UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT
NO. 1 TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
ALTAVOZ ENTERTAINMENT, INC.
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Nevada
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738911
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80-0941345
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(State
of Incorporation)
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(Primary
Standard Industrial
Classification Code Number)
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(IRS
Employer Identification No.)
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622 Hungerford Drive, Suite 2
Rockville, Maryland 20850
Phone: (800) 229-3764
(Address, including zip code, and telephone
number, including area code, of registrant's principal executive offices)
Nelson Jacobsen
Chief Executive Officer
622 Hungerford Drive, Suite 2
Rockville, Maryland 20850
Phone: (800) 229-3764
(Name, Address, including zip code, and
telephone number, including area code, of agent for service)
Copies to:
Paul A. Rachmuth, Esq.
265 Sunrise Highway, Ste. 62
Rockville Centre, New York 11570
Phone: (516) 330-0170
Approximate
date of commencement of proposed sale to the public: From time to time after the effective date of this registration statement.
If
any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check
the following box. [ ]
If
this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration statement number of the earlier effective registration statement
for the same offering. [ ]
If
this Form is a posteffective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If
this Form is a posteffective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer or a smaller reporting
company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting
company" in Rule 12b-2 of the Exchange Act. (Check one):
Large
accelerated filer [ ] Accelerated filer [ ]
Nonaccelerated
filer [ ] Smaller reporting company [X]
CALCULATION
OF REGISTRATION FEE
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Title
of Each Class of Securities to be
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Amount
to be
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Proposed
Maximum
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Proposed
maximum
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Amount
of
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Registered
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Registered
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Offering
Price
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aggregate
offering price registration fee
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Per
Share (3)
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(3)
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Common
Stock, Par Value $0.001 Per
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75,000,000
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$0.004
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$300,000.00
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$37.20
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Share.
(1)
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Common
Stock issued selling
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91,566,666
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$0.004
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$366,266.67
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$45.42
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shareholders
in connection with payment
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for
services, private placements and
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investments
by insiders. (2)
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Total:
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166,566,666
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$666,266.67
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$82.61
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(1)
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The
Company’s common stock noted in the first row will be offered under the primary
offering prospectus relating to our proposed public offering.
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(2)
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Selling
shareholders hold 341,666 shares of the Company’s common stock issued under the
Company’s Private Placement Memorandum Dated July 15, 2016; 9,000,000 shares
of the Company’s common stock issued as compensation to professionals; and
82,225,000 shares of the Company’s common stock issued to insiders in private transactions.
See the “Selling Shareholders” Section at Page 22.
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(3)
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Estimated
solely for the purpose of calculating the registration fee in accordance with Rule 457(c)
under the Securities Act based upon the average of the bid and asked prices of the Registrant’s
common stock as quoted on PTCPink of $0.004 per share on November 20, 2017.
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The
Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until
the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a) may determine.
The
information in this prospectus may not be complete and may be changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities,
nor is it a solicitation of an offer to buy these securities, in any state in which the offer or sale is not permitted.
SUBJECT
TO COMPLETION, DATED November 28, 2017
PROSPECTUS
75,000,000
Shares of Common Stock
INITIAL
OFFERING PRICE: $0.004 Per Share
This
is a public offering of 75,000,000 shares of common stock, $0.001 par value, of Altavoz Entertainment, Inc.
The
registration statement, of which this Prospectus forms a part, also registers on behalf of selling shareholders, a total of Ninety-One
Million, Five Hundred and Sixty-Six Thousand Six Hundred and SixtySix (91,566,666) shares of our common stock. We will not receive
any of the proceeds from the sale of shares to be offered by the Selling Shareholders.
There
is no minimum number of shares that must be sold by us for the offering to close, and we will retain the proceeds from the sale
of the offered shares that are sold. The offering is being conducted on a selfunderwritten, best efforts basis, which means that
our president and chief executive officer, Nelson Jacobsen, and Ken Balog, a company director, will attempt to sell the shares.
This prospectus will permit our principal executive officers to sell the shares directly to the public, with no commission or
other remuneration payable to them for any shares that they may sell. Messrs. Jacobsen and Balog will sell the shares and intend
to offer them to, among others, friends, family members and business acquaintances. In offering the securities on our behalf,
they will rely on the safe harbor from brokerdealer registration set out in Rule 3a4-1 under the Securities and Exchange Act of
1934 (the “Exchange Act”). The intended methods of communication include, without limitations, telephone and personal
contact. For more information, see the section of this prospectus entitled "Plan of Distribution."
The
selling shareholders will sell at prevailing market prices, or privately negotiated prices. The selling shareholders will be responsible
for any commissions or discounts due to brokers or dealers. We will pay all of the other offering expenses. Each selling shareholder
or dealer selling common stock issuable upon the conversion of the preferred stock is required to deliver a current prospectus
upon the sale. In addition, for the purposes of the Securities Act of 1933, as amended, the selling holders may be deemed to be
underwriters.
Our
common stock is traded on OvertheCounter Pink Sheets Market under the symbol AVOZ. The offering price is based upon the average
of the bid and asked prices of the Registrant’s common stock as quoted on PTCPink of $0.004 per share on November 20, 2017.
[1]
We
are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act and, as such, may elect to
comply with certain reduced reporting requirements after this offering.
AN
INVESTMENT IN OUR SECURITIES INVOLVES A HIGH DEGREE OF RISK. PERSONS SHOULD NOT INVEST UNLESS
THEY
CAN AFFORD TO LOSE THEIR INVESTMENT. YOU SHOULD READ THE SECTION ENTITLED "RISK FACTORS"
BEGINNING
ON PAGE 5 OF THIS PROSPECTUS FOR A DISCUSSION OF CERTAIN FACTORS YOU SHOULD CONSIDER
BEFORE
BUYING OUR SECURITIES.
NO
UNDERWRITER OR OTHER PERSON HAS BEEN ENGAGED TO FACILITATE THE SALE OF SHARES OF COMMON
STOCK
IN THIS OFFERING. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS
AND
THE INFORMATION WE HAVE REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANY PERSON TO PROVIDE
YOU
WITH ANY INFORMATION ABOUT, THE STOCK, THIS OFFERING OR OUR COMPANY THAT IS DIFFERENT FROM
THE
INFORMATION INCLUDED IN THIS PROSPECTUS.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS
APPROVED
OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS
PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The
date of this prospectus is November 28, 2017
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Table
of Contents
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Page
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About
this Prospectus
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1
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Prospectus
Summary
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1
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Summary
of the Offer
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3
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Summary
Consolidated Financial Data and Other Data
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4
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Risk
Factors
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5
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Cautionary
Statement Regarding ForwardLooking Statements
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13
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Implications
of Being an Emerging Growth Company
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13
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Use
of Proceeds
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14
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Dilution
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15
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Capitalization
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15
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Market
for our Common Stock and Determination of Offering Price
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15
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Management's
Discussion and Analysis of Financial Condition and Results of Operations
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15
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Description
of Securities to be Registered
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18
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Results
of Operations
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18
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Selling
Shareholders
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22
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Plan
of Distribution
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23
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Related
Party Transactions
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25
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New
Accounting and Reporting Pronouncements
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25
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Critical
Accounting Policies and Estimates
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25
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Contractual
Commitments
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26
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Quantitative
and Qualitative Disclosures About Market Risk
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26
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Management
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26
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Executive
Compensation
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30
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Security
Ownership of Certain Beneficial Owners and Management
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32
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Dividend
Policy
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33
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Description
of Capital Stock and Warrants
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34
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Shareholder
Matters
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36
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Transfer
Agent
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40
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Legal
Matters
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40
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Experts
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40
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Where
You Can Find More Information
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41
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Index
to Financial Statements
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42
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Exhibits
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45
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Undertakings
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46
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ABOUT
THIS PROSPECTUS
You
may only rely on the information contained in this prospectus or on that information to which we have referred you. We have not
authorized anyone to provide you with different information. This prospectus does not constitute an offer to sell or a solicitation
of an offer to buy any securities other than the common stock offered by this prospectus. This prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any common stock in any circumstances in which such offer or solicitation
is unlawful. Neither the delivery of this prospectus nor any sale made in connection with this prospectus shall, under any circumstances,
create any implication or impression that there has been no change in our affairs since the date of this prospectus or that any
information contained in this Prospectus is correct as of any time after its date.
The
selling shareholders may, from time to time, sell the common stock described in this prospectus in one or more offerings. This
prospectus only provides you with a general description of the common stock they may offer. If required, when they sell shares
of common stock under this prospectus, we will provide a prospectus supplement that contains specific information about the terms
of the offering of the common stock. The prospectus supplement may also add, update or change information contained in this prospectus.
Dealer
Prospectus Delivery Obligation
Until
90 days after the later (i) the effective date of the registration statement or (ii) the first date on which the securities in
this offering are offered publicly, all dealers that effect transactions in the securities, whether or not participating in this
offering, may be required to deliver a prospectus.
PROSPECTUS
SUMMARY
This
summary provides an overview of certain information contained elsewhere in this Prospectus and does not contain all of the information
that you should consider or that may be important to you. Before making an investment decision, you should read the entire Prospectus
carefully, including the "Risk Factors" section, the financial statements and the notes to the financial statements.
In this Prospectus, the terms "Altavoz,", "Company," "we," "us" and "our" or
similar terms refer to Altavoz Entertainment, Inc. This Prospectus contains forwardlooking statements, which involve risks and
uncertainties. Our actual results could differ materially from those anticipated in these forwardlooking statements because of
certain risk factors, including those set forth under “Risk Factors” and elsewhere in this Prospectus.
Corporate
Background and Business Overview
Altavoz
was originally incorporated in Nevada in March of 2000 as Saveyourtime.com. On March 24, 2000, it filed a Form 10-SB with the
SEC, designating itself as a “blank check” company. On January 28, 2003, the Company filed with the SEC a Form 8-K
indicating that it had entered into an agreement and plan of merger with Hesperia Holding Corp. (“Hesperia”). On April
15, 2003, the Company filed with the SEC a Form 10-KSB (a) indicating that it had consummated its merger with Hesperia and changed
its name to Hesperia Holding, Inc. and (b) providing Form 10 information. From April, 2003 through November, 2005, the Company
filed with the SEC periodic and current public information pursuant to Exchange Act Section 13. On August 8, 2008, the Company
filed with the SEC a Form 15, terminating or suspending its reporting requirements under the Exchange Act. Current management
was not present at the Company at that time, however, it is understood that the reason for the Company’s filing of the Form
15 was that it was deficient in its SEC filings and was unable to become current in a timely fashion. In April 2009, the Company
acquired Hot Web Properties, Inc. In July 2009, it amended its Articles of Incorporation, changing the Company name to Max Media
Group, Inc. It was then listed with the National Quotation Bureau under the trading symbol “MXMI”.
Nelson
Jacobsen founded Altavoz, Inc., a Maryland corporation, in 2011. In September 2015, the Company merged with Altavoz, Inc. and
changed the Company’s name to Altavoz Entertainment, Inc. In April 2016 we changed our trading symbol to “AVOZ”.
We are currently listed with that symbol on the OvertheCounter Pink Sheets Market.
Altavoz
is an independent, full service, direct music distributor offering a wide range of digital and physical distribution products
and marketing solutions for music producers and musicians. We use proprietary and traditional distribution channels and social
media promotions to connect record labels and artists with music consumers.
We
implement Music Public Blockchain protocol (“Blockchain”). Blockchain is a computer based content management system
that allows artists to manage their music catalogs. We are an issuer of International Standard Recording Codes (“ISRCs”),
which are critical identification tools for sounds recording that enable tracking any iteration of the recordings across the digital
and physical music market. We can also issue Universal Product Codes (“UPCs”), which are used by physical retailers
and online outlets to gather and track sales information. Our use of IRSCs and UPCs allow us to distribute our artists’
music to the larger physical and digital distributors and streaming services.
SUMMARY
OF THE OFFER
Common
Stock Offered: A maximum of SeventyFive Million shares. There is no minimum number of shares that must be sold by us for the offering
to close.
Common
Stock Outstanding Before this Offering: 322,498,798 shares outstanding as of September 30, 2017.
Par
Value: $0.001
Use
of Proceeds: General corporate purposes, including working capital, hiring additional employees, capital expenditures and strategic
acquisitions. For a more complete description of our anticipated use of proceeds, please see the "Use of Proceeds" section.
OTCPink
Symbol: AVOZ
Risk
Factors: You should read the "Risk Factors" section of this prospectus and in the documents incorporated by reference
in this prospectus for a discussion of factors to consider before deciding to purchase shares of our common stock.
Expenses
of Offering: The Company will bear the expenses of this offering, which we estimate to be approximately $50,000, including legal
expenses of approximately $30,000, accounting expenses of approximately $10,000, and miscellaneous expenses, including registration
fee, of approximately $10,000.
SUMMARY
CONSOLIDATED FINANCIAL DATA AND OTHER DATA
The
following tables summarize our consolidated financial and other data. You should read this summary, consolidated financial and
other data together with the sections titled "Selected Consolidated Financial and Other Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations," our audited annual consolidated financial statements
and related notes included elsewhere in this prospectus, and our unaudited interim condensed consolidated financial statements
and the related notes included elsewhere in this prospectus. The summary consolidated statements of operations data for the years
ended December 31, 2015 and 2016 are derived from our audited annual consolidated financial statements included elsewhere in this
prospectus. The consolidated statements of operations data for the nine months ended September 30, 2017 and 2016 are derived from
our unaudited interim condensed consolidated financial statements included elsewhere in this prospectus. The unaudited interim
condensed consolidated financial statements have been prepared on the same basis as our audited annual consolidated financial
statements and, in our opinion, reflect all adjustments, which include only normal recurring adjustments that we consider necessary
for a fair presentation of the financial information set forth in those statements. Our historical results are not necessarily
indicative of the results that may be expected in the future. Results for the nine months ended September 30 2017 are not indicative
of results expected for the full year.
Consolidated
Statement of Operations
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Nine
Months Ended
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Year
Ended
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Year
Ended
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September
30, 2017
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Dec.
31, 2016
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Dec.
31, 2015
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(unaudited)
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(audited)
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(audited)
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Revenues
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$
11,945
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$ 15,385
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$
9,875
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Total
Expenses
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$
242,772
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$4,244,771
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89,328
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Net
Loss
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$
234,263
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$
33,122,841
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$
89,549
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Net
Loss Per Common Share, Basic and Diluted
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$
0.00
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$
0.44
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$
0.06
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Weighted
Average Common Shares Outstanding,
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311,023,798
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75,894,031
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1,611,653
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Basic
and Diluted
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Consolidated
Balance Sheet
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September
30, 2017
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Dec.
31, 2016
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Dec.31,
2015
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(unaudited)
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(audited)
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(audited)
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Total
Assets
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$
4,209
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$
4,449
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$
3,436
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Total
Liabilities
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$
298,702
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$
90,409
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$
211,055
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Stockholders’
Deficit
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$
294,493
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$
85,960
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$
207,619
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Total
Liabilities and Stockholders’ Deficit
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$
4,209
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$
4,449
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$
3,436
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RISK
FACTORS
AN
INVESTMENT IN OUR SECURITIES INVOLVES A HIGH DEGREE OF RISK. PERSONS SHOULD NOT INVEST UNLESS THEY CAN AFFORD TO LOSE THEIR INVESTMENT.
YOU SHOULD CAREFULLY CONSIDER THE MATERIAL RISKS SET FORTH IN THIS SECTION, TOGETHER WITH THE OTHER INFORMATION IN THIS PROSPECTUS,
BEFORE DECIDING WHETHER TO INVEST IN OUR SECURITIES. OUR BUSINESS, OPERATING RESULTS AND FINANCIAL CONDITION COULD BE SERIOUSLY
HARMED BY THE OCCURRENCE OF ANY OF THE FOLLOWING MATERIAL RISKS.
Risks
Relating to Our Liquidity
Our
independent registered public accounting firm’s report contains an explanatory paragraph that expresses substantial doubt
about our ability to continue as a going concern.
We
have incurred net losses since our inception. For the three months ended June 30, 2017, we incurred a net loss of $150,530. As
a result of our losses and limited cash balances, our independent registered public accounting firm has included in its report
for the year ended December 31, 2016 an explanatory paragraph that expresses substantial doubt about our ability to continue as
a going concern.
