10-Q/A 1 viva10q32017a.htm AMENDMENT NO. 1

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-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, 2017

 

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 November 29, 2017, 3,972,154,060 shares of common stock, $0.00001 par value per share, were outstanding.

 

 (1) 

 

 

EXPLANATORY NOTE

 

This Amendment No. 1 to Quarterly Report on Form 10-Q/A (this “Amended Report”) is being filed with the Securities and Exchange Commission to amend the Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 2017 (the “Original 10-Q”) of Viva Entertainment Group, Inc. to increase convertible debt and derivative liabilities due to a single note payable, which was inadvertently omitted in the Original 10Q. As a result, the total liabilities was increased $74,667 as of July 31, 2017, and the net loss was increase by $74,667 for the three and nine months ended July 31, 2017, respectively.

 

Accordingly, the section of Management’s Discussion and Analysis related to net losses during the three and nine months ended July 31, 2017 was updated for such changes. Other than that, this Amended Report still speaks only as of the date it was initially filed.

 

This Amended Report includes currently-dated certifications of the Company’s Chief Executive Officer and Chief Financial Officer, as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002.

 

 (2) 

 

 

VIVA ENTERTAINMENT GROUP INC.

QUARTERLY REPORT ON FORM 10-Q

July 31, 2017

 

TABLE OF CONTENTS

 

  PAGE
   
PART 1 - FINANCIAL INFORMATION  
   
Item 1. Financial Statements 4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 14
Item 3. Quantitative and Qualitative Disclosures About Market Risk 18
Item 4. Controls and Procedures 18
     
PART II - OTHER INFORMATION  
   
Item 1. Legal Proceedings 19
Item 1A.    Risk Factors 19
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Mine Safety Disclosures 19
Item 5. Other Information 19
Item 6. Exhibits 19
   
SIGNATURES 20

 

 

 

 (3) 

 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

VIVA ENTERTAINMENT GROUP INC.
Condensed Balance Sheets
 
   

July 31,

2017

 

October 31,

2016

    (Unaudited)    
    ( Restated )    
ASSETS                
                 
Current Assets                
Cash   $ 40,615     $ 385  
Total Current Assets     40,615       385  
                 
Other Assets                
   Software, net of amortization of $12,303 and $7,131     56,250       61,422  
Total Other Assets     56,250       61,422  
Total Assets   $ 96,865     $ 61,807  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)                
                 
Current Liabilities                
Accounts Payable and Accrued Liabilities   $ 263,549     $ 189,024  
Accrued Interest     71,587       43,426  
Accrued Salary and Wages     384,936       148,242  
Notes Payable     51,850       100,000  
Related Party Payable     112,070       —    
Convertible Notes Payable, net of discount     336,419       367,323  
Derivative Liability     1,499,146       1,248,689  
Total Current Liabilities     2,719,557       2,096,704  
                 
Stockholders’ Deficit                
                 
Common Stock (6,900,000,000 shares authorized, par value 0.00001, 3,912,154,060 and 130,166,696 shares issued and outstanding at July 31, 2017 and October 31, 2016, respectively)     39,122       1,302  
Stock issuable     3,079,200       512,400  
Additional paid-in capital     14,461,362       2,204,879  
Accumulated deficit     (20,202,376 )     (4,753,478 )
Total Stockholders’ Deficit     (2,622,692 )     (2,034,897 )
Total Liabilities and Stockholders’ Deficit   $ 96,865     $ 61,807  
                 
The Accompanying Notes are an Integral Part of These Financial Statements

 

 

 (4) 

 

 

VIVA ENTERTAINMENT GROUP INC.

Condensed Statements of Operations

(Unaudited)

                 
    For the Three Months Ended July 31, 2017   For the Three Months Ended July 31, 2016   For the Nine Months Ended July 31, 2017   For the Nine Months Ended July 31, 2016
      (Restated)               (Restated)          
Revenues                                
    Subscriptions   $ 3,000     $ —       $ 3,000     $ —    
Total Revenues     3,000       —         3,000       —    
                                 
Operating Expenses                                
Consulting services     3,032,214       791,355       3,064,519       1,771,912  
General and administrative     268,816       360,346       526,354       410,821  
Wages     98,096       221,538       9,307,374       311,525  
Total operating expenses     3,399,126       1,373,239       12,898,247       2,494,258  
                                 
Loss from operations     (3,396,126  )     (1,373,239     (12,895,247     (2,494,258
                                 
