UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

(Mark One)

[X]	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2015

OR

[  ]	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _______ to _______

 

Commission File Number: 000-54706

 

MV PORTFOLIOS, INC.

(Exact Name of Registrant as Specified in its Charter)

 

Nevada	83-0483725
(State of Incorporation)	(IRS Employer Identification No.)

 

2850 Isabella Boulevard

Suite 50

Jacksonville Beach, FL  32250

(Address of principal executive offices)

 

(904) 903-4504

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:  None

 

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.10 Par Value Per Share

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ ]   No [X]

 

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 ). Yes [ ]   No [X]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.   (Check one):

 

Large accelerated filer

[  ]

Accelerated filer

[  ]

Non-accelerated filer

[  ]

Smaller reporting company

[X]

 

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

 

 There were 84,230,628 (Post Reverse Stock Split) shares of common stock issued and outstanding as of March 31, 2017.

 

 

 

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MV PORTFOLIOS, INC.

Form 10-Q

For the Quarter ended March 31, 2015

 

Table of Contents

			Page
Part I - Financial Information
Item 1	Financial Statements		1
	Consolidated Balance Sheets (unaudited)		2
	Consolidated Statements of Operations (unaudited)		3
	Consolidated Statements of Cash Flows (unaudited)		4
	Notes to the Consolidated Financial Statements (unaudited)		5
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		20
Item 2	Unregistered Sale of Equity Securities and Use of Proceeds		20
Item 3	Defaults Upon Senior Securities		20
Item 4	Mine Safety Disclosures		20
Item 5	Other Information		20
Item 6	Exhibits		21
Signatures			22

 

 

 

 

 

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PART I

FINANCIAL INFORMATION

 

MV PORTFOLIOS, INC. AND SUBSIDIARIES

Table of Contents

 

Unaudited Consolidated Financial Statements:
Unaudited Consolidated Balance Sheets as of March 31, 2015 and June 30, 2014	2
Unaudited Consolidated Statements of Operations for the Three and Nine Months Ended March 31, 2015 and 2014	3
Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2015 and 2014	4
Notes to Unaudited Consolidated Financial Statements	5

 

 

 

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MV PORTFOLIOS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

 

	March 31, 2015		June 30, 2014
Assets
Current assets:
Cash	$ 2,154		$ 1,468,401
Prepaid expenses	-		280,880
Deferred financing costs	-		689,556
Total Current Assets	2,154		2,438,837
Assets held for sale – from discontinued operations	-		3,608
Total assets	$ 2,154		$ 2,442,445
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable and accrued expenses	$ 1,103,563		$ 640,364
Derivative liabilities	76,400		2,365,315
Convertible notes	-		3,959,995
Total current liabilities	1,179,963		6,965,674
Convertible notes, net of unamortized discounts of $0 and $211,543	-		113,457
Total liabilities	1,179,963		7,079,131
Stockholders' deficit:
Convertible preferred stock, Series A, par value $0.001 per share; 50,000,000 shares authorized; 8,000,000 shares issued and outstanding	8,000		8,000
Convertible preferred stock, Series B, par value $0.001 per share;
3,592,238 shares authorized; 749,740 shares and no shares issued
and outstanding	750		-
Convertible preferred stock, Series C, par value $0.001 per share;
50,000,000 shares authorized; 4,032,977 and no shares issued and
outstanding	4,033		-
Convertible preferred stock, Series D, par value $0.001 per share;
50,000,000 shares authorized; 20,000 and no shares issued and
outstanding	20		-
Common stock, par value $0.001 per share; 300,000,000 shares
authorized; 24,872,211 and 11,026,013 shares issued and
outstanding	24,872		11,026
Additional paid-in capital	19,953,892		(76,214)
Accumulated deficit	(21,167,315)		(4,579,498)
Total stockholders' deficit attributable to MV Portfolios, Inc.	(1,175,748)		(4,636,686)
Total stockholders’ equity attributable to noncontrolling interest	(2,061)		-
Total Stockholders’ deficit	(1,177,809)		(4,636,686)
Total liabilities and stockholders' deficit	$ 2,154		$ 2,442,445
See accompanying notes to the unaudited consolidated financial statements.

 

 

 

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MV PORTFOLIOS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

	Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended
	March 31, 2015		March 31, 2014		March 31, 2015		March 31, 2014
Operating expenses:
General and administrative	$ 1,901,234		$ 356,412		$ 14,243,752		$ 589,174
Acquisition related costs	-		1,472,706		-		1,472,706
Loss from operations	1,901,234		1,829,118		14,243,752		2,061,880
Other income (expenses):
	-		33		-		33
Interest expense	-		(404,994)		(4,629,943)		(413,335)
Gain on change in fair value of derivative liabilities	151,675		(2,380,540)		2,288,915		(2,380,540)
Total other income (expenses), net	151,675		(2,785,501)		(2,341,028)		(2,793,842)
Loss from continuing operations	(1,749,559)		(4,614,619)		(16,584,780)		(4,855,722)
Loss from discontinued operations	-		(212,479)		(3,608)		(212,479)
Net loss	$ (1,749,559)		$ (4,827,098)		$ (16,588,388)		$ (5,068,201)
Net loss attributable to non controlling interest	(571)		-		(571)		-
Net loss attributable to MV Portfolios, Inc.	$ (1,748,988)		$ (4,827,098)		$ (16,587,817)		$ (5,068,201)
Basic and diluted net loss per share:
Loss from continuing operations per share	$ (0.07)		$ (0.42)		$ (0.84)		$ (0.44)
Loss from discontinued operations per share	(0.00)		(0.02)		(0.00)		(0.02)
Net loss per share	$ (0.07)		$ (0.44)		$ (0.84)		$ (0.46)
Weighted average number of common shares outstanding
- basic and diluted	24,554,530		10,918,321		19,655,124		10,918,321
See accompanying notes to the unaudited consolidated financial statements.

