UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

x

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

 

For the Quarterly Period Ended September 30, 2015 

or

 

¨

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

 

For the transition period from ______________ to ______________

 

 

Zonzia Media, Inc.

(Name of small business issuer in its charter)

 

 

NEVADA		84-0871427
(State of or other jurisdiction of incorporation or organization)		(IRS Employer I.D. No.)

 

 

74 N. Pecos Road, Suite D

Henderson, Nevada 89074

(Address of Principal Executive Office)

(702) 463-8528

(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 o

 

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 o

 

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 definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer  o        Accelerated filer  o

 

Non-accelerated filer  o      Smaller reporting company  x

 

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

 

The number of shares of Common Stock, $0.001 par value, of the registrant outstanding at November 23, 2015 was 229,440,924

 

 

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.			3
CONDENSED BALANCE SHEETS			3
CONDENSED STATEMENTS OF OPERATIONS			4
CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)			5
CONDENSED STATEMENTS OF CASH FLOWS			7
NOTES TO CONDENSED FINANCIAL STATEMENTS			8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.			15
Item 3. Quantitative and Qualitative Disclosures About Market Risk			20
Item 4. Controls and Procedures.			20
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.			21
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.			21
Item 3. Defaults Upon Senior Securities.			21
Item 4. Mine Safety Disclosures.			21
Item 5. Other Information.			21
Item 6. Exhibits.			22
Signatures			23
Exhibit Index			24

 

 

Statement Regarding Forward-Looking Statements

 

Certain statements contained in this report on Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. All statements, other than statements of historical facts, are forward-looking statements. Forward-looking statements include statements about matters such as: future prices and sales of, and demand for, our products; future industry market conditions; future changes in our activities, future exploration, production, operating and overhead costs; operational and management restructuring activities (including implementation of methodologies and changes in the board of directors); future employment and contributions of personnel; tax and interest rates; capital expenditures and their impact on us; nature and timing of restructuring charges and the impact thereof; productivity, business process, rationalization, investment, acquisition, consulting, operational, tax, financial and capital projects and initiatives; contingencies; environmental compliance and changes in the regulatory environment; and future working capital, costs, revenues, business opportunities, debt levels, cash flows, margins, earnings and growth.

 

The words “believe,” “expect,” “anticipate,” “estimate,” “project,” “plan,” “should,” “intend,” “may,” “will,” “would,” “potential” and similar expressions identify forward-looking statements, but are not the exclusive means of doing so These statements are based on assumptions and assessments made by our management in light of their experience and their perception of historical and current trends, current conditions, possible future developments and other factors they believe to be appropriate. Forward-looking statements are not guarantees, representations or warranties and are subject to risks and uncertainties that could cause actual results, developments and business decisions to differ materially from those contemplated by such forward-looking statements.  Some of those risks and uncertainties include the risk factors set forth in this report and our Annual Report on Form 10-K for the fiscal year ended December 31, 2014, and the following: current global economic and capital market uncertainties; potential dilution to our stockholders from our recapitalization and balance sheet restructuring activities; potential inability to continue to comply with government regulations; adoption of or changes in legislation or regulations adversely affecting our businesses; permitting constraints or delays, business opportunities that may be presented to, or pursued by, us; changes in the United States or other monetary or fiscal policies or regulations; changes in generally accepted accounting principles; geopolitical events; potential inability to implement our business strategies; potential inability to grow revenues organically; potential inability to attract and retain key personnel; assertion of claims, lawsuits and proceedings against us; potential inability to maintain an effective system of internal controls over financial reporting; potential inability or failure to timely file periodic reports with the SEC; potential inability to list our securities on any securities exchange or market; and work stoppages or other labor difficulties. Occurrence of such events or circumstances could have a material adverse effect on our business, financial condition, results of operations or cash flows or the market price of our securities. All subsequent written and oral forward-looking statements by or attributable to us or persons acting on our behalf are expressly qualified in their entirety by these factors. We undertake no obligation to publicly update or revise any forward-looking statement.

 

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

ZONZIA MEDIA, INC.

(formerly HDIMAX Media, Inc. and Indigo-Energy, Inc.)

BALANCE SHEETS

 

ASSETS
		September 30, 2015				December 31, 2014
		(unaudited)
Current Assets
Cash		$	28,377			$	208
Licensed content			480,000				–
Total current assets			508,377				208
Other Assets
Other assets			10,000				–
Total assets		$	518,377			$	208
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable		$	1,661,392			$	710,769
Accrued expenses			372,460				690,247
Related party accounts payable			–				340,163
Accrued compensation			618,087				495,167
Accrued interest			2,810
Convertible promissory notes payable, net of discounts			150,261				–
Promissory notes payable			70,000				–
Derivative liability			532,600				–
Total current liabilities			3,407,610				2,236,346
Stockholders' Equity (Deficit)
Preferred stock, $0.001 par value, 200,000,000 shares authorized and none issued and outstanding at September 30, 2015 and December 31, 2014		$	–			$	–
Common stock, $0.001 par value, 2,000,000,000 shares authorized and 229,249,597 and 758,065,119 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively			229,250				758,065
Additional paid in capital			101,267,847				22,923,087
Accumulated deficit			(104,386,330	)			(25,917,290	)
Total stockholders' equity (deficit)			(2,889,233	)			(2,236,138	)
Total liabilities and stockholders' equity (deficit)		$	518,377			$	208

 

The accompanying notes are an integral part of these condensed financial statements

 

 

ZONZIA MEDIA, INC.

(formerly HDIMAX Media, Inc. and Indigo-Energy, Inc.)

STATEMENTS OF OPERATIONS

 

 

		For the Three Months Ended September 30,				For the Three Months Ended September 30,				For the Nine Months Ended September 30,				For the Period from Inception on May 24, 2014 to September 30,
		2015				2014				2015				2014
		(unaudited)				(unaudited)				(unaudited)				(unaudited)
Revenue
Net revenue		$	–			$	439			$	–			$	439
Expenses
General and administrative			31,531				19,180				418,114				19,281
Sales and marketing			320,224				156,942				157,381				156,942
Officer and director compensation			3,417,552				–				76,307,429				54,800
Professional fees			196,228				294,906				2,234,276				387,906
Total operating expenses			3,965,535				471,028				79,117,200				618,929
Gain (loss) from operations			(3,965,535	)			(470,589	)			(79,117,200	)			(618,490	)
Other income (expense)
Gain on change in fair value of derivatives			12,010				–				12,010				–
Interest Expense			(72,853	)			(4,452	)			(183,872	)			(4,452	)
Total other expenses			(60,843	)			(4,452	)			(171,862	)			(4,452	)
Net loss		$	(4,026,378	)		$	(475,041	)		$	(79,289,062	)		$	(622,942	)
Net loss per share - basic and diluted		$	(0.02	)		$	(0.01	)		$	(0.31	)		$	(0.01	)
Weighted average shares outstanding			228,759,483				48,500,000				257,285,107				48,500,000

 

The accompanying notes are an integral part of these condensed financial statements

 

ZONZIA MEDIA, INC.

(formerly HDIMAX Media, Inc. and Indigo-Energy, Inc.)

