10-Q 1 selt_10q-013115.htm FORM 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 ____________

 

FORM 10-Q

 ____________

  

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

 

For the quarterly period ended January 31, 2015

 

OR

 

o     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: 333-186461

 _______________________________________

 

SELECT-TV SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

_______________________________________

 

Nevada   99-0378854

(State or other jurisdiction of

incorporation or organization)

  (IRS Employer Identification No.)
     

1395 Brickell Avenue, Suite 800

Miami, FL

  33131
(Address of principal executive offices)   (Zip Code)

 

(418) 264-7134

(Registrant’s telephone number, including area code)

 

_______________________________________

 

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 x  No ¨

 

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

 

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

 

Large accelerated filer  ¨ Accelerated filer  ¨
Non-accelerated filer  ¨ (Do not check if a smaller reporting company) Smaller reporting company  x

 

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

 

As of March 17, 2015, the registrant had 176,447,075 shares of its Common Stock, $0.001 par value, outstanding.

 

 

 
 

 

SELECT-TV SOLUTIONS INC.

FORM 10-Q

JANUARY 31, 2015

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION  
     
Item 1. Financial Statements  
  Consolidated Balance Sheets as of January 31, 2015 (unaudited) and April 30, 2014 3
  Consolidated Statements of Operations for the Three and Nine months Ended January 31, 2015 and 2014 (unaudited) 4
  Consolidated Statements of Cash Flows for the Nine months Ended January 31, 2015 and 2014 (unaudited) 5
  Notes to Consolidated Financial Statements (unaudited) 7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 15
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

   

 

2
 

 

PART I – FINANCIAL INFORMATION

 

Item 1.    Financial Statements

 

Select-TV Solutions, Inc.

Consolidated Balance Sheets

 

   January 31,   April 30, 
   2015   2014 
   (unaudited)   Restated 
         
ASSETS
         
Current assets:          
Cash and cash equivalents  $310,936   $543,853 
Accounts receivable   2,696     
Sales tax receivable   52,740     
Due from related parties   320,706    346,050 
Inventory   284,305     
Prepaid expenses   887,367     
Total current assets   1,858,750    889,903 
           
Equipment, net   26,786     
           
Licenses, net   56,983     
           
Goodwill   3,446,495     
           
Total assets  $5,389,014   $889,903 
           
           
LIABILITIES AND STOCKHOLDERS' DEFICIT          
           
Current liabilities:          
Accounts payable  $188,804   $14,700 
Accrued liabilities   76,351     
Loans payable - current   40,645     
Total current liabilities   305,800    14,700 
           
Other liabilities        
           
Total liabilities   305,800    14,700 
           
Stockholders' equity:          
Common stock, $0.001 par value, 500,000,000 shares authorized,163,281,025 and 54,134,000 shares issued and outstanding at January 31, 2015 and April 30, 2014, respectively   163,281    54,134 
Paid-in capital (deficiency)   6,947,804    (34,614)
Common stock issuable   1,400,855    1,482,366 
Deferred issuance costs       (128,194)
Accumulated other comprehensive gain   5,234     
Accumulated deficit   (3,433,960)   (498,489)
Total stockholders' equity   5,083,214    875,203 
           
Total liabilities and stockholders' equity  $5,389,014   $889,903 

 

See accompanying notes to consolidated financial statements.

 

3
 

 

Select-TV Solutions, Inc.

Consolidated Statements of Operations

(Unaudited)

 

   For the Three Months Ended   For the Nine Months Ended 
   January 31,   January 31,   January 31,   January 31, 
   2015   2014   2015   2014 
                 
Revenues  $1,152   $   $30,977   $ 
                     
Operating expenses:                    
Cost of revenues   20,492        190,073     
Selling and marketing expenses   5,347        26,000     
General and administrative expenses   876,310    1,164    2,749,008    9,462 
                     
Total operating costs   902,149    1,164    2,965,081    9,462 
                     
Loss from operations   (900,997)   (1,164)   (2,934,104)   (9,462)
                     
Other income (expense):                    
Other income       1,450        1,450 
Currency exchange gain (loss)   817        (1,367)    
                     
Income (loss) before income taxes   (900,180)   286    (2,935,471)   (8,012)
                     
Provision for income taxes                
                     
Net income (loss)  $(900,180)  $286   $(2,935,471)  $(8,012)
                     
                     
Net income (loss) per share - basic and diluted  $(0.01)  $0.00   $(0.02)  $(0.00)
                     
Weighted average number of shares
outstanding - Basic and Diluted
 
 
 
 
 
159,884,891
 
 
 
 
 
 
 
54,134,000
 
 
 
 
 
 
 
120,026,306
 
 
 
 
 
 
 
54,134,000
 
 
                     
Net income (loss)   (900,180)   286    (2,935,471)   (8,012)
                     
Foreign currency translation gain   3,500        3,500     
                     
Total comprehensive income (loss)  $(896,680)  $286   $(2,931,971)  $(8,012)

 

See accompanying notes to consolidated financial statements.

 

 

 

4
 

 

Select-TV Solutions, Inc.