 

 

 

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MV PORTFOLIOS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	MV Portfolios, Inc. and Subsidiaries		MV Patents, LLC
	Nine Months Ended		Nine Months Ended
	March 31, 2015		March 31, 2014
Cash flows from operating activities:
Net loss	$(16,588,388)		$(5,068,201)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation	441		294
Impairment of mining rights	450,000		-
Loss on disposal of assets held for sale	3,167		-
Amortization of debt discounts and deferred financing costs	4,561,099		347,068
Gain on change in fair value of derivative liabilities	(2,288,915)		2,380,540
Options expense	6,680,570		-
Stock based compensation	4,062,000		-
Warrants issued for services	305,837		-
Loss on common stock issued for liabilities	229,850		-
Loss on Series B preferred stock issued for liabilities	220,470		-
Settlement of legal fees through the issuance of convertible notes	-		25,000
Change in operating assets and liabilities:
Prepaid expenses	280,880		12,278
Accounts payable and accrued expenses	876,742		248,751
Net cash used in operating activities	(1,206,247)		(2,054,270)
Cash flows from investing activities:
Cash received in reverse merger	-		209,392
Net cash used in operating activities	-		209,392
Cash flows from financing activities:
Contribution by non controlling interest	40,000		-
Repayment of convertible notes	(300,000)		-
Stockholder contributions	-		2,757
Cash paid for debt issuance costs	-		(295,150)
Proceeds from issuing convertible notes	-		3,934,995
Proceeds from demand note	-		50,000
Proceeds from participation notes	-		20,000
Net cash (used) provided by financing activities	(260,000)		3,712,602
Net (decrease) increase in cash	(1,466,247)		1,867,724
Cash, beginning of period	1,468,401		2,523
Cash, end of period	$2,154		$1,870,247
Supplemental disclosures of cash flow information:
Interest paid	$15,000		$-
Income taxes paid	-		-
Non-cash investing and financing activities:
Conversion of convertible notes to Series C preferred stock	$3,660,000		$-
Beneficial conversion feature	3,660,000		-
Common stock issued to related party for mining rights	450,000		-
Common stock issued for exchange of warrants	4,000		-
Conversion of Series C preferred stock to common stock	3,684		-
Common stock issued for liabilities	339,009		-
Conversion of convertible notes to Series B	325,000		-
Series B preferred stock issued for liabilities	300,000		-
Conversion of accrued interest to Series C preferred stock	198,578		-
Conversion of Series B preferred stock to common stock	2,843		-
Conversion of accrued interest to Series B preferred stock	26,271		-
See accompanying notes to the unaudited consolidated financial statements.

 

 

 

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MV PORTFOLIOS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

1. Intrim Financial Statements 

 

The unaudited consolidated financial statements of MV Portfolios, Inc. and Subsidiaries (collectively the “Company”) as of March 31, 2015 and for the nine month periods ended March 31, 2015 and 2014 have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading.

 

The consolidated balance sheet of the Company at June 30, 2014 has been derived from the audited financial statements at that date, but does not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. All adjustments that, in the opinion of management, are necessary for a fair presentation for the periods presented have been reflected as required by the SEC. Such adjustments are of a normal, recurring nature. It is suggested that these unaudited consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended June 30, 2014. The results of operations for interim periods are not necessarily indicative of the operating results to be expected for the full year or any other interim period.

 

2. General Organization and Business 

 

MV Portfolios, Inc. and subsidiaries (collectively the “Company”) is a Nevada corporation. The Company was an exploration stage mining company with a focus on the identification, acquisition and development of rare and precious metals mining properties in the Americas. On February 7, 2014, the Company entered into a securities exchange agreement (the “Securities Exchange”) with MVP Portfolio, LLC (“MVP Portfolio”), a Florida limited liability company, MV Patents, LLC (“MV Patents”), a Florida limited liability company and majority member of MVP Portfolio, and other members of MVP Portfolio (all such members collectively, the “Members”). Pursuant to the Securities Exchange, the Members sold all of their membership interests in MVP Portfolio to the Company in exchange for an aggregate of 9,385,000 shares of common stock, $0.10 par value per share, after taking into account the 1 for 100 reverse stock split (the “Reverse Split”) of the Company’s issued and outstanding common stock. Following the Securities Exchange, the Company assumed the additional line of business of MVP Portfolio.

 

The Securities Exchange was consummated in anticipation of a 1 for 100 Reverse Split. As the share exchange was dependent upon the Reverse Split, all share and per share amounts herein have been retroactively restated to reflect the 1 for 100 Reverse Split as if it has been effected during all periods presented.

 

MV Patents, formed on July 11, 2011 has limited operations. MVP Portfolio was formed on July 26, 2013 as a wholly owned subsidiary of MV Patents. On August 30, 2013, MV Patents transferred a portion of its patents without recourse to MVP Portfolio. Pursuant to the Securities Exchange on February 7, 2014, MVP Portfolio ceased to be a subsidiary of MV Patents and became a wholly owned subsidiary of the Company. MV Patents is deemed to be the predecessor entity to MVP Portfolio.

 

On March 6, 2014, MVP Portfolios changed its form of organization to a Florida corporation from a Florida limited liability company, and changed its name to Visual Real Estate, Inc. (“VRE”). VRE has historically maintained a June 30 fiscal year, through MV Patents, the predecessor business to MVP Portfolio.

 

As of June 30, 2015 VRE has not commenced its planned principal operations, the business of patent licensing and assertion of rights under patents against parties believed to be selling goods or services that rely upon VRE’s patented technology. VRE owns a patent portfolio it refers to as “Video Drive-by” and online mapping, which has previously been used by its predecessors and licensees commercially. VRE currently owns a patent portfolio consisting of eight (8) issued and sixteen (16) pending patents. The patents disclose systems and methods for providing video drive-by data to enable a street level view of a neighborhood surrounding a geographic location. The systems include, generally, a video and data server

 

 

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farm incorporating at least one (1) video storage server that stores video image files containing video drive-by data corresponding to a geographic location, a data base server that processes a data query received from a user over the internet and an image processing server. VRE’s activities since inception have consisted principally of acquiring additional technology patents and raising capital.

 

Subsequent to the Securities Exchange, the Company changed its fiscal year end to June 30, which is VRE’s year end.

 

On November 20, 2014, the Company formed a wholly owned subsidiary, Flexine, Inc., which will explore productization potential from a patent from Harvard University for a novel material that may be used to create a unique variable focus lens for SmartPhone cameras.

 

On November 20, 2014, the Company formed a wholly owned subsidiary, ResoCator, Inc.(which name was changed to LocatorX, Inc. in March 2016), which will explore productization potential from a patent from the University of Oxford for a Miniature Atomic Clock (“MAC”).  MV Portfolios, Inc. has signed an option agreement for US Patent 82217724 with ISIS Innovations (University of Oxford’s patent licensing company).

 

3.