Other expense                                
Gain on settlement of debt     (300,323 )     —         (289,313 )     —    
Gain/(Loss) on change in derivative liability     (894,165 )     72,940       (1,145,093 )     72,940  
Interest expense     (232,346 )     (693,366 )     (1,119,244 )     (706,224 )
Total other expense     (1,426,834 )     (620,426 )     (2,553,650 )     (633,284 )
                                 
Net Loss   $ (4,822,960 )   $ (1,993,665 )   $ (15,448,897 )   $ (3,127,542 )
                                 
Net Loss Per Common Share – Basic and Diluted   $ (0.00 )   $ (0.02 )   $

 

(0.01

)   $ (0.03 )
                                 
Weighted Average Number of Common Shares Outstanding     2,686,505,096       122,264,196       1,221,450,275       92,786,575  
                                 
The Accompanying Notes are an Integral Part of These Financial Statements

 

 

 

 (5) 

 

 

 

VIVA ENTERTAINMENT GROUP INC.
Condensed Statements of Cash Flows
For the Nine Months Ended July 31, 2017 and 2016
(Unaudited)
 
    2017   2016
    (Restated)    
Operating Activities                
Net loss   $ (15,448,897 )   $ (3,127,542 )
Adjustments to reconcile net loss to cash used in operating activities:                
Amortization of intangible assets     5,172       3,349  
Amortization of debt discount     1,052,784       95,728  
Shares previously retired     (444 )     —    
Derivative expense     1,145,093       (519,620 )
Loss on settlement of debt     289,313       —    
Penalties incurred on unpaid debt     (120,408 )     —    
Common stock issued and payable for services     12,279,796       1,916,161  
Changes in operating assets and liabilities:                
Accounts payable and accrued liabilities     197,618       39,116  
Accrued expenses     204,873       45,189  
Other assets     —         (69,270 )
Net Cash Used in Operating Activities     (395,100 )     (577,559 )
Investing Activities                
     Effect of reverse merger     —         (171,504 )
Net Cash Used in Investing Activities     —         (171,504 )
Financing Activities                
   Net proceeds from issuance of related party payable     102,070       —    
   Proceeds from sale of common stock     12,000       —    
   Proceeds from issuance of convertible notes     321,260       763,430  
Net Cash From Financing Activities     435,330       763,430  
Increase in Cash     40,230       14,367  
Cash - Beginning of Period     385       —    
Cash - End of Period   $ 40,615     $ 14,367  
Supplemental Disclosure of Cash Flow Information                
Stock issued on conversion of debt, interest and penalties   $ 1,100,060     $ —    
Derivative adjustment from debt extinguishment     10,590       —    
Derivative settlement     1,459,101       —    
Discount from derivative issuance     575,055       —    
Stock issued for debt discount     —         100,000  
Beneficial Conversion Feature     —         35,000  
Stock issued for debt discount - derivative     —         1,119,560  
Cash paid for:                
Interest   $ —       $ —    
Income taxes   $ —       $ —    
                 
The Accompanying Notes are an Integral Part of These Financial Statements

 

 

 

 (6) 

 

 

 

 

 VIVA ENTERTAINMENT GROUP INC.

Notes to Financial Statements

 

 

NOTE 1 – NATURE OF OPERATIONS

 

Description of Business and History

 

The Company was incorporated on October 26, 2009 in the State of Nevada. The Company originally engaged in the development of a website and also the design and development of a catalogue to sell over the counter and prescription medications, and supplements. In 2012, the Company undertook a change in focus to the natural resources sector where it was engaged in the acquisition and exploration of base metals and mineral mining properties.

 

On April 5, 2016, the Company completed the purchase of Viva Entertainment Group, Inc. (“Viva Entertainment”), a Delaware corporation, from EMS Find, Inc. (“EMS”) pursuant to a stock purchase agreement. Viva Entertainment’s Chief Executive Officer, Johnny Falcones, was appointed as the Company’s sole director, President and Chief Executive Officer to manage the development and marketing of Viva Entertainment’s over the top (IPTV/OTT) application for connected TV’s, desktop computers, tablets, and smart phones.

