UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

For the quarterly period ended September 30, 2012

 

or

 

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

For the transition period from                to              

 

VGTEL, INC.

(Exact name of Registrant as specified in its charter)

 

New York	000-52983	01-0671426
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

 

 

400 Rella Blvd., Suite 174
Suffern, NY	10901
(Address of principal executive offices)	(Zip Code)
(845) 368-0110
(Registrant’s telephone number, including area code)
N/A
(Former name or former address, if changed since last report)

 

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

 

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

 

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

 

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

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

 

VGTel, Inc. had issued 19,774,100 common shares outstanding as of November 14, 2012.

 

 

FORM 10-Q

 

QUARTERLY PERIOD ENDED SEPTEMBER 30, 2012

 

INDEX

 

PART I- FINANCIAL INFORMATION
Item 1	Unaudited Financial Statements	2-4
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	7
Item 3	Quantitative and Qualitative Disclosures about Market Risk	13
Item 4	Controls and Procedures	13
PART II - OTHER INFORMATION
Item 1	Legal Proceedings	14
Item 1A	Risk Factors	14
Item 2	Defaults Upon Senior Securities	14
Item 3	Unregistered Sales of Equity Securities and Use of Proceeds	14
Item 4	Reserved	14
Item 5	Other Information	14
Item 6	Exhibits	15
Signatures		16

 

 

PART I- FINANCIAL INFORMATION

 

VGTel, Inc.

(A Development Stage Company)

Balance Sheets

(Unaudited)

		September 30,				March 31,
		2012				2012
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	9,988			$	714
Total Current Assets		$	9,988				714
Property and equipment, net of accumulated depreciation of $0			37,500				35,000
Total Assets		$	47,488			$	35,714
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable			452,986				746,116
Accounts Payable to Related Parties			25,000				102,751
Derivative Liability			131,574				-
Short Term Debt, net of discount			70,300				92,595
Total Current Liabilities			679,860				941,462
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred Stock, $.001 par value, Authorized 10,000,000 shares, none issued
Common Stock, $.0001 par value , Authorized 200,000,000 shares issued & outstanding 19,774,100 and 15,413,387 as of September 30, 2012 and March 31, 2012 respectively			1,977				1,541
Additional Paid in Capital			5,239,526				1,789,762
Deficit accumulated since re-entering the development stage on April 1, 2011			(4,949,512	)			(1,772,688	)
Retained Deficit			(924,363	)			(924,363	)
Total Stockholders' Equity			(632,372	)			(905,748	)
Total Liabilities and Stockholders' Equity			47,488				35,714

 

The accompanying notes are an integral part of these unaudited financial statements.

 

 

VGTel, Inc.

(A Development Stage Company)

Statements of Expenses

(Unaudited)

 

																		Accumulated from
		Three Months Ended								Six Months Ended								Inception April 1, 2011 to
		September 30, 2012				September 30, 2011				September 30, 2012				September 30, 2011				September 30, 2012
OPERATING EXPENSES
General   and administrative			7,235				259,550				36,048				274,485				106,980
Officers' compensation & rent			22,850				905,833				175,250				905,833				1,117,643
Legal Services			-				-				-				-				240,982
Professional Services- Consulting			9,096				172,528				10,419				518,380				528,800
Loss on Settlement of AP			2,916,128				-				2,916,128				-				2,916,128
Total operating expense			2,955,309				1,337,911				3,137,845				1,698,698				4,910,533
Gain (Loss) on Derivatives			(38,979	)			-				(38,979	)			-				(38,979	)
Net Loss from Continuing Operations			(2,994,288	)			(1,337,911	)			(3,176,824	)			(1,698,698	)			(4,949,512	)
Net Loss			(2,994,288	)			(1,337,911	)			(3,176,824	)			(1,698,698	)			(4,949,512	)
Basic and Diluted			(0.18	)			(0.11	)			(0.20	)			(0.14	)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING			16,647,230				12,547,850				16,152,040				12,397,048

  

 

The accompanying notes are an integral part of these unaudited financial statements.

 

 

VGTel, Inc.