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

 

		Common Stock								Paid in				Accumulated				Total
		Shares				Amount				Capital				Deficit				Equity (deficit)
Balance, Inception May 24, 2014			–			$	–			$	488							$	488
Issuance of founder's shares in May 2014			48,500,000				48				(48	)							–
Cancellation of founder's shares related to reverse capitalization in November 2014			(48,500,000	)			(48	)			47								(1	)
Reverse capitalization in November 2014			757,689,386				757,689				(488	)			(820,022	)			(62,821	)
Common stock issued for debt settlement in December 2014			375,733				376				123,088								123,464
Stock based compensation											22,800,000								22,800,000
Net loss															(25,097,268	)			(25,097,268	)
Balance December 31, 2014			758,065,119			$	758,065			$	22,923,087			$	(25,917,290	)		$	(2,236,138	)
Settlement agreement with former officers and directors in January 2015			(709,121,205	)			(709,121	)			162,000				820,022				272,901
Stock based compensation in January 2015			145,000,000				145,000				63,846,061								63,991,061
Common stock issued for previously accrued consulting fees in January 2015			75,000				75				24,925								25,000
Common stock issued for cash in January 2015			307,971				308				34,692								35,000
Common stock issued for employment agreement termination in January 2015			5,000,000				5,000				1,895,000								1,900,000
Common stock issued for cash in February 2015			177,777				177				32,623								32,800
Stock based compensation in February 2015			4,092,500				4,093				774,455								778,548
Common stock issued for settlement of related party accounts payable in February 2015			7,500,000				7,500				332,663								340,163
Common stock issued for cash in February 2015			100,000				100				27,950								28,050
Stock based compensation in April 2015			5,000,000				5,000				1,495,000								1,500,000
Common stock issued for previously accrued consulting fees in April 2015			4,500,000				4,500				922,554								927,054

 

 

ZONZIA MEDIA, INC.

(formerly HDIMAX Media, Inc. and Indigo-Energy, Inc.)

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (continued)

 

		Common Stock								Paid in				Accumulated				Total
		Shares				Amount				Capital				Deficit				Equity (deficit)
Common stock issued in lieu of interest in April 2015			440,000				440				64,330								64,770
Common stock issued for cash in April 2015			25,445				25				4,975								5,000
Stock based compensation in May 2015			3,200,000				3,200				964,800								968,000
Common stock issued for previously accrued consulting fees in May 2015			509,524				510				112,111								112,621
Common stock issued in lieu of` interest in May 2015			250,000				250				45,332								45,582
Common stock issued for cash in May 2015			1,641,929				1,642				168,358								170,000
Stock based compensation in June 2015			150,000				150				49,350								49,500
Common stock issued for previously accrued consulting fees in June 2015			250,000				250				49,750								50,000
Common stock issued for cash in June 2015			476,915				477				84,523								85,000
Stock based compensation in July 2015			150,000				150				7,597								7,747
Common stock issued for cash in July 2015			1,152,564				1,153				68,847								70,000
Stock based compensation in August 2015			50,000				50				3,314								3,364
Stock based compensation in September 2015			225,000				225				10,115								10,340
Common stock issued in lieu of interest in September 2015			31,058				31				1,584								1,615
Stock based compensation											7,266,024								7,266,024
Related party debt forgiveness
Services contributed by employees/officers											288,988								288,988
Related party debt forgiveness											100,000								100,000
Reclassification of options and warrants to liability											(493,161	)							(493,161	)
Net loss															(79,289,062	)			(79,289,062	)
Balance September 30, 2015			229,249,597			$	229,250			$	101,267,847			$	(104,386,330	)		$	(2,889,233	)

 

The accompanying notes are an integral part of these condensed financial statements

 

 

ZONZIA MEDIA, INC.

(formerly HDIMAX Media, Inc. and Indigo-Energy, Inc.)

CONDENSED STATEMENT OF CASH FLOWS

(Unaudited)

 

 

		For the Nine Months Ended September 30, 2015				For the Period from Inception on May 24, 2014 to September 30, 2014
		(unaudited)				(unaudited)
Cash Flows from Operating Activities
Net loss		$	(79,289,062	)		$	(622,942	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Stock-based compensation			77,729,258				–
Non-cash interest			163,415				–
(Gain) loss on change in fair value of derivatives			(12,010	)			–
Debt discount accretion			19,763				–
Gain on non-cash settlement of accrued expenses			(809,714	)			–
Change in other assets			(10,000	)			(488	)
Change in accounts payable			595,623				104,509
Change in accrued expenses			104,661				107,333
Change in accrued compensation			907,075				–
Change in accrued interest			2,810				4,452
Net cash used in operating activities			(598,181	)			(407,136	)
Cash Flows from Financing Activities
Proceeds from issuance of related party promissory notes			70,000				450,000
Proceeds from issuance of convertible promissory notes			130,500				–
Proceeds from issuance of common stock			425,850				488
Net cash provided by financing activities			626,350				450,488
Net increase in cash			28,169				43,352
Cash at beginning of the period			208				–
Cash at end of the period		$	28,377			$	43,352
Supplementary Disclosures of Cash Flow Information
Cash paid for income taxes		$	–			$	–
Cash paid for interest		$	–			$	–

 

 

The accompanying notes are an integral part of these condensed financial statements

 

 

ZONZIA MEDIA, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2015

(Unaudited)

 

 

1. Interim Financial Statements

 

The accompanying interim unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30, 2015, are not necessarily indicative of the results that may be expected for the year ending December 31, 2015. For further information, refer to the financial statements and footnotes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014. 

 

The accompanying condensed financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America which contemplate continuation of the Company as a going concern.

 

Description of Business

 

Zonzia Media, Inc, initially organized as HDIMAX Media, Inc., and incorporated in the State of Delaware in May 2014, is a multi-platform entertainment company focused on delivering compelling content with the objective of generating both advertising and subscription revenue.

 

Reverse Merger with Indigo-Energy, Inc.

 

On November 21, 2014, through a wholly-owned subsidiary of a public shell Company then known as Indigo-Energy, Inc., HDIMAX Acquisition Corporation, a Nevada corporation, was merged with and into HDIMAX, Inc., a Delaware corporation (“HDIMAX”) (such merger, the “Merger”) pursuant to the Agreement and Plan of Merger, effective as of September 2, 2014, and as amended effective as of November 20, 2014, by and among Indigo-Energy, Inc. (our “company” or “we” or “us”), HDIMAX and HDIMAX Acquisition Corporation (the “Merger Agreement”). HDIMAX was the surviving corporation of the Merger and as such will continue as a wholly-owned subsidiary of our Company. Upon closing the merger, we changed our name to HDIMAX Media, Inc.

 

As a result of the Merger, all of HDIMAX’s common stock was converted into 712,121,205 shares of our Company’s common stock, which represents approximately 94% of the outstanding shares of our company’s common stock after giving effect to the Merger. The common stock issuance, representing 94% of the outstanding shares of the consolidated Company was accounted for as a reverse capitalization in accordance with accounting principles generally accepted in the United States (“US GAAP”) and the Rules and Regulations as promulgated by the United States Securities and Exchanges Commission (“SEC”).