Going Concern

 

The Company is engaged in limited operations. The Company primary activities are carried out through its subsidiaries ResoCator, Inc., Flexine, Inc. and Visual Real Estate, Inc. The ongoing business plan of the Company is to assert its intellectual property rights to monetize its patents through net recoveries. Net recoveries relate to monetary payments received by the Company in respect to its patents through judgments, settlements, royalty agreements, or other disposition of the patents or cash proceeds of any equity actually received as consideration for any such disposition, including those received in connection with litigation.

 

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. As shown in the accompanying consolidated financial statements, the Company has incurred losses for all periods presented, as the ongoing business has not yet commenced. The Company has not established an ongoing source of revenues and has funded activities to date primarily from convertible notes and common stock offerings. In addition, the Company had a working capital deficit as of March 31, 2015. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

 

The Company is subject to a number of risks including, but not limited to, the need to obtain adequate funding and possible risk of failure to monetize its patents. If the Company does not successfully monetize its patents, it will be unable to generate revenues or achieve profitability.

 

Management’s plan with respect to funding the ongoing operations is to secure equity financing through access to U.S. capital markets as a registrant of the U.S. Securities and Exchange Commission.

 

While the Company believes, it will be successful in obtaining the necessary financing to (i) fund its operations, (ii) monetize its patents and meet revenue projections and (iii) manage costs, it does not currently have any financing plans in place and there are no assurances that such additional funding will be achieved and that it will succeed in its future operations. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts of liabilities that might be necessary should the Company be unable to continue as a going concern. Operating results for the nine-month period ended March 31, 2015 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2015.

 

4. Discontinued Operations 

 

Pursuant to the Securities Exchange, the pre-existing mining business was discontinued.

 

On April 28, 2014 the Company notified Mexivada Mining Corp. and Compania Minera Mexivada S.A de C.V., of termination of the Mexivada Property Option Agreement dated as of February 11, 2011, as

 

 

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amended October 24, 2011, and that the Company would not pay any further fees or expenses associated with the Agreement. The remaining interests were sold on July 24, 2014.

 

The following table presents summarized operating results for these discontinued operations. The table below does not present MV Patents because the historical financial information represents the activity of MV Patents as the predecessor business to VRE, and does not include any of the operations of the discontinued exploration stage mining business. The historical financial information for MV Patents for the nine months ended March 31, 2014 is included in the accompanying consolidated financial statements.

 

	Nine Months Ended March 31, 2015
Loss from discontinued operations	$3,608

 

Components of assets from discontinued operations consist of the following as of March 31, 2015 and June 30, 2014.

 

	March 31, 2015		June 30, 2014
Current assets:
Property and equipment	$ -		$ 8,809
Less: accumulated depreciation	-		(5,201)
Total assets held for sale	$ -		$ 3,608

 

5. Related Party Transactions 

 

Officer and director fees totaled $322,500 and $335,060 for the nine month periods ended March 31, 2015 and 2014, respectively. The total compensation of officers and directors was recorded as a component of general and administrative expenses.

 

In September 2014 the Company granted 5,140,339 common stock options to its officers (see Note 10). The total fair value of the award was estimated to be $9,605,675. Share-based compensation expense is recognized ratably over the vesting periods. For the nine month period ended March 31, 2015, the Company recognized share-based compensation expense as a component of general and administrative expenses of $6,676,385

 

As of March 31, 2015, and June 30, 2014 the Company owed its officers and directors $117,917 and $17,917 respectively for compensation which was recorded as accounts payable and accrued liabilities in its consolidated balance sheets.

 

In August 2014, the Company issued 300,000 shares of common stock for certain unpatented mining claims valued at $450,000 on the date of the acquisition. The mining claims were owned by a company whose sole owner is an officer and Director of the Company. In addition, the Company determined that $450,000 was impaired and an expense was recognized in the nine months ended March 31, 2015.

 

6. Derivative Liabilities 

 

As of March 31, 2015 and June 30, 2014, there were 2,965,705 and 2,820,778 outstanding derivative warrants, respectively, with 1,475,043 and 1,410,389 common shares issuable upon exercise, respectively. The warrants qualify as derivative liabilities due to the existence of reset provisions which cause the instruments to no longer be indexed to the Company’s own stock under FASB ASC 815.

 

The Company estimated the fair value of the outstanding derivative warrants using a probability-weighted scenario analysis model. As of March 31, 2015 and June 30, 2014, the fair value of the derivative warrants was determined to be $76,400 and $2,365,315, respectively resulting in a gain on the change in the fair value of derivative liabilities of $2,289,315 for the nine month period ended March 31, 2015.

 

The following is a summary of the key assumptions used in the probability-weighted scenario analysis model to estimate the fair value of the warrants as of March 31, 2015 and June 30, 2014:

 

 

 

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	March 31, 2015		June 30, 2014
Common stock issuable upon exercise of warrants	1,475,043		1,410,389
Exercise price	$1.062 and $1.349		$0.90 and $1.10
Market price of the Company’s common stock	$0.16		$1.75
Risk free interest rate	0.46%		0.47%
Dividend yield	0.00%		0.00%
Volatility	213.31%		278.08%
Expected term	0.73-1.29 years		1.48-2.04 years

 

See Note 7 for fair value hierarchy of the derivative liabilities.

 

7. Fair Value Measurements 

 

As defined in FASB ASC Topic 820, fair value is the price that would 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. This Topic requires disclosure that establishes a framework for measuring fair value and expands disclosure about fair value measurements. The statement requires fair value measurements be classified and disclosed in one of the following categories:

 

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. The Company considers active markets as those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

 

Level 2: Pricing inputs other than quoted market prices included in Level 1 that are based on observable market data and are directly or indirectly observable for substantially the full term of the asset or liability. These include quoted market prices for similar assets or liabilities, quoted market prices for identical or similar assets in markets that are not active, adjusted quoted market prices, inputs from observable data such as interest rate and yield curves, volatilities or default rates observable at commonly quoted intervals or inputs derived from observable market data by correlation or other means.

 

Level 3: Pricing inputs that are unobservable or less observable from objective sources. Unobservable inputs should only be used to the extent observable inputs are not available. These inputs maintain the concept of an exit price from the perspective of a market participant and should reflect assumptions of other market participants. An entity should consider all market participant assumptions that are available without unreasonable cost and effort. These are given the lowest priority and are generally used in internally developed methodologies to generate management's best estimate of the fair value when no observable market data is available.

 

Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement.

 

The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.

