sports events, and other live events. |
Results of Operations
For the period from May 24, 2014 (inception)
through December 31, 2014:
The financial statements and dollar amounts
included herein are stated in United States dollars and are prepared in accordance with United States generally accepted accounting
principles.
Since HDIMAX, Inc. was considered the accounting
acquirer and surviving entity upon completion of the merger transaction on November 21, 2014 and subsequently cancelled in January
2015, the following management’s discussion and analysis provides information and analysis associated with our advertising
and content development operations. Additionally, since the inception date of HDIMAX was contained in 2014; accordingly, no 2013
comparative operational results exist and are correspondingly omitted. The results of operations are not expected to be indicative
of our future operations due to the Settlement Agreement with an effective date of January 22, 2015.
Revenue
During the period ended December 31, 2014 we
generated net revenue of $439. The amount recognized was based on a lower than market net cost per impression as dictated by our
third party service provider arrangement. Through the remainder of 2015, we expect to launch our subscription services and begin
our advertising campaigns and other goods and services offerings.
Sales and Marketing
We incurred total sales and marketing expenses
of $1,006,012 during the period ended December 31, 2014. The majority of these expenses consisted of payments to third party content
developers, lead and internet impression generators, and other brand marketing expenses primarily paid on behalf on our former
website brand partners.
Officer Compensation
Officer compensation for period ended December
31, 2014 of $23,295,167 is primarily the result of accruing compensation due under employment agreements that became effective
upon the completion of the reverse acquisition of HDIMAX, Inc. Of the amount incurred for the period, $22,800,000 relates to the
obligation to issue 60,000,000 shares of common stock to former officers and directors. Upon entry into the settlement agreement
with HDIMAX, Inc. and related entities on January 22, 2015, the compensation obligations were forgiven and no shares of common
stock will be issued under the former agreements. In addition, approximately $130,000 of incurred and accrued cash based compensation
recognized during the period ended December 31, 2014 has been forgiven.
Professional Fees
The Company incurred $729,411 of professional
fees during the period ended December 31, 2014. The majority of these fees were incurred for the preparation and completion of
our reverse acquisition of HDIMAX, Inc. During the on-going ramp up of our principal business operations, through at least the
first half of 2015, we expect to continue to incur significant legal, accounting, and other consulting fees associated with entering
into material definitive contracts.
General & Administrative
Our general and administrative expenses totaling
$53,565 for the period ended December 31, 2014 were primarily associated with our on-going capital raising efforts and administrative
costs associated with the completion of the HDIMAX, Inc. acquisition. Our general and administrative costs are expected to significantly
fluctuate until we fully commence our planned principle business operations expected to occur in the second half of 2015.
For the period ended September 30, 2015:
The following discussion of the financial condition
and results of operations should be read together with our condensed financial statements for the three and nine month periods
ended September 30, 2015.
Revenue
We did not generate any revenue during the
three and nine months ended September 30, 2015 or during the period from our inception through September 30, 2014. Beginning in
the first quarter of 2016, we expect to begin to recognize revenue as we ramp up our content offerings. Additionally, if we are
successful in our funding and brand awareness campaigns we may be able to launch our subscription service by mid-2016.
Sales and Marketing
For the three and nine months ended September
30, 2015 we incurred sales and marketing expenses totaling approximately $320,000 and $580,000 (net of the non-cash reversal of
a non-recurring accrued obligations of approximately $422,000), respectively. The increases during the periods ended September
30, 2015 were the result of the accrual of $110,000 ($55,000 monthly) associated with the launch of the Sonifi Solutions Hotel
Network platform in August with initial distribution as a 4-hour loop linear channel to approximately 540,000 hotel guest rooms
and as VOD distributed content to approximately 880,000 hotel guest rooms; and the accrual of $135,000 associated with the launch
of the Zonzia Premiere Channel in August with initial distribution as a 24/7 linear channel to approximately 405,000 hotel guest
rooms through Sonifi Solutions’ in-guest room satellite-delivered television and interactive hotel entertainment platforms..
As we continue to build our brand awareness and video and other content libraries, along with our infrastructure, we expect our
sales and marketing expenses to increase throughout the next twelve months and beyond.
Officer and Director Compensation
Officer compensation for the three and nine
months ended September 30, 2015 of approximately $3,418,000 and $76,307,000 is primarily the result of non-recurring stock awards
to our officers and directors, inclusive of the modification of previously issued awards. Included in officer and director compensation
during the nine month period was the recognition, totaling $9,975,000, of unrecognized compensation cost associated with the cancellation
of an unvested restricted stock award issued to a former officer and approximately $2,771,000 of accrued compensation cost due
to a previously issued, but unvested restricted stock award issued to a current officer that has been cancelled. During the three
and nine months ended September 30, 2015 we recognized total compensation cost of $2,996,794 and $7,266,024, respectively, associated
with a stock based award granted to Mr. Myles Pressey III, inclusive of the incremental cost associated with the modification of
the award originally contained in the employment agreement with an effective date of January 29, 2015. Pursuant to the modification,
a stock based-award to Mr. Pressey III, consisting of 25,000,000 shares of restricted stock that was previously scheduled to be
granted upon the first anniversary of his employment agreement, was replaced with a performance-based stock award. Under the performance
based award, Mr. Pressey III is eligible to receive 62,500,000 shares of restricted stock upon the Company’s achievement
of $25,000,000 in revenue on a consolidated reporting basis for any calendar year, or upon the achievement of another corporate
performance benchmark to be set by the Board of Directors. Our officer compensation cost for the period ended September 30, 2014
of approximately $54,800 was associated with payments made to our former CEO and Chairman under an informal arrangement.
We believe a significant portion of the stock
awards granted during 2015 were necessary to attract and retain individuals to serve in officer, director, and other consulting
roles. In this regard, we issued a total of 157,447,500 shares of fully vested, restricted and unregistered shares of common stock
to these individuals. Throughout the remainder of the fiscal year it is not anticipated that officers will accrue compensation
in excess of monthly salaries.
Professional Fees
The Company incurred approximately $196,000
and $2,234,000 of professional fees during the three and nine month period ended September 30, 2015, respectively. The majority
of these fees were incurred on a non-cash and non-recurring basis via the issuance of 5,334,524 shares of restricted and unregistered
common stock granted to various consultants for business development and contract review and generation. Professional fees of approximately
$295,000 and $388,000 incurred during the three months ended September 30, 2014 and for the period from inception through September
30, 2014, respectively, were the result of our initial entity creation. We expect our professional fees to steadily decline as
we approach the launch date of our principal business activities.
General & Administrative
Our general and administrative expenses totaling
approximately $32,000 and $418,000 for the three and nine month periods ended September 30, 2015, respectively, were primarily
associated with our on-going capital raising efforts and other administrative costs. Additionally, we incurred one-time charges
totaling approximately $298,000 associated with the Settlement Agreement with our former Officers and Directors. Our general and
administrative costs are expected to significantly fluctuate until we fully commence our planned principal business operations
expected to occur in the second half of 2015.
Liquidity and Capital Resources
Working Capital
At September 30, 2015, we had a working capital
deficit of approximately $2,900,000, primarily due to professional service providers, officers and directors, and other related
parties. The working capital deficit includes convertible notes that will be settled via the issuance of shares of common stock
if not fully repaid with cash prior to February 2016 and derivative liabilities associated with our previously outstanding options
and warrants being reclassified from equity to liabilities during the period ended September 30, 2015. We do not expect that we
will be required to settle any of our derivative liabilities in cash which at September 30, 2015 approximated $533,000. Our working
capital is not sufficient to meet our operations. Additionally, our ability to execute our content strategy and meet our day to
day liquidity needs through the remainder of the year requires us to raise additional capital.
As part of our Submission/Insertion Order with
Sonifi we are required to make payments, beginning in August 2015, at the greater of $55,000 or fifty percent (50%) of the of our
gross advertising sales (net of any ad agency commission) per month, subject to a $140,000 monthly cap through August of 2016.
During the second and third years of the agreements with Sonifi we are obligated to pay the greater of $70,000 or fifty percent
(50%) of the Company’s gross advertising sales (net of any ad agency commission) per month subject to the same monthly cap,
and $110,000 per month, respectively. The agreement has an initial term ending in September 2018, subject to earlier termination
rights in accordance with the agreement. As Part of our License Agreement with Sonifi we are required to make payments, beginning
in August 2015, of twenty-two cents ($0.22) per each guest room in all participating properties subscribing to the service. The
agreement has an initial term ending July 31, 2017, subject to earlier termination rights in accordance with the agreement. Additionally,
we incurred non-refundable cash advance obligations totaling $480,000 during the three and nine periods ended September 30, 2015
for certain content currently broadcast across our distribution platforms.
Our plans presented in this Report, particularly
under “Plan of Operations” below, are dependent upon our ability to raise significant capital in the near term. If
we are unsuccessful in generating sufficient cash through operations or raising additional capital through means such as debt issuances,
equity offerings or short-term advances from related parties, we will be required to significantly reduce our operational efforts
and curtail our rapid growth strategy. Further, as of the date of this Report we do not have any firm funding commitment.
Cash Flow
Cash Used in Operating Activities
Our cash used in operations, totaling approximately
$598,000, primarily consisted of payments to service providers to prepare and execute our Settlement Agreement with our former
officers and directors. Our operational cash used significantly declined from the quarter ended December 31, 2014 as a result of
significant, non-recurring, stock based compensation of approximately $77,730,000. For the near term, and under informal agreements,
many of our services providers and related parties have agreed to defer payment until we increase our liquidity, which resulted
in off-sets to our net loss and cash used in operations totaling approximately $700,000. Additionally, we recognized non-cash gains
of approximately $918,000 related to the reversal of previously accrued compensation due to our former officers and an internet
marketing service provider that we were released from during the period, partially off-set by the approximately $108,000 expense
for our Settlement Agreement. As noted above, we will require additional capital in order to monetize our content strategy and
overall plan of operations.
Cash Provided by Financing Activities
Cash for the period was provided by the issuance
of 3,882,601 shares of restricted and unregistered shares of common stock totaling $425,850, the issuance of two promissory notes
in the amount of $70,000, and the issuance of convertible promissory notes for gross proceeds of $130,500.
Our ability to continue as a going concern
for at least the next 12 months will depend on our ability to raise the money we require through equity or debt financing. Through
the end of October 2015 we raised an additional $150,000 through the issuance of two additional convertible promissory notes. There
is no assurance that we will be able to obtain further funds required for our continued operations or that additional financing
will be available to us when needed or, if available, that it can be obtained on reasonable terms. If we are not able to obtain
the additional financing on a timely basis, we will not be able to meet our other obligations as they become due, and we will be
forced to scale down or perhaps even cease our operations. As of the date of this Report we do not have any firm funding commitment.
Plan of Operations
Much of the nine months ended September 30,
2015 was spent modifying our business model and dissolving our business relationship with our former Chairman and Chief Executive
Officer which initially culminated in the entry into a Settlement Agreement on January 22, 2015. Subsequent to the Settlement Agreement,
we spent significant amounts of time and effort on administrative tasks such as changing our Company name, assessing our on-going
liabilities and operational plans, and maintaining our regulatory compliance. An integral part of these activities was to attract
and retain highly experienced individuals to form our management team, Board of Directors, and Advisory Board. We believe that
we have successfully attracted and retained these individuals. Once in place, our team began the process of rebranding the Company
into Zonzia Media and assessing the value of various content delivery platforms and developing the corresponding relationships
with applicable service providers.
Capital Raising
Since late in 2014 through the date of this
report, our Officers, Directors and other consultants and Advisory Board Members have devoted significant time and effort to raising
the capital necessary to fully implement our principal business plans including securing content and building the required content
delivery infrastructure. While we have received positive feedback from these efforts, we do not have any firm funding commitments
as of the date of this report sufficient to fully implement our business strategies in the near term.
Distribution
Through our distribution agreement with Sonifi
Solutions our Zonzia Premiere channel is currently being distributed in hotel rooms across the US. In September 2015, as a 4-hour
loop linear channel, Zonzia Premiere programming reported playing in 575,253 hotel rooms across the U.S. Using standard Nielsen
and hotel occupancy metrics, this represents Zonzia content being available to an average monthly Audience Universe of approximately
28.4 Million hotel guests. Also in September 2015, Zonzia Premiere content in Free Video On Demand (VOD) was available in 878,628
hotel rooms across the US. Also in September 2015, as a 24/7 linear channel, Zonzia Premiere programming reported playing
in 405,733 hotel rooms across the U.S.
Through our distribution agreement with simplyME
Distribution, in September 2015 Zonzia content in Free Video On Demand was available in approximately 27 million households across
the US.
Advertising
In September of 2015 Zonzia engaged Trifecta
Media to sell advertising for all of our cable and hotel distributed content. Trifecta Media specializes in advertiser sales across
a diverse spectrum of media platforms including cable and hotels. Trifecta’s advertising is anticipated to begin airing and
contributing revenue in January 2016.
OTT Platform, Content Delivery and Storage
In September of 2015 Zonzia engaged Kaltura,
a leading video technology company, to develop and power all of Zonzia’s OTT Video On Demand services.
Kaltura’s OTT software is one of the
most advanced and comprehensive pay OTT solution on the market today. It includes advanced monetization, social and personalization
features; innovative tools for improving user acquisition and retention; and multi-screen, multi-device support.
With Kaltura’s OTT monetization tools,
Zonzia will be able to simultaneously deploy its unique mixture of advertising supported and subscriber based business models providing
for maximum flexibility. These tools will support server-side and native ad insertion technology for Video On Demand and live content,
in-app purchases, a range of payment options and even discounts for introducing friends. Kaltura’s Digital Rights Management
(DRM) support will provide full content protection, while Kaltura’s monetization tools will be customized to Zonzia’s
unique content distribution model and will be designed to deliver a seamless experience to our consumers across all devices.
By allowing each viewer in the household to
set up an individual profile, Kaltura’s OTT software will deliver each viewer a personalized experience, which will increase
Zonzia’s subscriber engagement. This will give us tremendous insight and understanding of our subscribers’ unique behavior
allowing us to continually strengthen loyalty and maximize revenues.
Kaltura’s OTT software will provide a
consistent cross-device experience which will allow our users to take their favorite Zonzia content wherever they go and intuitively
interact between screens with TV control and synched second-screen metadata. The household “parent” account can decide
which members of the household can access content on specific devices and can set VOD budgets per user.
Kaltura’s OTT software will give us the
ability to boost viewer engagement, attract new subscribers and monetize content across multiple devices.
Content Development
In our hotel rooms and cable households we
are currently distributing content which we licensed from our partner simplyME Distribution. Zonzia’s objective is to provide
licensed content, original content and live content over all of our platforms. Under the direct supervision of our Officers we
have made significant contacts within the industry and have had preliminary meetings with various entertainers, producers, and
other content developers to provide a significant volume of video and other live streaming events pending the financial ability
to acquire and develop our intended content library.
We recently signed an agreement with M Squared
Entertainment to distribute its celebrity based show Behind The Velvet Rope across all of Zonzia’s platforms. Behind
The Velvet Rope is currently being distributed through Zonzia’s hotel room and cable household distribution network.
Behind The Velvet Rope , hosted by Arthur Kade, is the all-access entertainment destination which brings consumers up-close
and personal with celebrities through red carpet and in-studio interviews. Each episode features prominent celebrities from the
worlds of film, music, TV, fashion, sports, theater and publishing. Host Arthur Kade has interviewed some of the industry’s
most revered and iconic names such as Meryl Streep, George Clooney and Leonardo DiCaprio.
Zonzia also recently signed an agreement with
Ace Entertainment Inc. to distribute its jazz based series Studio Jams across all of Zonzia’s platforms. Studio
Jams is an up-close and personal behind-the-scenes insider’s peek at the brilliant artistry encompassing the wondrous
creation of jazz music. Each episode features a different group of esteemed jazz musicians gathered together in a recording studio
to create new music, reminisce about old music and just have a great time. Many of these iconic artists are working together for
the very first time. Studio Jams is also currently distributed worldwide on Voice of America, the official external radio
and television broadcasting service of the U.S. federal government, reaching an estimated worldwide audience of 125 million people.
Critical Accounting Policies And Estimates
Embedded Conversion Features and Other Equity-linked
Instruments
The Company classifies all of its common stock
purchase warrants and options, embedded debt conversion features, and other derivative financial instruments as equity if the contracts
(1) require physical settlement or net-share settlement or (2) give the Company a choice of net-cash settlement or settlement in
its own shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any contracts that
(1) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is
outside the control of the Company), (2) give the counterparty a choice of net-cash settlement or settlement in shares (physical
settlement or net-share settlement), or (3) contracts that contain reset provisions. The Company assesses classification of its
equity-linked instruments at each reporting date to determine whether a change in classification between equity and liabilities
(assets) is required.
The Company accounts for variable conversion
elements embedded in its convertible instruments that meet the definition of a derivative as liabilities. The variable conversion
elements are re-measured at fair value with the changes in the value reported as a component of other income (expense) in the accompanying
results of operations. The Company estimates the fair value of the variable conversion element using a Black-Scholes Merton Pricing
model based on the variable number of additional shares of common stock the Company is required to issue upon conversion.
The derivative liabilities are measured at
fair value using a Black Scholes Merton Pricing Model. The model is based on assumptions including quoted market prices and estimated
volatility factors based on historical quoted market prices for the Company’s common stock, and are classified within Level
3 of the fair value hierarchy as established by US GAAP. Significant declines in the Company’s listed market exposes us to
a requirement to issue significant numbers of shares of common stock that can be sold in the market which likely will result in
further declines of the listed stock price and will likely have a detrimental impact on our ability to raise additional capital.
Additionally, fluctuations in the volatility assumptions used in the Black Scholes model can result in material changes in the
estimated fair value of our financial instruments.
There have not been any other material changes
to the critical accounting policies and estimates previously disclosed in our Annual Report on Form 10-K for the year ended December
31, 2014.
Plan of Operations
While our officers have extensive experience
in internet and channel content distribution, our company is in the early stages of pursuing our mission to entertain a global
audience through content that we license, acquire, or we obtain through revenue share deals with content providers. Our primary
targeted genres include movies, TV shows, comedy, music, sports, food, health and fitness. We believe our business model and content
strategy gives us a significant opportunity to deliver value to users, developers and marketers while realizing our monetization
objectives. Keys to meeting our objectives include, but are not limited to:
| · | Establish multiple distribution channels
for our content, each with an extensive reach to potential users. |
| · | Distribute high definition television
content available through our content partner simplyME. |
| · | Attract popular licensed television content.
This is a targeted objective of our Advisory Board. |
| · | Develop a strong ad operation setup to
sell across all of our content delivery platforms, including through our distribution partner simplyME Distribution. |
| · | Execute on a solid marketing
strategy to promote our content on social media and top consumer websites which is currently under construction via an agreement
with software and technology provider Kaltura, Inc., with an initial roll-out projected for the second quarter 2016. |
The chart below summarizes some of the Company’s targeted
milestones and related timeframes with regard to its objectives to establish distribution platforms, license or develop content
and secure advertisers.
Objective: Establish Distribution Platforms
Distribution Platform |
Targeted Development Milestone
|
Targeted Timeframe |
1. Cable Television
Current Status: Launched with 30 programming hours,
live in approximately 27 million households in the United States |
|
Achieved |
· Household Reach |
Available in an additional 13 million households
|
First quarter 2016 |
· Programming Hours |
90 programming hours of content |
Second quarter 2016 |
|
|
|
2. Hotel-in-room channel
Current status: Launched with 4-hour loop linear
channel under agreement with Sonifi, providing content to 545,000 hotel rooms and launched with 24/7 linear channel under agreement
with Sonifi, providing content to 405,733 hotel rooms
|
VOD distribution launch to approximately 882,000 hotel rooms |
Achieved |
· Hotel Room Reach |
Expand to 900,000 hotel rooms via VOD |
First quarter 2016 |
|
|
|
3. Website: Zonzia.com
Current status: site in initial stages, with substantive
content offerings to come
|
Partial functions available, including VOD
Complete website available, including original content |
Second quarter 2016
Fourth quarter 2016 |
Objective: Content Development and Acquisition
Offering |
Targeted Milestone
|
Targeted Timeframe |
Linear Programming
|
Content provided through simplyME
Original programming |
Achieved
Fourth quarter 2016
|
Zonzia Over-the-top Channel |
Offer general content programming |
Second quarter 2016
|
Video on Demand (VOD) and Subscription Video on Demand (SVOD) |
Offer full length feature films, TV series, documentaries,
live events and general programming
|
Fourth quarter 2016 |
Objective: Secure Advertisers across
All Distribution Platforms
Platform |
Targeted Timeframe |
Cable television |
Fourth quarter 2015 |
Hotel-in-room channel |
Fourth quarter 2015 |
Zonzia.com and original content |
Third quarter 2016 |
Objective: Secure Capital to Fund Development
The timing and successful execution of our
overall business strategy is dependent upon our current ability to raise additional capital at terms favorable to us. Our officers
and directors have spent significant time and effort cultivating relationships with individuals and entities that may be interested
in investing in our Company.
Since late in 2014 through the date of this
report, our Officers, Directors and other consultants and Advisory Board Members have devoted significant time and effort to raising
the capital necessary to fully implement our principal business plans including securing content and building the required content
delivery infrastructure. While we have received positive feedback from these efforts and much preliminary interest from potential
debt and/or equity investors, we do not have any firm funding commitments as of the date of this report sufficient to fully implement
our business strategies in the near term.
Please see the section entitled “Use
of Proceeds” on page 13 for a detailed description on how the Company intends to use proceeds raised from this offering in
seeking to accomplish the development milestones set forth in this Plan of Operations.
Launch Strategy
Our content and platform launch strategy is
to produce and acquire compelling content that creates a connection with our targeted audience across desired platforms. If we
are successful in our capital raising efforts, we intend to be operating in all of our delivery platforms and subscription services
in the fourth quarter of 2016.
The overall objective is to drive significant
viewers to engage in the offerings of our video on demand and over the top Channel. We intend to engage in an aggressive business
to business public relations drive to rapidly evolve a marketplace for our viewers, clients, and consumers.
Develop High Quality and Entertaining
Content to Increase User Engagement
We anticipate aggressively pursuing content
acquisitions and as a result we believe that a portion of our potential licensing partners will require non-refundable, prepaid
royalty payments in order to present their content on our distribution platforms. The majority of the costs incurred with this
type of third party content development are paid through revenue sharing arrangements in which the vendors receive a percentage
of the impression revenue from our advertising basis. We intend to prioritize product development investments that we believe will
drive user engagement. One of our critical, near-term uses of funds is to significantly improve and expand our content library
and unique offerings. Our expenditures likely will include, at least partially, up-front payments to movie and live event producers
and/or promoters. Key to increasing our content offerings is our ability to analyze and organize vast amounts of information in
real time to enable us to select the unique content that we believe will be most compelling to each individual user. We are focused
on providing entertaining content and other products to increase engagement, representing a core part of our strategy to maximize
our long-term business performance.
Marketing and Business Development
As at June 30, 2015, we had spent over $1,000,000
on sales and marketing expenses, reflecting our commitment to invest to improve our ad products in order to attract more customers
to work with us, to create more value for marketers and to enhance marketers’ ability to make their advertising more relevant
for users. Our advertising strategy centers on the belief that, with ad products that are relevant, well-targeted, social and well-integrated
with our content offerings, we can enhance the user experience while providing an attractive return for marketers. We expect to
continue to spend significantly in order to grow our brand awareness, develop relevant ecommerce partner relationships and increase
advertising value.
Attract and Retain Highly Talented Management
and Professional Consultants
The technology industry is highly competitive
and heavily dependent upon attracting and maintaining innovative and experienced individuals. We are heavily dependent on our officer
group, and loss of the services of these officers could have a material impact on our ability to implement our business plan.
Based on our value based approach, we seek
to engage legal, accounting and other management consulting professionals upon the completion of extensive due diligence processes
accounting for experience level, customer satisfaction and cost comparisons.
Content Storage and Delivery
We engaged Kaltura, Inc. to build the infrastructure
to store our anticipated content library on a cloud based server; provide necessary display setting conversions allowing the content
to be viewed on multiple devices including mobile phones, tablets, and televisions as well as in high definition; and allow for
direct delivery to our strategic content delivery interface partners who ultimately provide the material to our targeted viewers.
Our technology partner Kaltura, Inc. has begun
building the platforms that will allow us to distribute our content securely in a variety manners including television on demand,
mobile devices, and other devices with internet capability. Through our content partner simplyME Distribution LLC and out Channel
Distribution Agreement with them, we presently have access to a mobile portal provide via a digital app with Flipps.com.
Content Development
Initially, we are distributing content that
we license from our partner simplyME Distribution across two platforms: the cable and hotel network platforms. The Company’s
objective is to provide its own content for distribution as it is developed and acquired over time. Under the direct supervision
of our Officers we have made significant contacts within the industry and have had preliminary meetings with various entertainers,
producers, and other content developers to provide a significant volume of video and other live streaming events pending the financial
ability to acquire and develop our intended content library.
Brand Awareness
Through our officers and other relationships
within in the industry we have begun a social media brand awareness campaign designed to attract consumers to our content delivery
platforms.
Recent Activities
Subsequent to the Settlement Agreement with
our former CEO in January 2015, we have spent significant amounts of time and effort attracting and retaining highly experienced
individuals to form our management team, Board of Directors, and Advisory Board. We believe that we have successfully attracted
and retained these individuals. Once in place, our team began the process of rebranding the Company into Zonzia Media and assessing
the value of various content delivery platforms and developing the corresponding relationships with applicable service providers.
Off Balance Sheet Arrangements
We currently do not have any off-balance sheet
arrangements.
Stock Based Compensation
We have on occasion issued equity and equity
linked instruments to employees and non-employees in lieu of cash for the receipt of goods and services and, in certain circumstances
the settlement of short-term loan arrangements. The applicable GAAP establishes that share-based payment transactions with non-employees
shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever
is more reliably measurable.
In these transactions, the Company issues unregistered
and restricted equity instruments.
While the Company believes that its shareholders
currently have approximately 12 million shares of freely-traded stock with a quoted market price (a Level 1input within the GAAP
hierarchy), the fair value of the unregistered and restricted shares issued in compensation transactions with non-employees as
valued by the quoted market price does not reflect the economic substance of the transactions and does not represent the Company’s
principal market, correspondingly, the quoted market price is not the most reliably measurable fair value. This determination was
based upon the liquidity restrictions placed upon our unregistered restricted equity instruments along with the quoted market not
being the most active or principal trading market.
When unregistered common shares are issued
for the settlement of short-term financing arrangements, the reacquisition price of the extinguished financing arrangement is determined
by the value of the debt which is more clearly evident, and no additional inducement expense is recognized.
In situations in which we issue unregistered
restricted common shares in exchange for goods and services, and the value of the goods and services are not the most reliably
measurable, we recognize the fair value of the unregistered restricted equity instruments based on the value of similar instruments
issued in private placements in exchange for cash in the most recent transactions (a Level 2 input within the GAAP hierarchy).
The Company has determined this methodology reflects the risk adjusted fair value of our unregistered restricted equity instruments
using a commercially reasonable valuation technique within the most active market.
Quantitative and Qualitative Disclosures
About Market Risk
Under the scaled disclosure requirements applicable
to smaller reporting companies (as defined in Item 10(f)(1) of Regulation S-K), we are not required to report quantitative and
qualitative disclosures about market risk specified in Item 305 of Regulation S-K.
DIRECTORS AND EXECUTIVE OFFICERS
The following individuals serve as directors
and executive officers of our company as of the date of this report. All directors of our company hold office until the next annual
meeting of our stockholders or until their successors have been elected and qualified. The executive officers of our company are
appointed by our board of directors and hold office until their death, resignation or removal from office.
Name |
|
Age |
|
Office |
Myles A. Pressey III |
|
58 |
|
Chairman of the Board and Interim Chief Financial Officer |
Johnathan F. Adair |
|
50 |
|
Chief Executive Officer |
Stanley L. Teeple |
|
63 |
|
Chief Compliance Officer |
Steven L. Sanders |
|
55 |
|
Director |
Philip Fraley |
|
33 |
|
Director |
Joseph Martin |
|
44 |
|
Director |
|
|
|
|
|
Advisory Board members: |
|
|
|
|
Charles R. Dutton |
|
|
|
|
Myles A. Pressey III
Since September 2014, Mr. Pressey has devoted
his full time to the Company, first as Chief Business Development Officer and then, beginning in late January 2015, as both Chairman
of the Board and Chief Interim Financial Officer. Throughout his career, Mr. Pressey served in many roles in investment and relationship
management. Mr. Pressey has provided financial advisor services to high net worth individuals, represented retired professional
basketball players in sponsorship deals and negotiated and managed endorsement and television appearance deals for athletes and
entertainers. From February 2012 through July 2014, Mr. Pressey has owned and operated Regency Park Entertainment, an independent
film production and finance company. From January2010 to January 2012, Mr. Pressey was the Managing Director of Film & Media
at Sun Center Studios, Pennsylvania’s only state-of-the-art sound stage facility and campus dedicated to servicing major
film and television production companies within the entertainment industry. Before joining Sun Center Studios in 2010, Mr. Pressey
served as the Chief Executive Officer of Pressey Padell Sports & Entertainment, which was founded in 2008 and focused on all
facets of business management for athletes and entertainers. Pressey Padell Sports & Entertainment handled not only endorsements
and TV appearances but also guided each athlete and entertainer and their families through all of their financial, marketing and
endorsement matters. Mr. Pressey devotes his full time business efforts on behalf of Zonzia Media, Inc.
In connection with Mr. Pressey’ appointment
as the Company’s Chairman of the Board of Directors and Interim Chief Financial Officer, Mr. Pressey entered into an employment
agreement with the Company on January 29, 2015. The employment agreement provides for an initial term of four years, with an automatic
one-year renewal thereafter, unless the employment agreement is terminated by advance written notice of either party. Under the
terms of the employment agreement, Mr. Pressey receives a base salary in the amount of $250,000 per year. Subject to the discretion
of the CEO and the Board of Directors, Mr. Pressey shall be eligible for an annual bonus of not less than fifteen percent (15%)
and not more than thirty-five percent (35%) of annual base salary. Mr. Pressey received an initial grant of 125,000,000 shares
of the Company’s restricted common stock within 30 days of signing the employment agreement. In addition, pursuant to an
amendment to Mr. Pressey’s compensation approved by the Board of Directors, Mr. Pressey is entitled to a potential subsequent
equity award; provided that this entire subsequent award is subject to the achievement of corporate performance benchmarks set
by the Board of Directors. For example, if the Company achieves twenty-five million dollars ($25,000,000) in revenue on a consolidated
reporting basis during any calendar year, Mr. Pressey III will be entitled to the entire award of 62,500,000 shares to be issued
in equal annual increments over the remaining term of his employment agreement, all subject to Mr. Pressey’s continued service.
The employment agreement further provides that Mr. Pressey is entitled to 4 weeks of paid vacation per year.
The Company may terminate the employment agreement
with Mr. Pressey for cause, without cause, or by reason of his death or disability. Mr. Pressey may terminate the employment agreement
for any reason by advance written notice. If the employment agreement is terminated by reason of death, disability, resignation
by Mr. Pressey or termination by the Company without Cause (as defined in the employment agreement) then the Company will be required
to pay to Mr. Pressey severance pay of four months base compensation and continue all other benefits under the agreement for a
period of four months. If the Company terminates the employment agreement for Cause, then Mr. Pressey will only be entitled to
the base salary and benefits earned through and including the date of termination. Mr. Pressey has agreed not to compete with us
during the term of his employment agreement and for a period of twelve months thereafter. We also agree to indemnify Mr. Pressey
pursuant to the employment agreement.
Before establishing Pressey Padell Sports&
Entertainment, Mr. Pressey held various business and investment management roles. Mr. Pressey holds a Bachelor of Arts Degree from
Antioch University.
Mr. Pressey’s experience with current
and retired professional athletes, entertainers, capital market and investment and business management is critical to our content,
marketing and business development strategy that is centered on our ability to establish and maintain long-term relationships with
content providers across all of our media offerings.
Johnathan F. Adair
Mr. Adair has served as the Company’s
Chief Executive Officer since November 2015. From January through October, 2015, Mr. Adair served as the Company’s Chief
Operating Officer. Mr. Adair is a seasoned veteran and well versed in all aspects of the entertainment industry with over 20 years
of experience. Mr. Adair’s background includes post at Sony Pictures Entertainment, Universal Pictures, The Walt Disney Company
and the Los Angeles Philharmonic. From February 2012 through December 2014, Mr. Adair served as a partner at Regency Park Entertainment,
an independent film production and finance company. From January 2010 to January 2012 Mr. Adair served as a partner at Valley Vista
Entertainment an independent film and TV production company. At Sony Pictures, Mr. Adair created and guided the marketing strategies
for the company’s licensed consumer products division including the blockbuster Spiderman 2, which broke both box office
and licensed sales records. At Universal Pictures, Mr. Adair ran the worldwide marketing operations for Universal Home Entertainment
Productions representing over $120 million in revenue. While at the Walt Disney Company, Mr. Adair directed the consumer products
marketing and promotional strategies for the Winnie The Pooh and Mickey Mouse brands and Disney’s television and live action
film properties. Mr. Adair devotes full-time of his business efforts to Zonzia Media, Inc.
In connection with Mr. Adair’
appointment as the Company’s COO in January 2015 and as the Company’s CEO as of November, 2015, Mr. Adair entered into
an employment agreement with the Company. The employment agreement provides for an initial term of four years, with an automatic
one-year renewal thereafter, unless the employment agreement is terminated by advance written notice of either party. Under the
terms of the employment agreement, Mr. Adair receives a base salary in the amount of $250,000 per year. Subject to the discretion
of the CEO and the Board of Directors, Mr. Adair shall be eligible for an annual bonus of not less than fifteen percent (15%) and
not more than thirty-five percent (35%) of annual base salary. Mr. Adair received an initial grant of 5,000,000 shares of the Company’s
restricted common stock within 30 days of signing the employment agreement, and will be granted 2,500,000 additional shares of
the Company’s common stock on each of the subsequent four anniversaries of the commencement of employment, should Mr. Adair
continue to be employed in good standings on such dates. The employment agreement further provides that Mr. Adair is entitled to
4 weeks of paid vacation per year.
The Company may terminate the employment agreement
with Mr. Adair for cause, without cause, or by reason of his death or disability. Mr. Adair may terminate the employment agreement
for any reason by advance written notice. If the employment agreement is terminated by reason of death, disability, resignation
by Mr. Adair or termination by the Company without Cause (as defined in the employment agreement) then the Company will be required
to pay to Mr. Adair severance pay of four months base compensation and continue all other benefits under the agreement for a period
of four months. If the Company terminates the employment agreement for Cause, then Mr. Adair will only be entitled to the base
salary and benefits earned through and including the date of termination. Mr. Adair has agreed not to compete with us during the
term of his employment agreement and for a period of twelve months thereafter. We also agree to indemnify Mr. Adair pursuant to
the employment agreement.
An accomplished and award winning violinist
and pianist, Johnathan headed the marketing and communications divisions of the Los Angeles Philharmonic Association. Johnathan
began his career at Sony Music where he served in the business affairs, marketing and A&R divisions. Johnathan is a graduate
with honors of Harvard University.
Stanley L. Teeple
Mr. Teeple has served as the Company’s
Secretary and Chief Compliance Officer since December 2014. From October 2006 through December 2010 Mr. Teeple was Chief Financial
Officer for Indigo-Energy, Inc. (a former name of the Company). From January 2011 through September 2013, as President of Stan
Teeple, Inc., Mr. Teeple provided services as Chief Financial Officer and provided consulting services for various companies, including
Element Renewal, a privately held water treatment company. In October 2013, Mr. Teeple undertook the engagement from New Hope Partners
LLC, a privately held group of shareholders of Indigo-Energy, Inc., to work on the turnaround and compliance-related efforts, in
hopes of returning the company to fully-reporting status. In May 2014, that task was accomplished and Indigo Energy engaged Mr.
Teeple as its interim CFO and consultant. That engagement continued until December 1, 2014 when the Company named Mr. Teeple as
its Chief Compliance Officer and Secretary.
In connection with Mr. Teeple’ appointment
as the Company’s Secretary and Chief Compliance Officer, Mr. Teeple entered into an employment agreement with the Company
on December 1, 2014 and a subsequent Modification Agreement on January 29, 2015. The employment agreement and modification provides
for an initial term of four years, with an automatic one-year renewal thereafter, unless the employment agreement is terminated
by advance written notice of either party. Under the terms of the employment agreement, Mr. Teeple receives a base salary in the
amount of $250,000 per year. Subject to the discretion of the CEO and the Board of Directors, Mr. Teeple shall be eligible for
an annual bonus of not less than fifteen percent (15%) and not more than thirty-five percent (35%) of annual base salary. Mr. Teeple
received an initial grant of 5,000,000 shares of the Company’s restricted common stock within 30 days of signing the employment
agreement, and will be granted 2,500,000 additional shares of the Company’s common stock on each of the subsequent four anniversaries
of the commencement of employment, should Mr. Teeple continue to be employed in good standings on such dates. The employment agreement
further provides that Mr. Teeple is entitled to 4 weeks of paid vacation per year.
The Company may terminate the employment
agreement with Mr. Teeple for cause, without cause, or by reason of his death or disability. Mr. Teeple may terminate the employment
agreement for any reason by advance written notice. If the employment agreement is terminated by reason of death, disability, resignation
by Mr. Teeple or termination by the Company without Cause (as defined in the employment agreement) then the Company will be required
to pay to Mr. Teeple severance pay of four months base compensation and continue all other benefits under the agreement for a period
of four months. If the Company terminates the employment agreement for Cause, then Mr. Teeple will only be entitled to the base
salary and benefits earned through and including the date of termination. Mr. Teeple has agreed not to compete with us during the
term of his employment agreement and for a period of twelve months thereafter. We also agree to indemnify Mr. Teeple pursuant to
the employment agreement.
Over the last 30 years Mr. Teeple has held
numerous senior management positions in a number of public and private companies across a broad spectrum of industries. Additionally
he has operated and worked for various court appointed trustees and principals as CEO, COO, and CFO in the entertainment, pharmaceuticals,
food, travel, and tech industries. He previously operated his consulting business on a project-to-project basis, and holds various
other directorships and now devotes full time to Zonzia Media, Inc.. His businesses operational strengths include knowing how to
manage and maximize the resources and preserve the integrity of a company from start-up through to maturity.
Steven L. Sanders
Mr. Sanders has served as a member of the Board
of Directors of Zonzia Media, Inc. since February 19, 2105. As Chairman, CEO, and Chief Investment Strategist (CIS) at StoneRidge
Investment Partners, LLC since 2009, Steven Sanders is a leader in the money management industry. Mr. Sanders has led multiple
firms to growth and profitability over his extensive 30-year career. In 2009, Mr. Sanders led the growth of StoneRidge from $200
Million to $1.2 Billion in assets under management while driving enhancements to the firm's equity investment process and helping
launch and develop StoneRidge’s suite of custom designed fixed income products.
Possessing nearly 30 years of investment and
entrepreneurial experience, Mr. Sanders serves as Board Chairman of Beltraith Capital, LLC, a holding company formed by Mr. Sanders
to raise capital and acquire a controlling interest in StoneRidge in 2009.
Prior to joining StoneRidge, from 2006-2009,
Mr. Sanders served as Chief Investment Strategist at Creative Financial Group Asset Management, with $1.8 Billion in assets under
management. During that period, Mr. Sanders Co-founded and served as Chairman & CEO of First Genesis Financial Group, a subdivision
of Creative Financial Group. While there, Mr. Sanders developed and co-managed the firm’s absolute return, macro-economic
thematic investment strategy.
Mr. Sanders has provided economic and financial
market commentary to national and local television networks such as CNBC, Bloomberg, CNN, ABC World News, Fox TV, and CN8’s
Money Matters Today. His presentations on Macro Economics and Financial Markets are in demand at many investment conferences. Mr.
Sanders has served as a spokesperson for Citibank Master Card and Visa’s national financial education program and authored
a booklet about the virtues of saving and spending wisely, “Money Matters for Young Adults”. Since 2007, he has co-hosted
Financial Voices; a weekly financial and economic awareness program which airs on 900AM WURD Radio in Philadelphia and broadcast
internationally via the web. Mr. Sanders serves as Chairman of the Investment Committee for The Philadelphia Foundation, a member
of the Board of Trustees at the Pennsylvania Academy of Fine Arts, Advisory Board member of The Network for Teaching Entrepreneurship
Philadelphia and Board member for TOCFWH. Mr. Sanders holds a B.B.A. in Risk Management from Howard University. His engagement
provides that Zonzia issues 150,000 shares of restricted stock annually for his service as a member of the Board of Directors.
Philip Fraley
Mr. Fraley is President of Real Partners,
LLC, a financial services and wealth advisory firm, where he has served since May 2012. Prior to that, Mr. Fraley served as a Director
of Guggenheim Partners from May 2010 to May 2012. He has spent the past 10 years of his career working in the family office
and investment advisory industry specializing in investment, wealth management and merchant banking for both U.S. and international
clients. Previously, Philip held positions at Guggenheim Partners and BNY Mellon. Philip is a graduate of the University of
Pittsburgh with a B.S. in Accounting.
Mr. Fraley joined the Zonzia Board of Directors
on June 3, 2015 and continues to pursue his other business interests providing Zonzia services as required. His engagement provides
that Zonzia issues 150,000 shares of restricted stock annually for his service as a member of the Board of Directors.
Joseph Martin
Mr. Martin joined the Company’s Board
of Directors on July 30, 2015. As Co-Chair of the Intellectual Property Group at the 175-lawyer regional law firm Archer &
Greiner, P.C. from November 1999 through July 2015, Mr. Martin has represented cutting edge technology companies for a good part
of his professional career. As both an intellectual property litigator and a business consultant, Mr. Martin has specialized in
helping entrepreneurial clients protect and monetize their IP assets, resolve governance disputes, and grow revenue through strategic
acquisitions and financings. Since January 2010, Mr. Martin has served as the President of the Board of Trustees of the Tuckerton
Seaport Museum, where he leads an innovative Board and executive team which has garnered numerous awards and national recognition
as a museum of distinction. Mr. Martin is a graduate of Rutgers University School of Law where he earned his Juris Doctorate degree
and received his B.A. degree from the College of New Jersey.
Advisory Board
The Advisory Board Charter provides that Advisory
Board members will assist Zonzia’s Directors, management, and specifically the Chairman of the Board of Directors regarding
business issues including marketing, content development, sales, financing, expansion, creativity and others.
Mandate for Membership
Selection
as an Advisory Board member is due to an individual’s specific skill-set of knowledge and experiences that places him or
her on the leading edge of what Zonzia has defined as its operating model. Each member has distinct knowledge on different aspects
of business such as marketing, product development and sales techniques that are of use to the Directors. Each must be a seasoned
professional who has unique insight, knowledge, and experience in the world of entertainment, film, music, and development of creative
content. Moreover, each must have a like mind with the Board and management of the Company in areas of character, moral codes,
and faith which is so important to our corporate mission.
Charles “Roc” Dutton
Mr. Dutton
joined the Company’s Advisory Board in May of 2015 and is compensated for his contributions with an annual stock award
of 75,000 shares of restricted common stock.
Charles Roc Dutton, 61 hails from Baltimore, Maryland. In his youth, Dutton
had a short-lived stint as an amateur boxer with the nickname "Roc." Upon graduation from Hagerstown Junior College
in Maryland he enrolled as a drama major at Towson State University in Towson, Maryland. After his time at Towson,
Dutton earned a master's degree in acting from the Yale School of Drama.
From January 2009
until January 2013 Mr. Dutton worked as a self-employed developer, actor, and producer of various made-for-television and film
roles. From February- October 2013 Mr. Dutton was engaged as a primary actor in the television series “Zero Hour”.
From November –December 2013 Mr. Dutton was engaged filing the feature film “The Monkey’s Paw”. From January
2014 through June 2015 Mr. Dutton worked as an independent actor and television and film producer.
In 1984, Dutton made
his Broadway debut in August Wilson's Ma Rainey's Black Bottom , winning a Theatre World Award and
a Tony Award nomination for Best Actor. In 1988, Dutton played a killer in the television miniseries The Murder
of Mary Phagan opposite Jack Lemmon and Kevin Spacey. 1990 brought him a second Best Actor Tony nomination
for his role in another Wilson play, The Piano Lesson . From 1991-1994, he starred in the Fox television
series Roc . Dutton co-starred in Alien 3 , the debut film of director David Fincher, then co-starred
in 1993's Rudy . Other films he has appeared in include Get on the Bus ; A Time to Kill
; Cookie's Fortune ; Crocodile Dundee II ; Country; Menace ; and Secret Window
.
Dutton won Outstanding
Guest Actor Emmy Awards in 2002 and 2003 for his roles in The Practice and Without a Trace
. He was previously nominated in 1999, for his guest-starring role as Alvah Case in the HBO prison drama Oz in
its second season premiere episode. For this role, he was also nominated for an NAACP Image Award. Also in 1999, he starred
in an ensemble cast in Aftershock: Earthquake in New York in which he played the Mayor of New York City. Dutton
gained acclaim for his comedy show Roc shown on FOX television (but produced by HBO) from 1991–1994,
especially mid-run when the show was broadcast live. His work in this role won him a NAACP Image Award. He co-starred in the popular
but short-lived 2005 CBS science fiction series, Threshold.
In 2000, Dutton directed
the HBO miniseries The Corner. The miniseries was close to his heart for Dutton grew up on the streets of East Baltimore.