We
may not be able to generate the amount of cash needed to fund our future operations.
Our
ability either to fund planned capital expenditures and development efforts will depend on our ability to generate cash in the
future. Our ability to generate cash is in part subject to general economic, financial, competitive, regulatory and other factors
that are beyond our control. We cannot assure you, however, that our business will generate sufficient cash flow from operations
to fund our liquidity needs.
We
are seeking additional capital funding and such capital may not be available to us.
We
are exploring various equity financing alternatives. If we are unable to obtain additional capital, we may be required to delay
or reduce our operations. We cannot assure you that any necessary additional financing will be available on terms favorable to
us, or at all. If we raise additional funds by issuing securities convertible into or exercisable for common stock, the percentage
ownership of our stockholders could be significantly diluted, and these newly issued securities may have rights, preferences or
privileges senior to those of existing stockholders. Market and industry factors may harm the market price of our common stock
and may adversely impact our ability to raise additional funds. Similarly, if our common stock is delisted from the OTC Markets,
it may limit our ability to raise additional funds.
Risks
Relating to Our Business
We
have limited working capital and limited access to financing.
Our
cash requirements, at times, may exceed the level of cash generated by operations. Accordingly, we may have limited working capital.
We
currently have sufficient cash to sustain our operations for a period of approximately one month. We will require additional funds
through the operation of our business, receipt of conventional sources of capital or through future sales of our common stock
until our revenues are sufficient to meet our cost structure, and ultimately achieve profitable operations. Management estimates
that to fund our operations, projected business expansion and the professional costs of operating a public entity (i.e. legal,
accounting and auditing expenses) it will need approximately $300,000 over the next twelve months. Management further estimates
that if it scaled back its expansion plans and deferred paying some of its professional expenses until after the effectiveness
of this registration, it would need to expend approximately $120,000 over the next 12 months, of which approximately $36,000 would
be derived from business operations and the balance from private and related-party investments. There is no assurance we will
be successful in raising additional capital or achieving profitable operations. Furthermore, the large number of shares available
from the selling Security Holder pursuant to the prospectus and the depressive effect of the availability of such shares may make
it difficult for us to raise funds from other sources. Wherever possible, our board of directors will attempt to use noncash consideration
to satisfy obligations. In many instances, we believe that the noncash consideration will consist of restricted shares of our
common stock. These actions will result in dilution of the ownership interests of existing stockholders and may further dilute
common stock book value, and that dilution may be material.
Our
ability to obtain adequate additional financing on satisfactory terms may be limited. Our ability to raise financing through sales
of equity securities depends on general market conditions, including the demand for our common stock. We may be unable to raise
adequate capital through the sale of equity securities, and if we can sell equity, our existing stockholders could experience
substantial dilution. If adequate financing is not available at all or it is unavailable on acceptable terms, we may find we are
unable to fund expansion, continue offering products and services, take advantage of acquisition opportunities, develop or enhance
services or products, or respond to competitive pressures in the industry.
The
proceeds of this offering may be insufficient to permit us to fully implement our business plan. To do so, we will need to obtain
additional financing, which may not be available.
We
face the risk that we may not be able to effectively implement our business plan. If we are not effective in addressing these
risks, we may not operate profitably and we may not generate adequate working capital to meet our obligations as they become due.
We
will become subject to the periodic reporting requirements of the Exchange Act, which requires us to incur audit fees and legal
fees for the preparation of such reports. These additional costs could reduce our ability to earn a profit.
Following
the effective date of our registration statement of which this prospectus is a part, we will be required to file periodic reports
with the SEC pursuant to the Exchange Act and the rules and regulations promulgated thereunder. To comply with these requirements,
our independent registered public accounting firm must review our financial statements on a quarterly basis and audit our financial
statements on an annual basis. Moreover, our legal counsel must review and assist in the preparation of such reports. The costs
charged by these professionals for such services cannot be specifically predicted at this time because factors such as that the
number and type of transactions we engage in and the complexity of our reports cannot be determined at this time and will have
a major effect on the amount of time to be spent by our auditors and attorneys. However, based on conversations with our professionals,
the annual costs are likely to range from $25,000 to $50,000 in the first year or two after our Registration statement goes effective.
The incurrence of such costs will be an expense to our operations and thus have a negative effect on our ability to meet our overhead
requirements and earn a profit.
Our
internal controls may be inadequate, which could cause our financial reporting to be unreliable and lead to misinformation being
disseminated to the public.
Our
management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Exchange
Act Rule 13a-15(f), internal control over financial reporting is a process designed by, or under the supervision of, the principal
executive and principal financial officer and effected by the board of directors, management and other personnel, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles and includes those policies and procedures that:
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·
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pertain
to the maintenance of records that in reasonable detail accurately and fairly reflect
the transactions and disposition of the assets of the Company;
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·
|
provide
reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the Company are being made only in accordance with
authorizations of management and/or directors of the Company; and
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·
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provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use or disposition of the Company's assets that could have a material effect on the financial
statements.
|
Our
internal controls may become inadequate or ineffective if our operations grow, which could cause our financial reporting to be
unreliable and lead to misinformation being disseminated to the public. Investors relying upon this misinformation may make an
uninformed investment decision.
Our
operating results will fluctuate significantly from period to period
.
Like
participants in the entertainment industry, our revenues and results of operations will be significantly dependent upon the timing
of releases and the commercial success of the media that we distribute, none of which can be predicted with certainty. Accordingly,
our revenues and results of operations may fluctuate significantly from period to period, and the results of any one period may
not be indicative of the results for any future periods.
If
we are alleged or accused of having infringed on the intellectual property or other rights of third parties, we could be subject
to significant liability for damages and invalidation of our proprietary rights.
Our
business activities are and will be highly dependent upon intellectual property, a field that has encountered increasing litigation
in recent years. If third parties allege that we have infringed on their intellectual property rights, privacy rights or publicity
rights or have defamed them, we could become a party to litigation. These claims and any resulting lawsuits could subject us to
significant liability for damages and invalidation of our proprietary rights and/or restrict our ability to publish and distribute
the infringing or defaming content. In addition, defending such cases involves significant levels of legal costs. There can be
no assurance that we would prevail in any such litigation. If we were to lose a litigation relating to intellectual property,
we could be forced to pay monetary damages and to cease the sale of certain products or the use of certain technology. Any of
the foregoing may adversely affect our business and may cause us to cease operations.
We,
and third parties that manage portions of our secure data, are subject to cyber security risks and incidents.
Our
business involves the storage and transmission of confidential information. The protection of our customer, employee and company
data is vitally important to us. While we have implemented measures to prevent security breaches and cyber incidents, any failure
of these measures and any failure of third parties that assist us in managing our secure data could materially adversely affect
our business, financial condition and results of operations.
Limited
Operating History; History of Losses and Anticipation of Future Losses. Accordingly, the Company has a limited operating
history on which to base an evaluation of its business and prospects.
The
Company and its prospects must be considered in light of the risks, difficulties and uncertainties frequently encountered by companies
in an early stage of development, particularly companies in new and rapidly evolving markets.
Security
Risks. Despite the implementation of security measures, the Company's networks may be vulnerable to unauthorized access, computer
viruses and other disruptive problems.
A
party who is able to circumvent security measures could misappropriate proprietary information or cause interruptions in the Company's
operations. Many companies have experienced, and may in the future experience, interruptions in service as a result of the accidental
or intentional actions of internet users, current and former employees or others. The Company may be required to expend significant
capital or other resources to protect against the threat of security breaches or to alleviate problems caused by such breaches.
Although the Company intends to continue to implement industry standard security measures, there can be no assurance that measures
implemented by the Company will not be circumvented in the future. Eliminating computer viruses and alleviating other security
problems may require interruptions, delays or cessation of service to users accessing the Company's Web sites, which could have
a material adverse effect on the Company's business, results of operations and financial condition.
Relationships
with Customers and Business Partners.
If
we are not able to continue to attract successful record labels and artists as our clients we will not be able to grow to a profitable
level.
Our
relationships with our business partners AMPED and The Connextion are non-exclusive and are not pursuant to a contractual obligation.
If we are not able to maintain our relationships with our business partners, due to a loss of key executives or forces out of
our control, we may not be able to remain competitive in the music distribution marketplace.
Acquisition
Risk.
The
Company may pursue the acquisition of new or complementary businesses, services or technologies, although it has no present understandings,
commitments or agreements with respect to any material acquisitions or investments. Any such future acquisitions would be accompanied
by the risks commonly encountered in acquisitions of companies, including, among other things, the difficulty of integrating the
operations and personnel of the acquired companies, the potential disruption of the Company's ongoing business, the inability
of management to incorporate successfully acquired technology and rights into the Company's services and content offerings, additional
expense associated with amortization of acquired intangible assets, the maintenance of uniform standards, controls, procedures
and policies, and the potential impairment of relationships with employees, customers and strategic partners.
Certain
AntiTakeover Provisions.
The
Company's Board of Directors has the authority to issue up to 100,000,000 shares of Preferred Stock and to determine the price,
rights, preferences, privileges and restrictions, including voting rights, of those shares without any further vote or action
by the stockholders of the Company. The rights of the holders of Common Stock will be subject to, and may be adversely affected
by, the rights of the holders of any Preferred Stock that may be issued in the future. The issuance of Preferred Stock may have
the effect of delaying, deferring or preventing a change in control of the Company, may discourage bids for the Company's Common
Stock at a premium over the market price of the Common Stock and may adversely affect the market price of, and the other rights
of the holders of, the Common Stock. The Company has no present plans to issue shares of Preferred Stock.
The
Company's Amended and Restated Bylaws provide that the Company will indemnify officers and directors against losses that they
may incur in investigations and legal proceedings resulting from their services to the Company, which may be broad enough to include
services in connection with takeover defense measures. Such provisions may have the effect of preventing changes in the management
of the Company. See "Description of Capital Stock."
No
Specific Use of Proceeds.
The
Company has not designated any specific use for much of the net proceeds from the sale by the Company of the shares of Common
Stock offered hereby. Rather, the Company intends to use most of the net proceeds general corporate purposes, including working
capital, hiring additional employees, capital expenditures and strategic acquisitions. The Company has no present plans or commitments
and is not currently engaged in any negotiations with respect to strategic acquisitions. Accordingly, management will have significant
flexibility in applying the net proceeds of this offering. The failure of management to apply such funds effectively could have
a material adverse effect on the Company's business, results of operations and financial condition. See "Use of Proceeds."
Risks
Relating to Our Stock
Control
by Certain Stockholders.
Upon
completion of this offering, the Company's directors and executive officers will beneficially own approximately 58.5% of the outstanding
Common Stock. As a result, these stockholders, if they act as a group, will have a significant influence on all matters requiring
stockholder approval, including the election of directors and approval of significant corporate transactions. Such control may
have the effect of delaying or preventing a change in control of the Company. See the Section entitled "Security Ownership
of Certain Beneficial Owners and Management" at Page 32.
Limited
Public Market for Stock.
Prior
to this offering, the company has been listed on the OTC Pink Sheets. Accordingly, the company’s securities have only been
thinly traded. The initial public offering price was determined based on the prior trading price in the OTC Pink Sheet market.
The initial public offering price may not be indicative of future market prices.
Possible
Volatility of Stock Price.
The
trading price of the Common Stock is likely to be highly volatile and could be subject to wide fluctuations in response to factors
such as actual or anticipated variations in quarterly operating results, announcements of technological innovations, new sales
formats or new services by the Company or its competitors, changes in financial estimates by securities analysts, conditions or
trends in Internet markets, changes in the market valuations of other Internet companies, announcements by the Company or its
competitors of significant acquisitions, strategic partnerships, joint ventures, capital commitments, additions or departures
of key personnel, sales of Common Stock and other events or factors, many of which are beyond the Company's control.
Broad
market and industry factors may materially adversely affect the market price of the Common Stock, regardless of the Company's
operating performance.
The
stock market has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating
performance of the companies whose stock is being traded.
In
the past, following periods of volatility in the market price of a company's securities, securities classaction litigation have
been instituted against such companies. Such litigation, if instituted against us, could result in substantial costs and a diversion
of management's attention and resources, which could have a material adverse effect on the Company's business operations and financial
condition.
Shares
Eligible for Future Sale; Registration Rights.
As
a result of this offering, Selling Shareholders will be able to sell the common stock of the Company that they hold. If the Selling
Shareholders elect to sell a substantial number of shares of Common Stock in the public market following this offering, market
price for the Company's Common Stock could be adversely affected.
Shareholders
may be diluted significantly through our efforts to obtain financing and satisfy obligations through issuance of additional shares
of our common stock.
We
have no committed source of financing. Wherever possible, our board of directors will attempt to use noncash consideration to
satisfy obligation or to acquire services. Our board of directors has authority, without action or vote of the shareholders, to
issue all or part of the authorized but unissued shares. In addition, if a trading market develops for our common stock, we may
attempt to raise capital by selling shares of our common stock, possibly at a discount to market. These actions will result in
dilution of the ownership interests of existing shareholders, may further dilute common stock book value, and that dilution may
be material.
Any
market that develops in shares of our common stock will be subject to the penny stock regulations and restrictions pertaining
to low priced stocks that may create a lack of liquidity and make trading difficult or impossible.
Our
shares will be considered a "penny stock." Rule 3a51-l of the Exchange Act establishes the definition of a "penny
stock," for purposes relevant to us, as any equity security that has a minimum bid price of less than $5.00 per share or
with an exercise price of less than $5 .00 per share, subject to a limited number of exceptions, which are not available to us.
This classification will severely and adversely affect any market liquidity for our common stock.
The
market for penny stocks has experienced numerous frauds and abuses that could adversely impact investors in our stock.
Company
management believes that the market for penny stocks has suffered from patterns of fraud and abuse. Such patterns include:
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·
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Control
of the market for the security by one or a few brokerdealers that are often related to
the promoter or issuer;
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·
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Manipulation
of prices through prearranged matching of purchases and sales and false and misleading
press releases;
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·
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"Boiler
room" practices involving high pressure sales tactics and unrealistic price projections
by sales persons;
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·
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Excessive
and undisclosed bidask differentials and markups by selling brokerdealers; and
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Wholesale
dumping of the same securities by promoters and brokerdealers after prices have been
manipulated to a desired level, along with the inevitable collapse of those prices with
consequent investor losses.
|
Our
board of directors has the authority, without stockholder approval, to issue preferred stock with terms that may not be beneficial
to common stockholders and with the ability to affect adversely stockholder voting power and perpetuate their control over us.
Our
articles of incorporation allow us to issue shares of preferred stock without any vote or further action by our stockholders.
Our board of directors has the authority to fix and determine the relative rights and preferences of preferred stock. Our board
of directors also has the authority to issue preferred stock without further stockholder approval, including large blocks of preferred
stock. As a result, our board of directors could authorize the issuance of a series of preferred stock that would grant to holders
the preferred right to our assets upon liquidation, the right to receive dividend payments before dividends are distributed to
the holders of common stock and the right to the redemption of the shares, together with a premium, prior to the redemption of
our common stock.
Almost
all our presently issued and outstanding common shares are restricted under rule 144 of the Securities Act, as amended. Once registered,
the shares may be sold in the open market, the price of our common stock could be adversely affected.
Almost
all our outstanding shares of common stock are "restricted securities" as defined under Rule 144 promulgated under the
Securities Act and may only be sold pursuant to an effective registration statement or an exemption from registration, if available.
Once registered, the holders may sell the shares in the open market, which may have a depressive effect upon the price of the
common stock in any market that may develop.
We
could be removed from the OTCPink if we fail to remain current with our financial reporting requirements.
Companies
trading on the OTCPink must be reporting issuers under Section 12 of the Securities Exchange Act of 1934, as amended, and must
be current in their reports under Section 13 to maintain price quotation privileges on the OTCPink. If we fail to remain current
in our reporting requirements, we would be removed from the OTCPink. As a result, the market liquidity of our securities could
be severely adversely affected by limiting the ability of brokerdealers to trade our securities and the ability of stockholders
to sell their securities in the secondary market.