(A Development Stage Company)

Statements of Cash Flows

(Unaudited)

 

										Accumulated from
		Six Month Ended								Inception April 1, 2011 to
		September 30, 2012				September 30, 2011				September 30, 2012
Cash flows from operating activities
Net Income (Loss)			(3,176,824	)			(1,698,698	)		$	(4,949,512	)
Adjustments to reconcile net loss to net cash used by operating activities:
Stock Based Compensation			140,000				900,000				1,040,001
Loss on settlement of payables			2,916,128				-				2,916,128
Loss on derivative liability			38,979				-				38,979
Changes in assets and liabilities:
Accounts Payable			15,371				169,060				760,162
Accounts Payable – related parties			7,820				560,133				110,571
Net cash (used) in operating activities			(58,526	)			(69,505	)			(83,671	)
Cash flows from investing activities
Cash paid for purchase of fixed assets			(2,500	)			-				(37,500	)
Net cash provided (used) by investing activities
Cash flows from financing activities
Proceeds from Shareholders			70,300				67,399				128,300
Net cash provided (used) by financing activities			70,300				67,399				128,300
Net increase (decrease ) in cash			9,274				(2,106	)			7,129
Cash and cash equivalents, beginning of period			714				2,859				2,859
Cash and cash equivalents, end of period			9,988				753				9,988
Non-cash transactions:
Reclassification of AP to Debt			-				-				34,595
Reclassification of subscription receivable to APIC			-				-				2,981
Debt discount due to derivative liability			92,595				-				92,595
Shares issued for retirement of AP			394,071				-				394,071

 

The accompanying notes are an integral part of these unaudited financial statements.

 

 

VGTel, Inc.

(A Development Stage Company)

Notes to Unaudited Financial Statements

 

NOTE 1 – Basis of Presentation

 

The unaudited interim financial statements of VGTel, Inc. (the “Company”) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q of Article 10 of Regulations S-X in the United States of America and are presented in United States dollars. They do not include all information and footnotes required by United States generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there has been no material changes in the information disclosed in the notes to the financial statements for the year ended March 31, 2012 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission.

 

The interim unaudited financial statements should be read in conjunction with those financial statements included in Form 10-K. In the opinion of Management, all adjustments considered necessary for fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the three months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the year ending March 31, 2013.

 

The Company spun off its prior telemarketing software business in January 2011 in contemplation of a merger with a private operating entity that did not materialize.  The Company re-entered the development stage for reporting purposes beginning April 1, 2011.

 

NOTE 2 – GOING CONCERN

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  The Company has no established source of revenue.  This raises substantial doubt about the Company’s ability to continue as a going concern.  Without realization of additional capital, it would be unlikely for the Company to continue as a going concern.  The financial statements do not include any adjustments that might result from this uncertainty.

 

The Company’s activities to date have been supported by equity financing.  It has sustained a loss from inception of $924,363 from discontinued operations, and a net loss since re-entering the development stage on April 1, 2011 through the period ended September 30, 2012 of $4,910,533. Management plans to seek funding from its shareholders and other qualified investors to pursue its business plan.  In the alternative, the Company may be amenable to a sale, merger or other acquisition in the event such transaction is deemed by Management to be in the best interests of the shareholders. 

 

NOTE 3 – RELATED PARTY TRANSACTIONS

 

The Law Offices of Bruce W. Minsky, PC (which is affiliated with the Company’s director, Bruce Minsky), provided legal services to the Company in the amount of $7,821.40 for the period ended September 30, 2012, and was owed a total of $85,571 for the period ended September 30, 2012. On September 11, 2012, the Company issued 855,714 shares of common stock to retire the entire outstanding payables of $85,571.

 

NOTE 4 – SETTLEMENT OF PAYABLES

 

On September 11, 2012, the Company issued 3,940,714 shares of common stock to three entities to convert a total amount of $394,071 of payables. $308,500 of third party payables and $85,571 of related party payables were converted into shares of common stock. The fair value of these shares totaled $3,310,200 and a $2,916,128 loss on settlement of AP was recorded as of September 30, 2012. $633,228 of the loss on settlement of AP was to related parties, while $2,282,900 was related to third parties.