Certain assets and liabilities are reported at fair value on a recurring or non-recurring basis in the Company’s consolidated balance sheets. The following methods and assumptions were used to estimate the fair values:

 

Cash, Prepaid expenses, Accounts payable, Accrued liabilities

 

The carrying amounts approximate fair value because of the short-term nature or maturity of the instruments.

 

Derivative liabilities

 

The Company’s determination of fair value of its derivative instruments incorporates various factors required under FASB Topic ASC 815. See Note 6 for the fair value calculations. The fair values of the Company’s derivatives are valued using less observable data from objective sources as inputs into internal valuation models. Therefore, the Company considers the fair value of its derivatives to be Level 3 hierarchy.

 

The following table sets forth the fair value hierarchy within our financial assets and liabilities by level that they were accounted for at fair value on a recurring basis as of March 31, 2015 and June 30, 2014:

 

 

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		Fair Value Measurement at March 31, 2015
		Level 1		Level 2		Level 3
Liabilities:
Warrant derivative liabilities		-		-		76,400
		Fair Value Measurement at June 30, 2014
		Level 1		Level 2		Level 3
Liabilities:
Warrant derivative liabilities		-		-		2,365,315

 

The following table sets forth the changes in the fair value of derivative liabilities for the nine month period ended March 31, 2015:

 

Balance, June 30, 2014	$2,365,315
Change in fair value of derivative liabilities	(2,288,915)
Balance, March 31, 2015	$76,400

 

8. Convertible Notes 

 

On September 2, 2014, the Company converted $351,271 of convertible notes, including accrued interest of $26,271, into 3,512,710 shares of the Company’s Series B convertible preferred stock, par value $0.001 (the “Series B Preferred Stock”), at a post-Reverse Split conversion price of $0.10 and subject to a 9.99% conversion blocker. Each share of Series B Preferred Stock will participate in dividends and other distributions on an equivalent basis with common stock. Holders of Series B Preferred Stock shall vote together with the holders of common stock as a single class, and each holder of outstanding shares of Series B Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of common stock into which the shares of Series B Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on a particular matter.

 

On August 26, 2014, the Company converted $3,858,578 of convertible notes, including accrued interest of $198,578 into 7,717,170 shares of the Company’s Series C convertible preferred stock, par value $0.001 (the “Series C Preferred Stock”), at a post-Reverse Split conversion price of $0.50 and subject to a 9.99% conversion blocker. Each share of Series C Preferred Stock will be entitled to a liquidation preference equal to $0.001 per share. Otherwise, the Series C Preferred Stock will be equivalent in all respects to the Common Stock, with each share of Series C Preferred stock entitled to one vote and the holders of the Series C Preferred Stock voting together with the holders of the Common Stock. The Series C Preferred Stock is convertible into common stock at a ratio of 1 to 1.

 

Pursuant to the conversion of convertible notes into Series C Preferred Stock, the Company incurred interest expense of $3,660,000 related to a beneficial conversion feature that existed within the underlying transactions.

 

During the nine month period ended March 31, 2015, additional amortization expense of $211,543 was recognized associated with the debt discounts and deferred financing costs, respectively, related to the notes originally issued in November 2013, February 2014 and March 2014. The discounts and deferred financing costs associated with these notes were completely amortized at December 31, 2014. In addition, $300,000 of convertible note was paid off in cash.

 

9. Stockholders’ Equity 

 

In August 2014, the Company issued 1,000,000 common shares to an unrelated party in exchange for financial advisory and investment banking services valued at $2,000,000. Additionally, 600,000 shares were issued for services with a fair value of $826,000. The expense was recognized in full during the nine months ended March 31, 2015.

 

In August 2014, the Company issued 300,000 shares of common stock for certain unpatented mining claims valued at $450,000 on the date of the acquisition. The mining claims were owned by a company whose sole owner is a related party.

 

 

 

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In September 2014, the Company issued 79,530 shares of Series B Preferred Stock as settlement of an outstanding payable of $79,530 for legal fees owed to an unrelated party. The fair value of the shares was determined to be $300,000 resulting in an additional expense of $220,470 recognized during the nine months ended March 31, 2015. All shares of Series B Preferred Stock is convertible into common stock at a ratio of 1 to 1.

 

In September 2014, the Company issued an aggregate of 169,505 common shares to two unrelated parties as settlement of outstanding payables of $109,159 owed for professional services. The fair value of the shares was determined to be $339,009 resulting in an additional expense of $229,850 recognized during the nine months ended December, 31, 2014.

 

In September 2014, the Company issued 20,000 shares of Series D convertible preferred stock (the “Series D Preferred Stock”), to officers and Directors for compensation valued at $40,000, which was expensed during the nine months ending March 31, 2015. The Series D Preferred Stock will be equivalent in all respects to the Company’s common stock, except that each share of Series D Preferred Stock will be entitled to cast 1,000 votes per share and contain liquidation preference. All shares of Series D Convertible Preferred Stock is convertible into common stock at a ratio of 1 to 1.

 

In October 2014, the Company issued a total of 1,250,000 common shares and warrants to purchase 900,000 common shares to a third party for consulting services valued at 1,501,837. There are 3 tranches of warrants, each comprising of warrants to purchase 300,000 shares, at exercise prices of $0.50, $1,00 and $2.00 per share. The warrants are exercisable immediately and expire on October 27, 2019.

 

During the nine months ended March 31, 2015, the Company issued 2,842,500 common shares upon the conversion of 2,842,500 shares of Series B preferred stock.

 

In October 2014, the Company issued an aggregate of 3,684,193 common shares upon the conversion of 3,684,193 shares of Series C preferred stock.

 

As a result of the effectuation of the Reverse Split on September 8, 2014, the Company issued 4,000,000 common shares under an exchange agreement for warrants originally issued in November 2013.

 

From February through March 2015, the Company’s wholly owned subsidiary LocatorX, Inc. issued 40,000 shares for proceeds of $40,000. The issuance of the subsidiary shares resulted in an adjustment to noncontrolling interest of $1,490.

 

Outstanding shares of Series A convertible preferred stock are convertible into common shares at a ratio of 100 to 1.

 

10. Stock Options and Warrants 

 

Options

 

On February 7, 2014, the Company’s Board of Directors voted to terminate the 2007 Stock Option Plan and adopted the 2014 Equity Incentive Plan (the “2014 Plan”), which provides for the issuance of incentive awards of up to 6,150,564 shares of the Company’s Common Stock to officers, key employees, consultants and directors. The options’ exercise price will be no less than the closing price of the Company’s shares on the day of issuance. When incentive stock options are granted to an employee who, at the time the incentive stock option is granted, owns stock representing more than 10% of the voting power of all classes of stock of the Company, the per share exercise price will be no less than 110% of the closing price of the Company’s shares on the day of issuance.

