UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q10-Q/A
Amendment No. 1
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31,April 30, 2018
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________.
COMMISSION FILE NUMBER: 333-163815
VIVA ENTERTAINMENT GROUP INC.
(Exact name of registrant as specified in its charter)
| Nevada | 1311 | 98-0642409 |
| (State or other jurisdiction of organization) | (Primary Standard Industrial Classification Code) | (IRS Employer Identification #) |
143-41 84th Drive
Briarwood, New York 11435
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 347-681-1668
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐☒ No☒☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (check one):
| Large Accelerated filer☐ | Accelerated filer☐ | Non-accelerated filer☐ |
| Smaller reporting company☒ | Emerging growth company☐ | |
| (Do not check if a smaller reporting company) |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ☐No☒
As of October 2,June 19, 2018, 7,240,764,8875,253,676,602 shares of common stock, $0.00001 par value per share, were outstanding.
VIVA ENTERTAINMENT GROUP INC.
QUARTERLY REPORT ON FORM 10-Q
July 31, 2018
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.EXPLANATORY NOTE
| VIVA ENTERTAINMENT GROUP INC. | ||||||||
| Condensed Balance Sheets | ||||||||
| July 31, 2018 | October 31, 2017 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | 5,363 | $ | 2,682 | ||||
| Total Current Assets | 5,363 | 2,682 | ||||||
| Other Assets | ||||||||
| Software, net of amortization of $19,231 and $14,035 | 49,322 | 54,518 | ||||||
| Total Other Assets | 49,322 | 54,518 | ||||||
| Total Assets | $ | 54,685 | $ | 57,200 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current Liabilities | ||||||||
| Accounts Payable and Accrued Liabilities | $ | 413,549 | $ | 413,549 | ||||
| Accrued Interest | 139,115 | 61,520 | ||||||
| Accrued Salary and Wages | 509,638 | 439,343 | ||||||
| Related Party Payable | 68,770 | 66,070 | ||||||
| Convertible Notes Payable, net of discount | 687,043 | 514,402 | ||||||
| Derivative Liability | 2,156,148 | 1,463,047 | ||||||
| Total Current Liabilities | 3,974,263 | 2,957,931 | ||||||
| Stockholders’ Deficit | ||||||||
| Common Stock (13,000,000,000 shares authorized, par value 0.00001, 7,129,014,887 and 4,134,740,009 shares issued and outstanding at July 31, 2018 and October 31, 2017 | 71,734 | 41,348 | ||||||
| Common Stock Issuable | 1,808,250 | 3,079,200 | ||||||
| Additional paid-in capital | 20,755,716 | 15,012,970 | ||||||
| Accumulated deficit | (26,555,278 | ) | (21,034,249 | ) | ||||
| Total Stockholders’ Deficit | (3,919,578 | ) | (2,900,731 | ) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | 54,685 | $ | 57,200 | ||||
| The Accompanying Notes are an Integral Part of These Financial Statements | ||||||||
VIVA ENTERTAINMENT GROUP INC. | ||||||||||||||||
Condensed Statements of Operations (Unaudited) | ||||||||||||||||
| For the Three Months Ended July 31, 2018 | For the Three Months Ended July 31, 2017 | For the Nine Months Ended July 31, 2018 | For the Nine Months Ended July 31, 2017 | |||||||||||||
| Revenues | ||||||||||||||||
| Subscriptions | $ | 8,470 | $ | 3,000 | $ | 35,921 | $ | 3,000 | ||||||||
| Operating Expenses | ||||||||||||||||
| Consulting services | 258,000 | 3,032,214 | 409,200 | 3,064,519 | ||||||||||||
| Professional fees | 265,500 | — | 545,297 | — | ||||||||||||
| Content | 5,749 | — | 59,003 | — | ||||||||||||
| General and administrative | 821,204 | 26 | 2,878,253 | 526,354 | ||||||||||||
| Wages | 72,055 | 98,096 | 245,905 | 9,307,374 | ||||||||||||
| Total Operating Expenses | 1,422,508 | 3,399,126 | 4,137,658 | 12,898,247 | ||||||||||||
| Loss from operations | (1,414,038 | ) | (3,396,126 | ) | (4,101,737 | ) | (12,895,247 | ) | ||||||||
| Other expense | ||||||||||||||||
| Loss on settlement of debt | (73,336 | ) | (300,323 | ) | (107,098 | ) | (289,313 | ) | ||||||||
| Gain/(Loss) on change in derivative liability | (1,129,269 | ) | (894,165 | ) | (1,177,385 | ) | (1,145,093 | ) | ||||||||
| Interest expense | 231,060 | (232,346 | ) | (134,809 | ) | (1,119,244 | ) | |||||||||
| Total other expense | (971,545 | ) | (1,426,834 | ) | (1,419,292 | ) | (2,553,650) | |||||||||
| Net Loss | $ | (2,385,583 | ) | $ | (4,822,960 | ) | $ | (5,521,029 | ) | $ | (15,448,897 | ) | ||||
| Net Loss Per Common Share – Basic and Diluted | $ | (0.00 | ) | $ | (0.00) | $ | (0.00 | ) | $ | (0.01 | ) | |||||
| Weighted Average Number of Common Shares Outstanding | 7,203,994,996 | 2,686,505,096 | 6,348,337,376 | 1,221,450,275 | ||||||||||||
| The Accompanying Notes are an Integral Part of These Financial Statements | ||||||||||||||||