Any
trading market that may develop may be restricted by virtue of state securities "Blue Sky" laws that prohibit trading
absent compliance with individual state laws. These restrictions may make it difficult or impossible to sell shares in those states.
There
is currently no liquid, public market for our common stock, and there can be no assurance that any established public market will
develop in the foreseeable future. Transfer of our common stock may also be restricted under the securities or securities regulations
laws promulgated by various states and foreign jurisdictions, commonly referred to as "Blue Sky" laws. Absent compliance
with such individual state laws, our common stock may not be traded in such jurisdictions. Because the securities registered hereunder
have not been registered for resale under the blue sky laws of any state, the holders of such shares and persons who desire to
purchase them in any trading market that might develop in the future, should be aware that there may be significant state blue
sky law restrictions upon the ability of investors to sell the securities and of purchasers to purchase the securities. These
restrictions prohibit the secondary trading of our common stock. We currently do not intend to and may not be able to qualify
securities for resale in at least 17 states which do not offer manual exemptions (or may offer manual exemptions but may not offer
one to us if we are considered a shell company at the time of application) and require shares to be qualified before they can
be resold by our shareholders. Accordingly, investors should consider the secondary market for our securities to be a limited
one. See also "Plan of DistributionState Securities Blue Sky Laws."
CAUTIONARY
STATEMENT REGARDING FORWARDLOOKING STATEMENTS
Some
of the statements contained or incorporated by reference in this prospectus or in any prospectus supplement constitute forward
looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section
21E of the Securities Exchange Act of 1934, as amended. Forwardlooking statements relate to expectations, beliefs, projections,
future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts.
In some cases, you can identify forwardlooking statements by terms such as "anticipate," "believe," "could,"
"estimate," "expects," "intend," "may," "plan," "potential," "project,"
"should," "will" and "would" or the negative of these terms or other comparable terminology.
Forwardlooking
statements contained or incorporated by reference in this prospectus or in any prospectus supplement are based on our beliefs,
assumptions and expectations of our future performance, considering all information currently available to us. These beliefs,
assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us or are
within our control. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially
from those expressed in our forwardlooking statements. Forwardlooking statements we make or incorporate by reference in this prospectus
or in any prospectus supplement are subject to various risks and uncertainties that could cause actual results to vary from our
forward looking statements, including:
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Our
financial performance, including our ability to achieve revenue growth, margins or earnings;
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Our
ability to raise additional capital and fund planned capital expenditures and development
efforts;
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·
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Our
ability to gauge and predict the commercial success of our business;
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·
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The
ability of our officers and directors to generate potential investment opportunities:
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·
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Our
ability to maintain relationships with customers, employees and suppliers; and
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·
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Our
ability to meet the OTCPink Capital Market continuing listing standards and maintain
our listing.
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We
caution you not to place undue reliance on these forwardlooking statements which speak only as of the date of this prospectus,
any prospectus supplement or the date of any document incorporated by reference in this prospectus or any prospectus supplement.
All subsequent written and oral forwardlooking statements attributable to us or any person acting on our behalf are expressly
qualified in their entirety by the cautionary statements contained or referred to in this section. Except to the extent required
by applicable law or regulation, we undertake no obligation to update these forwardlooking statements to reflect events or circumstances
after the date of this filing or to reflect the occurrence of unanticipated events.
IMPLICATIONS
OF BEING AN EMERGING GROWTH COMPANY
We
qualify as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act.
An emerging growth company may take advantage of relief from certain reporting requirements and other burdens that are otherwise
applicable generally to public companies. These provisions include:
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reduced
obligations with respect to financial data, including presenting only two years of audited
financial statements and only two years of selected financial data in this prospectus;
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an
exception from compliance with the auditor attestation requirements of Section 404 of
the SarbanesOxley Act of 2002, or the SarbanesOxley Act;
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reduced
disclosure about our executive compensation arrangements in our periodic reports, proxy
statements and registration statements; and
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exemptions
from the requirements of holding nonbinding advisory votes on executive compensation
or golden parachute arrangements.
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We
may take advantage of these provisions for up to five years or such earlier time that we no longer qualify as an emerging growth
company. We would cease to be an emerging growth company if we have more than $1.0 billion in annual revenue, have more than $700
million in market value of our capital stock held by nonaffiliates as of the end of our second fiscal quarter or issue more than
$1.0 billion of nonconvertible debt over a threeyear period. We may choose to take advantage of some but not all of these reduced
reporting burdens. For example, we have taken advantage of the exemption from auditor attestation on the effectiveness of our
internal control over financial reporting. To the extent that we take advantage of these reduced reporting burdens, the information
that we provide shareholders may be different than you might obtain from other public companies in which you hold equity interests.
In
addition, under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time
as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or
revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public
companies that are not emerging growth companies.
USE
OF PROCEEDS
We
estimate that we will receive up to $250,000 from the sale of the shares, based on the sale of 75,000,000 Shares at a public offering
price of $0.004 per share, after deducting the estimated $50,000 for the expenses associated with this offering. If we engage
brokerdealers to assist us in selling the shares, we will incur additional costs associated with this offering. We will use these
proceeds for general working capital, including hiring additional employees, capital expenditures and strategic acquisitions.
An estimate for the use of proceeds, based on a range of funds received is as follows:
|
Percentage
of targeted funds received
|
25%
of Raise/
(%
of Total)
|
50%
of Raise/
(%
of Total)
|
75%
of Raise/
(%
of Total)
|
100%
of Raise/
(%
of Total)
|
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Use
of Funds
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Sales and Customer
Relations (1)
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$20,000
(32%)
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$40,000
(32%)
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$60,000
(32%)
|
$80,000
(32%)
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Marketing
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$20,000
(32%)
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$40,000
(32%)
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$60,000
(32%)
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$80,000
(32%)
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Technology Research
& Dev.
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$10,000
(16%)
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$20,000
(32%)
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$30,000
(16%)
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$40,000
(16%)
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Working Capital and
General Corporate Purposes, Including Acquisitions (2)
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$12,500
(20%)
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$25,500
(20%)
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$37,500
(20%)
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$50,000
(20%)
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|
|
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$62,500
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$125,000
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$187,500
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$250,000
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(1)
|
Includes
hiring of additional personnel.
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(2)
|
Working
capital and general corporate purposes includes amounts required to pay officers’
salaries and incentive bonuses, professional fees, ongoing public reporting costs, office
related expenses, acquisitions of other companies using the Company’s stock and
other corporate expenses.
|
The
allocation of net proceeds set forth above is only an estimate based on our current plans and assumptions regarding the industry
and general economic conditions and our future revenues and expenditures. If any of these factors change, it may be necessary
or advisable for us to reallocate some of the proceeds in the above listed categories or to use portions for other purposes. Investors
will be relying on the judgment of our management regarding application of the net proceeds of this offering.
DILUTION
As
of September 30, 2017, our net deficit book value per share was $(.0011) based on 354,998,798 shares outstanding on a fully diluted
basis and a proforma net deficit book value of $321,402. Net tangible book value per share is determined by dividing the number
of outstanding shares of common stock on a fully diluted basis into our net (deficit) tangible book value, which is our total
tangible assets less our total liabilities. After giving effect to the sale of the shares in this offering and after deducting
estimated expenses of this offering, our proforma as adjusted net tangible book value will be $(19,699) or $0.00 per share. This
represents an immediate increase in net tangible book value of approximately $.0011 per share to our existing shareholders and
an immediate dilution of $.0011 per share to investors purchasing shares in this offering.
CAPITALIZATION
We
are authorized to issue 750,000,000 shares of common stock, par value of $0.001 per share and 100,000,000 shares of preferred
stock, par value of $0.001 per share. As of September 30, 2017, 322,498,798 shares of the Company's common stock are issued and
outstanding. The holders of common stock are entitled to one vote per share for the election of directors and on all other matters
to be voted upon by the stockholders.
MARKET
FOR OUR COMMON STOCK AND
DETERMINATION
OF OFFERING PRICE
The
Company’s stock is currently thinly traded on the OTC Pink Sheets Markets under the symbol AVOZ.PK. As of September 30,
2017, we estimate that there were approximately 593 holders of record of our common stock. This figure does not take into account
those shareholders whose certificates are held in the name of brokerdealers or other nominees.
Our
common stock is traded on OvertheCounter Pink Sheets Market under the symbol AVOZ. The offering price is based upon the average
of the bid and asked prices of the Registrant’s common stock as quoted on PTCPink of $0.004 per share on November 20, 2017.
[2]
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The
following discussion of our financial condition and results of operation should be read in conjunction with the financial statements
and related notes that appear elsewhere in this prospectus. This discussion contains forwardlooking statements and information
relating to our business that reflect our current views and assumptions with respect to future events and are subject to risks
and uncertainties, including the risks in the section entitled Risk Factors beginning on page 5, that may cause our or our industry’s
actual results, levels of activity, performance or achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by these forwardlooking statements.
These
forwardlooking statements speak only as of the date of this prospectus. Although we believe that the expectations reflected in
the forwardlooking statements are reasonable, we cannot guarantee future results, levels of activity, or achievements. Except
as required by applicable law, including the securities laws of the United States, we expressly disclaim any obligation or undertaking
to disseminate any update or revisions of any of the forwardlooking statements to reflect any change in our expectations with
regard thereto or to conform these statements to actual results.
All
written and oral forwardlooking statements made are attributable to us or persons acting on our behalf. Given the uncertainties
that surround such statements, you are cautioned not to place undue reliance on such forwardlooking statements.
Company
Overview
Altavoz
is an independent, full service, direct music distributor offering a wide range of digital and physical distribution products
and marketing solutions for musicians. We use proprietary and traditional distribution channels and social media promotions to
connect our artists with music consumers. We work in two spheres of distribution: digital and physical. While the physical distribution
is limited, the core of the Company's business comes from the use of Distribution as a Service ("DaaS"). DaaS is a cloud
based software system that uses the Company's proprietary platform to distribute to online stores such as iTunes and Amazon.com,
as well as streaming devices, through mp3 and wav technology. It enables us to act as a middleman between artists and retail outlets.
DaaS connects artists with over 2,500 digital outlets across 74 countries, 3,000 retailers (online and brick and mortar) and over
16,000 public libraries. Altavoz directly markets our DaaS service to artists via appearances at trade shows and major industry
events, such as the Grammys, the Country Music Awards and the Billboard Music Awards.
We
implement Music Public Blockchain protocol, which is a computer based content management system that allows artists to manage
their music catalogs. We are an issuer of International Standard Recording Codes (“ISRCs”), which are critical identification
tools for sounds recording that enable tracking any iteration of the recordings across the digital and physical music market.
We can also issue Universal Product Codes (“UPCs”), which are used by physical retailers and online outlets to gather
and track sales information. Our use of IRSCs and UPCs allow us to distribute our artists’ music to the larger physical
and digital distributors and streaming services.
Altavoz
has business relationships with music industry leader, The Connexion, a white label (i.e. subdistributor) of InGrooves Fontana
Music Group. Through these relationships, Altavoz provides its customers with access to physical and digital stores they otherwise
could not otherwise obtain through direct sales; these relationships also give Altavoz bulk pricing and discount advantage
on platforms such as Amazon and iTunes, among others.
Artists
can face high startup costs when trying to promote their music. These costs include promotional and marketing expenses for all
forms of music content, as well as the cost of manufacturing, packaging and distributing physical CDs. One attractive draw for
smaller record labels and artists to Altavoz is that we do not charge them any a large upfront cost for distribution deals. Instead,
our customers, record labels and artists need only pay a smaller start-up fee; typically in the range of $1,000 to $5,000. A typical
contract would contain a two-year exclusivity for digital and physical music distribution. Altavoz is also working towards creating
a relationship with a lending institution to provide an Altavoz-backed loan through a separate entity. This service is not yet
available and might not be implemented.
Altavoz
splits the revenue for the music sales with our record label or artist customer. The split is usually on a sliding scale, ranging
from 50/50 on the first five thousand units sold, and going to a 70/30 split after sales reach twenty thousand units.
We
currently have exclusive distribution agreements with twenty artists and two music distributors. These distribution agreements
each typically generate between $100 and $600 per month, depending on the popularity of the artist and promotional efforts of
the Company.
Our
Competition
Our
management estimates that annual digital music sales are approximately $6.7 billion. Of this, management estimates that 90% is
controlled by the “Majors” (i.e. Capital Music Group/Universal, Sony Music Entertainment and Warner Music Group).
Independent distribution companies, of which we are one, account for the remaining 10% of the industry revenue.
Our
competitors are independent distribution companies such as Caroline Distribution backed by Capital Music Group/Universal;
RED Distribution, a division of Sony Music Entertainment; Redeye, a small independent. We know of no other company that offers
independent, smaller quantity release labels a DaaS platform to access physical and digital music retailers and wholesalers and
marketing intelligence data.
Growth
Strategy
The
Majors continue to streamline purchasing, which limits the number of wholesalers working with retailers. Altavoz provides distribution
with a global approach. For physical distribution, the Company has a base of over 3,000 media outlets, mainly consisting of independent
‘Mom & Pop' retailers (which is where most physical media of non-major artists is purchased in the United States). Altavoz
will also sell to other media outlets using One-Stops, considered a wholesaler's wholesaler, as they carry a wide number of selections
but in a limited amount. Digitally, our relationship with Fontana/Ingrooves ensure our artists are in all the download streaming
and digital outlets across 74 countries at the top of the industry payouts and with state of the art fraud and monetization capabilities
that our partners brings to Altavoz. In 2018 Altavoz will be one of the few distributors exporting American made music. Further,
by using our software that measures the geographic distribution of potential customers based on downloads and inquiries, Altavoz
can pinpoint oversea opportunities for suppliers and trading partners.
The
Company seeks to further develop its own intellectual property that would focus on geocentric retail placement to increase the
effectiveness of the DAAS system and enable retailers to make strategic business and marketing decisions. Using our cloud based
platform, Altavoz intends to offer this realtime awareness capability that aggregates and analyzes industry and internal data
into a "Fan Heat Map" giving our suppliers and retail partners actionable, strategic sales and marketing intelligence
on each product, down to the zip code. This data will be augmented by our software that will allow consumers to notify their friends,
Altavoz, and retailers that they are interested in a product. The data produced allows brickandmortar stores receive products
that are more likely to sell; generating fewer returns. We offer record labels access to this data so that they can best
plan bookings for tours, branding events, special performances, and more.
We
intend to develop our cloud based digital platform so that it provides a one stop solution for independent record labels and artists
giving them a music distribution platform with marketing intelligence through a Fan Heat Map, a universal payment option which
accepts credit card and bitcoin payments and a greater revenue through a higher royalty rate than other distribution companies.
Using
DaaS with the data from Fan Heat Map will allow our customers to make better strategic business decisions. We will then be able
to expand our distribution network and attract more established record labels and artists.
Dividends
The
Company has never paid any cash dividends on our common shares, and we do not anticipate that we will pay any dividends with respect
to those securities in the foreseeable future. Our current business plan is to retain any future earnings to finance the expansion
development of our business.
DESCRIPTION
OF SECURITIES TO BE REGISTERED
This
prospectus includes a public offering of 75,000,000 Shares of our common stock plus an additional 91,566,666 Shares offered by
the Selling Security Holders. The following description of our common stock is only a summary. You should also refer to our certificate
of incorporation and bylaws, which have been incorporated by reference as exhibits to the registration statement of which this
prospectus forms a part.
We
are authorized to issue 750,000,000 shares of common stock, par value of $0.001 per share and 100,000,000 shares of preferred
stock, par value of $0.001 per share. As of September 30, 2017, there were 322,498,798 shares of the Company's common stock issued
and outstanding. The holders of common stock are entitled to one vote per share for the election of directors and on all other
matters to be voted upon by the stockholders.
There
is no cumulative voting. Subject to preferences that may be applicable to any outstanding securities, the holders of common stock
are entitled to receive, when and if declared by the board of directors, out of funds legally available for such purpose, any
dividends on a pro rata basis. In the event of our liquidation, dissolution or winding up, the holders of common stock are entitled
to share ratably in all assets remaining after payment of liabilities, subject to prior distribution rights of preferred stock,
if any, then outstanding. The common stock has no preemptive or conversion rights or other subscription rights. There are no redemption
or sinking fund provisions applicable to the common stock.