It was adapted from The Corner: A Year in the Life of an Inner-City Neighborhood (Broadway Books, 1997) by David
Simon (a reporter for the Baltimore Sun ) and Ed Burns (a retired Baltimore homicide detective).
The Corner won several Emmys in 2000, including Best Miniseries. Dutton won for his direction of the miniseries. He worked
with Simon previously in a 1996 episode of Homicide: Life on the Street .
He starred as Montgomery
County, Maryland Police Chief Charles Moose in the 2003 made-for-TV movie D.C. Sniper: 23 Days of Fear , and
appears in Season 2 of The L Word . Dutton also appeared in "Another Toothpick," an episode of The
Sopranos . He guest starred on House M.D. as the father of Doctor Eric Foreman (Omar Epps) and
on Sleeper Cell: American Terror as the father of undercover FBI agent Darwyn Al-Sayeed. He also directed
two episodes of Sleeper Cell .
On February
14, 2013 Dutton returned to TV in Zero Hour playing the role of a priest.
In 2013, Dutton played
Detective Margolis in the horror film The Monkey's Paw .
Family Relationships
There are no family relationships among our
directors or officers.
Conflicts Of Interest
Our directors and officers are subject to restrictions
regarding opportunities that may compete with our company’s business plan. New opportunities that are brought to the attention
of our directors and officers must be presented to our Board of Directors and made available to our company for consideration and
review under principles of state law corporate opportunity doctrines.
Involvement in Certain Legal Proceedings
None of our directors or executive officers
has been involved in any of the following events during the past ten years:
|
(a) |
any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years before that time; |
|
|
|
|
(b) |
any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offences); |
|
|
|
|
(c) |
being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; |
|
|
|
|
(d) |
being found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; |
|
|
|
|
(e) |
being the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of: (i) any federal or state securities or commodities law or regulation; or (ii) any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease- and-desist order, or removal or prohibition order; or (iii) any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or |
|
|
|
|
(f) |
being the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Securities Exchange Act of 1934), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
EXECUTIVE COMPENSATION
Executives and Directors Compensation
During the period ended December 31, 2014 we
entered into various employment arrangements with our previous and current executive officers. Some of these arrangements were
retroactively forgiven and cancelled as part of our Master Settlement Agreement entered into on January 22, 2015, as described
in the notes to the Summary Compensation Table. For a more detailed description of the Master Settlement Agreement, please see
Item 1 – Description of Business.
The following table provides certain summary
information concerning compensation of our named executive officers for our fiscal year ended December 31, 2014 :
Summary Compensation Table
Name
($) |
Year
($) |
|
Salary
($) |
|
|
Bonus
($) |
|
|
Stock
Awards
($) |
|
|
Option
Awards
($) |
|
|
Non-
Equity
Incentive
Plan
Comp
($) |
|
|
Non-
qualified Deferred
Comp.
Earnings
($) |
|
|
All Other
Comp.
($) |
|
|
TOTAL
($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rajinder Brar, Former CEO and CFO (1) |
2014 |
|
$ |
370,511 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
$ |
370,511 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aneliya Vasilieva, Former Chief Content Officer (2) |
2014 |
|
$ |
83,333 |
|
|
|
– |
|
|
$ |
9,975,000 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
$ |
10,058,333 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Myles A. Pressey III, Interim CEO and Chief Business Development Officer (3) |
2014 |
|
$ |
93,833 |
|
|
|
– |
|
|
$ |
13,725,000 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
$ |
13,818,833 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James Walter Sr., Former CEO and CFO (4) |
2014 |
|
$ |
– |
|
|
|
– |
|
|
$ |
476,875 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
$ |
476,875 |
|
_______________
|
(1) |
Mr. Brar was appointed Chairman and Chief Executive Officer on November 21, 2014. Effective January 22, 2015 Mr. Brar resigned all previously appointed Officer and Board positions. |
|
(2) |
Ms. Vasilieva was appointed Chief Content Officer on November 21, 2014. Effective January 22, 2015 Ms. Vasilieva resigned as Chief Content Officer. The above compensation represents accrued amounts related to a December 2014 employment agreement that was retroactively cancelled with all previously accrued amounts being forfeited. Stock awards, representing 26,250,000 shares of restricted and unregistered common stock, scheduled to vest on January 1, 2015 were cancelled. |
|
(3) |
Mr. Pressey III was appointed Chief Business Development Officer and a Board Member on November 21, 2014. Effective January 22, 2015 Mr. Pressey III resigned as Chief Business Development Officer and Director. The above compensation represents accrued amounts related to a December 2014 employment agreement that was retroactively cancelled. Stock awards, representing 33,750,000 shares of restricted and unregistered common stock, scheduled to vest on January 1, 2015 were cancelled. Additionally, $900,000 of stock based compensation was earned on a pre-merger basis while in the employ of the public shell company and correspondingly eliminated from being presented in the accompanying statement of operations for the period ended December 31, 2014. Mr. Pressey was appointed as the Company’s Chief Business Development Officer and its Interim Chief Executive Officer and Interim Chief Financial Officer on January 29, 2015. |
|
(4) |
Mr. Walter Sr. resigned as the Sole Officer and Director of the Company on November 21, 2014. Additionally, $476,875 of stock based compensation was earned on a pre-merger basis while in the employ of the public shell company and correspondingly eliminated from being presented in the accompanying statement of operations for the period ended December 31, 2014. On January 22, 2015 Mr. Walter was appointed as the Sole Officer and Director and subsequently resigned all Officer positions on January 29, 2015. |
Compensation of Executive Officers
Other than Mr. James C. Walter Sr., none of
the named executive officers shown in the Summary Compensation Table served as executive officers of the non-surviving public company
shell.
Outstanding Equity Awards at Fiscal Year
End
As of December 31, 2014 the Company’s
named executive officers collectively held restricted stock awards totaling 120,000,000 shares of common stock, half of which were
scheduled to vest as of January 1, 2015 with an additional 60,000,000 shares of restricted common stock scheduled to vest as of
July 15, 2015. In accordance with our Settlement Agreement dated January 22, 2015 all of these previously issued equity compensation
awards were retroactively cancelled in January 2015. Accordingly, they are not shown in the table below. The table below sets forth
all other options and stock awards received by the named executive officers of the Company with respect to fiscal year 2014:
|
|
Option Awards |
|
|
Stock Awards |
|
Name |
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable |
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable |
|
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#) |
|
|
Option
Exercise
Price
($) |
|
|
Option
Expiration
Date |
|
Number of
Shares or
Units of
Stock that
Have Not
Vested
(#) |
|
|
Market
Value of
Shares or
Units of
Stock that
Have Not
Vested
($) |
|
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights that
Have Not
Vested
(#) |
|
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights that
Have Not
Vested
(#) |
|
James C. Walter Sr. |
|
|
250,000 |
|
|
|
– |
|
|
|
– |
|
|
$ |
11.00 |
|
|
10/16/17 |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
Compensation of Directors
For the period ended December 31, 2014, one
of our Directors also served as an executive officer of the Company. No officer received additional compensation in respect to
his service on the Board in 2014. Accordingly, the tabular disclosure called for by Item 402(r) of Regulation S-K is not applicable.
Employment Agreements
We have entered into employment agreements
with the following current executive officers, the terms of which are summarized below.
Myles A. Pressey III, Chairman
and Interim Chief Financial Officer
Mr. Pressey III entered into an employment
agreement with the Company on January 29, 2015. The employment agreement provides for an initial term of four years, with an automatic
one-year renewal thereafter, unless the employment agreement is terminated by advance written notice of either party. Under the
terms of the employment agreement, Mr. Pressey III receives a base salary in the amount of $250,000 per year. Subject to the discretion
of the Board of Directors, Mr. Pressey III shall be eligible for an annual bonus of not less than fifteen percent (15%) and not
more than thirty-five percent (35%) of annual base salary. Mr. Pressey received an initial grant of 125,000,000 shares of the
Company’s restricted common stock within 30 days of signing the employment agreement. In addition, pursuant to an amendment
to Mr. Pressey’s compensation approved by the Board of Directors, Mr. Pressey is entitled to a potential subsequent equity
award; provided that this entire subsequent award is subject to the achievement of corporate performance benchmarks set by the
Board of Directors. For example, if the Company achieves twenty-five million dollars ($25,000,000) in revenue on a consolidated
reporting basis during any calendar year, Mr. Pressey III will be entitled to the entire award of 62,500,000 shares to be issued
in equal annual increments over the remaining term of his employment agreement, all subject to Mr. Pressey’s continued service.
The employment agreement further provides that Mr. Pressey is entitled to 4 weeks of paid vacation per year.
The Company may terminate the employment
agreement with Mr. Pressey III for cause, without cause, or by reason of his death or disability. Mr. Pressey III may terminate
the employment agreement for any reason by advance written notice. If the employment agreement is terminated by reason of death,
disability, Mr. Pressey III’s resignation or termination by the Company without Cause (as defined in the employment agreement)
then the Company will be required to pay to Mr. Pressey III severance pay of four months base compensation and continue all other
benefits under the agreement for a period of four months. If the Company terminates the employment agreement for Cause, then Mr.
Pressey III will be entitled to the base salary and benefits earned through and including the date of termination. Mr. Pressey
III has agreed not to compete with us during the term of his employment agreement and for a period of twelve months thereafter.
The Company also agreed to indemnify Mr. Pressey III pursuant to the employment agreement.
Stanley L. Teeple, Chief Compliance Officer
We entered into an employment agreement with
Stanley Teeple, our Chief Compliance Officer dated December 1, 2014. Mr. Teeple performs the duties and functions of his office
under the supervisory authority of our Board of Directors and Chief Executive Officer. The employment agreement provides for an
initial term ending December 31, 2016, with an automatic one-year renewal thereafter, unless the employment agreement is terminated
by advance written notice of either party. Under the terms of the employment agreement, Mr. Teeple receives a base salary in the
amount of $250,000 per year, subject to review at least annually by the CEO or Board of Directors. For 2014, Mr. Teeple is eligible
for a $100,000 bonus and for 2015 and subsequent years, a bonus of not less than 5% and not more than thirty-five percent (35%)
of prior year annual base salary shall be awarded in the discretion of the CEO and Board of Directors or committee thereof. Mr.
Teeple shall receive a one-time grant of one million shares of the Company’s common stock, to be issued not later than June
30, 2015. Mr. Teeple is also entitled to participate in and receive such other benefits and compensation that our company may furnish
to other management personnel or employees generally. The employment agreement further provides that Mr. Teeple is entitled to
3 weeks of paid vacation per year commencing January 1 2015. He is also entitled to and other executive level benefits under the
employment agreement.
We may terminate the employment agreement with
Mr. Teeple for cause, without cause, or by reason of his death or disability. Mr. Teeple may terminate the employment agreement
for any reason by advance written notice. If the employment agreement is terminated by reason of death, disability, or termination
by the Company without Cause (as defined in the employment agreement) then our company will be required to pay to Mr. Teeple severance
pay of four months base compensation and continue all other benefits under the agreement for a period of four months. If we terminate
the employment agreement for cause or if Mr. Teeple terminates the employment agreement, then Mr. Teeple will be entitled to the
base salary and benefits earned through and including the date of termination. Mr. Teeple has agreed not to compete with us during
the term of his employment agreement and for a period of twelve months thereafter. We also agree to indemnify Mr. Teeple pursuant
to the employment agreement.
Johnathan F. Adair, Chief Executive Officer
Mr. Adair entered into an employment agreement
with the Company on January 29, 2015. The employment agreement provides for an initial term of four years, with an automatic one-year
renewal thereafter, unless the employment agreement is terminated by advance written notice of either party. Under the terms of
the employment agreement, Mr. Adair receives a base salary in the amount of $250,000 per year. Subject to the discretion of the
CEO and the Board of Directors, Mr. Adair shall be eligible for an annual bonus of not less than fifteen percent (15%) and not
more than thirty-five percent (35%) of annual base salary. Mr. Adair shall receive an initial grant of 5,000,000 shares of the
Company’s restricted common stock within 30 days of signing the employment agreement, and will be granted 2,500,000 additional
shares of the Company’s common stock on each of the subsequent four anniversaries of the commencement of employment, should
Mr. Adair continue to be employed in good standings on such dates. The employment agreement further provides that Mr. Adair is
entitled to 4 weeks of paid vacation per year.
The Company may terminate the employment
agreement with Mr. Adair for cause, without cause, or by reason of his death or disability. Mr. Adair may terminate the employment
agreement for any reason by advance written notice. If the employment agreement is terminated by reason of death, disability, resignation
by Mr. Adair or termination by the Company without Cause (as defined in the employment agreement) then the Company will be required
to pay to Mr. Adair severance pay of four months base compensation and continue all other benefits under the agreement for a period
of four months. If the Company terminates the employment agreement for Cause, then Mr. Adair will only be entitled to the base
salary and benefits earned through and including the date of termination. Mr. Adair has agreed not to compete with us during the
term of his employment agreement and for a period of twelve months thereafter. We also agree to indemnify Mr. Adair pursuant to
the employment agreement.
Pension Benefits
We do not maintain any pension plan or arrangement
under which our named executive officers are entitled to participate or receive post-retirement benefits.
Nonqualified Deferred Compensation
We do not maintain any nonqualified deferred
compensation plan or arrangement under which our named executive officers are entitled to participate.
Employee Benefit Plans
2007 Stock Option Plan. Our Board of
Directors adopted our company’s 2007 Stock Option Plan (the “2007 Stock Option Plan”). The 2007 Stock Option
Plan was approved by our stockholders at a meeting of stockholders held on October 15, 2007. The description set forth below summarizes
the principal terms and conditions of the 2007 Stock Option Plan, does not purport to be complete and is qualified in its entirety
by reference to the 2007 Stock Option Plan, a copy of which has been filed with the Securities and Exchange Commission as an Exhibit
to this Report.
General. The primary objectives of the
2007 Stock Option Plan are to:
| · | attract and retain selected key employees,
consultants and directors; |
| · | encourage their commitment; |
| · | motivate superior performance; |
| · | facilitate attainment of ownership interests
in our company; |
| · | align personal interests with those of
our stockholders; and |
| · | enable them to share
in the long-term growth and success of our company. |
Shares Subject to 2007 Stock Option Plan.
The number of shares of common stock of our company reserved under the 2007 Stock Option Plan is 90,9091 1 . The number
of shares available under both the 2007 Stock Option Plan and outstanding incentive awards are subject to adjustments to prevent
enlargement or dilution of rights resulting from stock dividends, stock splits, recapitalization or similar transactions, or resulting
from a change in applicable laws or other circumstances.
Administration. The Plan shall be administered
by either the Board of Directors of the Company (the “Board”) or by a committee (the “Committee”) to which
administration of the Plan, or of part of the Plan, may be delegated by the Board (in either case, the “Administrator”).
The Board shall appoint and remove members of such Committee, if any, in its discretion in accordance with applicable laws. If
necessary in order to comply with Rule 16b-3 under the Exchange Act and Section 162(m) of the Code, the Committee shall, in the
Board’s discretion, be comprised solely of “non-employee directors” within the meaning of said Rule 16b-3 and
“outside directors” within the meaning of Section 162(m) of the Code. The foregoing notwithstanding, the Administrator
may delegate nondiscretionary administrative duties to such employees of the Company as it deems proper and the Board, in its absolute
discretion, may at any time and from time to time exercise any and all rights and duties of the Administrator under the Plan.
_______________
1 This reflects the 1-for-44 reverse
stock split, which became effective on November 12, 2014. Originally, 40,000,000 shares of our common stock was reserved under
the 2007 Stock Option Plan.
Eligibility. Every person who at the
date of grant of an Option is an employee of the Company or of any Affiliate (as defined below) of the Company is eligible to receive
Non-qualified stock options (“NQSOs”) or Incentive Stock Options (“ISOs”) under the Plan. Every person
who at the date of grant is a consultant to, or non-employee director of, the Company or any Affiliate (as defined below) of the
Company is eligible to receive NQSOs under the Plan. The term “Affiliate” as used in the Plan means a parent or subsidiary
corporation as defined in the applicable provisions (currently Sections 424(e) and (f), respectively) of the Code. The term “employee”
includes an officer or director who is an employee of the Company. The term “consultant” includes persons employed
by, or otherwise affiliated with, a consultant.
Terms and Conditions
All Options granted under the 2007 Stock Option
Plan shall be subject to the terms and conditions provided therein, including:
1. Time of Option Exercise.
Subject to the other relevant provisions of the Plan, Options granted under the Plan shall be exercisable (a) immediately as of
the effective date of the stock option agreement granting the Option, or (b) in accordance with a schedule as may be set by the
Administrator (each such date on such schedule, the “Vesting Base Date”) and specified in the written stock option
agreement relating to such Option. In any case, no Option shall be exercisable until a written stock option agreement in form satisfactory
to the Company is executed by the Company and the optionee.
2. Nontransferability
of Option Rights. Except with the express written approval of the Administrator which approval the Administrator is authorized
to give only with respect to NQSOs, no Option granted under the Plan shall be assignable or otherwise transferable by the optionee
except by will, by the laws of descent and distribution or pursuant to a qualified domestic relations order. During the life of
the optionee, an Option shall be exercisable only by the optionee.
3. Payment. All options
issued under the Plan are deemed to be cashless. Options may be exercised using the intrinsic value of the options.
4. Termination of Employment.
All options issued under the plan are to be vested immediately unless stipulated otherwise by the Administrator at the time of
issuance. The Employee shall have 90 days from termination to exercise the option or it shall expire.
5. Determination of Value.
For purposes of the Plan, the fair market value of Shares or other securities of the Company shall be determined as follows:
(a) Fair market value
shall be the closing price of such stock on the date before the date the value is to be determined on the principal recognized
securities exchange or recognized securities market on which such stock is reported, but if selling prices are not reported, its
fair market value shall be the mean between the high bid and low asked prices for such stock on the date before the date the value
is to be determined (or if there are no quoted prices for such date, then for the last preceding business day on which there were
quoted prices).
(b) In the absence of
an established market for the stock, the fair market value thereof shall be determined in good faith by the Administrator, with
reference to the Company’s net worth, prospective earning power, dividend-paying capacity, and other relevant factors, including
the goodwill of the Company, the economic outlook in the Company’s industry, the Company’s position in the industry,
the Company’s management, and the values of stock of other corporations in the same or similar line of business.
Federal Income Tax Consequences
The holder of an ISO does not realize taxable
income upon the grant or upon the exercise of the option (although the option spread is an item of tax preference income potentially
subject to the alternative minimum tax). If the stock acquired upon exercise of the options sold or otherwise disposed of within
two (2) years from the option grant date or within one year from the exercise date then, in general, gain realized on the sale
is treated as ordinary income to the extent of the option spread at the exercise date, and the Company receives a corresponding
deduction. Any remaining gain is treated as capital gain. If the stock is held for at least two (2) years from the grant date and
one year from the exercise date, then gain or loss realized upon the sale will be capital gain or loss and the Company will not
be entitled to a deduction. A special basis adjustment applies to reduce the gain for alternative minimum tax purposes.
Section 409A of the Code generally provides
that any deferred compensation arrangement that does not satisfy specific written requirements regarding (i) timing and form of
payouts, (ii) advance election of deferrals and (iii) restrictions on acceleration of payouts results in immediate taxation of
all amounts deferred to the extent not subject to a substantial risk of forfeiture. In addition, taxes on the amounts included in
income also are subject to a 20% excise tax and interest. In general, to avoid a violation of Section 409A of the Code, amounts
deferred may be paid out only upon separation from service, disability, death, a specified time, a change in control (as defined
by the Treasury Department) or an unforeseen emergency. Furthermore, the election to defer generally must be made in the calendar
year before performance of services, and any provision for accelerated payout other than for reasons specified by the Treasury
may cause the amounts deferred to be subject to early taxation and to the imposition of the excise tax. Section 409A of the Code
is broadly applicable to any form of deferred compensation other than tax-qualified retirement plans and bona fide vacation, sick
leave, compensatory time, disability pay or death benefits and may be applicable to certain awards under the 2007 Stock Option
Plan. The Treasury Department has provided guidance on transition issues and final regulations under new Section 409A of the Code.
Incentive awards under the 2007 Stock Option Plan that are subject to Section 409A of the Code are intended to satisfy the requirements
of Section 409A of the Code, as specified in an incentive agreement.
Generally, taxable compensation earned by “covered
employees” (as defined in Section 162(m) of the Code) for options or other applicable incentive awards is intended to constitute
qualified performance-based compensation. We should, therefore, be entitled to a tax deduction for compensation paid in the same
amount as the ordinary income recognized by the covered employees without any reduction under the limitations of Section 162(m)
on deductible compensation paid to such employees. However, the committee may determine, within its sole discretion, to grant incentive
awards to such covered employees that do not qualify as performance-based compensation. Under Section 162(m), our company is denied
a deduction for annual compensation paid to such employees in excess of $1,000,000.
THE FOREGOING IS A SUMMARY OF THE UNITED
STATES FEDERAL INCOME TAX CONSEQUENCES THAT GENERALLY WILL ARISE UNDER THE CODE WITH RESPECT TO INCENTIVE AWARDS GRANTED UNDER
THE 2007 STOCK OPTION PLAN AND DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF ALL RELEVANT PROVISIONS OF THE CODE.
MOREOVER, THIS SUMMARY IS BASED ON CURRENT
FEDERAL INCOME TAX LAWS UNDER THE CODE, WHICH ARE SUBJECT TO CHANGE. THE TREATMENT OF FOREIGN, STATE, LOCAL OR ESTATE TAXES IS
NOT ADDRESSED. THE TAX CONSEQUENCES OF THE INCENTIVE AWARDS ARE COMPLEX AND DEPENDENT ON EACH INDIVIDUAL’S PERSONAL TAX SITUATION.
ALL PARTICIPANTS ARE ADVISED TO CONSULT WITH THEIR OWN TAX ADVISERS RESPECTING INCENTIVE AWARDS.
Limitation of Liability and Indemnification
Matters
Our articles of incorporation contain provisions
that limit the liability of our directors for monetary damages to the fullest extent permitted by Nevada law.
Our articles of incorporation and bylaws authorize
our company to provide indemnification to our directors and officers and persons who are or were serving at our request as a director,
officer, manager or trustee of another corporation or of a partnership, limited liability company, joint venture, trust or other
enterprise to the fullest extent permitted by Nevada law. Our articles of incorporation and bylaws also authorize our company,
by action of our Board of Directors, to provide indemnification to employees and agents of our company and persons who are serving
or did serve at our request as an employee or agent of another corporation or of a partnership, limited liability company, joint
venture, trust or other enterprise with the same scope and effect as provided to our directors and officers as described above.
Our company has not entered into any indemnification
agreement with any of its directors or officers.
We anticipate obtaining director and officer
liability insurance with respect to possible director and officer liabilities arising out of certain matters, including matters
arising under the Securities Act.
Option Exercises and Stock Vested
None of our named executive officers exercised
stock options during 2014 and through the date of this Report.
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Other than as disclosed below, none of the
following persons have, since our date of incorporation, had any material interest, direct or indirect, in any transaction with
us or in any presently proposed transaction that has or will materially affect us:
| · | Any person proposed as a nominee for election
as a director; |
| · | Any person who beneficially owns, directly
or indirectly, shares carrying more than 10% of the voting rights attached to our outstanding shares of common stock; |
| · | Any relative or spouse
of any of the foregoing persons who has the same house as such person. |
Related Transactions
On May 24, 2014 our prior Chairman and Chief
Executive Officer contributed the brands, rights, and ecommerce opportunities of HDIMAX.com and Frontlinewire.com to the Company
in exchange for 48,500,000 shares of common stock of the Company. Since we were under control of our founder on the date of the
transaction, our founder’s historical cost became the carrying cost of the contributed assets totaling $488. As of December
31, 2014the cost of registering the websites was fully amortized; however, we maintained the rights to the domain names.
During the period ended December 31, 2014 we
paid our founder, Chairman, and Chief Executive Officer and related entities $211,591 for the development of content and other
marketing related expenses. The amount is classified in sales and marketing in the accompanying statement of operations.
As of December 31, 2014 we owed a related party
$340,163 as result of the related party directly paying third party vendors on our behalf. In February 2015 we issued 7,500,000
shares of restricted and unregistered common stock in full settlement of these previously accrued obligations.
Section 16(a) Beneficial Ownership Reporting
Compliance
Section 16(a) of the Exchange Act requires
that the directors, officers and persons who beneficially own more than 10% of the equity securities of reporting companies, file
reports of ownership and changes in ownership with the Securities and Exchange Commission (the “SEC”). Directors, officers
and greater than 10% stockholders are required by SEC regulation to furnish our company with copies of all Section 16(a) forms
that they file. Based solely on our review of the copies of such forms we received, we believe that during the year ended December
31, 2014, and through the date of this Report, all such filing requirements applicable to our company were complied with.
Code of Ethics
We have not adopted a corporate code of ethics
that applies to our Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer or controller, or persons
performing similar functions. Our decision not to adopt such a code of ethics results from our having only a limited number of
officers and directors operating as the management for our company. We believe that, as a result of the limited interaction that
occurs, having such a small management structure for our company eliminates the current need for such a code.
Committees of our Board of Directors
Audit Committee
We do not have a formal standing audit committee.
Rather, audit committee functions are performed by our entire Board of Directors. These functions include: (1) selection and oversight
of our independent accountant; (2) establishing procedures for the receipt, retention and treatment of complaints regarding accounting,
internal controls and auditing matters; (3) establishing procedures for the confidential, anonymous submission by our employees
of concerns regarding accounting and auditing matters; (4) engaging outside advisors; and (5) funding for the outside auditory
and outside advisors engagement by the audit committee.
Audit Committee Financial Expert
None of our directors or officers has the qualifications
or experience to be considered a financial expert. We believe that the cost related to retaining a financial expert at this time
is prohibitive. However, we do intend to appoint an audit committee financial expert in the foreseeable future.
Director Independence
Three of the members of our Board of Directors
may be deemed to be independent under the standards for independence contained in the Nasdaq Marketplaces Rules, Rule 4350(d) and
Rule 4200(a)(15).
Compensation Committee
Compensation committee functions are performed
by our entire Board of Directors. Our Board of Directors does not have a charter or other formal policies regarding compensation.
Nominating and Corporate Governance Committee
Nominating and Corporate Governance committee
functions are performed by our entire Board of Directors. Our Board of Directors does not have a charter or other formal policies
regarding director nominations or corporate governance.
Stockholder Communications
Any stockholder may communicate directly to
our Board of Directors by sending a letter to our company’s address of record.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
Principal Stockholders and Management
The following table provides certain information regarding the ownership
of our common stock as of December 31, 2015 by:
| · | each of our executive officers; |
| · | each person known to us to own more than
5% of our outstanding common stock; and |
| · | all of our executive
officers and directors and as a group. |
Name and Address of Stockholders† | |
Shares Beneficially Owned (1)(2) | | |
Percentage
Ownership (1) | |
Myles A. Pressey III (Chairman of the Board and Interim Chief Financial Officer) | |
| 128,409,091 | | |
| 54.79% | |
Stanley L. Teeple (3) | |
| 8,313,841 | (3) | |
| 3.54% | |
Johnathan F. Adair (4) | |
| 5,000,000 | | |
| 2.13% | |
Steven L. Sanders (Director) | |
| 150,000 | | |
| * | |
Philip Fraley (Director) | |
| 150,000 | | |
| * | |
Joseph Martin (Director) | |
| 3,331,819 | | |
| 1.43% | |
| |
| | | |
| | |
Officers and Directors as a group (6) persons | |
| 145,354,751 | | |
| 62.02% | |
_______________
† Each stockholder’s address is c/o Zonzia Media, Inc.
74 N. Pecos Road, Suite D, Henderson, Nevada 89074
* Represents less than 1%.
|
(1) |
Based on an aggregate of 234,344,775 shares of common stock outstanding as of December 31, 2015, and outstanding options and warrants convertible into shares of common stock totaling 4,439,773 for a grand total of 238,784,548. Rounded to the nearest hundredth of a percent. |
|
|
|
|
(2) |
Unless otherwise indicated, shares are fully vested shares of the Company common stock.. |
|
|
|
|
(3) |
Includes 132,023 shares held by Stan Teeple, Inc., an entity which Mr. Teeple controls as its CEO. Mr. Teeple was appointed Chief Compliance Officer effective December 3, 2014. |
|
|
|
|
(4) |
Formerly Chief Operating Officer and Appointed Chief Executive Officer effective November 6,, 2015. |
Changes in Control
Not applicable.
THE EQUITY PURCHASE
TRANSACTION
General
On February 10, 2016, we entered into a
Purchase Agreement and the Registration Rights Agreement with the Equity Purchaser. Pursuant to the terms of the Purchase Agreement,
the Equity Purchaser has agreed to purchase from us up to $2 million in the aggregate worth of our common stock from time to time,
until December 31, 2016. Pursuant to the terms of the Registration Rights Agreements, we have filed with the SEC the registration
statement that includes this prospectus to register for resale under the Securities Act of 1933, as amended (the “Securities
Act”) the shares that may be issued to the Equity Purchaser under the Purchase Agreement.
We do not have the right to commence any
sales to the Equity Purchaser under the Purchase Agreement until the SEC has declared effective the registration statement of
which this prospectus forms a part. Thereafter, we may, from time to time and at our sole discretion, direct the Equity Purchaser
to purchase shares of our common stock. The purchase price per share will be equal to 70% of the lowest daily volume weighted
average price of the common stock for the five consecutive trading days immediately following our request for the Equity Purchaser
to purchase the shares. In consideration for entering into the Purchase Agreement, we issued to the Equity Purchaser a Promissory
Note in the principal amount of $120,000, which is payable with interest at 10% on June 30, 2016.
Purchase of Shares Under the Purchase Agreements
Under the Purchase Agreements, we may direct
Kodiak Capital to purchase up to $2 million of shares of our common stock. The closing of the sale of the shares will occur on
the sixth trading day following our request for the Equity Purchaser to purchase the shares. The purchase price per share will
be equal to 70% of the lowest daily volume weighted average price of the common stock for the five consecutive trading days immediately
following our request for the Equity Purchaser to purchase the shares. There is no minimum amount that we may require the Equity
Purchaser to purchase at any one time.
Other than as set forth above, there are no
trading volume requirements or restrictions under the Purchase Agreement, and we will control the timing and amount of any sales
of our common stock to the Equity Purchaser.
Conditions to Sales
Under the Purchase Agreement, the following
conditions, which cannot be waived by the Investor, must be satisfied in order for us to sell shares of our common stock to the
Equity Purchaser.
| · | The registration statement of which this
prospectus forms a part, and any amendment or supplement thereto, must be effective for the sale by the Equity Purchaser of the
shares to be purchased by the Equity Purchaser, and (i) neither we nor the Equity Purchaser have received notice that the SEC has
issued or intends to issue a stop order with respect to the registration statement or that the SEC otherwise has suspended or withdrawn
the effectiveness of the registration statement, either temporarily or permanently, or intends or has threatened to do so and (ii)
there is no other suspension of the use or withdrawal of the effectiveness of the registration statement or this prospectus. |
| · | Our representations and warranties contained
in the Purchase Agreement must be true and correct in all material respects (except for representations and warranties specifically
made as of a particular date), except for any conditions that have temporarily caused any representations or warranties to be incorrect
and which have been corrected with no continuing impairment to us or the Equity Purchaser. |
| · | We must have performed in all material
respects all covenants, agreements and conditions required by the Purchase Agreement to be performed, satisfied or complied with
by us. |
| · | No statute, rule, regulation, executive
order, decree, ruling or injunction has been enacted, entered, promulgated or adopted by any court or governmental authority of
competent jurisdiction that prohibits or directly and materially adversely affects any of the transactions contemplated by the
Purchase Agreement, and no proceeding has been commenced that may have the effect of prohibiting or materially adversely affecting
any of the transactions contemplated by the Purchase Agreement. |
| · | The trading of our common stock has not
been suspended by the SEC, the principal trading market for our common stock or Financial Industry Regulatory Authority, Inc. and
our common stock has been approved for listing or quotation on and has not been delisted from such principal market. |
| · | The number of shares of our common stock
to be purchased by the Equity Purchaser at a particular closing may not exceed the number of shares that, when aggregated with
all other shares of common stock then beneficially owned by such Equity Purchaser, would result in the Equity Purchaser owning
more than 9.99% of all of our outstanding common stock. |
| · | We must have no knowledge
of any event more likely than not to have the effect of causing the registration statement of which this prospectus forms a part
to be suspended or otherwise ineffective. |
Our Termination Rights
We have the unconditional right, at any time,
for any reason and without any payment or liability to us, to give notice to the Equity Purchaser to terminate the Purchase Agreement.
No Short-Selling by the Equity Purchasers
The Equity Purchaser has agreed that neither
it nor any of its affiliates shall engage in any direct or indirect short-selling of our common stock during any time prior to
the termination of the Purchase Agreement.
Effect of Performance of the Purchase Agreement
on Our Stockholders
All shares of common stock registered in this
offering are expected to be freely tradable. It is anticipated that shares registered in this offering will be sold over a period
commencing on the date that the registration statement including this prospectus becomes effective through December 31, 2016. The
sale by the Equity Purchaser of a significant amount of shares registered in this offering at any given time could cause the market
price of our common stock to decline and to be highly volatile. The Equity Purchaser may ultimately purchase all, some or none
of the shares of common stock not yet issued but registered in this offering. If we sell these shares to the Equity Purchaser,
the Equity Purchaser may sell all, some or none of such shares. Therefore, sales to the Equity Purchaser by us under the Purchase
Agreement may result in substantial dilution to the interests of other holders of our common stock. In addition, if we sell a substantial
number of shares to the Equity Purchaser under the Purchase Agreement, or if investors expect that we will do so, the actual sales
of shares or the mere existence of our arrangement with the Equity Purchaser may make it more difficult for us to sell equity or
equity-related securities in the future at a time and at a price that we might otherwise wish to effect such sales. However, we
have the right to control the timing and amount of any sales of our shares to the Equity Purchaser and the Purchase Agreement may
be terminated by us at any time at our discretion without any cost to us.
Pursuant to the terms of the Purchase Agreement,
we have the right, but not the obligation, to direct Kodiak Capital to purchase up to $2 million shares of our common stock. Depending
on the price per share at which we sell our common stock to the Equity Purchaser, we may be authorized to issue and sell to the
Equity Purchaser under the Purchase Agreement more shares of our common stock than are offered under this prospectus. If we choose
to do so, we must first register for resale under the Securities Act any such additional shares, which could cause additional
substantial dilution to our stockholders. The number of shares ultimately offered for resale by the Equity Purchaser under this
prospectus is dependent upon the number of shares we direct the Equity Purchaser to purchase under the Purchase Agreement.
The
following table sets forth the amount of proceeds we would receive from the Equity Purchaser from the sale of shares at varying
purchase:
Assumed Average
Purchase Price
Per Share |
|
|
Number
of Registered
Shares to be Issued if
Full Purchase (1) |
|
|
Percentage of
Outstanding Shares
After Giving Effect to
the Issuance (2) |
|
|
Additional Proceeds
from the Sale of
Registered Shares Under
the
Purchase Agreement |
|
$ |
0.06 |
(3) |
|
|
30,000,000 |
|
|
|
11.35 |
% |
|
$ |
2,000,000 |
|
$ |
0.10 |
|
|
|
20,000,000 |
|
|
|
7.86 |
% |
|
$ |
2,000,000 |
|
$ |
0.25 |
|
|
|
8,000,000 |
|
|
|
3.30 |
% |
|
$ |
2,000,000 |
|
$ |
0.50 |
|
|
|
4,000,000 |
|
|
|
1.68 |
% |
|
$ |
2,000,000 |
|
$ |
1.00 |
|
|
|
2,000,000 |
|
|
|
0.84 |
% |
|
$ |
2,000,000 |
|
______________
(1) |
Although the Purchase Agreement with the Equity Purchaser provides that we may sell up $2 million of our common stock to the Equity Purchaser in the aggregate, we are only registering 30,000,000 shares for resale by the Equity Purchaser under this prospectus, which may or may not cover all the shares we ultimately sell to the Equity Purchaser under the Purchase Agreement, depending on the purchase price per share. As a result, we have included in this column only those shares that we are registering in this offering. |
|
|
(2) |
The denominator is based on 234,344,775 shares outstanding as of January 31, 2016, and is adjusted to include the number of shares set forth in the adjacent column which we would have sold to the Equity Purchaser at the applicable assumed purchase price per share. The numerator is based on the number of shares issuable under the Purchase Agreement at the corresponding assumed purchase price set forth in the adjacent column. The number of shares in such column does not include shares that may be issued to the Equity Purchaser under the Purchase Agreement which are not registered in this offering. |
|
|
(3) |
$0.06 is the closing price of the common stock on February 10, 2016. |
SELLING STOCKHOLDERS
This prospectus relates to the possible
resale by the selling stockholders, including 30,000,000 shares of common stock that may be issued to the Equity Purchaser pursuant
to the Purchase Agreement. We are filing the registration statement of which this prospectus forms a part pursuant to the provisions
of the agreements executed in connection with the selling stockholders’ agreement to purchase the shares.
Pursuant to the Registration Rights Agreement,
which we entered into with the Equity Purchaser on February 10, 2016 concurrently with our execution of the Purchase Agreement,
we agreed to provide certain registration rights with respect to sales by the Equity Purchaser of the shares of our common stock
that may be issued to the Equity Purchaser under the Purchase Agreement. See the description under the heading “The Equity
Purchase Transactions” for more information about the Purchase Agreement.
In addition to the 30,000,000 shares of
common stock that may be issued to the Equity Purchaser, this prospectus also covers the resale by the selling stockholders named
below from time to time of up to a total of 34,468,343 shares of our common stock that were issued to such selling stockholders
pursuant to transactions exempt from registration under the Securities Act. All of the common stock offered by the selling stockholders
is being offered for their own accounts.
Issuances of Securities being Offered
A description of each transaction in which
common stock being offered in this offering was sold to the selling stockholders is set forth below. Generally, in addition to
the shares that may be issued to the Equity Purchaser, the shares that are being offered for resale by the selling stockholders
can be categorized as follows: (i) shares that were sold in private placements of our common stock; and (ii) shares to compensate
our executives and our consultants, and (iii) as consideration to extinguish debts and contractual payment obligations of the Company.
Private Placement Transactions
A majority of the shares included in the selling
stockholder table below are held by third party investors. Each of the investors in the foregoing private placements is a U.S.
person having sufficient knowledge in business and financial matters to be capable of evaluating the merits and risks of the transaction.
The transactions were exempt from registration under the Securities Act of 1933, based upon Section 4(2) for transactions by the
issuer not involving any public offering and Rule 506 of Regulation D promulgated thereunder. There was no underwriter, no underwriting
discounts or commissions, no general solicitation, no advertisement, and resale restrictions were imposed by placing restrictive
legends on the certificates.
Issuance to Executives and Consultants
Excluding the shares being registered for the
Equity Purchaser, shares held by affiliates represent approximately 54.5% of the shares included in the Selling Stockholders’
table. Mr. Pressey III beneficially owns a total of approximately 128 million shares of restricted common stock, of which 10,000,000,
or approximately29%, are being registered hereby. Shares are also being registered for Johnathan Adair, our Chief Executive Officer
and Stanley Teeple our Chief Compliance Officer. In addition we are registering 150,000 shares held by Director Steven Sanders
and 2,500,000 for Director Joseph Martin.
The remainder of the shares included in the
table below, was issued to consultants in exchange for services or was issued as consideration to extinguish historical debts and
contractual payment obligations of the Company.
Selling Stockholders
The following table sets forth certain information
regarding the selling stockholders and the shares offered by them in this prospectus.
Except as specifically set forth in the footnotes
to the table, none of the selling stockholders has held a position as an officer or director of the Company, nor has any selling
stockholder had any material relationship of any kind with us or any of our affiliates, other than as an employee, as set forth
in the footnotes to the table. All information with respect to share ownership has been furnished by the selling stockholders.
The shares being offered are being registered to permit public resale of the shares and each selling stockholder may offer all
or part of the shares owned for resale from time to time. In addition, none of the selling stockholders has any family relationships
with our officers, directors or controlling stockholders, except as indicated in the footnotes to the table. For additional information
regarding our capitalization, including shares held by officers, directors and 5% holders, refer to “Security Ownership of
Certain Beneficial Owners and Management” above.
The term “selling stockholders”
also includes any transferees, pledges, donees, or other successors in interest to the selling stockholders named in the table
below. To our knowledge, subject to applicable community property laws, each person named in the table has sole voting and investment
power with respect to the shares of common stock set forth opposite such person’s name. We will file a supplement to this
prospectus to name successors to any named selling stockholders who are able to use this prospectus to resell the securities registered
hereby.
We will receive no proceeds from the sale of
the registered shares. We have agreed to bear the expenses of registration of the shares, other than commissions and discounts
of agents or broker-dealers and transfer taxes, if any. We have no contractual obligations to provide any of our shareholders with
registration of their shares.
Name of Selling Stockholder1 |
Number of Shares of Common Stock Beneficially Owned Prior to Offering2 |
Total Number of Shares to be
Offered for Selling Stockholders Account |
Total Shares to be Owned and Percent of Total Outstanding After Completion of this Offering2,3,4 |
Davis Martin Consulting, LLC |
3,181,818 |
2,500,000 |
681,818 |
0% |
International Private Capital Group LLC |
2,046,765 |
905,051 |
0 |
0% |
James C. Walter Jr. |
5,402,273 |
500,000 |
4,902,273 |
2.09% |
Jerry Bratz Sr. |
1,556,851 |
1,033,370 |
523,481 |
0% |
Johnathan Adair(5) |
5,000,000 |
2,500,000 |
2,500,000 |
1.07% |
Karrey Anne Geddes |
17,045 |
17,045 |
0 |
0% |
Lance A. McKinlay |
184,393 |
184,393 |
0 |
0% |
Leslie Greif |
490,332 |
490,332 |
0 |
0% |
Lynwood Bibbens |
5,000,000 |
1,250,000 |
3,750,000 |
1.64% |
Margaret W. Morie |
130,360 |
130,360 |
0 |
0% |
Mark Spuler |
277,777 |
277,777 |
0 |
0% |
McKinlay Law Group |
1,428,572 |
1,428,572 |
0 |
0% |
Michael J. Ducas |
6,568,182 |
3,568,182 |
3,000,000 |
1.28% |
Myles A. Pressey III(6) |
128,409,091 |
10,000,000 |
118,409,091 |
50.53% |
Naresh Malik(7) |
5,000,000 |
1,250,000 |
3,750,000 |
1.64% |
New Hope Partners LLC |
16,381,105 |
3,017,468 |
13,363,637 |
5.70% |
Raynard A. Barnard |
57,971 |
57,971 |
0 |
0% |
Sandra Delgozzo |
22,727 |
22,727 |
0 |
0% |
Scott Alan Stiner |
2,250,000 |
1,000,000 |
1,250,000 |
1% |
Stanley L. Teeple(8) |
8,313,841 |
3,632,023 |
4,681,818 |
1.44% |
Steven Sanders |
150,000 |
150,000 |
0 |
0% |
Weltman Bernfield LLC |
52,627 |
52,627 |
0 |
0% |
William Barnett |
400,000 |
400,000 |
0 |
0% |
William Michael Long |
25,445 |
25,445 |
0 |
0% |
Christopher A. Wilson |
37,500 |
37,500 |
0 |
0% |
Gerard L. Oskam |
37,500 |
37,500 |
0 |
0% |
Kodiak Capital Group, LLC(9) |
0 |
30,000,000(10) |
0 |
0% |
Total |
192,422,175 |
64,468,344 |
156,812,118 |
66.92% |
1. |
Unless a relationship is specified in the notes below, each selling stockholder is a third party investor with no other relationship with the registrant. |
2. |
The number of shares listed in these columns include all shares beneficially owned and all options or warrants to purchase shares held, whether or not deemed to be beneficially owned, by the selling stockholder. The ownership percentages listed in these columns include only shares beneficially owned by the listed selling stockholder. Beneficial ownership is determined in accordance with the rules of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, we have included the shares the person has the right to acquire within 60 days of the date above, including through the exercise of any option, warrant or other right or conversion of any security. The shares that a stockholder has the right to acquire within 60 days, however, are not included in the computation of the percentage ownership of any other stockholder. The ownership percentages are calculated assuming that 234,344,775 shares, including outstanding options and warrants convertible into shares of common stock totaling 4,439,773 shares, were outstanding as of December 31, 2015. Although we may at our discretion elect to issue to the Equity Purchaser up to an aggregate amount of $2 million of our common stock under the Purchase Agreement, such shares are not included in determining the percentage of shares owned before this offering. |
3. |
Shares have been adjusted for the 1 for 44 reverse stock split effective November 12, 2014 |
4. |
Under the rules adopted by the SEC, a person is deemed to be a beneficial owner of securities with respect to which the person has or shares: (a) voting power, which includes the power to vote or direct the vote of the security, or (b) investment power, which includes the power to dispose of or to direct the disposition of the security. Unless otherwise indicated below, the persons named in the table above have sole voting and investment power with respect to all shares beneficially owned. Assumes that all the securities listed hereunder have been sold. |
5. |
Johnathan F. Adair was appointed as our Chief Executive Officer on November 6, 2015. |
6. |
Myles A. Pressey III was elected as a director and our Interim Chief Financial Officer effective January 29, 2015. |
7. |
Naresh Malik resigned as our Chief Executive Officer on November 6, 2015. |
8. |
Mr. Teeple was appointed as our Chief Compliance Officer effective December 3, 2014. The shares being registered include 2,250,000 shares held by Mr. Teeple individual and 132,023 shares held by Stan Teeple, Inc., an entity controlled by Stanley L. Teeple. |
9. |
Ryan C. Hodson, is the Managing Member of Kodiak Capital Group, LLC and has the voting and dispositive
power with repect to the shares held by Kodiak. |
10. |
Assumes a purchase price of $0.06, which price represents the closing price bid price for the Company’s
common stock as reported by Bloomberg Finance, L.P., for the 5 trading days ended February 10, 2016. Because the actual
date and price per share for the Company’s put right under the Purchase Agreement is unknown, the actual purchase price for
the shares is unknown. Accordingly, the actual shares issuable pursuant to the Purchase Agreement may be more or less than the
amount of shares being registered herein. |
PLAN OF DISTRIBUTION
The Equity Purchasers are “underwriters,”
and the other selling stockholders may be deemed to be an “underwriter,” within the meaning of the Securities Act.