Consolidated Statements of Cash Flows

(unaudited)

 

   For the Nine Months Ended 
   January 31,   January 31, 
   2015   2014 
         
Cash flows from operating activities:          
Net loss  $(2,935,471)  $(8,012)
Adjustments to reconcile net loss to net cash used in operations:          
Depreciation and amortization   32,002    486 
Stock issued and issuable for services   1,198,000     
Changes in operating assets and liabilities:          
Accounts receivable   (424)    
Sales tax receivable   5,015     
Inventory   (19,160)    
Prepaid expenses   (149,630)    
Accounts payable   40,324     
Accrued liabilities   64,908     
Net cash used in operating activities   (1,764,436)   (7,526)
           
Cash flows from investing activities:          
Acquisition of equipment   (10,373)    
Cash acquired in merger   912     
Net cash used in investing activities   (9,461)    
           
Cash flows from financing activities:          
Advances to related parties   (692,056)    
Proceeds from sale of stock subscriptions   1,202,855     
Proceeds from sale of common stock and warrants, net of issuance costs   1,118,949     
Payments on loans payable   (93,350)    
Net cash provided by financing activities   1,536,398     
           
Effects of exchange rates on cash   4,582     
           
Net increase in cash   (232,917)   (7,526)
           
Cash and cash equivalents at beginning of period   543,853    7,978 
           
Cash and cash equivalents at end of period  $310,936   $452 

 

Continued

 

 

5
 

 

Select-TV Solutions, Inc.

Consolidated Statements of Cash Flows (Continued)

(unaudited)

 

   For the Nine Months Ended 
   January 31,   January 31, 
   2015   2014 
         
Supplemental disclosure of cash flow information:          
           
Cash paid for interest  $   $ 
           
Cash paid for taxes  $   $ 
           
Non-cash investing and financing activities:          
           
49,678,443 shares issued in acquisition of Select-TV Solutions (USA), Inc.:     
Net liabilities acquired in acquisitions, net of cash  $464,054   $ 
Goodwill  $(3,446,495)  $ 
Common stock  $49,679   $ 
Paid in capital  $2,931,028   $ 
Other comprehensive loss  $1,734   $ 
           
Common stock issued and issuable for prepaid consulting services:          
Prepaid expenses  $(637,737)  $ 
Common stock  $8,128   $ 
Paid in capital  $529,609   $ 
Common stock issuable  $100,000   $ 
           
Common stock issued for subscriptions received:          
Common stock  $29,647   $ 
Paid in capital  $1,324,525   $ 
Common stock issuable  $(1,482,366)  $ 
Deferred issuance costs  $128,194   $ 
           
Common stock returned to treasury and cancelled:          
Common stock  $(8,100)  $ 
Paid in capital  $8,100   $ 

 

See accompanying notes to consolidated financial statements.

 

 

6
 

Select-TV Solutions, Inc.

Notes to Consolidated Financial Statements

January 31, 2015

(Unaudited)

 

Note 1 – Organization, Presentation and Going Concern

 

Organization

 

Select-TV Solutions, Inc. (the "Company" or “SELT”) was incorporated in Nevada on May 17, 2011 under the name of Renaissance Films Inc. (“RFI”) and intended to produce documentary films. On September 26, 2011, the Company changed its name to Sedition Films Inc.

 

On April 7, 2014, the Company experienced a change in control. Conseil Plumage Blanc Ltd. (“CPB”) acquired a majority of the issued and outstanding common stock of the Company in accordance with a stock purchase agreement by and between CPB and Jesse Lawrence, the Company’s former director and majority shareholder. On the closing date, April 7, 2014, pursuant to the terms of the Stock Purchase Agreement, CPB purchased from Jesse Lawrence 40,000,000 shares of the Company’s outstanding common stock for $375,000. As a result of the change in control, CPB owned a total of 40,000,000 shares of the Company’s common stock representing 74%.

 

On May 1, 2014, the Company filed an amendment to its Articles of Incorporation in the State of Nevada to change its name to Select-TV Solutions, Inc.

 

On July 18, 2014, the Company entered into a Merger Agreement with Select-TV Solutions (USA), Inc. (“STVU”), a Florida corporation. Pursuant to the terms of the Agreement, the Company issued 1.25 shares of common stock for each share STVU, or 49,678,443 shares. As a result of the merger, the Company, as the surviving entity, acquired the license rights to Select-TV HITV (Hospitality Interactive TV, software and hardware), and EMAGINE (home IPTV software and hardware), thus enabling the Company to provide end-to-end IPTV (Internet Protocol Television) solutions to the Hospitality, Residential and Hospital subscribers in North America. The Closing of the transaction was effective on the close of business July 31, 2014.

 

On January 13, 2015, the Company formed Select-TV USA Holdings, Inc. (“STVH”), a Nevada corporation, as a wholly-owned subsidiary to acquire companies in and related to the Hospitality, Residential and Hospital IPTV industry.

 

Stock Split

 

On May 1, 2014, the Company's Board of Directors declared a ten-to-one forward stock split of all outstanding shares of common stock. The effect of the stock split increased the number of shares of common stock outstanding from 5,413,400 to 54,134,000 as of May 1, 2014. All common share and per common share data in these financial statements and related notes hereto have been retroactively adjusted to account for the effect of the stock split for all periods presented prior to May 1, 2014. The total number of authorized common shares and the par value thereof was not changed by the split.

 

Basis of Presentation

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial statement presentation and in accordance with Form 10-Q. Accordingly, they do not include all of the information and footnotes required in annual financial statements. In the opinion of management, the unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position and results of operations and cash flows for the interim periods reported in this Form 10-Q. The results of operations presented are not necessarily indicative of the results to be expected for any other interim period or for the entire year.

 

These unaudited consolidated financial statements should be read in conjunction with the April 30, 2014 audited annual financial statements included in the Annual Report on Form 10-K/A, filed with the U.S. Securities and Exchange Commission (“SEC”) on September 10, 2014.