 

On February 7, 2014, the Company granted an aggregate of 4,690,339 common stock options to certain officers and advisors of the Company. The stock options were granted upon the effectuation of the Reverse Split on September 8, 2014. The options are exercisable at $0.50 per share and expire on February 7, 2024. 3,690,339 of the option vest in twelve quarterly installments beginning February 7, 2014 and 1,000,000 of the options vest in twelve monthly installments beginning February 7, 2014. The total fair value of the award was estimated to be $9,380,675.

 

 

 

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On October 21, 2014, the Company granted an aggregate of 450,000 common stock options to certain officers and advisors of the Company. The options are exercisable at $0.50 per share and expire on October 21, 2024. The options vest in four annual installments beginning October 21, 2014.

 

The estimated fair value of each option award granted was determined on the date of effectiveness of the grant using the Black-Scholes option valuation model. The following weighted-average assumptions were used for the options granted during the nine months ended March 31, 2015:

 

		31-Mar-15
Risk free interest rate		1.44% - 2.48%
Expected stock price volatility		312.48% - 321.74%
Dividend yield		0.00%
Expected option term		2.5 - 5.9 years

 

A summary of the status of the Company’s stock option plan as of March 31, 2015 and changes during the nine months ended March 31, 2015 is as follows:

 

		Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Term (Years)		Total Intrinsic Value
Outstanding as of June 30, 2014		-		$-
Granted		5,140,339		0.500
Forfeited		-		-
/Outstanding as of December 31, 2014		5,140,339		$0.500		8.675		$-
Options vested and exercisable		2,066,808		$0.500		8.652		$-

 

LocatorX Options

 

From January through March 2015, LocatorX granted an aggregate of 250,000 common stock options to certain consultants of the Company. The options are exercisable at $0.10 per share and expire on December 31, 2020. The options vest in twelve quarterly installments.

 

The fair value of as of March 31, 2015 is $13,213 and the expense recognized for the nine months ended is $4,185.

 

The estimated fair value of each option award granted was determined on the date of effectiveness of the grant using the Black-Scholes option valuation model. The following weighted-average assumptions were used for the options granted during the year ended June 30, 2015:

 

	2015
Risk-free interest rate	1.07%
Expected volatility	73.58%
Dividend yield	0.00%
Expected option term	3.0-4.4 years

 

A summary of the status of LocatorX’s stock options as of March 31, 2015 is as follows:

 

		Options		Weighted Average Exercise Price		Weighted Average Remaining Term (Years)		Aggregate Intrinsic Value
Outstanding at December 31, 2014		-		$ -
Granted		250,000		0.100
Outstanding at March 31, 2015		250,000		0.100		5.76		$ -

 

 

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Exercisable at March 31, 2015

20,833

$ 0.100

5.76

$ -

 

Warrants

 

The following table presents the warrant activity during the nine month period ended March 31, 2015 presented on a post 1 for 100 Reverse Split basis:

 

		Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Term (Years)		Total Intrinsic Value
Outstanding as of June 30, 2014		1,995,600		$0.894		1.879		$1,860,154
Reset adjustments		69,743		1.352
Granted		900,000		1.167
Outstanding as of March 31, 2015		2,965,343		$1.110		2.169		$-
Options vested and exercisable		2,965,343		$1.110		2.169		$-

 

11. Retirement Plan 

 

Effective January 1, 2014, the Company adopted a qualified 401(k) deferred compensation plan, with deferrals beginning in June 2014. All employees who are eighteen years or older and have worked for at least three consecutive months are eligible to participate in the plan. The plan provides for mandatory safe-harbor matching contributions and discretionary non-elective contributions as determined by management. The Company did not elect to make any contributions for the nine month period ended March 31, 2015.

 

12. Commitments and Contingencies 

 

Concentration of Credit Risk

 

The Company maintains its cash in a restricted escrow account in an institution insured by the Federal Deposit Insurance Corporation and, at times, balances may exceed government insured limits. The Company has never experienced any losses related to these balances.

 

Employment Agreements

 

The Company has employment agreements with two employees and a separate consulting agreement with one of the Company’s executive officers. The aggregate future commitment under these agreements is as follows:

 

2015	$322,000
2016	430,000
2017	44,767
	$797,767

 

These agreements provide for additional bonus payments that are calculated as defined.

 

Other

 

The Company is involved in various legal proceedings and litigation arising in the ordinary course of business. In the opinion of management and legal counsel, the outcome of such proceedings and litigation will not have a material adverse effect on the Company's consolidated financial statements.

 

On November 16, 2015 SiberLaw LLP filed for a default judgement against Visual Real Estate, Inc. for a liquidated amount of $146,736.43. The Duval county Florida court ruled in SiberLaw's favor, and the amount recorded as a liability on the balance sheet. SiberLaw registered a lien at the US Patent Trademark Office for all patents owned by the Company's  subsidiary Visual Real Estate Inc. These patents relate to Video Drive By family of patents including US Patents 7389181, 7929800, 8078396, 8090633, 8207964, 8213743, 8558848, 8554015.

 

 

 

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Pursuant to the Securities Exchange the Company agreed to pay the members of MV Patents ten (10%) percent of the net proceeds to be received from any enforcement activities or sales transactions related to the patents owned or applications pending as of the closing of the Securities Exchange.

 

Outstanding shares of common stock includes 150,000 shares that contain nonstandard anti-dilution provisions which reset with future issuances of common stock if the Company issues any common stock, or securities convertible into or exercisable for shares of common stock, at a price per share or conversion or exercise price per share less than $2.00. These anti-dilution rights mature on March 31, 2015.

 

13. Subsequent Events 

 

During the period from February to June 2015, the subsidiary LocatorX issued 90,000 shares in exchange for $110,000 cash.

 

During the period from April 2015 to June 2016, the subsidiary LocatorX issued 4,090,000 options, with exercise price from $0.10/share to $0.20/share, and vesting term from 12 equal installments over 3 years, 8 equal installments over 3 years, to 1 installment over 1 quarter.

 

In July 2015, the Company borrowed $5,000 from their officer. The note is due on demand, and bears no interest.