 

Pursuant to the stock purchase agreement, the Company and EMS agreed to transfer control of Viva Entertainment to the Company through the purchase of all outstanding shares of stock of Viva Entertainment by the Company in exchange for the issuance to EMS of a 10% promissory note in the principal amount of $100,000, due six months from the Closing (the “EMS Note”), and the issuance of 22,000,000 shares of common stock to Johnny Falcones. For accounting purposes, the transaction was treated as a reverse merger since the acquired entity now forms the basis for operations and the transaction resulted in a change in control, with the acquired company electing to become the successor issuer for reporting purposes. The accompanying financial statements have been prepared to reflect the assets, liabilities and operations of Viva Entertainment Group, Inc. exclusive of Black River Petroleum since all predecessor operations were discontinued. As part of the transaction, stock payable and amounts due to former officers were forgiven, with the balances recorded as Contributed Capital. For equity purposes, additional paid-in capital and retained deficit shown are those of Viva, exclusive of Black River Petroleum. 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. (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.

 

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, 2017, the Company has a working capital deficiency and has an accumulated deficit of $20,202,376.  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 – RESTATEMENT OF FINANCIAL STATEMENTS  

The Company has restated its un-audited financial statement for the period ended July 31, 2017 to account for a correction to convertible notes previously issued and outstanding but underreported in the previously filed financial statements. The table below highlights the material changes to the financial statements:

 

Balance Sheet as of July 31, 2017 –  

    Balance Per Adjusted Statements   Adjustments   Balance Previously Reported
             
 Total Assets   96,865           -   $ 96,865   
Convertible Notes Payable   $ 336,419     $ 20,347 (1)   $ 316,072  
Accrued Interest   $ 71,587     $ (156) (2)   $ 71,743  
Derivative Liability   $ 1,499,146     $ 54,476 (3)   $ 1,444,670  
Total Liabilities   $ 2,719,557     $ 74,667     $ 2,644,890  
Accumulated Deficit   $ (20,202,376 )   $ (74,667) (6)   $ (20,127,709 )

 

 

For the three months ended July 31, 2017 –     

      Balance Per Audited Statements       Adjustments       Balance Previously Reported  
Change Fair Value of Derivative Liability   $ (894,165 )   $ (38,476) (4)   $ (855,689 )
Interest Expense   $ (232,346 )   $ (36,191) (5)   $ (196,155 )
Net Loss   $ (4,822,960 )   $ (74,667)   $ (4,748,293 )

 

  

For the nine months ended July 31, 2017 –   

    Balance Per Audited Statements   Adjustments   Balance Previously Reported
             
Change Fair Value of Derivative Liability   $ (1,145,093 )   $ (38,476) (4)   $ (1,106,617 )
Interest Expense   $ (1,119,244 )   $ (36,191) (5)   $ (1,083,053 )
Net Loss   $ (15,448,897 )   $ (74,667 )   $ (15,374,230 )

 

 

  1) Change in convertible notes payable represents a correction to notes previously issued and outstanding but underreported in the previously filed financial statements.
  2) Accrued interest adjustment reflects the impact of recording the corrected convertible note payable amount.
  3) Change in derivative liability reflects the impact of recording the corrected convertible note payable amount.
  4) Change in the fair value of derivative liability reflects the impact of revaluing the derivative liability following the correction to convertible notes payable.
  5) Change in interest expense reflects amount of derivative expense recorded on the correction of the convertible note payable.
  6) Change in accumulated deficit reflects the aggregate impact of the adjustments to the company’s profit and loss for the periods presented.

 

 

 (7) 

 

 

 

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim information Regulation S-K. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments consisting of a normal and recurring nature considered necessary for a fair presentation have been included.  These financial statements should be read in conjunction with out audited financial statements for the year ended October 31, 2016.

 

Use of Estimates

 

The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net revenue and expenses in the reporting period. We regularly evaluate our estimates and assumptions related to the useful life and recoverability of long-lived assets, stock-based compensation and deferred income tax asset valuation allowances. We base our estimates and assumptions on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by us may differ materially and adversely from our estimates. To the extent there are material differences between our estimates and the actual results, our future results of operations will be affected.

 

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. During a period of net loss, all potentially dilutive securities are anti-dilutive. Accordingly, for the three and nine months ended July 31, 2017 and 2016, potentially dilutive securities have been excluded from the computations since they would be anti-dilutive. However, these dilutive securities could potentially dilute earnings per share in the future. 

 

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, 2017 and October 31, 2016. The Company’s financial instruments consist of cash and derivative liabilities.  The Company considers the carrying value of such amounts in the financial statements to approximate their fair value due to the short-term nature of these financial instruments.