| VIVA ENTERTAINMENT GROUP INC. | ||||||||
| Condensed Statements of Cash Flows | ||||||||
| For the Nine Months Ended | For the Nine Months Ended | |||||||
| July 31, 2018 | July 31, 2017 | |||||||
| Operating Activities | ||||||||
| Net loss | $ | (5,521,029 | ) | $ | (15,448,897 | ) | ||
| Adjustments to reconcile net loss to cash used in operating activities: | ||||||||
| Amortization of other assets | 5,196 | 5,172 | ||||||
| Amortization of debt discount | 632,886 | 1,052,784 | ||||||
| Penalties incurred on debt | 48,501 | (120,408 | ) | |||||
| Shares previously retired | — | (444 | ) | |||||
| Derivative Expense | 359,292 | 1,145,093 | ||||||
| Change in fair value of derivative liability | 818,014 | — | ||||||
| Loss on settlement of debt | 107,098 | 289,313 | ||||||
| Common stock issued and payable for services | 2,969,412 | 12,279,796 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accrued payroll | 84,740 | 204,873 | ||||||
| Accounts payable and accrued liabilities | 120,361 | 197,618 | ||||||
| Net Cash Used in Operating Activities | (375,569 | ) | (395,100 | ) | ||||
| Financing Activities | ||||||||
| Proceeds from borrowing from related parties | 12,700 | 102,070 | ||||||
| Proceeds from sale of common stock | — | 12,000 | ||||||
| Payment on debt | (10,000 | ) | — | |||||
| Proceeds from issuance of convertible notes | 375,550 | 321,260 | ||||||
| Net Cash Provided by in Financing Activities | 378,250 | 435,330 | ||||||
| Increase (Decrease) in Cash | 2,681 | 40,230 | ||||||
| Cash - Beginning of Period | 2,682 | 385 | ||||||
| Cash - End of Period | $ | 5,363 | $ | 40,615 | ||||
| Cash paid for: | ||||||||
| Interest | $ | — | — | |||||
| Income taxes | $ | — | — | |||||
| Supplemental Disclosure of Cash Flow Information | ||||||||
| Derivative issuances | $ | 408,560 | $ | 575,055 | ||||
| Derivative conversions | $ | 892,725 | $ | 1,459,101 | ||||
| Derivative adjustment from debt extinguishment | $ | — | $ | 10,590 | ||||
| Debt converted into common stock | $ | 532,947 | $ | 1,100,060 | ||||
| The Accompanying Notes are an Integral Part of These Financial Statements | ||||||||
VIVA ENTERTAINMENT GROUP INC.
Notes to Consolidated Financial Statements
For the Nine Months Ended July 31, 2018 and 2017
NOTE 1 – NATURE OF OPERATIONS
Description of Business and History
The Company was incorporated on October 26, 2009 in the State of Nevada. The Company originally engaged in the development of a website and also the design and development of a catalogue to sell over the counter and prescription medications, and supplements. In 2012, the Company undertook a change in focus to the natural resources sector where it was engaged in the acquisition and exploration of base metals and mineral mining properties.
On April 5, 2016, the Company completed the purchase of Viva Entertainment Group, Inc. (“Viva Entertainment”), a Delaware corporation, from EMS Find, Inc. (“EMS”(the “Company,”) pursuantis filing this Amendment No. 1 on Form 10-Q/A (this “Amendment”) to a stock purchase agreement. Viva Entertainment’s Chief Executive Officer, Johnny Falcones, was appointed as the Company’s sole director, President and Chief Executive Officer to manage the development and marketing of Viva Entertainment’s over the top (IPTV/OTT) applicationamend our Quarterly Report on Form 10-Q for connected TV’s, desktop computers, tablets, and smart phones.
Pursuant to the stock purchase agreement, the Company and EMS agreed to transfer control of Viva Entertainment to the Company through the purchase of all outstanding shares of stock of Viva Entertainment by the Company in exchange for the issuance to EMS of a 10% promissory note in the principal amount of $100,000, due six months from the Closing (the “EMS Note”), and the issuance of 22,000,000 shares of common stock to Johnny Falcones. For accounting purposes, the transaction was treated as a reverse merger since the acquired entity now forms the basis for operations and the transaction resulted in a change in control, with the acquired company electing to become the successor issuer for reporting purposes. The accompanying financial statements have been prepared to reflect the assets, liabilities and operations of Viva Entertainment Group, Inc. exclusive of Black River Petroleum since all predecessor operations were discontinued. As part of the transaction, stock payable and amounts due to former officers were forgiven, with the balances recorded as Contributed Capital. For equity purposes, additional paid-in capital and retained deficit shown are those of Viva, exclusive of Black River Petroleum. Viva had no operations prior to the quarter ended April 30, 2016.