 

Going Concern

 

The accompanying unaudited consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred a net loss of $2,935,471 for the nine months ended January 31, 2015 and has incurred cumulative losses since inception of $3,433,960. These conditions raise substantial doubt about the ability of the Company to continue as a going concern.

 

7
 

 

Select-TV Solutions, Inc.

Notes to Consolidated Financial Statements

January 31, 2015

(Unaudited)

 

Note 1 – Organization, Presentation and Going Concern (Continued)

 

Going Concern (Continued)

 

The ability of the Company to continue as a going concern is dependent upon its abilities to generate revenues, to continue to raise investment capital, and develop and implement its business plan. No assurance can be given that the Company will be successful in these efforts.

 

The unaudited financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Management believes that actions presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to continue as a going concern. No assurance can be given that the Company will be successful in these efforts.

 

Significant Accounting Policies

 

Revenue Recognition

 

Revenue is recognized upon delivery when the following conditions are met:

 

·The Company has transferred the significant risks and rewards of ownership to the buyer;
·The amount of revenue can be measured reliably;
·It is probable that the economic benefits associated with the transaction will flow to the Company;
·And collection is assured.

 

These conditions occur when the goods or services have been delivered to the contractually agreed location of the customer.

 

Inventory

 

Inventories are stated at the lower of cost or market (“LCM”). The Company uses the first-in-first-out (“FIFO”) method of valuing inventory. Inventory consists primarily of finished goods and accessories for use in the delivery of media content to its customers.

 

Goodwill and Other Intangible Assets

 

Goodwill represents the excess of acquisition consideration paid over the fair value of identifiable net tangible and identifiable intangible assets acquired. Goodwill and other indefinite-lived intangible assets are not amortized, but are reviewed for impairment at least annually, in the fourth quarter, or earlier upon the occurrence of certain triggering events.

 

Goodwill is allocated among and evaluated for impairment at the reporting unit level. Management evaluates goodwill for impairment using a two-step process provided by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 350, Intangibles — Goodwill and Other. The first step is to compare the fair value of each of our reporting units to their respective book values, including goodwill. If the fair value of a reporting unit exceeds its book value, reporting unit goodwill is not considered impaired and the second step of the impairment test is not required. If the book value of a reporting unit exceeds its fair value, the second step of the impairment test is performed to measure the amount of impairment loss, if any. The second step of the impairment test compares the implied fair value of the reporting unit’s goodwill with the book value of that goodwill. If the book value of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. Intangible assets with determinable useful lives are amortized using the straight-line method over the expected life of the assets. The Company did not recognize any impairment losses for the nine months ended January 31, 2015.

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of Select-TV Solutions, Inc. and its wholly-owned subsidiaries, Oriana Technologies Canada Inc., Select-TV Solutions (Canada), Inc. and Select-TV USA Holdings, Inc. All significant inter-company balances and transactions have been eliminated in consolidation.

 

8
 

 

Select-TV Solutions, Inc.

Notes to Consolidated Financial Statements

January 31, 2015

(Unaudited)

 

Note 2 – Prepaid Expenses

 

Prepaid expenses consist of the following at January 31, 2015 and April 30, 2014:

 

   January 31,   April 30, 
   2015   2014 
         
Prepaid consulting  $113,385   $ 
           
Acquisition deposits   600,000      
           
Hotel deployment partnership agreement   98,000     
           
Deposits on inventory   69,500     
           
Other   6,482     
           
Prepaid expenses  $887,367   $ 

 

During the nine months ended January 31, 2015, the Company issued an aggregate of 8,127,366 shares of its restricted common stock, and an additional 1,000,000 shares of its restricted common stock are included in common stock issuable, to twelve consultants for services to be provided pursuant to consulting agreements. The shares were valued at an average price of $0.07 per share based on the most recent sales of stock subscriptions to investors as of the dates of obligation for a total of $637,737. Based on the terms of the agreements, $524,352 has been included in general and administrative expenses for the nine months ended January 31, 2015 and $113,385 is included in prepaid expenses at January 31, 2015. (See Note 5 – Stockholders’ Equity).

 

During the nine months ended January 31, 2015, the Company has advanced $600,000 related to potential acquisitions (See Note 8 – Subsequent Events).

 

On May 1, 2014, STVU (which was merged into the Company on July 31, 2014) entered into a Hotel Deployment Partnership Agreement with AACSA Partners LLC (“AACSA”) whereby AACSA is to provide the Company with up to 1,000 hotel customers through three distinct phases. The agreement has an initial term of seven years and renews annually for each subsequent year unless terminated as permitted in the agreement.

 

The three Phases are as follows:

 

Phase 1 – Includes a commitment by AACSA for contracting of 100 hotels nationwide by December 31, 2014. The Company has paid a $100,000 fee for Phase 1 as of July 31, 2014. Two hotels have been deployed as of January 31, 2015 and $2,000 is included in cost of revenues for the three and nine months ended January 31, 2015. $98,000 is included in prepaid expenses at January 31, 2015.

 

Phase 2 – Includes a commitment by AACSA for contracting an additional 150 hotels nationwide between January 1, 2015 and June 30, 2015. Fees of $150,000 will be payable in installments of $75,000 due on January 15, 2015 (unpaid) and $75,000 due on April 15, 2015 for the Phase 2 implementation.

 

Phase 3 – Includes a commitment by AACSA for contracting an additional 750 hotels nationwide between July 1, 2015 and June 30, 2016. Fees of $750,000 will be payable in three equal quarterly installments of $250,000 each starting on July 1, 2015 for the Phase 3 implementation.