 

On January 22, 2015, we entered into a Settlement Agreement in which we cancelled all of the 712,121,205 shares of restricted and unregistered common stock previously issued to effectuate the merger with Rajinder Brar, the previous sole owner of HDIMAX, Inc. In consideration for the shares being cancelled, we forfeited our rights to sell advertising and other products on websites previously controlled Mr. Brar and related entities, with the exception of www.hdimax.com. An outline of the significant terms of the Settlement Agreement includes, but is not limited to, the following:

  

·

The 712,121,205 million shares of HDIMAX Media, Inc. (formerly Indigo-Energy) common stock issued to Rajinder Brar, the owner of 100% of the previously outstanding stock of HDIMAX, Inc. immediately preceding the reverse acquisition transaction, were cancelled.

 

·

Rajinder Brar, Aneliya Vasileva, and Myles Pressey III, previously appointed as the Company’s officers and Board of Directors immediately following the completion of the reverse acquisition, resigned and forfeited future compensation terms associated with any and all previously agreed upon employment agreements, inclusive of the compensation accrued as of December 31, 2014.

 

·

Mr. James C. Walter Sr. was reappointed to serve as a Director charged with appointing new officers. Mr. Walter Sr. served as the Sole Officer and Director of the Company immediately preceding the completion of the reverse acquisition transaction.

 

·

The Company’s option agreement to acquire Fashion Style Magazine, Inc., an entity wholly owned by Rajinder Brar, was cancelled.

 

 

·

The Omnibus Agreement and License dated November 21, 2014, by and between the Company and Fashion Style Magazine, Inc. was terminated. The brands and assets wholly owned by Rajinder Brar through Fashion Style Magazine, Inc. were intended to be a core portion of the consolidated Company’s business operations subsequent to the completion of the reverse acquisition.

 

·

The Company forfeited all rights to Frontlinewire.com, a brand and website acquired in the reverse acquisition.

 

·

The Company maintained all rights to hdimax.com, a brand and website acquired in the reverse acquisition, but agreed to assign those assets back to their original owners by May 1, 2015. We do not intend to further develop or publish content at www.hdimax.com.

 

For additional details, including a copy of the Settlement Agreement, please see our Current Report on Form 8-K filed on January 29, 2015.

 

On March 9, 2015 we changed our name to Zonzia Media, Inc. and we are developing a new multi-platform entertainment distribution channel with the goal of being a unique hybrid of a linear channel, a video-on-demand channel and an over-the-top channel. Our technology will allow our viewers instant access to our available content on most internet connected devices.

 

Use of Estimates

 

In preparing financial statements in conformity with generally accepted accounting principles, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenditures during the reported periods. Actual results could differ materially from those estimates.

 

Cash and Cash Equivalents

 

We consider all highly liquid instruments with an original maturity of 90 days or less at the time of purchase to be cash equivalents. We did not have any cash equivalents at September 30, 2015 or December 31, 2014.

 

Fair Value Measurements

 

The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  Financial assets are marked to bid prices and financial liabilities are marked to offer prices.  The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity.  In addition, the fair value of liabilities should include consideration of non-performance risk, including the party’s own credit risk.

 

Fair value measurements do not include transaction costs.  A fair value hierarchy is used to prioritize the quality and reliability of the information used to determine fair values.  Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.  The fair value hierarchy is defined into the following three categories:

 

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

 

Embedded Conversion Features and Other Equity-linked Instruments

 

The Company classifies all of its common stock purchase warrants and other derivative financial instruments as equity if the contracts (1) require physical settlement or net-share settlement or (2) give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any contracts that (1) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the Company), (2) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement), or (3) contracts that contain reset provisions. The Company assesses classification of its equity-linked instruments at each reporting date to determine whether a change in classification between equity and liabilities (assets) is required.

 

 

Recently Issued Accounting Pronouncements

 

There have been no recently issued accounting pronouncements that were not previously disclosed in our annual report on Form 10-K filed on April 15, 2015 through the date of this report that we believe will have a material impact on our financial position, results of operations, or cash flows.

  

2. Going Concern

 

Since our inception on May 24, 2014, we have generated immaterial revenues resulting in the incurrence of net losses through September 30, 2015. This has further led to negative working capital, all which results in substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Our management, Board, and Advisory Board has focused its efforts and our limited resources on raising additional capital through debt or equity offerings at terms not detrimental to our planned future operations. As of the date of this report we do not have any firm funding commitments.

 

3. Related Party Transactions

 

During the nine months ended September 30, 2015 we settled prior obligations due to a related party totaling $340,163 via the issuance of 7,500,000 shares of restricted and unregistered shares of common stock. The settled obligation also represents that balance outstanding as of December 31, 2014.

 

During the nine months ended September 30, 2015 a total of four of our Officers agreed to waive all or portions of their base salaries or previously accrued bonuses earned during the year ended December 31, 2014 and through September 30, 2015 totaling $288,988. Since we consider our Officers related parties we have determined the bonus and salary forgiveness was in the nature of a capital contribution and no gain was recognized in the accompanying condensed statement of operations.

 

We issued a Director 250,000 shares of restricted and unregistered shares of common stock for cash proceeds totaling $25,000 in January 2015. 

 

As part of the Settlement Agreement we entered into on January 22, 2015 we cancelled restricted stock award grants to two of our former officers. Since we did not replace a cancelled award totaling 52,500,000 shares of restricted and unregistered shares of common stock, and effectively repurchased the award for no consideration as assumed by the application of accounting principles generally accepted in the United States, the unrecognized grant-date fair value of the award totaling $9,975,000 was recognized during the nine months ended September 30, 2015. Additionally, we cancelled a restricted stock award granted to our current Interim Chief Executive Officer totaling 67,500,000 shares and replaced the award with the grant of 125,000,000 shares of restricted and unregistered shares as part of a new employment agreement on January 29, 2015. The total compensation cost recognized during the nine months ended September 30, 2015 associated with the cancellation and replacement of this restricted stock award was $47,500,000.

 

During the nine months ended September 30, 2015 we issued 2,000,000 shares of unregistered and restricted common stock to an affiliate for consulting services valued at $680,000. A promissory note in the amount of $35,000 was issued to the same affiliate of the company, for cash proceeds of $35,000 in April 2015. As additional consideration on the promissory note, this same affiliate received 215,000 shares of unregistered and restricted common stock valued at $32,039. Upon renewal of this promissory note in May 2015 this affiliate received 100,000 shares of unregistered and restricted common stock valued at $17,260.

 

Employment Agreement Amendment

 

On May 29, 2015, we amended our Chairman and Chief Business Development Office, Mr. Myles Pressey III’s, employment agreement. Mr. Pressey III was originally going to be granted 25,000,000 shares of fully vested restricted and unregistered shares of common stock on January 29, 2016 whereas the amendment calls for Mr. Pressey III to receive up to 62,500,000 shares of restricted and unregistered common stock subject to the achievement of performance benchmarks set by the Board of Directors. The modification of Mr. Pressey III’s equity award resulted in the recognition of compensation totaling $7,266,025 during the nine months ended September 30, 2015.

 

4. Stockholders’ Equity

 

The following provides information for the shares of restricted and unregistered shares of common stock that we issued (or cancelled) from January 1, 2015 through the date of this report:

 

In January 2015 we issued 75,000 shares of restricted and unregistered common stock for consulting services valued at $25,000.