 

The Company adopted ASC No. 820-10 (ASC 820-10), Fair Value Measurements.  ASC 820-10 relates to financial assets and financial liabilities. ASC 820-10 defines fair value, establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (GAAP), and expands disclosures about fair value measurements. The provisions of this standard apply to other accounting pronouncements that require or permit fair value measurements and are to be applied prospectively with limited exceptions.

 

 (8) 

 

  

ASC 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This standard is now the single source in GAAP for the definition of fair value, except for the fair value of leased property as defined in SFAS 13. ASC 820-10 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions, about market participant assumptions, that are developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under ASC 820-10 are described below:

 

  Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

 

  Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

 

  Level 3 Inputs that are both significant to the fair value measurement and unobservable. These inputs rely on management's own assumptions about the assumptions that market participants would use in pricing the asset or liability. (The unobservable inputs are developed based on the best information available in the circumstances and July include the Company's own data.)

 

The following presents the Company's fair value hierarchy for those assets and liabilities measured at fair value on a non-recurring basis as of July 31, 2017 and October 31, 2016:

 

July 31, 2017: 

    Level 1   Level 2   Level 3   Total
Convertible Notes Payable, net   $ 336,419     $ —       $ —       $ 336,419  
Derivative Liability     1,499,146                       1,499,146  
Total   $ 1,835,565     $ —       $ —       $ 1,835,565  

 

 

October 31, 2016: 

    Level 1   Level 2   Level 3   Total
Convertible Notes Payable, net   $ 367,323     $ —       $ —       $ 367,323  
Derivative Liability     1,248,689       —         —         1,248,689  
Total   $ 1,616,012     $ —       $ —       $ 1,616,012  

  

 

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 Statements of Cash Flows, the Company considers liquid investments with an original maturity of three months or less to be cash equivalents. As of July 31, 2017 and October 31, 2016, the Company had no cash equivalents.

 

 (9) 

 

 

NOTE 4 – RELATED PARTY TRANSACTIONS

 

In connection with the acquisition of Viva Entertainment and the resignation of our former officers and directors, the Company received forgiveness of stock payable of $3,390,000 and amounts due to former CEO of $132,854. These amounts were written off prior to closing and have therefore not been included in Equity. However, the former CEO funded an additional $30,000 to the Company for working capital during the year ended October 31, 2016.

 

The detail composition of $384,936 in accrued wages with related parties as of July 31, 2017 is as follows: Johnny Falcones $126,840, Alberto Gomez $152,548 and John Sepulveda $105,548. This accrual covered services rendered by the employees for the period from April, 2016 through July 31, 2017 less payments made to such employees during the period.

 

Stock payable includes $1,929,200 to officers and directors of the company due to unissued shares earned on employment agreements. 

In addition, John Sepulveda funded $10,000 to the Company for working capital during the year ended October 31, 2016 which remains outstanding together with advances, net of $102,070 from the spouse of the company’s Chief Executive Officer as of July 31, 2017.

 

NOTE 5 – CONVERTIBLE NOTES PAYABLE

 

    Principal Balance   Loan Discount   Accrued Interest
October 31, 2016   $ 975,100     $ (607,777 )   $ 43,426  
Issued in the year   $ 305,450       (679,242 )     —    
Converted into stock or repaid     (709,896 )     —         (375,888 )
Amortization of debt discount     —         1,052,784       —    
Interest accrued     —         —         404,049  
July 31, 2017   $ 570,654     $ (234,235 )   $ 71,587  

 

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.

 

 

 (10) 

 

 

NOTE 5 – CONVERTIBLE NOTES PAYABLE - CON’T

 

 

The following table summarized the convertible notes and activity in the nine months ended July 31, 2017: 