 

As of January 31, 2015, the Company has prepaid $69,500 on a purchase order for inventory from a supplier.

 

 

9
 

 

Select-TV Solutions, Inc.

Notes to Consolidated Financial Statements

January 31, 2015

(Unaudited)

 

Note 3 – Equipment, net

 

Equipment, net, is recorded at cost and consisted of the following at January 31, 2015 and April 30, 2014:

 

   January 31,   April 30, 
   2015   2014 
         
Equipment  $57,494   $ 
           
Accumulated depreciation   (30,708)    
           
Equipment, net  $26,786   $ 

 

Depreciation expense was $5,702 and $486 for the nine months ended January 31, 2015 and 2014, respectively. The balance of equipment at January 31, 2015 was a result of the merger with STVU on July 31, 2014 and equipment purchases of $10,373 during the nine months ended January 31, 2015. In April 2014, in conjunction with the Company’s change in control, the total amount of film equipment was disposed of at a loss of $498.

 

Note 4 – Licenses, net

 

As a result of the merger with STVU, the Company acquired the license rights to Select-TV HITV (Hospitality Interactive TV, software and hardware), and EMAGINE (home IPTV software and hardware), thus enabling the Company to provide end-to-end IPTV (Internet Protocol Television) solutions to the Hospitality, Residential and Hospital subscribers in North America. Licenses, net, consisted of the following at January 31, 2015 and April 30, 2014:

 

   January 31,   April 30, 
   215   2014 
         
Licenses  $263,000   $ 
           
Accumulated amortization   (206,017)    
           
Licenses, net  $56,983   $ 

 

Amortization expense was $26,300 and $-0- for the nine months ended January 31, 2015 and 2014, respectively.

 

Note 5 – Stockholders’ Equity

 

The Company has authorized 500,000,000 shares of Common Stock, $0.001 par value. 

 

On May 1, 2014, the Company's Board of Directors declared a ten-to-one forward stock split of all outstanding shares of common stock. The effect of the stock split increased the number of shares of common stock outstanding from 5,413,400 to 54,134,000 as of May 1, 2014. All common share and per common share data in these consolidated financial statements and related notes hereto have been retroactively adjusted to account for the effect of the stock split for all periods presented prior to May 1, 2014. The total number of authorized common shares and the par value thereof was not changed by the split.

 

During the nine months ended January 31, 2015, the Company issued 29,647,316 shares of its restricted common stock for stock subscriptions received as of April 30, 2014 of $1,482,366. These shares were included in common stock issuable at April 30, 2014. $128,194 of issuance costs were charged to paid in capital relating to these shares during the nine months ended January 31, 2015.

 

 

10
 

 

Select-TV Solutions, Inc.

Notes to Consolidated Financial Statements

January 31, 2015

(Unaudited)

 

Note 5 – Stockholders’ Equity (Continued)

 

During the nine months ended January 31, 2015, the Company issued 18,293,900 shares of its restricted common stock for cash of $1,118,949 (net of issuance costs of $415,440). 500,000 of these shares included warrants to purchase an aggregate of 250,000 additional shares of the Company’s restricted common stock at an exercise price of $0.15. The warrants expire three years after their grant.

 

Pursuant to the merger with STVU, the Company issued 1.25 shares of its restricted common stock for each share of STVU, or 49,678,443 shares. These shares have been valued at a fair value of $2,980,707 based on the average vale of stock subscriptions sold to investors at the date of merger.

 

During the nine months ended January 31, 2015, the Company issued an aggregate of 8,000,000 shares of its restricted common stock to its then two directors. The shares were valued at $0.10 per share based on the most recent sales of stock subscriptions to investors at the date of issuance for a total of $800,000, which is included in general and administrative expenses for the nine months ended January 31, 2015.

 

During the nine months ended January 31, 2015, the Company issued an aggregate of 2,500,000 shares of its restricted common stock to a consultant for services pursuant to a consulting agreement. The shares were valued at an average of $0.08 per share based on the most recent sales of stock subscriptions to investors at the dates of obligation for a total of $200,000, which is included in general and administrative expenses for the nine months ended January 31, 2015.

 

During the nine months ended January 31, 2015, the Company issued an aggregate of 1,000,000 shares of its restricted common stock to two of its directors for services. The shares were valued at $0.10 per share based on the most recent sales of stock subscriptions to investors at the date of obligation for a total of $100,000, which is included in general and administrative expenses for the nine months ended January 31, 2015.

 

During the nine months ended January 31, 2015, the Company issued an aggregate of 8,127,366 shares of its restricted common stock, and an additional 1,000,000 shares of its restricted common stock are included in common stock issuable, to twelve consultants for services to be provided pursuant to consulting agreements. The shares were valued at an average price of $0.07 per share based on the most recent sales of stock subscriptions to investors as of the dates of obligation for a total of $637,737. Based on the terms of the agreements, $524,352 has been included in general and administrative expenses for the nine months ended January 31, 2015 and $113,385 is included in prepaid expenses at January 31, 2015.

 

During the nine months ended January 31, 2015, the Company received stock subscriptions of $1,202,855 for 14,856,050 shares of common stock. These shares are included in common stock issuable at January 31, 2015. 10,750,000 of these shares include warrants to purchase an aggregate of 5,375,000 additional shares of the Company’s restricted common stock at an exercise price of $0.15. The warrants expire three years after their grant.