Except for the Equity Purchaser, who has no assignment rights, the other selling stockholders and any of their respective pledgees,
donees, assignees and successors-in-interest may, from time to time, sell any or all of their shares of common stock being offered
under this prospectus on any stock exchange, market or trading facility on which shares of our common stock are traded or in private
transactions. These sales may be at fixed or negotiated prices. The selling stockholders may use any one or more of the following
methods when disposing of shares:
| · | ordinary brokerage transactions and transactions
in which the broker-dealer solicits investors; |
| · | block trades in which the broker-dealer
will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; |
| · | purchases by a broker-dealer as principal
and resale by the broker-dealer for its account; |
| · | an exchange distribution in accordance
with the rules of the applicable exchange; |
| · | privately negotiated transactions; |
| · | to cover short sales made after the date
that this Registration Statement is declared effective by the Commission; |
| · | broker-dealers may agree with the selling
stockholder to sell a specified number of such shares at a stipulated price per share; |
| · | a combination of any such methods of sale;
and |
| · | any other method permitted
pursuant to applicable law; provided, however, that selling stockholders who are executive officers or directors of the Company
have agreed to sell the shares they hold personally through their individual broker (not a broker that may be engaged on behalf
of the Company, if applicable) and not as principal acting for their own accounts. |
The selling stockholder may also sell shares
under an exemption from the registration requirements under the Securities Act, if available, rather than under this prospectus.
In general, selling stockholders who are executive
officers will make sales of shares they hold personally through their individual brokers, and not as principal acting for their
own accounts, and accordingly, will not directly solicit potential investors with offers to sell stock they hold personally.
Broker-dealers engaged by the selling stockholders
may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling
stockholder (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated.
Except for the Equity Purchaser, the other
selling stockholders may from time to time pledge or grant a security interest in some or all of the Shares owned by it and, if
it defaults in the performance of their secured obligations, the pledgees or secured parties may offer and sell shares of common
stock from time to time under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other applicable
provision of the Securities Act of 1933 amending the list of selling stockholders to include the pledgee, transferee or other
successors in interest as selling stockholders under this prospectus.
Upon the company being notified in writing
by a selling stockholder that any material arrangement has been entered into with a broker-dealer for the sale of common stock
through a block trade, special offering, exchange distribution or secondary distribution or a purchase by a broker or dealer, a
supplement to this prospectus will be filed, if required, pursuant to Rule 424(b) under the Securities Act, disclosing (i) the
name of each such selling stockholder and of the participating broker-dealer(s), (ii) the number of shares involved, (iii) the
price at which such the shares of common stock were sold, (iv) the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable, (v) that such broker-dealer(s) did not conduct any investigation to verify the information
set out or incorporated by reference in this prospectus, and (vi) other facts material to the transaction. In addition, upon the
company being notified in writing by a selling stockholder that a donee or pledgee intends to sell more than 500 shares of common
stock, a supplement to this prospectus will be filed if then required in accordance with applicable securities law.
Except for the Equity Purchaser, the other
selling stockholders also may transfer the shares of common stock in other circumstances, in which case the transferees, pledgees
or other successors in interest will be the selling beneficial owners for purposes of this prospectus.
The Equity Purchasers are “underwriters,”
and the other selling stockholders and any broker-dealers or agents that are involved in selling the shares offered under this
prospectus may be deemed to be "underwriters," within the meaning of the Securities Act in connection with these sales.
Commissions received by these broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed
to be underwriting commissions or discounts under the Securities Act. Any broker-dealers or agents that are deemed to be underwriters
may not sell shares offered under this prospectus unless and until we set forth the names of the underwriters and the material
details of their underwriting arrangements in a supplement to this prospectus or, if required, in a replacement prospectus included
in a post-effective amendment to the registration statement of which this prospectus is a part.
The Company has advised the selling
stockholders that it may not use shares registered on this Registration Statement to cover short sales of common stock made prior
to the date on which this Registration Statement shall have been declared effective by the Commission. If the selling stockholder
uses this prospectus for any sale of the common stock, it will be subject to the prospectus delivery requirements of the Securities
Act. The selling stockholder will be responsible to comply with the applicable provisions of the Securities Act and Exchange Act,
and the rules and regulations thereunder promulgated, including, without limitation, Regulation M, as applicable to such selling
stockholder in connection with resales of their respective shares under this Registration Statement. The Equity Purchaser has agreed
not to engage in any direct or indirect short selling of our common stock during the term of the Purchase Agreement.
The Company is required to pay all fees and
expenses incident to the registration of the shares, but the company will not receive any proceeds from the sale of the common
stock by selling stockholders. The Company has agreed to indemnify the selling stockholder against certain losses, claims, damages
and liabilities, including liabilities under the Securities Act.
Blue Sky Restrictions on Resale
If a selling stockholder wants to
sell shares of our common stock under this registration statement in the United States, the selling stockholder will also
need to comply with state securities laws, also known as “Blue Sky laws,” with regard to secondary sales. All
states offer a variety of exemption from registration for secondary sales. Many states, for example, have an exemption for
secondary trading of securities registered under Section 12(g) of the Exchange Act or for securities of issuers that publish
continuous disclosure of financial and non-financial information in a recognized securities manual, such as Standard &
Poor’s. The broker for the selling stockholder will be able to advise the selling stockholder as to which states that
our common stock is exempt from registration with that state for secondary sales.
Any person who purchases shares of our common
stock from a selling stockholder under this registration statement who then wants to sell such shares will also have to comply
with Blue Sky laws regarding secondary sales.
When the registration statement becomes effective,
and the selling stockholders indicate in which state(s) they desire to sell their shares, we will be able to identify whether it
will need to register or will rely on an exemption therefrom.
DESCRIPTION OF REGISTRANT’S SECURITIES
Authorized Capital Stock
Our authorized capital stock consists of 2,200,000,000
shares, 2,000,000,000 shares of which are common stock, par value $.001 per share, and 200,000,000 shares of which are preferred
stock, par value $.001 per share.
Common Stock
Dividends. Each share of our common
stock is entitled to receive an equal dividend, if one is declared, which is unlikely. We have never paid dividends on our common
stock and do not intend to do so in the foreseeable future. We intend to retain future earnings (if any) to finance our growth.
See “Risk Factors.”
Liquidation. If our company is liquidated,
then assets that remain (if any) after the creditors are paid and the owners of preferred stock receive liquidation preferences
(as applicable) will be distributed to the owners of our common stock pro rata .
Voting Rights. Each share of our common
stock entitles the owner to one vote. There is no cumulative voting. A simple majority can elect all of the directors of our company
at a given meeting, and the minority would not be able to elect any director of our company at that meeting.
Preemptive Rights. Owners of our common
stock have no preemptive rights. We may sell shares of our common stock to third parties without first offering such shares to
current stockholders.
Redemption Rights. We do not have the
right to buy back shares of our common stock except in extraordinary transactions, such as mergers and court approved bankruptcy
reorganizations. Owners of our common stock do not ordinarily have the right to require us to buy their common stock. We do not
have a sinking fund to provide assets for any buy back.
Conversion Rights. Shares of our common
stock cannot be converted into any other kind of stock except in extraordinary transactions, such as mergers and court approved
bankruptcy reorganizations.
Nonassessability. All outstanding shares
of our common stock are fully paid and nonassessable.
Preferred Stock
Our articles of incorporation authorize our
Board of Directors to issue “blank check” preferred stock. Our Board of Directors may divide this preferred stock into
series and establish the rights, preferences and privileges thereof. Our Board of Directors may, without prior stockholder approval,
issue any or all of the shares of this preferred stock with dividend, liquidation, conversion, voting or other rights that could
adversely affect the relative voting power or other rights of our common stock. Preferred stock could be used as a method of discouraging,
delaying or preventing a takeover or other change in control of our company. Issuances of preferred stock in the future could have
a dilutive effect on our common stock. See “Risk Factors—Risks Related to our Common Stock.”
As of the date of this Report, there are no
shares of our preferred stock outstanding.
Nevada Anti-Takeover Statutes
Nevada law provides that an acquiring person
who acquires a controlling interest in a corporation may only exercise the voting rights of control shares if those voting rights
are conferred by a majority vote of the corporation’s disinterested stockholders at a special meeting held upon the request
of the acquiring person. If the acquiring person is accorded full voting rights and acquires control shares with at least a majority
of all the voting power, then stockholders who did not vote in favor of authorizing voting rights for those control shares are
entitled to payment for the fair value of such stockholders’ shares. A “controlling interest” is an interest
that is sufficient to enable the acquiring person to exercise at least one-fifth of the voting power of the corporation in the
election of directors. “Control shares” are outstanding voting shares that an acquiring person or associated persons
acquire or offer to acquire in an acquisition and those shares acquired during the 90-day period before the person involved became
an acquiring person.
These provisions of Nevada law apply only
to “issuing corporations” as defined therein. An “issuing corporation” is a Nevada corporation that (a)
has 200 or more stockholders, with at least 100 of such stockholders being both stockholders of record and residents of Nevada,
and (b) does business in Nevada directly or through an affiliated corporation. As of the date of this Report, we do not have 100
stockholders of record that are residents of Nevada. Therefore, these provisions of Nevada law do not apply to acquisitions of
our shares and will not so apply until such time as both of the foregoing conditions are satisfied. At such time as these provisions
of Nevada law may apply to us, they may discourage companies or persons interested in acquiring a significant interest in or control
of our company, regardless of whether such acquisition may be in the interest of our stockholders.
Nevada law also restricts the ability of a
corporation to engage in any combination with an interested stockholder for three years from when the interested stockholder acquires
shares that cause the stockholder to become an interested stockholder, unless the combination or purchase of shares by the interested
stockholder is approved by the board of directors before the stockholder became an interested stockholder. If the combination was
not previously approved, then the interested stockholder may only effect a combination after the three-year period if the stockholder
receives approval from a majority of the disinterested shares or the offer satisfies certain fair price criteria.
An “interested stockholder” is
a person who is:
| · | the beneficial owner, directly or indirectly,
of 10% or more of the voting power of the outstanding voting shares of the corporation; or |
| · | an affiliate or associate
of the corporation and, at any time within three years immediately before the date in question, was the beneficial owner, directly
or indirectly of 10% or more of the voting power of the then outstanding shares of the corporation. |
Our articles of incorporation and bylaws do
not exclude us from these restrictions.
These provisions are intended to enhance the
likelihood of continuity and stability in the composition of the board of directors and in the policies formulated by the board
of directors and to discourage some types of transactions that may involve the actual or threatened change of control of our company.
These provisions are designed to reduce our vulnerability to an unsolicited proposal for the potential restructuring or sale of
all or a part of our company. However, these provisions could discourage potential acquisition proposals and could delay or prevent
a change in control of our company. They also may have the effect of preventing changes in our management.
Periodic Securities and Exchange Commission
Reports
We file reports with the SEC electronically.
The reports we file are Forms 10-K, 10-Q and 8-K. You may read copies of materials we file with the SEC at the SEC’s Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference
Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that will contain copies of the reports we file
electronically. The address for the Internet site is www.sec.gov.
Stock Transfer Agent
Our stock transfer agent for our securities
is Continental Stock Transfer & Trust Company.
SHARES ELIGIBLE FOR FUTURE SALE
Market Considerations
Currently, our common stock trades on the OTCQB
marketplace. This market is separate and distinct from the NASDAQ stock market and other stock exchanges. NASDAQ has no business
relationship with issuers of securities quoted on the OTCQB. The SEC’s order handling rules, which apply to NASDAQ-listed
securities, do not apply to securities quoted on the OTC.
Shares Covered by this Prospectus
As of January 31, 2015, we have 234,344,775
shares of our common stock outstanding, of which approximately 2,055,834 shares are currently freely tradable prior to this offering.
Of the outstanding shares, all of the 34,468,343 shares being registered for resale in this offering may be sold without restriction
or further registration under the Securities Act, except for any shares purchased by our “affiliates,” as that term
is defined in Rule 144 under the Securities Act, whose sales may be made only in compliance with the limitations of Rule 144 described
below.
The remaining shares outstanding after this
offering are deemed “restricted securities” under Rule 144. Restricted securities may be sold in the public market
only if registered or if they qualify for an exemption under the Securities Act, such as Rule 144, which rule is summarized below.
Rule 144
Certain outstanding shares of our common stock
which are not included in this prospectus may be eligible for sale in the public market under Rule 144. In general, under Rule
144 as currently in effect, a person who has beneficially owned restricted shares of our common stock for at least six months would
be entitled to sell their securities provided that (1) such person is not deemed to have been one of our affiliates at the time
of, or at any time during the three months preceding, a sale, (2) we are subject to the reporting requirements of the Exchange
Act for at least 90 days before the sale and (3) if the sale occurs prior to satisfaction of a one-year holding period, we provide
current information at the time of sale.
In the event that the registration statement
of which this prospectus is a part lapses for any reason (the Company is required to maintain its effectiveness for one year after
the effective date), all currently outstanding shares of common stock will be subject to resale pursuant to Rule 144, subject to
the limitations described herein. Common stock issued upon exercise of the options at any time while a registration statement covering
such shares is not effective will be subject to sale pursuant to Rule 144 upon the expiration of the holding period, which commences
on the date the Company receives payment of the exercise price under the option agreements.
Persons who have beneficially owned restricted
shares of our common stock for at least six months but who are our affiliates at the time of, or at any time during the three months
preceding, a sale, would be subject to additional restrictions, by which such person would be entitled to sell within any three-month
period only a number of securities that does not exceed the greater of:
| · | 1% of the total number of securities of
the same class then outstanding; or |
| · | the average weekly trading
volume of such securities during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale. |
provided , that, in each case, that
we are subject to the periodic reporting requirements of the Exchange Act for at least three months before the sale.
However, since our common stock is traded over
the counter, which is not an “automated quotation system,” our stockholders will not be able to rely on the market-based
volume limitation described in the second bullet above. If, in the future, our securities are listed on an exchange or quoted on
NASDAQ, then our stockholders would be able to rely on the market-based volume limitation. Unless and until our stock is so listed
or quoted, our stockholders can only rely on the percentage based volume limitation described in the first bullet above.
Such sales by affiliates must also comply with
the manner of sale, current public information and notice provisions of Rule 144. The selling stockholders will not be governed
by the foregoing restrictions when selling their shares pursuant to this prospectus.
Restrictions on the Use of Rule 144 by
Shell Companies or Former Shell Companies
Rule 144 is not available for the resale of
securities initially issued by companies that are, or previously were, shell companies, like us, unless certain conditions are
met. As a result, it is likely that pursuant to Rule 144 our non-stockholders, who were issued shares of our common stock while
we were a shell company, will be able to sell the their shares of our common stock from and after November 26, 2015 (the one year
anniversary of the Form 10 disclosure) without registration. However, we are registering for public resale certain shares of our
outstanding common stock which were issued prior to the acquisition of HDIMAX, as described elsewhere in this in the registration
statement of which this prospectus forms a part.
LEGAL MATTERS
The validity of the issuance of the common
stock offered by the selling stockholders under this prospectus will be passed upon for us by Barnett & Linn. William Barnett
owns a total of 400,000 shares of our common stock.
EXPERTS
The financial statements for the period ended
December 31, 2014 included in this prospectus and elsewhere in the registration statement, have been audited by Haynie & Company,
an independent registered public accounting firm, to the extent and for the periods indicated in their report appearing elsewhere
herein, and are included in reliance upon such report and upon the authority of such firm as experts in accounting and auditing.
CHANGE IN ACCOUNTANTS
On September 14, 2015,
we were notified that the Haynie and Company audit partner on our account was no longer with the firm and had joined the firm WSRP,
LLC. As a result, Zonzia Media, Inc. dismissed Haynie and Company as our independent registered public accounting firm effective
immediately. The dismissal was approved by the Board of Directors of the Company.
Haynie’s reports
on the financial statements as of December 31, 2014 and for the period from May 24, 2014 (the Company’s inception) to December
31, 2014 contained a going concern note resulting from the fact that the Company has no source of recurring revenue; negative working
capital; and has suffered recurring losses from operations. Other than the foregoing, Haynie’s reports on the financial statements
for the fiscal year end December 31, 2014 and for the period from May 24, 2014 to December 31, 2014 did not contain an adverse
opinion or a disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope, or accounting principles.
During the Company’s
period from May 24, 2014 to December 31, 2014 and through September 14, 2015, there were no disagreements with Haynie on any matter
of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if
not resolved to the satisfaction of Haynie, would have caused it to make reference to the subject matter of the disagreements in
connection with its report. Further, there were no reportable events as described in Item 304(a)(1)(v) of Regulation S-K occurring
during the Company’s period from May 24, 2014 to December 31, 2014 and through September 14, 2015.
The Company provided
a copy of the foregoing disclosures to Haynie prior to the date of our filing a current report on Form 8-K containg them on September
18, 2015. Haynie furnished us with a letter addressed to the Securities and Exchange Commission, a copy of which was filed as Exhibit
16.1 to such Form 8-K.
On September 14, 2015,
the Board of Directors of the Company engaged WSRP, LLC (“WSRP”) as the Company’s new independent registered
public accounting firm. One of the partners with WSRP is the same auditor who was engaged on the audit of the Company while at
Haynie.
During the period
from May 24, 2014 to December 31, 2014 through September 14, 2015 and during any subsequent interim period preceding the date of
engagement, neither the Company, nor anyone acting on its behalf, consulted with WSRP regarding (a) the application of accounting
principles to a specified transaction, either completed or proposed, or the type of audit opinion that would have been rendered
on the Company’s financial statements, and no written report was provided to the Company nor was oral advice rendered that
was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting
issue; or (b) any matter that was either the subject of a disagreement (as defined in paragraph 304(a)(1)(iv) of Regulation S-K)
or a reportable event (as described in paragraph 304(a)(1)(v) of Regulation S-K.).
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement
on Form S-1 under the Securities Act with respect to the common stock offered by this prospectus. This prospectus, which is part
of the registration statement, omits certain information, exhibits, schedules and undertakings set forth in the registration statement.
For further information pertaining to us and our common stock, reference is made to the registration statement and the exhibits
and schedules to the registration statement. Statements contained in this prospectus as to the contents or provisions of any documents
referred to in this prospectus are not necessarily complete, and in each instance where a copy of the document has been filed as
an exhibit to the registration statement, reference is made to the exhibit for a more complete description of the matters involved.
You may read and copy all or any portion of
the registration statement without charge at the public reference room of the SEC at 100 F Street, N. E., Washington, D. C. 20549.
Copies of the registration statement may be obtained from the SEC at prescribed rates from the public reference room of the SEC
at such address. You may obtain information regarding the operation of the public reference room by calling 1-800-SEC-0330. In
addition, registration statements and certain other filings made with the SEC electronically are publicly available through the
SEC’s web site at http://www.sec.gov. The registration statement, including all exhibits and amendments thereto, has been
filed electronically with the SEC.
We are subject to the information and periodic
reporting requirements of the Exchange Act and, accordingly, we file annual reports containing financial statements audited by
an independent registered public accounting firm, quarterly reports containing unaudited financial data, current reports and other
reports and information with the SEC. You may inspect and copy each of our periodic reports, proxy statements and other information
at the SEC’s public reference room, and at the web site of the SEC referred to above.
INDEX TO FINANCIAL STATEMENTS
Financial Statements of Zonzia Media, Inc. |
|
Report of Independent Registered Public Accounting Firm, Haynie & Company, Certified Public Accountants |
|
|
F-2 |
|
Balance Sheets as at December 31, 2014 |
|
|
F-3 |
|
Statement of Operations for the period from May 24, 2014 (inception) through December 31, 2014 |
|
|
F-4 |
|
Statement of Stockholders’ Deficit for the period from May 24, 2014 (inception) through December 31, 2014 |
|
|
F-5 |
|
Statement of Cash Flows for the period from May 24, 2014 (inception) through December 31, 2014 |
|
|
F-6 |
|
Notes to financial statements |
|
|
F-7 |
|
Unaudited Interim Financial Statements of Zonzia Media, Inc. for the period ended September 30, 2015 |
|
|
|
|
Condensed Balance Sheet |
|
|
F-16 |
|
Condensed Statement of Operations |
|
|
F-17 |
|
Condensed Statement of Stockholders’ Deficit |
|
|
F-18 |
|
Condensed Statement of Cash Flows |
|
|
F-20 |
|
Notes to condensed financial statements |
|
|
F-21 |
|
All schedules have been omitted because the information required
to be presented in them is not applicable or is shown in the financial statements or related notes.
INDEPENDENT AUDITOR’S REPORT
To the Board of Directors
Zonzia Media, Inc. (formerly HDIMAX Media, Inc. and Indigo-Energy,
Inc.)
Henderson, NV
We have audited the accompanying balance sheet
of Zonzia Media, Inc. (formerly HDIMAX Media, Inc. and Indigo- Energy, Inc.) as of December 31, 2014 and the related statement
of operations, stockholders’ deficit and cash flows for the period from May 24, 2014 to December 31, 2014. These consolidated
financial statements are the responsibility of Zonzia Media, Inc.’s management. Our responsibility is to express an opinion
on these financial statements based on our audit.
We conducted our audit in accordance with the
standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included
consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over
financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements referred
to above present fairly, in all material respects, the financial position of Zonzia Media, Inc. (formerly HDIMAX Media, Inc. and
Indigo-Energy, Inc.), as of December 31, 2014 and the results of their operations and their cash flows for the period from May
24, 2014 to December 31, 2014 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have
been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the
Company has no source of recurring revenue; negative working capital; and has suffered recurring losses from operations; which
raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are
also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Haynie & Company
Haynie & Company
Salt Lake City, Utah
Date: April 15, 2015
ZONZIA MEDIA, INC.
(formerly HDIMAX Media, Inc. and Indigo-Energy, Inc.)
CONSOLIDATED BALANCE SHEET
ASSETS | |
| |
| |
| |
| |
December 31, 2014 | |
Current Assets | |
| | |
Cash | |
$ | 208 | |
| |
| | |
Total assets | |
$ | 208 | |
| |
| | |
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | |
| | |
| |
| | |
Current Liabilities | |
| | |
Accounts payable | |
$ | 710,769 | |
Accrued expenses | |
| 690,247 | |
Related party accounts payable | |
| 340,163 | |
Accrued compensation | |
| 495,167 | |
| |
| | |
Total current liabilities | |
| 2,236,346 | |
| |
| | |
Stockholders' Equity (Deficit) | |
| | |
| |
| | |
Preferred stock, $0.001 par value, 200,000,000 shares authorized and none issued and outstanding at December 31, 2014 | |
| | |
Common stock, $0.001 par value, 2,000,000,000 shares authorized and 758,065,119 shares issued and outstanding at December 31, 2014 | |
$ | 758,065 | |
Additional paid in capital | |
| 22,923,087 | |
Accumulated deficit | |
| (25,917,290 | ) |
| |
| | |
Total stockholders' equity (deficit) | |
| (2,236,138 | ) |
| |
| | |
Total liabilities and stockholders' equity (deficit) | |
$ | 208 | |
The accompanying notes are an integral part of these condensed financial statements
ZONZIA MEDIA, INC.
(formerly HDIMAX Media, Inc. and Indigo-Energy, Inc.)
STATEMENT OF OPERATIONS
| |
For the Period from Inception on May 24, 2014 to December 31, 2014 | |
| |
| |
Revenue | |
| | |
Net revenue | |
$ | 439 | |
| |
| | |
Expenses | |
| | |
General and administrative | |
| 53,565 | |
Sales and marketing | |
| 1,006,102 | |
Officer compensation | |
| 23,295,167 | |
Professional fees | |
| 729,411 | |
| |
| | |
Total operating expenses | |
| 25,084,245 | |
| |
| | |
Gain (loss) from operations | |
| (25,083,806 | ) |
| |
| | |
Other income (expense) | |
| | |
Interest expense | |
| (13,462 | ) |
| |
| | |
Total other expenses | |
| (13,462 | ) |
| |
| | |
Net loss | |
$ | (25,097,268 | ) |
| |
| | |
Net loss per share - basic and diluted | |
$ | (0.14 | ) |
| |
| | |
Weighted average shares outstanding | |
| 185,663,218 | |
The accompanying notes are an integral part of these condensed financial statements
ZONZIA MEDIA, INC.
(formerly HDIMAX Media, Inc. and Indigo-Energy, Inc.)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
| |
Common Stock | | |
Paid in | | |
Accumulated | | |
Total Equity | |
| |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
(deficit) | |
| |
| | |
| | |
| | |
| | |
| |
Balance, Inception May 24, 2014 | |
| – | | |
$ | – | | |
$ | 488 | | |
$ | – | | |
$ | 488 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance of founder's shares in May 2014 | |
| 48,500,000 | | |
| 48 | | |
| (48 | ) | |
| – | | |
| – | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Cancellation of founder's shares related to reverse capitalization in November 2014 | |
| (48,500,000 | ) | |
| (48 | ) | |
| 47 | | |
| – | | |
| (1 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Reverse capitalization in November 2014 | |
| 757,689,386 | | |
| 757,689 | | |
| (488 | ) | |
| (820,022 | ) | |
| (62,821 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Common stock issued for debt settlement in December 2014 | |
| 375,733 | | |
| 376 | | |
| 123,088 | | |
| – | | |
| 123,464 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Stock based compensation | |
| – | | |
| – | | |
| 22,800,000 | | |
| – | | |
| 22,800,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net loss | |
| – | | |
| – | | |
| – | | |
| (25,097,268 | ) | |
| (25,097,268 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Balance December 31, 2014 | |
| 758,065,119 | | |
$ | 758,065 | | |
$ | 22,923,087 | | |
$ | (25,917,290 | ) | |
$ | (2,236,138 | ) |
The accompanying notes are an integral part of these consolidated statements.
ZONZIA MEDIA, INC.
(formerly HDIMAX Media, Inc. and Indigo-Energy, Inc.)
STATEMENT OF CASH FLOWS
| |
For the Period from Inception on May 24, 2014 to December 31, 2014 | |
| |
| |
Cash Flows from Operating Activities | |
| | |
Net loss | |
$ | (25,097,268 | ) |
| |
| | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |
| | |
Stock-based compensation | |
| 22,800,000 | |
Debt discount and deferred issuance cost amortization | |
| 12,560 | |
Change in accounts payable | |
| 460,530 | |
Change in accrued expenses | |
| 496,754 | |
Change in related party accounts payable | |
| 272,465 | |
Change in accrued payroll | |
| 495,167 | |
| |
| | |
Net cash used in operating activities | |
| (559,792 | ) |
| |
| | |
Cash Flows from Financing Activities | |
| | |
Proceeds from related party notes payable | |
| 560,000 | |
| |
| | |
Net cash provided by financing activities | |
| 560,000 | |
| |
| | |
Net increase in cash and cash equivalents | |
| 208 | |
| |
| | |
Cash and cash equivalents at beginning of the period | |
| – | |
| |
| | |
Cash and cash equivalents at end of the period | |
$ | 208 | |
| |
| | |
Supplementary Disclosures of Cash Flow Information | |
| | |
Cash paid for income taxes | |
$ | – | |
Cash paid for interest | |
$ | – | |
The accompanying notes are an integral part of these condensed financial statements
ZONZIA MEDIA, INC.
(formerly HDIMAX Media, Inc. and Indigo-Energy, Inc.)
Notes to Consolidated Financial Statements
NOTE 1 - DESCRIPTION OF BUSINESS
Zonzia Media, Inc, initially organized
as HDIMAX Media, Inc., and incorporated in the State of Delaware in May 2014, is a digital publishing and broadcast Company focused
on content development and multi-platform content distribution, advertising, and ecommerce.
Reverse Merger with Indigo-Energy,
Inc.
On November 21, 2014, through a wholly-owned
subsidiary of a public shell Company then known as Indigo-Energy, Inc., HDIMAX Acquisition Corporation, a Nevada corporation, was
merged with and into HDIMAX, Inc., a Delaware corporation (“HDIMAX”) (such merger, the “Merger”) pursuant
to the Agreement and Plan of Merger, effective as of September 2, 2014, and as amended effective as of November 20, 2014, by and
among Indigo-Energy, Inc. (our “company” or “we” or “us”), HDIMAX and HDIMAX Acquisition Corporation
(the “Merger Agreement”). HDIMAX was the surviving corporation of the Merger and as such will continue as a wholly-owned
subsidiary of our Company. Upon closing the merger, we changed our name to HDIMAX Media, Inc.
As a result of the Merger, all of HDIMAX’s
common stock was converted into 712,121,205 shares of our Company’s common stock, which represents approximately 94% of the
outstanding shares of our company’s common stock after giving effect to the Merger. The common stock issuance, representing
94% of the outstanding shares of the consolidated Company was accounted for as a reverse capitalization in accordance with accounting
principles generally accepted in the United States (“US GAAP”) and the Rules and Regulations as promulgated by the
United States Securities and Exchanges Commission (“SEC”).
In accordance with US GAAP, and as previously
disclosed in our original Current Report on Form 8-K as filed on November 26, 2014, HDIMAX, Inc. (private operating company) was
deemed the accounting acquirer. Further, as of the date of the reverse capitalization transaction, the legal acquirer also deemed
the accounting acquiree, Zonzia Media, Inc. (formerly HDIMAX Media, Inc. and Indigo-Energy, Inc.) was considered a shell company
as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934. Further, the Staff of the Securities and Exchange
Commission considers a public shell reverse acquisition to be a capital transaction in substance, rather than a business combination.
That is, the transaction is a reverse recapitalization, equivalent to the issuance of stock by the private company (HDIMAX, Inc.)
for the net monetary assets of the shell corporation accompanied by a recapitalization. The accounting is similar to that resulting
from a reverse acquisition, except that no goodwill or other intangible assets should be recorded.
As of December 31, 2014, we provided clients
and customers advertising and ecommerce opportunities through engaging consumers on two websites, Frontlinewire.com and HDIMAX.com.
HDIMAX.com - Operates as an internet
television network. HDI Max is engaged in the internet delivery of television shows, movies and original content to its customers
directly on televisions, computers, and mobile devices in the United States and Internationally. The original content ranges from
news and comedy to travel and sports.
HDIMAX.com offers consumers live video
streaming that will be unique to internet television in that users are not charged based on usage and all consumers have unlimited
access to live streaming or other previously posted content such as movies and television.
Frontlinewire.com (FLW) –
Frontlinewire.com was launched to provide a premier news service that delivers the latest breaking news and information
on the latest top stories, weather, business, entertainment, politics, and more.
In addition to the above websites, we previously
had an agreement to provides ecommerce opportunities to other websites, all of which were controlled by our former, Chairman, and
Chief Executive Office, Rajinder Brar, including www.fashionstylemag.com, www.themanlife.com, www.thewomanlife.com, and www.southasianlife.com.
On January 22, 2015, we entered into a
Settlement Agreement in which we cancelled all of the 712,121,205 shares of restricted and unregistered common stock previously
issued to effectuate the merger with Rajinder Brar, the previous sole owner of HDIMAX, Inc. In consideration for the shares being
cancelled, we forfeited our rights to sell advertising and other products on websites previously controlled Mr. Brar and related
entities, with the exception of www.hdimax.com. An outline of the significant terms of the Settlement Agreement include, but are
not limited to, the following:
| · | The 712,121,205 million shares of HDIMAX
Media, Inc. (formerly Indigo-Energy) common stock issued to Rajinder Brar, the owner of 100% of the previously outstanding stock
of HDIMAX, Inc. immediately preceding the reverse acquisition transaction, were cancelled. |
| | |
| · | Rajinder Brar, Aneliya Vasileva, and Myles Pressey III, previously appointed as the Company’s officers
and Board of Directors immediately following the completion of the reverse acquisition, resigned and forfeited future compensation
terms associated with any and all previously agreed upon employment agreements, inclusive of the compensation accrued as of December
31, 2014. |
| · | Mr. James C. Walter Sr. was reappointed
to serve as a Director charged with appointing new officers. Mr. Walter Sr. served as the Sole Officer and Director of the Company
immediately preceding the completion of the reverse acquisition transaction. |
| · | The Company’s option agreement to
acquire Fashion Style Magazine, Inc., an entity wholly owned by Rajinder Brar, was cancelled. |
| · | The Omnibus Agreement and License dated
November 21, 2014, by and between the Company and Fashion Style Magazine, Inc. was terminated. The brands and assets wholly owned
by Rajinder Brar through Fashion Style Magazine, Inc. were intended to be a core portion of the consolidated Company’s business
operations subsequent to the completion of the reverse acquisition. |
| · | The Company forfeited all rights to Frontlinewire.com,
a brand and website acquired in the reverse acquisition. |
| · | The Company maintained all rights to hdimax.com,
a brand and website acquired in the reverse acquisition, but agreed to assign those assets back to their original owners by May
1, 2015. We do not intend to further develop or publish content at www.hdimax.com.
|
For additional details, including
a copy of the Settlement Agreement, please see our Current Report on Form 8-K filed on January 29, 2015.
On March 9, 2015 we changed our name to Zonzia Media, Inc. and
we are developing a new multi-platform entertainment distribution channel with the goal of being a unique hybrid of a linear channel,
a video-on-demand channel and an over-the-top channel. Our viewer immersion technology will allow our views instant access to our
available content.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
The accompanying financial statements have
been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States
of America (“US GAAP”) and have been presented on a going concern basis, which contemplates the realization of assets
and satisfaction of liabilities in the normal course of business.
Use of Estimates
The preparation of financial statements
in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid
instruments with an original maturity of 90 days or less at the time of purchase to be cash equivalents. The Company did not have
any cash equivalents at December 31, 2014.
Revenue Recognition
We recognize revenues when the services
or products have been provided or delivered, the fees we charge are fixed or determinable, we and our advertisers or other customers
understand the specific nature and terms of the agreed upon transactions, and collectability is reasonably assured.
Most of our advertising customers pay on
a cost-per-impression basis that enables advertisers to pay us based on the number of times their ads display on our websites.
For the sale of certain third-party products and services, we recognize revenue on negotiated commission rate as a percentage of
the gross amount billed to the customers.
Fair Value Measurements
The fair value of a financial instrument
is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked
to offer prices. The fair value should be calculated based on assumptions that market participants would use in pricing the
asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include
consideration of non-performance risk, including the party’s own credit risk.
Fair value measurements do not include
transaction costs. A fair value hierarchy is used to prioritize the quality and reliability of the information used to determine
fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to
the fair value measurement. The fair value hierarchy is defined into the following three categories:
Level 1: Quoted market prices
in active markets for identical assets or liabilities.
Level 2:
Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs
that are not corroborated by market data.
Stock Based Compensation
The Company has on occasion issued equity
and equity linked instruments to employees and non-employees in lieu of cash for the receipt of goods and services and, in certain
circumstances the settlement of short-term loan arrangements. The applicable GAAP establishes that share-based payment transactions
with non-employees shall be measured at the fair value of the consideration received or the fair value of the equity instruments
issued, whichever is more reliably measurable.
In these transactions, the Company issues
unregistered and restricted equity instruments.
While the Company currently has
2,055,832 shares of freely-traded stock with a quoted market price (a Level 1input within the GAAP hierarchy), the fair value
of the unregistered and restricted shares issued in compensation transactions with non-employees as valued by the quoted
market price does not always reflect the economic substance of the transactions and does not always represent
the Company’s principal market, correspondingly, the quoted market price is not always the most reliably measurable
indicator of the fair value. The determination of fair value is based upon facts and circumstances including the
liquidity restrictions placed upon our unregistered restricted equity instruments along with the quoted market not being the
most active or principal trading market.
When unregistered common shares are issued
for the settlement of short-term financing arrangements, the reacquisition price of the extinguished financing arrangement is determined
by the value of the debt which is more clearly evident, and no additional inducement expense is recognized.
In situations in which we issue unregistered
restricted common shares in exchange for goods and services, and the value of the goods and services are not the most reliably
measurable, we recognize the fair value of the unregistered restricted equity instruments based on the value of similar instruments
issued in private placements in exchange for cash in the most recent transactions (a Level 2 input within the GAAP hierarchy).
The Company has determined this methodology reflects the risk adjusted fair value of our unregistered restricted equity instruments
using a commercially reasonable valuation technique within the most active market.
Income Taxes
Income taxes are recorded in the period
in which the related transactions have been recognized in the financial statements. Deferred tax assets and liabilities are recorded
for expected future tax consequences of loss carryforwards and temporary differences. Temporary differences are the differences
between the reported amounts of assets and liabilities in the financial statements and their tax basis. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of, or all of,
the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax
laws and rates on the date of enactment.
Loss Per Common Share
Basic net loss per common share is computed
by dividing net loss by the weighted average number of common shares outstanding. Dilutive loss per common share includes additional
dilution from common stock equivalents, such as stock options and warrants, and convertible instruments, if the impact is not antidilutive.
Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards (“ASU”) No. 2014-09, Revenue from Contracts with Customers.
The objective of this update is to 1) remove inconsistencies and weaknesses in revenue requirements, 2) provide a robust framework
for addressing revenue recognition issues, 3) improve comparability of revenue recognition practices across entities, industries,
jurisdictions, and capital markets 4) provide more useful information to users of financial statements through improved disclosure
requirements, and 5) simplify the preparation of financial statements. This update is effective in annual reporting periods beginning
after December 15, 2016 and the interim periods within that year. The Company will be evaluating the impact of this update
as it pertains to the Company’s financial statements and other required disclosures on an on-going basis, currently contingent
the commencement of principal revenue generating activities, until its eventual adoption and implementation.
In June 2014, the FASB issued ASU No. 2014-10,
Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable
Interest Entities Guidance in Topic 810, Consolidation, which removes all incremental financial reporting requirements from GAAP
for development stage entities, including the removal of Topic 915 from the FASB Accounting Standards Codification. The presentation
and disclosure requirements in Topic 915 will no longer be required for the first annual period beginning after December 15, 2014.
The revised consolidation standards are effective one year later, in annual periods beginning after December 15, 2015. Early adoption
is permitted. We adopted ASU No. 2014-10 effective on our inception date of May 24, 2014.
In June 2014, the FASB
issued ASU No. 2014-12, Stock Compensation. The amendments require that a performance target that affects vesting and that could
be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing
guidance in as it relates to awards with performance conditions that affect vesting to account for such awards. As such, the performance
target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in
the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost
attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable
of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized
prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the
requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those
awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible
to vest in the award if the performance target is achieved. As indicated in the definition of vest, the stated vesting period (which
includes the period in which the performance target could be achieved) may differ from the requisite service period. The amendment
is effective for annual periods beginning after December 15, 2015 with early adoption permitted. The Company is currently evaluating
the impacts of this amendment on the stock-based compensation awards expected to be issued in future periods.
In August 2014, the FASB
issued ASU No. 2014-15 Presentation of Financial Statements – Going Concern. In connection with preparing financial statements
for each annual and interim reporting period, an entity's management should evaluate whether there are conditions or events, considered
in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after
the date that the financial statements are issued (or within one year after the date that the financial statements are
available to be issued when applicable).
Management's evaluation
should be based on relevant conditions and events that are known and reasonably knowable at the date that the financial statements
are issued (or at the date that the financial statements are available to be issued when applicable).
Substantial doubt about
an entity's ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate
that it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that
the financial statements are issued (or available to be issued).
When management identifies
conditions or events that raise substantial doubt about an entity's ability to continue as a going concern, management should consider
whether its plans that are intended to mitigate those relevant conditions or events will alleviate the substantial doubt. The mitigating
effect of management's plans should be considered only to the extent that (1) it is probable that the plans will be effectively
implemented and, if so, (2) it is probable that the plans will mitigate the conditions or events that raise substantial doubt about
the entity's ability to continue as a going concern.
If conditions or events
raise substantial doubt about an entity's ability to continue as a going concern, but the substantial doubt is alleviated as a
result of consideration of management's plans, the entity should disclose information that enables users of the financial statements
to understand all of the following (or refer to similar information disclosed elsewhere in the footnotes):
a. Principal
conditions or events that raised substantial doubt about the entity's ability to continue as a going concern (before consideration
of management's plans)
b. Management's
evaluation of the significance of those conditions or events in relation to the entity's ability to meet its obligations
c. Management's
plans that alleviated substantial doubt about the entity's ability to continue as a going concern.
If conditions or events
raise substantial doubt about an entity's ability to continue as a going concern, and substantial doubt is not alleviated after
consideration of management's plans, an entity should include a statement in the footnotes indicating that there is substantial
doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements
are issued (or available to be issued). Additionally, the entity should disclose information that enables users of the financial
statements to understand all of the following:
a. Principal
conditions or events that raise substantial doubt about the entity's ability to continue as a going concern
b. Management's
evaluation of the significance of those conditions or events in relation to the entity's ability to meet its obligations
c. Management's
plans that are intended to mitigate the conditions or events that raise substantial doubt about the entity's ability to continue
as a going concern.
We do not expect the effective implementation
of this ASU, beginning in fiscal 2017, to materially impact future disclosures.
In November 2014, the FASB issued ASU No.
2014-16 Derivatives and Hedging. For hybrid financial instruments issued in the form of a share, an entity (an issuer or an investor)
should determine the nature of the host contract by considering all stated and implied substantive terms and features of the hybrid
financial instrument, weighing each term and feature on the basis of relevant facts and circumstances. That is, an entity should
determine the nature of the host contract by considering the economic characteristics and risks of the entire hybrid financial
instrument, including the embedded derivative feature that is being evaluated for separate accounting from the host contract.
In evaluating the stated and implied substantive
terms and features, the existence or omission of any single term or feature does not necessarily determine the economic characteristics
and risks of the host contract. Although an individual term or feature may weigh more heavily in the evaluation on the basis of
facts and circumstances, an entity should use judgment based on an evaluation of all the relevant terms and features. For example,
the presence of a fixed-price, noncontingent redemption option held by the investor in a convertible preferred stock contract is
not, in and of itself, determinative in the evaluation of whether the nature of the host contract is more akin to a debt instrument
or more akin to an equity instrument. Rather, the nature of the host contract depends on the economic characteristics and risks
of the entire hybrid financial instrument. The amendment is effective for fiscal years beginning after December 15, 2015 and may
be retroactively applied for all periods. We are currently evaluating the potential impacts on our financial statements in the
event we enter into these types of arrangements in the future.
In February 2015 the FASB issued ASU No.
2015-02, Consolidation. Under current GAAP we may be required to consolidate another legal entity in situations in which our contractual
rights do not give us the ability to act primarily on our own behalf, we do not hold a majority of the legal entity's voting rights,
or we are not exposed to a majority of the legal entity's economic benefits or obligations. The Standards Update amends the GAAP
to require that all legal entities are subject to reevaluation under the revised consolidation model.
Specifically, the amendments:
1. Modify the
evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest
entities
2. Eliminate
the presumption that a general partner should consolidate a limited partnership
3. Affect the
consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related
party relationships
4. Provide a
scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply
with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for
registered money market funds.
We do not believe this
updated consolidation guidance will have a material impact on our future financial position, results of operations, or cash flows.
In April 2015 the FASB
issued ASU No. 2015-03, Interest-Imputation of Interest. The Standards Update requires 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. We do not believe this updated presentation requirement will have a material impact on our future financial
position, results of operations, or cash flows.
There have been no other recently issued
accounting pronouncements through the date of this report that the Company believes will have a material impact on the financial
position, results of operations, or cash flows.
NOTE 3 - GOING CONCERN
Since our inception on May 24, 2014, we
have generated immaterial revenues resulting in the incurrence of a net loss for the period ended December 31, 2014. This has further
led to negative working capital, all which results in substantial doubt about the Company’s ability to continue as a going
concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Our management, Board, and Advisory Board
has focused its efforts and our limited resources on raising additional capital through debt or equity offerings at terms not detrimental
to our planned future operations. As of the date of this report we do not have any firm funding commitments.
NOTE 4 - NOTES PAYABLE
In June and September we received proceeds
from short-term loans from Indigo-Energy, the pre-merger public shell Company used to effectuate our reverse capitalization, for
proceeds of $200,000 and $250,000, respectively. Indigo-Energy financed the loans to us on a pre-merger basis, totaling $450,000,
via the issuance of 2,272,727 (100,000,000 pre-merger) shares to investors. Upon completion of the merger with Indigo-Energy, considered
to be the accounting acquiree in accordance with US GAAP, the note payable was eliminated and the corresponding 2,272,727 shares
issued were including in our reverse capitalization adjustment.