For Nine Months Ended: July 31, 2017
                                         
Holders   Agreement Date     Maturity       Original Amount       Rate      

Beginning

Balance

      Borrowings       Repayments       Conversion       Assignments      

Ending

Balance

 
Essex Global #1   4/6/2016     3/30/2017     $ 145,000       10 %     145,000       16,218       —         (62,034 )     (99,184 )     —    
EMS Find, Inc.   2/27/2017     3/31/2018     $ 100,000       10 %     100,000       77,718       —         (69,923 )     (53,795 )     54,001  
LG Capital #1   5/3/2016     5/3/2017     $ 78,750       10 %     78,750       —         —         (77,940 )     —         810  
Cerberus #1   5/3/2016     5/3/2017     $ 78,750       10 %     78,750       —         —         (39,745 )     —         39,005  
Green Tree #1   5/23/2016     5/23/2017     $ 50,000       12 %     50,000       19,158       —         (69,158 )     —         —    
LG Capital #2   6/3/2016     6/3/2017     $ 78,750       10 %     78,750       —         —         (26,575 )     —         52,175  
Cerberus #2   6/8/2016     6/8/2017     $ 78,750       10 %     78,750       —         —         —         —         78,750  
Collision Capital, LLC #1   7/1/2016     7/1/2017     $ 110,000       12 %     110,000       92,523       —         (172,523 )     —         30,000  
Green Tree #2   7/1/2016     7/1/2017     $ 50,000       12 %     50,000       —         —         (10,112 )     (10,000 )     29,888  
Essex Global #2   7/19/2016     7/19/2017     $ 37,100       10 %     37,100       —         —         (37,100 )     —         —    
DBL Group, Inc.   8/1/2016     8/1/2017       25,000       8 %     25,000       25,000       —         (24,960 )     (25,000 )     40  
Robert Rico   8/1/2016     8/1/2017     $ 25,000       8 %     25,000       —         —         —         (25,000 )     —    
CrossOver Promotions   8/2/2016     8/2/2017     $ 35,000       8 %     35,000       —         —         —         (35,000 )     —    
Hector Cruz   8/5/2016     8/5/2017     $ 25,000       8 %     25,000       —         —         —         (15,000 )     10,000  
Collision Capital, LLC #2   8/4/2016     8/4/2017     $ 25,000       12 %     25,000       10,499       —         (35,499 )     —         —    
Crown Bridge Partners   9/7/2016     9/7/2017     $ 45,000       8 %     45,000       —         —         (45,000 )     —         —    
Mercedes Benitez   8/15/2016     8/15/2017     $ 13,000       8 %     13,000       —         —         —         (13,000 )     —    
Green Tree #3   8/4/2016     8/4/2017     $ 25,000       12 %     25,000       —         —         —         —         25,000  
Green Tree #4   9/12/2016     9/12/2017     $ 50,000       12 %     50,000       —         —         (42,500 )     —         7,500  
GPL Ventures   1/25/2017     7/25/2017     $ 36,000       12 %     —         —         (34,764 )     (1,236 )     36,000       —    
Power Up Lending Group   1/3/2017     11/10/2017     $ 28,000       8 %     —         42,000       —         (42,000 )     —         —    
Educational Group   1/26/2017     1/26/2018     $ 20,000       8 %     —         51,500       —         (71,500 )     20,000       —    
Macro Services   1/26/2017     1/26/2018     $ 10,000       8 %     —         26,050       —         (36,050 )     10,000       —    
L&H   1/2/2017     1/2/2018     $ 34,184       8 %     —         1,000       —         (45,184 )     44,184       —    
Emerald Coast   1/27/2017     1/27/2018     $ 15,000       8 %     —         —         —         (15,000 )     15,000       —    
GreenTree #5   10/28/2016     10/28/2017     $ 15,000       8 %     —         —         —         (15,000 )     15,000       —    
Ke Li   10/28/2016     10/28/2017     $ 10,000       8 %     —         —         —         (10,000 )     10,000       —    
Williams Holding Corp   3/1/2017     3/1/2018     $ 25,000       8 %     —         —         —         (9,950 )     25,000       15,050  
Biz Development #1   3/20/2017     3/20/2018     $ 28,000       8 %     —         12,300       —         (27,465 )     28,000       12,836  
Howard Schraub   3/27/2017     3/27/2018     $ 53,795       8 %     —         8,890       —         (53,750 )     44,860       —    
Global Opportunity   6/30/2017     6/30/2017     $ 8,935       8 %     —         —         —         (8,935 )     8,935     —    
George Harrison   3/15/2017     3/15/2018     $ 5,000       12 %     —         5,000       —         —         —         5,000  
Chonillo Law Group   5/2/2017     11/2/2017     $ 50,000       8 %     —         50,000       —         —         —         50,000  
Biz Development #2   5/5/2017     10/5/2017     $ 32,500       12 %     —         32,500       —         —         —         32,500  
Collision Capital #3   5/22/2017     5/22/2018     $ 40,000       15 %     —         40,000       —         —         —         40,000  
GreenTree #6   5/22/2017     5/22/2018     $ 40,000       15 %     —         40,000       —         —         —         40,000  
Integrated Ventures (EMS)   7/5/2017     7/5/2018     $ 50,000       10 %     —         50,000       —         —         —         50,000  
Howard Schraub #2   7/24/2017     7/24/2018     $ 45,760       10 %     —         45,760       —         —         —         45,760  
Howard Schraub #3   7/24/2017     7/24/2018     $ 36,000       10 %     —                                 36,000       36,000  
                                  1,085,100       771,306       (57,884 )     (1,049,138 )     17,000       766,384  