RESULTS
OF OPERATIONS
A
summary of the U.S. GAAP results of operations for the quarters ended September 30, 2017 and 2016 and for the years ended December
31, 2016 and 2015, as disclosed in our consolidated financial statements in Item 8,
Financial Statements and Supplementary
Data,
herein referred to as our "
consolidated financial statements
" is as follows:
Revenue:
The
following table compares revenues received by the Company in the quarters ended September 30, 2017 and 2016 and the revenue received
in the fiscal years ended December 31, 2016 and December 31, 2015:
|
Revenue
for the Quarters Ended September 30, 2017 and 2016
|
|
|
|
Quarter
Ended
|
Quarter
Ended
|
Increase/
|
|
|
September
30, 2017
|
September
30, 2016
|
Decrease
|
|
Sales
– Net
|
$3,009
|
$4,029
|
$(1,020)
|
|
Cost
of Goods Sold
|
$778
|
$635
|
$143
|
|
Gross
Profit (Loss)
|
$2,231
|
$3,394
|
$(1,163)
|
|
Gross
Profit (Loss) as a Percentage of Revenue
|
74%
|
84%
|
(10%)
|
|
|
|
|
|
|
Revenue
for the Years Ended December 31, 2016 and 2015
|
|
|
|
Year
Ended
|
Year
Ended
|
Increase/
|
|
|
Dec.
31,2016
|
Dec.
31, 2015
|
Decrease
|
|
Sales
– Net
|
$15,385
|
$9,875
|
$5,510
|
|
Cost
of Sales
|
$7,955
|
$8,899
|
$(944)
|
|
Gross
Profit (Loss)
|
$7,430
|
$976
|
$6,454
|
|
Gross
Profit (Loss) as a Percentage of Revenue
|
42%
|
10%
|
32%
|
|
|
|
|
|
|
Operating
Expenses:
The
following table compares operating expenses of the Company in the quarters ended September 30, 2017 and 2016 and the operating
expenses in the fiscal years ended December 31, 2016 and 2015:
|
Operating
Expenses for the Quarters Ended September 30, 2017 and 2016
|
|
|
|
|
Quarter
Ended
|
Quarter
Ended
|
Increase/
|
|
|
September
30, 2017
|
September
30, 2016
|
Decrease
|
|
Selling
Expenses (Marketing, Travel and Entertainment)
|
$347
|
$
1,438
|
$(1,091)
|
|
|
General and Administrative
Expenses
|
$85,618
|
$50,617
|
$35,001
|
|
|
Total
Operating Expenses
|
$85,965
|
$52,055
|
$33910
|
|
|
Other Income (Expenses)
|
$0
|
$0
|
$0
|
|
|
Net
Loss before Taxes
|
$83,734
|
$48,661
|
$35,073
|
|
|
|
|
|
Operating
Expenses for the Fiscal Years Ended December 31, 2016 and 2015
|
|
|
|
|
|
|
|
|
|
Year
Ended
|
Year
Ended
|
Increase/
|
|
|
Dec.
31, 2016
|
Dec.
31, 2015
|
Decrease
|
|
|
Selling Expenses
|
$29,926
|
$9,390
|
$20,536
|
|
|
Total
General and Administrative Expenses
|
$
4,214,845
|
$
79,938
|
$4,134,907
|
|
|
Total Operating Expenses
|
$4,244,771
|
$89,328
|
$4,155,443
|
|
|
Other
Income (Expenses)
|
$(28,882,500)
|
$0
|
$28,882,500
|
|
|
Net Loss
|
$33,122,841
|
$89,549
|
$33,033,292
|
|
|
|
|
|
|
|
|
Liquidity
and Capital Resources:
The
following table compares the liquidity and capital resources of the Company in the quarters ended September 30, 2017 and 2016
and the liquidity and capital resources in the fiscal years ended December 31, 2016 and 2015:
|
Liquidity
and Capital Resources for the Quarters Ended September 30, 2017 and 2016
|
|
|
|
|
Quarter
Ended
|
Quarter
Ended
|
Increase/
|
|
|
September
30, 2017
|
September
30, 2016
|
Decrease
|
|
Current
Assets
|
$0
|
$12,522
|
$(12,522)
|
|
|
Current Liabilities
|
$298,702
|
$40,938
|
$257,764
|
|
|
Accounts
Payable and Accrued Expenses
|
$
256,577
|
$40,938
|
$215,639
|
|
|
Working Capital (Deficit)
|
$(298,702)
|
$(28,416)
|
$(270,286)
|
|
|
|
|
|
Liquidity
and Capital Resources for the Fiscal Years Ended December 31, 2016 and 2015
|
|
|
|
|
|
|
|
|
|
Year
Ended
|
Year
Ended
|
Increase/
|
|
|
Dec.
31, 2016
|
Dec.
31, 2015
|
Decrease
|
|
Current
Assets
|
$0
|
$951
|
($951)
|
|
|
Current Liabilities
|
$90,409
|
$211,055
|
$(120,646)
|
|
|
Accounts
Payable and Accrued Expenses
|
$84,906
|
$41,552
|
$43,354
|
|
|
Working Capital
|
$(90,409)
|
$(210,104)
|
$119,695
|
|
|
|
|
|
|
|
|
Satisfaction
of Our Cash Obligations for the Next 12 Months:
We
believe that over the next twelve months our existing capital combined with anticipated cash flow from operations will not be
sufficient to sustain our current operations. Management estimates that to fund our operations, projected business expansion and
the professional costs of operating a public entity (i.e. legal, accounting and auditing expenses) it will need approximately
$300,000 over the next twelve months. Management further estimates that if it scaled back its expansion plans and deferred paying
some of its professional expenses until after the effectiveness of this registration, it would need to expend approximately $120,000
over the next 12 months, of which approximately $36,000 would be derived from business operations and the balance from private
and related-party investments.
Two
of our major stockholders, Frank Rubba and the Jacobsen Family trust have made non-binding agreements to fund our operational
shortfall for the next 12 months from time to time as needed. In the event we locate potential acquisitions and/or mergers we
will most likely need to obtain additional funding through the sale of equity and/or debt securities. There can be no assurances
that we will receive the funds from the stockholders or that we will be able to secure funding from other sources on terms that
are favorable to us, or at all.
Research
and Development:
We
have no existing commitments for cash expenditures on research and development. However, As funds become available through the
proceeds of this offering or otherwise, we will pursue technical improvements to our existing cloud-based distribution system
and computer-based management system.
Expected
Purchase or Sale of Plant and Significant Equipment:
We
have no existing commitments for the purchase or sale of any plant or significant equipment; as such items are not required
by us at this time.
Significant
Changes in the Number of Employees:
We
currently have 1 fulltime employee. The employee maintains and updates our cloud-based distribution system, computer-based management
system and provides customer and technical support. Over the next 12 months, we intend to hire additional employees to assist
and expand these functions as our needs and available cash dictate. None of our employees are subject to any collective bargaining
agreements.
OffBalance
Sheet Arrangements:
We
do not have any offbalance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial
condition, results or operations, liquidity, capital expenditures or capital resources that is deemed material.
SELLING
SHAREHOLDERS
Selling
shareholders hold 341,666 shares of the Company’s common stock under the Company’s Private Placement Memorandum Dated
July 15, 2016; 9,300,000 shares of the Company’s common stock issued as compensation to professionals; and 62,000,000
shares of the Company’s common stock issued to insiders in private transactions.
The
table below sets forth:
|
|
·
|
The
name of each of the Selling Shareholders;
|
|
|
·
|
The
number of shares and percentage of common stock beneficially owned by each of the Selling
Shareholders as of September 30, 2017;
|
|
|
·
|
The
number of shares that may be offered for sale by the Selling Shareholders under this
prospectus;
|
|
|
·
|
The
number of shares and percentage of common stock that would be beneficially owned by each
of the Selling Shareholders if they were to sell all of their shares offered for sale
under this prospectus (assuming a sale of all of the common stock that may be offered
by this prospectus).
|
No
material relationships exist between any of the Selling Shareholders and the Company, except as identified in the footnotes to
this table nor have any such material relationships existed within the past three years. None of the Selling Shareholders are
members of the Financial Industry Regulatory Authority (FINRA), or affiliates of such members, except as noted in the footnotes
below.
Beneficial
ownership is determined under the rules of the SEC and includes investment power with respect to common stock. The shares issuable
under this offering are not treated as outstanding for the purposes of computing the percentage ownership of any person.
Except
as indicated below, the Selling Shareholders are not the beneficial owners of any additional shares of common stock or other equity
securities issued by us or any securities convertible into, or exercisable or exchangeable for, our equity securities.
We
may require the Selling Shareholders to suspend the sales of common stock offered by this prospectus upon the occurrence of any
event that makes any statement in this prospectus or the related registration statement untrue in any material respect or that
requires the changing of statements in these documents in order to make statements in those documents not misleading.
|
|
|
Beneficial
Ownership
|
|
|
Beneficial
Ownership
|
|
|
|
Prior
to this Offering
|
|
|
After
to this Offering
|
|
Selling
Shareholder
|
|
No.
of
|
Percentage
|
|
Shares
to be
|
No.
of
|
Percentage
|
|
|
|
Shares
|
|
|
Offered
|
Shares
|
|
|
Capricorn
Partners
(1)
|
|
1,650,000
|
Pt
|
1%
|
1,650,000
|
0
|
0%
|
|
Gus
West & Assoc.
|
41666-pp
|
2,041,666
|
2mm-pt
|
1%
|
2,041,666
|
0
|
0%
|
|
Lee
Ginsberg
|
|
1,000,000
|
|
0%
|
1,000,000
|
0
|
0%
|
|
Michael
Mannicho
|
|
2,000,000
|
|
1%
|
2,000,000
|
0
|
0%
|
|
Martone
Construction Corp.
|
300000-pp
|
36,300,000
|
|
11%
|
36,300,000
|
0
|
0%
|
|
Walter
McDonough
|
|
2,000,000
|
|
1%
|
2,000,000
|
0
|
0%
|
|
Meltzman
Venture Capital
|
|
2,000,000
|
|
1%
|
2,000,000
|
0
|
0%
|
|
Motor
Media USA, LLC
|
|
150,000
|
|
0%
|
150,000
|
0
|
0%
|
|
Mirsada
Muratovic
|
|
500,000
|
|
0%
|
500,000
|
0
|
0%
|
|
Jeff
Osborn
|
|
150,000
|
|
0%
|
150,000
|
0
|
0%
|
|
Out
of Order, LLC
(1)
|
|
14,800,000
|
|
5%
|
14,800,000
|
0
|
0%
|
|
Paul
A. Rachmuth
(2)
|
|
1,000,000
|
|
0%
|
1,000,000
|
0
|
0%
|
|
Robert
Rowe
|
|
6,500,000
|
|
2%
|
6,500,000
|
0
|
0%
|
|
Frank
Rubba
|
|
21,475,000
|
|
7%
|
21,475,000
|
0
|
0%
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
91,566,666
|
|
|
91,566,666
|
|
|
|
|
(1)
|
Capricorn
Partners and Out of Order, LLC have common ownership and, combined, hold 6% of the Company’s
outstanding stock prior to this offering.
|
|
|
(2)
|
Paul
A. Rachmuth acts as the Company’s General Counsel, who received his shares for
services rendered to the Company.
|
PLAN
OF DISTRIBUTION
As
our shares are currently only listed on the OTC Pink Sheet Markets, the current and potential market for our common stock is limited
and the liquidity of our shares may be severely limited.
The
trading price of our common stock could be subject to wide fluctuations in response to various events or factors, many of which
are beyond our control. As a result, investors may be unable to sell their shares at or greater than the price at which they are
being offered.
To
the extent required, this prospectus may be amended or supplemented from time to time to describe a specific plan of distribution.
If the plan of distribution involves an arrangement with a brokerdealer for the sale of shares through a block trade, special
offering, or secondary distribution or purchase by a broker or dealer, the amendment or supplement will disclose:
|
|
·
|
the
name of the participating brokerdealer(s);
|
|
|
·
|
the
number of shares involved;
|
|
|
·
|
the
commissions paid or discounts or concessions allowed to the brokerdealer(s), where applicable;
|
|
|
·
|
that
a brokerdealer(s) did not conduct any investigation to verify the information set out
or incorporated by reference in this prospectus; and
|
|
|
·
|
other
facts material to the transaction.
|
In
effecting sales, brokerdealers engaged by us may arrange for other brokerdealers to participate. Brokerdealers or agents may receive
compensation in the form of commissions, discounts or concessions. Brokerdealers or agents may also receive compensation from
the purchasers of the shares for whom they act as agents. Compensation as to a particular brokerdealer might be in excess of customary
commissions and will be in amounts to be negotiated in connection with the sale. Brokerdealers or agents and any other participating
brokerdealers may be deemed to be "underwriters" within the meaning of Section 2(11) of the Securities Act of 1933,
as amended, in connection with sales of the shares. Accordingly, any commission, discount or concession received by them and any
profit on the resale of the shares purchased by them may be deemed to be underwriting discounts or commissions under the Securities
Act.
The
shares will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws.
In
addition, in some states the shares may not be sold unless they have been registered or qualified for sale in the applicable state
or an exemption from the registration or qualification requirement is available and is complied with.
Under
applicable rules and regulations under the Securities Exchange Act, any person engaged in the distribution of the shares may not
simultaneously engage in market making activities with respect to our common stock for a period beginning on the later of one
business day prior to the determination of the offering price or such time that a person becomes a distribution participant, and
ending upon such person's completion of participation in the distribution. In addition, each Selling Shareholder will be subject
to applicable provisions of the Securities Exchange Act and the associated rules and regulations under the Securities Exchange
Act, including Regulation M, which provisions may limit the timing of purchases and sales of shares of our common stock by the
Selling Shareholders. We will make copies of this prospectus available to the Selling Shareholders and have informed them of the
need to deliver copies of this prospectus to purchasers at or prior to the time of any sale of the shares.
Investors
can purchase common stock in this offering by completing a Subscription Agreement, a copy of which is filed as Exhibit 99.1 to
the registration statement of which this prospectus is a part, and sending it together with payment in full. All payments must
be made in United States currency either by personal check, bank draft, or cashier check. There is no minimum subscription requirement.
All subscription agreements and checks are irrevocable. The Company expressly reserves the right to either accept or reject any
subscription. Any subscription rejected will be returned to the subscriber within five business days of the rejection date. Furthermore,
once a subscription agreement is accepted, it will be executed without reconfirmation to or from the subscriber. Once we accept
a subscription, the subscriber cannot withdraw it.
Any
purchasers of our securities should be aware that any market that develops in our common stock will be subject to "penny
stock" restrictions.
We
will pay all expenses incident to the registration, offering and sale of the shares other than commissions or discounts of underwriters,
brokerdealers or agents.
Insofar
as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling
persons, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
We
will bear the costs of registering the shares.
RELATED
PARTY TRANSACTIONS
In
the ordinary course of business, we enter into transactions with related parties, primarily our equity method investors and entities
owned and controlled by the Chairman of our Board of Directors. In particular, Nelson Jacobsen and the Jacobsen Family Trust have
advanced the Company $223,620 and Frank Rubba had advanced the Company $63,620. The conversion of these amounts is discussed in
the subsequent event section of Footnote #2 of the consolidated financial statements. The conversion of the promissory note is
disclosed in subsequent event section of Footnote #2 of the consolidated financial statements.
On
August 25, 2016, Nelson Jacobsen and Frank Rubba entered into an agreement for the sale by Mr. Jacobsen to Mr. Rubba of 15,000,000
shares of the Company’s stock for $50,000.
On
September 25, 2017, Nelson Jacobsen and Gus West & Assoc. entered into an agreement for the sale by Mr. Jacobsen to Gus West
& Assoc. of 2,000,000 shares of the Company’s stock for $5,000.
On
September 25, 2017, Nelson Jacobsen and Martone Construction entered into an agreement for the sale by Mr. Jacobsen to Martone
Construction of 6,000,000 shares of the Company’s stock for $15,000.
On
September 25, 2017 Nelson Jacobsen and Ken Balog entered into an agreement for the sale by Mr. Jacobsen to Mr. Balog of 2,000,000
shares of the Company’s stock for $5,000.