 

 

NOTE 5 - NOTE PAYABLE

 

During the nine months ended September 30, 2012, the Company borrowed $70,300 from a third party. These loans are non-interest bearing and due on demand. Total notes payable to third parties at September 30, 2012 are $162,895.

 

NOTE 6 – DERIVATIVE LIABILITIES

 

The Company issued a $92,595 convertible note on March 23, 2012 and determined that the convertible note should be classified as liabilities and recorded at fair value due to their being no explicit limit to the number of shares to be delivered upon settlement of the conversion options. Under ASC 815-15 “Derivatives and Hedging” the liabilities were subsequently measured at fair value at the end of each reporting period with change in fair value recorded in earnings.

 

The convertible note was not exercisable for six months and only qualified for derivative accounting on September 23, 2012. The initial valuation of the convertible feature resulted in a loss on derivative liability of $23,251, a debt discount to the convertible note of $92,595, and a derivative liability of $115,846. The Company fair valued the convertible feature of the note as of September 30, 2012 and recorded a loss on derivative of $15,728.

 

NOTE 7 – FAIR VALUE

 

Financial instruments are recorded at fair value in accordance with the standard for “Fair Value Measurements codified within ASC 820”, which defines fair values, establishes a three level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measurements:

 

• Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical asset or liabilities in active markets.

 

• Level 2 – inputs to the valuation methodology include closing prices for similar assets and liabilities in active markets, and inputs that are observable for the assets and liabilities, either directly, for substantially the full term of the financial instruments.

 

• Level 3 – inputs to the valuation methodology are observable and significant to the fair value.

 

The following is a reconciliation of the level 3 inputs which were used to determine fair value of the conversion feature of the convertible note discussed in note 6.

 

Beginning balance April 1, 2012		$	0
Initial recognition of derivative		$	115,846
Mark to market of debt derivative		$	15,728
Derivative as of September 30, 2012		$	131,574

 

The Company’s conversion option was valued using pricing models and the Company generally uses similar models to value similar instruments. Where possible, the Company verifies the values produced by its pricing models to market prices. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit spreads, measures of volatility and correlations of such inputs. These financial instruments do not trade in liquid markets, and as such, model inputs cannot generally be verified and do involve significant management judgment. Such investments are typically classified within Level 3 of the fair value hierarchy. The Company determined a fair value for this convertible note using Black Scholes Option Pricing. Significant assumptions used in the valuation include the following:

 

Dividend yield: 0%

Expected volatility: 124.59% to 127.16%

Risk free rate: 0.14%

Expected Term: 0.48 to 0.50 years

 

 

NOTE 8 - STOCKHOLDERS’ EQUITY

 

On May 9, 2012, 350,000 shares (420,000 shares after the dividend) were issued for services rendered and valued at $140,000. On May 15, 2012, a 20% stock dividend was paid to shareholders. All share amounts in these financials have been revised to retroactively reflect this dividend.

 

On September 11, 2012, the Company issued 3,940,714 shares of common stock to settle accounts payable to related and third parties in an amount of $394,071. The Company recognized a loss from settlement of debt in amount of $2,916,128 and the fair value of the shares issued totaling $3,310,200 was recorded into additional paid in capital.

 

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

 

Forward Looking Statements

 

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes appearing elsewhere in this Report and in our Annual Report on Form 10-K for the year ended March 31, 2012 (the “Annual Report).

 

The information in this Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are statements other than statements of historical or present facts, that address activities, events, outcomes, and other matters that the Company plans, expects, intends, assumes, believes, budgets, predicts, forecasts, projects, estimates, or anticipates (and other similar expressions) will, should, or may occur in the future. Generally, the words “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “may,” “will,” “could,” “should,” “future,” “potential,” “continue,” variations of such words, and similar expressions identify forward-looking statements. These forward-looking statements are based on our current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events.

 

A. Corporate History and Background

We were (formerly known as  Tribeka  Tek,  Inc.) organized on February  5,  2002 under the laws of the State of New York as Tribeka Tek, Inc., and engaged in the business of providing Edgarizing services for publicly traded companies, including assisting filings through the Edgar system.  