In November 2014 we entered into two convertible
short-term notes payable with investors for proceeds totaling $110,000. The notes, at the option of the holder, were convertible
into shares of our restricted common stock at a 25% discount to the average closing quoted market price for the ten days immediately
prior to the conversion date. On December 17, 2014, the holders of the notes converted all of the principal and accrued interest
into 375,733 shares of restricted common stock. Since the notes were convertible into a predominantly fixed monetary value on the
dates of issuance in accordance with US GAAP, we determined the notes would be net settled via the issuance of restricted common
stock which resulted in the conversion feature being classified as a liability. During the period ended December 31, 2014 we recognized
interest expense totaling $11,660 resulting from the accretion of interest through the date of conversion.
NOTE 5 - RELATED PARTY TRANSACTIONS
On May 24, 2014 our prior Chairman and
Chief Executive Officer contributed the brands, rights, and ecommerce opportunities of HDIMAX.com and Frontlinewire.com to the
Company in exchange for 48,500,000 shares of common stock of the Company. Since we were under control of our founder on the date
of the transaction, our founder’s historical cost became the carrying cost of the contributed assets totaling $488. As of
December 31, 2014 the cost of registering the websites was fully amortized, however, we maintained the rights to the domain names.
During the period ended December 31, 2014
we paid our founder, Chairman, and Chief Executive Officer and related entities $211,591 for the development of content and other
marketing related expenses. The amount is classified in sales and marketing in the accompanying statement of operations.
As of December 31, 2014 we owed a related
party $340,163 as result of the related party directly paying third party vendors on our behalf. We do not have any formalized
arrangement for the settlement of this obligation and the related party has informally agreed to defer payment until we have obtained
the appropriate level of capital resources and liquidity. Since the obligations are effectively due on demand they are classified
as current in the accompanying balance sheet.
NOTE 6 - ACCRUED EXPENSES
Subsequent to the completion of our reverse
merger and recapitalization and corresponding Settlement Agreement, as more fully discussed in Note 10 – Subsequent Events,
we have been named as debtors by certain creditors of entities controlled by our former Chairman, Chief Executive Officer, and
majority shareholder through which we previously held an option to acquire and had certain Omnibus and License Agreements. As of
December 31, 2014 we have accrued total obligations of $690,247 associated with our exposure to these liabilities. We have engaged
legal counsel to vigorously dispute our alleged obligations to settle these accrued expenses.
NOTE 7 - STOCKHOLDERS’ EQUITY
Common Stock
As of December 31, 2014 we had 758,065,119
shares of common stock issued and outstanding. Our common stock transactions through the date of this report are as follows:
On May 24, 2014 we issued 48,500,000 shares
of common stock to our prior Chairman and Chief Executive Officer in exchange for contributed assets with a total value of $488.
On November 21, 2014, upon completion of
our merger, we issued our prior Chairman and Chief Executive Officer 712,121,205 shares of restricted and unregistered common stock.
Since we were deemed the accounting acquirer in our reverse merger transaction with a public shell company we determined the substance
of the transaction was capital in nature, rather than a business combination. In accounting for the reverse recapitalization we
recognized the net issuance of 709,189,386 shares of common stock for the assumption of net liabilities resulting in a net equity
deduction of $62,821.
On November 21, 2014 we entered into employment
agreements with two of our former officers to grant an aggregate of 120,000,000 shares of common stock for compensation. The grants
were to vest in two tranches, the first of which was on January 1, 2015. For the period ended December 31, 2014 we recognized compensation
cost associated with these employment agreements of $22,800,000. In January 22, 2015, as part of our Settlement Agreement, we retroactively
cancelled these employment agreements and all previously accrued compensation and related burden was forgiven.
In December 2014 we issued a total of 375,733
shares of restricted and unregistered common stock in settlement of convertible notes payable with a principal balance of $110,000
and unamortized discounts of $13,088.
In January 2015 we issued 75,000 shares
of restricted and unregistered common stock for consulting services valued at $25,000.
In January 2015 we issued 57,971 shares
restricted and unregistered shares of common stock for cash totaling $10,000.
In January 2015 we issued a total of 145,200,000
shares of restricted and unregistered shares of common stock as compensation to our officers, directors, and
other consultants valued at $54,054,409.
In January 2015 we issued 5,000,000 shares
of restricted and unregistered shares of common stock to a former employee of HDIMAX, Inc. valued at $1,900,000.
In January 2015, in accordance with the
terms of our Settlement Agreement with our former Chairman and Chief Executive Officer, we cancelled 712,121,205 shares of unregisters
and restricted common stock.
In February 2015 we issued 142,500 shares
of restricted and unregistered common stock for accounting and legal services valued at $20,000.
In February 2015 we issued a total of 200,000
shares of restricted and unregistered shares of common stock as compensation directors valued at $38,348.
In February 2015 we issued 3,750,000 shares
of restricted and unregistered common stock for consulting services valued at $719,021.
In February 2015 we issued 177,777 restricted and unregistered shares of common stock for cash totaling $32,800.
In February 2015 we issued 7,500,000
shares of restricted and unregistered common stock in settlement of previously accrued related party liabilities totaling $340,163.
Stock Options
In accordance with the terms of our Merger
Agreement, the Company exchanged all of the previously outstanding options on a one for one basis. The options are fully vested
and all associated compensation expense was recognized in periods prior to that presented. The stock option grant date fair value
was estimated using a Black-Scholes pricing model.
As of December 31, 2014 the Company had
568,182 stock options outstanding. During the period presented there were no options granted, exercised, cancelled, or forfeited,
correspondingly, no additional compensation expense was recognized for the periods presented. All options outstanding are exercisable
and do not have any intrinsic value at December 31, 2014 and are set to expire in October of 2017. At December 31, 2014 the weighted
average exercise price of the outstanding options was $6.60 with a weighted average remaining term of 2.83 years.
Warrants
In accordance with the terms of our Merger
Agreement, the Company exchanged all of the previously outstanding warrants on a one for one basis. The warrants are fully vested
and all associated consideration was recognized in periods prior to that presented. The warrant grant date fair value was estimated
using a Black-Scholes pricing model.
As of the December 31, 2014, the Company
had outstanding warrants of 871,591. The weighted average exercise price of the outstanding warrants at December 31, 2014 was $0.88
with a weighted average remaining term of 2.83 years as of December 31, 2014. The warrants did not have any intrinsic value as
of December 31, 2014 and were fully vested. Of the outstanding warrants, 862,500 are contingently exercisable only in the event
that other equity-linked instruments are exercised.
NOTE 8 - INCOME TAXES
Income taxes from continued operations for the period ended
December 31, 2014 consist of the following:
| |
2014 | |
Current: | |
| | |
Federal | |
$ | – | |
| |
| | |
Deferred: | |
| | |
NOL Carryforwards | |
$ | 887,000 | |
Valuation allowance | |
| (887,000 | ) |
Deferred tax assets, net | |
$ | – | |
At December 31, 2014 we had federal net
operating losses of approximately $2,609,000 which will begin to expire in 2034 and could be subject to certain limitations under
section 382 of the Internal Revenue Code associated with changes in control we effectuated in the first quarter of 2015.
The Company has provided a full valuation
allowance for all periods for its net deferred tax assets as it cannot conclude it is more likely than not that they will be realized
or limited and / or forfeited under the applicable provisions of the Internal Revenue Code prior to expiration.
As of December 31, 2014, the Company did
not have any unrecognized tax benefits. The Company's policy is to recognize interest and penalties related to income tax matters
in income tax expense. The Company currently has no federal or state tax examinations in progress. The Company is subject to U.S.
federal and state income tax examination from inception in 2014.
NOTE 9 - REVERSE MERGER AND
RECAPITALIZATION
On November 21, 2014 we recapitalized the
previously outstanding 48,500,000 outstanding shares of HDIMAX, Inc. common stock via a reverse merger with a wholly-owned subsidiary
of Indigo-Energy, Inc., a public shell company. In order to complete the reverse merger, Indigo-Energy, Inc., defined as the legal
acquirer, issued 712,121,205 shares of restricted and unregistered shares of common stock. The issuance of the shares of common
stock resulted in a change of control of Indigo-Eneregy, Inc. in which the previous shareholder of HDIMAX, Inc. obtained approximately
94% of the consolidated Company immediately following the transaction.
Further, in accounting for the reverse
merger, HDIMAX is deemed to be the accounting acquirer. Since as of the date of the transaction, Indigo-Energy, Inc., the legal
acquirer also deemed the accounting acquiree, was considered a shell company as defined in Rule 12b-2 promulgated under the Securities
Exchange Act of 1934, we determined the transaction was capital in nature rather than a business combination. Correspondingly,
in accordance with the Rules and Regulations as promulgated by the Securities and Exchange Commission (“SEC”), we recognized
the issuance of the restricted and unregistered shares of common stock based on the assumption of net monetary liabilities, along
with a recapitalization. On the date of merger we assumed net liabilities of $107,901. Additionally, as a result of the par value
of the stock being excess of the net liabilities assumed and the pre-merger equity of the shell company, we recognized an adjustment
to our accumulated deficit of $820,022 associated with the completion of the transaction since the par value and assumed liabilities
exceeded our previous excess capital.
NOTE 10 - SUBSEQUENT EVENTS
See Note 7 – Stockholders’
Equity for a description of the unregistered and restricted share issuances subsequent to December 31, 2014 and through the date
of this report.
On January 22, 2015 we entered into a Settlement
Agreement with Rajinder Brar, the previous sole owner of HDIMAX, Inc., in which we cancelled all of the 712,121,205 shares of common
stock previously issued to Mr. Brar. In consideration for the shares being cancelled, we forfeited our rights to sell advertising
and other products on websites previously controlled Mr. Brar and related entities, with the exception of www.hdimax.com. An outline
of the significant terms of the Settlement Agreement include, but are not limited to, the following:
| · | The 712,121,205 million shares of HDIMAX
Media, Inc. (formerly Indigo-Energy) common stock issued to Rajinder Brar, the owner of 100% of the previously outstanding stock
of HDIMAX, Inc. immediately preceding the reverse acquisition transaction, were cancelled. |
| · | Rajinder Brar, Aneliya Vasileva, and Myles
Pressey III, previously appointed as the Company’s officers and Board of Directors immediately following the completion of
the reverse acquisition, resigned and forfeited future compensation terms associated with any and all previously agreed upon employment
agreements. |
| · | Mr. James C. Walter Sr. was reappointed
to serve as a Director charged with appointing new officers. Mr. Walter Sr. served as the Sole Officer and Director of the Company
immediately preceding the completion of the reverse acquisition transaction. |
| | |
| · | The Company’s option agreement to acquire Fashion Style Magazine, Inc., an entity wholly owned by
Rajinder Brar, was cancelled. |
| · | The Omnibus Agreement and License dated
November 21, 2014, by and between the Company and Fashion Style Magazine, Inc. was terminated. The brands and assets wholly owned
by Rajinder Brar through Fashion Style Magazine, Inc. were intended to be a core portion of the consolidated Company’s business
operations subsequent to the completion of the reverse acquisition. |
| · | The Company forfeited all rights to Frontlinewire.com,
a brand and website acquired in the reverse acquisition. |
| · | The Company maintained all rights to hdimax.com,
a brand and website acquired in the reverse acquisition, but agreed to assign those assets back to their original owners by May
1, 2015. |
We do not intend to further develop or
publish content at www.hdimax.com. For additional details, including a copy of the Settlement Agreement, please see our Current
Report on Form 8-K filed on January 29, 2015.
During the first quarter of 2015, associated
with the cancellation of our previously effective employment agreements with two former officers, we reversed previously accrued
compensation expense and related burden, inclusive of stock-based compensation, totaling $23,295,167.
ZONZIA MEDIA,
INC.
(formerly HDIMAX
Media, Inc. and Indigo-Energy, Inc.)
BALANCE SHEETS
ASSETS | |
| | |
| |
| |
| | |
| |
| |
September 30, 2015 | | |
December 31, 2014 | |
| |
(unaudited) | | |
| |
Current Assets | |
| | | |
| | |
Cash | |
$ | 28,377 | | |
$ | 208 | |
Licensed content | |
| 480,000 | | |
| – | |
| |
| | | |
| | |
Total current assets | |
| 508,377 | | |
| 208 | |
| |
| | | |
| | |
Other Assets | |
| | | |
| | |
Other assets | |
| 10,000 | | |
| – | |
| |
| | | |
| | |
Total assets | |
$ | 518,377 | | |
$ | 208 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | |
| | | |
| | |
| |
| | | |
| | |
Current Liabilities | |
| | | |
| | |
Accounts payable | |
$ | 1,661,392 | | |
$ | 710,769 | |
Accrued expenses | |
| 372,460 | | |
| 690,247 | |
Related party accounts payable | |
| – | | |
| 340,163 | |
Accrued compensation | |
| 618,087 | | |
| 495,167 | |
Accrued interest | |
| 2,810 | | |
| | |
Convertible promissory notes payable, net of discounts | |
| 150,261 | | |
| – | |
Promissory notes payable | |
| 70,000 | | |
| – | |
Derivative liability | |
| 532,600 | | |
| – | |
| |
| | | |
| | |
Total current liabilities | |
| 3,407,610 | | |
| 2,236,346 | |
| |
| | | |
| | |
Stockholders' Equity (Deficit) | |
| | | |
| | |
Preferred stock, $0.001 par value, 200,000,000 shares
authorized and none issued and outstanding at September 30, 2015 and December 31, 2014 | |
$ | – | | |
$ | – | |
Common stock, $0.001 par value, 2,000,000,000 shares
authorized and 229,249,597 and 758,065,119 shares issued and outstanding at September 30, 2015 and December 31, 2014,
respectively | |
| 229,250 | | |
| 758,065 | |
Additional paid in capital | |
| 101,267,847 | | |
| 22,923,087 | |
Accumulated deficit | |
| (104,386,330 | ) | |
| (25,917,290 | ) |
| |
| | | |
| | |
Total stockholders' equity (deficit) | |
| (2,889,233 | ) | |
| (2,236,138 | ) |
| |
| | | |
| | |
Total liabilities and stockholders' equity (deficit) | |
$ | 518,377 | | |
$ | 208 | |
The accompanying notes are an integral
part of these condensed financial statements
ZONZIA MEDIA,
INC.
(formerly HDIMAX
Media, Inc. and Indigo-Energy, Inc.)
STATEMENTS OF
OPERATIONS
| |
For the Three Months Ended September 30, | | |
For the Three Months Ended September 30, | | |
For the Nine Months Ended September 30, | | |
For the Period from Inception on May 24, 2014 to September
30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
| |
(unaudited) | | |
(unaudited) | | |
(unaudited) | | |
(unaudited) | |
Revenue | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Net revenue | |
$ | – | | |
$ | 439 | | |
$ | – | | |
$ | 439 | |
| |
| | | |
| | | |
| | | |
| | |
Expenses | |
| | | |
| | | |
| | | |
| | |
General and administrative | |
| 31,531 | | |
| 19,180 | | |
| 418,114 | | |
| 19,281 | |
Sales and marketing | |
| 320,224 | | |
| 156,942 | | |
| 157,381 | | |
| 156,942 | |
Officer and director compensation | |
| 3,417,552 | | |
| – | | |
| 76,307,429 | | |
| 54,800 | |
Professional fees | |
| 196,228 | | |
| 294,906 | | |
| 2,234,276 | | |
| 387,906 | |
| |
| | | |
| | | |
| | | |
| | |
Total operating expenses | |
| 3,965,535 | | |
| 471,028 | | |
| 79,117,200 | | |
| 618,929 | |
| |
| | | |
| | | |
| | | |
| | |
Gain (loss) from operations | |
| (3,965,535 | ) | |
| (470,589 | ) | |
| (79,117,200 | ) | |
| (618,490 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other income (expense) | |
| | | |
| | | |
| | | |
| | |
Gain on change in fair value of derivatives | |
| 12,010 | | |
| – | | |
| 12,010 | | |
| – | |
Interest Expense | |
| (72,853 | ) | |
| (4,452 | ) | |
| (183,872 | ) | |
| (4,452 | ) |
| |
| | | |
| | | |
| | | |
| | |
Total other expenses | |
| (60,843 | ) | |
| (4,452 | ) | |
| (171,862 | ) | |
| (4,452 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net loss | |
$ | (4,026,378 | ) | |
$ | (475,041 | ) | |
$ | (79,289,062 | ) | |
$ | (622,942 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net loss per share - basic and diluted | |
$ | (0.02 | ) | |
$ | (0.01 | ) | |
$ | (0.31 | ) | |
$ | (0.01 | ) |
| |
| | | |
| | | |
| | | |
| | |
Weighted average shares outstanding | |
| 228,759,483 | | |
| 48,500,000 | | |
| 257,285,107 | | |
| 48,500,000 | |
The accompanying notes are an integral
part of these condensed financial statements
ZONZIA MEDIA,
INC.
(formerly HDIMAX
Media, Inc. and Indigo-Energy, Inc.)
STATEMENTS OF
STOCKHOLDERS' EQUITY (DEFICIT)
| |
Common Stock | | |
Paid in | | |
Accumulated | | |
Total | |
| |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Equity (deficit) | |
| |
| | |
| | |
| | |
| | |
| |
Balance, Inception May 24, 2014 | |
| – | | |
$ | – | | |
$ | 488 | | |
| | | |
$ | 488 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance of founder's shares in May 2014 | |
| 48,500,000 | | |
| 48 | | |
| (48 | ) | |
| | | |
| – | |
Cancellation of founder's shares related to reverse capitalization in November 2014 | |
| (48,500,000 | ) | |
| (48 | ) | |
| 47 | | |
| | | |
| (1 | ) |
Reverse capitalization in November 2014 | |
| 757,689,386 | | |
| 757,689 | | |
| (488 | ) | |
| (820,022 | ) | |
| (62,821 | ) |
Common stock issued for debt settlement in December 2014 | |
| 375,733 | | |
| 376 | | |
| 123,088 | | |
| | | |
| 123,464 | |
Stock based compensation | |
| | | |
| | | |
| 22,800,000 | | |
| | | |
| 22,800,000 | |
Net loss | |
| | | |
| | | |
| | | |
| (25,097,268 | ) | |
| (25,097,268 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Balance December 31, 2014 | |
| 758,065,119 | | |
$ | 758,065 | | |
$ | 22,923,087 | | |
$ | (25,917,290 | ) | |
$ | (2,236,138 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Settlement agreement with former officers and directors in January 2015 | |
| (709,121,205 | ) | |
| (709,121 | ) | |
| 162,000 | | |
| 820,022 | | |
| 272,901 | |
Stock based compensation in January 2015 | |
| 145,000,000 | | |
| 145,000 | | |
| 63,846,061 | | |
| | | |
| 63,991,061 | |
Common stock issued for previously accrued consulting fees in January 2015 | |
| 75,000 | | |
| 75 | | |
| 24,925 | | |
| | | |
| 25,000 | |
Common stock issued for cash in January 2015 | |
| 307,971 | | |
| 308 | | |
| 34,692 | | |
| | | |
| 35,000 | |
Common stock issued for employment agreement termination in January 2015 | |
| 5,000,000 | | |
| 5,000 | | |
| 1,895,000 | | |
| | | |
| 1,900,000 | |
Common stock issued for cash in February 2015 | |
| 177,777 | | |
| 177 | | |
| 32,623 | | |
| | | |
| 32,800 | |
Stock based compensation in February 2015 | |
| 4,092,500 | | |
| 4,093 | | |
| 774,455 | | |
| | | |
| 778,548 | |
Common stock issued for settlement of related party accounts payable in February 2015 | |
| 7,500,000 | | |
| 7,500 | | |
| 332,663 | | |
| | | |
| 340,163 | |
Common stock issued for cash in February 2015 | |
| 100,000 | | |
| 100 | | |
| 27,950 | | |
| | | |
| 28,050 | |
Stock based compensation in April 2015 | |
| 5,000,000 | | |
| 5,000 | | |
| 1,495,000 | | |
| | | |
| 1,500,000 | |
Common stock issued for previously accrued consulting fees in April 2015 | |
| 4,500,000 | | |
| 4,500 | | |
| 922,554 | | |
| | | |
| 927,054 | |
ZONZIA MEDIA,
INC.
(formerly HDIMAX
Media, Inc. and Indigo-Energy, Inc.)
STATEMENTS OF
STOCKHOLDERS' EQUITY (DEFICIT) (continued)
| |
Common Stock | | |
Paid in | | |
Accumulated | | |
Total | |
| |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Equity (deficit) | |
| |
| | |
| | |
| | |
| | |
| |
Common stock issued in lieu of interest in April 2015 | |
| 440,000 | | |
| 440 | | |
| 64,330 | | |
| | | |
| 64,770 | |
Common stock issued for cash in April 2015 | |
| 25,445 | | |
| 25 | | |
| 4,975 | | |
| | | |
| 5,000 | |
Stock based compensation in May 2015 | |
| 3,200,000 | | |
| 3,200 | | |
| 964,800 | | |
| | | |
| 968,000 | |
Common stock issued for previously accrued consulting fees in May 2015 | |
| 509,524 | | |
| 510 | | |
| 112,111 | | |
| | | |
| 112,621 | |
Common stock issued in lieu of` interest in May 2015 | |
| 250,000 | | |
| 250 | | |
| 45,332 | | |
| | | |
| 45,582 | |
Common stock issued for cash in May 2015 | |
| 1,641,929 | | |
| 1,642 | | |
| 168,358 | | |
| | | |
| 170,000 | |
Stock based compensation in June 2015 | |
| 150,000 | | |
| 150 | | |
| 49,350 | | |
| | | |
| 49,500 | |
Common stock issued for previously accrued consulting fees in June 2015 | |
| 250,000 | | |
| 250 | | |
| 49,750 | | |
| | | |
| 50,000 | |
Common stock issued for cash in June 2015 | |
| 476,915 | | |
| 477 | | |
| 84,523 | | |
| | | |
| 85,000 | |
Stock based compensation in July 2015 | |
| 150,000 | | |
| 150 | | |
| 7,597 | | |
| | | |
| 7,747 | |
Common stock issued for cash in July 2015 | |
| 1,152,564 | | |
| 1,153 | | |
| 68,847 | | |
| | | |
| 70,000 | |
Stock based compensation in August 2015 | |
| 50,000 | | |
| 50 | | |
| 3,314 | | |
| | | |
| 3,364 | |
Stock based compensation in September 2015 | |
| 225,000 | | |
| 225 | | |
| 10,115 | | |
| | | |
| 10,340 | |
Common stock issued in lieu of interest in September 2015 | |
| 31,058 | | |
| 31 | | |
| 1,584 | | |
| | | |
| 1,615 | |
Stock based compensation | |
| | | |
| | | |
| 7,266,024 | | |
| | | |
| 7,266,024 | |
Related party debt forgiveness | |
| | | |
| | | |
| | | |
| | | |
| | |
Services contributed by employees/officers | |
| | | |
| | | |
| 288,988 | | |
| | | |
| 288,988 | |
Related party debt forgiveness | |
| | | |
| | | |
| 100,000 | | |
| | | |
| 100,000 | |
Reclassification of options and warrants to liability | |
| | | |
| | | |
| (493,161 | ) | |
| | | |
| (493,161 | ) |
Net loss | |
| | | |
| | | |
| | | |
| (79,289,062 | ) | |
| (79,289,062 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Balance September 30, 2015 | |
| 229,249,597 | | |
$ | 229,250 | | |
$ | 101,267,847 | | |
$ | (104,386,330 | ) | |
$ | (2,889,233 | ) |
The accompanying notes are an integral
part of these condensed financial statements
ZONZIA MEDIA,
INC.
(formerly HDIMAX
Media, Inc. and Indigo-Energy, Inc.)
CONDENSED STATEMENT
OF CASH FLOWS
(Unaudited)
| |
For the Nine Months Ended
September 30, 2015 | | |
For the Period from Inception
on May 24, 2014 to September 30, 2014 | |
| |
(unaudited) | | |
(unaudited) | |
Cash Flows from Operating Activities | |
| | | |
| | |
| |
| | | |
| | |
Net loss | |
$ | (79,289,062 | ) | |
$ | (622,942 | ) |
| |
| | | |
| | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |
| | | |
| | |
Stock-based compensation | |
| 77,729,258 | | |
| – | |
Non-cash interest | |
| 163,415 | | |
| – | |
(Gain) loss on change in fair value of derivatives | |
| (12,010 | ) | |
| – | |
Debt discount accretion | |
| 19,763 | | |
| – | |
Gain on non-cash settlement of accrued expenses | |
| (809,714 | ) | |
| – | |
Change in other assets | |
| (10,000 | ) | |
| (488 | ) |
Change in accounts payable | |
| 595,623 | | |
| 104,509 | |
Change in accrued expenses | |
| 104,661 | | |
| 107,333 | |
Change in accrued compensation | |
| 907,075 | | |
| – | |
Change in accrued interest | |
| 2,810 | | |
| 4,452 | |
| |
| | | |
| | |
Net cash used in operating activities | |
| (598,181 | ) | |
| (407,136 | ) |
| |
| | | |
| | |
| |
| | | |
| | |
Cash Flows from Financing Activities | |
| | | |
| | |
Proceeds from issuance of related party promissory notes | |
| 70,000 | | |
| 450,000 | |
Proceeds from issuance of convertible promissory notes | |
| 130,500 | | |
| – | |
Proceeds from issuance of common stock | |
| 425,850 | | |
| 488 | |
| |
| | | |
| | |
Net cash provided by financing activities | |
| 626,350 | | |
| 450,488 | |
| |
| | | |
| | |
Net increase in cash | |
| 28,169 | | |
| 43,352 | |
| |
| | | |
| | |
Cash at beginning of the period | |
| 208 | | |
| – | |
| |
| | | |
| | |
Cash at end of the period | |
$ | 28,377 | | |
$ | 43,352 | |
| |
| | | |
| | |
Supplementary Disclosures of Cash Flow Information | |
| | | |
| | |
| |
| | | |
| | |
Cash paid for income taxes | |
$ | – | | |
$ | – | |
Cash paid for interest | |
$ | – | | |
$ | – | |
The accompanying
notes are an integral part of these condensed financial statements
ZONZIA MEDIA, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER
30, 2015
(Unaudited)
1. Interim Financial Statements
The accompanying interim unaudited condensed
financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine month periods ended September 30, 2015, are not necessarily indicative
of the results that may be expected for the year ending December 31, 2015. For further information, refer to the financial statements
and footnotes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014.
The accompanying condensed financial statements
have been prepared in conformity with accounting principles generally accepted in the United States of America which contemplate
continuation of the Company as a going concern.
Description of Business
Zonzia Media, Inc, initially organized
as HDIMAX Media, Inc., and incorporated in the State of Delaware in May 2014, is a multi-platform entertainment company focused
on delivering compelling content with the objective of generating both advertising and subscription revenue.
Reverse Merger with Indigo-Energy, Inc.
On November 21, 2014, through a wholly-owned
subsidiary of a public shell Company then known as Indigo-Energy, Inc., HDIMAX Acquisition Corporation, a Nevada corporation, was
merged with and into HDIMAX, Inc., a Delaware corporation (“HDIMAX”) (such merger, the “Merger”) pursuant
to the Agreement and Plan of Merger, effective as of September 2, 2014, and as amended effective as of November 20, 2014, by and
among Indigo-Energy, Inc. (our “company” or “we” or “us”), HDIMAX and HDIMAX Acquisition Corporation
(the “Merger Agreement”). HDIMAX was the surviving corporation of the Merger and as such will continue as a wholly-owned
subsidiary of our Company. Upon closing the merger, we changed our name to HDIMAX Media, Inc.
As a result of the Merger, all of HDIMAX’s
common stock was converted into 712,121,205 shares of our Company’s common stock, which represents approximately 94% of the
outstanding shares of our company’s common stock after giving effect to the Merger. The common stock issuance, representing
94% of the outstanding shares of the consolidated Company was accounted for as a reverse capitalization in accordance with accounting
principles generally accepted in the United States (“US GAAP”) and the Rules and Regulations as promulgated by the
United States Securities and Exchanges Commission (“SEC”).
On January 22, 2015, we entered into a
Settlement Agreement in which we cancelled all of the 712,121,205 shares of restricted and unregistered common stock previously
issued to effectuate the merger with Rajinder Brar, the previous sole owner of HDIMAX, Inc. In consideration for the shares being
cancelled, we forfeited our rights to sell advertising and other products on websites previously controlled Mr. Brar and related
entities, with the exception of www.hdimax.com. An outline of the significant terms of the Settlement
Agreement includes, but is not limited to, the following:
|
· |
The 712,121,205 million shares of HDIMAX Media, Inc. (formerly Indigo-Energy) common stock issued to Rajinder Brar, the owner of 100% of the previously outstanding stock of HDIMAX, Inc. immediately preceding the reverse acquisition transaction, were cancelled. |
|
· |
Rajinder Brar, Aneliya Vasileva, and Myles Pressey III, previously appointed as the Company’s officers and Board of Directors immediately following the completion of the reverse acquisition, resigned and forfeited future compensation terms associated with any and all previously agreed upon employment agreements, inclusive of the compensation accrued as of December 31, 2014. |
|
· |
Mr. James C. Walter Sr. was reappointed to serve as a Director charged with appointing new officers. Mr. Walter Sr. served as the Sole Officer and Director of the Company immediately preceding the completion of the reverse acquisition transaction. |
|
· |
The Company’s option agreement to acquire Fashion Style Magazine, Inc., an entity wholly owned by Rajinder Brar, was cancelled. |
|
|
|
|
· |
The Omnibus Agreement and License dated November 21, 2014, by and between the Company and Fashion Style
Magazine, Inc. was terminated. The brands and assets wholly owned by Rajinder Brar through Fashion Style Magazine, Inc. were intended
to be a core portion of the consolidated Company’s business operations subsequent to the completion of the reverse acquisition. |
|
· |
The Company forfeited all rights to Frontlinewire.com, a brand and website acquired in the reverse acquisition. |
|
· |
The Company maintained all rights to hdimax.com, a brand and website acquired in the reverse acquisition, but agreed to assign those assets back to their original owners by May 1, 2015. We do not intend to further develop or publish content at www.hdimax.com. |
For additional details, including a copy
of the Settlement Agreement, please see our Current Report on Form 8-K filed on January 29, 2015.
On March 9, 2015 we changed our name to
Zonzia Media, Inc. and we are developing a new multi-platform entertainment distribution channel with the goal of being a unique
hybrid of a linear channel, a video-on-demand channel and an over-the-top channel. Our technology will allow our viewers instant
access to our available content on most internet connected devices.
Use of Estimates
In preparing financial statements in conformity
with generally accepted accounting principles, we are required to make estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues
and expenditures during the reported periods. Actual results could differ materially from those estimates.
Cash and Cash Equivalents
We consider all highly liquid instruments
with an original maturity of 90 days or less at the time of purchase to be cash equivalents. We did not have any cash equivalents
at September 30, 2015 or December 31, 2014.
Fair Value Measurements
The fair value of a financial instrument
is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked
to offer prices. The fair value should be calculated based on assumptions that market participants would use in pricing the
asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include
consideration of non-performance risk, including the party’s own credit risk.
Fair value measurements do not include
transaction costs. A fair value hierarchy is used to prioritize the quality and reliability of the information used to determine
fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to
the fair value measurement. The fair value hierarchy is defined into the following three categories:
Level 1: Quoted market prices
in active markets for identical assets or liabilities.
Level 2:
Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs
that are not corroborated by market data.
Embedded Conversion Features and Other
Equity-linked Instruments
The Company classifies all of its common
stock purchase warrants and other derivative financial instruments as equity if the contracts (1) require physical settlement or
net-share settlement or (2) give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement
or net-share settlement). The Company classifies as assets or liabilities any contracts that (1) require net-cash settlement (including
a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the Company), (2)
give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement), or
(3) contracts that contain reset provisions. The Company assesses classification of its equity-linked instruments at each reporting
date to determine whether a change in classification between equity and liabilities (assets) is required.
Recently Issued Accounting Pronouncements
There have been no recently issued accounting
pronouncements that were not previously disclosed in our annual report on Form 10-K filed on April 15, 2015 through the date of
this report that we believe will have a material impact on our financial position, results of operations, or cash flows.
2. Going Concern
Since our inception on May 24, 2014, we
have generated immaterial revenues resulting in the incurrence of net losses through September 30, 2015. This has further led to
negative working capital, all which results in substantial doubt about the Company’s ability to continue as a going concern.
The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Our management, Board, and Advisory Board
has focused its efforts and our limited resources on raising additional capital through debt or equity offerings at terms not detrimental
to our planned future operations. As of the date of this report we do not have any firm funding commitments.
3. Related Party Transactions
During the nine months ended September
30, 2015 we settled prior obligations due to a related party totaling $340,163 via the issuance of 7,500,000 shares of restricted
and unregistered shares of common stock. The settled obligation also represents that balance outstanding as of December 31, 2014.
During the nine months ended September
30, 2015 a total of four of our Officers agreed to waive all or portions of their base salaries or previously accrued bonuses earned
during the year ended December 31, 2014 and through September 30, 2015 totaling $288,988. Since we consider our Officers related
parties we have determined the bonus and salary forgiveness was in the nature of a capital contribution and no gain was recognized
in the accompanying condensed statement of operations.
We issued to a Director 250,000
shares of restricted and unregistered shares of common stock for cash proceeds totaling $25,000 in January 2015.
As part of the Settlement Agreement we
entered into on January 22, 2015 we cancelled restricted stock award grants to two of our former officers. Since we did not replace
a cancelled award totaling 52,500,000 shares of restricted and unregistered shares of common stock, and effectively repurchased
the award for no consideration as assumed by the application of accounting principles generally accepted in the United States,
the unrecognized grant-date fair value of the award totaling $9,975,000 was recognized during the nine months ended September 30,
2015. Additionally, we cancelled a restricted stock award granted to our current Interim Chief Executive Officer totaling 67,500,000
shares and replaced the award with the grant of 125,000,000 shares of restricted and unregistered shares as part of a new employment
agreement on January 29, 2015. The total compensation cost recognized during the nine months ended September 30, 2015 associated
with the cancellation and replacement of this restricted stock award was $47,500,000.
During the nine months ended September
30, 2015 we issued 2,000,000 shares of unregistered and restricted common stock to an affiliate for consulting services valued
at $680,000. A promissory note in the amount of $35,000 was issued to the same affiliate of the company, for cash proceeds of
$35,000 in April 2015. As additional consideration on the promissory note, this same affiliate received 215,000 shares of unregistered
and restricted common stock valued at $32,039. Upon renewal of this promissory note in May 2015 this affiliate received 100,000
shares of unregistered and restricted common stock valued at $17,260.
Employment Agreement Amendment
On May 29, 2015, we amended our Chairman
and Chief Business Development Office, Mr. Myles Pressey III’s, employment agreement. Mr. Pressey III was originally going
to be granted 25,000,000 shares of fully vested restricted and unregistered shares of common stock on January 29, 2016 whereas
the amendment calls for Mr. Pressey III to receive up to 62,500,000 shares of restricted and unregistered common stock subject
to the achievement of performance benchmarks set by the Board of Directors. The modification of Mr. Pressey III’s equity
award resulted in the recognition of compensation totaling $7,266,025 during the nine months ended September 30, 2015.
4. Stockholders’ Equity
The following provides information for
the shares of restricted and unregistered shares of common stock that we issued (or cancelled) from January 1, 2015 through the
date of this report:
In January 2015 we issued 75,000 shares
of restricted and unregistered common stock for consulting services valued at $25,000.
In January 2015 we issued 57,971 shares
restricted and unregistered shares of common stock for cash totaling $10,000.
We issued a Director 250,000 shares of
restricted and unregistered shares of common stock for cash proceeds totaling $25,000 in January 2015.
In January 2015 we issued a total of 145,000,000
shares of restricted and unregistered shares of common stock as compensation to our officers, directors, and other consultants
valued at $54,016,061.
In January 2015 we issued 5,000,000 shares
of restricted and unregistered shares of common stock to a former employee of HDIMAX, Inc. valued at $1,900,000.
In January 2015, in accordance with the
terms of our Settlement Agreement with our former Chairman and Chief Executive Officer, we cancelled 712,121,205 shares of unregistered
and restricted common stock. We recognized settlement expense, included in the general and administrative expenses in the accompanying
condensed statement of operations, totaling $107,901 and reversed the previously recognized accumulated deficit adjustment of $820,022
associated with the Settlement.
In February 2015 we issued 142,500 shares
of restricted and unregistered common stock for accounting and legal services valued at $21,179.
In February 2015 we issued a total of 200,000
shares of restricted and unregistered shares of common stock as compensation directors valued at $38,348.
In February 2015 we issued 3,750,000 shares
of restricted and unregistered common stock for consulting services valued at $719,021.
In February 2015 we issued 177,777 restricted
and unregistered shares of common stock for cash totaling $32,800.
In February 2015 we issued 7,500,000 shares
of restricted and unregistered common stock in settlement of previously accrued related party liabilities totaling $340,163.
In March 2015 we issued 100,000 restricted
and unregistered shares of common stock for cash totaling $28,050.
In April 2015 we issued 440,000 shares
of restricted and unregistered common stock in conjunction with the issuance of notes payable for total consideration of $70,000.
In April 2015 we issued 4,500,000 shares
of restricted and unregistered common stock for consulting services valued at $927,054.
In April 2015 we issued a total of 5,000,000
shares of restricted and unregistered shares of common stock as compensation to our officers valued at $1,500,000.
In April 2015 we issued 25,445 shares of
restricted and unregistered shares of common stock for cash totaling $5,000.
In May 2015 we issued a total of 3,200,000
shares of restricted and unregistered shares of common stock as compensation to our officers and directors valued at $968,000.
In May 2015 we issued 509,524 shares of
restricted and unregistered common stock for consulting services valued at $112,621.
In May 2015 we issued 1,641,929 shares
of restricted and unregistered shares of common stock for cash totaling $170,000.
In May 2015 we issued Warrants for the
Purchase of 1,500,000 shares of restricted and unregistered shares of common stock as additional incentive for a $150,000 cash
investment in the company that was part of the $170,000 in the previous footnote.
In May 2015 we issued 250,000 shares of
restricted and unregistered shares of common stock for interest on outstanding notes and payables valued at $45,582.
In June 2015 we issued a total of 150,000
shares of restricted and unregistered shares of common stock as compensation to our officers and directors valued at $49,500.
In June 2015 we issued 250,000 shares of
restricted and unregistered common stock for settlement of an obligation valued at $50,000.
In June 2015 we issued 476,915 shares of
restricted and unregistered shares of common stock for cash totaling $85,000.
In July 2015 we issued 1,152,564 shares
of restricted and unregistered shares of common stock for cash totaling $70,000.
In July 2015 we issued 150,000 shares of
restricted and unregistered shares of common stock to a Director for services totaling $7,747.
In August 2015 we issued 50,000 shares
of restricted and unregistered common stock for services valued at $3,364.
In September 2015 we issued 225,000 shares
of restricted and unregistered common stock for services valued at $10,340.
In September 2015 we issued 31,058 shares
of restricted and unregistered shares of common stock for interest on outstanding notes valued at $1,614.
Warrants
During the period ended September 30, 2015
we issued warrants to certain investors as part of the private placements of our restricted and unregistered common stock.
The following table presents a summary
of our warrant activity:
| |
As of September 30, 2015 | |
| |
Shares | | |
Weighted Average Exercise Price | | |
Weight Average Remaining Term (years) | | |
Aggregate Intrinsic Value | |
Outstanding December 31, 2014 | |
| 871,591 | | |
$ | 0.88 | | |
| 2.83 | | |
$ | – | |
Warrants granted | |
| 3,000,000 | | |
| 0.22 | | |
| 2.65 | | |
| – | |
Warrants exercised | |
| – | | |
| – | | |
| – | | |
| – | |
Warrants expired, cancelled, forfeited | |
| – | | |
| – | | |
| – | | |
| – | |
| |
| | | |
| | | |
| | | |
| | |
Outstanding and exercisable at September 30, 2015 | |
| 3,871,591 | | |
$ | 0.37 | | |
| 2.69 | | |
$ | – | |
As of September 30, 2015 and December 31,
2014 all outstanding warrants were fully vested. Of the outstanding warrants, 862,500 are contingently exercisable only in the
event that other equity-linked instruments are exercised.
Options
As of September 30, 2015 and December 31,
2014 the Company had 568,182 stock options outstanding. During the periods presented there were no options granted, exercised,
cancelled, or forfeited, correspondingly, no additional compensation expense was recognized for the periods presented. All options
outstanding are exercisable and do not have any intrinsic value at September 30, 2015 and December 31, 2014 and are set to expire
in October of 2017. At September 30, 2015 the weighted average exercise price of the outstanding options was $6.60 with a weighted
average remaining term of 2.83 years.
5. Convertible Notes Payable
The Company has entered into various convertible
debt financing transactions with third party investors (“Investors”). As of September 30, 2015 the Company issued convertible
notes to Investors in the aggregate principal amount of $142,750. The notes are unsecured, and provide for the conversion of all
principal and interest outstanding under the notes into shares of the Company’s common stock beginning six months after the
issuance date of the respective notes (“conversion date”) at conversion rates of 55%-60% of the lowest listed market
price of the Company’s common stock for the previous twenty to twenty-five trading days immediately prior to the conversion
date.
The conversion price of the notes are subject
to adjustment in the event of stock splits, dividends, distributions and similar adjustments to our capital stock. The number of
shares of common stock subject to the Notes may be adjusted in the event of mergers, distributions, a sale of substantially all
of the Company’s assets, tender offers and dilutive issuances.
The Company has determined the resetting
terms of the conversion rates are separable into two elements: i) Fixed Conversion Rate element – since a fixed minimum
discount to the listed market price ranging from forty to forty-five percent of any listed market price has been determined to
be a predominant element of the conversion feature, we determined the fixed conversion element results in a fixed value of common
stock to the Investor at any conversion date; and ii) Variable Conversion Rate element – the volatility in our listed
market prices and wide ranging bid and ask spreads on a daily basis results in an additional variable amount of common stock value
being received by the Investors upon conversion. The fixed conversion element, resulting in the determination of stock settled
debt, is recognized as a debt discount at intrinsic value on the issuance date and is not re-valued in the subsequent periods.
The variable conversion element is classified as a derivative liability and is revalued on an on-going basis.
Convertible notes payable consist of the
following:
| |
As of September 30, 2015 | |
| |
Face Value of Note | | |
Intrinsic Value of Fixed Conversion Element | | |
Unamortized Discount | | |
Net Balance | |
JMJ Financial; 12% Convertible note due August 24, 2017 | |
$ | 27,500 | | |
$ | 20,833 | | |
$ | (20,137 | ) | |
$ | 28,196 | |
| |
| | | |
| | | |
| | | |
| | |
Auctus Fund, LLC; 8% Convertible note due May 28, 2016 | |
| 56,250 | | |
| 46,023 | | |
| (42,160 | ) | |
| 60,113 | |
| |
| | | |
| | | |
| | | |
| | |
LG Capital Funding, LLC; 8% Convertible note due August 21, 2016 | |
| 27,000 | | |
| 22,091 | | |
| (20,229 | ) | |
| 28,862 | |
| |
| | | |
| | | |
| | | |
| | |
St. George Investment, LLC; 8% Convertible note due September 9, 2016 | |
| 32,000 | | |
| 26,182 | | |
| (25,092 | ) | |
| 33,090 | |
| |
| | | |
| | | |
| | | |
| | |
Total Convertible Notes | |
$ | 142,750 | | |
$ | 115,129 | | |
$ | (107,618 | ) | |
$ | 150,261 | |
The Company did not have any convertible
notes outstanding as of December 31, 2014.
During the three and nine months ended
September 30, 2015 the Company recognized discount accretion totaling $19,763 included in interest expense in the accompanying
results of operations. Since the Company has determined the convertible notes will be stock settled, beginning six months after
the date of each issuance, all of the convertible notes payable have been classified as current in the accompanying balance sheet.
6. Embedded Debt Conversion Features
and Other Equity-linked Instruments
The Company accounts for variable conversion
elements embedded in its convertible instruments that meet the definition of a derivative as liabilities. The variable conversion
elements are re-measured at fair value with the changes in the value reported as a component of other income (expense) in the accompanying
results of operations. The Company estimates the fair value of the variable conversion element using a Black-Scholes Merton Pricing
model based on the variable number of additional shares of common stock the Company is required to issue upon conversion.
The Company periodically, or when specific
transactions occur that may have material impacts on the presentation of the financial statements, reviews it outstanding equity
and equity-linked instruments to determine the appropriate classification in the accompanying balance sheet, equity or liability
(asset). During the period ended September 30, 2015 the company reclassified all of its previously outstanding options and warrants
from equity to liability. The determination to reclassify the previously outstanding options and warrants resulted from the issuance
of convertible notes payable that are potentially convertible into an unlimited number shares of common stock.
The Company measures and re-measures the
fair value of the instruments not classified as permanent equity using a Black Scholes Merton pricing model. The following assumptions
were used to estimate the fair value of the Company’s derivative liabilities:
Expected volatility |
|
455% |
Expected term (years) |
|
0.75 to 2.80 |
Dividend yield |
|
0.0% |
Risk free rate |
|
0.1% |
During the three and nine months ended
September 30, 2015 the Company recognized a derivative liability, and corresponding finance fee, with an initial fair value totaling
$51,499 associated with the variable conversion element embedded in the convertible notes payable. Finance fees are included as
a component of interest expense in the accompanying results of operations.
In August 2015, outstanding options and
warrants with an aggregate fair value of $493,161 were reclassified from equity to derivative liability.
As of September 30, 2015 the Company had
derivative liability obligations with an aggregate fair value totaling $532,600. During the three and nine months ended September
30, 2015 the Company recognized a gain on the change in the fair value of derivative liabilities totaling $12,010 included as a
component of other income (expense) in the accompanying results of operations.