On
October 23, 2017 Nelson Jacobsen and Martone Construction entered into an agreement for the sale by Mr. Jacobsen to Martone Construction
of 30,000,000 shares of the Company’s stock for $75,000.
On
October 25, 2017 the Company issued 25,000,000 shares of restricted common stock to Nelson Jacobsen (founder and shareholder)
for $50,000.
NEW
ACCOUNTING AND REPORTING PRONOUNCEMENTS
During
the year ended December 31, 2016 and through December 31, 2015, there were several new accounting pronouncements issued by the
Financial Accounting Standards Board. Each of these pronouncements, as applicable, has been or will be adopted by the Company.
Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the
Company’s consolidated financial statements.
CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
The
preparation of financial statements and related notes requires us to make judgments, estimates, and assumptions that affect the
reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities.
An
accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters
that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or
changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the financial statements.
Financial
Reporting Release No. 60 requires all companies to include a discussion of critical accounting policies or methods used in the
preparation of financial statements. There are no critical policies or decisions that rely on judgments that are based on assumptions
about matters that are highly uncertain at the time the estimate is made. Note 2 to the financial statements, included elsewhere
in this prospectus, includes a summary of the significant accounting policies and methods used in the preparation of our financial
statements.
Revenue
Recognition
The
Company's management recognizes revenue when realized or realizable and earned. In connection with revenue, the Company established
a sales return and allowance reserve for anticipated merchandise to be returned based on historical operations. The Company's
sole revenue producing activity as a manufacturer and distributor of music is affected by movement in trends and customer desire
for new artists, varying economic conditions affecting consumer spending and changing product demand by retailers affecting their
desired inventory levels.
A
portion of the Company’s business involves the distribution of physical items (i.e. CDs and DVDs) to retail outlets. The
changes in the music trends may result in the retailers returning some unsold merchandise. The Company’s general policy
is to accept returns within a negotiated time from when shipped. The company does not hold reserves against potential returns.
Instead it reduces current revenue when credits for returns are issued.
CONTRACTUAL
COMMITMENTS
A
table with our contractual commitments is not required for smaller reporting companies within our MD&A. For information regarding
our contractual commitments refer to the footnotes of our consolidated financial statements.
QUANTITATIVE
AND QUALITATIVE
DISCLOSURES
ABOUT MARKET RISK
Quantitative
and Qualitative Disclosures about Market Risk is not required for smaller reporting companies
MANAGEMENT
Directors
and Executive Officers
The
following table and text sets forth the names and ages of all our directors and executive officers and our key management personnel
as of November 28, 2017. All our directors serve until the next annual meeting of stockholders and until their successors are
elected and qualified, or until their earlier death, retirement, resignation or removal. Executive officers serve at the discretion
of the board of directors, and are elected or appointed to serve until the next Board of Directors meeting following the annual
meeting of stockholders. Also provided is a brief description of the business experience of each director and executive officer
and the key management personnel during the past five years and an indication of directorships held by each director in other
companies’ subject to the reporting requirements under the Federal securities laws.
Set
forth below are the names, ages and positions of our directors and executive officers:
|
Name
|
Age
|
Position
|
|
Nelson Jacobsen
|
53
|
Chief Executive Officer
and Director
|
|
Kenneth Balog
|
53
|
Director
|
Nelson
Jacobsen, Director, Chief Executive Officer
Mr.
Jacobsen has decades of experience in the entertainment industry, through which he has developed a level of expertise in identifying
and aligning technology strategies with corporate goals and driving initiatives that support social causes. Mr. Jacobsen has been
the President of Altavoz, Inc. from its inception in 2011 until its merger with the Company in 2015. He has served as the Company’s
President since 2015. Prior to his involvement with the Company, Mr. Jacobsen served as the Chief Executive Officer of Community
Paperworks, Partner in Hastatus LLC and President of Leapfrog Productions. Additionally, Mr. Jacobsen has founded Help Earth Foundation,
launched CrisisCamp and RHoK DC, and is a member of the Tech@State advisory group to the State Department regarding the use of
technology. Mr. Jacobsen has not been an executive or board member of any other public company.
Kenneth
Edward Balog, Director
Mr.
Balog has over twenty years of experience in digital media. His career achievements include creating the first nonradio station
distribution deal with AudioNet/Broadcast.com (n.k.a.: Yahoo! Broadcasting). For the past five years Mr. Balog has been the Chief
Digital Officer of Hoopla digital, a digital media platform of Midwest Tapes, LLC. Mr. Balog has not been an executive or board
member of any other public company.
Director
Independence
Our
Board reviewed the NASDAQ independence standards with regard to our directors, including whether specified transactions or relationships
existed during the past three years, between our directors, or certain family members or affiliates of our directors, and certain
other affiliates, or our independent registered public accounting firm. As a result of the review, our Board determined that Ken
Balog is an "independent" as that term is used in NASDAQ Marketplace Rule 5605. We do not know of any family relationships
among or between any of our directors, executive officers, or key employees. With regard to the independence of our directors
regarding committee independence, see Board of Directors and Corporate Governance Committees of the Board below.
Term
of Office
Our
directors are appointed for a oneyear term to hold office until the next annual general meeting of our shareholders or until removed
from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed
by the board, except to the extent governed by an employment agreement.
Involvement
in Certain Legal Proceedings
To
the best of our knowledge, during the past ten years, none of the following occurred with respect to our present or former director,
executive officer, or employee: (1) any bankruptcy petition filed by or against any business of which such person was a general
partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction
in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
(3) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type
of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action),
the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the
judgment has not been reversed, suspended or vacated.
Meetings
of Our Board of Directors
Our
board of directors did not hold any meetings during the most recently completed fiscal year end. Various matters were approved
by consent resolution, which in each case was signed by each of the members of the Board then serving.
Committees
of the Board
We
do not currently have a compensation committee, executive committee, or stock plan committee.
The
board of directors will establish an audit committee and a compensation committee. The audit committee will review the results
and scope of the audit and other services provided by the independent auditors and review and evaluate the system of internal
controls. The compensation committee will manage any stock option plan we may establish and review and recommend compensation
arrangements for the officers. No final determination has yet been made as to the size of memberships of these committees or when
we will have sufficient members to establish committees.
Audit
Committee
We
do not have a separately designated standing audit committee. The entire Board of Directors performs the functions of an audit
committee, but no written charter governs the actions of the Board when performing the functions of what would generally be performed
by an audit committee. The Board approves the selection of our independent accountants and meets and interacts with the independent
accountants to discuss issues related to financial reporting. In addition, the Board reviews the scope and results of the audit
with the independent accountants, reviews with management and the independent accountants our annual operating results, considers
the adequacy of our internal accounting procedures and considers other auditing and accounting matters including fees to be paid
to the independent auditor and the performance of the independent auditor.
Nomination
Committee
Our
board of directors does not maintain a nominating committee. As a result, no written charter governs the director nomination process.
Our size and the size of our Board, at this time, do not require a separate nominating committee. When evaluating director nominees,
our directors consider the following factors:
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The
appropriate size of our board of directors;
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Our
needs with respect to the particular talents and experience of our directors;
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·
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The
knowledge, skills and experience of nominees, including experience in finance, administration
or public service, in light of prevailing business conditions and the knowledge, skills
and experience already possessed by other members of the Board;
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Experience
in political affairs;
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Experience
with accounting rules and practices; and
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The
desire to balance the benefit of continuity with the periodic injection of the fresh
perspective provided by new Board members.
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Our
goal is to assemble a Board that brings together a variety of perspectives and skills derived from high quality business and professional
experience. In doing so, the Board will also consider candidates with appropriate nonbusiness backgrounds.
Other
than the foregoing, there are no stated minimum criteria for director nominees, although the Board may also consider such other
factors as it may deem are in our best interests as well as those of our stockholders. In addition, the Board identifies nominees
by first evaluating the current members of the Board willing to continue in service. Current members of the Board with skills
and experience that are relevant to our business and who are willing to continue in service are considered for renomination. If
any member of the Board does not wish to continue in service or if the Board decides not to renominate a member for reelection,
the Board then identifies the desired skills and experience of a new nominee in light of the criteria above. Current members of
the Board are polled for suggestions as to individuals meeting the criteria described above. The Board may also engage in research
to identify qualified individuals. To date, we have not engaged third parties to identify or evaluate or assist in identifying
potential nominees, although we reserve the right in the future to retain a thirdparty search firm, if necessary. The Board does
not typically consider shareholder nominees because it believes that its current nomination process is sufficient to identify
directors who serve our best interests.
Section
16(a) Beneficial Ownership Reporting Compliance
Our
officers, directors and shareholders owning greater than ten percent of our shares are not required to comply with Section l 6(a)
of the Securities Exchange Act of 1934 because we do not have a class of securities registered under Section 12 of the Securities
Exchange Act of 1934.
Code
of Ethics
Our
Code of Ethics states that each executive officer, director or nominee for director will disclose to the Board the following information
regarding a relatedperson transaction for review, approval or ratification by the Board: (i) the name of the relatedperson (as
defined by Item 404(a) of Regulation SK under the Securities Exchange Act), and if he or she is an immediate family member of
an executive officer, director or nominee for director, the nature of such relationship; (ii) the relatedperson's interest
in the transaction; (iii) the approximate dollar value of the amount involved in the transaction; (iv) the approximate
dollar value of the amount of the relatedperson's interest in the transaction; and (v) in the case of indebtedness, the largest
total amount of principal outstanding since the beginning of our last fiscal year, the amount of principal outstanding as of the
latest practicable date, the amount of principal paid since the beginning of our last fiscal year, and the rate or amount of interest
payable on the indebtedness.
EXECUTIVE
COMPENSATION
Overview
The
following is a discussion of our program for compensating our named executive officers and directors. Currently, we do not have
a compensation committee, and, as such, our board of directors is responsible for determining the compensation of our named executive
officers.
Compensation
Program Objectives and Philosophy
The
primary goals of our policy of executive compensation are to attract and retain the most talented and dedicated executives possible,
to insure our executives are compensated effectively in a manner consistent with our strategy and competitive practice and to
align executive compensation with the achievement of our short and longterm business objectives.
The
board of directors considers a variety of factors in determining compensation of executives, including their particular background
and circumstances, such as their training and prior relevant work experience, their success in attracting and retaining savvy
and technically proficient managers and employees, increasing our revenues, broadening our product line offerings, managing our
costs and otherwise helping to lead our Company through a period of rapid growth.
In
the near future, we expect that our board of directors will form a compensation committee charged with the oversight of executive
compensation plans, policies and programs of our Company and with the full authority to determine and approve the compensation
of our chief executive officer and make recommendations with respect to the compensation of our other executive officers. We expect
that our compensation committee will continue to follow the general approach to executive compensation that we have followed to
date, rewarding superior individual and company performance with commensurate cash compensation.
Employment
Agreements
The
executives currently do not work under Employment Agreements.
StockBased
Awards under the Equity Incentive Plan
Currently,
we do not provide StockBased Awards under the Equity Incentive Plan to any employee, including the named executive officers.
Retirement
Benefits
Currently,
we do not provide Company sponsored retirement benefits to any employee, including the named executive officers.
Perquisites
We
have historically provided only modest perquisites to our named executive officers. We do not view perquisites as a significant
element of our compensation structure, but do believe that perquisites can be useful in attracting, motivating and retaining the
executive talent for which we compete. It is expected that our historical practices regarding perquisites will continue and will
be subject to periodic review by our board of directors
Summary
Compensation Table
The
table below summarizes all compensation awarded to, earned by, or paid to our directors and executive officers for all services
rendered in all capacities to us for the years ended December 31, 2016, 2015 and 2014.
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Name
|
Year
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Salary
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Bonus
|
Option
|
Stock
Awards & Non
|
Nonqualified
|
All
Other
|
Total
|
|
|
|
|
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Awards
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Equity
Incentive Plan
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Deferred
Comp.
|
Comp.
|
|
|
|
|
|
|
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Comp.
|
Earnings.
|
|
|
|
|
|
|
|
|
|
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|
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Nelson
Jacobsen
(1)
|
2016
|
$0
|
$0
|
$0
|
|
$12,000
|
$53,252
|
$65,252
|
|
|
|
|
|
|
|
|
|
|
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2015
|
$0
|
$0
|
$0
|
|
$0
|
$12,323
|
$12,323
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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2014
|
$0
|
$0
|
$0
|
|
$0
|
$0
|
$0
|
|
|
|
|
|
|
|
|
|
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|
Kenneth
|
2016
|
$0
|
$0
|
$0
|
60,000
Shares
|
$0
|
$0
|
$0
|
|
Edward
Balog
(2)
|
|
|
|
|
|
|
|
|
|
2015
|
$0
|
$0
|
$0
|
|
$0
|
$0
|
$0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
$0
|
$0
|
$0
|
|
$0
|
$0
|
$0
|
|
|
|
|
|
|
|
|
|
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1
Through October 2016, Nelson Jacobsen’s compensation had been determined by the company’s cash
availability. Beginning November 2016, Mr. Jacobsen has been accruing $6,000 per month in deferred compensation.
2
The Shares awarded Kenneth Balog represent compensation for his services as a Director.
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Incentive
Stock and Award Plan
None.
Stock
Option Grants
We
have not granted any stock options to the executive officers or directors since the adoption of the Plan.
Director
Compensation
None.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth, as of October 31, 2017, certain information as to shares of our common stock owned by (i) each person
known by us to beneficially own more than 5% of our outstanding common stock, (ii) each of our directors, and (iii) all of our
executive officers and directors as a group:
|
Names
and Addresses of Directors, Officers and 5%
|
Number
of Shares Owned
|
Percent
|
|
Stockholders
|
|
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Nelson
Jacobsen
|
186,270,000
(1)
|
58%
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4324
Yuma St. NW
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Washington,
DC 20016
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Kenneth
Edward Balog
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2,060,000
|
1%
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11019
Old Washington Hwy.
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Glen
Allen, VA 23059
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AVOZ,
LLC
|
1,250,000
|
0%
|
|
4324
Yuma St. NW
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Washington,
DC 20016
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Jacobsen
Family Trust
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63,000,000
|
20%
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1633
Nordic Hill Cr.
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Silver
Springs MD 20906
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Out
of Order, LLC/Capricorn Partners
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16,450,000
|
5%
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3055
N Mountain Road, #209
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Mesa,
AZ 85207
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Frank
Rubba
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21,475,000
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7%
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22
Surrey Lane
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Ocean,
NJ 07712
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Martone
Construction Management Inc.
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36,300,000
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5%
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5165
Macarthur Blvd.
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|
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Washington,
DC 20016
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|
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1.
Nelson Jacobsen's ownership includes his direct ownership, the ownership of his dependent children, his spouse's ownership,
and his ownership AVOZ, LLC.
DIVIDEND
POLICY
We
have never paid cash or any other form of dividend on our common stock, and we do not anticipate paying cash dividends in the
foreseeable future. Moreover, any future credit facilities might contain restrictions on our ability to declare and pay dividends
on our common stock. We plan to retain all earnings, if any, for the foreseeable future for use in the operation of our business
and to fund the pursuit of future growth. Future dividends, if any, will depend on, among other things, our results of operations,
capital requirements and on such other factors as our board of directors, in its discretion, may consider relevant.
DESCRIPTION
OF CAPITAL STOCK AND WARRANTS
The
following is a summary description of our capital stock. Copies of our charter and bylaws are filed as exhibits to the registration
statement of which this prospectus is a part. See "Where You Can Find More Information."
Common
Stock
All
shares of our common stock have equal rights as to earnings, assets, distributions and voting and, when issued and paid for, will
be duly authorized, validly issued, fully paid and nonassessable. Distributions may be paid to the holders of our common stock
if, as and when authorized by our board of directors and declared by us out of funds legally available therefore. Shares of our
common stock have no preemptive, appraisal, preferential exchange, conversion or redemption rights and are freely transferable,
except where their transfer is restricted by federal and state securities laws, by contract or by the restrictions in our charter.