In management’s opinion, all adjustments necessary for a fair statement of the results for the presented periods have been made. All adjustments made were of a normal recurring nature.
Viva Entertainment Group Inc. (F/K/A Black River Petroleum Corp.)2018 (the “Company”“Form 10-Q”) develops and markets Viva Entertainment’s over the top (IPTV/OTT) application for connected TV’s, desktop computers, tablets, and smart phones. The Company is based in Briarwood, New York.
Going Concern
These financial statements have been prepared on a going concern basis, which implies the Company will continue to meet its obligations and continue its operations for the next fiscal year. Realization value may be substantially different from carrying values, as shown and these financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. As of July 31, 2018, the Company has a working capital deficiency and has an accumulated deficit of $26,555,278. The continuation of Viva Entertainment Group as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordanceoriginally filed with accounting principles generally accepted in the United States for interim information Regulation S-K. Accordingly, they do not includeSecurities and Exchange Commission (the “SEC”) on June 19, 2018. The purpose of this Amendment is to correct the question “Indicate by check mark whether the registrant (1) has filed all of the information and footnotesreports required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments consisting of a normal and recurring nature considered necessary for a fair presentation have been included. These financial statements should be read in conjunction with the audited financial statements for the year ended October 31, 2017.
Use of Estimates
The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net revenue and expenses in the reporting period. We regularly evaluate our estimates and assumptions related to the useful life and recoverability of long-lived assets, stock-based compensation and deferred income tax asset valuation allowances. We base our estimates and assumptions on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experiencedfiled by us may differ materially and adversely from our estimates. To the extent there are material differences between our estimates and the actual results, our future results of operations will be affected.
Loss Per Common Share
The Company reports net loss per share in accordance with provisions of the FASB. The provisions require dual presentation of basic and diluted loss per share. Basic net loss per share excludes the impact of common stock equivalents. Diluted net loss per share utilizes the average market price per share when applying the treasury stock method in determining common stock equivalents. As of July 31, 2018 and October 31, 2017, there were no dilutive common stock equivalents outstanding.
Fair Value of Financial Instruments
Pursuant to ASC No. 820, “Fair Value Measurements and Disclosures”, the Company is required to estimate the fair value of all financial instruments included on its balance sheet as of July 31, 2018 and October 31, 2017. The Company’s financial instruments consist of cash and derivative liabilities. The Company considers the carrying value of such amounts in the financial statements to approximate their fair value due to the short-term nature of these financial instruments.
The Company adopted ASC No. 820-10 (ASC 820-10), Fair Value Measurements. ASC 820-10 relates to financial assets and financial liabilities. ASC 820-10 defines fair value, establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (GAAP), and expands disclosures about fair value measurements. The provisions of this standard apply to other accounting pronouncements that requireSection 13 or permit fair value measurements and are to be applied prospectively with limited exceptions.
ASC 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This standard is now the single source in GAAP for the definition of fair value, except for the fair value of leased property as defined in SFAS 13. ASC 820-10 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions, about market participant assumptions, that are developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under ASC 820-10 are described below:
The following presents the Company's fair value hierarchy for those assets and liabilities measured at fair value on a non-recurring basis as of July 31, 2018 and October 31, 2017:
July 31, 2018:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Convertible Notes Payable, net of discount | $ | — | $ | — | $ | 687,043 | $ | 687,043 | ||||||||
| Derivative Liability | — | — | 2,156,148 | 2,156,148 | ||||||||||||
| Total | $ | — | $ | — | $ | 2,843,191 | $ | 2,843,191 | ||||||||
October 31, 2017:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Convertible Notes Payable, net of discount | $ | — | $ | — | $ | 514,402 | $ | 514,402 | ||||||||
| Derivative Liability | — | — | 1,463,047 | 1,463,047 | ||||||||||||
| Total | $ | — | $ | — | $ | 1,977,449 | $ | 1,977,449 | ||||||||
Derivative Financial Instruments
Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments, and measurement of their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option-pricing model. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt, the Company will continue its evaluation process of these instruments as derivative financial instruments.
Once determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives. In addition, the fair value of freestanding derivative instruments such as warrants, are also valued using the Black-Scholes option-pricing model.
Cash and Cash Equivalents
For purposes of the Condensed Financial Statements, the Company considers liquid investments with an original maturity of three months or less to be cash equivalents. As of July 31, 2018 and October 31, 2017, the Company had no cash equivalents.
Revenue Recognition
Effective November 1, 2017, the Company adopted ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the sale of service contracts by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied. For the comparative periods, revenue has not been adjusted and continues to be reported under ASC 605 — Revenue Recognition. Under ASC 605, revenue is recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) the performance of service has been rendered to a customer or delivery has occurred; (3) the amount of fee to be paid by a customer is fixed and determinable; and (4) the collectability of the fee is reasonably assured.