 

 

In January 2015 we issued 57,971 shares restricted and unregistered shares of common stock for cash totaling $10,000.

 

We issued a Director 250,000 shares of restricted and unregistered shares of common stock for cash proceeds totaling $25,000 in January 2015.

 

In January 2015 we issued a total of 145,000,000 shares of restricted and unregistered shares of common stock as compensation to our officers, directors, and other consultants valued at $54,016,061.

  

In January 2015 we issued 5,000,000 shares of restricted and unregistered shares of common stock to a former employee of HDIMAX, Inc. valued at $1,900,000.

 

In January 2015, in accordance with the terms of our Settlement Agreement with our former Chairman and Chief Executive Officer, we cancelled 712,121,205 shares of unregistered and restricted common stock. We recognized settlement expense, included in the general and administrative expenses in the accompanying condensed statement of operations, totaling $107,901 and reversed the previously recognized accumulated deficit adjustment of $820,022 associated with the Settlement.

 

In February 2015 we issued 142,500 shares of restricted and unregistered common stock for accounting and legal services valued at $21,179.

 

In February 2015 we issued a total of 200,000 shares of restricted and unregistered shares of common stock as compensation directors valued at $38,348.

 

In February 2015 we issued 3,750,000 shares of restricted and unregistered common stock for consulting services valued at $719,021.

 

In February 2015 we issued 177,777 restricted and unregistered shares of common stock for cash totaling $32,800.

 

In February 2015 we issued 7,500,000 shares of restricted and unregistered common stock in settlement of previously accrued related party liabilities totaling $340,163.

 

In March 2015 we issued 100,000 restricted and unregistered shares of common stock for cash totaling $28,050.

 

In April 2015 we issued 440,000 shares of restricted and unregistered common stock in conjunction with the issuance of notes payable for total consideration of $70,000.

 

In April 2015 we issued 4,500,000 shares of restricted and unregistered common stock for consulting services valued at $927,054.

 

In April 2015 we issued a total of 5,000,000 shares of restricted and unregistered shares of common stock as compensation to our officers valued at $1,500,000.

 

In April 2015 we issued 25,445 shares of restricted and unregistered shares of common stock for cash totaling $5,000.

 

In May 2015 we issued a total of 3,200,000 shares of restricted and unregistered shares of common stock as compensation to our officers and directors valued at $968,000.

 

In May 2015 we issued 509,524 shares of restricted and unregistered common stock for consulting services valued at $112,621.

 

In May 2015 we issued 1,641,929 shares of restricted and unregistered shares of common stock for cash totaling $170,000.

 

In May 2015 we issued Warrants for the Purchase of 1,500,000 shares of restricted and unregistered shares of common stock as additional incentive for a $150,000 cash investment in the company that was part of the $170,000 in the previous footnote.

 

In May 2015 we issued 250,000 shares of restricted and unregistered shares of common stock for interest on outstanding notes and payables valued at $45,582.

 

In June 2015 we issued a total of 150,000 shares of restricted and unregistered shares of common stock as compensation to our officers and directors valued at $49,500.

  

 

In June 2015 we issued 250,000 shares of restricted and unregistered common stock for settlement of an obligation valued at $50,000.

 

In June 2015 we issued 476,915 shares of restricted and unregistered shares of common stock for cash totaling $85,000.

 

In July 2015 we issued 1,152,564 shares of restricted and unregistered shares of common stock for cash totaling $70,000.

 

In July 2015 we issued 150,000 shares of restricted and unregistered shares of common stock to a Director for services totaling $7,747.

 

In August 2015 we issued 50,000 shares of restricted and unregistered common stock for services valued at $3,364.

 

In September 2015 we issued 225,000 shares of restricted and unregistered common stock for services valued at $10,340.

 

In September 2015 we issued 31,058 shares of restricted and unregistered shares of common stock for interest on outstanding notes valued at $1,614.

 

Warrants

 

During the period ended September 30, 2015 we issued warrants to certain investors as part of the private placements of our restricted and unregistered common stock.

 

The following table presents a summary of our warrant activity:

 

As of September 30, 2015

Shares

Weighted Average Exercise Price

Weight Average Remaining Term (years)

Aggregate Intrinsic Value

Outstanding December 31, 2014

871,591

$

0.88

2.83

$

–

Warrants granted

3,000,000

0.22

2.65

–

Warrants exercised

–

–

–

–

Warrants expired, cancelled, forfeited

–

–

–

–

Outstanding and exercisable at September 30, 2015

3,871,591

$

0.37

2.69

$

–

 

As of September 30, 2015 and December 31, 2014 all outstanding warrants were fully vested. Of the outstanding warrants, 862,500 are contingently exercisable only in the event that other equity-linked instruments are exercised.

 

Options

 

As of September 30, 2015 and December 31, 2014 the Company had 568,182 stock options outstanding. During the periods presented there were no options granted, exercised, cancelled, or forfeited, correspondingly, no additional compensation expense was recognized for the periods presented. All options outstanding are exercisable and do not have any intrinsic value at September 30, 2015 and December 31, 2014 and are set to expire in October of 2017. At September 30, 2015 the weighted average exercise price of the outstanding options was $6.60 with a weighted average remaining term of 2.83 years.

 

 

5. Convertible Notes Payable

 

The Company has entered into various convertible debt financing transactions with third party investors (“Investors”). As of September 30, 2015 the Company issued convertible notes to Investors in the aggregate principal amount of $142,750. The notes are unsecured, and provide for the conversion of all principal and interest outstanding under the notes into shares of the Company’s common stock beginning six months after the issuance date of the respective notes (“conversion date”) at conversion rates of 55%-60% of the lowest listed market price of the Company’s common stock for the previous twenty to twenty-five trading days immediately prior to the conversion date.

 

The conversion price of the notes are subject to adjustment in the event of stock splits, dividends, distributions and similar adjustments to our capital stock. The number of shares of common stock subject to the Notes may be adjusted in the event of mergers, distributions, a sale of substantially all of the Company’s assets, tender offers and dilutive issuances.

 

 

The Company has determined the resetting terms of the conversion rates are separable into two elements: i) Fixed Conversion Rate element – since a fixed minimum discount to the listed market price ranging from forty to forty-five percent of any listed market price has been determined to be a predominant element of the conversion feature, we determined the fixed conversion element results in a fixed value of common stock to the Investor at any conversion date; and ii) Variable Conversion Rate element – the volatility in our listed market prices and wide ranging bid and ask spreads on a daily basis results in an additional variable amount of common stock value being received by the Investors upon conversion. The fixed conversion element, resulting in the determination of stock settled debt, is recognized as a debt discount at intrinsic value on the issuance date and is not re-valued in the subsequent periods. The variable conversion element is classified as a derivative liability and is revalued on an on-going basis.

 

Convertible notes payable consist of the following:

 

		As of September 30, 2015
		Face Value of Note				Intrinsic Value of Fixed Conversion Element				Unamortized Discount				Net Balance
JMJ Financial; 12% Convertible note due August 24, 2017		$	27,500			$	20,833			$	(20,137	)		$	28,196
Auctus Fund, LLC; 8% Convertible note due May 28, 2016			56,250				46,023				(42,160	)			60,113
LG Capital Funding, LLC; 8% Convertible note due August 21, 2016			27,000				22,091				(20,229	)			28,862
St. George Investment, LLC; 8% Convertible note due September 9, 2016			32,000				26,182				(25,092	)			33,090
Total Convertible Notes		$	142,750			$	115,129			$	(107,618	)		$	150,261

 

The Company did not have any convertible notes outstanding as of December 31, 2014.