In the event of our liquidation, dissolution or winding up, each share of our common stock will be entitled to share ratably in
all of our assets that are legally available for distribution after payment of or adequate provision for all of our known debts
and other liabilities and subject to any preferential rights of holders of our preferred stock, if any preferred stock is outstanding
at such time. Subject to our charter restrictions on the transfer and ownership of our stock and except as may be specified otherwise
in the terms of any class or series of our common stock, each share of our common stock entitles the holder to one vote on all
matters submitted to a vote of stockholders, including the election of directors. Except as provided with respect to any other
class or series of stock, the holders of our common stock will possess exclusive voting power. There is no cumulative voting in
the election of directors, which means that holders of a majority of the outstanding shares of common stock can elect all of our
directors and holders of Jess than a majority of such shares will be unable to elect any director.
Our
certificate of incorporation authorizes the issuance of Seven Hundred and Fifty Million (750,000,000) shares of common stock with
a par value of $.001 per share. There are Three Hundred Twenty-Two Million, Four Hundred Ninety-Eight Thousand, Seven Hundred
and Ninety-Eight (322,498,798) shares of common stock issued and outstanding at September 30, 2017 that are held by Five Hundred
Ninety-Three (593) shareholders.
Holders
of our common stock:
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have
equal ratable rights to dividends from funds legally available for payment of dividends
when, as and if declared by the board of directors;
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are
entitled to share ratably in all of the assets available for distribution to holders
of common stock upon liquidation, dissolution or winding up of our affairs;
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do
not have preemptive, subscription or conversion rights, or redemption or access to any
sinking fund; and
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are
entitled to one noncumulative vote per share on all matters submitted to stockholders
for a vote at any meeting of stockholders.
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The
rights of shareholders of Nevada corporations are described below. In addition, the Board of Directors, without a shareholder
vote, has the right to amend our bylaws to make it harder or easier to effect a change in our control. A majority of shareholder
votes are required for persons to become directors. In addition, shareholders may submit proposals to be voted on at annual meetings,
but such items may be rejected by the Board of Directors.
Preferred
Stock
Our
certificate of incorporation authorizes the issuance of One Hundred Million (100,000,000) shares of preferred stock with designations,
rights and preferences determined from time to time by our board of directors. No shares of preferred stock have been designated,
issued or are outstanding. Accordingly, our board of directors is empowered, without stockholder approval, to issue up to authorized
but unissued of One Hundred Million (100,000,000) shares of preferred stock with voting, liquidation, conversion, or other rights
that could adversely affect the rights of the holders of the common stock. Although we have no present intention to issue any
of these shares of preferred stock, there can be no assurance that we will not do so in the future.
Among
other rights, our board of directors may determine, without further vote or action by our stockholders:
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·
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the
number of shares and the designation of the series;
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·
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whether
to pay dividends on the series and, if so, the dividend rate, whether dividends will
be cumulative and, if so, from which date or dates, and the relative rights of priority
of payment of dividends on shares of the series;
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·
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whether
the series will have voting rights in addition to the voting rights provided by law and,
if so, the terms of the voting rights;
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·
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whether
the series will be convertible into or exchangeable for shares of any other class or
series of stock and, if so, the terms and conditions of conversion or exchange;
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·
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whether
or not the shares of the series will be redeemable and, if so, the dates, terms and conditions
of redemption and whether there will be a sinking fund for the redemption of that series
and, if so, the terms and amount of the sinking fund; and
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·
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the
rights of the shares of the series in the event of our voluntary or involuntary liquidation,
dissolution or winding up and the relative rights or priority, if any, of payment of
shares of the series.
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We
presently do not have plans to issue any additional shares of preferred stock. However, preferred stock could be used to dilute
a potential hostile acquirer. Accordingly, any future issuance of preferred stock or any rights to purchase preferred shares may
have the effect of making it more difficult for a third party to acquire control of us. This may delay, defer or prevent a change
of control in our Company or an unsolicited acquisition proposal. The issuance of preferred stock also could decrease the amount
of earnings attributable to, and assets available for distribution to, the holders of our common stock and could adversely affect
the rights and powers, including voting rights, of the holders of our common stock.
Authorized
but UnIssued Capital Stock
Nevada
law does not require stockholder approval for any issuance of authorized shares. These additional shares may be used for a variety
of corporate purposes, including future public offerings to raise additional capital or to facilitate corporate acquisitions.
One
of the effects of the existence of unissued and unreserved common stock (and/or preferred stock) may be to enable our board of
directors to issue shares to persons friendly to current management, which issuance could render more difficult or discourage
an attempt to obtain control of our board by means of a merger, tender offer, proxy contest or otherwise, and thereby protect
the continuity of our management and possibly deprive the stockholders of opportunities to sell their shares of our common stock
at prices higher than prevailing market prices.
Warrants
We
presently do not have any outstanding warrants for any class of our stock. We have no present intentions to offer to anyone warrants
for any class of our stock.
SHAREHOLDER
MATTERS
As
an issuer of "penny stock" the protection provided by the federal securities laws relating to forwardlooking statements
does not apply to us if our shares are considered to be penny stocks, which they currently are and probably will be for the foreseeable
future. Although the federal securities law provides a safe harbor for forwardlooking statements made by a public company that
files reports under the federal securities laws, this safe harbor is not available to issuers of penny stocks. As a result, we
will not have the benefit of this safe harbor protection in the event of any claim that the material provided by us, including
this prospectus, contained a material misstatement of fact or was misleading in any material respect because of our failure to
include any statements necessary to make the statements not misleading.
As
a Nevada corporation, we are subject to the Nevada Revised Statutes ("NRS" or "Nevada law"). Certain provisions
of Nevada law described below create rights that might be deemed material to our shareholders. Other provisions might delay or
make more difficult acquisitions of our stock or changes in our control or might also have the effect of preventing changes in
our management or might make it more difficult to accomplish transactions that some of our shareholders may believe to be in their
best interests.
Directors'
Duties
Section
78.138 of the Nevada law allows our directors and officers, in exercising their powers to further our interests, to consider the
interests of our employees, suppliers, creditors and customers. They can also consider the economy of the state and the nation,
the interests of the community and of society and our longterm and shortterm interests and shareholders, including the possibility
that these interests may be best served by our continued independence. Our directors may resist a change or potential change in
control if they, by a majority vote of a quorum, determine that the change or potential change is opposed to or not in our best
interest. Our board of directors may consider these interests or have reasonable grounds to believe that, within a reasonable
time, any debt which might be created as a result of the change in control would cause our assets to be less than our liabilities,
render us insolvent, or cause us to file for bankruptcy protection.
Dissenters'
Rights
Among
the rights granted under Nevada law which might be considered material is the right for shareholders to dissent from certain corporate
actions and obtain payment for their shares (see Nevada Revised Statutes ("NRS") 92A.380-390). This right is subject
to exceptions, summarized below, and arises in the event of mergers or plans of exchange. This right normally applies if shareholder
approval of the corporate action is required either by Nevada law or by the terms of the articles of incorporation.
A
shareholder does not have the right to dissent with respect to any plan of merger or exchange, if the shares held by the shareholder
are part of a class of shares which are:
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·
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listed
on a national securities exchange,
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·
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included
in the national market system by the National Association of Securities Dealers, or
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·
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held
of record by not less than 2,000 holders.
|
This
exception notwithstanding, a shareholder will still have a right of dissent if it is provided for in the articles of incorporation
or if the shareholders are required under the plan of merger or exchange to accept anything but cash or owner's interests, or
a combination of the two, in the surviving or acquiring entity, or in any other entity falling in any of the three categories
described above in this paragraph.
Inspection
Rights
Nevada
law also specifies that shareholders are to have the right to inspect company records (see NRS 78.105). This right extends to
any person who has been a shareholder of record for at least six months immediately preceding his demand. It also extends to any
person holding, or authorized in writing by the holders of, at least 5% of outstanding shares. Shareholders having this right
are to be granted inspection rights upon five days' written notice. The records covered by this right include official copies
of:
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the
articles of incorporation, and all amendments thereto,
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·
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bylaws
and all amendments thereto; and
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a
stock ledger or a duplicate stock ledger, revised annually, containing the names, alphabetically
arranged, of all persons who are stockholders of the corporation, showing their places
of residence, if known, and the number of shares held by them, respectively.
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In
lieu of the stock ledger or duplicate stock ledger, Nevada law provides that the corporation may keep a statement setting out
the name of the custodian of the stock ledger or duplicate stock ledger, and the present and complete post office address, including
street and number, if any, where the stock ledger or duplicate stock ledger specified in this section is kept.
Control
Share Acquisitions
Sections
78.378 to 78.3793 of Nevada law contain provisions that may prevent any person acquiring a controlling interest in a Nevadaregistered
company from exercising voting rights. To the extent that these rights support the voting power of minority shareholders, these
rights may also be deemed material. These provisions will be applicable to us as soon as we have 200 shareholders of record with
at least 100 of these having addresses in Nevada as reflected on our stock ledger. While we do not yet have the required number
of shareholders in Nevada or elsewhere, it is possible that at some future point we will reach these numbers and, accordingly,
these provisions will become applicable. We do not intend to notify shareholders when we have reached the number of shareholders
specified under these provisions of Nevada law. Shareholders can learn this information pursuant to the inspection rights described
above and can see the approximate number of our shareholders by checking under Item 5 of our annual reports on Form 10-K. This
form is filed with the Securities and Exchange Commission within 90 days of the close of each fiscal year hereafter. You can view
these and our other filings at www.sec.gov in the "EDGAR" database.
Under
NRS Sections 78.378 to 78.3793, an acquiring person who acquires a controlling interest in company shares may not exercise voting
rights on any of these shares unless these voting rights are granted by a majority vote of our disinterested shareholders at a
special shareholders' meeting held upon the request and at the expense of the acquiring person. If the acquiring person's shares
are accorded full voting rights and the acquiring person acquires control shares with a majority or more of all the voting power,
any shareholder, other than the acquiring person, who does not vote for authorizing voting rights for the control shares, is entitled
to demand payment for the fair value of their shares, and we must comply with the demand. An "acquiring person" means
any person who, individually or acting with others, acquires or offers to acquire, directly or indirectly, a controlling interest
in our shares. "Controlling interest" means the ownership of our outstanding voting shares sufficient to enable the
acquiring person, individually or acting with others, directly or indirectly, to exercise one fifth or more but less than one
third, one third or more but less than a majority, or a majority or more of the voting power of our shares in the election of
our directors. Voting rights must be given by a majority of our disinterested shareholders as each threshold is reached or exceeded.
"Control shares" means the company's outstanding voting shares that an acquiring person acquires or offers to acquire
in an acquisition or within 90 days immediately preceding the date when the acquiring person becomes an acquiring person.
These
Nevada statutes do not apply if a company's articles of incorporation or bylaws in effect on the tenth day following the acquisition
of a controlling interest by an acquiring person provide that these provisions do not apply.
According
to NRS 78.378, the provisions referred to above will not restrict our directors from taking action to protect the interests of
our Company and its shareholders, including without limitation, adopting or executing plans, arrangements or instruments that
deny rights, privileges, power or authority to a holder of a specified number of shares or percentage of share ownership or voting
power. Likewise, these provisions do not prevent directors or shareholders from including stricter requirements in our articles
of incorporation or bylaws relating to the acquisition of a controlling interest in the Company.
Our
articles of incorporation and bylaws do not exclude us from the restrictions imposed by NRS 78.378 to 78.3793, nor do they impose
any more stringent requirements.
Certain
Business Combinations
Sections
78.411 to 78.444 of the Nevada law may restrict our ability to engage in a wide variety of transactions with an "interested
shareholder." As was discussed above in connection with NRS 78.378 to 78.3793, these provisions could be considered material
to our shareholders, particularly to minority shareholders. They might also have the effect of delaying or making more difficult
acquisitions of our stock or changes in our control. These sections of NRS are applicable to any Nevada company with 200 or more
stockholders of record and that has a class of securities registered under Section 12 of the 1934 Securities Exchange Act, unless
the company's articles of incorporation provide otherwise. With the effectiveness of this registration statement, we will be required
to file reports with the SEC under section 15( d) of the Securities Act. Accordingly, upon the effectiveness of this registration
statement, we will be subject to these statutes when and if we have 200 shareholders as our Articles of Incorporation do not exempt
us from them. We cannot predict the likelihood that we will ever meet the criteria of number of shareholders and being registered
under Section 12 of 1934 Securities Exchange Act which would cause us to fall under these statutes or, if we do, what the timeframe
will be.
These
provisions of Nevada law prohibit us from engaging in any "combination" with an interested stockholder for three years
after the interested stockholder acquired the shares that cause him to become an interested shareholder, unless he/she had prior
approval of our board of directors. The term "combination" is described in NRS 78.416 and includes, among other things,
mergers, sales or purchases of assets, and issuances or reclassifications of securities. If the combination did not have prior
approval, the interested shareholder may proceed after the three-year period only if the shareholder receives approval from a
majority of our disinterested shares or the offer meets the requirements for fairness that are specified in NRS 78.441-42. For
the above provisions, "resident domestic corporation" means a Nevada corporation that has 200 or more shareholders.
An "interested stockholder" is defined in NSR 78.423 as someone who is either:
|
|
·
|
the
beneficial owner, directly or indirectly, of 10% or more of the voting power of our outstanding
voting shares; or
|
|
|
·
|
our
affiliate or associate and who within three years immediately before the date in question,
was the beneficial owner, directly or indirectly, of 10% or more of the voting power
of our outstanding shares at that time.
|
Amendments
to Bylaws
Our
articles of incorporation provide that the power to adopt, alter, amend, or repeal our bylaws is vested exclusively with the board
of directors. In exercising this discretion, our board of directors could conceivably alter our bylaws in ways that would affect
the rights of our shareholders and the ability of any shareholder or group to effect a change in our control; however, the
board would not have the right to do so in a way that would violate law or the applicable terms of our articles of incorporation.
TRANSFER
AGENT
The
Transfer Agent of our common stock is Pacific Stock Transfer Company, 6725 Via Austi Parkway, Suite 300, Las Vegas, Nevada 89119.
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION
FOR
SECURITIES ACT LIABILITIES
Under
our bylaws, we may indemnify an officer or director who is made a party to any proceeding, including a lawsuit, because of his/her
position, if he/she acted in good faith and in a manner he/she reasonably believed to be in our best interest. We may advance
expenses incurred in defending a proceeding. To the extent that the officer or director is successful on the merits in a proceeding
as to which he is to be indemnified, we must indemnify him against all expenses incurred, including attorney's fees. With respect
to a derivative action, indemnity may be made only for expenses actually and reasonably incurred in defending the proceeding,
and if the officer or director is judged liable, only by a court order. The indemnification is intended to be to the fullest extent
permitted by the laws of the State of Nevada.
Insofar
as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling
the registrant pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification
is against public policy as expressed in the Act and is therefore unenforceable.
LEGAL
MATTERS
The
validity of the issuance of the shares of common stock offered hereby will be passed upon for us by Paul A. Rachmuth, Attorney
at Law, 265 Sunrise Highway, Ste. 62, Rockville Centre, New York 11570.
EXPERTS
The
balance sheets of the Company as of December 31, 2016 and December 31, 2015, and the related statements of operations, statements
of changes in shareholders' deficit and the statements of cash flows for the years ended December 31, 2016 and 2015, included
in this registration statement on Form S-1 have been so included in reliance on the report of Turner Stone & Co., an independent
registered public accounting firm, given upon their authority as experts in accounting and auditing.
WHERE
YOU CAN FIND MORE INFORMATION
We
have filed a registration statement on Form S-1 with the SEC with respect to this offering. This prospectus constitutes only part
of the registration statement and does not contain all of the information set forth in the registration statement, its exhibits
and its schedules. For further information with respect to us and our securities, we refer you to the registration statement and
to the exhibits to the registration statement. Statements contained in this prospectus as to the contents of any contract, agreement
or other document to which we make reference are not necessarily complete and, in each instance, we refer you to the copy of the
contract, agreement or other document filed as an exhibit to the registration statement. Each of these statements is qualified
in all respects by this reference. We file annual, quarterly and current reports, proxy statements and other information with
the SEC. You may read and copy any reports, statements or other information that we have filed with the SEC at the SEC's Public
Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may request copies of these documents, upon payment of a copying
fee, by writing to the SEC. Please call the SEC at 1-800-SEC-0330 for information on the operation of the Public Reference Room.