There was no impact on the Company’s financial statements as a result of adopting Topic 606 for nine months ended July 31, 2018 or on prior periods.
NOTE 3 – RELATED PARTY TRANSACTIONS
The detail composition of the $509,638 in accrued wages as of July 31, 2018 includes amounts owed to Company officers, Johnny Falcones ($168,823), John Sepulveda ($157,034), and ($183,781) to Alberto Gomez. This accrual covered services rendered by the employees for the period from April, 2016 through July 31, 2018 less payments made to such employees during the period.
Common Stock Issuable includes $1,808,250 in stock payable with related parties as of July 31, 2018. This stock payable is due to unissued shares earned on the employment agreements and for services performed during the years ended October 31, 2017 and 2016.
John Sepulveda, a Company director, funded $10,000 to the Company for working capital during the year ended October 31, 2016. This amount was repaid during the 2017 fiscal year.
The Company periodically receives cash advances from officers and directors or their family members for routine working capital purposes. As of July 31, 2018, a balance of $68,770 was owed to the spouse of the Company’s Chief Executive Officer. The advance is non-interest bearing and payable on demand.
NOTE 4 – CONVERTIBLE NOTES PAYABLE
During the nine months ended July 31, 2018 and in prior fiscal years, the Company issued multiple convertible notes payable to several entities. The notes bear interest at rates between 8% and 15% and are convertible at rates between 40-60% of the lowest trading price of company’s common stock over a period ranging from 5-20 days prior to the date of conversion. All of the outstanding notes are either currently due or become due on or before July 31, 2019. The notes are summarized as follows:
| Total convertible notes payable at July 31, 2018 | $ | 687,043 | ||
| Less: Current portion of notes payable | (687,043 | ) | ||
| Long term portion of notes payable | $ | — |
The following table summarized the convertible note activity in the nine months ended July 31, 2018 and the year ended October 31, 2017:
| Principal Balance | Loan Discount | Accrued interest | ||||||||||
| October 31, 2016 | $ | 975,100 | $ | (607,777 | ) | $ | 43,426 | |||||
| Issued in the year | 1,026,202 | (1,111,092 | ) | — | ||||||||
| Converted into stock or repaid | (1,013,778 | ) | — | (28,765 | ) | |||||||
| Amortization of debt discount | — | 1,335,747 | — | |||||||||
| Interest accrued | — | — | 46,589 | |||||||||
| October 31, 2017 | $ | 897,524 | $ | (383,122 | ) | $ | 61,520 | |||||
| Issued in the period | 388,075 | (448,284 | ) | — | ||||||||
| Converted into stock or repaid | (475,736 | ) | — | (57,211 | ) | |||||||
| Assignments, net | 75,700 | — | — | |||||||||
| Amortization of debt discount | — | 632,886 | — | |||||||||
| Interest accrued | — | — | 134,806 | |||||||||
| July 31, 2018 | $ | 885,563 | $ | (198,520 | ) | $ | 139,115 | |||||
The Company evaluated the terms of the conversion features of its convertible debentures in accordance with ASC Topic No. 815 - 40,Derivatives and Hedging - Contracts in Entity's Own Stock and determined they are indexed to the Company's common stock and the conversion features meet the definition of a liability, and therefore bifurcated the conversion features and accounted for them as a separate derivative liability.
Changes in Derivative Liabilities were as follows:
| October 31, 2016 | 1,248,689 | |||
| Issuance of derivative | 1,086,089 | |||
| Conversion into stock or assignment | (1,827,309 | ) | ||
| Extinguishment of debt | (10,590 | ) | ||
| Change in fair value | 966,168 | |||
| October 31, 2017 | $ | 1,463,047 | ||
| Issuance of derivative | 767,812 | |||
| Conversion into stock or assignment | (892,725 | ) | ||
| Extinguishment of debt | — | |||
| Change in fair value | 818,014 | |||
| July 31, 2018 | 2,156,148 |
NOTE 5 – NOTES PAYABLE
Pursuant to the Stock Purchase Agreement, the Company issued to EMS a promissory note in the principal amount of $100,000, due six months from the Closing, which represents the purchase price paid by the Company for Viva Entertainment. The note bears interest at the rate of 10% per annum. During the year ended October 31, 2017, all principal and interest was converted into common stock.
NOTE 6 - COMMON STOCK
During the nine months ended July 31, 2018, the Company had the following common stock transactions:
Each of these issuances was made pursuant to an exemption from registration under Rule 144 of the Securities Act of 1933.