 

 

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NOTE 5 – CONVERTIBLE NOTES PAYABLE - CON’T

 

During the quarter ended July 31, 2017, the Company issued a total of $258,260 in new convertible debt, as follows:

 

Name   Date   Maturity Date   Amount   Rate
Chonillo Law Group     5/2/2017       11/2/2017     $ 50,000       8 %
Biz Development #2     5/5/2017       10/5/2017     $ 32,500       12 %
Collision Capital #3     5/22/2017       5/22/2018     $ 40,000       15 %
GreenTree #6     5/22/2017       5/22/2018     $ 40,000       15 %
Integrated Ventures (EMS)     7/5/2017       7/5/2018     $ 50,000       10 %
Howard Schraub #2     7/24/2017       7/24/2018     $ 45,760       10 %

 

The difference between the value of the derivative on the date of issuance and the note amounts is recorded as interest expense.

 

ASC 815 requires assessment of the fair market value of derivative liability at the end of each reporting period and recognition of any change in the fair market value as other income or expense.

 

Changes in Derivative Liabilities were as follows: 

October 31, 2016   $ 1,248,689  
Issuance of derivative     575,055  
Conversion into stock or assignment     (1,459,101 )
Extinguishment of debt     (10,590 )
Change in fair value     1,145,093  
July 31, 2017   $ 1,499,146  

 

 

 

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NOTE 6 – 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. All principal and interest was converted into common stock during the quarter ended April 30, 2017.

 

In addition, John Sepulveda, a related party of the Company, funded $10,000 to the Company for working capital during the year ended October 31, 2016 which remains outstanding together with advances, net of $102,070 from the spouse of the company’s Chief Executive Officer as of July 31, 2017. Both notes were due on demand with interest at a rate of 8% per annum.

 

NOTE 7 - COMMON STOCK 

 

During the three months ended July 31, 2017 the Company had the following common stock transactions:

  · 44,350,000 shares previously issued on the conversion of notes payable were cancelled due to change in broker services. These will be reissued during the period ended October 31, 2017.

 

  · 2,685,261,047 shares issued on the conversion of debentures payable (see Note 4).

Each of these issuances was made pursuant to an exemption from registration under Rule 144 of the Securities Act of 1933.

NOTE 8 – STOCK ISSUABLE

Common stock issuable consists of shares payable under employment contracts with officers of the Company valued at $1,929,200 and a consulting contract valued at $1,150,000. Common stock issuable was $3,079,200 and $512,400 as of July 31, 2017 and October 31, 2016. 

NOTE 9 – SUBSEQUENT EVENTS

In October 2017, the Company entered into an exchange agreement with Williams Holding Corp. pursuant to which 60,000,000 shares of common stock were issued in exchange for the cancellation of a $25,000 note payable previously issued to Robert Rico on August 1, 2016 for services and later assigned to Williams Holding.

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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 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Actual results may materially differ from those projected in the forward-looking statements as a result of certain risks and uncertainties set forth in this report. Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual results will not be different from expectations expressed in this report.

 

This filing contains a number of forward-looking statements which reflect management’s current views and expectations with respect 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. In particular, 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 only as of the 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 are not limited to, the risks to be discussed in our Annual Report on form 10-K and 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.

 

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Overview

 

Viva Entertainment Group Inc. (the “Company”) is a business that 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.

 

We were incorporated in the State of Nevada on October 26, 2009. From inception, we were 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, we undertook a change in our focus to the natural resources sector where it was engaged in the acquisition and exploration of base metals and mineral mining properties. After an unsuccessful exploration program on our mineral properties we decided to enter the market for over the top (IPTV/OTT) application for connected TV’s, desktop computers, tablets, and smart phones.