 

Pursuant to consulting agreements, the Company is obligated to issue 980,000 shares of its restricted common stock to two consultants for fees related to the receipt of common stock subscriptions from investors for the nine months ended January 31, 2015. The shares were valued at a total of $98,000 based on the most recent sales of stock subscriptions to investors at the date of the obligation, which is included as a reduction of paid in capital as issuance costs as of January 31, 2015. These shares are included in common stock issuable at January 31, 2015.

 

During the nine months ended January 31, 2015, three shareholders returned an aggregate of 8,100,000 common shares to treasury as a capital contribution. These shares were cancelled by the Company.

 

 

11
 

 

Select-TV Solutions, Inc.

Notes to Consolidated Financial Statements

January 31, 2015

(Unaudited)

 

Note 5 – Stockholders’ Equity (Continued)

 

Warrants

 

The following table summarizes warrant transactions for the nine months ended January 31, 2015:

 

           Weighted     
       Weighted   average     
       average   remaining   Aggregate 
   Number   exercise   contractual   intrinsic 
   of warrants   price   term (years)   value 
                 
Outstanding at April 30, 2014      $        $ 
                     
Granted in 2015   5,625,000   $0.15           
                     
Outstanding at January 31, 2015   5,625,000   $0.15    2.91   $ 
                     
Exercisable at January 31, 2015   5,625,000   $0.15    2.91   $ 
                     
Weighted Average Grant Date Fair Value       $0.09           

 

During the nine months ended January 31, 2015, the Company issued warrants to purchase a total of 5,625,000 shares of the Company’s common stock in conjunction with sales of Units. These warrants have contractual lives of three years and were valued at a grant date fair value of $0.09 per warrant using the Black-Scholes Option Pricing Model with the following assumptions:

 

Stock price  $0.10
Contractual term  3 years
Expected volatility  203.79%
Risk free interest rate  0.85% to 1.07%
Dividend yield  0

 

The stock price was based on the price of shares sold to investors and volatility was based on comparable volatility of other companies since the Company had no significant historical volatility.

 

Note 6 – Related Party Transactions

 

As of April 30, 2013, the Company owed a shareholder and officer $101 which was repaid during the year ended April 30, 2014.

 

During the three months ended July 31, 2014 and the year ended April 30, 2014, the Company advanced $371,350 and $346,050, respectively, to STVU for working capital purposes of STVU. As of July 31, 2014, due to the merger with STVU, the amounts are eliminated in consolidation.

 

On January 26, 2015, Philippe Germain, the Company’s Chairman and Director, advanced the Company $50,000 for working capital purposes. The advance is non-interest bearing and the Company expects to repay the loan no later than April 3, 2015.

 

During the nine months ended January 31, 2015, the Company advanced $320,706 to Cannoco PLC, a U.K corporation for its services and expenses related to possible future acquisitions. The advances are noninterest bearing and are due no later than October 31, 2015. Philippe Germain, the Company’s Chairman and director, is the sole shareholder of Cannoco PLC.

 

12
 

 

Select-TV Solutions, Inc.

Notes to Consolidated Financial Statements

January 31, 2015

(Unaudited)

 

Note 7 – Business Combinations

 

On July 18, 2014, the Company entered into a Merger Agreement with Select-TV Solutions (USA), Inc. (“STVU”), a Florida corporation. Pursuant to the terms of the Agreement, the Company issued 1.25 shares of its common stock for each share of STVU, or 49,678,443 shares.

 

The following table summarizes the consideration given for the net assets of STVU and the fair values of the assets acquired and liabilities assumed recognized at the merger date. Management is in the process of valuing any identifiable tangible and intangible assets. Until the valuation is complete and values are assigned to tangible or intangible assets, if any, the entire amount of the excess of the consideration given over the net liabilities acquired is allocated to goodwill.

 

Consideration Given:     
      
49,678,443 shares of common stock  $2,980,707 
      
Fair value of identifiable assets acquired and liabilities assumed:     
      
Cash   912 
Accounts receivable   2,272 
Sales tax receivable   57,755 
Deposits on inventory   265,145 
Prepaid expenses   100,000 
Equipment, net   25,537 
Licenses, net   83,283 
Accounts payable   (133,780)
Accrued liabilities   (11,443)
Loans payable - current   (136,335)
Amounts due to Select TV Solutions, Inc.   (717,400)
Accumulated other comprehensive loss   (1,734)
Identified intangible assets    
Total identifiable net assets (liabilities)   (465,788)
      
Goodwill and unidentified intangible assets   3,446,495 
      
   $2,980,707 

 

 

 

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Select-TV Solutions, Inc.

Notes to Consolidated Financial Statements

January 31, 2015

 (Unaudited)

 

Note 8 – Subsequent Events

 

On February 2, 2015, the Company issued an aggregate of 2,080,000 shares of its common stock to three consultants as payment for services. These shares were valued at a fair value of $208,000 or $0.10 per share.

 

On February 2, 2015 and February 12, 2015, the Company issued 8,000,000 shares of its common stock to two investors for $800,000 in cash.

 

On February 2, 2015 and February 12, 2015, the Company issued 3,086,050 shares of its common stock at a value of $308,605 to investors which were included in common stock issuable at January 31, 2015 and for which it had previously received $308,605.

 

On February 19, 2015, our wholly-owned subsidiary, Select-TV USA Holdings, Inc. entered into an Asset Purchase Agreement with JIFM Holdings, LLC. (“JIFM”) for the immediate sale of certain assets of JIFM. In exchange for the assets acquired under the Asset Purchase Agreement, the Company paid JIFM $350,000 (of which $300,000 had been paid prior to January 31, 2015 and included in Prepaid Expenses in the Balance Sheet) and a secured promissory note for $200,000 bearing interest at 2% per annum, due May 15, 2015, for an aggregate total of $550,000.