 

During the period from July 2015 to April 2016, the subsidiary LocatorX issued 240,962 shares in exchange for $481,924 cash.

During the period from September to November 2015, the Company issued 10,500,000 common shares for a total cash consideration of $420,000 and 5,250,000 warrants to purchase up to an additional 2,625,000 common shares at $0.06 per share through a private placement of securities.

 

During the period from September to November 2015, the Company issued 9,500,000 common shares for a total fair value of $485,000 to settle $380,000 liabilities, and recognized a loss of $105,000. In addition, the Company issued 4,750,000 warrants to purchase up to an additional 2,375,000 common shares at $0.06 per share

 

In May 2016, the Company issued a convertible note for $25,000. Along with the debt offering, the Company also issued 1,666,667 warrants. The warrants were exercisable immediately with an exercise price of $0.06 per share and has an expiration date of May 26, 2021.

 

In June 2016, the Company issued 105,611 common shares upon the conversion of 105,611 shares of Series C preferred stock. In October, 2016, the Company issued 52,806 common shares upon the conversion of 52,806 shares of Series C preferred stock.

 

On September 1, 2016, the Company formed a wholly owned subsidiary, Rabbit Drones, Inc. (which name was changed to 1^st Rescue, Inc. in January 2017), wich will explore the productization potential for a Miniature Atomic Clock (“MAC”) with a focus on medical equipment.

 

In the period from November to March 2016, the Company issued 15,475,000 common shares for a consideration of $309,500 and 15,475,000 warrants to purchase up to an additional 7,737,500 common shares with an exercise price of $0.06/share through a private placement of securities. In addition, 11,225,000 additional common shares are to be deferred and issued at a later date. In total 26,700,000 were sold for cash. In connection with this private placement of securities, the Company agreed to become current with the reporting obligations under Section 12(g) of the Exchange Act and file all reports due thereunder.

 

In January 2017, the subsidiary LocatorX entered into royalty fee agreement that replaced the prior royalty fee agreement. The royalty fee agreement has a variable royalty fee based on the annual earned royalty ranging from 10.0% to 5.0%, with a minimum annual royalty fee of $60,000, and options to purchase 2,000,000 shares at an exercise price of $1.20/share.

 

 

 

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In January 2017, the Company entered into employment agreements with the Chief Executive Officer and Chief Financial Officer. In connection with the employment agreements, options to purchase up to 10,000,000 common shares at $0.06 per share were issued.

 

In March 2017, the Subsidiary LocatorX issued 580,000 options with exercise price of $0.4/share to $1.2/share, and vesting term from fully vested immediately to 8 installments over 2 years.

In March 2017, the Company issued 4,400,000 common shares through a private placement of securities for a total consideration of $88,000, and issued warrants to purchase up to an additional 2,200,000 shares at $0.06 per share.

 

In March 2017, the Company issued 5,600,000 common shares to its officer to settle accrued salary for the amount of $112,000.

 

In March 2017, the Company issued 2,500,000 common shares to a third party for consulting services valued at $50,000.

 

In March 2017, the Company issued 85,000 Series E shares with 1000 to 1 voting rights pursuant to the November 2016 private placement of securities.

 

 

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Statement of Forward-Looking Information

 

This Report on Form 10-Q and other written and oral statements made from time to time by us may contain so-called “forward-looking statements,” all of which are subject to risks and uncertainties.  Forward-looking statements can be identified by the use of words such as “expects,” “plans,” “will,” “forecasts,” “projects,” “intends,” “estimates,” and other words of similar meaning.  One can identify them by the fact that they do not relate strictly to historical or current facts.  These statements are likely to address our growth strategy, financial results and product and development programs.  One must carefully consider any such statement and should understand that many factors could cause actual results to differ from our forward looking statements.  These factors may include inaccurate assumptions and a broad variety of other risks and uncertainties, including some that are known and some that are not.  No forward looking statement can be guaranteed and actual future results may vary materially.

 

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

 

Overview

 

MV Portfolios, Inc. (“we” or the “Company”) historically has been an exploration stage mining company with a focus on the identification, acquisition and development of rare and precious metals mining properties in the Americas.  On February 7, 2014, the Company entered into a securities exchange agreement (the “Securities Exchange”) with MVP Portfolio, LLC, a Florida limited liability company (“MVP Portfolio”), MV Patents, LLC, a Florida limited liability company (“MV Patents”), and the majority member of MVP Portfolio and other members of MVP Portfolio (all such members collectively, the “Members”). Pursuant to the Securities Exchange, the Members sold all of their membership interests in MVP Portfolio to the Company in exchange for an aggregate of 9,385,000 shares of common stock, $0.001 par value per share, taking into account the anticipated reverse stock split of our issued and outstanding common stock on a one for one hundred basis (the “Reverse Stock Split”).  Following the Securities Exchange, we assumed the additional line of business of MVP Portfolio as more fully described in our Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on February 10, 2014.

 

The Securities Exchange was consummated in anticipation of the Reverse Stock Split, which was effectuated on September 12, 2014; all share and per share amounts herein reflect the 1 for 100 Reverse Stock Split.

 

On March 6, 2014, MVP Portfolio changed its form of organization to a Florida corporation from a Florida limited liability company, and changed its name to Visual Real Estate, Inc. (“VRE”).  VRE has historically maintained a June 30 fiscal year which has been adopted as the fiscal year for the Company.

 

VRE is a development-stage company engaged in the business of patent licensing and assertion of rights under patents against parties believed to be selling goods or services that rely upon VRE’s patented technology. VRE owns a patent portfolio it refers to as “Video Drive-by” and online mapping, which has been used commercially. VRE currently owns a patent portfolio consisting of eight issued and sixteen pending patents. The patents disclose systems and methods for providing video drive-by data to enable a street level view of a neighborhood surrounding a geographic location. The systems include, generally, a video and data server farm incorporating at least one video storage server that stores video image files containing video drive-by data corresponding to a geographic location, a data base server that processes a data query received from a user over the internet and an image processing server.

 

On March 17, 2014, VRE filed a patent infringement lawsuit against Google Inc. in the United States District Court for the Middle District of Florida. The lawsuit claims infringement of three of VRE’s patents.  On August 20, 2014, Google, Inc. filed four petitions for InterParties Review (“IPR”) before the Patent Trial and Appeal Board (“PTAB”) challenging our patent infringement claims.  On January 25, 2016, the PTAB issued a final written decision on the IPR which was not favorable to the Company.  The ruling, indicating that the claims were too broad, invalidated our most valuable claims.  Therefore, we have dropped the law suit.  We are in the process of determining if we want to pursue a second lawsuit with a tighter claim that speaks to the value of the additional damages that relate to having the very simple innovation that we brought to market of typing in an address and identifying a specific parcel location and picture of a property.