 

During the three and nine months ended September 30, 2015 the Company recognized discount accretion totaling $19,763 included in interest expense in the accompanying results of operations. Since the Company has determined the convertible notes will be stock settled, beginning six months after the date of each issuance, all of the convertible notes payable have been classified as current in the accompanying balance sheet.

 

 

6. Embedded Debt Conversion Features and Other Equity-linked Instruments

 

The Company accounts for variable conversion elements embedded in its convertible instruments that meet the definition of a derivative as liabilities. The variable conversion elements are re-measured at fair value with the changes in the value reported as a component of other income (expense) in the accompanying results of operations. The Company estimates the fair value of the variable conversion element using a Black-Scholes Merton Pricing model based on the variable number of additional shares of common stock the Company is required to issue upon conversion.

 

The Company periodically, or when specific transactions occur that may have material impacts on the presentation of the financial statements, reviews it outstanding equity and equity-linked instruments to determine the appropriate classification in the accompanying balance sheet, equity or liability (asset). During the period ended September 30, 2015 the company reclassified all of its previously outstanding options and warrants from equity to liability. The determination to reclassify the previously outstanding options and warrants resulted from the issuance of convertible notes payable that are potentially convertible into an unlimited number shares of common stock.

 

 

The Company measures and re-measures the fair value of the instruments not classified as permanent equity using a Black Scholes Merton pricing model. The following assumptions were used to estimate the fair value of the Company’s derivative liabilities:

 

Expected volatility		455%
Expected term (years)		0.75 to 2.80
Dividend yield		0.0%
Risk free rate		0.1%

 

During the three and nine months ended September 30, 2015 the Company recognized a derivative liability, and corresponding finance fee, with an initial fair value totaling $51,499 associated with the variable conversion element embedded in the convertible notes payable. Finance fees are included as a component of interest expense in the accompanying results of operations.

 

In August 2015, outstanding options and warrants with an aggregate fair value of $493,161 were reclassified from equity to derivative liability.

 

As of September 30, 2015 the Company had derivative liability obligations with an aggregate fair value totaling $532,600. During the three and nine months ended September 30, 2015 the Company recognized a gain on the change in the fair value of derivative liabilities totaling $12,010 included as a component of other income (expense) in the accompanying results of operations.

 

Financial liabilities measured at fair value on a recurring basis are summarized below:

 

Fair value measurements

September 30, 2015

Quoted prices in active markets for unobservable identical assets (Level 1)

Significant other inputs (Level 2)

Significant observable inputs (Level 3)

Derivative liability

$

532,600

–

–

$

532,600

 

The derivative liabilities are measured at fair value using a Black Sholes Merton Pricing Model. The model is based on assumptions including quoted market prices and estimated volatility factors based on historical quoted market prices for the Company’s common stock, and are classified within Level 3 of the valuation hierarchy

 

The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities that are measured at fair value on a recurring basis:

 

		September 30, 2015				December 31, 2014
Beginning Balance		$	–			$	–
Aggregate fair value of derivative issued		$	51,449			$	–
Liability reclassification for other equity linked instruments		$	493,161			$	–
Change in fair value of derivative included in results of operations (gain) loss		$	(12,010	)		$	–
Ending Balance		$	532,600			$	–

 

 

7. Accrued Expenses

 

During the quarter ended March 31, 2015 our management, with the assistance of our defense attorney, analyzed the merit and likelihood of an unfavorable outcome in the matter of Congoo, LLC v. HDIMAX Max Media, Inc. Civ. Action No. 3:15-cv-01423. Based on the facts and circumstances, we determined the likelihood of an unfavorable outcome to be remote. Correspondingly, we reversed the previously accrued obligation of $422,448 as presented in sales and marketing expense in the accompanying condensed statement of operations.

 

 

8. Licensed Content

 

The Company entered into a content licensing and distribution agreement with an entertainment company in which we will distribute, on our available platforms, the following:

 

i.

Fifty-two (52) twenty three minute (0:23) episodes of a series known as “Behind the Velvet Rope”

ii.

Ancillary content including a minimum of ten to twenty event compilations approximately five to seven minutes in length each; and

iii.

Thirty to forty individual interviews approximately one to three minutes in length each.

 

The agreement calls for us to advance $480,000 to the entertainment company to be used for production of the series. After paying the advance, we are entitled to recoup the advanced amount plus an additional $10,000 (a total of $490,000) after which time the gross revenue generated under the agreement will be split on a 50/50 basis. The non-refundable advance obligation and capitalized licensed content are presented in accounts payable and current assets, respectively, in the accompanying balance sheet.

 

 

9. Subsequent Events

  

In October 2015 the Company received a total of $150,000 in cash proceeds from the issuance of additional convertible notes payable. The notes mature between nine and twelve months after the date of the issuance and are convertible into shares of common stock at conversion rates discounted to our listed market price of 50%.

 

In November 2015, Frank McEnulty resigned as our Chief Financial Officer and Mr. Naresh Malik resigned as our Chief Executive Officer. In conjunction with such resignations, our Chairman of the Board Mr. Myles Pressey III, will assume the position of Interim Chief Financial Officer; and our Chief Operating Officer, Mr. Johnathan Adair will assume the position of Chief Executive Officer.

 

In November 2015 we issued 191,327 shares of restricted and unregistered shares of common stock for cash proceeds totaling $15,000.

 

 

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

 

The following discussion provides information that we believe is relevant to an assessment and understanding of the results of operations and financial condition of the Company as of and for the three and nine months ended September 30, 2015, as well as our future results. It should be read in conjunction with the condensed financial statements and accompanying notes also included in this 10-Q and our Annual Report on Form 10-K as of and for the period ended December 31, 2014.

 

Overview

 

Zonzia Media, Inc. is a multi-platform entertainment company focused on delivering compelling content with the objective of generating both advertising and subscription revenue. Zonzia is currently distributing content in major hotel chains across the US and in cable television households across the US. In addition to our hotel and cable distribution, Zonzia also plans to distribute its content on most internet connected devices through its zonzia.com Over-The-Top (OTT) platform.

 

Once completed, Zonzia’s OTT software technology will allow instant access to our available content from internet connected devices including desktop computers, laptops, tablets, smart phones, internet connected game consoles and other internet connected devices. We anticipate delivering a variety of content on all of our platforms including:

 

§

Original Programming – featuring TV series, mini-series and documentaries.

§

Feature Films – full-length feature films from major Hollywood studios and independent production companies.

§

Television Shows – TV series from major networks and independent production companies.

§

Concerts, Sports and Live Events – streaming live music concerts, live sports events and other live events.

 

We are currently distributing licensed content through our hotel network and cable television distribution platforms.

 

Zonzia Over-The-Top (OTT) Platform

 

We plan to make our content readily available on computers, tablets, mobile devices, and other internet connected devices. Our content will be posted on the zonzia.com OTT platform. Over-The-Top (OTT) refers to any content not delivered as specifically programmed linear channels from a pay TV operator, which may encompass even on-demand content provided as TV Everywhere by a pay TV operator. Further, OTT has the component of running on the "open internet" or an unmanaged network.