 

On March 1, 2015, our wholly-owned subsidiary, Select-TV USA Holdings, Inc. entered into an Asset Purchase Agreement with MyStay, Inc. (“MyStay”) and Brooks Pickering for the immediate sale of certain assets of MyStay. In exchange for the assets acquired under the Asset Purchase Agreement, the Company paid MyStay $400,000 (of which $250,000 had been paid prior to January 31, 2015 and included in Prepaid Expenses in the balance sheet) and 9,500,000 shares of our common stock (unissued as of the date of this report).

 

On March 1, 2015, the Company entered into an employment agreement with Mr. Brooks Pickering to serve as the Company’s President and Chief Operating Officer. Terms of the consulting agreement include 1) a monthly fee of $12,500 (to be increased to $25,000 upon the achievement of three consecutive months of positive EBITDA), 2) a semi-annual bonus equal to 75% of the consulting fee paid in the prior six month period if the Company achieves certain semi-annual target goals, 3) stock options to purchase 2,500,000 at $0.10 of the Company’s common stock vesting upon the achievement of certain performance objectives in fiscal 2015, and 4) stock options to purchase 2,500,000 at $0.10 of the Company’s common stock vesting upon the achievement of certain performance objectives in fiscal 2016. The term of the agreement is effective March 1, 2015 until February 28, 2017, unless terminated by either party with a thirty (30) days advance written notice,or as extended by the parties by written agreement. Should the Executive continue providing the Services after February 28, 2017 without a further agreement in writing, the terms of the Agreement shall continue to apply on a month-to-month basis until the Parties enter into a further agreement.

 

On March 2, 2015, our wholly-owned subsidiary, Select-TV USA Holdings, Inc. entered into a Loan Sale Agreement with ZON Capital Partners, LP (“ZON”) for the immediate sale of certain assets of ZON. In exchange for the loan assets acquired, the Company paid ZON $250,000 (of which $50,000 had been paid prior to January 31, 2015 and included in Prepaid Expenses in the Balance Sheet).

 

The Company has evaluated subsequent events through the date the financial statements were issued and filed with the SEC. The Company has determined that there are no other events that warrant disclosure or recognition in the consolidated financial statements.

 

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

 

SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS

 

Certain statements made in this Form 10-Q are "forward-looking statements" (within the meaning of the Private Securities Litigation Reform Act of 1995) regarding the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. The Company's plans and objectives are based, in part, on assumptions involving the continued expansion of business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate and, therefore, there can be no assurance the forward-looking statements included in this report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved.

 

The forward-looking statements included in this Form 10-Q and referred to elsewhere are related to future events or our strategies or future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "should," "believe," "anticipate," "future," "potential," "estimate," "encourage," "opportunity," "growth," "leader," "expect," "intend," "plan," "expand," "focus," "through," "strategy," "provide," "offer," "allow," commitment," "implement," "result," "increase," "establish," "perform," "make," "continue," "can," "ongoing," "include" or the negative of such terms or comparable terminology. All forward-looking statements included in this Form 10-Q are based on information available to us as of the filing date of this report, and the Company assumes no obligation to update any such forward-looking statements, except as required by law. Our actual results could differ materially from the forward-looking statements.

 

Important factors that might cause our actual results to differ materially from the results contemplated by the forward-looking statements are contained in the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended April 30, 2014 and in our subsequent filings with the Securities and Exchange Commission.  The following discussion of our results of operations should be read together with our financial statements and related notes included elsewhere in this report.

 

Company Overview

 

Select-TV Solutions, Inc. (the "Company", “SELT”, “we”, “us” or “our”) was incorporated in Nevada on May 17, 2011 under the name of Renaissance Films Inc. (“RFI”) and intended to produce documentary films. On September 26, 2011, the Company changed its name to Sedition Films Inc.

 

On April 7, 2014, the Company experienced a change in control.  Conseil Plumage Blanc Ltd. (“CPB”) acquired a majority of the issued and outstanding common stock of the Company in accordance with a stock purchase agreement by and between CPB and Jesse Lawrence, the Company’s former director and majority shareholder. On the closing date, April 7, 2014, pursuant to the terms of the Stock Purchase Agreement, CPB purchased from Jesse Lawrence 4,000,000 (40,000,000 post-split) shares of the Company’s outstanding common stock for $375,000.  As a result of the change in control, CPB owned a total of 4,000,000 (40,000,000 post-split) shares of the Company’s common stock representing 74%.

 

In conjunction with the change in control, Mr. Jesse Lawrence resigned as the Company's director, and any other positions held by him on April 9, 2014. The resignation was not the result of any disagreement with the Company or any matter relating to the Company's operations, policies or practices. On the same date, Mr. Philippe Germain and Mr. Antonio Treminio were appointed as directors.

 

On May 1, 2014, the Company filed an amendment to its Articles of Incorporation in the State of Nevada to change its name to Select-TV Solutions, Inc. The Company intends to pursue significant opportunities available within the entertainment sector and online interactive niche.

 

On May 1, 2014, the Company's Board of Directors declared a ten-to-one forward stock split of all outstanding shares of common stock. The effect of the stock split increased the number of shares of common stock outstanding from 5,413,400 to 54,134,000 at May 1, 2014. The total number of authorized common shares and the par value thereof was not changed by the split.