Financial liabilities measured at fair
value on a recurring basis are summarized below:
| |
Fair value measurements | |
| |
September 30, 2015 | | |
Quoted prices in active markets for unobservable identical assets (Level 1) | | |
Significant other inputs (Level 2) | | |
Significant observable inputs (Level 3) | |
Derivative liability | |
$ | 532,600 | | |
| – | | |
| – | | |
$ | 532,600 | |
The derivative liabilities are measured
at fair value using a Black Sholes Merton Pricing Model. The model is based on assumptions including quoted market prices and estimated
volatility factors based on historical quoted market prices for the Company’s common stock, and are classified within Level
3 of the valuation hierarchy
The following table sets forth a summary
of the changes in the fair value of the Company’s Level 3 financial liabilities that are measured at fair value on a recurring
basis:
| |
September 30, 2015 | | |
December 31, 2014 | |
| |
| | |
| |
Beginning Balance | |
$ | – | | |
$ | – | |
Aggregate fair value of derivative issued | |
$ | 51,449 | | |
$ | – | |
Liability reclassification for other equity linked instruments | |
$ | 493,161 | | |
$ | – | |
Change in fair value of derivative included in results of operations (gain) loss | |
$ | (12,010 | ) | |
$ | – | |
| |
| | | |
| | |
Ending Balance | |
$ | 532,600 | | |
$ | – | |
7. Accrued Expenses
During the quarter ended March 31, 2015
our management, with the assistance of our defense attorney, analyzed the merit and likelihood of an unfavorable outcome in the
matter of Congoo, LLC v. HDIMAX Max Media, Inc. Civ. Action No. 3:15-cv-01423. Based on the facts and circumstances, we
determined the likelihood of an unfavorable outcome to be remote. Correspondingly, we reversed the previously accrued obligation
of $422,448 as presented in sales and marketing expense in the accompanying condensed statement of operations.
8. Licensed Content
The Company entered into a content licensing
and distribution agreement with an entertainment company in which we will distribute, on our available platforms, the following:
| i. | Fifty-two (52) twenty three minute (0:23) episodes of a series known as “Behind the Velvet
Rope” |
| ii. | Ancillary content including a minimum of ten to twenty event compilations approximately five to
seven minutes in length each; and |
| iii. | Thirty to forty individual interviews approximately one to three minutes in length each. |
The agreement calls for us to advance $480,000
to the entertainment company to be used for production of the series. After paying the advance, we are entitled to recoup the advanced
amount plus an additional $10,000 (a total of $490,000) after which time the gross revenue generated under the agreement will be
split on a 50/50 basis. The non-refundable advance obligation and capitalized licensed content are presented in accounts payable
and current assets, respectively, in the accompanying balance sheet.
9. Subsequent Events
In October 2015 the Company received a total of $150,000 in
cash proceeds from the issuance of additional convertible notes payable. The notes mature between nine and twelve months after
the date of the issuance and are convertible into shares of common stock at conversion rates discounted to our listed market price
of 50%.
In November 2015, Frank McEnulty resigned as our Chief Financial
Officer and Mr. Naresh Malik resigned as our Chief Executive Officer. In conjunction with such resignations, our Chairman of the
Board Mr. Myles Pressey III, will assume the position of Interim Chief Financial Officer; and our Chief Operating Officer, Mr.
Johnathan Adair will assume the position of Chief Executive Officer.
In November 2015 we issued 191,327 shares
of restricted and unregistered shares of common stock for cash proceeds totaling $15,000.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The actual and estimated expenses in connection
with this offering, all of which will be borne by us, are as follows:
SEC Registration Fee |
|
$ |
386.81 |
|
Accounting Fees |
|
|
7,500 |
* |
Legal Fees and Expenses |
|
|
12,000 |
* |
Transfer Agent Fee |
|
|
1,000 |
* |
Miscellaneous |
|
|
3,000 |
* |
|
|
|
|
|
Total |
|
$ |
23,886.81 |
* |
*estimated
Item 14. Indemnification of Directors and Officers
Section 78.7502 of the Nevada Revised Statutes
provides that a corporation may indemnify directors and officers as well as other employees and individuals against expenses including
attorneys' fees, judgments, fines and amounts paid in settlement in connection with various actions, suits or proceedings, whether
civil, criminal, administrative or investigative other than an action by or in the right of the corporation, a derivative action,
if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation,
and, with respect to any criminal action or proceeding, if they had no reasonable cause to believe their conduct was unlawful.
A similar standard is applicable in the case of derivative actions, except that indemnification only extends to expenses including
attorneys' fees incurred in connection with the defense or settlement of such actions and the statute requires court approval before
there can be any indemnification where the person seeking indemnification has been found liable to the corporation. The statute
provides that it is not exclusive of other indemnification that may be granted by a corporation's Amended and Restated Articles
of Incorporation, Bylaws, agreement, a vote of stockholders or disinterested directors or otherwise.
The Company’s Amended and Restated Articles
of Incorporation provides that it will indemnify and hold harmless, to the fullest extent permitted by Chapter 78 of the Nevada
Revised Statutes, as amended from time to time, each person that such section grants us the power to indemnify.
The Nevada Revised Statutes permit a corporation
to provide in its Amended and Restated Articles of Incorporation that a director of the corporation shall not be personally liable
to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability for:
| · | any breach of the director's duty of loyalty
to the corporation or its stockholders; |
| · | acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; |
| · | payments of unlawful dividends or unlawful
stock repurchases or redemptions; or |
| · | any transaction from
which the director derived an improper personal benefit. |
The Company’s Amended and Restated
Articles of Incorporation provides that, to the fullest extent permitted by applicable law, none of our directors will be personally
liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director. Any repeal or modification of
this provision will be prospective only and will not adversely affect any limitation, right or protection of a director of our
Company existing at the time of such repeal or modification.
Item 15. Recent Sale of Unregistered
Securities
On November 21, 2014, we issued 712,121,205
shares of common stock in exchange for the all of the issued and outstanding stock of HDIMAX, Inc. There was no underwriter, no
underwriting discounts or commissions, no general solicitation, no advertisement, and resale restrictions are being imposed by
placing a Rule 144 legend on the certificate(s). The one person who received securities, Rajinder Brar, had such knowledge in business
and financial matters that he is capable of evaluating the merits and risks of the transaction. This transaction was exempt from
registration under the Securities Act of 1933, based on Section 4(a)(2) for transactions by the issuer not involving any public
offering. All of these shares were subsequently canceled pursuant to the terms of a Settlement Agreement dated January 22, 2015.
In November 2014 the Company issued 113,636
shares of restricted and unregistered common stock for consulting services valued at $45,454.
In November 2014 the Company issued 712,121,205
shares of restricted and unregistered common stock to effectuate the merger with HDIMAX, Inc. Subsequently, in January 2015, the
712,121,205 shares to complete the merger with HDIMAX, Inc. were cancelled as part of a Settlement Agreement resulting in the disposition
of a majority of the previously acquired assets of HDIMAX, Inc.
In December 2014, the Company issued 375,733
shares of restricted and unregistered common stock for the settlement of discounted convertible notes and accrued interest totaling
$123,463.
In January 2015 we issued 75,000 shares of
restricted and unregistered common stock for consulting services valued at $25,000.
In January 2015 we issued 57,971 shares restricted
and unregistered shares of common stock for cash totaling $10,000.
In January 2015 we issued a total of 145,200,000
shares of restricted and unregistered shares of common stock as compensation to our officers, directors, and other consultants
valued at $54,054,409.
In January 2015 we issued 5,000,000 shares
of restricted and unregistered shares of common stock to a former employee of HDIMAX, Inc. valued at $1,900,000.
In January 2015, in accordance with the terms
of our Settlement Agreement with our former Chairman and Chief Executive Officer, we cancelled 712,121,205 shares of unregisters
and restricted common stock.
In February 2015 we issued 142,500 shares of
restricted and unregistered common stock for accounting and legal services valued at $20,000.
In February 2015 we issued a total of 200,000
shares of restricted and unregistered shares of common stock as compensation valued at $38,348.
In February 2015 we issued 3,750,000 shares
of restricted and unregistered common stock for consulting services valued at $719,021.
In February 2015 we issued 177,777 restricted
and unregistered shares of common stock for cash totaling $32,800.
In February 2015 we issued 7,500,000 shares
of restricted and unregistered common stock in settlement of previously accrued related party liabilities totaling $340,163.
In March 2015 we issued 100,000 restricted
and unregistered shares of common stock for cash totaling $28,050.
In April 2015 we issued 440,000 shares
of restricted and unregistered common stock in conjunction with the issuance of notes payable for total consideration of $70,000.
In April 2015 we issued 4,500,000 shares of
restricted and unregistered common stock for consulting services valued at $927,054.
In April 2015 we issued a total of 5,000,000
shares of restricted and unregistered shares of common stock as compensation to our officers valued at $1,500,000.
In April 2015 we issued 25,445 shares of restricted
and unregistered shares of common stock for cash totaling $5,000.
In May 2015 we issued a total of 3,200,000
shares of restricted and unregistered shares of common stock as compensation to our officers and directors valued at $968,000.
In May 2015 we issued 509,524 shares of restricted
and unregistered common stock for consulting services valued at $112,621.
In May 2015 we issued 1,641,929 shares of restricted
and unregistered shares of common stock for cash totaling $170,000.
In May 2015 we issued Warrants for the Purchase
of 1,500,000 shares of restricted and unregistered shares of common stock as additional incentive for a $150,000 cash investment
in the company that was part of the $170,000 in the previous footnote.
In May 2015 we issued 250,000 shares of restricted
and unregistered shares of common stock for interest on outstanding notes and payables valued at $45,582.
In June 2015 we issued a total of 150,000 shares
of restricted and unregistered shares of common stock as compensation to our officers and directors valued at $49,500.
In June 2015 we issued 250,000 shares of restricted
and unregistered common stock for settlement of an obligation valued at $50,000.
In June 2015 we issued 476,915 shares of restricted
and unregistered shares of common stock for cash totaling $85,000.
In July 2015 we issued 1,050,000 shares
of restricted and unregistered shares of common stock for cash totaling $60,000.
In August 2015 we issued 102,564 shares of
restricted and unregistered shares of common stock for cash totaling $10,000.
In September, 2015, we issued 508,000 shares
of restricted and unregistered shares of common stock valued at $55,948, to seven investors for cash, settlement of debt and
services rendered.
In December, 2015, we issued 5,141,327 shares
of restricted and unregistered shares of common stock valued at $205,653, to six investors for cash, settlement of debt and
services rendered.
All of the securities issued above were issued
pursuant to an exemption provided by Section 4(a)(2) of the Securities Act of 1933, as amended, and/or Rule 506 of Regulation D
promulgated thereunder. Each of the investors represented to the Company that it (i) is an “accredited investor” as
defined in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended, (ii) is knowledgeable, sophisticated
and experienced in making investment decisions of this kind, and (iii) has had adequate access to information about the Company.
Item 16. Index To Exhibits
Exhibit Index
Exhibit Number |
|
Description |
|
|
|
Exhibit 2.1 |
|
Agreement and Plan of Merger dated September 2, 2014,
by and among Indigo-Energy, Inc., HDIMAX, Inc. and HDIMAX
Acquisition Corporation, Inc. (1) |
Exhibit 2.2 |
|
Amendment to the Merger Agreement dated November 21, 2014 (2) |
Exhibit 3.1 |
|
Amended and Restated Articles of Incorporation of Indigo-Energy, Inc. (3) |
Exhibit 3.2 |
|
Amended and Restated Bylaws of Indigo-Energy, Inc. (4). |
Exhibit 5.1* |
|
Opinion of Barnett & Linn |
Exhibit 10.1 |
|
Settlement Agreement dated January 22, 2015 (5) |
Exhibit 10.2 |
|
Employment Agreement with Myles A. Pressey III (6) |
Exhibit 10.3 |
|
Employment Agreement with Johnathan Adair (6) |
Exhibit 10.4 |
|
Employment Agreement with Stanley L. Teeple (11) |
Exhibit 10.5 |
|
Distribution Channel Agreement with simplyME dated February 9, 2015 (7) |
Exhibit 10.6 |
|
Addendum to Distribution Channel Agreement with simplyME dated June 30, 2015 (8) |
Exhibit 10.7 |
|
Master License and Professional Services Agreement between Kaltura, Inc and the Company dated August 4,
2015(13) |
Exhibit 10.8 |
|
Submission/Insertion Order Agreement with Sonifi Solutions, Inc. dated July 9, 2015 (9) |
Exhibit 10.9 |
|
Amendment to Employment Agreement with Myles A. Pressey (12) |
Exhibit 10.11 |
|
Addendum #2 to Distribution Channel Agreement with simplyME dated July 31, 2015 (10) |
Exhibit 10.12 |
|
License Agreement between the Company and Sonifi Solutions, Inc. dated August 1, 2015 (10) |
Exhibit 10.13* |
|
Form of Equity Purchase Agreement dated
February 10, 2016 between the Company and Kodiak Capital Group, LLC |
Exhibit 10.14* |
|
Form of Registration Rights Agreement dated February 10, 2016 between the Company and Kodiak Capital Group, LLC. |
Exhibit 10.15* |
|
Form of Replacement Note dated February 10, 2016 made by the Company in favor of Kodiak Capital Group, LLC |
Exhibit 23.1* |
|
Consent of Haynie & Company |
Exhibit 23.2* |
|
Consent of Barnett & Linn (included in Exhibit 5.1)* |
101.INS |
|
XBRL Instances Document |
101.SCH |
|
XBRL Taxonomy Extension Schema Document |
101.CAL |
|
XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF |
|
XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |
|
XBRL Taxonomy Extension Label Linkbase Document |
101.PRE |
|
XBRL Taxonomy Extension Presentation Linkbase Document |
_______________
(1) |
Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed September 4, 2014 |
(2) |
Incorporated by reference to the applicable exhibit of the registrant’s Current Report on Form 8-K filed on November 26, 2014. |
(3) |
Incorporated by reference to the registrant’s definitive Information Statement on Schedule 14C filed on October 20, 2014. |
(4) |
Incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed October 6, 2014. |
(5) |
Incorporated by reference to Exhibit 99.1 to our Current Report on Form 8-K filed on January 28, 2015. |
(6) |
Incorporated by reference to the applicable exhibit to our Current Report on Form 8-K filed on February 4, 2015. |
(7) |
Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on July 1, 2015. |
(8) |
Incorporated by reference to the applicable exhibit to our Current Report on Form 8-K filed on July 7, 2015. |
(9) |
Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on July 10, 2015. |
(10) |
Incorporated by reference to the applicable exhibit to our Current Report on Form 8-K filed on August 5, 2015. |
(11) |
Incorporated by reference to the applicable exhibit to our Form S-1 filed on May 29, 2015. |
(12) |
Incorporated by reference to the applicable exhibit to our Form S-1/A filed on July 10, 2015. |
(13) |
Incorporated by reference to the applicable exhibit to our Form S-1 filed on January 15, 2016. |
* Filed herewith
|
(B) |
Financial Statement Schedules |
The following financial statements of the registrant, along
with the notes thereto and the Report of Independent Registered Public Accounting Firm, are filed herewith.
Financial Statements
INDEX TO FINANCIAL STATEMENTS
Financial Statements of Zonzia Media, Inc. |
|
Report of Independent Registered Public Accounting Firm, Haynie & Company, Certified Public Accountants |
|
|
F-2 |
|
Balance Sheets as at December 31, 2014 |
|
|
F-3 |
|
Statement of Operations for the period from May 24, 2014 (inception) through December 31, 2014 |
|
|
F-4 |
|
Statement of Stockholders’ Deficit for the period from May 24, 2014 (inception) through December 31, 2014 |
|
|
F-5 |
|
Statement of Cash Flows for the period from May 24, 2014 (inception) through December 31, 2014 |
|
|
F-6 |
|
Notes to financial statements |
|
|
F-7 |
|
Unaudited Interim Financial Statements of Zonzia Media, Inc. for the period ended September 30, 2015 |
|
|
|
|
Condensed Balance Sheet |
|
|
F-16 |
|
Condensed Statement of Operations |
|
|
F-17 |
|
Condensed Statement of Stockholders’ Deficit |
|
|
F-18 |
|
Condensed Statement of Cash Flows |
|
|
F-20 |
|
Notes to condensed financial statements |
|
|
F-21 |
|
All schedules have been omitted because the
information required to be presented in them is not applicable or is shown in the financial statements or related notes.
Item 17. Undertakings
Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to
the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Commission such indemnification
is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers
or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts
or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement;
and
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information
in the registration statement.
(2) That, for the purpose of determining any
liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of
a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the city of Henderson, State of Nevada, on February 12, 2016.
|
Zonzia Media, Inc. |
|
|
|
|
By: |
/s/ Johnathan F. Adair |
|
|
|
Johnathan F. Adair |
|
|
|
Chief Executive Officer
(Principal Executive Officer) |
|
Pursuant to the requirements of the Securities
Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated
SIGNATURE |
|
TITLE |
|
DATE |
|
|
|
|
|
/s/ Myles A. Pressey III |
|
Chairman of the Board of Directors |
|
February 12, 2016 |
|
|
|
|
|
/s/ Johnathan F.
Adair |
|
Chief Executive Officer |
|
|
|
|
(Principal Executive Officer) |
|
February 12, 2016 |
|
|
|
|
|
/s/ Myles A.
Pressey III |
|
Interim Chief Financial Officer |
|
February 12, 2016 |
|
|
(Principal Accounting and Financial Officer) |
|
|
|
|
|
|
|
/s/ Stanley L. Teeple |
|
Chief Compliance Officer |
|
February 12, 2016 |
|
|
|
|
|
/s/ Philip Fraley |
|
Director |
|
February 12, 2016 |
|
|
|
|
|
/s/ Steven Sanders |
|
Director |
|
February 12, 2016 |
|
|
|
|
|
/s/ Joseph Martin |
|
Director |
|
February 12, 2016 |
|
|
|
|
|
|
Exhibit Index
Exhibit Number |
|
Description |
|
|
|
Exhibit 2.1 |
|
Agreement and Plan of Merger dated September 2, 2014,
by and among Indigo-Energy, Inc., HDIMAX, Inc. and HDIMAX
Acquisition Corporation, Inc. (1) |
Exhibit 2.2 |
|
Amendment to the Merger Agreement dated November 21, 2014 (2) |
Exhibit 3.1 |
|
Amended and Restated Articles of Incorporation of Indigo-Energy, Inc. (3) |
Exhibit 3.2 |
|
Amended and Restated Bylaws of Indigo-Energy, Inc. (4). |
Exhibit 5.1* |
|
Opinion of Barnett & Linn |
Exhibit 10.1 |
|
Settlement Agreement dated January 22, 2015 (5) |
Exhibit 10.2 |
|
Employment Agreement with Myles A. Pressey III (6) |
Exhibit 10.3 |
|
Employment Agreement with Johnathan Adair (6) |
Exhibit 10.4 |
|
Employment Agreement with Stanley L. Teeple (11) |
Exhibit 10.5 |
|
Distribution Channel Agreement with simplyME dated February 9, 2015 (7) |
Exhibit 10.6 |
|
Addendum to Distribution Channel Agreement with simplyME dated June 30, 2015 (8) |
Exhibit 10.7 |
|
Master License and Professional Services
Agreement between Kaltura, Inc and the Company dated August 4, 2015 (13) |
Exhibit 10.8 |
|
Submission/Insertion Order Agreement with Sonifi Solutions, Inc. dated July 9, 2015 (9) |
Exhibit 10.9 |
|
Amendment to Employment Agreement with Myles A. Pressey (12) |
Exhibit 10.11 |
|
Addendum #2 to Distribution Channel Agreement with simplyME dated July 31, 2015 (10) |
Exhibit 10.12 |
|
License Agreement between the Company and Sonifi Solutions, Inc. dated August 1, 2015 (10) |
Exhibit 10.13* |
|
Form of Equity Purchase Agreement dated February 10, 2016 between the Company and Kodiak Capital Group, LLC |
Exhibit 10.14* |
|
Form of Registration Rights Agreement dated February 10, 2016 between the Company and Kodiak Capital Group, LLC. |
Exhibit 10.15* |
|
Form of Replacement Note dated February 10, 2016 made by the Company in favor of Kodiak Capital Group, LLC |
Exhibit 23.1* |
|
Consent of Haynie & Company |
Exhibit 23.2* |
|
Consent of Barnett & Linn (included in Exhibit 5.1)* |
101.INS |
|
XBRL Instances Document |
101.SCH |
|
XBRL Taxonomy Extension Schema Document |
101.CAL |
|
XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF |
|
XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |
|
XBRL Taxonomy Extension Label Linkbase Document |
101.PRE |
|
XBRL Taxonomy Extension Presentation Linkbase Document |
_______________
(1) |
Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed September 4, 2014 |
(2) |
Incorporated by reference to the applicable exhibit of the registrant’s Current Report on Form 8-K filed on November 26, 2014. |
(3) |
Incorporated by reference to the registrant’s definitive Information Statement on Schedule 14C filed on October 20, 2014. |
(4) |
Incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed October 6, 2014. |
(5) |
Incorporated by reference to Exhibit 99.1 to our Current Report on Form 8-K filed on January 28, 2015. |
(6) |
Incorporated by reference to the applicable exhibit to our Current Report on Form 8-K filed on February 4, 2015. |
(7) |
Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on July 1, 2015. |
(8) |
Incorporated by reference to the applicable exhibit to our Current Report on Form 8-K filed on July 7, 2015. |
(9) |
Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on July 10, 2015. |
(10) |
Incorporated by reference to the applicable exhibit to our Current Report on Form 8-K filed on August 5, 2015. |
(11) |
Incorporated by reference to the applicable exhibit to our Form S-1 filed on May 29, 2015. |
(12) |
Incorporated by reference to the applicable exhibit to our Form S-1/A filed on July 10, 2015. |
(13) |
Incorporated by reference to the applicable exhibit to our Form S-1 filed on January 15, 2016. |
* Filed herewith
EXHIBIT 5.1
|
BARNETT
& LINN |
|
|
ATTORNEYS
AT LAW |
|
|
23564 Calabasas Road, Suite 205 • Calabasas, CA 91302 |
|
|
|
|
|
www.barnettandlinn.com |
|
WILLIAM B. BARNETT |
|
TELEPHONE: 818-436-6410 |
Attorney/Principal |
|
FACSIMILE: 818-223-8303 |
|
|
wbarnett@wbarnettlaw.com |
February 12, 2016
Zonzia Media, Inc.
2580 Anthem Village Drive, Suite B-7
Henderson, NV 89074
Re:
Registration Statement on Form S-1
Gentlemen:
We have acted as legal
counsel to Zonzia Media, Inc., a Nevada corporation (the “Company”), with respect to the Registration Statement on
Form S-1 (File No. 333-________), as amended (the “Registration Statement”), initially filed with the U.S. Securities
and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “Securities Act”)
on February 12, 2016. The Registration Statement relates to the registration for resale of (a) up to 34,468,344 shares
(the “Shares”) of common stock of the Company, par value $0.001 per share (the “Common Stock”), and (b)
an aggregate of 30,000,000 shares (the “Unissued Shares”) of Common Stock that may be sold by the Company to Kodiak
Capital Group, LLC (“Kodiak Capital”), (the “Equity Purchaser”) pursuant to the terms of that certain
Equity Purchase Agreement dated February 10, 2016 between the Company and the Equity Purchaser (the “Purchase Agreement”).
In connection
with this opinion, we have examined originals or copies of the following documents:
(a) the
Registration Statement, in the form filed and to be filed with the Commission, the exhibits filed or to be filed in connection
therewith, and the form of Prospectus contained therein;
(b) the
Company’s Certificate of Incorporation, as amended;
(c) the
Company’s Bylaws, as amended;
(d) the
resolutions adopted by the Board of Directors of the Company authorizing the issuance and sale of the Company’s securities
to the Equity Purchaser;
(e) the
Purchase Agreement, and
(f) such
other documents as we have deemed necessary or appropriate to enable us to render the opinions expressed below.
This opinion is
based entirely on our review of the documents listed in the preceding paragraph, and we have made no other documentary review
or investigation of any kind whatsoever for purposes of this opinion. In our examination, we have assumed the
genuineness of all signatures, the conformity to the originals of all documents reviewed by us as copies, the authenticity
and completeness of all original documents reviewed by us in original or copy form, and the legal competence of each
individual executing any document. As to all matters of fact (including factual conclusions and characterizations
and descriptions of purpose, intention or other state of mind), we have relied entirely upon certificates of officers of the
Company and have assumed, without independent inquiry, the accuracy of those certificates.
In rendering this opinion,
we have also assumed that the members of the Company’s Board of Directors have acted in a manner consistent with their fiduciary
duties as required under applicable law in adopting the Purchase Agreement.
Subject to the limitations
set forth below, we have made such examination of law as we have deemed necessary for the purpose of this opinion. This
opinion is limited solely to the federal laws of the United States and the Nevada General Corporation Law. Our opinion
is based on these laws as in effect on the date hereof.
Based upon and subject
to the foregoing, we are of the opinion that:
|
1. |
The Issued Shares are legally issued, fully paid and non-assessable; |
|
2. |
The Unissued Shares, when issued and sold
in accordance with the terms of the Purchase Agreement, will be legally issued, fully paid and non-assessable; |
This opinion letter
is given as of the date hereof, and we express no opinion as to the effect of subsequent events or changes in law occurring or
becoming effective after the date hereof. We assume no obligation to update this opinion letter or otherwise advise
you with respect to any facts or circumstances or changes in law that may hereafter occur or come to our attention.
We hereby consent to
the filing of this opinion as an exhibit to the Registration Statement and to the reference to this firm under the heading “Legal
Matters” in the prospectus included in the Registration Statement. In rendering this opinion and giving this consent,
we do not admit that we are in the category as persons whose consent is required under Section 7 of the Securities Act or the rules
and regulations of the Commission thereunder.
Very truly yours,
BARNETT & LINN
/s/ William B.
Barnett
William B. Barnett
EXHIBIT 10.13
EQUITY PURCHASE AGREEMENT
THIS EQUITY PURCHASE AGREEMENT entered
into as of the 10th day of February, 2016 (this "AGREEMENT"), by and between KODIAK CAPITAL GROUP,
LLC, a Delaware limited liability company ("INVESTOR"), and ZONZIA MEDIA, INC., a Nevada corporation (the "COMPANY").
WHEREAS, the parties
desire that, upon the terms and subject to the conditions contained herein, the Company shall issue and sell to Investor, from
time to time as provided herein, and Investor shall purchase up to Two Million Dollars ($2,000,000) of the Company’s Common
Stock (as defined below); and
NOW, THEREFORE, the
parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 DEFINED TERMS as used in this Agreement, the following terms shall have the following meanings specified or indicated (such
meanings to be equally applicable to both the singular and plural forms of the terms defined)
"AGREEMENT"
shall have the meaning specified in the preamble hereof.
"BY-LAWS"
shall have the meaning specified in Section 4.7.
"CLAIM NOTICE"
shall have the meaning specified in Section 9.3(a).
“CLEARING DATE”
shall be the date in which the Put Shares have been deposited into the Investor’s brokerage account.
"CLOSING"
shall mean one of the closings of a purchase and sale of shares of Common Stock pursuant to Section 2.3.
"CLOSING CERTIFICATE"
shall mean the closing certificate of the Company in the form of Exhibit B hereto.
"CLOSING PRICE"
shall mean the closing bid price for the Company’s common stock on the Principal Market on a Trading Day as reported by Bloomberg
Finance L.P.
"COMMITMENT NOTE"
shall have the meaning specified in Section 2.1(b).
"COMMITMENT PERIOD"
shall mean the period commencing on the Execution Date, and ending on the date on which Investor shall have purchased Put Shares
pursuant to this Agreement for an aggregate Purchase Price of the Maximum Commitment Amount or December 31, 2016.
"COMMON STOCK"
shall mean the Company's common stock, $0.001 par value per share, and any shares of any other class of common stock whether now
or hereafter authorized, having the right to participate in the distribution of dividends (as and when declared) and assets (upon
liquidation of the Company).
"COMPANY"
shall have the meaning specified in the preamble to this Agreement.
"DAMAGES"
shall mean any loss, claim, damage, liability, cost and expense (including, without limitation, reasonable attorneys' fees and
disbursements and costs and expenses of expert witnesses and investigation).
"DISPUTE PERIOD"
shall have the meaning specified in Section 9.3(a).
"DTC" shall
have the meaning specified in Section 2.3.
"DWAC" shall
have the meaning specified in Section 2.3.
"EXCHANGE ACT"
shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“EXCHANGE CAP”
shall have the meaning set forth in Section 7.1(c).
"EXECUTION DATE"
shall mean the date that of the Agreement.
"FAST" shall
have the meaning specified in Section 2.3.
"FINRA" shall
mean the Financial Industry Regulatory Authority, Inc.
"INVESTMENT AMOUNT"
shall mean the Put Shares referenced in the Put Notice multiplied by the Purchase Price.
"INDEMNIFIED PARTY"
shall have the meaning specified in Section 9.3(a).
"INDEMNIFYING PARTY"
shall have the meaning specified in Section 9.3(a).
"INDEMNITY NOTICE"
shall have the meaning specified in Section 9.3(b).
"INVESTOR"
shall have the meaning specified in the preamble to this Agreement.
"LEGEND" shall
have the meaning specified in Section 8.1.
"MARKET PRICE"
shall mean the lowest closing bid price on the Principal Market for any Trading Day during the Valuation Period, as reported by
Bloomberg Finance L.P.
"MATERIAL ADVERSE
EFFECT" shall mean any effect on the business, operations, properties, or financial condition of the Company that is material
and adverse to the Company and/or any condition, circumstance, or situation that would prohibit or otherwise materially interfere
with the ability of the Company to enter into and perform its obligations under any of this Agreement.
"MAXIMUM COMMITMENT
AMOUNT" shall mean Two Million Dollars ($2,000,000).
"PERSON" shall
mean an individual, a corporation, a partnership, an association, a trust or other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"PRINCIPAL MARKET"
shall mean any of the national exchanges (i.e. NYSE, NYSE AMEX, Nasdaq), or principal quotation systems (i.e. OTCQX, OTCQB, the
OTC Bulletin Board), or other principal exchange or recognized quotation system which is at the time the principal trading platform
or market for the Common Stock.
"PURCHASE PRICE"
shall mean 70% of the Market Price on such date on which the Purchase Price is calculated in accordance with the terms and conditions
of this Agreement.
"PUT" shall
mean the right of the Company to require the Investor to purchase shares of Common Stock, subject to the terms and conditions of
this Agreement.
"PUT DATE"
shall mean any Trading Day during the Commitment Period that a Put Notice is deemed delivered pursuant to Section 2.2(b).
"PUT NOTICE"
shall mean a written notice, substantially in the form of Exhibit A hereto, to Investor setting forth the Put Shares with respect
to which the Company intends to require Investor to purchase pursuant to the terms of this Agreement.
"PUT SHARES"
shall mean all shares of Common Stock issued, or that the Company shall be entitled to issue, per any applicable Put Notice in
accordance with the terms and conditions of this Agreement.
"REGISTERED SECURITIES"
shall mean the (a) Put Shares, (b) Commitment Note and (c) any securities issued or issuable with respect to any of the foregoing
by way of exchange, stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization or otherwise. As to any particular Registered Securities, once issued such securities shall cease to be
Registrable Securities when (i) a Registration Statement has been declared effective by the SEC and such Registrable Securities
have been disposed of pursuant to a Registration Statement, (ii) such Registrable Securities have been sold under circumstances
under which all of the applicable conditions of Rule 144 are met, (iii) such time as such Registrable Securities have been otherwise
transferred to holders who may trade such shares without restriction under the Securities Act or (iv) in the opinion of counsel
to the Company, which counsel shall be reasonably acceptable to Investor, such Registrable Securities may be sold without registration
under the Securities Act or the need for an exemption from any such registration requirements and without any time, volume or manner
limitations pursuant to Rule 144(b)(i) (or any similar provision then in effect) under the Securities Act.
"REGISTRATION STATEMENT"
shall mean the Company’s effective registration statement on file with the SEC, and any follow up registration statement
or amendment thereto.
"REGULATION D"
shall mean Regulation D promulgated under the Securities Act.
"RULE 144"
shall mean Rule 144 under the Securities Act or any similar provision then in force under the Securities Act.
"SEC" shall
mean the United States Securities and Exchange Commission.
"SECURITIES ACT"
shall have the meaning specified in the recitals of this Agreement.
"SEC DOCUMENTS"
shall mean, as of a particular date, all reports and other documents filed by the Company pursuant to Section 13(a) or 15(d) of
the Exchange Act since the end of the Company's then most recently completed and reported fiscal year as of the time in question
(provided that if the date in question is within ninety days of the beginning of the Company's fiscal year, the term shall include
all documents filed since the beginning of the preceding fiscal year).
“SHORT SALES”
shall mean all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act.
"SUBSCRIPTION DATE"
shall mean the date on which this Agreement is executed and delivered by the Company and Investor.
"THIRD PARTY CLAIM"
shall have the meaning specified in Section 9.3(a).
“TRADING DAY” shall mean a day
on which the Principal Market shall be open for business.
“TRANSACTION DOCUMENTS”
shall mean this Agreement and the Registration Rights Agreement.
"TRANSFER AGENT"
shall mean the transfer agent for the Common Stock (and to any substitute or replacement transfer agent for the Common Stock upon
the Company's appointment of any such substitute or replacement transfer agent).
"UNDERWRITER"
shall mean any underwriter participating in any disposition of the Registered Securities on behalf of Investor pursuant to the
Registration Statement.
"VALUATION PERIOD"
shall mean the period of five (5) Trading Days immediately following the Clearing Date associated with the applicable Put Notice
during which the Purchase Price of the Common Stock is valued. Investor shall notify the Company in writing of the occurrence of
the Clearing Date associated with a Put Notice. The Valuation Period shall begin the first Trading Day following such written notice
from Investor.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
Section 2.1 INVESTMENTS.
(a) PUTS.
Upon the terms and conditions set forth herein (including, without limitation, the provisions of Article VII), on any Put Date
the Company may exercise a Put by the delivery of a Put Notice.
(b) COMMITMENT
NOTE. As a condition for the execution of this Agreement by the Investor, the Company shall issue to the Investor a Replacement
Note 1 to Convertible Promissory Note dated December 11, 2015 (“Original Note”) previously signed by the Company in
the principal amount equal to $120,000.00 (the Replacement Note 1 and the Original Note are collectively referred to as the “Note”)
on the Subscription Date.
Section 2.2 MECHANICS.
(a) PUT NOTICE.
At any time and from time to time during the Commitment Period, the Company may deliver a Put Notice to Investor, subject to
the conditions set forth in Section 7.2. On the Put Date the Company shall deliver to Investor’s brokerage account
the Put Shares referenced in the Put Notice.
(b) DATE OF
DELIVERY OF PUT NOTICE. A Put Notice shall be deemed delivered on (i) the Trading Day it is received by email by Investor if
such notice is received on or prior to 09:00 New York time, or (ii) the immediately succeeding Trading Day if it is
received by email after 09:00 New York time on a Trading Day or at any time on a day which is not a Trading Day. The
Valuation Period will commence on the Clearing Date.
Section 2.3 CLOSINGS. At the end of the Valuation Period the Purchase Price shall be established; if the value of the Put Shares
initially delivered to Investor is greater than the Maximum Commitment Amount then immediately after the Valuation Period the
Investor shall deliver to Company the Put Shares surplus associated with such Put. The Closing of a Put shall occur upon the
first Trading Day following the completion of the Valuation Period, whereby Investor shall deliver the Investment Amount, by
wire transfer of immediately available funds to an account designated by the Company. In addition, on or prior to such
Closing Date, each of the Company and Investor shall deliver to each other all documents, instruments and writings required
to be delivered or reasonably requested by either of them pursuant to this Agreement in order to implement and effect the
transactions contemplated herein.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
Investor represents
and warrants to the Company that:
Section 3.1 INTENT.
Investor is entering into this Agreement for its own account and Investor has no present arrangement (whether or not legally binding)
at any time to sell the Registered Securities to or through any person or entity; provided, however, that Investor reserves the
right to dispose of the Registered Securities at any time in accordance with federal and state securities laws applicable to such
disposition.
Section 3.2 NO
LEGAL ADVICE FROM THE COMPANY. The Investor acknowledges that it has had the opportunity to review this Agreement and the transactions
contemplated by this Agreement with its own legal counsel and investment and tax advisors. The Investor is relying solely on such
counsel and advisors and not on any statements or representations of the Company or any of its representatives or agents for legal,
tax or investment advice with respect to this investment, the transactions contemplated by this Agreement or the securities laws
of any jurisdiction.
Section 3.3 SOPHISTICATED
INVESTOR. Investor is a sophisticated investor (as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited investor
(as defined in Rule 501 of Regulation D), and Investor has such experience in business and financial matters that it is capable
of evaluating the merits and risks of an investment in the Registered Securities. Investor acknowledges that an investment in the
Registered Securities is speculative and involves a high degree of risk.
Section 3.4 AUTHORITY.
(a) Investor has the requisite power and authority to enter into and perform its obligations under this Agreement and the transactions
contemplated hereby in accordance with its terms; (b) the execution and delivery of this Agreement and the consummation by it of
the transactions contemplated hereby and thereby have been duly authorized by all necessary action and no further consent or authorization
of Investor or its partners is required; and (c) this Agreement has been duly authorized and validly executed and delivered by
Investor and constitutes a valid and binding obligation of Investor enforceable against it in accordance with its terms, subject
to applicable bankruptcy, insolvency, or similar laws relating to, or affecting generally the enforcement of, creditors' rights
and remedies or by other equitable principles of general application.
Section 3.5 NOT
AN AFFILIATE. Investor is not an officer, director or "affiliate" (as that term is defined in Rule 405 of the Securities
Act) of the Company.
Section 3.6 ORGANIZATION
AND STANDING. Investor is a limited liability company duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite power and authority to own, lease and operate its properties and to carry on its business
as now being conducted. Investor is duly qualified and in good standing in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, other than those in which the failure so to qualify would
not have a material adverse effect on Investor.
Section 3.7 ABSENCE
OF CONFLICTS. The execution and delivery of this Agreement and any other document or instrument contemplated hereby, and the consummation
of the transactions contemplated hereby and thereby, and compliance with the requirements hereof and thereof, will not (a) violate
any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on Investor, (b) violate any provision of
any indenture, instrument or agreement to which Investor is a party or is subject, or by which Investor or any of its assets is
bound, or conflict with or constitute a material default thereunder, (c) result in the creation or imposition of any lien pursuant
to the terms of any such indenture, instrument or agreement, or constitute a breach of any fiduciary duty owed by Investor to any
third party, or (d) require the approval of any third-party (that has not been obtained) pursuant to any material contract, instrument,
agreement, relationship or legal obligation to which Investor is subject or to which any of its assets, operations or management
may be subject.
Section 3.8 DISCLOSURE;
ACCESS TO INFORMATION. Investor had an opportunity to review copies of the SEC Documents filed on behalf of the Company and has
had access to all publicly available information with respect to the Company.
Section 3.9 MANNER
OF SALE. At no time was Investor presented with or solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents
and warrants to Investor that, except as disclosed in the SEC Documents:
Section 4.1 ORGANIZATION
OF THE COMPANY. The Company is a corporation duly organized and validly existing and in good standing under the laws of the State
of Nevada and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now
being conducted. The Company is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted or property owned by it makes such qualification necessary, other than those in which
the failure so to qualify would not have a Material Adverse Effect.
Section 4.2 AUTHORITY.
(a) The Company has the requisite corporate power and authority to enter into and perform its obligations under this Agreement
and to issue the Put Shares; (b) the execution and delivery of this Agreement by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action and no further consent
or authorization of the Company or its Board of Directors or stockholders is required; and (c) each of this Agreement and has been
duly executed and delivered by the Company and constitutes a valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of
general application.
Section 4.3 CAPITALIZATION.
As of the date hereof, the authorized capital stock of the Company consists of 3,000,000,000 shares of Common Stock, $0.001 par
value per share, of which 230,000,000 shares were issued and outstanding as of September 30, 2015. There are no outstanding securities
which are convertible into shares of Common Stock, whether such conversion is currently exercisable or exercisable only upon some
future date or the occurrence of some event in the future. All of the outstanding shares of Common Stock of the Company have been
duly and validly authorized and issued and are fully paid and non-assessable.
Section 4.4 COMMON
STOCK. To the best of its knowledge, the Company is in full compliance with all reporting requirements of the Exchange Act, and
the Company has maintained all requirements for the continued listing or quotation of the Common Stock, and such Common Stock is
currently listed or quoted on the Principal Market which is presently the OTCQB.
Section 4.5 SEC
DOCUMENTS. The Company may make available to Investor true and complete copies of the SEC Documents (including, without limitation,
proxy information and solicitation materials). To the Company’s knowledge, the Company has not provided to Investor any information
that, according to applicable law, rule or regulation, should have been disclosed publicly prior to the date hereof by the Company,
but which has not been so disclosed. As of their respective dates, the SEC Documents complied in all material respects with the
requirements of the Exchange Act, and other federal laws, rules and regulations applicable to such SEC Documents, and none of the
SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.
The financial statements of the Company included in the SEC Documents comply as to form and substance in all material respects
with applicable accounting requirements and the published rules and regulations of the SEC or other applicable rules and regulations
with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved (except (a) as may be otherwise indicated in such financial statements
or the notes thereto or (b) in the case of unaudited interim statements, to the extent they may not include footnotes or may be
condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates
thereof and the results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).
Section 4.6 VALID
ISSUANCES. When issued and paid for as herein provided, the Put Shares shall be duly and validly issued, fully paid, and non-assessable.
The sales of the Put Shares pursuant to this Agreement, and the Company's performance of its obligations hereunder, shall not (a)
result in the creation or imposition of any liens, charges, claims or other encumbrances upon the Put Shares, or any of the assets
of the Company, or (b) entitle the holders of outstanding shares of Common Stock to preemptive or other rights to subscribe to
or acquire the Common Stock or other securities of the Company. The Put Shares shall not subject Investor to personal liability,
in excess of the subscription price by reason of the ownership thereof.
Section 4.7 NO
CONFLICTS. The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby, including without limitation the issuance of the Put Shares, do not and will not (a) result in
a violation of the Company’s Articles of Incorporation or By-Laws or (b) conflict with, or constitute a material default
(or an event that with notice or lapse of time or both would become a material default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any material agreement, indenture, instrument or any "lock-up"
or similar provision of any underwriting or similar agreement to which the Company is a party, or (c) result in a violation of
any federal, state or local law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations)
applicable to the Company or by which any property or asset of the Company is bound or affected (except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material
Adverse Effect) nor is the Company otherwise in violation of, conflict with or in default under any of the foregoing. The business
of the Company is not being conducted in violation of any law, ordinance or regulation of any governmental entity, except for possible
violations that either singly or in the aggregate do not and will not have a Material Adverse Effect. The Company is not required
under federal, state or local law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration
with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement
or issue and sell the Common Stock in accordance with the terms hereof (other than any SEC, FINRA or state securities filings that
may be required to be made by the Company subsequent to any Closing, any registration statement that may be filed pursuant hereto);
provided that, for purposes of the representation made in this sentence, the Company is assuming and relying upon the accuracy
of the relevant representations and agreements of Investor herein.
Section 4.8 NO
MATERIAL ADVERSE CHANGE. Since December 31, 2014 no event has occurred that would have a Material Adverse Effect on the Company.
Section 4.9 LITIGATION
AND OTHER PROCEEDINGS. Except as disclosed in the Company’s SEC filings, there are no lawsuits or proceedings pending or
to the knowledge of the Company threatened, against the Company, nor has the Company received any written or oral notice of any
such action, suit, proceeding or investigation, which would have a Material Adverse Effect. No judgment, order, writ, injunction
or decree or award has been issued by or, so far as is known by the Company, requested of any court, arbitrator or governmental
agency which would have a Material Adverse Effect.
Section 4.10 DILUTION.
The number of shares of Common Stock issuable as Put Shares may increase substantially in certain circumstances, including, but
not necessarily limited to, the circumstance wherein the trading price of the Common Stock declines during the period between the
Execution Date and the end of the Commitment Period. The Company’s executive officers and directors have studied and fully
understand the nature of the transactions contemplated by this Agreement and recognize that they have a potential dilutive effect.
The board of directors of the Company has concluded in its good faith business judgment that such issuance is in the best interests
of the Company. The Company specifically acknowledges that its obligation to issue the Put Shares is binding upon the Company and
enforceable regardless of the dilution such issuance may have on the ownership interests of other shareholders of the Company.
ARTICLE V
COVENANTS OF INVESTOR
Section 5.1 COMPLIANCE
WITH LAW; TRADING IN SECURITIES. Investor's trading activities with respect to shares of the Common Stock will be in compliance
with all applicable state and federal securities laws, rules and regulations and the rules and regulations of FINRA and the Principal
Market on which the Common Stock is listed or quoted.
Section 5.2 SHORT
SALES AND CONFIDENTIALITY. Neither Investor nor any affiliate of the Investor acting on its behalf or pursuant to any understanding
with it will execute any Short Sales during the period from the date hereof to the end of the Commitment Period. For the purposes
hereof, and in accordance with Regulation SHO, the sale after delivery of a Put Notice of such number of shares of Common Stock
reasonably expected to be purchased under a Put Notice shall not be deemed a Short Sale.