Our SEC filings are also available to the public on the SEC internet site at http://www.sec.gov.
ALTAVOZ
ENTERTAINMENT, INC.
And
Subsidiaries Consolidated Financial Statements and Report of Independent Registered Public Accounting Firm
For
the Years Ended
December 31, 2016 and 2015
CONTENTS
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
1
|
|
CONSOLIDATED BALANCE SHEETS
|
2
|
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
3
|
|
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
|
4
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
5
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
6-18
|
ALTAVOZ ENTERTAINMENT,
INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS AS OF DECEMBER 31, 2016 AND DECEMBER 31, 2015
|
|
|
December 31, 2016
|
|
December 31, 2015
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
—
|
|
|
$
|
951
|
|
|
Total Current Assets
|
|
|
—
|
|
|
|
951
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Assets:
|
|
|
|
|
|
|
|
|
|
Equipment
|
|
|
2,832
|
|
|
|
1,244
|
|
|
Office Computers & Equipment
|
|
|
3,186
|
|
|
|
1,100
|
|
|
Office Software
|
|
|
332
|
|
|
|
332
|
|
|
Accumulated Depreciation
|
|
|
(1,901
|
)
|
|
|
(191
|
)
|
|
Total Fixed Assets
|
|
|
4,449
|
|
|
|
2,485
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
4,449
|
|
|
$
|
3,436
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts Payable
|
|
$
|
84,906
|
|
|
$
|
41,552
|
|
|
Other Current Liabilities
|
|
|
3
|
|
|
|
3
|
|
|
Shareholder Advances
|
|
|
3,500
|
|
|
|
167,500
|
|
|
Advances From Affiliates
|
|
|
2,000
|
|
|
|
2,000
|
|
|
Total Current Liabilities
|
|
|
90,409
|
|
|
|
211,055
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
90,409
|
|
|
|
211,055
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Deficit:
|
|
|
|
|
|
|
|
|
|
Preferred
Series B Stock: 100,000,000 Shares Authorized (Par Value $.001); Shares Issued and Outstanding At September 30, 2016 and December
31, 2015 Were 0.
|
|
|
—
|
|
|
|
—
|
|
|
Shares Authorized ($.001 Par Value)
|
|
|
|
|
|
|
|
|
|
No Shares Outstanding
|
|
|
|
|
|
|
|
|
|
Common Stock: 750,000,000 Shares Authorized (Par Value $.001); Shares Issued and Outstanding At December 31, 2016 and December 31, 2015 Were 311,023,798 and 2,217,132, Respectively.
|
|
|
311,024
|
|
|
|
2,217
|
|
|
Additional Paid In Capital
|
|
|
32,963,477
|
|
|
|
27,784
|
|
|
Accumulated Deficit
|
|
|
(33,360,461
|
)
|
|
|
(237,620
|
)
|
|
Total Stockholders Deficit
|
|
|
(85,960
|
)
|
|
|
(207,619
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities & Stockholders' Deficit
|
|
$
|
4,449
|
|
|
$
|
3,436
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
ALTAVOZ
ENTERTAINMENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015
|
|
|
December
31, 2016
|
|
December
31, 2015
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
Merchandise
Sales
|
|
$
|
15,385
|
|
|
$
|
9,875
|
|
|
Total
Revenue
|
|
|
15,385
|
|
|
|
9,875
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost Of Goods Sold
|
|
|
6,245
|
|
|
|
8,708
|
|
|
Depreciation
and Amortization
|
|
|
1,710
|
|
|
|
191
|
|
|
Total
Cost Of Goods Sold
|
|
|
7,955
|
|
|
|
8,899
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit
|
|
|
7,430
|
|
|
|
976
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, General &
Administrative Expenses:
|
|
|
|
|
|
|
|
|
|
Facilities
& Office Expense
|
|
|
16,258
|
|
|
|
24,868
|
|
|
Professional
Fees
|
|
|
164,279
|
|
|
|
23,414
|
|
|
Hosting
& Domain Services
|
|
|
10,789
|
|
|
|
6,486
|
|
|
Marketing
|
|
|
19,919
|
|
|
|
2,904
|
|
|
Travel
& Entertainment
|
|
|
10,007
|
|
|
|
5,490
|
|
|
Payroll
Expense
|
|
|
71,796
|
|
|
|
20,589
|
|
|
Licenses
& Permits
|
|
|
6,818
|
|
|
|
3,666
|
|
|
Stock
Compensation & Award Expense
|
|
|
3,905,400
|
|
|
|
—
|
|
|
Administrative
& Other Expenses
|
|
|
39,505
|
|
|
|
1,911
|
|
|
Total
Selling, General, & Administrative Expenses
|
|
|
4,244,771
|
|
|
|
89,328
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
From Operations
|
|
|
(4,237,341
|
)
|
|
|
(88,352
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Other Income
|
|
|
400
|
|
|
|
—
|
|
|
Debt
Settlement Costs
|
|
|
(28,882,900
|
)
|
|
|
—
|
|
|
Loss
Before Provision for Income Taxes
|
|
|
(33,119,841
|
)
|
|
|
(88,352
|
)
|
|
Provision
for Income Taxes
|
|
|
3,000
|
|
|
|
1,197
|
|
|
Net
Loss
|
|
|
(33,122,841
|
)
|
|
|
(89,549
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) Per
Share
|
|
$
|
(0.44
|
)
|
|
$
|
(0.06
|
)
|
|
Basic
Weighted Average Common Shares Outstanding
|
|
|
75,894,031
|
|
|
|
1,611,653
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
ALTAVOZ
ENTERTAINMENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2017 and THE YEAR ENDED 2016.
|
|
|
Common Stock
Shares
|
|
Par Value
|
|
Preferred Shares Series BShares
|
|
Par Value
|
|
Additional Paid-In Capital
|
|
Accumulated Deficit
|
|
Total
|
|
|
|
Balance at December 31, 2013
|
|
|
717,132
|
|
|
$
|
717
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
14,284
|
|
|
|
(7,385
|
)
|
|
$
|
7,616
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(140,686
|
)
|
|
|
(140,686
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2014
|
|
|
717,132
|
|
|
$
|
717
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
14,284
|
|
|
$
|
(148,071
|
)
|
|
$
|
(133,070
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(89,549
|
)
|
|
|
(89,549
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Issued For Cash (Avg $.01 per share)
|
|
|
1,500,000
|
|
|
|
1,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
13,500
|
|
|
|
—
|
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2015
|
|
|
2,217,132
|
|
|
$
|
2,217
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
27,784
|
|
|
$
|
(237,620
|
)
|
|
$
|
(207,619
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(33,122,841
|
)
|
|
|
(33,122,841
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Issued for Services Provided
|
|
|
15,970,000
|
|
|
|
15,970
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,760,430
|
|
|
|
|
|
|
|
1,776,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Issued To Current Shareholder For Services Provided
|
|
|
20,000,000
|
|
|
|
20,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,980,000
|
|
|
|
|
|
|
|
2,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Issued as a Donation
|
|
|
1,075,000
|
|
|
|
1,075
|
|
|
|
—
|
|
|
|
—
|
|
|
|
127,925
|
|
|
|
|
|
|
|
129,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Issued With Conversion of Promisory Note
|
|
|
25,000,000
|
|
|
|
25,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
75,000
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Issued For Reverse Acquisition
|
|
|
1,250,000
|
|
|
|
1,250
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,250
|
)
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Issued With Shareholder Advances
|
|
|
20,000,000
|
|
|
|
20,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,380,000
|
|
|
|
|
|
|
|
2,400,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Founders Shares Issued With Conversion of shareholder Advances
|
|
|
223,090,000
|
|
|
|
223,090
|
|
|
|
—
|
|
|
|
—
|
|
|
|
26,546,510
|
|
|
|
|
|
|
|
26,769,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Issued For Cash (Avg $.029 per share)
|
|
|
2,421,666
|
|
|
|
2,422
|
|
|
|
—
|
|
|
|
—
|
|
|
|
67,078
|
|
|
|
—
|
|
|
|
69,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2016
(audited)
|
|
|
311,023,798
|
|
|
$
|
311,024
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
32,963,477
|
|
|
$
|
(33,360,461
|
)
|
|
$
|
(85,960
|
)
|
The
accompanying notes are an integral part of these consolidated financial statements.
ALTAVOZ
ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015
|
|
|
|
|
Year
Ended December 31, 2016
|
|
Year
Ended December 31, 2015
|
|
|
|
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(33,122,841
|
)
|
|
$
|
(89,549
|
)
|
|
Adjustments to reconcile
net loss to cash used by operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
1,710
|
|
|
|
191
|
|
|
Non
Cash Expenses Paid By Shareholder
|
|
|
120,500
|
|
|
|
—
|
|
|
Common
Stock Issued For Services
|
|
|
3,776,400
|
|
|
|
—
|
|
|
Loss
On Extinguishment Of Debt
|
|
|
28,882,900
|
|
|
|
—
|
|
|
Stock
Issued For Donation
|
|
|
129,000
|
|
|
|
—
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
43,354
|
|
|
|
17,092
|
|
|
NET
CASH USED IN OPERATING ACTIVITIES
|
|
|
(168,977
|
)
|
|
|
(72,266
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOW FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Purchase
of computer equipment
|
|
|
(3,674
|
)
|
|
|
(1,721
|
)
|
|
NET
CASH USED IN INVESTING ACTIVITIES
|
|
|
(3,674
|
)
|
|
|
(1,721
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOW FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Advances
From Shareholders
|
|
|
57,200
|
|
|
|
57,500
|
|
|
Advances
From Affiliates
|
|
|
45,000
|
|
|
|
2,000
|
|
|
Proceeds
from the sale of common stock
|
|
|
69,500
|
|
|
|
15,000
|
|
|
NET
CASH PROVIDED FROM FINANCING ACTIVITIES
|
|
|
171,700
|
|
|
|
74,500
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
(951
|
)
|
|
|
513
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, beginning of year
|
|
|
951
|
|
|
|
438
|
|
|
Cash
and cash equivalents, end of year
|
|
$
|
—
|
|
|
$
|
951
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow
Disclosures
|
|
|
|
|
|
|
|
|
|
Interest
Paid
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Taxes
Paid
|
|
$
|
500
|
|
|
$
|
1,197
|
|
|
Advances
From Shareholders Converted To Stock
|
|
$
|
286,700
|
|
|
$
|
—
|
|
|
Convertible
Note Payable Converted Into Common Stock
|
|
$
|
100,000
|
|
|
$
|
—
|
|
|
Shareholder
Advances Exchanged For Convertible Debt
|
|
$
|
55,000
|
|
|
$
|
—
|
|
|
Stock
Issued For Interest In Affiliates
|
|
$
|
1,250
|
|
|
$
|
—
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
ALTAVOZ
ENTERTAINMENT, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature
of operations and basis of presentation
Altavoz
Entertainment, Inc. and its subsidiaries (the Company), is a Nevada corporation principally engaged in the operation of both physical
and digital distribution of music. Distribution services are provided both online and through distribution as a service (“DaaS”).
Customers include both music retailers, artists and other music distribution companies.
On
March 3, 2000, the Company was originally formed as Saveyoutime.com, Inc. under the laws of Nevada. Subsequently, on April 10,
2003, the Company filed a certificate of Merger with the Nevada Secretary of State reporting our merger with Hesperia Holding
Corp. The Company then changed its name to Hesperia Holding, Inc. During 2005, the Company discontinued the operations of two
subsidiaries and began pursuing acquisitions related to the film and media industries.
In
April 2009, the Company entered into an agreement (the “HWP Acquisition”) to acquire one hundred percent (100%) ownership
of Hot Web Properties, Inc. (“HWP”). Under the terms of the HWP Acquisition the Company agreed to issue the HWP shareholders
60,000,000 post-split common shares and the preferred shareholders seven million five hundred thousand (7,500,000) preferred shares.
The preferred shares entitled the holders to ten (10) for one (1) voting rights in the Company.
On
June 5, 2009, the Board of Directors executed a resolution to reverse split the Company’s common stock by a ratio of one
(1) share for each two hundred (200) shares issued and outstanding.
In
July 2009, the Company amended its Articles of Incorporation to change its name to Max Media Group, Inc. and the Company was listed
with the National Quotation Bureau under the trading symbol “MXMI.” In July 2009 the Company also amended its Articles
of Incorporation to put the reverse split of the Company’s common stock, by a ratio of one (1) share for each two hundred
(200) shares issued and outstanding, into effect.
On
April 12, 2012, a stock purchase agreement was executed by and between James E. Grady, the Company and BB2 Labs, Inc. During April
2012, Mr. Manocchio was appointed as a Director, President, Principal Executive Officer and Principal Accounting Officer of the
Company. Subsequently, the Company was revoked in the State of Nevada due to a failure to pay taxes and fees and for failing to
adhere to filing requirements.
On
August 1, 2012 the Company acquired two hundred and fifty thousand (250,000) shares of common stock and five million five hundred
thousand (5,500,000) shares of Class “B” Convertible Preferred Stock from James E. Grady. The Class “B”
Convertible Preferred Stock included one hundred (100) votes per share and may be convertible into ten (10) shares of common stock.
On
October 9, 2012 the Board of Directors executed a resolution to reverse split the Company’s common stock by a ratio of one
(1) share for each four hundred (400) shares issued and outstanding.
In
February 2016, the Company was reinstated in the state of Nevada by the new principal shareholder of the Company, Avoz, LLC, through
its General Manager Nelson Jacobsen.
ALTAVOZ
ENTERTAINMENT, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On
May 18, 2016, the Company entered into a Share Exchange Agreement ("Exchange Agreement"), by and among the Company,
Altavoz, Inc. ("Altavoz"), a Maryland corporation and the Stockholders of Altavoz. Altavoz had a total of 1 stockholder
as of the date of the Exchange Agreement.
Under
the terms and conditions of the Exchange Agreement, the Company offered and sold One Million (1,000,000) newly issued shares of
Company Common Stock in consideration for all the issued and outstanding shares of Altavoz capital stock. The effect of the issuance
was that, upon closing of the Exchange Agreement transaction, former Altavoz stockholders held approximately 25.1% of the issued
and outstanding shares of Company Common Stock.
As
a result of the Exchange Agreement transactions described above, the Altavoz stockholders acquired as of the date the transaction
closed, in the aggregate, approximately 25.1% of the issued and outstanding capital stock of the Company on a fully-diluted basis,
and Altavoz became a wholly owned subsidiary of the Company. The transaction was treated as a reverse acquisition, with the Company
as the accounting acquirer for financial reporting purposes. Under the Exchange Agreement, Nelson Jacobsen was appointed as the
President, Chief Executive Officer, Chief Financial Officer and Nancy Jacobsen was appointed as Secretary of the Company, and
Mr. Jacobsen, Ms. Jacobsen, and Mr. Ken Balog were appointed to serve as directors of the Company.
Principles
of consolidation
The
consolidated financial statements include the accounts of Altavoz Entertainment, Inc. and its wholly owned subsidiaries, Altavoz,
Inc. and Financed Entertainment Services Co. All significant intercompany transactions, accounts and balances have been eliminated
in consolidation.
Going
Concern
The
Company has incurred net losses since inception and has relied on its ability to fund its operations through borrowings from its
shareholders. Management expects operating losses and negative cash flows to continue at more significant levels in the future.
As the Company continues to incur losses, transition to profitability is dependent upon the successful acquisition of new music
content and existing music catalog to add to the distribution networks, adequate new funding, and the achievement of levels of
revenues to support the Company’s cost structure. The Company may never achieve profitability, and unless and until it does,
the Company will continue to need to raise additional cash. Management intends to fund future operations through private or public
equity offerings, and through arrangements with strategic partners. Based on the Company’s operating plan, existing working
capital at December 31, 2016 was not sufficient to meet the cash requirements to fund planned operations through December 31,
2017 without additional sources of cash. These conditions raise substantial doubt about the Company’s ability to continue
as a going concern. The accompanying financial statements have been prepared assuming that the Company will continue as a going
concern and do not include adjustments that might result from the outcome of this uncertainty. This basis of accounting contemplates
the recovery of the Company’s assets and the satisfaction of liabilities in the normal course of business.