 

 

Video on Demand (VOD) / Subscription Video on Demand (SVOD)

 

We anticipate that our Video on Demand (VOD) and Subscription Video on Demand (SVOD) offerings will include full length feature films, TV series, documentaries, live events and general programming. We are cross-soliciting film, TV and live event promoters, offering them a number of favorable deal options which will allow them to have direct access to our targeted demographics including entering into revenue sharing deals. By matching video and live event producers and promoters with our advertising customers, advertisers will have the ability to produce and embed user-targeted ads in our VOD and SVOD offerings. Our intention is that by providing entertaining content to an expanding end user base, our brand awareness will increase, enabling us to develop strong relationships and retention rates with our advertisers, ecommerce and other brand partners.

 

In addition to being able to deliver innovative and entertaining content across all of our delivery platforms, our overall success is heavily dependent on our ability to develop nationwide brand recognition which is intended to result in a significant viewer and ultimately consumer base. Our brand recognition and viewer base is expected to drive rapid expansion of individual consumer impressions that are essential in the development and effectiveness of our advertising program offerings. Since we generate advertising revenue from the number of user impressions we achieve, our content and other product offerings must be attractive to our individual users.

  

Viewer Subscriptions 

 

As we launch our OTT delivery platforms, including our website and mobile applications, our subscription content and accompanying interactive services may be initially available for free for limited periods in order to aggressively increase our brand awareness and consumer base.

 

As our brand awareness and consumer base gains momentum, we will launch a targeted subscription campaign drive which we anticipate will begin in the latter part of Q1 2016 or Q2 2016. Subsequent to the initial launch and trial period, we expect to begin charging subscribers a monthly fee of $4.99 per month.

 

Results of Operations

 

The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Additionally we were not incorporated until May of 2014, correspondingly, the following analysis of our results will not be materially based on comparisons to the period from our inception on May 24, 2014 to September 30, 2014, rather other periods within our history as deemed applicable.

 

The financial statements and dollar amounts included herein are stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles. The results of operations may not be indicative of our future operations as we continue to develop our content delivery platforms.

 

The following discussion of the financial condition and results of operations should be read together with our condensed financial statements for the three and nine month periods ended September 30, 2015.

  

Revenue

 

We did not generate any revenue during the three and nine months ended September 30, 2015 or during the period from our inception through September 30, 2014. Beginning in the first quarter of 2016, we expect to begin to recognize revenue as we ramp up our content offerings. Additionally, if we are successful in our funding and brand awareness campaigns we may be able to launch our subscription service by mid-2016.

 

Sales and Marketing

 

For the three and nine months ended September 30, 2015 we incurred sales and marketing expenses totaling approximately $320,000 and $580,000 (net of the non-cash reversal of a non-recurring accrued obligations of approximately $422,000), respectively. The increases during the periods ended September 30, 2015 were the result of the accrual of $110,000 ($55,000 monthly) associated with the launch of the Sonifi Solutions Hotel Network platform in August with initial distribution as a linear channel to approximately 540,000 hotel guest rooms and as VOD distributed content to approximately 880,000 hotel guest rooms. As we continue to build our brand awareness and video and other content libraries, along with our infrastructure, we expect our sales and marketing expenses to increase throughout the next twelve months and beyond.

 

 

Officer and Director Compensation

 

Officer compensation for the three and nine months ended September 30, 2015 of approximately $3,418,000 and $76,307,000 is primarily the result of non-recurring stock awards to our officers and directors, inclusive of the modification of previously issued awards. Included in officer and director compensation during the nine month period was the recognition, totaling $9,975,000, of unrecognized compensation cost associated with the cancellation of an unvested restricted stock award issued to a former officer and approximately $2,771,000 of accrued compensation cost due to a previously issued, but unvested restricted stock award issued to a current officer that has been cancelled. During the three and nine months ended September 30, 2015 we recognized total compensation cost of $2,996,794 and $7,266,024, respectively, associated with a stock based award granted to Mr. Myles Pressey III, inclusive of the incremental cost associated with the modification of the award originally contained in the employment agreement with an effective date of January 29, 2015. Pursuant to the modification, a stock based-award to Mr. Pressey III, consisting of 25,000,000 shares of restricted stock that was previously scheduled to be granted upon the first anniversary of his employment agreement, was replaced with a performance-based stock award. Under the performance based award, Mr. Pressey III is eligible to receive 62,500,000 shares of restricted stock upon the Company’s achievement of $25,000,000 in revenue on a consolidated reporting basis for any calendar year, or upon the achievement of another corporate performance benchmark to be set by the Board of Directors. Our officer compensation cost for the period ended September 30, 2014 of approximately $54,800 was associated with payments made to our former CEO and Chairman under an informal arrangement.

 

We believe a significant portion of the stock awards granted during 2015 were necessary to attract and retain individuals to serve in officer, director, and other consulting roles. In this regard, we issued a total of 157,447,500 shares of fully vested, restricted and unregistered shares of common stock to these individuals. Throughout the remainder of the fiscal year it is not anticipated that officers will accrue compensation in excess of monthly salaries.

 

Professional Fees

 

The Company incurred approximately $196,000 and $2,234,000 of professional fees during the three and nine month period ended September 30, 2015, respectively. The majority of these fees were incurred on a non-cash and non-recurring basis via the issuance of 5,334,524 shares of restricted and unregistered common stock granted to various consultants for business development and contract review and generation. Professional fees of approximately $295,000 and $388,000 incurred during the three months ended September 30, 2014 and for the period from inception through September 30, 2014, respectively, were the result of our initial entity creation. We expect our professional fees to steadily decline as we approach the launch date of our principal business activities.

 

General & Administrative

 

Our general and administrative expenses totaling approximately $32,000 and $418,000 for the three and nine month periods ended September 30, 2015, respectively, were primarily associated with our on-going capital raising efforts and other administrative costs. Additionally, we incurred one-time charges totaling approximately $298,000 associated with the Settlement Agreement with our former Officers and Directors. Our general and administrative costs are expected to significantly fluctuate until we fully commence our planned principal business operations expected to occur in the second half of 2015.

  

Liquidity and Capital Resources

 

Working Capital

 

At September 30, 2015, we had a working capital deficit of approximately $2,900,000, primarily due to professional service providers, officers and directors, and other related parties. The working capital deficit includes convertible notes that will be settled via the issuance of shares of common stock if not fully repaid with cash prior to February 2016 and derivative liabilities associated with our previously outstanding options and warrants being reclassified from equity to liabilities during the period ended September 30, 2015. We do not expect that we will be required to settle any of our derivative liabilities in cash which at September 30, 2015 approximated $533,000. Our working capital is not sufficient to meet our operations. Additionally, our ability to execute our content strategy and meet our day to day liquidity needs through the remainder of the year requires us to raise additional capital.