 

On July 7, 2014, the company’s shareholders appointed Mr. Geoffrey P. Mott as the Company’s Chief Executive Officer.

 

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On July 18, 2014, the Company entered into a Merger Agreement with Select-TV Solutions (USA), Inc. (“STVU”), a Florida corporation. Pursuant to the terms of the Agreement, the Company issued 1.25 shares of common stock for each share STVU, or 49,678,443 shares. As a result of the merger, the Company, as the surviving entity, acquired the license rights to Select-TV HITV (Hospitality Interactive TV, software and hardware), and EMAGINE (home IPTV software and hardware), thus enabling the Company to provide end-to-end IPTV (Internet Protocol Television) solutions to the Hospitality, Residential and Hospital subscribers in North America. The Closing of the transaction was effective on the close of business July 31, 2014.

 

On August 29, 2014, the shareholders of the Company voted to add Eric Gareau and Christian Trudeau to the Board of Directors, joining Mr. Germain. On the same date, Mr. Antonio Treminio resigned his position as Director.

 

On January 13, 2015, the Company formed Select-TV USA Holdings, Inc. (“STVH”), a Nevada corporation, as a wholly-owned subsidiary to acquire companies in and related to the Hospitality, Residential and Hospital IPTV industry.

 

Plan of Operations

 

The Company, through its sublicense, has the right to carry on the Select-TV Business, Intellectual Property, Trademarks, trade Names, Copyrights and Trade Secrets. The Company believes it has a strong technology platform, proven market validation in some of the best hotels in the world and a great opportunity to become a leader in the North American hospitality market over the next few years. At a time when consumer expectations for entertainment quality and service value-added are on the rise, hotel owners and brands know they need to redefine what they should expect from in-room entertainment systems and their vendors.

 

Management continues to explore new investment opportunities with a focus on technology and the hospitality market.

 

Results of Operations

 

For the three months ended January 31, 2015 compared to the three months ended January 31, 2014

 

Revenues

 

The Company had revenue of $1,152 for the three months ended January 31, 2015 compared to no revenue for the three months ended January 31, 2014. The increase in revenue is due to the merger with Select-TV Solutions (USA), Inc.

 

Operating Expenses

 

For the three months ended January 31, 2015, total operating expenses were $902,149 compared to $1,164 for the three months ended January 31, 2014 resulting in an increase of $900,985.

 

Cost of revenues increased $20,492 and is directly attributable to the initial costs associated with bringing new customers on-line to receive the Company’s products and services.

 

Selling and marketing expenses increased $5,347 and is primarily due to the merger with Select-TV Solutions (USA), Inc.

 

General and administrative expenses increased by $875,146 and were primarily due to $469,425 of stock based consulting fees and $177,830 of consulting fees. The remaining increase of $227,891 is related to general and overhead costs due to the Company’s change in business to provide products and services to the hospitality, residential, and hospital subsidiaries, and the merger with Select-TV Solutions (USA), Inc.

 

Net loss for the three months ended January 31, 2015 was $900,180 compared to net income of $286 for the three months ended January 31, 2014.

 

For the nine months ended January 31, 2015 compared to the nine months ended January 31, 2014

 

Revenues

 

The Company had revenue of $30,977 for the nine months ended January 31, 2015 compared to no revenue for the nine months ended January 31, 2014. The increase in revenue is due to the merger with Select-TV Solutions (USA), Inc.

 

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Operating Expenses

 

For the nine months ended January 31, 2015, total operating expenses were $2,965,081 compared to $9,462 for the nine months ended January 31, 2014 resulting in an increase of $2,955,619.

 

Cost of revenues increased $190,073 and is directly attributable to the initial costs associated with bringing new customers on-line to receive the Company’s products and services.

 

Selling and marketing expenses increased $26,000 and is primarily due to the merger with Select-TV Solutions (USA), Inc.

 

General and administrative expenses increased by $2,739,546 and were primarily due to 8,000,000 shares issued for stock based compensation of in the amount of $800,000, $824,352 of stock based consulting fees, and $463,156 of consulting fees. The remaining increase of $652,238 is related to general and overhead costs due to the Company’s change in business to provide products and services to the hospitality, residential, and hospital subsidiaries, and the merger with Select-TV Solutions (USA), Inc.

 

Net loss for the nine months ended January 31, 2015 was $2,935,471 compared to $8,012 for the nine months ended January 31, 2014.

 

Liquidity and Capital Resources

 

As of January 31, 2015, we had cash of $310,936 and working capital of $1,552,950. Cash used in operating activities was $1,764,436 and $7,526 for the nine months ended January 31, 2015, and 2014, respectively.  The principal elements of cash flow used in operations for the nine months ended January 31, 2015 included a net loss of $2,935,471, offset by depreciation and amortization of $32,002 and stock issued and issuable for services of $1,198,000; and increased by changes in operating assets and liabilities of $58,967. The principal elements of cash flow used in operations for the nine months ended January 31, 2014 included a net loss of $8,012, offset by depreciation expense of $486.

 

Cash used in investing activities for the nine months ended January 31, 2015 consisted of $10,373 for the acquisition of equipment offset by $912 of cash received in the merger with STVU. No cash was used in investing activities during the nine months ended January 31, 2014.

 

Cash provided by financing activities was $1,536,398 for the nine months ended January 31, 2015 compared to no cash provided by financing activities for the nine months ended January 31, 2014. Financing activities for the nine months ended January 31, 2015 included $1,118,949 from the sale of common stock, $1,202,855 received for stock subscriptions offset by payments on loan payable of $93,350 and advances to related parties of $692,056.