NOTE 7 – SUBSEQUENT EVENTS
The Company reviewed material events subsequent to July 31, 2018. None were noted apart from the following:
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Cautionary Notice Regarding Forward Looking Statements
The information contained in Item 2 contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E15(d) of the Securities Exchange Act of 1934 as amended (the “Exchange Act”). Actual results may materially differ from those projected induring the forward-looking statements as a result of certain risks and uncertainties set forth in this report. Although management believespreceding 12 months (or for such shorter period that the assumptions maderegistrant was required to file such reports), and expectations reflected in(2) has been subject to such filing requirements for the forward-looking statements are reasonable, there is no assurance thatpast 90 days.”, previously indicating “No” due to an unintentional oversight. Accordingly, this Amendment No. 1 hereby amends and restates the underlying assumptions will, in fact, provequestion to be correct or that actual results will not be different from expectations expressed in this report.indicate “Yes”.
No other changes have been made to the Form 10-Q. This filing contains a number of forward-looking statements which reflect management’s current views and expectations with respectAmendment No. 1 to our business, strategies, products, future results and events, and financial performance. All statements made in this filing other than statements of historical fact, including statements addressing operating performance, events, or developments which management expects or anticipates will or may occur in the future, including statements related to distributor channels, volume growth, revenues, profitability, new products, adequacy of funds from operations, statements expressing general optimism about future operating results, and non-historical information, are forward looking statements. The words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “may,” variations of such words, and similar expressions identify forward-looking statements, but are not the exclusive means of identifying such statements, and their absence does not mean that the statement is not forward-looking. These forward-looking statements are subject to certain risks and uncertainties, including those discussed below. Our actual results, performance or achievements could differ materially from historical results as well as those expressed in, anticipated, or implied by these forward-looking statements. We do not undertake any obligation to revise these forward-looking statements to reflect any future events or circumstances.
Readers should not place undue reliance on these forward-looking statements, which are based on management’s current expectations and projections about future events, are not guarantees of future performance, are subject to risks, uncertainties and assumptions (including those described below), and apply onlyForm 10-Q speaks as of the original filing date of this filing. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. Factors which could cause or contribute to such differences include, but areForm 10-Q, does not limitedreflect events that may have occurred subsequent to the risks to be discussedoriginal filing date, and does not modify or update in our Annual Report on form 10-K andany way disclosures made in the press releases and other communications to shareholders issued by us from time to time which attempt to advise interested parties of the risks and factors which may affect our business. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.original Form 10-Q.
Overview
Viva Entertainment Group Inc. (the “Company”) develops and markets Viva Entertainment’s over the top (IPTV/OTT) application for connected TV’s, desktop computers, tablets, and smart phones. The Company is based in Briarwood, New York.
Internet Protocol Television (IPTV/OTT) is a system through which television services are delivered using the Internet protocol suite over a network such as the Internet, instead of being delivered through traditional terrestrial, satellite signal, and cable television formats.
OTT services may be classified into three main groups: 1) Live television, with or without interactivity related to the current TV show; 2) Time-shifted television: catch-up TV (replays a TV show that was broadcast hours or days ago), start over TV (replays the current TV show from its beginning); 3) Video On Demand (VOD): browse a catalog of videos, not related to TV programming.
A Content Delivery Network (CDN) is an interconnected system of computers on the Internet that provides Web content rapidly to numerous users by duplicating the content on multiple servers and directing the content to users based on proximity. CDNs are used by Internet Service Providers (ISPs) to deliver static or dynamic Web pages but the technology is especially well suited to streaming audio, video, and Internet Television ( IPTV ) programming Over-The-Top (OTT) content, describes broadband delivery of video and audio without a multiple system operator being involved in the control or distribution of the content itself. Consumers can access OTT content through internet-connected devices such as PCs, laptops, tablets, smart phones including iPhones and Droid phones, set-top boxes, Smart TVs and gaming consoles.
Platform:
The company’s subscription offering provides the components and systems to build up a CDN and along with Viva Middleware (the heart of the system), allows the provision of IPTV (Live and VOD) and other value added services, no matter the type of network (managed or unmanaged) or the number of subscribers.
Middleware:
Interactive TV Middleware is a multi service delivery platform (MSDP), providing converged and interactive IPTV services for the ISP, Telco, Cable and Campus/Hospitality market. The platform enables end users to enjoy rich multimedia services any time - any place. Services can be delivered over IP, DVB-C/T/S or 3G/4G access networks using several different devices in managed network or Over The Top, via open Internet. In addition, this innovative approach enables third parties to develop attractive first or second screen applications on different devices like PC, mobile phones, tablets, Smart TV sets or various STB devices.
Competitive Edge:
The platform represents the heart of the IPTV ecosystem, enabling service providers to accomplish attractive visual and functional differentiation of their IPTV service. Agile development allows service providers quick response to competitive market conditions. The company's main competitive advantages are field proven application platform, platform openness and flexibility, unique bouquet of IPTV converged multimedia services and customizable, responsive and graphics-rich user interface. Pay as you grow approach enables service providers to start slowly and extend the system according to the actual growth of the subscriber base. The platform comes with comprehensive system management module, which enables total control over operational parameters and central customer, device and service provisioning. The company enables the service provider to manage its video, audio and information assets and to offer these assets within reliable and compelling platform. It offers a rich information support for Live TV service with customizable channel list and e-program guide in various shapes. TV channel recording functionality is available in various flavors to satisfy user's needs and lifestyle: program recording, Time-shifting, Pause Live TV and Instant TV recording. Middleware is offered as a standalone solution, as the most important building block for the complete end to end IPTV solution, whether in the multicast, DVB or Over the Top environment.