 

On November 20, 2014, the Company formed a wholly owned subsidiary, Flexine, Inc., which will explore productization potential from a patent from Harvard University for a novel material that may be used to create a unique variable focus lens for SmartPhone cameras.

 

 

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On November 20, 2014, the Company formed a wholly owned subsidiary, ResoCator, Inc.(which name was changed to LocatorX, Inc. in March 2016), which will explore productization potential from a patent from the University of Oxford for a Miniature Atomic Clock (“MAC”).  MV Portfolios, Inc. has signed an option agreement for US Patent 82217724 with ISIS Innovations (University of Oxford’s patent licensing company).  We have non-binding interest and nondisclosure agreements in place with several companies that recognize the potential of the MAC devices that we believe we will be capable of being created assuming, among other items, that we have sufficient funding, for which we have no commitments. The Company completed the license agreement funding on October 1, 2015. The terms of the agreement allow for LocatorX, Inc. to license the patent to all markets and all locations and receive a royalty fee of 2% on sales and minimum payments starting in two years for the life of the patent which ends in 2032.

On March 9, 2016, LocatorX, Inc. moved its business operations to Florida and became domesticated as a Florida corporation.  ResoCator, Inc. thereafter ceased its business operations in Nevada and dissolved its corporate existence in Nevada.  In connection with the domestication in Florida, the LocatorX, Inc. amended and restated its Bylaws, as well as authorized a stock split.  The Board and Shareholders authorized and approved the Company to perform a stock split whereby each shareholder would receive 10 shares of common stock for each share of common stock currently owned by each such shareholder (the “Stock Split”).  In March, 2016, the Company changed its name from ResoCator, Inc. to “LocatorX, Inc.” by filing Articles of Amendment with the State of Florida.

 

On April 25, 2015, the Company decided not to renew its leases with the Bureau of Mines relating to its portfolio of Nevada properties as it was no longer a focus of operations and a potential buyer for the leases was not identified.  Therefore, CalGold de Mexico, S. de R.L. de C.V. was liquidated.  The Company reported a write off of $450,000 related to Mining Rights at March 31, 2015.

 

Results of Operations

 

Our historical results of operations up to February 6, 2014 reflect the business of MV Patents, which operated the VRE business, and MVP Portfolio, as the predecessor of the Company’s business.  Results of operations from February 7, 2014 through the date of this report include the pre-Securities Exchange business unrelated to VRE, which is reflected as discontinued operations in the consolidated financial statements, and the business of VRE. The results of operations for the three months ended March 31, 2015 include the consolidated results of operations of MV Portfolios, Inc. and Subsidiaries (including (i) CalGold de Mexico, S. de R.L. de C.V., formed to explore mining opportunities in Mexico, and included in discontinued operations, (ii) VRE, (iii) Flexine, Inc. and (iv) ResCator, Inc.

 

Results of operations for the nine month periods ended March 31, 2014 includes the results of operations of MV Patents, as the predecessor business to VRE.

 

Comparison of the three months ended March 31, 2015 and March 31, 2014

 

Our general and administrative expenses totaled $1,901,234 and $356,412 for the three months ended March 31, 2015 and 2014, respectively. General and administrative expenses increased to $1,901,234 for the three months ended March 31, 2015 from $356,412 for the three months ended March 31, 2014 primarily due to fees paid to consultants and professional service providers, and share based compensation for the officers of the company.

 

We recorded non-operating gains of $151,675 during the three months ended March 31, 2015, compared to non-operating expenses of $2,785,501 during the three months ended March 31, 2014. The non-operating gains during the three months ended March 31, 2004 related to the change in fair value of the derivative liabilities. The non-operating expenses of $404,994 during the three months ended March 31, 2014 consisted of interest expense.

 

We had a net loss of $1,749,559 for the three months ended March 31, 2015 and a net loss of $4,827,098 for the three months March 31, 2014, including losses from discontinued operations of $0 and $219,479, respectively, relating to the pre-Securities Exchange mining activities of California Gold and Subsidiary.

 

Comparison of the nine months ended March 31, 2015 and March 31, 2014

 

Our general and administrative expenses totaled $14,243,752 and $589,174 for the nine months ended March 31, 2015 and 2014, respectively. General and administrative expenses increased to $14,243,752 for the nine months

 

 

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ended March 31, 2015 from $589,174 for the nine months ended March 31, 2014, primarily due to fees paid to consultants and professional service providers, and share based compensation for the officers of the company.

 

We recorded non-operating expenses of $2,341,028 during the nine months ended March 31, 2015, compared to non-operating expenses of $2,793,842 during the three months ended March 31, 2014. The increase was primarily related to interest expense of $3,660,000 associated with the beneficial conversion feature on certain notes payable that were converted into Series C Preferred Stock on August 26, 2014.  The total incurred interest expense was $4,629,943 which includes the $3,660,000 mentioned above as well as $969,943 for the amortization of debt discounts and deferred financing costs, related to notes originally issued in November 2013, February 2014 and March 2014. Non-operating gains of $2,288,915 during the nine months ended March 31, 2004 resulted from a change in the fair value of the derivative liabilities.

 

We had a net loss of $16,588,388 for the nine months ended March 31, 2015 and a net loss of $5,068,201 for the nine months March 31, 2014, including losses from discontinued operations of $3,608 and $212,479, respectively, relating to the pre-Securities Exchange mining activities of California Gold and Subsidiary.

 

Liquidity and Capital Resources

 

Our cash and cash equivalents balance as of March 31, 2015 was $2,154 compared to $1,468,401 as of June 30, 2014.  The decrease resulted primarily from the net loss and the repayment of $300,000 of convertible notes, professional services and compensation expense to officers and employees of the Company.

 

In the future, we expect to seek to raise additional capital through additional sales of our equity or debt securities. There can be no assurance, however, that such financing will be available to us or, if it is available, that it will be available on terms acceptable to us and that it will be sufficient to fund our expected needs. If we are unable to obtain sufficient financing, we may not be able to proceed with our new business plan or meet our ongoing operational working capital needs.

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements.

 

Significant Accounting Policies

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to select appropriate accounting policies and to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.