Other than to other
Persons party to this Agreement, Investor has maintained the confidentiality of all disclosures made to it in connection with this
transaction (including the existence and terms of this transaction).
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1 RESERVATION
OF COMMON STOCK. The Company will, from time to time as needed in advance of a Closing Date, reserve and keep available until the
consummation of such Closing, free of preemptive rights sufficient shares of Common Stock for the purpose of enabling the Company
to satisfy its obligation to issue the Put Shares to be issued in connection therewith. The number of shares so reserved from time
to time, as theretofore increased or reduced as hereinafter provided, may be reduced by the number of shares actually delivered
hereunder.
Section 6.2 LISTING
OF COMMON STOCK. If the Company applies to have the Common Stock traded on any other Principal Market, it shall include in such
application the Put Shares, and shall take such other action as is necessary or desirable in the reasonable opinion of Investor
to cause the Common Stock to be listed on such other Principal Market as promptly as possible. The Company shall use its commercially
reasonable efforts to continue the listing and trading of the Common Stock on the Principal Market (including, without limitation,
maintaining sufficient net tangible assets) and will comply in all respects with the Company's reporting, filing and other obligations
under the bylaws or rules of the FINRA and the Principal Market.
Section 6.3 CERTAIN
AGREEMENTS. So long as this Agreement remains in effect, the Company covenants and agrees that it will not, without the prior written
consent of the Investor, enter into any other equity line of credit agreement with a third party during the Commitment Period having
terms and conditions substantially comparable to this Agreement. For the avoidance of doubt, nothing contained in the Transaction
Documents shall restrict, or require the Investor's consent for, any agreement providing for the issuance or distribution of (or
the issuance or distribution of) any equity securities pursuant to any agreement or arrangement that is not commonly understood
to be an "equity line of credit."
ARTICLE VII
CONDITIONS TO DELIVERY OF
PUT NOTICES AND CONDITIONS TO CLOSING
Section 7.1 CONDITIONS
PRECEDENT TO THE OBLIGATION OF THE COMPANY TO ISSUE AND SELL COMMON STOCK. The obligation hereunder of the Company to issue and
sell the Put Shares to Investor is subject to the satisfaction of each of the conditions set forth below.
(a) ACCURACY OF INVESTOR'S
REPRESENTATIONS AND WARRANTIES. The representations and warranties of Investor shall be true and correct in all material respects
as of the date of this Agreement and as of the date of each such Closing as though made at each such time.
(b) PERFORMANCE
BY INVESTOR. Investor shall have performed, satisfied and complied in all respects with all covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by Investor at or prior to such Closing.
(c) PRINCIPAL
MARKET REGULATION. The Company shall not issue any Put Shares, and the Investor shall not have the right to receive any Put Shares,
if the issuance of such shares would exceed the aggregate number of shares of Common Stock which the Company may issue without
breaching the Company’s obligations under the rules or regulations of the Principal Market (the “Exchange Cap”).
Section 7.2 CONDITIONS
PRECEDENT TO THE RIGHT OF THE COMPANY TO DELIVER A PUT NOTICE AND THE OBLIGATION OF INVESTOR TO PURCHASE PUT SHARES. The right
of the Company to deliver a Put Notice and the obligation of Investor hereunder to acquire and pay for the Put Shares is subject
to the satisfaction of each of the following conditions which cannot be waived by the Investor:
(a) EFFECTIVE
REGISTRATION STATEMENT. The Registration Statement, and any amendment or supplement thereto, shall remain effective for the sale
by Investor of the Registered Securities subject to such Put Notice, and (i) neither the Company nor Investor shall have received
notice that the SEC has issued or intends to issue a stop order with respect to such Registration Statement or that the SEC otherwise
has suspended or withdrawn the effectiveness of such Registration Statement, either temporarily or permanently, or intends or has
threatened to do so and (ii) no other suspension of the use or withdrawal of the effectiveness of such Registration Statement or
related prospectus shall exist.
(b) ACCURACY
OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Company shall be true and correct in
all material respects (except for representations and warranties specifically made as of a particular date), except for any conditions
which have temporarily caused any representations or warranties herein to be incorrect and which have been corrected with no continuing
impairment to the Company or Investor.
(c) PERFORMANCE
BY THE COMPANY. The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied with by the Company.
(d) NO
INJUNCTION. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated
or adopted by any court or governmental authority of competent jurisdiction that prohibits or directly and materially adversely
affects any of the transactions contemplated by this Agreement, and no proceeding shall have been commenced that may have the effect
of prohibiting or materially adversely affecting any of the transactions contemplated by this Agreement.
(e) ADVERSE
CHANGES. Since the date of filing of the Company's most recent SEC Document, no event that had or is reasonably likely to have
a Material Adverse Effect has occurred.
(f) NO
SUSPENSION OF TRADING IN OR DELISTING OF COMMON STOCK. The trading of the Common Stock shall not have been suspended by the SEC,
the Principal Market or the FINRA and the Common Stock shall have been approved for listing or quotation on and shall not have
been delisted from the Principal Market.
(g) TEN
PERCENT LIMITATION. On each Closing Date, the number of Put Shares then to be purchased by Investor shall not exceed the number
of such shares that, when aggregated with all other shares of Common Stock then owned by Investor beneficially or deemed beneficially
owned by Investor, would result in Investor owning more than 9.99% of all of such Common Stock as would be outstanding on such
Closing Date, as determined in accordance with Section 16 of the Exchange Act and the regulations promulgated thereunder. For purposes
of this Section, in the event that the amount of Common Stock outstanding as determined in accordance with Section 16 of the Exchange
Act and the regulations promulgated thereunder is greater on a Closing Date than on the date upon which the Put Notice associated
with such Closing Date is given, the amount of Common Stock outstanding on such Closing Date shall govern for purposes of determining
whether Investor, when aggregating all purchases of Common Stock made pursuant to this Agreement, would own more than 9.99% of
the Common Stock following such Closing Date.
(h) PRINCIPAL
MARKET REGULATION. The Company shall not issue any Put Shares, and the Investor shall not have the right to receive any Put Shares,
if the issuance of such shares would exceed the Exchange Cap.
(i) NO
KNOWLEDGE. The Company shall have no knowledge of any event more likely than not to have the effect of causing such Registration
Statement to be suspended or otherwise ineffective (which event is more likely than not to occur within the fifteen (15) Trading
Days following the Trading Day on which such Put Notice is deemed delivered).
(j) NO
VIOLATION OF SHAREHOLDER APPROVAL REQUIREMENT. The issuance of shares of Common Stock with respect to the applicable Closing, if
any, shall not violate the shareholder approval requirements of the Principal Market.
(k) OTHER.
On the date of delivery of each Put Notice, Investor shall have received a certificate in substantially the form and substance
of Exhibit B hereto, executed by an executive officer of the Company and to the effect that all the conditions to such Closing
shall have been satisfied as at the date of each such certificate.
ARTICLE VIII
LEGENDS
Section 8.1 NO
STOCK LEGEND OR STOCK TRANSFER RESTRICTIONS. No legend shall be placed on the share certificates representing the Put Shares.
Section 8.2 INVESTOR'S
COMPLIANCE. Nothing in this Article VIII shall affect in any way Investor's obligations under any agreement to comply with all
applicable securities laws upon the sale of the Common Stock.
ARTICLE IX
NOTICES; INDEMNIFICATION
Section 9.1 NOTICES.
All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (a) personally served, (b) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (c) delivered by reputable air courier service with charges prepaid, or (d) transmitted by
hand delivery, telegram, or email as a PDF, addressed as set forth below or to such other address as such party shall have specified
most recently by written notice given in accordance herewith. Any notice or other communication required or permitted to be given
hereunder shall be deemed effective (i) upon hand delivery or delivery by email at the address designated below (if delivered on
a business day during normal business hours where such notice is to be received), or the first business day following such delivery
(if delivered other than on a business day during normal business hours where such notice is to be received) or (ii) on the second
business day following the date of mailing by express courier service or on the fifth business day after deposited in the mail,
in each case, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such
communications shall be:
If to the Company:
If to the Investor:
Kodiak Capital Group, LLC
260 Newport Center Drive
Newport Beach, CA 92660
ryan@kodiakfunds.com
Either party hereto may from time to time
change its address or email for notices under this Section 9.1 by giving at least ten (10) days' prior written notice of such changed
address to the other party hereto.
Section 9.2 INDEMNIFICATION.
Each party (an “Indemnifying Party”) agrees to indemnify and hold harmless the other party along with its officers,
directors, employees, and authorized agents, and each Person or entity, if any, who controls such party within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act (an “Indemnified Party”) from and against any Damages, joint
or several, and any action in respect thereof to which the Indemnified Party becomes subject to, resulting from, arising out of
or relating to (i) any misrepresentation, breach of warranty or nonfulfillment of or failure to perform any covenant or agreement
on the part of Indemnifying Party contained in this Agreement, (ii) any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement or any post-effective amendment thereof or supplement thereto, or the omission or
alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading,
(iii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus or contained
in the final prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the
SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in the
light of the circumstances under which the statements therein were made, not misleading, or (iv) any violation or alleged violation
by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation under the Securities
Act, the Exchange Act or any state securities law, as such Damages are incurred, except to the extent such Damages result primarily
from Indemnified Party's failure to perform any covenant or agreement contained in this Agreement or Indemnified Party's negligence,
recklessness or bad faith in performing its obligations under this Agreement; provided, however, that the foregoing indemnity agreement
shall not apply to any Damages of an Indemnified Party to the extent, but only to the extent, arising out of or based upon any
untrue statement or alleged untrue statement or omission or alleged omission made by an Indemnifying Party in reliance upon and
in conformity with written information furnished to the Indemnifying Party by the Indemnified Party expressly for use in the Registration
Statement, any post-effective amendment thereof or supplement thereto, or any preliminary prospectus or final prospectus (as amended
or supplemented).
Section 9.3 METHOD
OF ASSERTING INDEMNIFICATION CLAIMS. All claims for indemnification by any Indemnified Party (as defined below) under Section 9.2
shall be asserted and resolved as follows:
(a) In
the event any claim or demand in respect of which an Indemnified Party might seek indemnity under Section 9.2 is asserted against
or sought to be collected from such Indemnified Party by a person other than a party hereto or an affiliate thereof (a "THIRD
PARTY CLAIM"), the Indemnified Party shall deliver a written notification, enclosing a copy of all papers served, if any,
and specifying the nature of and basis for such Third Party Claim and for the Indemnified Party's claim for indemnification that
is being asserted under any provision of Section 9.2 against an Indemnifying Party, together with the amount or, if not then reasonably
ascertainable, the estimated amount, determined in good faith, of such Third Party Claim (a "CLAIM NOTICE") with reasonable
promptness to the Indemnifying Party. If the Indemnified Party fails to provide the Claim Notice with reasonable promptness after
the Indemnified Party receives notice of such Third Party Claim, the Indemnifying Party shall not be obligated to indemnify the
Indemnified Party with respect to such Third Party Claim to the extent that the Indemnifying Party's ability to defend has been
prejudiced by such failure of the Indemnified Party. The Indemnifying Party shall notify the Indemnified Party as soon as practicable
within the period ending thirty (30) calendar days following receipt by the Indemnifying Party of either a Claim Notice or an Indemnity
Notice (as defined below) (the "DISPUTE PERIOD") whether the Indemnifying Party disputes its liability or the amount
of its liability to the Indemnified Party under Section 9.2 and whether the Indemnifying Party desires, at its sole cost and expense,
to defend the Indemnified Party against such Third Party Claim.
(i) If
the Indemnifying Party notifies the Indemnified Party within the Dispute Period that the Indemnifying Party desires to defend the
Indemnified Party with respect to the Third Party Claim pursuant to this Section 9.3(a), then the Indemnifying Party shall have
the right to defend, with counsel reasonably satisfactory to the Indemnified Party, at the sole cost and expense of the Indemnifying
Party, such Third Party Claim by all appropriate proceedings, which proceedings shall be vigorously and diligently prosecuted by
the Indemnifying Party to a final conclusion or will be settled at the discretion of the Indemnifying Party (but only with the
consent of the Indemnified Party in the case of any settlement that provides for any relief other than the payment of monetary
damages or that provides for the payment of monetary damages as to which the Indemnified Party shall not be indemnified in full
pursuant to Section 9.2). The Indemnifying Party shall have full control of such defense and proceedings, including any compromise
or settlement thereof; provided, however, that the Indemnified Party may, at the sole cost and expense of the Indemnified Party,
at any time prior to the Indemnifying Party's delivery of the notice referred to in the first sentence of this clause (i), file
any motion, answer or other pleadings or take any other action that the Indemnified Party reasonably believes to be necessary or
appropriate to protect its interests; and provided further, that if requested by the Indemnifying Party, the Indemnified Party
will, at the sole cost and expense of the Indemnifying Party, provide reasonable cooperation to the Indemnifying Party in contesting
any Third Party Claim that the Indemnifying Party elects to contest. The Indemnified Party may participate in, but not control,
any defense or settlement of any Third Party Claim controlled by the Indemnifying Party pursuant to this clause (i), and except
as provided in the preceding sentence, the Indemnified Party shall bear its own costs and expenses with respect to such participation.
Notwithstanding the foregoing, the Indemnified Party may takeover the control of the defense or settlement of a Third Party Claim
at any time if it irrevocably waives its right to indemnity under Section 9.2 with respect to such Third Party Claim.
(ii) If
the Indemnifying Party fails to notify the Indemnified Party within the Dispute Period that the Indemnifying Party desires to defend
the Third Party Claim pursuant to Section 9.3(a), or if the Indemnifying Party gives such notice but fails to prosecute vigorously
and diligently or settle the Third Party Claim, or if the Indemnifying Party fails to give any notice whatsoever within the Dispute
Period, then the Indemnified Party shall have the right to defend, at the sole cost and expense of the Indemnifying Party, the
Third Party Claim by all appropriate proceedings, which proceedings shall be prosecuted by the Indemnified Party in a reasonable
manner and in good faith or will be settled at the discretion of the Indemnified Party(with the consent of the Indemnifying Party,
which consent will not be unreasonably withheld). The Indemnified Party will have full control of such defense and proceedings,
including any compromise or settlement thereof; provided, however, that if requested by the Indemnified Party, the Indemnifying
Party will, at the sole cost and expense of the Indemnifying Party, provide reasonable cooperation to the Indemnified Party and
its counsel in contesting any Third Party Claim which the Indemnified Party is contesting. Notwithstanding the foregoing provisions
of this clause (ii), if the Indemnifying Party has notified the Indemnified Party within the Dispute Period that the Indemnifying
Party disputes its liability or the amount of its liability hereunder to the Indemnified Party with respect to such Third Party
Claim and if such dispute is resolved in favor of the Indemnifying Party in the manner provided in clause (iii) below, the Indemnifying
Party will not be required to bear the costs and expenses of the Indemnified Party's defense pursuant to this clause (ii) or of
the Indemnifying Party's participation therein at the Indemnified Party's request, and the Indemnified Party shall reimburse the
Indemnifying Party in full for all reasonable costs and expenses incurred by the Indemnifying Party in connection with such litigation.
The Indemnifying Party may participate in, but not control, any defense or settlement controlled by the Indemnified Party pursuant
to this clause (ii), and the Indemnifying Party shall bear its own costs and expenses with respect to such participation.
(iii) If
the Indemnifying Party notifies the Indemnified Party that it does not dispute its liability or the amount of its liability to
the Indemnified Party with respect to the Third Party Claim under Section 9.2 or fails to notify the Indemnified Party within the
Dispute Period whether the Indemnifying Party disputes its liability or the amount of its liability to the Indemnified Party with
respect to such Third Party Claim, the amount of Damages specified in the Claim Notice shall be conclusively deemed a liability
of the Indemnifying Party under Section 9.2 and the Indemnifying Party shall pay the amount of such Damages to the Indemnified
Party on demand. If the Indemnifying Party has timely disputed its liability or the amount of its liability with respect to such
claim, the Indemnifying Party and the Indemnified Party shall proceed in good faith to negotiate a resolution of such dispute;
provided, however, that if the dispute is not resolved within thirty (30) days after the Claim Notice, the Indemnifying Party shall
be entitled to institute such legal action as it deems appropriate.
(b) In
the event any Indemnified Party should have a claim under Section 9.2 against the Indemnifying Party that does not involve a Third
Party Claim, the Indemnified Party shall deliver a written notification of a claim for indemnity under Section 9.2 specifying the
nature of and basis for such claim, together with the amount or, if not then reasonably ascertainable, the estimated amount, determined
in good faith, of such claim (an "INDEMNITY NOTICE") with reasonable promptness to the Indemnifying Party. The failure
by any Indemnified Party to give the Indemnity Notice shall not impair such party's rights hereunder except to the extent that
the Indemnifying Party demonstrates that it has been irreparably prejudiced thereby. If the Indemnifying Party notifies the Indemnified
Party that it does not dispute the claim or the amount of the claim described in such Indemnity Notice or fails to notify the Indemnified
Party within the Dispute Period whether the Indemnifying Party disputes the claim or the amount of the claim described in such
Indemnity Notice, the amount of Damages specified in the Indemnity Notice will be conclusively deemed a liability of the Indemnifying
Party under Section 9.2 and the Indemnifying Party shall pay the amount of such Damages to the Indemnified Party on demand. If
the Indemnifying Party has timely disputed its liability or the amount of its liability with respect to such claim, the Indemnifying
Party and the Indemnified Party shall proceed in good faith to negotiate a resolution of such dispute; provided, however, that
if the dispute is not resolved within thirty (30) days after the Claim Notice, the Indemnifying Party shall be entitled to institute
such legal action as it deems appropriate.
(c) The
Indemnifying Party agrees to pay the Indemnified Party, promptly as such expenses are incurred and are due and payable, for any
reasonable legal fees or other reasonable expenses incurred by them in connection with investigating or defending any such Claim.
(d) The
indemnity provisions contained herein shall be in addition to (i) any cause of action or similar rights of the Indemnified Party
against the Indemnifying Party or others, and (ii) any liabilities the Indemnifying Party may be subject to.
ARTICLE X
MISCELLANEOUS
Section 10.1 GOVERNING
LAW; JURISDICTION. This Agreement shall be governed by and interpreted in accordance with the laws of the State of California without
regard to the principles of conflicts of law. Each of the Company and Investor hereby submit to the exclusive jurisdiction of the
United States Federal and state courts located in Orange County, California with respect to any dispute arising under this Agreement,
the agreements entered into in connection herewith or the transactions contemplated hereby or thereby.
Section 10.2 JURY
TRIAL WAIVER. The Company and the Investor hereby waive a trial by jury in any action, proceeding or counterclaim brought by either
of the parties hereto against the other in respect of any matter arising out of or in connection with the Transaction Documents.
Section 10.3 ASSIGNMENT.
This Agreement shall be binding upon and inure to the benefit of the Company and Investor and their respective successors. Neither
this Agreement nor any rights of Investor or the Company hereunder may be assigned by either party to any other person.
Section 10.4 THIRD
PARTY BENEFICIARIES. This Agreement is intended for the benefit of the Company and Investor and their respective successors, and
is not for the benefit of, nor may any provision hereof be enforced by, any other person.
Section 10.5 TERMINATION.
The Company may terminate this Agreement at any time by written notice to the Investor. Additionally, this Agreement shall terminate
at the end of Commitment Period or as otherwise provided herein; provided, however, that the provisions of Articles IX, and Sections
10.1 and 10.2 shall survive the termination of this Agreement for a period of twenty four (24) months.
Section 10.6 ENTIRE
AGREEMENT, AMENDMENT; NO WAIVER. This Agreement and the instruments referenced herein contain the entire understanding of the Company
and Investor with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither
the Company nor Investor makes any representation, warranty, covenant or undertaking with respect to such matters. This Agreement
may not be amended.
Section 10.7 FEES
AND EXPENSES. The Company agrees to pay its own expenses in connection with the preparation of this Agreement and performance of
its obligations hereunder. The Company shall pay all stamp or other similar taxes and duties levied in connection with issuance
of the Put Shares pursuant hereto.
Section 10.8 COUNTERPARTS.
This Agreement may be executed in multiple counterparts, each of which may be executed by less than all of the parties and shall
be deemed to be an original instrument which shall be enforceable against the parties actually executing such counterparts and
all of which together shall constitute one and the same instrument. This Agreement may be delivered to the other parties hereto
by email of a copy of this Agreement bearing the signature of the parties so delivering this Agreement.
Section 10.9 SEVERABILITY.
In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable
or void, this Agreement shall continue in full force and effect without said provision; provided that such severability shall be
ineffective if it materially changes the economic benefit of this Agreement to any party.
Section 10.10 FURTHER
ASSURANCES. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order
to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
Section 10.11 NO
STRICT CONSTRUCTION. The language used in this Agreement will be deemed to be the language chosen by the parties to express their
mutual intent, and no rules of strict construction will be applied against any party.
Section 10.12 EQUITABLE
RELIEF. The Company recognizes that in the event that it fails to perform, observe, or discharge any or all of its obligations
under this Agreement, any remedy at law may prove to be inadequate relief to Investor. The Company therefore agrees that Investor
shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages.
Section 10.13 TITLE
AND SUBTITLES. The titles and subtitles used in this Agreement are used for the convenience of reference and are not to be considered
in construing or interpreting this Agreement.
Section 10.14 REPORTING
ENTITY FOR THE COMMON STOCK. The reporting entity relied upon for the determination of the Closing Price for the Common Stock on
any given Trading Day for the purposes of this Agreement shall be Bloomberg Finance L.P. or any successor thereto. The written
mutual consent of Investor and the Company shall be required to employ any other reporting entity.
Section 10.15 PUBLICITY.
The Company and Investor shall consult with each other in issuing any press releases or otherwise making public statements with
respect to the transactions contemplated hereby and no party shall issue any such press release or otherwise make any such public
statement without the prior written consent of the other parties, which consent shall not be unreasonably withheld or delayed,
except that no prior consent shall be required if such disclosure is required by law, in which such case the disclosing party shall
provide the other parties with prior notice of such public statement. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of Investor without the prior written consent of such Investor, except to the extent required by law. Investor
acknowledges that this Agreement and all or part of the Transaction Documents may be deemed to be "material contracts"
as that term is defined by Item 601(b)(10) of Regulation S-K, and that the Company may therefore be required to file such documents
as exhibits to reports or registration statements filed under the Securities Act or the Exchange Act. Investor further agrees that
the status of such documents and materials as material contracts shall be determined solely by the Company, in consultation with
its counsel.
IN WITNESS WHEREOF, the parties have caused
this Agreement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written.
COMPANY:
ZONZIA MEDIA, INC.
By: /s/ Johnathan Adair
Name: Johnathan Adair
Title:
INVESTOR:
KODIAK CAPITAL GROUP, LLC
By: /s/ Ryan C. Hodson
Name: Ryan C. Hodson
Title: Managing Member
[-Signature page to Equity Purchase Agreement-]
EXHIBIT A
FORM OF PUT NOTICE
TO: KODIAK CAPITAL GROUP, LLC
We refer to the Equity Purchase Agreement dated February 10,
2016 (the “Agreement”) entered into by ZONZIA MEDIA, INC. (the “Company”) and you. Capitalized terms defined
in the Agreement shall, unless otherwise defined, have the same meaning when used herein.
We hereby:
1) Give you notice that we require you
to purchase ______________ Put Shares;
2) Certify that, as of the date hereof,
to the best of our knowledge, the conditions set forth in Section 7.2 of the Agreement are satisfied.
Date: _____________, 2016
ZONZIA MEDIA, INC.
By: ____________________________
Name:
Title:
EXHIBIT B
FORM OF CERTIFICATE OF THE CHIEF EXECUTIVE
OFFICER OF ZONZIA MEDIA, INC.
Pursuant to Section
7.2(l) of that certain Equity Purchase Agreement dated February 10, 2016 (the “Agreement”) by and between the Company
and KODIAK CAPITAL GROUP, LLC (the “Investor”), the undersigned, in his capacity as the Chief Executive Officer of
ZONZIA MEDIA, INC. (the “Company”), and not in his individual capacity, hereby certifies, as of the date hereof (such
date, the “Condition Satisfaction Date”), the following:
1. The
representations and warranties of the Company are true and correct in all material respects as of the Condition Satisfaction Date
as though made on the Condition Satisfaction Date (except for representations and warranties specifically made as of a particular
date) with respect to all periods, and as to all events and circumstances occurring or existing to and including the Condition
Satisfaction Date, except for any conditions which have temporarily caused any representations or warranties of the Company set
forth in the Agreement to be incorrect and which have been corrected with no continuing impairment to the Company or Investor;
and
2. All
of the Company’s conditions to Closing set forth in Section 7.2 of the Agreement have been satisfied as of the Condition
Satisfaction Date.
Capitalized terms used
herein shall have the meanings set forth in the Agreement unless otherwise defined herein.
IN WITNESS WHEREOF,
the undersigned has hereunto affixed his hand as of the ___ day of ____________, 2016.
By:__________________________
Name:
Title:
EXHIBIT 10.14
REGISTRATION RIGHTS AGREEMENT
This Registration Rights
Agreement ("Agreement"), dated February 10, 2016, is made by and between Zonzia Media, Inc., Nevada corporation ("Company"),
and KODIAK CAPITAL GROUP, LLC a Delaware limited liability company (the "Investor").
RECITALS
WHEREAS, upon the terms
and subject to the conditions of the Equity Purchase Agreement ("Purchase Agreement"), between the Investor and the Company,
the Company has agreed to issue and sell to the Investor shares (the "Put Shares") of its common stock, $0.001 par value
per share (the "Common Stock") from time to time for an aggregate investment price of up to Two Million Dollars ($2,000,000)
(the "Registered Securities"); and
WHEREAS, to induce the
Investor to execute and deliver the Purchase Agreement, the Company has agreed to provide certain registration rights under the
Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), and applicable state securities laws with respect to the Registered Securities;
NOW, THEREFORE, in consideration
of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company and the Investor hereby agree as follows:
1. Definitions.
(a) As
used in this Agreement, the following terms shall have the following meaning:
(i) "Subscription
Date" means the date of this Agreement.
(ii) "Investor"
has the meaning set forth in the preamble to this Agreement.
(iii) "Register,"
"registered" and "registration" refer to a registration effected by preparing and filing a Registration Statement
or Statements in compliance with the Securities Act and pursuant to Rule 415 under the Securities Act or any successor rule providing
for offering securities on a delayed or continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange Commission (the "SEC").
(iv) "Registered
Securities" will have the same meaning as set forth in the Purchase Agreement.
(v)
"Registration Statement" means the Company’s registration
statement on Form S-1, or any similar registration statement of the Company filed with SEC under the Securities Act with respect
to the Registered Securities.
(vi)
"EDGAR" means the SEC's Electronic Data Gathering, Analysis
and Retrieval System.
(vii)
“Exchange Act” means
the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the SEC thereunder,
all as the same will then be in effect.
(b) Capitalized
terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Purchase Agreement.
2. Obligation
of the Company. In connection with the registration of the Registered Securities, the Company shall do each of the following:
(a) Prepare
promptly and file with the SEC by December 31, 2016, a Registration Statement with respect to not less than the maximum allowable
under Rule 415 of Registered Securities, and thereafter use all commercially reasonable efforts to cause such Registration Statement
relating to the Registered Securities to become effective within five (5) business days after notice from the Securities and Exchange
Commission that such Registration Statement may be declared effective, and keep the Registration Statement effective at all times
prior to the termination of the Purchase Agreement until the earliest of (i) the date that is three months after the completion
of the last Closing Date under the Purchase Agreement, (ii) the date when the Investor may sell all Registered Securities under
Rule 144 without volume limitations, or (iii) the date the Investor no longer owns any of the Registered Securities (collectively,
the "Registration Period"), which Registration Statement (including any amendments or supplements, thereto and prospectuses
contained therein) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;
(b) Prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to the Registration Statement and the prospectus used in connection with the Registration Statement
as may be necessary to keep the Registration Statement effective at all times during the Registration Period, and to comply with
the provisions of the Securities Act with respect to the disposition of all Registered Securities of the Company covered by the
Registration Statement until the expiration of the Registration Period.
(c) With
respect to the Registered Securities, upon written request by the Investor, permit counsel designated by Investor to review the
Registration Statement and all amendments and supplements thereto a reasonable period of time (but not less than two (2) business
days) prior to their filing with the SEC, and not file any document in a form to which such counsel reasonably objects.
(d) As promptly as practicable after becoming aware of the following facts,
the Company shall notify Investor and Investor’s legal counsel
identified to the Company and (if requested by any such person) confirm such notice in writing no later than one (1) business day
thereafter (i): (A) when a prospectus or any prospectus supplement or post-effective amendment to the Registration Statement is
filed; (B) with respect to the Registration Statement or any post-effective amendment, when the same has become effective; (ii)
of the issuance by the SEC of any stop order suspending the effectiveness of the Registration Statement covering any or all of
the Registered Securities or the initiation of any proceedings for that purpose; and (iii) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption from qualification of any of the Registered Securities
for sale in any jurisdiction, or the initiation or threatening of any proceeding for such purpose.
(e) Unless
available to the Investor without charge through EDGAR, the SEC's website or the Company's website, furnish to Investor, promptly
after the same is prepared and publicly distributed, filed with the SEC, or received by the Company, one (1) copy of the Registration
Statement, each preliminary prospectus and the prospectus, and each amendment or supplement thereto;
(f) Use
all commercially reasonable efforts to (i) register and/or qualify the Registered Securities covered by the Registration Statement
under such other securities or blue sky laws of such jurisdictions as the Investor may reasonably request and in which significant
volumes of shares of Common Stock are traded, (ii) prepare and file in those jurisdictions such amendments (including post-effective
amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof
at all times during the Registration Period, (iii) take such other actions as may be necessary to maintain such registrations and
qualification in effect at all times during the Registration Period, and (iv) take all other actions reasonably necessary or advisable
to qualify the Registered Securities for sale in such jurisdictions: provided, however, that the Company shall not be required
in connection therewith or as a condition thereto to (A) qualify to do business in any jurisdiction where it would not otherwise
be required to qualify but for this Section 3(f), (B) subject itself to general taxation in any such jurisdiction, (C) file a general
consent to service of process in any such jurisdiction, (D) provide any undertakings that cause more than nominal expense or burden
to the Company or (E) make any change in its charter or by-laws or any then existing contracts, which in each case the Board of
Directors of the Company determines to be contrary to the best interests of the Company and its stockholders;
(g) As
promptly as practicable after becoming aware of such event, notify the Investor of the happening of any event of which the Company
has knowledge, as a result of which the prospectus included in the Registration Statement, as then in effect, includes any untrue
statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not misleading ("Registration Default"), and promptly
prepare a supplement or amendment to the Registration Statement or other appropriate filing with the SEC to correct such untrue
statement or omission, and take any other commercially reasonable steps to cure the Registration Default, and, unless available
to the Investor without charge through EDGAR, the SEC's website or the Company's website, deliver a number of copies of such supplement
or amendment to the Investor as the Investor may reasonably request.
(h) Use its commercially
reasonable efforts, if eligible, either to (i) cause all the Registered Securities covered by the Registration Statement to be
listed on a national securities exchange and on each additional national securities exchange on which securities of the same class
or series issued by the Company are then listed, if any, if the listing of such Registered Securities is then permitted under the
rules of such exchange, or (ii) secure designation of all the Registered Securities covered by the Registration Statement as a
National Association of Securities Dealers Automated Quotations System ("Nasdaq”) security within the meaning of Rule
11Aa2-1 of the SEC under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the quotation of the
Registered Securities on the Nasdaq Capital Market; or if, despite the Company’s commercially reasonable efforts to satisfy
the preceding clause (i) or (ii), the Company is unsuccessful in doing so, to use its commercially reasonable efforts to secure
authorization of the Financial Industry Regulatory Authority (“FINRA”) and quotation for such Registered Securities
on the over-the-counter bulletin board or on the OTC Markets and, without limiting the generality of the foregoing;
(i) Provide
a transfer agent for the Registered Securities not later than the Subscription Date under the Purchase Agreement;
(j) Cooperate
with the Investor to facilitate the timely preparation and delivery of certificates for the Registered Securities to be offered
pursuant to the Registration Statement and enable such certificates for the Registered Securities to be in such denominations or
amounts as the case may be, as the Investor may reasonably request and registration in such names as the Investor may request;
and, within five (5) business days after a Registration Statement which includes Registered Securities is ordered effective by
the SEC, the Company shall deliver, and shall cause legal counsel selected by the Company to deliver, to the transfer agent for
the Registered Securities (with copies to the Investor) an appropriate instruction and opinion of such counsel, if so required
by the Company’s transfer agent; and
(k) Take
all other commercially reasonable actions necessary to expedite and facilitate distribution to the Investor of the Registered Securities
pursuant to the Registration Statement.
3. Obligations
of the Investor. In connection with the registration of the Registered Securities, the Investor shall have the following obligations;
(a) It
shall be a condition precedent to the obligations of the Company to complete the registration pursuant to this Agreement with respect
to the Registered Securities of the Investor that the Investor shall timely furnish to the Company such information regarding itself,
the Registered Securities held by it, and the intended method of disposition of the Registered Securities held by it, as shall
be reasonably required to effect the registration of such Registered Securities and shall timely execute such documents in connection
with such registration as the Company may reasonably request.
(b) The
Investor by such Investor’s acceptance of the Registered
Securities agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing
of the Registration Statement hereunder; and
(c) The
Investor agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section
3(d)(ii) or (iii) or 3(g) above, the Investor will immediately discontinue disposition of Registered Securities pursuant to the
Registration Statement covering such Registered Securities until the Investor receives the copies of the supplemented or amended
prospectus contemplated by Section 3(d)(ii) or (iii) or 3(g) and, if so directed by the Company, the Investor shall deliver to
the Company (at the expense of the Company) or destroy (and deliver to the Company a certificate of destruction) all copies in
the Investor’s possession, of the prospectus covering such
Registered Securities current at the time of receipt of such notice.
4. Expenses
of Registration. All reasonable expenses incurred in connection with registrations, filings or qualifications pursuant to Section
3, including, without limitation, all registration, listing, and qualifications fees, printers and accounting fees, the
fees and disbursements of counsel for the Company shall be borne by the Company.
5. Indemnification.
After Registered Securities are included in a Registration Statement under this Agreement:
(a) To
the extent permitted by law, the Company will indemnify and hold harmless, the Investor, the directors, if any, of such Investor,
the officers, if any, of such Investor, each person, if any, who controls the Investor within the meaning of the Securities Act
or the Exchange Act (each, an "Indemnified Person"), against any losses, claims, damages, liabilities or expenses (joint
or several) incurred (collectively, "Claims") to which any of them may become subject under the Securities Act, the Exchange
Act or otherwise, insofar as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise
out of or are based upon: (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration
Statement or any post-effective amendment thereof or the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement
of a material fact contained in any preliminary prospectus or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein
any material fact necessary to make the statements made therein, in the light of the circumstances under which the statements therein
were made, not misleading or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any
state securities law or any rule or regulation under the Securities Act, the Exchange Act or any state securities law (the matters
in the foregoing clauses (i) through (iii) being collectively referred to as "Violations"). Subject to Section 6(b) hereof,
the Company shall reimburse the Investor, promptly as such expenses are incurred and are due and payable, for any reasonable legal
fees or other reasonable expenses incurred by them in connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement contained in this Section 6(a) shall not (i) apply to
any Claims arising out of or based upon a Violation which occurs in reliance upon and in conformity with information furnished
in writing to the Company by or on behalf of any Indemnified Person expressly for use in connection with the preparation of the
Registration Statement or any such amendment thereof or supplement thereto, if such prospectus was timely made available by the
Company pursuant to Section 3(b) hereof; (ii) with respect to any preliminary prospectus, inure to the benefit of any such person
from whom the person asserting any such Claim purchased the Registered Securities that are the subject thereof (or to the benefit
of any person controlling such person) if the untrue statement or omission of material fact contained in the preliminary prospectus
was corrected in the prospectus, as then amended or supplemented, if such prospectus was timely made available by the Company pursuant
to Section 3(b) hereof; (iii) be available to the extent such Claim is based on a failure of the Investor to deliver or cause to
be delivered the prospectus made available by the Company; or (iv) apply to amounts paid in settlement of any Claim if such settlement
is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld. The Investor will
indemnify the Company, its officers, directors and agents (including legal counsel) against any claims arising out of or based
upon a Violation which occurs in reliance upon and in conformity with information furnished in writing to the Company, by or on
behalf of the Investor, expressly for use in connection with the preparation of the Registration Statement, subject to such limitations
and conditions set forth in the previous sentence.
(b) Promptly
after receipt by an Indemnified Person under this Section 6 of notice of the commencement of any action (including any governmental
action), such Indemnified Person shall, if a Claim in respect thereof is to be made against any indemnifying party under this Section
6, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right
to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed,
to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person,
as the case may be; provided, however, that an Indemnified Person shall have the right to retain its own counsel
with the reasonable fees and expenses to be paid by the indemnifying party, if, in the reasonable opinion of counsel retained by
the indemnifying party, the representation by such counsel of the Indemnified Person and the indemnifying party would be inappropriate
due to actual or potential differing interests between such Indemnified Person and any other party represented by such counsel
in such proceeding. In such event, the Company shall pay for only one separate legal counsel for the Investor selected by the Investor.
The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action
shall not relieve such indemnifying party of any liability to the Indemnified Person under this Section 6, except to the extent
that the indemnifying party is prejudiced in its ability to defend such action. The indemnification required by this Section 6
shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as such expense, loss,
damage or liability is incurred and is due and payable.
6. Contribution. To
the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to
make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 6 to the
fullest extent permitted by law; provided, however, that (a) no contribution shall be made under circumstances
where the maker would not have been liable for indemnification under the fault standards set forth in Section 6 and; (b) no
seller of Registered Securities guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any seller of Registered Securities who was not guilty of such fraudulent
misrepresentation.
7. Reports
under Exchange Act. With a view to making available to the Investor the benefits of Rule 144 promulgated under the Securities Act
or any other similar rule or regulation of the SEC that may at any time permit the Investor to sell securities of the Company to
the public without registration ("Rule 144"), the Company agrees to use its commercially reasonable efforts to:
(a) make
and keep public information available, as those terms are understood and defined in Rule 144;
(b) file
with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act for so long as
the Company remains subject to such requirements, and the filing of such reports is required for sales under Rule 144;
(c) furnish
to the Investor so long as the Investor owns Registered Securities, promptly upon request, (i) a written statement by the Company
that it has complied with the reporting requirements of Rule 144, the Securities Act and the Exchange Act, (ii) unless available
to the Investor without charge through EDGAR, the SEC's website or the Company's website, a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be
reasonably requested to permit the Investors to sell such securities pursuant to Rule 144 without registration; and
(d)
at
the request of any Investor of Registered Securities, give its Transfer Agent instructions (supported by an opinion of Company
counsel, if required or requested by the Transfer Agent) to the effect that, upon the Transfer Agent’s
receipt from such Investor of:
(i)
a certificate (a “Rule 144 Certificate”)
certifying (A) that such Investor has held the shares of Registered Securities which the Investor proposes to sell (the “Securities
Being Sold”) for a period of not less than (6) months and
(B) as to such other matters as may be appropriate in accordance with Rule 144 under the Securities Act, and
(ii)
an opinion of counsel acceptable to the Company (for which purposes it is agreed that the initial Investor’s
counsel shall be deemed acceptable if such opinion is not given by Company counsel) that, based on the Rule 144 Certificate, Securities
Being Sold may be sold pursuant to the provisions of Rule 144, even in the absence of an effective Registration Statement, the
Transfer Agent is to effect the transfer of the Securities Being Sold and issue to the buyer(s) or transferee(s) thereof one or
more stock certificates representing the transferred Securities Being Sold without any restrictive legend and without recording
any restrictions on the transferability of such shares on the Transfer Agent’s
books and records (except to the extent any such legend or restriction results from facts other than the identity of the Investor,
as the seller or transferor thereof, or the status, including any relevant legends or restrictions, of the shares of the Securities
Being Sold while held by the Investor). If the Transfer Agent requires any additional documentation at the time of the transfer,
the Company shall deliver or cause to be delivered all such reasonable additional documentation as may be necessary to effectuate
the issuance of an unlegended certificate.
8. Miscellaneous.
(a) Registered
Owners. A person or entity is deemed to be a holder of Registered Securities whenever such person or entity owns of record such
Registered Securities. If the Company receives conflicting instructions, notices or elections from two or more persons or entities
with respect to the same Registered Securities, the Company shall act upon the basis of instructions, notice or election received
from the registered owner of such Registered Securities.
(b) Rights
Cumulative; Waivers. The rights of each of the parties under this Agreement are cumulative. The rights of each of the parties hereunder
shall not be capable of being waived or varied other than by an express waiver or variation in writing. Any failure to exercise
or any delay in exercising any of such rights shall not operate as a waiver or variation of that or any other such right. Any defective
or partial exercise of any of such rights shall not preclude any other or further exercise of that or any other such right. No
act or course of conduct or negotiation on the part of any party shall in any way preclude such party from exercising any such
right or constitute a suspension or any variation of any such right.
(c) Benefit;
Successors Bound. This Agreement and the terms, covenants, conditions, provisions, obligations, undertakings, rights, and benefits
hereof, shall be binding upon, and shall inure to the benefit of, the undersigned parties and their successors.
(d) Entire
Agreement. This Agreement contains the entire agreement between the parties with respect to the subject matter hereof. There are
no promises, agreements, conditions, undertakings, understandings, warranties, covenants or representations, oral or written, express
or implied, between them with respect to this Agreement or the matters described in this Agreement, except as set forth in this
Agreement and in the other documentation relating to the transactions contemplated by this Agreement. Any such negotiations, promises,
or understandings shall not be used to interpret or constitute this Agreement.
(e) Amendment.
Any provision of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance
and either retroactively or prospectively), only with the written consent of the Company and Investor. Any amendment or waiver
affected in accordance with this Section 9 shall be binding upon the Company.
(f) Severability.
Each part of this Agreement is intended to be severable. In the event that any provision of this Agreement is found by any court
or other authority of competent jurisdiction to be illegal or unenforceable, such provision shall be severed or modified to the
extent necessary to render it enforceable and as so severed or modified, this Agreement shall continue in full force and effect.
(g) Notices.
Notices required or permitted to be given hereunder shall be in writing and shall be deemed to be sufficiently given when personally
delivered (by hand, by courier, by telephone line facsimile transmission, receipt confirmed, email or other means) or sent by certified
mail, return receipt requested, properly addressed and with proper postage pre-paid (i) if to the Company, at its executive office
and (ii) if to the Investor, at the address set forth under its name in the Purchase Agreement, with a copy to its designated attorney,
or at such other address as each such party furnishes by notice given in accordance with this Section 9(g), and shall be effective,
when personally delivered, upon receipt and, when so sent by certified mail, five (5) business days after deposit with the United
States Postal Service.
(h) Governing
Law. This Agreement shall be governed by and interpreted in accordance with the laws of the State of California without regard
to the principles of conflicts of law. Each of the Company and Investor hereby submit to the exclusive jurisdiction of the United
States Federal and state courts located in Orange County, California with respect to any dispute arising under this Agreement,
the agreements entered into in connection herewith or the transactions contemplated hereby or thereby.
(i) Consents.
The person signing this Agreement on behalf of each party hereby represents and warrants that he has the necessary power, consent
and authority to execute and deliver this Agreement on behalf of that party.
(j) Further
Assurances. In addition to the instruments and documents to be made, executed and delivered pursuant to this Agreement, the parties
hereto agree to make, execute and deliver or cause to be made, executed and delivered, to the requesting party such other instruments
and to take such other actions as the requesting party may reasonably require to carry out the terms of this Agreement and the
transactions contemplated hereby.
(k) Section
Headings. The Section headings in this Agreement are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
(l) Construction.
Unless the context otherwise requires, when used herein, the singular shall be deemed to include the plural, the plural shall be
deemed to include each of the singular, and pronouns of one or no gender shall be deemed to include the equivalent pronoun of the
other or no gender.
(m) Execution
in Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all
of which shall constitute one and the same agreement. This Agreement, once executed by a party, may be delivered to the other party
hereto by email of a .pdf or telephone line facsimile transmission of a copy of this Agreement bearing the signature of the party
so delivering this Agreement. A facsimile transmission or email of a .pdf of this signed Agreement shall be legal and binding on
all parties hereto.
IN WITNESS WHEREOF, the parties have caused
this Agreement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written.
COMPANY:
ZONZIA MEDIA, INC.
By:
/s/ Jonathan Adair
Name: Jonathan Adair
Title: Chief Executive Officer
INVESTOR:
KODIAK CAPITAL GROUP, LLC
By: /s/ Ryan C. Hodson
Name: Ryan C. Hodson
Title: Managing Member
EXHIBIT 10.15
REPLACEMENT
PROMISSORY NOTE 1
REPLACEMENT
PROMISSORY NOTE 1 dated as of February 10, 2016, made by and between Zonzia Media, Inc., a Nevada corporation (the
“Company”) and Kodiak Capital Group, LLC (the :Holder”)
WITNESSETH:
WHEREAS,
the Company previously executed and delivered to the Holder a Convertible Promissory Note dated December 11, 2015 (the “Original
Note), and
WHEREAS,
to reflect the agreement of the Company and the Holder to increase the interest rate, eliminate the right to convert and to change
the Maturity Date, the Company and Holder desire to execute this Note, which amends and restates in its entirety the Original Note.
NOW,
THEREFORE, in consideration of the premises and the agreements hereinafter set forth, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged Company and Holder agree that the Original Note is hereby amended
and restated in its entirety as follows.