Management
estimates
The
preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) requires
management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying
notes. Actual results could differ from those estimates.
ALTAVOZ
ENTERTAINMENT, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Earnings
(Loss) Per Share (EPS)
Basic
earnings (loss) per common share are calculated by dividing net loss by the weighted average number of shares outstanding during
the period. Diluted loss per common share is calculated by adjusting outstanding shares, assuming conversion of all potentially
dilutive stock options and warrants. The computation of diluted EPS does not assume conversion, exercise, or contingent issuance
of shares that would have an anti-dilutive effect on earnings per common share. Anti-dilution results from an increase in earnings
per share or reduction in loss per share from the inclusion of potentially dilutive shares in EPS calculations. Currently there
are no potential diluters which have been excluded from EPS that could potentially have a dilutive effect on EPS in the future.
Cash
For
purposes of the consolidated statements of cash flows, cash includes demand, time deposits with original maturities of three months
or less at the date of purchase, and money market accounts. The Company maintains deposits in one financial institution. At December
31, 2016 and December 31, 2015, the Federal Deposit Insurance Corporation (FDIC) provided insurance coverage of up to $250,000,
per depositor, per institution. None of the Company’s cash was in excess of the insured limits.
Fixed
Assets
The
Company’s fixed assets are stated at cost. The cost of maintenance and repairs is charged to expense as incurred; significant
renewals and betterments are capitalized. Depreciation is computed using the straight line method over estimated useful lives
as follows:
|
General
Equipment
|
5
years
|
|
Office
Computers & Equipment
|
3
years
|
|
Office
Software
|
3
years
|
ALTAVOZ
ENTERTAINMENT, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Revenue
Recognition
The
Company generates revenue primarily from on-demand fees for music and revenues generated from Company hosted software subscriptions
over the Internet.
The
Company recognizes revenue when all of the following conditions are satisfied:
·
There is persuasive evidence of an arrangement;
·
Services have been rendered and there are no remaining performance obligations;
·
The collection of fees is reasonably assured; and,
·
Amount of fees to be paid by the customer are fixed or determinable.
Subscription
Services and Usage-Based Fee Arrangements.
Subscription services and usage-based fee arrangements generally include a combination
of the Company’s products delivered as distribution-as-a- service and support services. These arrangements are non-cancelable
and do not contain refund-type provisions.
Cost
of Revenues
The
Company’s cost of revenues consists primarily of allocated facilities costs, customer support, data centers, expenses for
document preparation, and compliance services, depreciation on computer equipment used in supporting the Company’s DaaS
(“Desk-Top-As-A-Service”) offerings, and professional services associated with implementation of software.
Advertising
Expenses
The
Company expenses advertising costs as incurred. Advertising expenses for the years ended December 31, 2016 and 2015 were $19,919
and $2,854, respectively.
Income
taxes
Deferred
tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period
that includes the enactment date. In addition, a valuation allowance is established to reduce any deferred tax asset for which
it is determined that it is more likely than not that some portion of the deferred tax asset will not be realized.
The
Company recognizes the benefits of tax positions in the consolidated financial statements if such positions are more likely than
not to be sustained upon examination by the taxing authority and satisfy the appropriate measurement criteria. If the recognition
threshold is met, the tax benefit is generally measured and recognized as the tax benefit having the highest likelihood, in management's
judgment, of being realized upon ultimate settlement with the taxing authority, assuming full knowledge of the position and all
ALTAVOZ
ENTERTAINMENT, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
relevant
facts. The Company also recognizes interest and penalties accrued related to unrecognized tax benefits in the provision for income
taxes. The Company believes appropriate provisions for all outstanding tax related issues have been made for all jurisdictions
and all open tax years.
Licensing
Fees
The
Company licenses from artists and other distributors music rights. All expenses associated with this activity have been reflected
in the Company’s operating results.
Capital
Stock
The
Company has no outstanding Series B Preferred Shares at December 31, 2016 or 2015 (100,000,000 authorized). Series B Preferred
shares convert to common stock on a 10 for 1 basis and carry 100 to 1 super voting rights.
The
Company has 311,023,798 outstanding shares of Common Stock at December 31, 2016 (750,000,000 authorized)
Fair
Value Measurements
The
Accounting Standards Codification (“ASC”) Topic 820,
Fair Value Measurement
, defines fair value, establishes
a framework for measuring fair value in accordance with GAAP, and requires certain disclosures about fair value measurements.
In general, the fair values of financial instruments are based upon quoted market prices, where available. If such quoted market
prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based
parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments
may include amounts to reflect counterparty credit quality and the counterparty’s creditworthiness, among other things,
as well as unobservable parameters. Any such valuation adjustments are applied consistently over time.
Fair
value of financial instruments
In
accordance with the reporting requirements of ASC Topic 825,
Financial Instruments
, the Company calculates the fair value
of its assets and liabilities which qualify as financial instruments under this standard and includes this additional information
in the notes to the consolidated financial statements when the fair value is different than the carrying value of those financial
instruments. The Company does not have any assets or liabilities measured at fair value on a recurring or a non-recurring basis,
consequently, the Company did not have any fair value adjustments for assets and liabilities measured at fair value as of the
dates of the consolidated balance sheets.
ALTAVOZ
ENTERTAINMENT, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Recent
accounting pronouncements
During
the years ended December 31, 2016 and December 31, 2015, there were several new accounting pronouncements issued by the Financial
Accounting Standards Board (“FASB”). Each of these pronouncements, as applicable, has been or will be adopted by the
Company. Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact
on the Company’s consolidated financial statements.
In
May 2014, the FASB issued ASU No.2014-09,
Revenue from Contracts with Customers (Topic 606)
. This standard provides a single
set of guidelines for revenue recognition to be used across all industries and requires additional disclosures. It is effective
for annual and interim reporting periods beginning after December 15, 2017. This standard permits early adoption, but not before
December 15, 2016, and permits the use of either a retrospective or cumulative effect transition method. We are currently evaluating
the potential impact of this standard on our financial position and results of operations, as well as our selected transition
method. Based on our preliminary assessment, we believe the new standard will not have a material impact on our financial position
and results of operations, as we do not expect to change the manner or timing of recognizing revenue on a majority of our revenue
transactions. We recognize revenue on sales to customers and distributors upon satisfaction of our performance obligations when
the goods are shipped. For consignment sales, we recognize revenue when the goods are pulled from consignment inventory.
Subsequent
events
In
preparing the consolidated financial statements, the Company has reviewed, as determined necessary by the Company’s management,
events that have occurred after December 31, 2016, up until the issuance of the consolidated financial statements.
On
August 31, 2017 the Company entered into a one year consulting agreement with a shareholder. Compensation included the award of
8,000,000 common shares. Shares are restricted, and include “piggy back rights” and “claw back rights”.
On
July 17, 2017 the Company converted certain advances from a shareholder totaling $9,730 to 3,475,000 shares of common stock.
Stockholders’
Deficit
In
January 2016 the Company entered into a consulting agreement with a shareholder where for services 20,000,000 shares of common
stock were issued. These shares were valued at fair value of $0.10 per share and have been charged as stock compensation ($2,000,000)
to general and administrative expense.
In
year 2016, the Company issued 15,970,000 restricted common shares to various service providers. These shares were valued at fair
value of $0.11 per share and have been charged as stock compensation ($1,776,400) to general and administrative expense.
ALTAVOZ
ENTERTAINMENT, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
On
October 5, 2016 the Company entered into a convertible promissory note with a shareholder in the amount of $100,000. The note
bears interest at 5% and was subsequently in 2016 converted into 25,000,000 shares of restricted common stock.
On
2016, the Company issued 243,090,000 restricted common shares to founders, debt holders and affiliates in exchange for cash advances
provided of $286,700. These shares were valued at $0.12 per share.
In
year 2016 the Company issued 1,075,000 shares to certain non-profit entities recording the related expense as donations ($129,000).
These shares are valued at fair value of $0.12 per share.
2.
RELATED PARTY TRANSACTIONS
Related
Party Borrowings
Related
party transactions can arise with the Company’s officers and directors and their family members and affiliates. Except as
disclosed below, no related party transactions have been entered into during the years which might reasonably affect any decisions
made by the users of these consolidated
financial
statements.
During
the years ended December 31, 2016 and 2015, the Company has received advances and loans from related parties and directors as
follows:
|
|
|
2016
|
|
2015
|
|
Convertible
Promissory NoteStockholder Advances
|
|
$
|
100,000
|
|
|
$
|
0
|
|
|
Stockholder Advances
|
|
|
122,700
|
|
|
|
167,500
|
|
|
Advances
from Affiliate
|
|
|
0
|
|
|
|
2,000
|
|
|
|
|
$
|
222,700
|
|
|
$
|
169,500
|
|
Convertible
Promissory note bears interest at 5%. All Advances are noninterest bearing.
In
year 2016 the following related party common stock activity was transacted with the noted related parties:
|
|
·
|
25,000,000
shares were issued to a shareholder with conversion of a $100,000 promissory note.
|
|
|
·
|
50,000
shares were issued to an outside director for services
|
|
|
·
|
20,000,000
shares were awarded to a shareholder for consulting services
|
|
|
·
|
223,090,000
shares were issued to an affiliated group of an officer and director in exchange for
conversion of advances made.
|
|
|
·
|
20,000,000
shares were awarded to a shareholder in exchange for conversion of advances made.
|
ALTAVOZ
ENTERTAINMENT, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
The
use of the proceeds from these borrowings has been to maintain the operations of the Company while seeking additional funding
to grow marketing and operations of the Company. These advances
have
not yet been documented, but will be documented and will carry with them market rates of interest and terms. In 2016 these amounts
were converted to common stock.
During
the years ending December 31, 2016 and December 31, 2015, the Company has not been a party to any other material transaction,
or proposed transactions, in which any member of the key management personnel (including directors, any other executive officer,
senior manager, any spouse or relative of any of the foregoing, or any relative of such spouse), had or was to have a direct or
indirect material interest.
3.
INCOME TAXES
Income
Taxes
Income
taxes are accounted for based upon an asset and liability approach. Accordingly, deferred tax assets and liabilities arise from
the difference between the tax basis of an asset or liability and its reported amount in the financial statements. Deferred tax
amounts are determined using the tax rates expected to be in effect when the taxes will actually be paid or refunds received,
as provided under currently enacted tax law. Valuation allowances are established when necessary to reduce deferred tax assets
to the amount expected to be realized. Income tax expense or benefit is the tax payable or refundable, respectively, for the period
plus or minus the change in deferred tax assets and liabilities during the period.
Accounting
guidance requires the recognition of a financial statement benefit of a tax position only after determining that the relevant
tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not
threshold, the amount recognized in the financial statements is the largest benefit that has a greater than fifty percent likelihood
of being realized upon ultimate settlement with the relevant tax authority. The Company believes its income tax filing positions
and deductions will be sustained upon examination and accordingly, no reserves, or related accruals for interest and penalties
have been recorded at December 31, 2016 and 2015. The Company recognizes interest and penalties on unrecognized tax benefits as
well as interest received from favorable tax settlements within income tax expense.
The
components of income tax expense for the years ended December 31, 2016 and 2015 consist of the following:
|
|
|
2016
|
|
2015
|
|
Current
tax provision
|
|
$
|
3,000
|
|
|
$
|
1,197
|
|
|
Deferred tax provisions
|
|
|
(2,473,675
|
)
|
|
|
(30,447
|
)
|
|
Valuation
allowances
|
|
|
2,473,675
|
|
|
|
30,447
|
|
|
Total
Income tax provision
|
|
$
|
3,000
|
|
|
$
|
1,197
|
|
ALTAVOZ
ENTERTAINMENT, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Reconciliations
between the statutory rate and the effective tax rate for the years ended December 31, 2016 and 2015 consist as follows:
|
|
|
2016
|
|
2015
|
|
Federal
statutory tax rate
|
|
|
(34.0
|
)%
|
|
|
(34.0
|
)%
|
|
State
taxes, net of federal benefits
|
|
|
0.0
|
%
|
|
|
(1.4
|
)%
|
|
Permanent
differences
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
Executive
Compensation Limitation
|
|
|
26.0
|
%
|
|
|
0.0
|
%
|
|
Valuation
allowance
|
|
|
8.0
|
%
|
|
|
34.0
|
%
|
|
Effective
tax rate
|
|
|
0.0
|
%
|
|
|
(1.4
|
)%
|
Significant
components of the Company's estimated deferred tax assets and liabilities as of December 31, 2016 and December 31, 2015 are as
follows:
|
|
|
2016
|
|
2015
|
|
Deferred tax asset:
|
|
|
|
|
|
|
|
|
|
Net
operating loss carryforward
|
|
$
|
(2,551,955
|
)
|
|
$
|
(77,894
|
)
|
|
Total
deferred tax asset
|
|
|
2,551,955
|
|
|
|
77,894
|
|
|
Valuation
allowance
|
|
|
(2,551,955
|
)
|
|
|
(77,894
|
)
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
As
of December 31, 2016, we had approximately $7,565,341 of federal net operating loss carry forwards. These carry forwards, if not
used, will begin to expire in 2034. Future utilization of our net operating loss carry forwards is subject to certain limitations
under Section 382 of the Internal Revenue Code. The Company is not current in filing both federal and state tax returns. These
net operating amounts are estimates.
We
provide for a valuation allowance when it is more likely than not that we will not realize a portion of the deferred tax assets.
We have established a valuation allowance against our net deferred tax asset due to the uncertainty that enough taxable income
will be generated in those taxing jurisdictions to utilize the assets. Therefore, we have not reflected any benefit of such deferred
tax assets in the accompanying financial statements.
We
reviewed all income tax positions taken or that we expect to be taken for all open years and determined that our income tax positions
are appropriately stated and supported for all open years. The Company is subject to U.S. federal income tax examinations by tax
authorities for years after 2014 due to unexpired net operating loss carryforwards originating in and subsequent to that year.
The Company may be subject to income tax examinations for the various taxing authorities which vary by jurisdiction.
EXHIBITS
† To be filed by amendment.
Recent
Sales of Unregistered Securities.
Since
January 1, 2014 the Company has sold to following unregistered securities:
In
2015 the Company sold a total of 1,500,000 common shares with an average price per share of $0.01, pursuant to Securities Act
Rule 504.
In
2016 the Company issued a total of 224,330,000 common shares as founders shares pursuant to Securities Act Section 4(2), issued
a total of 20,850,000 common shares as compensation for services rendered, with an average value per share of $0.01, pursuant
to Securities Act Rule 701 and sold a total of 39,401,666 common shares with an average price per share of $0.0055, pursuant to
Securities Act Rule 504.
In
2017 the Company issued a total of 9,875,000 common shares as compensation for services rendered, with an average value per share
of $0.01, pursuant to Securities Act Rule 701 and sold a total of 25,000,000 common shares with an average price per share of
$0.002 and converted $9,730 of debt into 3,475,000 shares, pursuant to Securities Act Rule 504.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized in the City of Rockville, State of Maryland, on November 19, 2017.
ALTAVOZ
ENTERTAINMENT, INC.
By:
/s/ Nelson Jacobsen
Nelson
Jacobsen
Chief
Executive Officer
Chief
Financial Officer
PURSUANT
TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS AMENDED REGISTRATION STATEMENT HAS BEEN SIGNED BY OR ON BEHALF
OF THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES
INDICATED:
|
Name
|
Position
|
Date
|
|
/s/ Nelson Jacobsen
|
Chief Executive Officer,
|
November 28, 2017
|
|
Nelson Jacobsen
|
Principal Executive
Officer,
|
|
|
|
Chief Financial Officer,
|
|
|
|
Principal Financial
Officer,
|
|
|
|
Principal Accounting
Officer and
|
|
|
|
Chairman
|
|
|
/s/ Nelson Jacobsen
|
Secretary
|
November 28, 2017
|
|
Nelson Jacobsen
|
|
|
[1]
The offering price will be adjusted based on the then-current market price of the Company’s common stock at the time
of the expected effective date of the offering.
[2]
The offering price will be adjusted based on the then-current market price of the Company’s common stock at the time
of the expected effective date of the offering.
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