  

On April 5, 2016, we completed the purchase from EMS Find, Inc. (“EMS”) of Viva Entertainment Group, Inc. (“Viva Entertainment”), a Delaware corporation and a subsidiary of EMS, pursuant to a stock purchase agreement (“Stock Purchase Agreement”), and Viva Entertainment’s Chief Executive Officer, Johnny Falcones, resigned from all positions at EMS and has been elected as our sole director and President and Chief Executive Officer to manage the development and marketing of Viva Entertainment’s over the top (IPTV/OTT) application for connected TV’s, desktop computers, tablets, and smart phones.

 

This purchase represents a new business and industry which we operate in. Pursuant to the Stock Purchase Agreement, the Company and EMS agreed to transfer control of Viva Entertainment to the Company through the purchase from the Seller by the Purchaser of all 800 outstanding shares of stock of Viva Entertainment to 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”), which represents the purchase price paid by us for Viva Entertainment.  In connection with the closing, Alexander Stanbury, our former President and Chief Executive Officer, transferred to Johnny Falcones 26,629,371 shares of restricted common stock of the Company from the shares of common stock owned by Mr. Stanbury in exchange for payment of $93,625 from the $135,000 of financing arranged with Essex Global Investment Corp. for the acquisition of the Company (the “Acquisition Financing Facility”).

 

On April 6, 2016, we closed on the $135,000 Acquisition Financing Facility pursuant to a securities purchase agreement, dated April 6, 2016 (the "Essex Securities Purchase Agreement"), with Essex Global Investment Corp, a Nevada corporation ("Essex"), for the sale of a convertible promissory note (the "Essex Note") in the principal amount of $145,000, with an original issue discount of $10,000.

 

The Essex Note, which is due on March 30, 2017, bears interest at the rate of 10% per annum. All principal and accrued interest on the Note was convertible at any time into shares of our common stock at the election of Essex at a conversion price for each share of Common Stock equal to 55% of the lowest reported trading price of the Company’s common stock for the twenty prior trading days including the day upon which the conversion notice is received us or our transfer agent. The conversion price discount will be decreased to 45% if the Company experiences a DTC "chill" on its shares. If we are not current within ninety days from the date of the Note, the conversion discount will increase by 20%, so that the conversion price would be 35% of the trading price as calculated above.

 

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We have the right to prepay the Essex Note during the first six months following the date of issuance of the Essex Note with a premium of up to 135% of all amounts owed to Essex, including default interest, depending upon when the prepayment is effectuated. The Essex Note may not be redeemed after 180 days.

 

The Essex Note contains default events which, if triggered and not timely cured, will result in default interest and penalties. As of July 31, 2017, the Essex Note was paid in full.

 

On April 8, 2016, in connection with the purchase of Viva Entertainment Group, Inc., our Board of Directors authorized the issuance of an aggregate of 37,170,629 shares of common stock, comprised of 22,000,000 issued to our Founder and Chief Executive Officer (5,000,000 of which are registered in name of the wife of the CEO), 13,170,629 as common shares for consulting services to various consultants and 2,000,000 common shares as consideration for an investor entering into a share purchase agreement. An additional 500,000 common shares was issued for general corporate purposes.

  

Plan of Operation

 

As of July 31, 2017 we had a working capital deficiency of $2,622,692, had small revenues from subscription in amount of $3,000, and have an accumulated deficit of $20,202,376.

 

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 only 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. We have not generated any revenues to date. 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 subscription in amount of $3,000 for the three and nine months ended July 31, 2017, compared to zero revenues during the comparative periods in 2016. 

 

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Operating Expenses

 

For the three and nine months ended July 31, 2017, we incurred operating expenses in the amounts of $3,399,126 and $12,898,247, respectively. We incurred operating expenses in the amounts of $1,373,239 and $2,494,258, respectively during the three and nine months ended July 31, 2016. Our operating expenses were comprised of: (i) consulting services expenses of $3,032,214 and $3,064,519 for the three and nine months ended July 31, 2017, respectively (ii) general and administrative expenses of $268,816 and $526,354 for the three and nine months ended July 31, 2017, respectively, and (iii) wage expenses of $98,096 and $9,307,374 for three and nine months ended July 31, 2017, respectively. Comparatively, our operating expenses were comprised of: (i) consulting services expenses of $791,355 and $1,771,912 for the three and nine months ended July 31, 2016, respectively (ii) general and administrative expenses of $360,346 and $410,821 for the three and nine months ended July 31, 2016, respectively, and (iii) wage expenses of $221,538 and $311,525 for three and nine months ended July 31, 2016, respectively. 