The company's IPTV solution is based on the best of breed components and solutions from the leading vendors in the IPTV world that have been proven in many wide and varied cases and environments in the past. End-2-End solutions designed by the company are based on the Open Standards Systems and Standards adopted in the DVB and IP world.
Distribution
Our company operates three main specific segments of business. They are the following: (1) Broadcast and Digital Content Syndication to media distribution affiliated companies; (2) Direct-To-Consumer content subscription and on demand content services; (3) Consumer Electronic Subscription Sales that are company branded and sold to engaged customers on our owned and/or affiliated media platforms to ensure an enhanced audience participation experience. Each are dependent on some common variables including brand recognition and reinforcement, ability to adequately market our services, and the continued use of available technology tools to enable efficient growth and management of the business. We operate and derive revenues for the aforementioned areas of businesses mentioned herein as follows:
(1) Broadcast and Digital Content Syndication:
a. This business relies on the continued increase of content offerings into the marketplace offered to media companies in both the broadcast and digital media space.
b. There’s a heavy reliance factor on the levels of audience, customer engagements, and ratings that determine the levels of participation that our content has.
c. The successful sale of advertising associated with our syndicated content depends to the aforementioned levels of active consumer engagements with our media affiliated partners.
d. Part of the business model is to license the content to these media entities that become our content affiliates.
e. The company will derive revenue from the sale of advertising offerings that are directly associated with the content subscription being syndicated to these media affiliated entities.
(2) Direct-To-Consumer Content Subscription and On Demand Content Services:
a. This business relies on the successful completion and launch of our company’s own content software application.
b. The company has secured affiliation agreements to provide a wide offering of content subscription available to consumers including but not limited to live and linear broadcast and cable television networks, on demand prime time television shows, pay-per-view and purchase options for an estimated 7,000+ Hollywood films/movies, and hundreds of audio channels in a wide variety of genres and formats.
c. The content subscription offerings for this business derives revenues from active consumer subscriptions of content, as well as, per instance or pay-per-view and on demand offerings that require the consumer to pay using a bank credit or debit card per transaction.
(3) Consumer Electronic Subscription Sales:
a. This part of the business is based on a joint venture with third party partners.
b. The third party partner owns and controls a consumer electronics sourcing company that provides electronic consumer goods to certain retail store chains and e-commerce sales outlets.
c. The joint venture agreement allows for the company to open e-commerce stores on its own consumer directed media software applications and/or third party affiliated distribution partner platforms.
d. Once launched revenues will be derived from the sales of consumer electronics subscription for a revenue share of the sales (after manufacturing, sourcing, shipping, and other related expenses are accounted for).
Growth Strategy
The company has a multifaceted approach to marketing its services and offerings. These are mainly based on the business unit:
(1) Broadcast and Digital Content Syndication:
a. The company engages in direct calls to prospective media affiliated partners using its in-house staff of affiliate sales and affiliate relations personnel.
b. The company markets on a regular basis most of its content offerings via industry targeted bulk email offerings or participation in industry related trade shows and sponsored events.
c. The company also brings market awareness of its content services and offerings using widely distributed press releases to known industry related trade publishers.
(2) Direct-To-Consumer Content Subscription and On Demand Content Services:
a. The company also plans to leverage its existing relationships with industry media affiliated partners that desire to bring awareness of their own content offerings in our App thus driving their consumer base to actively be incentive to download or seek the application in the device of their choosing.
b. The company is currently actively in deployment of a social media marketing initiative to bring awareness and drive incentives to consumers to actively download or seek the application in the device of their choosing.
c. The company is currently working with a certain increasing number of “social media influencers” or well-known talents that have been incentivized by the company to provide them with their own space to feature their branded content on our App. As such their main task is to drive their social media followers to actively pursue their respective featured content on our App thus aiding in the increase of consumer downloads of the app and active user engagements.
(3) Consumer Electronic Subscription Sales:
a. The company plans to utilize unsold media inventory from its broadcast and digital content syndication business to promote our App Consumer Electronic Subscriptions brand awareness and content subscription offerings in an aim to drive audiences to download or seek the application in the device of their choosing.
b. The company also plans to leverage its existing relationships with industry media affiliated partners that desire to bring awareness of their own content offerings in our App Consumer Electronic Subscription thus driving their consumer base to actively be incentive to download or seek the application in the device of their choosing.
c. The company is currently actively in deployment of a social media marketing initiative to bring awareness and drive incentives to consumers to actively download or seek the application in the device of their choosing.