 

Going Concern

 

Due to the uncertainty of our ability to meet our current operating and capital expenses, our independent auditors included an explanatory paragraph in their report on the financial statements for the year ended April 30, 2014 regarding concerns about our ability to continue as a going concern. Our consolidated financial statements contain additional note disclosures describing the circumstances that lead to this conclusion by our independent auditors.

 

Our unaudited consolidated financial statements have been prepared on a going concern basis, which assumes the realization of assets and settlement of liabilities in the normal course of business. Our ability to continue as a going concern is dependent upon our ability to generate profitable operations in the future and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they become due. The outcome of these matters cannot be predicted with any certainty at this time and raise substantial doubt that we will be able to continue as a going concern. Our unaudited consolidated financial statements do not include any adjustments to the amount and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern.

 

There is no assurance that our operations will be profitable. Our continued existence and plans for future growth depend on our ability to obtain the additional capital necessary to operate either through the generation of revenue or the issuance of additional debt or equity.

 

Off-Balance Sheet Arrangements

 

We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

 

17
 

 

Critical Accounting Policies

   

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Such estimates and assumptions affect the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experiences and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions and conditions. We continue to monitor significant estimates made during the preparation of our financial statements. On an ongoing basis, we evaluate estimates and assumptions based upon historical experience and various other factors and circumstances. We believe our estimates and assumptions are reasonable in the circumstances; however, actual results may differ from these estimates under different future conditions.

 

See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 2, “Summary of Significant Accounting Policies” in our audited financial statements as of and for the year ended April 30, 2014, included in our Annual Report on Form 10-K/A filed with the U.S. Securities and Exchange Commission (“SEC”) on September 10, 2014.

 

Item 3.    Quantitative and Qualitative Disclosures About Market Risk.

  

The disclosure required under this item is not required to be reported by smaller reporting companies.

 

Item 4.    Controls and Procedures.

  

(a)Evaluation of Disclosure Controls and Procedures

   

In connection with the preparation of this Quarterly Report on Form 10-Q, an evaluation was carried out by the Company's management, with the participation of the principal executive officer and the principal financial officer, of the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 ("Exchange Act")) as of January 31, 2015. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to management, including the chief executive officer and the chief financial officer, to allow timely decisions regarding required disclosures.

 

Based on that evaluation, the Company's management concluded, as of the end of the period covered by this report, that the Company's disclosure controls and procedures were not effective in recording, processing, summarizing, and reporting information required to be disclosed, within the time periods specified in the Commission's rules and forms, and that such information was accumulated and communicated to management, including the principal executive officer and the principal financial officer, to allow timely decisions regarding required disclosures.

 

(b)Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

18
 

PART II – OTHER INFORMATION

 

Item 1.    Legal Proceedings.

   

We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

 

Item 1A.  Risk Factors.

  

The disclosure required under this item is not required to be reported by smaller reporting companies.

 

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

 

On November 25, 2014, pursuant to consulting agreements, the Company issued 450,000 shares of the Company’s common stock to two consultants at a fair value of $45,000.  

 

On November 25, 2014, pursuant to stock subscription agreements, the Company issued 3,610,180 shares of the Company’s common stock to 12 investors for $361,018.

 

On January 26, 2015, pursuant to a consulting agreement, the Company issued 1,500,000 shares of the Company’s common stock to a consultant at a fair value of $150,000. 

 

On January 26, 2015, the Company issued 1,000,000 shares of the Company’s common stock to two directors for fees at a fair value of $100,000. 

 

On February 2, 2015, the Company issued an aggregate of 2,080,000 shares of its common stock to three consultants as payment for services. These shares were valued at a fair value of $208,000 or $0.10 per share.

 

On February 2, 2015 and February 12, 2015, the Company issued 8,000,000 shares of its common stock to two investors for $800,000 in cash.

 

On February 2, 2015 and February 12, 2015, the Company issued 3,086,050 shares of its common stock at a value of $308,605 to investors which were included in common stock issuable at January 31, 2015 and for which it had previously received $308,605.

 

Proceeds from the above unregistered sales of equity securities are to be used for working capital purposes.

 

These securities were not registered under the Securities Act of 1933, as amended (the “Securities Act”), but were issued in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act as a transaction by an issuer not involving a public offering.

 

Item 3.    Defaults Upon Senior Securities.

  

None.

 

Item 4.    Mine Safety Disclosures.

 

Not applicable.

 

Item 5.    Other Information.

 

None.

 

Item 6.    Exhibits

  

  Exhibit 31.1 Rule 13a-14(a) Certification by the Principal Executive Officer
  Exhibit 31.2 Rule 13a-14(a) Certification by the Principal Financial Officer
  Exhibit 32.1 Certification by the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
  Exhibit 32.2 Certification by the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
  Exhibit 101.INS XBRL Instance Document
  Exhibit 101.SCH XBRL Schema Document
  Exhibit 101.CAL XBRL Calculation Linkbase Document
  Exhibit 101.DEF XBRL Definition Linkbase Document
  Exhibit 101.LAB XBRL Label Linkbase Document
  Exhibit 101.PRE XBRL Presentation Linkbase Document

 

   

 

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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.

 

 

Select-TV Solutions, Inc.

 

/s/ Geoffrey P. Mott   March 17, 2015
Geoffrey P. Mott, Chief Executive Officer   Date

 

 

 

 

 

 

 

 

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