 

Net Loss

 

Our net loss for the three and nine months ended July 31, 2017 was $4,822,960 and $15,448,897, respectively, compared to net losses of $1,993,665 and $3,127,542 for the three and nine months ended July 31, 2016. The increase in net loss was the result of the increase in compensation and above mentioned costs. During the three and nine months ended July 31, 2017, we also incurred losses of $894,165 and $1,145,093, respectively, on changes of the derivative liability, compared to gain of $72,940 on changes of the derivative liability during the three and nine months ended July 31, 2016. In addition, we had interest expenses of $232,346 and $1,119,244 during the three and nine months ended July 31, 2017, compared to interest expenses of $693,366 and $706,224 during the three and nine months ended July 31, 2016.

 

Liquidity and Capital Resources

 

As of July 31, 2017, we had cash of $40,615. As of October 31, 2016, we had cash of $385.

 

Net cash used in operating activities was $395,100 and $577,559 for the nine months ended July 31, 2017 and 2016, respectively. The net cash used in operations was principally attributable to net losses of $15,448,897 and $3,127,542 during the nine months ended July 31, 2017 and 2016, respectively, offset principally by amortization of debt discount of $1,052,784 and $95,728, amortization expense of $5,172 and $3,349, common shares issued for services of $12,279,796 and $1,916,161, increase in accounts payable by $197,618 and $39,116, and increase in accrued expenses by $204,873 and $45,189 in such same periods, respectively. Loss of settlement of debt of $289,313 and -0-, in such same periods, respectively.

 

Cash flows used for investing activities were $-0- during the nine months ended July 31, 2017, compared to net cash of $171,504 used in investing activities during the nine months ended July 31, 2016, which was solely as a result of the effects of the reverse merger.

 

Cash flows provided by financing activities were $435,330 and $763,430 for nine months ended July 31, 2017 and 2016, respectively. Positive cash flows from financing activities during the nine months ended July 31, 2017 were due primarily to proceeds from related party payable of $102,070, proceeds from sales of common stock and convertible notes in amount of $12,000 and $321,260, respectively. Positive cash flows from financing activities during the nine months ended July 31, 2016 were solely due to proceeds from convertible notes in amount of $763,430. 

 

We have small revenues from subscription in amount of $3,000 for the three and nine months ended July 31, 2017, and have four 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 2017 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.

 

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Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements.

   

Recent Accounting Pronouncements

 

In March 2016, the FASB issued ASU 2016-09, Stock Compensation, which is intended to simplify the accounting for share-based payment award transactions. The new standard will modify several aspects of the accounting and reporting for employee share-based payments and related tax accounting impacts, including the presentation in the statements of operations and cash flows of certain tax benefits or deficiencies and employee tax withholdings, as well as the accounting for award forfeitures over the vesting period. The guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within that year, and will be adopted by the Company in the first quarter of fiscal 2017. The Company anticipates the new standard will result in an increase in the number of shares used in the calculation of diluted earnings per share and will add volatility to the Company’s effective tax rate and income tax expense.

 

Subsequent Events

 

In October 2017, the Company entered into an exchange agreement with Williams Holding Corp. pursuant to which 60,000,000 shares of common stock were issued in exchange for the cancellation of a $25,000 note payable previously issued to Robert Rico on August 1, 2016 for services and later assigned to Williams Holding.

 

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 three and nine months ended July 31, 2017 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.

 

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PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

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.

 

Item 1A. Risk Factors.

 

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.

 

Item 5. Other Information.

 

None. 

 

Item 6. Exhibits.

 

(a) Exhibits

 

 

Exhibit 
Number
  Description
31.1   Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*   Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS**   XBRL Instance Document
101.SCH**   XBRL Taxonomy Schema
101.CAL**   XBRL Taxonomy Calculation Linkbase
101.DEF**   XBRL Taxonomy Definition Linkbase
101.LAB**   XBRL Taxonomy Label Linkbase
101.PRE**   XBRL Taxonomy Presentation Linkbase

 

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

** Filed herewith 

 

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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: November 29, 2017 VIVA ENTERTIANMENT GROUP INC.  
     
  /s/ Johnny Falcones  
  Johnny Falcones  
  President, Chief Executive Officer, Chief  
  Financial Officer and Director  

 

 

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