On June 19, 2018, we signed a strategic venture agreement with Kredit Koncepts Financial LLC, a New York-based credit recovery and rebuilding service. Under the terms of the agreement, we provide subscription services to Kredit Koncepts customers and Kredit Koncepts bundles a $1,500 unsecured line of credit that pre-reports positive subscriptions payments as part of their credit rebuilding membership.
As part of our growth strategy, we acquired the rights and live streamed all 2018 FIFA World Cup soccer games from Russia. We launched a new marketing campaign in several major US cities. After adding World Cup programming, Vivalive TV placed subscribers in the front row of the biggest live sporting events in the world, including NBA Finals, Russia 2108, PGA Golf Tour, Major League Baseball, NHL Stanley Cup, and professional tennis
We focus on select markets including Los Angeles, New York, Houston, Chicago, DC, Boston, Atlanta, Miami, and Arizona while comprising multiple aspects, including:
Plan of Operation
As of July 31, 2018, we had a working capital deficiency of $3,968,900 and accumulated deficit of $26,555,278. We had revenues from subscriptions in amounts of $8,470 and $35,921 during the three and nine months ended July 31, 2018, respectively.
Our auditors have issued a going concern opinion. This means that our auditors believe there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our bills. This is because we have not generated any material revenues or profits.
We have four officers and directors. They are responsible for our managerial and organizational structure which will include preparation of disclosure and accounting controls under the Sarbanes Oxley Act of 2002. When these controls are implemented, they will be responsible for the administration of the controls. Should they not have sufficient experience, they may be incapable of creating and implementing the controls which may cause us to be subject to sanctions and fines by the SEC which ultimately could cause you to lose your investment.
Limited Operating History
There is no historical financial information about us upon which to base an evaluation of our performance. The revenues generated to date was small. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources.
Results of Operations
Revenues
We had revenues from subscriptions in amount of $8,470 and $35,921 during the three and nine months ended July 31, 2018, respectively, compared to $3,000 in revenues from subscriptions during the comparative three- and nine-month periods in 2017.
Operating Expenses
For the three months ended July 31, 2018, we incurred operating expenses in the amounts of $1,422,508, compared to the operating expenses in the amounts of $3,399,126 during the three months ended July 31, 2017. Our operating expenses were comprised of: (i) consulting services expenses of $258,000 and $3,032,214 for the three months ended July 31, 2018 and 2017, respectively (ii) content expenses of $5,749 for the three months ended July 31, 2018, which was $0 during the comparative period in 2017 (iii) professional fees of $265,500 and $-0- for the three months ended July 31, 2018 and 2017, respectively (iv) general and administrative expenses of $821,204 and $26 for the three months ended July 31, 2018 and 2017, respectively, and (v) wage expenses of $72,055 and $98,096 for the three months ended July 31, 2018 and 2017, respectively.
For the nine months ended July 31, 2018, we incurred operating expenses in the amount of $4,137,658, compared to the operating expenses in the amount of $12,898,247 during the nine months ended July 31, 2017. Our operating expenses were comprised of: (i) consulting services expenses of $409,200 and $3,064,519 for the nine months ended July 31, 2018 and 2017, respectively (ii) content expenses of $59,003 for the nine months ended July 31, 2018, which was $-0- during the comparative period in 2017 (iii) professional fees of $545,297 and $-0- for the nine months ended July 31, 2018 and 2017, respectively (iv) general and administrative expenses of $2,878,253 and $526,354 for the nine months ended July 31, 2018 and 2017, respectively, and (v) wage expenses of $245,905 and $9,307,374 for the nine months ended July 31, 2018 and 2017, respectively.
Net Loss
Our net loss for the three and nine months ended July 31, 2018 was $2,385,583 and $5,521,029, respectively, compared to the net loss of $4,822,960 and $15,448,897 for the three and nine months ended July 31, 2017, respectively. The decrease in net loss in 2018 was the result of the decrease in wages by approximately $7.9 million and above-mentioned costs.
Inflation
We do not believe that inflation has had a material effect on our results of operations.
Liquidity and Capital Resources
As of July 31, 2018, we had cash of $5,363. Current liabilities exceeded current assets by $3,968,900 at July 31, 2018, which included derivative liabilities of $2,156,148, accrued salaries due to officers of $509,638, net convertible debt of $687,043, related party payable of $68,770, accounts payable and accrued expenses of $413,549, and accrued interest of $139,115. Other long-term assets consisted of capitalized software development costs of $49,322, net of accumulated amortization.
Net cash used in operating activities was $375,569 and $395,100 for the nine months ended July 31, 2018 and 2017, respectively. The net cash used in operations was primarily attributable to net losses of $5,521,029 and $15,448,897 during the nine months ended July 31, 2018 and 2017, respectively, partially offset by amortization of debt discount of $632,886 and $1,052,784, penalties incurred on debt of $48,501 and $120,408, amortization expense of $5,196 and $5,172, common shares issued for services of $2,969,412 and $12,279,796, loss on conversion of debt of $107,098 and $289,313 change in fair value of derivative of $818,014 and $1,145,093 and increase in accounts payable and accrued expenses of $205,101 and $402,491, in such same periods, respectively.