NEITHER THIS SECURITY NOR
THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE OR UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES ARE RESTRICTED AND MAY NOT
BE OFFERED, RESOLD, PLEDGED OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION OR EXEMPTION OR SAFE HARBOR
THEREFROM.
ISSUE DATE: December 11,
2015
PRINCIPAL AMOUNT: $120,000
ZONZIA MEDIA, INC.
PROMISSORY NOTE DUE June
30, 2016
THIS Note is a duly authorized
issuance of $120,000 of ZONZIA MEDIA, INC., a Nevada corporation (the "Company") designated as its Note.
FOR
VALUE RECEIVED, the Company promises to pay to KODIAK CAPITAL GROUP, LLC, the registered holder hereof (the "Holder"),
the principal sum of one hundred twenty and 00/100 Dollars ($120,000) on June 30, 2016 (the “Maturity Date”). The principal
of this Note is payable in United States dollars, at the address last appearing on the Note Register of the Company as designated
in writing by the Holder. The Company will pay the outstanding principal amount of this Note, together with interest at 10% per
annum, in cash on the Maturity Date to the registered holder of this Note. The forwarding of such wire transfer shall constitute
a payment hereunder and shall satisfy and discharge the liability for principal on this Note to the extent of the sum represented
by such check or wire transfer plus any amounts so deducted.
This Note is subject to the following
additional provisions:
1. The
Note is exchangeable for an equal aggregate principal amount of Note of different authorized denominations, as requested by the
Holder surrendering the same. No service charge will be made for such registration or transfer or exchange.
2. No
provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal
of this Note at the time, place, and rate, and in the coin or currency, herein prescribed. This Note is a direct obligation of
the Company.
(a) During
the first 120 days of this Note is in effect, the Company shall have the option to redeem this Note and pay to the Holder 150%
of the unpaid principal and accrued interest amount due under this Note, in full. The redemption must be closed and paid for within
3 business days of the Company sending the redemption demand to the Holder.
3. The
Holder of the Note, by acceptance hereof, agrees that this Note is being acquired for investment and that such Holder will not
offer, sell or otherwise dispose of this Note except under circumstances which will not result in a violation of the Act or any
applicable state Blue Sky or foreign laws or similar laws relating to the sale of securities.
4. This
Note shall be governed by and construed in accordance with the laws of the State of California. Each of the parties consents to
the jurisdiction of the federal courts whose districts encompass any part of the City of Newport Beach or the state courts of the
State of California sitting in the City of Newport Beach in connection with any dispute arising under this Note and hereby waives,
to the maximum extent permitted by law, any objection, including any objection based on forum non coveniens, to the bringing of
any such proceeding in such jurisdictions. Each of the parties hereby waives the right to a trial by jury in connection with any
dispute arising under this Note.
5. The following shall constitute
an "Event of Default"
a. The
Company shall default in the payment of principal on this Note and same shall continue for a period of five (5) days; or
b. Any
of the representations or warranties made by the Company herein, in any certificate or financial or other written statements heretofore
or hereafter furnished by the Company in connection with the execution and delivery of this Note shall be false or misleading in
any material respect at the time made; or
c. The
Company shall fail to perform or observe, in any material respect, any other covenant, term, provision, condition, agreement or
obligation of any Note and such failure shall continue uncured for a period of five (5) days after written notice from the Holder
of such failure; or
d. The
Company shall (1) make an assignment for the benefit of creditors or commence proceedings for its dissolution; or (2) apply for
or consent to the appointment of a trustee, liquidator or receiver for its or for a substantial part of its property or business;
or
e. A
trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without
its consent and shall not be discharged within sixty (60) days after such appointment; or
f. Any
governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control
of the whole or any substantial portion of the properties or assets of the Company and shall not be dismissed within sixty (60)
days thereafter; or
g. Any
money judgment, writ or warrant of attachment, or similar process in excess of One Hundred Thousand ($100,000) Dollars in the aggregate
shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid, unvacated, unbonded
or unstayed for a period of thirty (30) days or in any event later than five (5) days prior to the date of any proposed sale thereunder;
or
h. Bankruptcy,
reorganization, insolvency or liquidation proceedings or other proceedings for relief under any bankruptcy law or any law for the
relief of debtors shall be instituted by or against the Company and, if instituted against the Company, shall not be dismissed
within sixty (60) days after such institution or the Company shall by any action or answer approve of, consent to, or acquiesce
in any such proceedings or admit the material allegations of, or default in answering a petition filed in any such proceeding;
or
Then,
or at any time thereafter, and in each and every such case, unless such Event of Default shall have been waived in writing by the
Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder and in the Holder's
sole discretion, the Holder may consider all obligations under this Note immediately due and payable within five (5) days of notice,
without presentment, demand, protest or notice of any kinds, all of which are hereby expressly waived, anything herein or in any
note or other instruments contained to the contrary notwithstanding, and the Holder may immediately enforce any and all of the
Holder's rights and remedies provided herein or any other rights or remedies afforded by law.
IN WITNESS
WHEREOF, Company and Holder have duly executed this Replacement Promissory Note 1 as of the day and year first above written.
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, hereunto duly
authorized.
ZONZIA MEDIA, INC. |
|
KODIAK CAPITAL GROUP, LLC |
|
|
|
|
By: |
/s/ Johnathan
Adair |
|
By: |
/s/ Ryan C Hodson |
|
Johnathan Adair
Chief Executive
Officer |
|
|
Ryan C Hodson Managing Member |
EXHIBIT 23.1
![](http://www.sec.gov/Archives/edgar/data/356870/000101968716005144/zonzia_s1-ex2301a.jpg)
Consent of Independent Registered
Public Accounting Firm
As the former independent registered
public accountants of Zonzia Media, Inc., we hereby consent to the incorporation by reference in the Form S-1 of Zonzia Media,
Inc., our report dated April 15, 2015, relating to the consolidated balance sheet of Zonzia Media, Inc., as of December 31, 2014,
and the related consolidated statement of operations, stockholders' deficit and cash flows for the period from May 24, 2014 to
December 31, 2014, and the related notes to the consolidated financial statements.
We also consent to the reference to our firm under
the caption “Experts”.
![](http://www.sec.gov/Archives/edgar/data/356870/000101968716005144/zonzia_s1-ex2301b.jpg)
Haynie & Company
Salt Lake City, Utah
February 11, 2016
v3.3.1.900
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v3.3.1.900
Condensed Balance Sheets - USD ($)
|
Sep. 30, 2015 |
Dec. 31, 2014 |
Current Assets |
|
|
Cash |
$ 28,377
|
$ 208
|
Licensed content |
480,000
|
0
|
Total Current Assets |
508,377
|
208
|
Other Assets |
|
|
Other Assets |
10,000
|
0
|
Total assets |
518,377
|
208
|
Current Liabilities |
|
|
Accounts payable |
1,661,392
|
710,769
|
Accrued expenses |
372,460
|
690,247
|
Related party accounts payable |
0
|
340,163
|
Accrued compensation |
618,087
|
495,167
|
Accrued interest |
2,810
|
0
|
Convertible promissory notes payable, net of discounts |
150,261
|
0
|
Promissory notes payable |
70,000
|
0
|
Derivative liability |
532,600
|
0
|
Total current liabilities |
3,407,610
|
2,236,346
|
Stockholders' Equity (Deficit) |
|
|
Preferred stock, $0.001 par value, 200,000,000 shares authorized and none issued and outstanding at September 30, 2015 and December 31, 2014 |
0
|
0
|
Common stock, $0.001 par value, 2,000,000,000 shares authorized and 229,249,597 and 758,065,119 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively |
229,250
|
758,065
|
Additional paid in capital |
101,267,847
|
22,923,087
|
Accumulated deficit |
(104,386,330)
|
(25,917,290)
|
Total stockholders' equity (deficit) |
(2,889,233)
|
(2,236,138)
|
Total liabilities and stockholders' equity (deficit) |
$ 518,377
|
$ 208
|
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v3.3.1.900
Condensed Balance Sheets (Parenthetical) - $ / shares
|
Sep. 30, 2015 |
Dec. 31, 2014 |
Statement of Financial Position [Abstract] |
|
|
Preferred stock, par value |
$ 0.001
|
$ .001
|
Preferred stock, shares authorized |
200,000,000
|
200,000,000
|
Preferred stock, shares issued |
0
|
0
|
Preferred stock, shares outstanding |
0
|
0
|
Common stock, par value |
$ 0.001
|
$ .001
|
Common stock, shares authorized |
2,000,000,000
|
2,000,000,000
|
Common stock, shares issued |
229,249,597
|
758,065,119
|
Common stock, shares outstanding |
229,249,597
|
758,065,119
|
X |
- DefinitionFace amount or stated value per share of common stock.
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v3.3.1.900
Condensed Statement of Operations - USD ($)
|
3 Months Ended |
4 Months Ended |
7 Months Ended |
9 Months Ended |
Sep. 30, 2015 |
Sep. 30, 2014 |
Sep. 30, 2014 |
Dec. 31, 2014 |
Sep. 30, 2015 |
Revenue |
|
|
|
|
|
Net revenue |
$ 0
|
$ 439
|
$ 439
|
$ 439
|
$ 0
|
Expenses |
|
|
|
|
|
General and administrative |
31,531
|
19,180
|
19,281
|
53,565
|
418,114
|
Sales and marketing |
320,224
|
156,942
|
156,942
|
1,006,102
|
157,381
|
Officer and director compensation |
3,417,552
|
0
|
54,800
|
23,295,167
|
76,307,429
|
Professional fees |
196,228
|
294,906
|
387,906
|
729,411
|
2,234,276
|
Total operating expenses |
3,965,535
|
471,028
|
618,929
|
25,084,245
|
79,117,200
|
Gain (loss) from operations |
(3,965,535)
|
(470,589)
|
(618,490)
|
(25,083,806)
|
(79,117,200)
|
Other income (expense) |
|
|
|
|
|
Gain on change in fair value of derivatives |
12,010
|
0
|
0
|
|
12,010
|
Interest Expense |
(72,853)
|
(4,452)
|
(4,452)
|
(13,462)
|
(183,872)
|
Total other expenses |
(60,843)
|
(4,452)
|
(4,452)
|
(13,462)
|
(171,862)
|
Net loss |
$ (4,026,378)
|
$ (475,041)
|
$ (622,942)
|
$ (25,097,268)
|
$ (79,289,062)
|
Net loss per share - basic and diluted |
$ (.02)
|
$ (.01)
|
$ (.01)
|
$ (0.14)
|
$ (.31)
|
Weighted average shares outstanding |
228,759,483
|
48,500,000
|
48,500,000
|
185,663,218
|
257,285,107
|
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v3.3.1.900
Condensed Statements of Stockholders Equity (Deficit) - USD ($)
|
Common Stock |
Additional Paid-In Capital |
Retained Earnings / Accumulated Deficit |
Total |
Beginning balance, shares at May. 23, 2014 |
0
|
|
|
|
Beginning balance, value at May. 23, 2014 |
$ 0
|
$ 488
|
$ 0
|
$ 488
|
Issuance of founders shares |
48,500,000
|
|
|
|
Issuance of founders shares value |
$ 48
|
(48)
|
|
|
Cancellation of founders shares related to reverse capitalization, shares |
(48,500,000)
|
|
|
|
Cancellation of founders shares related to reverse capitalization, value |
$ (48)
|
47
|
|
(1)
|
Reverse capitalization, shares |
757,689,386
|
|
|
|
Reverse capitalization, value |
$ 757,689
|
(488)
|
(820,022)
|
(62,821)
|
Common stock issued for debt settlement, shares |
375,733
|
|
|
|
Common stock issued for debt settlement, value |
$ 376
|
123,088
|
|
123,464
|
Stock based compensation |
|
22,800,000
|
|
22,800,000
|
Net loss |
|
|
(25,097,268)
|
(25,097,268)
|
Ending balance, shares at Dec. 31, 2014 |
758,065,119
|
|
|
|
Ending balance, value at Dec. 31, 2014 |
$ 758,065
|
22,923,087
|
(25,917,290)
|
(2,236,138)
|
Settlement agreement with former officers and directors, shares |
(709,121,205)
|
|
|
|
Settlement agreement with former officers and directors, value |
$ (709,121)
|
162,000
|
820,022
|
272,901
|
Stock based compensation, shares |
157,868,500
|
|
|
|
Stock based compensation, value |
$ 157,868
|
69,890,516
|
|
71,556,339
|
Common stock issued for previously accrued consulting fees, shares |
533,524
|
|
|
|
Common stock issued for previously accrued consulting fees, value |
$ 5,335
|
1,109,340
|
|
1,114,675
|
Common stock issued for cash, shares |
3,882,601
|
|
|
|
Common stock issued for cash, value |
$ 3,882
|
421,968
|
|
425,850
|
Common stock issued for employment agreement termination, shares |
5,000,000
|
|
|
|
Common stock issued for employment agreement termination, value |
$ 5,000
|
1,895,000
|
|
1,900,000
|
Related party debt forgiveness |
|
100,000
|
|
100,000
|
Common stock issued for settlement of related party accounts payable, shares |
7,500,000
|
|
|
|
Common stock issued for settlement of related party accounts payable, value |
$ 7,500
|
332,663
|
|
340,163
|
Common stock issued in lieu of interest, shares |
721,058
|
|
|
|
Common stock issued in lieu of interest, value |
$ 721
|
111,246
|
|
111,967
|
Stock based compensation |
|
7,266,024
|
|
7,266,024
|
Services contributed by employees/officers |
|
288,988
|
|
288,988
|
Reclassification of options and warrants to liability |
|
(493,161)
|
|
(493,161)
|
Net loss |
|
|
(79,289,062)
|
(79,289,062)
|
Ending balance, shares at Sep. 30, 2015 |
229,249,597
|
|
|
|
Ending balance, value at Sep. 30, 2015 |
$ 229,250
|
$ 101,267,847
|
$ (104,386,330)
|
$ (2,889,233)
|
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v3.3.1.900
Condensed Statement of Cash Flows - USD ($)
|
4 Months Ended |
7 Months Ended |
9 Months Ended |
Sep. 30, 2014 |
Dec. 31, 2014 |
Sep. 30, 2015 |
Cash Flows from Operating Activities |
|
|
|
Net loss |
$ (622,942)
|
$ (25,097,268)
|
$ (79,289,062)
|
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
Stock-based compensation |
0
|
22,800,000
|
77,729,258
|
Debt discount and deferred issuance cost amortization |
|
12,560
|
|
Non-cash interest |
0
|
|
163,415
|
(Gain) loss on change in fair value of derivatives |
0
|
|
(12,010)
|
Debt discount accretion |
0
|
|
19,763
|
Gain on non-cash settlement of accrued expenses |
0
|
|
(809,714)
|
Change in other assets |
(488)
|
|
(10,000)
|
Change in accounts payable |
104,509
|
460,530
|
595,623
|
Change in accrued expenses |
107,333
|
496,754
|
104,661
|
Change in related party accounts payable |
|
272,465
|
|
Change in accrued compensation |
0
|
495,167
|
907,075
|
Change in accrued interest |
4,452
|
|
2,810
|
Net cash used in operating activities |
(407,136)
|
(559,792)
|
(598,181)
|
Cash Flows from Financing Activities |
|
|
|
Proceeds from issuance of related party promissory notes |
450,000
|
560,000
|
70,000
|
Proceeds from issuance of convertible promissory notes |
0
|
|
130,500
|
Proceeds from issuance of common stock |
488
|
|
425,850
|
Net cash provided by financing activities |
450,488
|
560,000
|
626,350
|
Net increase in cash |
43,352
|
208
|
28,169
|
Cash at beginning of the period |
0
|
0
|
208
|
Cash at end of the period |
43,352
|
208
|
28,377
|
Supplementary Disclosures of Cash Flow Information |
|
|
|
Cash paid for income taxes |
0
|
0
|
0
|
Cash paid for interest |
$ 0
|
$ 0
|
$ 0
|
X |
- DefinitionGain on non-cash settlement of accrued expenses
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v3.3.1.900
1. Interim Financial Statements
|
9 Months Ended |
Sep. 30, 2015 |
Accounting Policies [Abstract] |
|
Interim Financial Statements |
The accompanying
interim unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by accounting principles generally accepted in the United States
for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30,
2015, are not necessarily indicative of the results that may be expected for the year ending December 31, 2015. For further information,
refer to the financial statements and footnotes thereto included in our Annual Report on Form 10-K for the fiscal year ended December
31, 2014.
The accompanying
condensed financial statements have been prepared in conformity with accounting principles generally accepted in the United States
of America which contemplate continuation of the Company as a going concern.
Description
of Business
Zonzia Media,
Inc, initially organized as HDIMAX Media, Inc., and incorporated in the State of Delaware in May 2014, is a multi-platform entertainment
company focused on delivering compelling content with the objective of generating both advertising and subscription revenue.
Reverse
Merger with Indigo-Energy, Inc.
On November
21, 2014, through a wholly-owned subsidiary of a public shell Company then known as Indigo-Energy, Inc., HDIMAX Acquisition Corporation,
a Nevada corporation, was merged with and into HDIMAX, Inc., a Delaware corporation (HDIMAX) (such merger, the Merger)
pursuant to the Agreement and Plan of Merger, effective as of September 2, 2014, and as amended effective as of November 20, 2014,
by and among Indigo-Energy, Inc. (our company or we or us), HDIMAX and HDIMAX Acquisition
Corporation (the Merger Agreement). HDIMAX was the surviving corporation of the Merger and as such will continue
as a wholly-owned subsidiary of our Company. Upon closing the merger, we changed our name to HDIMAX Media, Inc.
As a result
of the Merger, all of HDIMAXs common stock was converted into 712,121,205 shares of our Companys common stock, which
represents approximately 94% of the outstanding shares of our companys common stock after giving effect to the Merger.
The common stock issuance, representing 94% of the outstanding shares of the consolidated Company was accounted for as a reverse
capitalization in accordance with accounting principles generally accepted in the United States (US GAAP) and the
Rules and Regulations as promulgated by the United States Securities and Exchanges Commission (SEC).
On January
22, 2015, we entered into a Settlement Agreement in which we cancelled all of the 712,121,205 shares of restricted and unregistered
common stock previously issued to effectuate the merger with Rajinder Brar, the previous sole owner of HDIMAX, Inc. In consideration
for the shares being cancelled, we forfeited our rights to sell advertising and other products on websites previously controlled
Mr. Brar and related entities, with the exception of www.hdimax.com. An outline of the significant
terms of the Settlement Agreement includes, but is not limited to, the following:
|
· |
The 712,121,205 million shares of HDIMAX
Media, Inc. (formerly Indigo-Energy) common stock issued to Rajinder Brar, the owner of 100% of the previously outstanding
stock of HDIMAX, Inc. immediately preceding the reverse acquisition transaction, were cancelled. |
|
· |
Rajinder Brar, Aneliya Vasileva, and
Myles Pressey III, previously appointed as the Companys officers and Board of Directors immediately following the completion
of the reverse acquisition, resigned and forfeited future compensation terms associated with any and all previously agreed
upon employment agreements, inclusive of the compensation accrued as of December 31, 2014. |
|
· |
Mr. James C. Walter Sr. was reappointed
to serve as a Director charged with appointing new officers. Mr. Walter Sr. served as the Sole Officer and Director of the
Company immediately preceding the completion of the reverse acquisition transaction. |
|
· |
The Companys option agreement
to acquire Fashion Style Magazine, Inc., an entity wholly owned by Rajinder Brar, was cancelled. |
|
· |
The Omnibus Agreement and License dated
November 21, 2014, by and between the Company and Fashion Style Magazine, Inc. was terminated. The brands and assets wholly
owned by Rajinder Brar through Fashion Style Magazine, Inc. were intended to be a core portion of the consolidated Companys
business operations subsequent to the completion of the reverse acquisition. |
|
· |
The Company forfeited all rights to
Frontlinewire.com, a brand and website acquired in the reverse acquisition. |
|
· |
The Company maintained all rights to
hdimax.com, a brand and website acquired in the reverse acquisition, but agreed to assign those assets back to their original
owners by May 1, 2015. We do not intend to further develop or publish content at www.hdimax.com. |
For additional
details, including a copy of the Settlement Agreement, please see our Current Report on Form 8-K filed on January 29, 2015.
On March
9, 2015 we changed our name to Zonzia Media, Inc. and we are developing a new multi-platform entertainment distribution channel
with the goal of being a unique hybrid of a linear channel, a video-on-demand channel and an over-the-top channel. Our technology
will allow our viewers instant access to our available content on most internet connected devices.
Use of
Estimates
In preparing
financial statements in conformity with generally accepted accounting principles, we are required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and revenues and expenditures during the reported periods. Actual results could differ materially
from those estimates.
Cash and
Cash Equivalents
We consider
all highly liquid instruments with an original maturity of 90 days or less at the time of purchase to be cash equivalents. We
did not have any cash equivalents at September 30, 2015 or December 31, 2014.
Fair Value
Measurements
The fair
value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date. Financial assets are marked to bid prices
and financial liabilities are marked to offer prices. The fair value should be calculated based on assumptions that market
participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the
fair value of liabilities should include consideration of non-performance risk, including the partys own credit risk.
Fair value
measurements do not include transaction costs. A fair value hierarchy is used to prioritize the quality and reliability
of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest
level of input that is significant to the fair value measurement. The fair value hierarchy is defined into the following
three categories:
Level
1: Quoted market prices in active markets for identical assets or liabilities.
Level
2: Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level
3: Unobservable inputs that are not corroborated by market data.
Embedded
Conversion Features and Other Equity-linked Instruments
The Company
classifies all of its common stock purchase warrants and other derivative financial instruments as equity if the contracts (1)
require physical settlement or net-share settlement or (2) give the Company a choice of net-cash settlement or settlement in its
own shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any contracts that (1)
require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside
the control of the Company), (2) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement
or net-share settlement), or (3) contracts that contain reset provisions. The Company assesses classification of its equity-linked
instruments at each reporting date to determine whether a change in classification between equity and liabilities (assets) is
required.
Recently
Issued Accounting Pronouncements
There have
been no recently issued accounting pronouncements that were not previously disclosed in our annual report on Form 10-K filed on
April 15, 2015 through the date of this report that we believe will have a material impact on our financial position, results
of operations, or cash flows.
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- DefinitionThe entire disclosure for the business description and accounting policies concepts. Business description describes the nature and type of organization including but not limited to organizational structure as may be applicable to holding companies, parent and subsidiary relationships, business divisions, business units, business segments, affiliates and information about significant ownership of the reporting entity. Accounting policies describe all significant accounting policies of the reporting entity.
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v3.3.1.900
2. Going Concern
|
7 Months Ended |
9 Months Ended |
Dec. 31, 2014 |
Sep. 30, 2015 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
|
|
Going Concern |
Since our
inception on May 24, 2014, we have generated immaterial revenues resulting in the incurrence of a net loss for the period ended
December 31, 2014. This has further led to negative working capital, all which results in substantial doubt about the Companys
ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome
of this uncertainty.
Our management,
Board, and Advisory Board has focused its efforts and our limited resources on raising additional capital through debt or equity
offerings at terms not detrimental to our planned future operations. As of the date of this report we do not have any firm funding
commitments.
|
Since our
inception on May 24, 2014, we have generated immaterial revenues resulting in the incurrence of net losses through September 30,
2015. This has further led to negative working capital, all which results in substantial doubt about the Companys ability
to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of
this uncertainty.
Our management,
Board, and Advisory Board has focused its efforts and our limited resources on raising additional capital through debt or equity
offerings at terms not detrimental to our planned future operations. As of the date of this report we do not have any firm funding
commitments.
|
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- DefinitionThe entire disclosure when substantial doubt is raised about the ability to continue as a going concern. Includes, but is not limited to, principal conditions or events that raised substantial doubt about the ability to continue as a going concern, management's evaluation of the significance of those conditions or events in relation to the ability to meet its obligations, and management's plans that alleviated or are intended to mitigate the conditions or events that raise substantial doubt about the ability to continue as a going concern.
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v3.3.1.900
3. Related Party Transactions
|
7 Months Ended |
9 Months Ended |
Dec. 31, 2014 |
Sep. 30, 2015 |
Related Party Transactions [Abstract] |
|
|
Related Party Transactions |
On May 24,
2014 our prior Chairman and Chief Executive Officer contributed the brands, rights, and ecommerce opportunities of HDIMAX.com
and Frontlinewire.com to the Company in exchange for 48,500,000 shares of common stock of the Company. Since we were under control
of our founder on the date of the transaction, our founders historical cost became the carrying cost of the contributed
assets totaling $488. As of December 31, 2014 the cost of registering the websites was fully amortized, however, we maintained
the rights to the domain names.
During the
period ended December 31, 2014 we paid our founder, Chairman, and Chief Executive Officer and related entities $211,591 for the
development of content and other marketing related expenses. The amount is classified in sales and marketing in the accompanying
statement of operations.
As of December
31, 2014 we owed a related party $340,163 as result of the related party directly paying third party vendors on our behalf. We
do not have any formalized arrangement for the settlement of this obligation and the related party has informally agreed to defer
payment until we have obtained the appropriate level of capital resources and liquidity. Since the obligations are effectively
due on demand they are classified as current in the accompanying balance sheet.
|
During the
nine months ended September 30, 2015 we settled prior obligations due to a related party totaling $340,163 via the issuance of
7,500,000 shares of restricted and unregistered shares of common stock. The settled obligation also represents that balance outstanding
as of December 31, 2014.
During the
nine months ended September 30, 2015 a total of four of our Officers agreed to waive all or portions of their base salaries or
previously accrued bonuses earned during the year ended December 31, 2014 and through September 30, 2015 totaling $288,988. Since
we consider our Officers related parties we have determined the bonus and salary forgiveness was in the nature of a capital contribution
and no gain was recognized in the accompanying condensed statement of operations.
We issued
a Director 250,000 shares of restricted and unregistered shares of common stock for cash proceeds totaling $25,000 in January
2015.
As part of
the Settlement Agreement we entered into on January 22, 2015 we cancelled restricted stock award grants to two of our former officers.
Since we did not replace a cancelled award totaling 52,500,000 shares of restricted and unregistered shares of common stock, and
effectively repurchased the award for no consideration as assumed by the application of accounting principles generally accepted
in the United States, the unrecognized grant-date fair value of the award totaling $9,975,000 was recognized during the nine months
ended September 30, 2015. Additionally, we cancelled a restricted stock award granted to our current Interim Chief Executive Officer
totaling 67,500,000 shares and replaced the award with the grant of 125,000,000 shares of restricted and unregistered shares as
part of a new employment agreement on January 29, 2015. The total compensation cost recognized during the nine months ended September
30, 2015 associated with the cancellation and replacement of this restricted stock award was $47,500,000.
During the
nine months ended September 30, 2015 we issued 2,000,000 shares of unregistered and restricted common stock to an affiliate for
consulting services valued at $680,000. A promissory note in the amount of $35,000 was issued to the same affiliate of the company,
for cash proceeds of $35,000 in April 2015. As additional consideration on the promissory note, this same affiliate received 215,000
shares of unregistered and restricted common stock valued at $32,039. Upon renewal of this promissory note in May 2015 this affiliate
received 100,000 shares of unregistered and restricted common stock valued at $17,260.
Employment
Agreement Amendment
On May 29,
2015, we amended our Chairman and Chief Business Development Office, Mr. Myles Pressey IIIs, employment agreement. Mr.
Pressey III was originally going to be granted 25,000,000 shares of fully vested restricted and unregistered shares of common
stock on January 29, 2016 whereas the amendment calls for Mr. Pressey III to receive up to 62,500,000 shares of restricted and
unregistered common stock subject to the achievement of performance benchmarks set by the Board of Directors. The modification
of Mr. Pressey IIIs equity award resulted in the recognition of compensation totaling $7,266,025 during the nine months
ended September 30, 2015.
|
X |
- DefinitionThe entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.
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v3.3.1.900
4. Stockholders' Equity
|
7 Months Ended |
9 Months Ended |
Dec. 31, 2014 |
Sep. 30, 2015 |
Equity [Abstract] |
|
|
Stockholders' Equity |
Common
Stock
As of December
31, 2014 we had 758,065,119 shares of common stock issued and outstanding. Our common stock transactions through the date of this
report are as follows:
On May 24,
2014 we issued 48,500,000 shares of common stock to our prior Chairman and Chief Executive Officer in exchange for contributed
assets with a total value of $488.
On November
21, 2014, upon completion of our merger, we issued our prior Chairman and Chief Executive Officer 712,121,205 shares of restricted
and unregistered common stock. Since we were deemed the accounting acquirer in our reverse merger transaction with a public shell
company we determined the substance of the transaction was capital in nature, rather than a business combination. In accounting
for the reverse recapitalization we recognized the net issuance of 709,189,386 shares of common stock for the assumption of net
liabilities resulting in a net equity deduction of $62,821.
On November
21, 2014 we entered into employment agreements with two of our former officers to grant an aggregate of 120,000,000 shares of
common stock for compensation. The grants were to vest in two tranches, the first of which was on January 1, 2015. For the period
ended December 31, 2014 we recognized compensation cost associated with these employment agreements of $22,800,000. In January
22, 2015, as part of our Settlement Agreement, we retroactively cancelled these employment agreements and all previously accrued
compensation and related burden was forgiven.
In December
2014 we issued a total of 375,733 shares of restricted and unregistered common stock in settlement of convertible notes payable
with a principal balance of $110,000 and unamortized discounts of $13,088.
In January
2015 we issued 75,000 shares of restricted and unregistered common stock for consulting services valued at $25,000.
In January
2015 we issued 57,971 shares restricted and unregistered shares of common stock for cash totaling $10,000.
In January
2015 we issued a total of 145,200,000 shares of restricted and unregistered shares of common stock as compensation to our officers,
directors, and other consultants valued at $54,054,409.
In January
2015 we issued 5,000,000 shares of restricted and unregistered shares of common stock to a former employee of HDIMAX, Inc. valued
at $1,900,000.
In January
2015, in accordance with the terms of our Settlement Agreement with our former Chairman and Chief Executive Officer, we cancelled
712,121,205 shares of unregisters and restricted common stock.
In February
2015 we issued 142,500 shares of restricted and unregistered common stock for accounting and legal services valued at $20,000.
In February
2015 we issued a total of 200,000 shares of restricted and unregistered shares of common stock as compensation directors valued
at $38,348.
In February
2015 we issued 3,750,000 shares of restricted and unregistered common stock for consulting services valued at $719,021.
In February
2015 we issued 177,777 restricted and unregistered shares of common stock for cash totaling $32,800.
In February
2015 we issued 7,500,000 shares of restricted and unregistered common stock in settlement of previously accrued related party
liabilities totaling $340,163.
Stock
Options
In accordance
with the terms of our Merger Agreement, the Company exchanged all of the previously outstanding options on a one for one basis.
The options are fully vested and all associated compensation expense was recognized in periods prior to that presented. The stock
option grant date fair value was estimated using a Black-Scholes pricing model.
As of December
31, 2014 the Company had 568,182 stock options outstanding. During the period presented there were no options granted, exercised,
cancelled, or forfeited, correspondingly, no additional compensation expense was recognized for the periods presented. All options
outstanding are exercisable and do not have any intrinsic value at December 31, 2014 and are set to expire in October of 2017.
At December 31, 2014 the weighted average exercise price of the outstanding options was $6.60 with a weighted average remaining
term of 2.83 years.
Warrants
In accordance
with the terms of our Merger Agreement, the Company exchanged all of the previously outstanding warrants on a one for one basis.
The warrants are fully vested and all associated consideration was recognized in periods prior to that presented. The warrant
grant date fair value was estimated using a Black-Scholes pricing model.
As of the
December 31, 2014, the Company had outstanding warrants of 871,591. The weighted average exercise price of the outstanding warrants
at December 31, 2014 was $0.88 with a weighted average remaining term of 2.83 years as of December 31, 2014. The warrants did
not have any intrinsic value as of December 31, 2014 and were fully vested. Of the outstanding warrants, 862,500 are contingently
exercisable only in the event that other equity-linked instruments are exercised.
|
The following
provides information for the shares of restricted and unregistered shares of common stock that we issued (or cancelled) from January
1, 2015 through the date of this report:
In January
2015 we issued 75,000 shares of restricted and unregistered common stock for consulting services valued at $25,000.
In January
2015 we issued 57,971 shares restricted and unregistered shares of common stock for cash totaling $10,000.
We issued
a Director 250,000 shares of restricted and unregistered shares of common stock for cash proceeds totaling $25,000 in January
2015.
In January
2015 we issued a total of 145,000,000 shares of restricted and unregistered shares of common stock as compensation to our officers,
directors, and other consultants valued at $54,016,061.
In January
2015 we issued 5,000,000 shares of restricted and unregistered shares of common stock to a former employee of HDIMAX, Inc. valued
at $1,900,000.
In January
2015, in accordance with the terms of our Settlement Agreement with our former Chairman and Chief Executive Officer, we cancelled
712,121,205 shares of unregistered and restricted common stock. We recognized settlement expense, included in the general and
administrative expenses in the accompanying condensed statement of operations, totaling $107,901 and reversed the previously recognized
accumulated deficit adjustment of $820,022 associated with the Settlement.
In February
2015 we issued 142,500 shares of restricted and unregistered common stock for accounting and legal services valued at $21,179.
In February
2015 we issued a total of 200,000 shares of restricted and unregistered shares of common stock as compensation directors valued
at $38,348.
In February
2015 we issued 3,750,000 shares of restricted and unregistered common stock for consulting services valued at $719,021.
In February
2015 we issued 177,777 restricted and unregistered shares of common stock for cash totaling $32,800.
In February
2015 we issued 7,500,000 shares of restricted and unregistered common stock in settlement of previously accrued related party
liabilities totaling $340,163.
In March
2015 we issued 100,000 restricted and unregistered shares of common stock for cash totaling $28,050.
In April
2015 we issued 440,000 shares of restricted and unregistered common stock in conjunction with the issuance of notes payable for
total consideration of $70,000.
In April
2015 we issued 4,500,000 shares of restricted and unregistered common stock for consulting services valued at $927,054.
In April
2015 we issued a total of 5,000,000 shares of restricted and unregistered shares of common stock as compensation to our officers
valued at $1,500,000.
In April
2015 we issued 25,445 shares of restricted and unregistered shares of common stock for cash totaling $5,000.
In May 2015
we issued a total of 3,200,000 shares of restricted and unregistered shares of common stock as compensation to our officers and
directors valued at $968,000.
In May 2015
we issued 509,524 shares of restricted and unregistered common stock for consulting services valued at $112,621.
In May 2015
we issued 1,641,929 shares of restricted and unregistered shares of common stock for cash totaling $170,000.
In May 2015
we issued Warrants for the Purchase of 1,500,000 shares of restricted and unregistered shares of common stock as additional incentive
for a $150,000 cash investment in the company that was part of the $170,000 in the previous footnote.
In May 2015
we issued 250,000 shares of restricted and unregistered shares of common stock for interest on outstanding notes and payables
valued at $45,582.
In June 2015
we issued a total of 150,000 shares of restricted and unregistered shares of common stock as compensation to our officers and
directors valued at $49,500.
In June 2015
we issued 250,000 shares of restricted and unregistered common stock for settlement of an obligation valued at $50,000.
In June 2015
we issued 476,915 shares of restricted and unregistered shares of common stock for cash totaling $85,000.
In July 2015
we issued 1,152,564 shares of restricted and unregistered shares of common stock for cash totaling $70,000.
In July 2015
we issued 150,000 shares of restricted and unregistered shares of common stock to a Director for services totaling $7,747.
In August
2015 we issued 50,000 shares of restricted and unregistered common stock for services valued at $3,364.
In September
2015 we issued 225,000 shares of restricted and unregistered common stock for services valued at $10,340.
In September
2015 we issued 31,058 shares of restricted and unregistered shares of common stock for interest on outstanding notes valued at
$1,614.
Warrants
During the
period ended September 30, 2015 we issued warrants to certain investors as part of the private placements of our restricted and
unregistered common stock.
The following
table presents a summary of our warrant activity:
| |
As
of September 30, 2015 | |
| |
Shares | | |
Weighted
Average Exercise Price | | |
Weight
Average Remaining Term (years) | | |
Aggregate
Intrinsic Value | |
Outstanding December 31, 2014 | |
| 871,591 | | |
$ | 0.88 | | |
| 2.83 | | |
$ | | |
Warrants granted | |
| 3,000,000 | | |
| 0.22 | | |
| 2.65 | | |
| | |
Warrants exercised | |
| | | |
| | | |
| | | |
| | |
Warrants
expired, cancelled, forfeited | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Outstanding
and exercisable at September 30, 2015 | |
| 3,871,591 | | |
$ | 0.37 | | |
| 2.69 | | |
$ | | |
As of September
30, 2015 and December 31, 2014 all outstanding warrants were fully vested. Of the outstanding warrants, 862,500 are contingently
exercisable only in the event that other equity-linked instruments are exercised.
Options
As of September
30, 2015 and December 31, 2014 the Company had 568,182 stock options outstanding. During the periods presented there were no options
granted, exercised, cancelled, or forfeited, correspondingly, no additional compensation expense was recognized for the periods
presented. All options outstanding are exercisable and do not have any intrinsic value at September 30, 2015 and December 31,
2014 and are set to expire in October of 2017. At September 30, 2015 the weighted average exercise price of the outstanding options
was $6.60 with a weighted average remaining term of 2.83 years.
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v3.3.1.900
5. Convertible Notes Payable
|
7 Months Ended |
9 Months Ended |
Dec. 31, 2014 |
Sep. 30, 2015 |
Debt Disclosure [Abstract] |
|
|
Convertible Notes Payable |
In June and
September we received proceeds from short-term loans from Indigo-Energy, the pre-merger public shell Company used to effectuate
our reverse capitalization, for proceeds of $200,000 and $250,000, respectively. Indigo-Energy financed the loans to us on a pre-merger
basis, totaling $450,000, via the issuance of 2,272,727 (100,000,000 pre-merger) shares to investors. Upon completion of the merger
with Indigo-Energy, considered to be the accounting acquiree in accordance with US GAAP, the note payable was eliminated and the
corresponding 2,272,727 shares issued were including in our reverse capitalization adjustment.
In November
2014 we entered into two convertible short-term notes payable with investors for proceeds totaling $110,000. The notes, at the
option of the holder, were convertible into shares of our restricted common stock at a 25% discount to the average closing quoted
market price for the ten days immediately prior to the conversion date. On December 17, 2014, the holders of the notes converted
all of the principal and accrued interest into 375,733 shares of restricted common stock. Since the notes were convertible into
a predominantly fixed monetary value on the dates of issuance in accordance with US GAAP, we determined the notes would be net
settled via the issuance of restricted common stock which resulted in the conversion feature being classified as a liability.
During the period ended December 31, 2014 we recognized interest expense totaling $11,660 resulting from the accretion of interest
through the date of conversion.
|
The Company
has entered into various convertible debt financing transactions with third party investors (Investors). As of September
30, 2015 the Company issued convertible notes to Investors in the aggregate principal amount of $142,750. The notes are unsecured,
and provide for the conversion of all principal and interest outstanding under the notes into shares of the Companys common
stock beginning six months after the issuance date of the respective notes (conversion date) at conversion rates
of 55%-60% of the lowest listed market price of the Companys common stock for the previous twenty to twenty-five trading
days immediately prior to the conversion date.
The conversion
price of the notes are subject to adjustment in the event of stock splits, dividends, distributions and similar adjustments to
our capital stock. The number of shares of common stock subject to the Notes may be adjusted in the event of mergers, distributions,
a sale of substantially all of the Companys assets, tender offers and dilutive issuances.
The Company
has determined the resetting terms of the conversion rates are separable into two elements: i) Fixed Conversion Rate element
since a fixed minimum discount to the listed market price ranging from forty to forty-five percent of any listed market
price has been determined to be a predominant element of the conversion feature, we determined the fixed conversion element results
in a fixed value of common stock to the Investor at any conversion date; and ii) Variable Conversion Rate element
the volatility in our listed market prices and wide ranging bid and ask spreads on a daily basis results in an additional variable
amount of common stock value being received by the Investors upon conversion. The fixed conversion element, resulting in the determination
of stock settled debt, is recognized as a debt discount at intrinsic value on the issuance date and is not re-valued in the subsequent
periods. The variable conversion element is classified as a derivative liability and is revalued on an on-going basis.
Convertible
notes payable consist of the following:
| |
As
of September 30, 2015 | |
| |
Face
Value of Note | | |
Intrinsic
Value of Fixed Conversion Element | | |
Unamortized
Discount | | |
Net Balance | |
JMJ
Financial; 12% Convertible note due August 24, 2017 | |
$ | 27,500 | | |
$ | 20,833 | | |
$ | (20,137 | ) | |
$ | 28,196 | |
| |
| | | |
| | | |
| | | |
| | |
Auctus
Fund, LLC; 8% Convertible note due May 28, 2016 | |
| 56,250 | | |
| 46,023 | | |
| (42,160 | ) | |
| 60,113 | |
| |
| | | |
| | | |
| | | |
| | |
LG
Capital Funding, LLC; 8% Convertible note due August 21, 2016 | |
| 27,000 | | |
| 22,091 | | |
| (20,229 | ) | |
| 28,862 | |
| |
| | | |
| | | |
| | | |
| | |
St.
George Investment, LLC; 8% Convertible note due September 9, 2016 | |
| 32,000 | | |
| 26,182 | | |
| (25,092 | ) | |
| 33,090 | |
| |
| | | |
| | | |
| | | |
| | |
Total
Convertible Notes | |
$ | 142,750 | | |
$ | 115,129 | | |
$ | (107,618 | ) | |
$ | 150,261 | |
The Company
did not have any convertible notes outstanding as of December 31, 2014.
During the
three and nine months ended September 30, 2015 the Company recognized discount accretion totaling $19,763 included in interest
expense in the accompanying results of operations. Since the Company has determined the convertible notes will be stock settled,
beginning six months after the date of each issuance, all of the convertible notes payable have been classified as current in
the accompanying balance sheet.
|
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- DefinitionThe entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.
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v3.3.1.900
6. Embedded Debt Conversion Features and Other Equity-linked Instruments
|
9 Months Ended |
Sep. 30, 2015 |
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
|
Embedded Debt Conversion Features and Other Equity-linked Instruments |
The Company
accounts for variable conversion elements embedded in its convertible instruments that meet the definition of a derivative as
liabilities. The variable conversion elements are re-measured at fair value with the changes in the value reported as a component
of other income (expense) in the accompanying results of operations. The Company estimates the fair value of the variable conversion
element using a Black-Scholes Merton Pricing model based on the variable number of additional shares of common stock the Company
is required to issue upon conversion.
The Company
periodically, or when specific transactions occur that may have material impacts on the presentation of the financial statements,
reviews it outstanding equity and equity-linked instruments to determine the appropriate classification in the accompanying balance
sheet, equity or liability (asset). During the period ended September 30, 2015 the company reclassified all of its previously
outstanding options and warrants from equity to liability. The determination to reclassify the previously outstanding options
and warrants resulted from the issuance of convertible notes payable that are potentially convertible into an unlimited number
shares of common stock.
The Company
measures and re-measures the fair value of the instruments not classified as permanent equity using a Black Scholes Merton pricing
model. The following assumptions were used to estimate the fair value of the Companys derivative liabilities:
Expected volatility |
|
455% |
Expected term (years) |
|
0.75 to 2.80 |
Dividend yield |
|
0.0% |
Risk free rate |
|
0.1% |
During the
three and nine months ended September 30, 2015 the Company recognized a derivative liability, and corresponding finance fee, with
an initial fair value totaling $51,499 associated with the variable conversion element embedded in the convertible notes payable.
Finance fees are included as a component of interest expense in the accompanying results of operations.
In August
2015, outstanding options and warrants with an aggregate fair value of $493,161 were reclassified from equity to derivative liability.
As of September
30, 2015 the Company had derivative liability obligations with an aggregate fair value totaling $532,600. During the three and
nine months ended September 30, 2015 the Company recognized a gain on the change in the fair value of derivative liabilities totaling
$12,010 included as a component of other income (expense) in the accompanying results of operations.
Financial
liabilities measured at fair value on a recurring basis are summarized below:
| |
Fair value measurements | |
| |
September 30, 2015 | | |
Quoted prices in
active markets for unobservable
identical assets
(Level 1) | | |
Significant other
inputs (Level 2) | | |
Significant observable
inputs (Level 3) | |
Derivative liability | |
$ | 532,600 | | |
| | | |
| | | |
$ | 532,600 | |
The derivative
liabilities are measured at fair value using a Black Sholes Merton Pricing Model. The model is based on assumptions including
quoted market prices and estimated volatility factors based on historical quoted market prices for the Companys common
stock, and are classified within Level 3 of the valuation hierarchy
The following
table sets forth a summary of the changes in the fair value of the Companys Level 3 financial liabilities that are measured
at fair value on a recurring basis:
| |
September 30, 2015 | | |
December 31, 2014 | |
| |
| | |
| |
Beginning Balance | |
$ | | | |
$ | | |
Aggregate fair value of derivative issued | |
$ | 51,449 | | |
$ | | |
Liability reclassification for other equity linked instruments | |
$ | 493,161 | | |
$ | | |
Change in fair value of derivative included
in results of operations (gain) loss | |
$ | (12,010 | ) | |
$ | | |
| |
| | | |
| | |
Ending Balance | |
$ | 532,600 | | |
$ | | |
|
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v3.3.1.900
7. Accrued Expenses
|
7 Months Ended |
9 Months Ended |
Dec. 31, 2014 |
Sep. 30, 2015 |
Payables and Accruals [Abstract] |
|
|
Accrued Expenses |
Subsequent
to the completion of our reverse merger and recapitalization and corresponding Settlement Agreement, as more fully discussed in
Note 10 Subsequent Events, we have been named as debtors by certain creditors of entities controlled by our former Chairman,
Chief Executive Officer, and majority shareholder through which we previously held an option to acquire and had certain Omnibus
and License Agreements. As of December 31, 2014 we have accrued total obligations of $690,247 associated with our exposure to
these liabilities. We have engaged legal counsel to vigorously dispute our alleged obligations to settle these accrued expenses.
|
During the
quarter ended March 31, 2015 our management, with the assistance of our defense attorney, analyzed the merit and likelihood of
an unfavorable outcome in the matter of Congoo, LLC v. HDIMAX Max Media, Inc. Civ. Action No. 3:15-cv-01423. Based on the
facts and circumstances, we determined the likelihood of an unfavorable outcome to be remote. Correspondingly, we reversed the
previously accrued obligation of $422,448 as presented in sales and marketing expense in the accompanying condensed statement
of operations.
|
X |
- DefinitionThe entire disclosure for accounts payable and accrued liabilities at the end of the reporting period.