 

As part of our agreements and insertion order with Sonifi we are required make payments, beginning in August 2015, at the greater of $55,000 or fifty percent (50%) of the of our gross advertising sales (net of any ad agency commission) per month, subject to a $140,000 monthly cap through August of 2016. During the second and third years of the agreements with Sonifi we are obligated to pay the greater of $70,000 or fifty percent (50%) of the Company’s gross advertising sales (net of any ad agency commission) per month subject to the same monthly cap, and $110,000 per month, respectively. The agreement has an initial term ending in September 2018, subject to earlier termination rights in accordance with the agreement. Additionally, we incurred non-refundable cash advance obligations totaling $480,000 during the three and nine periods ended September 30, 2015 for certain content currently broadcast across our distribution platforms.

 

 

Our plans presented in this Report, particularly under “Plan of Operations” below, are dependent upon our ability to raise significant capital in the near term. If we are unsuccessful in generating sufficient cash through operations or raising additional capital through means such as debt issuances, equity offerings or short-term advances from related parties, we will be required to significantly reduce our operational efforts and curtail our rapid growth strategy. Further, as of the date of this Report we do not have any firm funding commitment.

 

Cash Flow

 

Cash Used in Operating Activities

 

Our cash used in operations, totaling approximately $598,000, primarily consisted of payments to service providers to prepare and execute our Settlement Agreement with our former officers and directors. Our operational cash used significantly declined from the quarter ended December 31, 2014 as a result of significant, non-recurring, stock based compensation of approximately $77,730,000. For the near term, and under informal agreements, many of our services providers and related parties have agreed to defer payment until we increase our liquidity, which resulted in off-sets to our net loss and cash used in operations totaling approximately $700,000. Additionally, we recognized non-cash gains of approximately $918,000 related to the reversal of previously accrued compensation due to our former officers and an internet marketing service provider that we were released from during the period, partially off-set by the approximately $108,000 expense for our Settlement Agreement. As noted above, we will require additional capital in order to monetize our content strategy and overall plan of operations.

 

Cash Provided by Financing Activities

 

Cash for the period was provided by the issuance of 3,882,601 shares of restricted and unregistered shares of common stock totaling $425,850, the issuance of two promissory notes in the amount of $70,000, and the issuance of convertible promissory notes for gross proceeds of $130,500.

 

Our ability to continue as a going concern for at least the next 12 months will depend on our ability to raise the money we require through equity or debt financing. Through the end of October 2015 we raised an additional $150,000 through the issuance of two additional convertible promissory notes. There is no assurance that we will be able to obtain further funds required for our continued operations or that additional financing will be available to us when needed or, if available, that it can be obtained on reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will not be able to meet our other obligations as they become due, and we will be forced to scale down or perhaps even cease our operations. As of the date of this Report we do not have any firm funding commitment.

 

Plan of Operations

 

Much of the nine months ended September 30, 2015 was spent modifying our business model and dissolving our business relationship with our former Chairman and Chief Executive Officer which initially culminated in the entry into a Settlement Agreement on January 22, 2015. Subsequent to the Settlement Agreement, we spent significant amounts of time and effort on administrative tasks such as changing our Company name, assessing our on-going liabilities and operational plans, and maintaining our regulatory compliance. An integral part of these activities was to attract and retain highly experienced individuals to form our management team, Board of Directors, and Advisory Board. We believe that we have successfully attracted and retained these individuals. Once in place, our team began the process of rebranding the Company into Zonzia Media and assessing the value of various content delivery platforms and developing the corresponding relationships with applicable service providers.

 

Capital Raising

 

Since late in 2014 through the date of this report, our Officers, Directors and other consultants and Advisory Board Members have devoted significant time and effort to raising the capital necessary to fully implement our principal business plans including securing content and building the required content delivery infrastructure. While we have received positive feedback from these efforts, we do not have any firm funding commitments as of the date of this report sufficient to fully implement our business strategies in the near term.

 

Distribution

 

Through our distribution agreement with Sonifi Solutions our Zonzia Premiere channel is currently being distributed in hotel rooms across the US. In September 2015, as a linear channel, Zonzia Premiere programming reported playing in 575,253 hotel rooms across the U.S. Using standard Nielsen and hotel occupancy metrics, this represents Zonzia content being available to an average monthly Audience Universe of approximately 28.4 Million hotel guests. Also in September 2015, Zonzia Premiere content in Free Video On Demand (VOD) was available in 878,628 hotel rooms across the US.

 

 

Through our distribution agreement with simplyME Distribution, in September 2015 Zonzia content in Free Video On Demand was available in approximately 27 million households across the US.

 

Advertising

 

In September of 2015 Zonzia engaged Trifecta Media to sell advertising for all of our cable and hotel distributed content. Trifecta Media specializes in advertiser sales across a diverse spectrum of media platforms including cable and hotels. Trifecta’s advertising is anticipated to begin airing and contributing revenue in December 2015.

 

OTT Platform, Content Delivery and Storage

 

In September of 2015 Zonzia engaged Kaltura, the leading video technology company, to develop and power all of Zonzia’s OTT Video On Demand services.

 

Kaltura’s OTT software is one of the most advanced and comprehensive pay OTT solution on the market today. It includes advanced monetization, social and personalization features; innovative tools for improving user acquisition and retention; and multi-screen, multi-device support.

 

With Kaltura’s OTT monetization tools, Zonzia will be able to simultaneously deploy its unique mixture of advertising supported and subscriber based business models providing for maximum flexibility. These tools will support server-side and native ad insertion technology for Video On Demand and live content, in-app purchases, a range of payment options and even discounts for introducing friends. Kaltura’s Digital Rights Management (DRM) support will provide full content protection, while Kaltura’s monetization tools will be customized to Zonzia’s unique content distribution model and will be designed to deliver a seamless experience to our consumers across all devices.

 

By allowing each viewer in the household to set up an individual profile, Kaltura’s OTT software will deliver each viewer a personalized experience, which will increase Zonzia’s subscriber engagement. This will give us tremendous insight and understanding of our subscribers’ unique behavior allowing us to continually strengthen loyalty and maximize revenues.

 

Kaltura’s OTT software will provide a consistent cross-device experience which will allow our users to take their favorite Zonzia content wherever they go and intuitively interact between screens with TV control and synched second-screen metadata. The household “parent” account can decide which members of the household can access content on specific devices and can set VOD budgets per user.

 

Kaltura’s OTT software will give us the ability to boost viewer engagement, attract new subscribers and monetize content across multiple devices.

 

Content Development

 

In our hotel rooms and cable households we are currently distributing content which we licensed from our partner simplyME Distribution. Zonzia’s objective is to provide licensed content, original content and live content over all of our platforms. Under the direct supervision of our Officers we have made significant contacts within the industry and have had preliminary meetings with various entertainers, producers, and other content developers to provide a significant volume of video and other live streaming events pending the financial ability to acquire and develop our intended content library.

 

We recently signed an agreement with M Squared Entertainment to distribute its celebrity based show Behind The Velvet Rope across all of Zonzia’s platforms. Behind The Velvet Rope is currently being distributed through Zonzia’s hotel room and cable household distribution network. Behind The Velvet Rope, hosted by Arthur Kade, is the all-access entertainment destination which brings consumers up-close and personal with celebrities through red carpet and in-studio interviews. Each episode features prominent celebrities from the worlds of film, music, TV, fashion, sports, theater and publishing. Host Arthur Kade has interviewed some of the industry’s most revered and iconic names such as Meryl Streep, George Clooney and Leonardo DiCaprio.