There were no cash flows from investing activities during the nine months ended July 31, 2018 and 2017.
Cash flows provided by financing activities were $378,250 and $435,330 for the nine months ended July 31, 2018 and 2017, respectively. Positive cash flows from financing activities during the nine months ended July 31, 2018 were due primarily to proceeds of $375,550 from convertible notes, which was $321,260 during the same period in 2017. We also had proceeds of $12,700 from related party loan in 2018, which was $102,070 during the same period in 2017, offset by the payment on debt in amount of $10,000 and $-0- during the nine months ended July 31, 2018 and 2017, respectively. During the nine months ended July 31, 2017, the Company issued a total of 14,500,000 shares of restricted common stock for cash proceeds of $12,000.
We had revenues from subscription in amount of $8,470 and $35,921 during the three and nine months ended July 31, 2018, respectively, and have eight salaried employees including Johnny Falcones, our officer and director. We currently require very limited resources but intend to hire employees and consultants in the latter part of 2018 for the Viva Entertainment operations. In due course, should we require capital for these operations, we will need to raise additional capital. There is no guarantee that we will be able to raise further capital. At present, we have not made any arrangements to raise additional capital but are diligently working on this.
If we need additional capital and cannot raise it we will either have to suspend operations until we do raise the capital or cease operations entirely. Other than as described in this paragraph, we have no other financing plans.
Future Contractual Obligations and Commitment
We incur contractual obligations and financial commitments in the normal course of our operations and financing activities. Contractual obligations include future cash payments required under existing contracts, such as debt and lease agreements. These obligations may result from both general financing activities and from commercial arrangements that are directly supported by related operating activities.
As of the date of this prospectus, we have no future contractual obligations or commitments.
Off-Balance Sheet Arrangements
As of the date of this prospectus, we have not entered into any transaction, agreement or other contractual arrangement with an entity unconsolidated under which it has:
Recent Accounting Pronouncements
In March 2016, the FASB issued ASU 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”. The standard is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. ASU 2016-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and early adoption is permitted. We elected to early adopt the new guidance in the second quarter of fiscal year 2016 which requires us to reflect any adjustments as of January 1, 2016, the beginning of the annual period that includes the interim period of adoption. The primary impact of adoption was the recognition of additional stock compensation expense and paid-in capital for all periods in fiscal year 2016. Additional amendments to the recognition of excess tax benefits, accounting for income taxes and minimum statutory withholding tax requirements had no impact to retained earnings as of January 1, 2016, where the cumulative effect of these changes is required to be recorded. We have elected to account for forfeitures as they occur to determine the amount of compensation cost to be recognized in each period.
In November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows (Topic 230).” ASU No. 2016-18 requires that restricted cash be included with cash and cash equivalents when reconciling the change in cash flow. This guidance is reflected in these financial statements.
In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which removes the second step of the two-step goodwill impairment test. Under ASU 2017-04, an entity will apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. ASU 2017-04 does not amend the optional qualitative assessment of goodwill impairment. Additionally, an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. ASU 2017-04 is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019; early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company has not elected early adoption of this standard and is currently in the process of evaluating the impact of adopting ASU 2017-04 and cannot currently estimate the financial statement impact of adoption.
In May 2017, the FASB issued ASU No. 2017-09, “Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting.” The amendments in this update provide guidance about which changes to the terms or conditions of a share-based award require an entity to apply modification accounting in Topic 718. The guidance will be effective for the Company for its fiscal year 2018, with early adoption permitted. The Company does not expect this ASU to materially impact the Company’s consolidated financial statements.
Accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.
Subsequent Events
The Company reviewed material events subsequent to July 31, 2018. None were noted apart from the following:
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
As a “smaller reporting company” as defined by Item 8 of Regulation S-X, we are not required to provide information required by this Item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act (defined below)). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended (the "Exchange Act") is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Accordingly, management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.
Changes in Internal Controls Over Financial Reporting.
In addition, our management with the participation of our Principal Executive Officer and Principal Financial Officer have determined that no change in our internal control over financial reporting occurred during or subsequent to the nine months ended July 31, 2018 that has materially affected, or is (as that term is defined in Rules 13(a)-15(f) and 15(d)-15(f) of the Securities Exchange Act of 1934) reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.
As a “smaller reporting company” as defined by Item 8 of Regulation S-X, we are not required to provide information required by this Item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
None.
(a) Exhibits
* In accordance with SEC Release 33-8238, Exhibit 32.1 is furnished and not filed.
** Filed herewith
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Dated: October | VIVA | |
| /s/ Johnny Falcones | ||
| Johnny Falcones | ||
| President, Chief Executive Officer, Chief | ||
| Financial Officer and Director |