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v3.3.1.900
8. Licensed Content
|
9 Months Ended |
Sep. 30, 2015 |
Licensed Content |
|
Licensed Content |
The Company
entered into a content licensing and distribution agreement with an entertainment company in which we will distribute, on our
available platforms, the following:
| i. | Fifty-two
(52) twenty three minute (0:23) episodes of a series known as Behind the Velvet
Rope |
| ii. | Ancillary
content including a minimum of ten to twenty event compilations approximately five to
seven minutes in length each; and |
| iii. | Thirty
to forty individual interviews approximately one to three minutes in length each. |
The agreement
calls for us to advance $480,000 to the entertainment company to be used for production of the series. After paying the advance,
we are entitled to recoup the advanced amount plus an additional $10,000 (a total of $490,000) after which time the gross revenue
generated under the agreement will be split on a 50/50 basis. The non-refundable advance obligation and capitalized licensed content
are presented in accounts payable and current assets, respectively, in the accompanying balance sheet.
|
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v3.3.1.900
9. Subsequent Events
|
7 Months Ended |
9 Months Ended |
Dec. 31, 2014 |
Sep. 30, 2015 |
Subsequent Events [Abstract] |
|
|
Subsequent Events |
See Note
7 Stockholders Equity for a description of the unregistered and restricted share issuances subsequent to December
31, 2014 and through the date of this report.
On January
22, 2015 we entered into a Settlement Agreement with Rajinder Brar, the previous sole owner of HDIMAX, Inc., in which we cancelled
all of the 712,121,205 shares of common stock previously issued to Mr. Brar. In consideration for the shares being cancelled,
we forfeited our rights to sell advertising and other products on websites previously controlled Mr. Brar and related entities,
with the exception of www.hdimax.com. An outline of the significant terms of the Settlement Agreement include, but are not limited
to, the following:
| · | The
712,121,205 million shares of HDIMAX Media, Inc. (formerly Indigo-Energy) common stock
issued to Rajinder Brar, the owner of 100% of the previously outstanding stock of HDIMAX,
Inc. immediately preceding the reverse acquisition transaction, were cancelled. |
| · | Rajinder
Brar, Aneliya Vasileva, and Myles Pressey III, previously appointed as the Companys
officers and Board of Directors immediately following the completion of the reverse acquisition,
resigned and forfeited future compensation terms associated with any and all previously
agreed upon employment agreements. |
| · | Mr.
James C. Walter Sr. was reappointed to serve as a Director charged with appointing new
officers. Mr. Walter Sr. served as the Sole Officer and Director of the Company immediately
preceding the completion of the reverse acquisition transaction. |
| · | The
Companys option agreement to acquire Fashion Style Magazine, Inc., an entity wholly
owned by Rajinder Brar, was cancelled. |
| · | The
Omnibus Agreement and License dated November 21, 2014, by and between the Company and
Fashion Style Magazine, Inc. was terminated. The brands and assets wholly owned by Rajinder
Brar through Fashion Style Magazine, Inc. were intended to be a core portion of the consolidated
Companys business operations subsequent to the completion of the reverse acquisition. |
| · | The
Company forfeited all rights to Frontlinewire.com, a brand and website acquired in the
reverse acquisition. |
| · | The
Company maintained all rights to hdimax.com, a brand and website acquired in the reverse
acquisition, but agreed to assign those assets back to their original owners by May 1,
2015. |
We do not
intend to further develop or publish content at www.hdimax.com. For additional details, including a copy of the Settlement Agreement,
please see our Current Report on Form 8-K filed on January 29, 2015.
During the
first quarter of 2015, associated with the cancellation of our previously effective employment agreements with two former officers,
we reversed previously accrued compensation expense and related burden, inclusive of stock-based compensation, totaling $23,295,167.
|
In October
2015 the Company received a total of $150,000 in cash proceeds from the issuance of additional convertible notes payable. The
notes mature between nine and twelve months after the date of the issuance and are convertible into shares of common stock at
conversion rates discounted to our listed market price of 50%.
In November
2015, Frank McEnulty resigned as our Chief Financial Officer and Mr. Naresh Malik resigned as our Chief Executive Officer. In
conjunction with such resignations, our Chairman of the Board Mr. Myles Pressey III, will assume the position of Interim Chief
Financial Officer; and our Chief Operating Officer, Mr. Johnathan Adair will assume the position of Chief Executive Officer.
In November
2015 we issued 191,327 shares of restricted and unregistered shares of common stock for cash proceeds totaling $15,000.
|
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v3.3.1.900
1. Description of Business (Dec 2014 Note)
|
7 Months Ended |
Dec. 31, 2014 |
Accounting Policies [Abstract] |
|
1. Description of Business |
Zonzia Media,
Inc, initially organized as HDIMAX Media, Inc., and incorporated in the State of Delaware in May 2014, is a digital publishing
and broadcast Company focused on content development and multi-platform content distribution, advertising, and ecommerce.
Reverse
Merger with Indigo-Energy, Inc.
On November
21, 2014, through a wholly-owned subsidiary of a public shell Company then known as Indigo-Energy, Inc., HDIMAX Acquisition Corporation,
a Nevada corporation, was merged with and into HDIMAX, Inc., a Delaware corporation (HDIMAX) (such merger, the Merger)
pursuant to the Agreement and Plan of Merger, effective as of September 2, 2014, and as amended effective as of November 20, 2014,
by and among Indigo-Energy, Inc. (our company or we or us), HDIMAX and HDIMAX Acquisition
Corporation (the Merger Agreement). HDIMAX was the surviving corporation of the Merger and as such will continue
as a wholly-owned subsidiary of our Company. Upon closing the merger, we changed our name to HDIMAX Media, Inc.
As a result
of the Merger, all of HDIMAXs common stock was converted into 712,121,205 shares of our Companys common stock, which
represents approximately 94% of the outstanding shares of our companys common stock after giving effect to the Merger.
The common stock issuance, representing 94% of the outstanding shares of the consolidated Company was accounted for as a reverse
capitalization in accordance with accounting principles generally accepted in the United States (US GAAP) and the
Rules and Regulations as promulgated by the United States Securities and Exchanges Commission (SEC).
In accordance
with US GAAP, and as previously disclosed in our original Current Report on Form 8-K as filed on November 26, 2014, HDIMAX, Inc.
(private operating company) was deemed the accounting acquirer. Further, as of the date of the reverse capitalization transaction,
the legal acquirer also deemed the accounting acquiree, Zonzia Media, Inc. (formerly HDIMAX Media, Inc. and Indigo-Energy, Inc.)
was considered a shell company as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934. Further, the Staff
of the Securities and Exchange Commission considers a public shell reverse acquisition to be a capital transaction in substance,
rather than a business combination. That is, the transaction is a reverse recapitalization, equivalent to the issuance of stock
by the private company (HDIMAX, Inc.) for the net monetary assets of the shell corporation accompanied by a recapitalization.
The accounting is similar to that resulting from a reverse acquisition, except that no goodwill or other intangible assets should
be recorded.
As of December
31, 2014, we provided clients and customers advertising and ecommerce opportunities through engaging consumers on two websites,
Frontlinewire.com and HDIMAX.com.
HDIMAX.com
- Operates as an internet television network. HDI Max is engaged in the internet delivery of television shows, movies and
original content to its customers directly on televisions, computers, and mobile devices in the United States and Internationally.
The original content ranges from news and comedy to travel and sports.
HDIMAX.com
offers consumers live video streaming that will be unique to internet television in that users are not charged based on usage
and all consumers have unlimited access to live streaming or other previously posted content such as movies and television.
Frontlinewire.com
(FLW) Frontlinewire.com was launched to provide a premier news service that delivers the latest breaking news and
information on the latest top stories, weather, business, entertainment, politics, and more.
In addition
to the above websites, we previously had an agreement to provides ecommerce opportunities to other websites, all of which were
controlled by our former, Chairman, and Chief Executive Office, Rajinder Brar, including www.fashionstylemag.com, www.themanlife.com,
www.thewomanlife.com, and www.southasianlife.com.
On January
22, 2015, we entered into a Settlement Agreement in which we cancelled all of the 712,121,205 shares of restricted and unregistered
common stock previously issued to effectuate the merger with Rajinder Brar, the previous sole owner of HDIMAX, Inc. In consideration
for the shares being cancelled, we forfeited our rights to sell advertising and other products on websites previously controlled
Mr. Brar and related entities, with the exception of www.hdimax.com. An outline of the significant terms of the Settlement Agreement
include, but are not limited to, the following:
| · | The
712,121,205 million shares of HDIMAX Media, Inc. (formerly Indigo-Energy) common stock
issued to Rajinder Brar, the owner of 100% of the previously outstanding stock of HDIMAX,
Inc. immediately preceding the reverse acquisition transaction, were cancelled. |
| · | Rajinder
Brar, Aneliya Vasileva, and Myles Pressey III, previously appointed as the Companys
officers and Board of Directors immediately following the completion of the reverse acquisition,
resigned and forfeited future compensation terms associated with any and all previously
agreed upon employment agreements, inclusive of the compensation accrued as of December
31, 2014. |
| · | Mr.
James C. Walter Sr. was reappointed to serve as a Director charged with appointing new
officers. Mr. Walter Sr. served as the Sole Officer and Director of the Company immediately
preceding the completion of the reverse acquisition transaction. |
| · | The
Companys option agreement to acquire Fashion Style Magazine, Inc., an entity wholly
owned by Rajinder Brar, was cancelled. |
| · | The
Omnibus Agreement and License dated November 21, 2014, by and between the Company and
Fashion Style Magazine, Inc. was terminated. The brands and assets wholly owned by Rajinder
Brar through Fashion Style Magazine, Inc. were intended to be a core portion of the consolidated
Companys business operations subsequent to the completion of the reverse acquisition. |
| · | The
Company forfeited all rights to Frontlinewire.com, a brand and website acquired in the
reverse acquisition. |
| · | The
Company maintained all rights to hdimax.com, a brand and website acquired in the reverse
acquisition, but agreed to assign those assets back to their original owners by May 1,
2015. We do not intend to further develop or publish content at www.hdimax.com. |
For
additional details, including a copy of the Settlement Agreement, please see our Current Report on Form 8-K filed on January 29,
2015.
On March
9, 2015 we changed our name to Zonzia Media, Inc. and we are developing a new multi-platform entertainment distribution channel
with the goal of being a unique hybrid of a linear channel, a video-on-demand channel and an over-the-top channel. Our viewer
immersion technology will allow our views instant access to our available content.
|
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- DefinitionThe entire disclosure for the business description and basis of presentation concepts. Business description describes the nature and type of organization including but not limited to organizational structure as may be applicable to holding companies, parent and subsidiary relationships, business divisions, business units, business segments, affiliates and information about significant ownership of the reporting entity. Basis of presentation describes the underlying basis used to prepare the financial statements (for example, US Generally Accepted Accounting Principles, Other Comprehensive Basis of Accounting, IFRS).
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v3.3.1.900
4. Notes Payable (Dec 2014 Note)
|
7 Months Ended |
9 Months Ended |
Dec. 31, 2014 |
Sep. 30, 2015 |
Debt Disclosure [Abstract] |
|
|
4. Notes Payable |
In June and
September we received proceeds from short-term loans from Indigo-Energy, the pre-merger public shell Company used to effectuate
our reverse capitalization, for proceeds of $200,000 and $250,000, respectively. Indigo-Energy financed the loans to us on a pre-merger
basis, totaling $450,000, via the issuance of 2,272,727 (100,000,000 pre-merger) shares to investors. Upon completion of the merger
with Indigo-Energy, considered to be the accounting acquiree in accordance with US GAAP, the note payable was eliminated and the
corresponding 2,272,727 shares issued were including in our reverse capitalization adjustment.
In November
2014 we entered into two convertible short-term notes payable with investors for proceeds totaling $110,000. The notes, at the
option of the holder, were convertible into shares of our restricted common stock at a 25% discount to the average closing quoted
market price for the ten days immediately prior to the conversion date. On December 17, 2014, the holders of the notes converted
all of the principal and accrued interest into 375,733 shares of restricted common stock. Since the notes were convertible into
a predominantly fixed monetary value on the dates of issuance in accordance with US GAAP, we determined the notes would be net
settled via the issuance of restricted common stock which resulted in the conversion feature being classified as a liability.
During the period ended December 31, 2014 we recognized interest expense totaling $11,660 resulting from the accretion of interest
through the date of conversion.
|
The Company
has entered into various convertible debt financing transactions with third party investors (Investors). As of September
30, 2015 the Company issued convertible notes to Investors in the aggregate principal amount of $142,750. The notes are unsecured,
and provide for the conversion of all principal and interest outstanding under the notes into shares of the Companys common
stock beginning six months after the issuance date of the respective notes (conversion date) at conversion rates
of 55%-60% of the lowest listed market price of the Companys common stock for the previous twenty to twenty-five trading
days immediately prior to the conversion date.
The conversion
price of the notes are subject to adjustment in the event of stock splits, dividends, distributions and similar adjustments to
our capital stock. The number of shares of common stock subject to the Notes may be adjusted in the event of mergers, distributions,
a sale of substantially all of the Companys assets, tender offers and dilutive issuances.
The Company
has determined the resetting terms of the conversion rates are separable into two elements: i) Fixed Conversion Rate element
since a fixed minimum discount to the listed market price ranging from forty to forty-five percent of any listed market
price has been determined to be a predominant element of the conversion feature, we determined the fixed conversion element results
in a fixed value of common stock to the Investor at any conversion date; and ii) Variable Conversion Rate element
the volatility in our listed market prices and wide ranging bid and ask spreads on a daily basis results in an additional variable
amount of common stock value being received by the Investors upon conversion. The fixed conversion element, resulting in the determination
of stock settled debt, is recognized as a debt discount at intrinsic value on the issuance date and is not re-valued in the subsequent
periods. The variable conversion element is classified as a derivative liability and is revalued on an on-going basis.
Convertible
notes payable consist of the following:
| |
As
of September 30, 2015 | |
| |
Face
Value of Note | | |
Intrinsic
Value of Fixed Conversion Element | | |
Unamortized
Discount | | |
Net Balance | |
JMJ
Financial; 12% Convertible note due August 24, 2017 | |
$ | 27,500 | | |
$ | 20,833 | | |
$ | (20,137 | ) | |
$ | 28,196 | |
| |
| | | |
| | | |
| | | |
| | |
Auctus
Fund, LLC; 8% Convertible note due May 28, 2016 | |
| 56,250 | | |
| 46,023 | | |
| (42,160 | ) | |
| 60,113 | |
| |
| | | |
| | | |
| | | |
| | |
LG
Capital Funding, LLC; 8% Convertible note due August 21, 2016 | |
| 27,000 | | |
| 22,091 | | |
| (20,229 | ) | |
| 28,862 | |
| |
| | | |
| | | |
| | | |
| | |
St.
George Investment, LLC; 8% Convertible note due September 9, 2016 | |
| 32,000 | | |
| 26,182 | | |
| (25,092 | ) | |
| 33,090 | |
| |
| | | |
| | | |
| | | |
| | |
Total
Convertible Notes | |
$ | 142,750 | | |
$ | 115,129 | | |
$ | (107,618 | ) | |
$ | 150,261 | |
The Company
did not have any convertible notes outstanding as of December 31, 2014.
During the
three and nine months ended September 30, 2015 the Company recognized discount accretion totaling $19,763 included in interest
expense in the accompanying results of operations. Since the Company has determined the convertible notes will be stock settled,
beginning six months after the date of each issuance, all of the convertible notes payable have been classified as current in
the accompanying balance sheet.
|
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- DefinitionThe entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.
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v3.3.1.900
8. Income Taxes (Dec 2014 Note)
|
7 Months Ended |
Dec. 31, 2014 |
Income Tax Disclosure [Abstract] |
|
8. Income Taxes |
Income taxes from continued operations
for the period ended December 31, 2014 consist of the following:
| |
2014 | |
Current: | |
| | |
Federal | |
$ | | |
| |
| | |
Deferred: | |
| | |
NOL Carryforwards | |
$ | 887,000 | |
Valuation allowance | |
| (887,000 | ) |
Deferred tax assets, net | |
$ | | |
At December
31, 2014 we had federal net operating losses of approximately $2,609,000 which will begin to expire in 2034 and could be subject
to certain limitations under section 382 of the Internal Revenue Code associated with changes in control we effectuated in the
first quarter of 2015.
The Company
has provided a full valuation allowance for all periods for its net deferred tax assets as it cannot conclude it is more likely
than not that they will be realized or limited and / or forfeited under the applicable provisions of the Internal Revenue Code
prior to expiration.
As of December
31, 2014, the Company did not have any unrecognized tax benefits. The Company's policy is to recognize interest and penalties
related to income tax matters in income tax expense. The Company currently has no federal or state tax examinations in progress.
The Company is subject to U.S. federal and state income tax examination from inception in 2014.
|
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- DefinitionThe entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
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v3.3.1.900
9. Reverse Merger and Recapitalization (Dec 2014 Note)
|
7 Months Ended |
Dec. 31, 2014 |
Business Combinations [Abstract] |
|
9. Reverse Merger and Recapitalization |
On November
21, 2014 we recapitalized the previously outstanding 48,500,000 outstanding shares of HDIMAX, Inc. common stock via a reverse
merger with a wholly-owned subsidiary of Indigo-Energy, Inc., a public shell company. In order to complete the reverse merger,
Indigo-Energy, Inc., defined as the legal acquirer, issued 712,121,205 shares of restricted and unregistered shares of common
stock. The issuance of the shares of common stock resulted in a change of control of Indigo-Eneregy, Inc. in which the previous
shareholder of HDIMAX, Inc. obtained approximately 94% of the consolidated Company immediately following the transaction.
Further,
in accounting for the reverse merger, HDIMAX is deemed to be the accounting acquirer. Since as of the date of the transaction,
Indigo-Energy, Inc., the legal acquirer also deemed the accounting acquiree, was considered a shell company as defined in Rule
12b-2 promulgated under the Securities Exchange Act of 1934, we determined the transaction was capital in nature rather than a
business combination. Correspondingly, in accordance with the Rules and Regulations as promulgated by the Securities and Exchange
Commission (SEC), we recognized the issuance of the restricted and unregistered shares of common stock based on
the assumption of net monetary liabilities, along with a recapitalization. On the date of merger we assumed net liabilities of
$107,901. Additionally, as a result of the par value of the stock being excess of the net liabilities assumed and the pre-merger
equity of the shell company, we recognized an adjustment to our accumulated deficit of $820,022 associated with the completion
of the transaction since the par value and assumed liabilities exceeded our previous excess capital.
|
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v3.3.1.900
1. Interim Financial Statements (Policies)
|
7 Months Ended |
9 Months Ended |
Dec. 31, 2014 |
Sep. 30, 2015 |
Accounting Policies [Abstract] |
|
|
Description of Business |
Basis of Presentation
The accompanying
financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally
accepted in the United States of America (US GAAP) and have been presented on a going concern basis, which contemplates
the realization of assets and satisfaction of liabilities in the normal course of business.
|
Description
of Business
Zonzia Media,
Inc, initially organized as HDIMAX Media, Inc., and incorporated in the State of Delaware in May 2014, , is a multi-platform entertainment
company focused on delivering compelling content with the objective of generating both advertising and subscription revenue.
Reverse
Merger with Indigo-Energy, Inc.
On November
21, 2014, through a wholly-owned subsidiary of a public shell Company then known as Indigo-Energy, Inc., HDIMAX Acquisition Corporation,
a Nevada corporation, was merged with and into HDIMAX, Inc., a Delaware corporation (HDIMAX) (such merger, the Merger)
pursuant to the Agreement and Plan of Merger, effective as of September 2, 2014, and as amended effective as of November 20, 2014,
by and among Indigo-Energy, Inc. (our company or we or us), HDIMAX and HDIMAX Acquisition
Corporation (the Merger Agreement). HDIMAX was the surviving corporation of the Merger and as such will continue
as a wholly-owned subsidiary of our Company. Upon closing the merger, we changed our name to HDIMAX Media, Inc.
As a result
of the Merger, all of HDIMAXs common stock was converted into 712,121,205 shares of our Companys common stock, which
represents approximately 94% of the outstanding shares of our companys common stock after giving effect to the Merger.
The common stock issuance, representing 94% of the outstanding shares of the consolidated Company was accounted for as a reverse
capitalization in accordance with accounting principles generally accepted in the United States (US GAAP) and the
Rules and Regulations as promulgated by the United States Securities and Exchanges Commission (SEC).
On January
22, 2015, we entered into a Settlement Agreement in which we cancelled all of the 712,121,205 shares of restricted and unregistered
common stock previously issued to effectuate the merger with Rajinder Brar, the previous sole owner of HDIMAX, Inc. In consideration
for the shares being cancelled, we forfeited our rights to sell advertising and other products on websites previously controlled
Mr. Brar and related entities, with the exception of www.hdimax.com. An outline of the significant
terms of the Settlement Agreement includes, but is not limited to, the following:
|
· |
The 712,121,205 million shares of HDIMAX
Media, Inc. (formerly Indigo-Energy) common stock issued to Rajinder Brar, the owner of 100% of the previously outstanding
stock of HDIMAX, Inc. immediately preceding the reverse acquisition transaction, were cancelled. |
|
· |
Rajinder Brar, Aneliya Vasileva, and
Myles Pressey III, previously appointed as the Companys officers and Board of Directors immediately following the completion
of the reverse acquisition, resigned and forfeited future compensation terms associated with any and all previously agreed
upon employment agreements, inclusive of the compensation accrued as of December 31, 2014. |
|
· |
Mr. James C. Walter Sr. was reappointed
to serve as a Director charged with appointing new officers. Mr. Walter Sr. served as the Sole Officer and Director of the
Company immediately preceding the completion of the reverse acquisition transaction. |
|
· |
The Companys option agreement
to acquire Fashion Style Magazine, Inc., an entity wholly owned by Rajinder Brar, was cancelled. |
|
· |
The Omnibus Agreement and License dated
November 21, 2014, by and between the Company and Fashion Style Magazine, Inc. was terminated. The brands and assets wholly
owned by Rajinder Brar through Fashion Style Magazine, Inc. were intended to be a core portion of the consolidated Companys
business operations subsequent to the completion of the reverse acquisition. |
|
· |
The Company forfeited all rights to
Frontlinewire.com, a brand and website acquired in the reverse acquisition. |
|
· |
The Company maintained all rights to
hdimax.com, a brand and website acquired in the reverse acquisition, but agreed to assign those assets back to their original
owners by May 1, 2015. We do not intend to further develop or publish content at www.hdimax.com. |
For additional
details, including a copy of the Settlement Agreement, please see our Current Report on Form 8-K filed on January 29, 2015.
On March
9, 2015 we changed our name to Zonzia Media, Inc. and we are developing a new multi-platform entertainment distribution channel
with the goal of being a unique hybrid of a linear channel, a video-on-demand channel and an over-the-top channel. Our technology
will allow our viewers instant access to our available content on most internet connected devices.
|
Use of Estimates |
Use of
Estimates
The preparation
of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
|
Use of
Estimates
In preparing
financial statements in conformity with generally accepted accounting principles, we are required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and revenues and expenditures during the reported periods. Actual results could differ materially
from those estimates.
|
Cash and Cash Equivalents |
Cash and
Cash Equivalents
The Company
considers all highly liquid instruments with an original maturity of 90 days or less at the time of purchase to be cash equivalents.
The Company did not have any cash equivalents at December 31, 2014.
|
Cash and
Cash Equivalents
We consider
all highly liquid instruments with an original maturity of 90 days or less at the time of purchase to be cash equivalents. We
did not have any cash equivalents at September 30, 2015 or December 31, 2014.
|
Revenue Recognition |
Revenue Recognition
We recognize
revenues when the services or products have been provided or delivered, the fees we charge are fixed or determinable, we and our
advertisers or other customers understand the specific nature and terms of the agreed upon transactions, and collectability is
reasonably assured.
Most of our
advertising customers pay on a cost-per-impression basis that enables advertisers to pay us based on the number of times their
ads display on our websites. For the sale of certain third-party products and services, we recognize revenue on negotiated commission
rate as a percentage of the gross amount billed to the customers.
|
|
Fair Value Measurements |
Fair Value Measurements
The fair
value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date. Financial assets are marked to bid prices
and financial liabilities are marked to offer prices. The fair value should be calculated based on assumptions that market
participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the
fair value of liabilities should include consideration of non-performance risk, including the partys own credit risk.
Fair value
measurements do not include transaction costs. A fair value hierarchy is used to prioritize the quality and reliability
of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest
level of input that is significant to the fair value measurement. The fair value hierarchy is defined into the following
three categories:
Level
1: Quoted market prices in active markets for identical assets or liabilities.
Level
2: Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level
3: Unobservable inputs that are not corroborated by market data.
|
Fair Value
Measurements
The fair
value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date. Financial assets are marked to bid prices
and financial liabilities are marked to offer prices. The fair value should be calculated based on assumptions that market
participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the
fair value of liabilities should include consideration of non-performance risk, including the partys own credit risk.
Fair value
measurements do not include transaction costs. A fair value hierarchy is used to prioritize the quality and reliability
of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest
level of input that is significant to the fair value measurement. The fair value hierarchy is defined into the following
three categories:
Level
1: Quoted market prices in active markets for identical assets or liabilities.
Level
2: Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level
3: Unobservable inputs that are not corroborated by market data.
|
Stock Based Compensation |
Stock
Based Compensation
The Company
has on occasion issued equity and equity linked instruments to employees and non-employees in lieu of cash for the receipt of
goods and services and, in certain circumstances the settlement of short-term loan arrangements. The applicable GAAP establishes
that share-based payment transactions with non-employees shall be measured at the fair value of the consideration received or
the fair value of the equity instruments issued, whichever is more reliably measurable.
In these
transactions, the Company issues unregistered and restricted equity instruments.
While the
Company currently has 2,055,832 shares of freely-traded stock with a quoted market price (a Level 1input within the GAAP hierarchy),
the fair value of the unregistered and restricted shares issued in compensation transactions with non-employees as valued by the
quoted market price does not always reflect the economic substance of the transactions and does not always represent the Companys
principal market, correspondingly, the quoted market price is not always the most reliably measurable indicator of the fair value.
The determination of fair value is based upon facts and circumstances including the liquidity restrictions placed upon our unregistered
restricted equity instruments along with the quoted market not being the most active or principal trading market.
When unregistered
common shares are issued for the settlement of short-term financing arrangements, the reacquisition price of the extinguished
financing arrangement is determined by the value of the debt which is more clearly evident, and no additional inducement expense
is recognized.
In situations
in which we issue unregistered restricted common shares in exchange for goods and services, and the value of the goods and services
are not the most reliably measurable, we recognize the fair value of the unregistered restricted equity instruments based on the
value of similar instruments issued in private placements in exchange for cash in the most recent transactions (a Level 2 input
within the GAAP hierarchy). The Company has determined this methodology reflects the risk adjusted fair value of our unregistered
restricted equity instruments using a commercially reasonable valuation technique within the most active market.
|
|
Embedded Conversion Features and Other Equity-linked Instruments |
|
Embedded
Conversion Features and Other Equity-linked Instruments
The Company
classifies all of its common stock purchase warrants and other derivative financial instruments as equity if the contracts (1)
require physical settlement or net-share settlement or (2) give the Company a choice of net-cash settlement or settlement in its
own shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any contracts that (1)
require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside
the control of the Company), (2) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement
or net-share settlement), or (3) contracts that contain reset provisions. The Company assesses classification of its equity-linked
instruments at each reporting date to determine whether a change in classification between equity and liabilities (assets) is
required.
|
Income Taxes |
Income
Taxes
Income taxes
are recorded in the period in which the related transactions have been recognized in the financial statements. Deferred tax assets
and liabilities are recorded for expected future tax consequences of loss carryforwards and temporary differences. Temporary differences
are the differences between the reported amounts of assets and liabilities in the financial statements and their tax basis. Deferred
tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion
of, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects
of changes in tax laws and rates on the date of enactment.
|
|
Loss Per Common Share |
Loss Per
Common Share
Basic net
loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding. Dilutive loss
per common share includes additional dilution from common stock equivalents, such as stock options and warrants, and convertible
instruments, if the impact is not antidilutive.
|
|
Recently Issued Accounting Pronouncements |
Recently
Issued Accounting Pronouncements
In May 2014,
the Financial Accounting Standards Board (FASB) issued Accounting Standards (ASU) No. 2014-09, Revenue
from Contracts with Customers. The objective of this update is to 1) remove inconsistencies and weaknesses in revenue requirements,
2) provide a robust framework for addressing revenue recognition issues, 3) improve comparability of revenue recognition practices
across entities, industries, jurisdictions, and capital markets 4) provide more useful information to users of financial statements
through improved disclosure requirements, and 5) simplify the preparation of financial statements. This update is effective in
annual reporting periods beginning after December 15, 2016 and the interim periods within that year. The Company will be
evaluating the impact of this update as it pertains to the Companys financial statements and other required disclosures
on an on-going basis, currently contingent the commencement of principal revenue generating activities, until its eventual adoption
and implementation.
In June 2014,
the FASB issued ASU No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements,
Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation, which removes all incremental financial
reporting requirements from GAAP for development stage entities, including the removal of Topic 915 from the FASB Accounting Standards
Codification. The presentation and disclosure requirements in Topic 915 will no longer be required for the first annual period
beginning after December 15, 2014. The revised consolidation standards are effective one year later, in annual periods beginning
after December 15, 2015. Early adoption is permitted. We adopted ASU No. 2014-10 effective on our inception date of May 24, 2014.
In
June 2014, the FASB issued ASU No. 2014-12, Stock Compensation. The amendments require that a performance target that affects
vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity
should apply existing guidance in as it relates to awards with performance conditions that affect vesting to account for such
awards. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. Compensation
cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent
the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance
target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation
cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized
during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted
to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service
and still be eligible to vest in the award if the performance target is achieved. As indicated in the definition of vest, the
stated vesting period (which includes the period in which the performance target could be achieved) may differ from the requisite
service period. The amendment is effective for annual periods beginning after December 15, 2015 with early adoption permitted.
The Company is currently evaluating the impacts of this amendment on the stock-based compensation awards expected to be issued
in future periods.
In
August 2014, the FASB issued ASU No. 2014-15 Presentation of Financial Statements Going Concern. In connection with preparing
financial statements for each annual and interim reporting period, an entity's management should evaluate whether there are conditions
or events, considered in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern
within one year after the date that the financial statements are issued (or within one year after the date that the financial
statements are available to be issued when applicable).
Management's
evaluation should be based on relevant conditions and events that are known and reasonably knowable at the date that the financial
statements are issued (or at the date that the financial statements are available to be issued when applicable).
Substantial
doubt about an entity's ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate,
indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the
date that the financial statements are issued (or available to be issued).
When
management identifies conditions or events that raise substantial doubt about an entity's ability to continue as a going concern,
management should consider whether its plans that are intended to mitigate those relevant conditions or events will alleviate
the substantial doubt. The mitigating effect of management's plans should be considered only to the extent that (1) it is probable
that the plans will be effectively implemented and, if so, (2) it is probable that the plans will mitigate the conditions or events
that raise substantial doubt about the entity's ability to continue as a going concern.
If
conditions or events raise substantial doubt about an entity's ability to continue as a going concern, but the substantial doubt
is alleviated as a result of consideration of management's plans, the entity should disclose information that enables users of
the financial statements to understand all of the following (or refer to similar information disclosed elsewhere in the footnotes):
a.
Principal conditions or events that raised substantial doubt about the entity's ability to continue as a going concern (before
consideration of management's plans)
b.
Management's evaluation of the significance of those conditions or events in relation to the entity's ability to meet its obligations
c.
Management's plans that alleviated substantial doubt about the entity's ability to continue as a going concern.
If
conditions or events raise substantial doubt about an entity's ability to continue as a going concern, and substantial doubt is
not alleviated after consideration of management's plans, an entity should include a statement in the footnotes indicating that
there is substantial doubt about the entity's ability to continue as a going concern within one year after the date that
the financial statements are issued (or available to be issued). Additionally, the entity should disclose information that enables
users of the financial statements to understand all of the following:
a.
Principal conditions or events that raise substantial doubt about the entity's ability to continue as a going concern
b.
Management's evaluation of the significance of those conditions or events in relation to the entity's ability to meet its obligations
c.
Management's plans that are intended to mitigate the conditions or events that raise substantial doubt about the entity's ability
to continue as a going concern.
We do not
expect the effective implementation of this ASU, beginning in fiscal 2017, to materially impact future disclosures.
In November
2014, the FASB issued ASU No. 2014-16 Derivatives and Hedging. For hybrid financial instruments issued in the form of a share,
an entity (an issuer or an investor) should determine the nature of the host contract by considering all stated and implied substantive
terms and features of the hybrid financial instrument, weighing each term and feature on the basis of relevant facts and circumstances.
That is, an entity should determine the nature of the host contract by considering the economic characteristics and risks of the
entire hybrid financial instrument, including the embedded derivative feature that is being evaluated for separate accounting
from the host contract.
In evaluating
the stated and implied substantive terms and features, the existence or omission of any single term or feature does not necessarily
determine the economic characteristics and risks of the host contract. Although an individual term or feature may weigh more heavily
in the evaluation on the basis of facts and circumstances, an entity should use judgment based on an evaluation of all the relevant
terms and features. For example, the presence of a fixed-price, noncontingent redemption option held by the investor in a convertible
preferred stock contract is not, in and of itself, determinative in the evaluation of whether the nature of the host contract
is more akin to a debt instrument or more akin to an equity instrument. Rather, the nature of the host contract depends on the
economic characteristics and risks of the entire hybrid financial instrument. The amendment is effective for fiscal years beginning
after December 15, 2015 and may be retroactively applied for all periods. We are currently evaluating the potential impacts on
our financial statements in the event we enter into these types of arrangements in the future.
In February
2015 the FASB issued ASU No. 2015-02, Consolidation. Under current GAAP we may be required to consolidate another legal entity
in situations in which our contractual rights do not give us the ability to act primarily on our own behalf, we do not hold a
majority of the legal entity's voting rights, or we are not exposed to a majority of the legal entity's economic benefits or obligations.
The Standards Update amends the GAAP to require that all legal entities are subject to reevaluation
under the revised consolidation model. Specifically, the amendments:
1.
Modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting
interest entities
2.
Eliminate the presumption that a general partner should consolidate a limited partnership
3.
Affect the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements
and related party relationships
4.
Provide a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required
to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act
of 1940 for registered money market funds.
We
do not believe this updated consolidation guidance will have a material impact on our future financial position, results of operations,
or cash flows.
In
April 2015 the FASB issued ASU No. 2015-03, Interest-Imputation of Interest. The Standards Update requires 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. We do not believe this updated presentation requirement will have a material
impact on our future financial position, results of operations, or cash flows.
There have
been no other recently issued accounting pronouncements through the date of this report that the Company believes will have a
material impact on the financial position, results of operations, or cash flows.
|
Recently
Issued Accounting Pronouncements
There have
been no recently issued accounting pronouncements that were not previously disclosed in our annual report on Form 10-K filed on
April 15, 2015 through the date of this report that we believe will have a material impact on our financial position, results
of operations, or cash flows.
|
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v3.3.1.900
4. Stockholders Equity (Tables)
|
9 Months Ended |
Sep. 30, 2015 |
Warrants and Rights Note Disclosure [Abstract] |
|
Warrants outstanding |
| |
As
of September 30, 2015 | |
| |
Shares | | |
Weighted
Average Exercise Price | | |
Weight
Average Remaining Term (years) | | |
Aggregate
Intrinsic Value | |
Outstanding December 31, 2014 | |
| 871,591 | | |
$ | 0.88 | | |
| 2.83 | | |
$ | | |
Warrants granted | |
| 3,000,000 | | |
| 0.22 | | |
| 2.65 | | |
| | |
Warrants exercised | |
| | | |
| | | |
| | | |
| | |
Warrants
expired, cancelled, forfeited | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Outstanding
and exercisable at September 30, 2015 | |
| 3,871,591 | | |
$ | 0.37 | | |
| 2.69 | | |
$ | | |
|
X |
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v3.3.1.900
5. Convertible Notes Payable (Tables)
|
9 Months Ended |
Sep. 30, 2015 |
Debt Disclosure [Abstract] |
|
Convertible Notes Payable |
| |
As
of September 30, 2015 | |
| |
Face
Value of Note | | |
Intrinsic
Value of Fixed Conversion Element | | |
Unamortized
Discount | | |
Net Balance | |
JMJ
Financial; 12% Convertible note due August 24, 2017 | |
$ | 27,500 | | |
$ | 20,833 | | |
$ | (20,137 | ) | |
$ | 28,196 | |
| |
| | | |
| | | |
| | | |
| | |
Auctus
Fund, LLC; 8% Convertible note due May 28, 2016 | |
| 56,250 | | |
| 46,023 | | |
| (42,160 | ) | |
| 60,113 | |
| |
| | | |
| | | |
| | | |
| | |
LG
Capital Funding, LLC; 8% Convertible note due August 21, 2016 | |
| 27,000 | | |
| 22,091 | | |
| (20,229 | ) | |
| 28,862 | |
| |
| | | |
| | | |
| | | |
| | |
St.
George Investment, LLC; 8% Convertible note due September 9, 2016 | |
| 32,000 | | |
| 26,182 | | |
| (25,092 | ) | |
| 33,090 | |
| |
| | | |
| | | |
| | | |
| | |
Total
Convertible Notes | |
$ | 142,750 | | |
$ | 115,129 | | |
$ | (107,618 | ) | |
$ | 150,261 | |
|
X |
- DefinitionTabular disclosure of borrowings which can be exchanged for a specified number of another security at the option of the issuer or the holder. Disclosures include, but are not limited to, principal amount, amortized premium or discount, and amount of liability and equity components.
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v3.3.1.900
6. Embedded Debt Conversion Features and Other Equity-linked Instruments (Tables)
|
9 Months Ended |
Sep. 30, 2015 |
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
|
Assumptions used for determining fair value of derivative liabilities |
Expected volatility |
|
455% |
Expected term (years) |
|
0.75 to 2.80 |
Dividend yield |
|
0.0% |
Risk free rate |
|
0.1% |
|
Fair value of derivative liabilities |
| |
Fair value measurements | |
| |
September 30, 2015 | | |
Quoted prices in
active markets for unobservable
identical assets
(Level 1) | | |
Significant other
inputs (Level 2) | | |
Significant observable
inputs (Level 3) | |
Derivative liability | |
$ | 532,600 | | |
| | | |
| | | |
$ | 532,600 | |
|
Changes in fair value of Level 3 liabilities |
| |
September 30, 2015 | | |
December 31, 2014 | |
| |
| | |
| |
Beginning Balance | |
$ | | | |
$ | | |
Aggregate fair value of derivative issued | |
$ | 51,449 | | |
$ | | |
Liability reclassification for other equity linked instruments | |
$ | 493,161 | | |
$ | | |
Change in fair value of derivative included
in results of operations (gain) loss | |
$ | (12,010 | ) | |
$ | | |
| |
| | | |
| | |
Ending Balance | |
$ | 532,600 | | |
$ | | |
|
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v3.3.1.900
3. Related Party Transactions (Details Narrative) - USD ($)
|
4 Months Ended |
7 Months Ended |
9 Months Ended |
Sep. 30, 2014 |
Dec. 31, 2014 |
Sep. 30, 2015 |
Common stock issued for settlement of related party accounts payable, value |
|
|
$ 340,163
|
Contributed capital, salary forgiveness |
|
|
288,988
|
Proceeds from issuance of stock |
$ 488
|
|
425,850
|
Share-based compensation |
0
|
$ 22,800,000
|
77,729,258
|
Promissory note issued |
|
0
|
70,000
|
Proceeds from issuance of promissory note |
$ 450,000
|
$ 560,000
|
$ 70,000
|
Director |
|
|
|
Common stock issued for cash, shares |
|
|
250,000
|
Proceeds from issuance of stock |
|
|
$ 25,000
|
Affiliate |
|
|
|
Stock issued for services, shares issued |
|
|
2,000,000
|
Stock issued for services, value |
|
|
$ 680,000
|
Promissory note issued |
|
|
35,000
|
Proceeds from issuance of promissory note |
|
|
$ 35,000
|
Stock issued for consideration of note, shares issued |
|
|
215,000
|
Stock issued for consideration of note, value |
|
|
$ 32,039
|
Stock issued for renewal of promissory note, shares issued |
|
|
100,000
|
Stock issued for renewal of promissory note, value |
|
|
$ 17,260
|
Interim Chief Executive Officer |
|
|
|
Share-based compensation |
|
|
$ 47,500,000
|
Stock issued for prior obligation |
|
|
|
Common stock issued for settlement of related party accounts payable, shares |
|
|
7,500,000
|
Common stock issued for settlement of related party accounts payable, value |
|
|
$ 340,163
|
Services contributed |
|
|
|
Contributed capital, salary forgiveness |
|
|
288,988
|
Cancellation of Restricted Stock Award | Two former officers |
|
|
|
Share-based compensation |
|
|
9,975,000
|
Employment agreement | Pressey |
|
|
|
Share-based compensation |
|
|
$ 7,266,025
|
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4. Stockholders' Equity (Details - Warrant activity) - Warrants [Member]
|
9 Months Ended |
Sep. 30, 2015
$ / shares
shares
|
Warrants outstanding, beginning | shares |
871,591
|
Warrants granted | shares |
3,000,000
|
Warrants outstanding, ending | shares |
3,871,591
|
Weighted average exercise price, beginning | $ / shares |
$ .88
|
Weighted average exercise price, granted | $ / shares |
.22
|
Weighted average exercise price, ending | $ / shares |
$ .37
|
Weighted average remaining contractual term, beginning |
2 years 9 months 25 days
|
Weighted average remaining contractual term, granted |
2 years 7 months 24 days
|
Weighted average remaining contractual term, ending |
2 years 8 months 8 days
|
X |
- DefinitionWeighted average remaining contractual term, beginning
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5. Convertible Notes Payable (Details) - USD ($)
|
Sep. 30, 2015 |
Dec. 31, 2014 |
Face value of note |
$ 142,750
|
|
Intrinsic value of fixed conversion element |
115,129
|
|
Unamortized discount |
(107,618)
|
|
Net balance |
150,261
|
$ 0
|
Convertible Notes Payable 1 |
|
|
Face value of note |
27,500
|
|
Intrinsic value of fixed conversion element |
20,833
|
|
Unamortized discount |
(20,137)
|
|
Net balance |
28,196
|
|
Convertible Notes Payable 2 |
|
|
Face value of note |
56,250
|
|
Intrinsic value of fixed conversion element |
46,023
|
|
Unamortized discount |
(42,160)
|
|
Net balance |
60,113
|
|
Convertible Notes Payable 3 |
|
|
Face value of note |
27,000
|
|
Intrinsic value of fixed conversion element |
22,091
|
|
Unamortized discount |
(20,229)
|
|
Net balance |
28,862
|
|
Convertible Notes Payable 4 |
|
|
Face value of note |
32,000
|
|
Intrinsic value of fixed conversion element |
26,182
|
|
Unamortized discount |
(25,092)
|
|
Net balance |
$ 33,090
|
|
X |
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6. Embedded Debt Conversion (Details - fair value measurements) - Fair Value, Measurements, Recurring [Member]
|
Sep. 30, 2015
USD ($)
|
Derivative liability |
$ 532,600
|
Fair Value, Inputs, Level 1 |
|
Derivative liability |
0
|
Fair Value, Inputs, Level 2 |
|
Derivative liability |
0
|
Fair Value, Inputs, Level 3 |
|
Derivative liability |
$ 532,600
|
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v3.3.1.900
6. Embedded Debt Conversion (Details - Level 3) - Fair Value, Measurements, Recurring [Member] - Fair Value, Inputs, Level 3 - USD ($)
|
9 Months Ended |
12 Months Ended |
Sep. 30, 2015 |
Dec. 31, 2014 |
Beginning balance |
$ 0
|
$ 0
|
Aggregate fair value of derivative issued |
51,449
|
0
|
Liability reclassification for other equity linked instruments |
493,161
|
0
|
Change in fair value of derivative included in results of operations (gain) loss |
(12,010)
|
0
|
Ending balance |
$ 532,600
|
$ 0
|
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