 

Zonzia also recently signed an agreement with Ace Entertainment Inc. to distribute its jazz based series Studio Jams across all of Zonzia’s platforms. Studio Jams is an up-close and personal behind-the-scenes insider’s peek at the brilliant artistry encompassing the wondrous creation of jazz music. Each episode features a different group of esteemed jazz musicians gathered together in a recording studio to create new music, reminisce about old music and just have a great time. Many of these iconic artists are working together for the very first time. Studio Jams is also currently distributed worldwide on Voice of America, the official external radio and television broadcasting service of the U.S. federal government, reaching an estimated worldwide audience of 125 million people.

 

 

Critical Accounting Policies And Estimates

 

Embedded Conversion Features and Other Equity-linked Instruments

 

The Company classifies all of its common stock purchase warrants and options, embedded debt conversion features, and other derivative financial instruments as equity if the contracts (1) require physical settlement or net-share settlement or (2) give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any contracts that (1) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the Company), (2) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement), or (3) contracts that contain reset provisions. The Company assesses classification of its equity-linked instruments at each reporting date to determine whether a change in classification between equity and liabilities (assets) is required.

 

The Company accounts for variable conversion elements embedded in its convertible instruments that meet the definition of a derivative as liabilities. The variable conversion elements are re-measured at fair value with the changes in the value reported as a component of other income (expense) in the accompanying results of operations. The Company estimates the fair value of the variable conversion element using a Black-Scholes Merton Pricing model based on the variable number of additional shares of common stock the Company is required to issue upon conversion.

 

The derivative liabilities are measured at fair value using a Black Scholes Merton Pricing Model. The model is based on assumptions including quoted market prices and estimated volatility factors based on historical quoted market prices for the Company’s common stock, and are classified within Level 3 of the fair value hierarchy as established by US GAAP. Significant declines in the Company’s listed market exposes us to a requirement to issue significant numbers of shares of common stock that can be sold in the market which likely will result in further declines of the listed stock price and will likely have a detrimental impact on our ability to raise additional capital. Additionally, fluctuations in the volatility assumptions used in the Black Scholes model can result in material changes in the estimated fair value of our financial instruments.

 

There have not been any other material changes to the critical accounting policies and estimates previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2014.

 

Off- Balance Sheet Arrangements

 

None.

  

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

Not applicable for smaller reporting companies.

 

Item 4. Controls and Procedures.

 

A. Disclosure

 

Evaluation of Disclosure Controls and Procedures

 

As of the end of the period covered by this Quarterly Report on Form 10-Q, management performed, with the participation of our Principal Executive Officer and our Principal Accounting Officer, an evaluation of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (“Exchange Act”). Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Exchange Act and SEC’s rules, and that such information is accumulated and communicated to our management, including our Principal Executive, to allow timely decisions regarding required disclosures. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Our Principal Executive and Accounting Officer concluded that, as of September 30, 2015, our disclosure controls and procedures were not effective.

 

B. Internal Control over Financial Reporting

 

No change in our internal control over financial reporting, as such term is defined in Exchange Act Rule 13(a)-15 occurred during the fiscal quarter ended September 30, 2015, that materially affected or is reasonably likely to materially affect our internal control over financial reporting.

 

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

Congoo, LLC v. HDIMAX Max Media, Inc. Civ. Action No. 3:15-cv-01423

 

The Plaintiff’s in the case provide online advertising opportunities for a fee. The Plaintiff alleged the Company owes them in excess of $422,000 based on an agreement, dated prior to our merger, with an entity controlled by our former Chairman and Chief Executive Officer. The plaintiff alleges that the entity with the prior agreement merged into our Company and changed the name.

 

On April 24, 2015 the Plaintiff’s attorney notified the district court judge requesting our adjournment from participation in the complaint and that we may be entitled to a dismissal. We have provided an Amended Complaint to our former Chairman and Chief Executive Officer, who has accepted and service, and has until mid-December to respond.

 

From time to time, we are involved in lawsuits, claims, investigations and proceedings that arise in the ordinary course of business. There are no matters pending that we expect to have a material adverse impact on our business, results of operations, financial condition or cash flows.

 

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

 

In July 2015 we issued 150,000 shares of restricted and unregistered shares of common stock to a Director for services totaling $7,747.

 

In August 2015 we issued 50,000 shares of restricted and unregistered common stock for services valued at $3,364.

 

In September 2015 we issued 225,000 shares of restricted and unregistered common stock for services valued at $10,340.

 

In September 2015 we issued 31,058 shares of restricted and unregistered shares of common stock for interest on outstanding notes valued at $1,614.

 

In November 2015 we issued 191,327 shares of restricted and unregistered shares of common stock for cash proceeds totaling $15,000.

 

All other sales of unregistered equity securities were previously disclosed.

 

We relied upon Section 4(2) and/or Regulation D of the Securities Act of 1933, as amended, for the issuances of the securities listed above. Each prospective investor was given, the Company’s Form 10-K, Form 10-Q and Form 8-k’s previously filed with the SEC. These materials and filings included all material aspects of an investment in us, including the business, management, offering details, risk factors, consolidated financial statements and use of proceeds. It is the belief of management that each of the individuals who invested has such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the investment and therefore did not need the protections offered by registering their shares under Securities and Act of 1933, as amended. Each investor completed a Stock Purchase Agreement, a Consulting Agreement and/or Subscription Agreement whereby the investors certified that they were purchasing the shares for their own accounts, with investment intent. These offerings were not accompanied by general advertisement or general solicitation and the share certificates were issued with a Rule 144 restrictive legend.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosure.

 

Not applicable.

 

Item 5. Other Information.

 

None

 

 

 

Item 6. Exhibits.

 

(a)     The following documents are filed as part of this Report:

 

(2) Exhibits filed as part of this Report:

 

Exhibit Number		Description
10.1		Addendum to Distribution Channel Agreement with simplyME dated June 30, 2015 (1)
31		Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended.
32		Certification 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 Schema Document
101.CAL		XBRL Calculation Linkbase Document
101.DEF		XBRL Definition Linkbase Document
101.LAB		XBRL Label Linkbase Document
101.PRE		XBRL Presentation Linkbase Document

 

(1)	Incorporated by reference to the exhibit 10.1 to our Current Report on Form 8-K filed on July 7, 2015.

 

 

 

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.

 

	ZONZIA MEDIA, INC.
	(Registrant)
Date: November 23, 2015	By:	/s/ Johnathan Adair
		Name: Johnathan Adair
		Title: Principal Executive Officer
		/s/ Myles A. Pressey III
		Name: Myles A. Pressey III
		Title: Interim Principal Accounting Officer

 

 

 

Exhibit Index

 

Exhibit Number		Description
10.1		Addendum to Distribution Channel Agreement with simplyME dated June 30, 2015 (1)
31		Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended.
32		Certification 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 Schema Document
101.CAL		XBRL Calculation Linkbase Document
101.DEF		XBRL Definition Linkbase Document
101.LAB		XBRL Label Linkbase Document
101.PRE		XBRL Presentation Linkbase Document

 

(1)	Incorporated by reference to the exhibit 10.1 to our Current Report on Form 8-K filed on July 7, 2015.