 

In preparing our consolidated financial statements, we make estimates and assumptions that affect the accounting for and recognition and disclosure of assets, liabilities, equity, revenues and expenses. We must make these estimates and assumptions because certain information that we use is dependent on future events, cannot be calculated with a high degree of precision from data available or simply cannot be readily calculated based on generally accepted methods. In some cases, these estimates are particularly difficult to determine and we must exercise significant judgment. We periodically evaluate our estimates and judgments that are most critical in nature. We believe that the following discussion of critical accounting policies address all important accounting areas where the nature of accounting estimates or assumptions is material due to the levels of subjectivity and judgment. Actual results could differ materially from the estimates and assumptions that we use in the preparation of our financial statements.

 

Derivative Financial Instruments

 

For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income. The estimated fair value of derivative warrants was calculated using the Black-Scholes option pricing model at each grant date. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period, in accordance with FASB ASC Topic 815, Derivatives and Hedging. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

 

 

 

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Stock-Based Compensation

 

The Company accounts for its stock-based compensation in which the Company obtains employee services in share-based payment transactions under FASB ASC Topic 718, Compensation - Stock Compensation, which requires the Company to expense the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of such instruments over the vesting period.

 

The Company also adopted FASB ASC Topic 505-50, Equity-Based Payments to Non-Employees, to account for equity instruments issued to parties other than employees for acquiring goods or services. Such awards for services are recorded at either the fair value of the consideration received or the fair value of the instruments issued in exchange for such services, whichever is more reliably measurable.

 

Commitments

 

The Company has employment agreements with two employees and a separate consulting agreement with one of the Company’s executive officers. The aggregate future commitment under these agreements is as follows:

 

Calendar Year Commitments
2015		$	322,500
2016			430,000
2017			44,767
		$	797,267

 

These agreements provide for additional bonus payments that are calculated as defined.

 

ITEM3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

 

Not applicable.

 

ITEM4.  CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

We maintain “disclosure controls and procedures,” as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures.

 

The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

 

With respect to the quarterly period ended March 31, 2015, under the supervision and with the participation of our management, we conducted an evaluation of the effectiveness of the design and operations of our disclosure controls and procedures. Based upon this evaluation, the Company’s management has concluded that the Company’s disclosure controls and procedures were not effective as of March 31, 2015. However, to the extent possible, we will implement procedures to assure that the initiation of transactions, the custody of assets and the recording of transactions will be performed by separate individuals. We believe that the foregoing steps will

 

 

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remediate the material weakness identified above, and we will continue to monitor the effectiveness of these steps and make any changes that our management deems appropriate.

 

Management is in the process of determining how best to make the required changes that are needed to implement an effective system of internal control over financial reporting. Our management acknowledges the existence of this problem, and intends to develop procedures to address it to the extent possible given the Company’s limitations in financial and human resources.

 

Changes in Internal Controls over Financial Reporting

 

There was no change in our internal controls over financial reporting that occurred during the period covered by this report, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

 

 

 

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PART II

OTHER INFORMATION

 

ITEM1.  LEGAL PROCEEDINGS

 

 

In the ordinary course of business, we actively pursue legal remedies to enforce our intellectual property rights. Other than ordinary routine litigation incidental to the business and other than as set forth below, we know of no material, active or pending legal proceedings against us.

 

On March 17, 2014, Visual Real Estate, Inc., our wholly-owned subsidiary and successor to MVP as a result of a corporate reorganization, filed a patent infringement lawsuit against Google Inc. in the United States District Court for the Middle District of Florida. The lawsuit claims infringement of three of Visual Real Estate’s patents: U.S. Patent number 7,389,181, entitled “Apparatus and Method for Producing Video Drive-By Data Corresponding to a Geographic Location”; U.S. Patent number 7,929,800, entitled “Methods and Apparatus for Generating a Continuum of Image Data”; and U.S. Patent number 8,078,396, entitled “Methods for and Apparatus for Generating a Continuum of Three Dimensional Image Data.” Among other things, the complaint identifies Google Street View and Google Earth as infringing Visual Real Estate’s patents. The case number is 3:14-cv-00274-TJC-PDB. On August 20, 2014, Google, Inc. filed four petitions for InterParties Review (“IPR”) before the Patent Trial and Appeal Board (“PTAB”) challenging our patent infringement claims.  On January 25, 2016, the PTAB issued a final written decision on the IPR which was not favorable to the Company.  The ruling, indicating that the claims were too broad, invalidated our most valuable claims.  Therefore, we have dropped the law suit.  We are in the process of determining if we want to pursue a second lawsuit with a tighter claim suit that speaks to the value of the additional damages that relate to having the very simple innovation that we brought to market of typing in an address and identifying a specific parcel location and picture of a property.

 

On January 5, 2015 ResoCator, Inc. filed a provisional patent application for the “Global Resource Locator”. The patent relates to a variety of useful inventions that are enabled by a Miniature Atomic Clock as described in Patent 8217724.  ResoCator, Inc. received an exclusive option for the Patent 8217724 from the University of Oxford.

 

ITEM2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

The following issuances of securities were exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended:

 

On August 24, 2014 we issued 300,000 shares to The David Stephen Group, LLC, an entity affiliated with David Rector, who was our Chief Operating Officer and a director from Feb 07, 2014 and resigned effective Jan 12, 2015.  These shares were issued as compensation for the assignment of certain unpatented mining claims located in Lander County, Nevada.

 

On September 9, 2014 we issued 400,000 shares to a third party for consulting services.

 

On September 10, 2014 we issued 19,505 shares to a third party for consulting services.

 

ITEM3.  DEFAULTS UPON SENIOR SECURITIES

 

Not applicable.

 

ITEM4.  MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM5.  OTHER INFORMATION

 

None.

 

 

 

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ITEM 6.  EXHIBITS

 

Exhibit
Number		Description
31.1		Certification of Chief Executive Officer of MV Portfolios, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Chief Financial Officer of MV Portfolios, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Chief Executive Officer of MV Portfolios, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

32.2

Certification of Chief Financial Officer of MV Portfolios, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

 

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SIGNATURES

 

Pursuant to the requirements of the Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

MV Portfolios, Inc.

(Registrant)

 

 

Date:  April 17, 2017	By: /s/ William Meadow William Meadow Chief Executive Officer (Principal Executive Officer)
Date: April 17, 2017	By: /s/ Shea Ralph Shea Ralph Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

 

 

 

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