 

On January 18, 2006 we  acquired  all  of  the  software and intellectual property assets pertaining to the “VGTel system”, from NYN International,  LLC,  a  technology development company which developed the ‘GMG system’.  These assets were designed to allow us to operate in the ‘voice-over-internet-protocol’ (“VOIP”) sector of the telecommunications industry. Effective February 2006, we ceased to provide Edgarizing services and devoted our full attention to the VOIP services.

 

In January 2006, we changed our name to VGTel, Inc.  On December 30, 2010, after nearly five years of operating the business relating to the GMG assets with only minimal operations and continued losses, we determined to cease business operations related to the GMG assets and seek to find a suitable business to enter into or to acquire a merger candidate.

 

On December 30, 2010, we entered into a ‘Common Stock Purchase Agreement’ (the “Purchase Agreement ”) by and among Joseph R. Indovina (the “ Buyer ” and/or “Indovina”), Ron Kallus, Niva Kallus, Israel Hason and individual shareholders (the “Sellers”), and the Company, which closed on January 10, 2011. Pursuant to the terms of the Purchase Agreement, Indovina acquired 3,999,388.shares, or approximately 27.14%, of the issued and outstanding shares of common stock of Company from the Sellers with the Sellers receiving, in the aggregate two hundred sixty five thousand six hundred thirteen dollars ($265,613.00) from Indovina for the purchase. On January 10, 2011, in accordance with the Purchase Agreement, our then current officers and directors resigned and Indovina was named President, Secretary and Director. Further, pursuant to Purchase Agreement, prior to the Closing, the GMG intellectual properties, products, assets, the “VGTel” name, and business was spun out from Company to Ron Kallus and Israel Hason in exchange for the cancellation of certain shares issued to them and forgiveness for loans made to Company by Ron Kallus and forgiveness of certain accrued payables for services provided to the Company by Ron Kallus and affiliate parties.

 

 

On February 24, 2011, we executed an Agreement and Plan of Share Exchange (“the Exchange Agreement”) with Venture Industries, Inc. (“Venture”), a company organized under the laws of the State of Nevada, pursuant to which we would acquire 100% of the issued and outstanding shares of Venture, in exchange for the issuance of 21,238,285 shares of our common stock, par value $0.0001. The shares that we would issue to the shareholders of Venture would have constituted 65% of our issued and outstanding common stock on a fully-diluted basis as of and immediately after the consummation of the transactions contemplated by the Exchange Agreement and after giving effect to the Cancellation Agreement canceling a specific number of shares from our Sole Officer who was resigning. The closing of the transaction was scheduled to take place on March 30, 2011.  

  

On June 30, 2011, the Company received a letter (the “Letter”) dated July [sic] 29, 2011 from Lawrence Harris as President of Venture, terminating the Exchange Agreement. The Letter alleged breaches of the Exchange Agreement by us, including the removal of Lawrence Harris as our President on June 28, 2011.   Upon further investigation by our Board of Directors, we determined that issues and disputes existed as to whether the share exchange transaction had closed. We then determined on July 19, 2011, to accept the termination of the Exchange Agreement by Venture pursuant to the Letter.   

 

As a result of the termination prior to closing of the Exchange Agreement, by and among the Company and Venture, the disclosure in our filings with the Securities and Exchange Commission relating to Venture Industries, Inc. or our ongoing operations, share issuances, shell company status, share ownership or control are not applicable and should no longer be relied upon when analyzing our business, operations or financial condition. The affected information appears in our Form 8-K filed on April 5, 2011 and our Preliminary Information Statements filed on April 8, 2011, April 22, 2011 and May 13, 2011.

 

Consequently, as a result of the termination of the Exchange Agreement prior to closing, we remained a Shell Company, as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and had been seeking appropriate business opportunities.

 

Peter Shafran was brought on as our new Chief Executive Officer, at the end of August 2011. Mr. Shafran has been practicing law for over 28 years. Serving as the Executive Producer of River Spirit Music, he produces and promotes concerts in the Hudson Valley region. Mr. Shafran received a Bachelor of Arts degree in Psychology from SUNY-Binghamton, and his Juris Doctor degree from Hofstra University School of Law.

 

On August 30, 2011, the Board of Directors voted to change the name of the Company to 360 Entertainment & Productions, Inc.   The name change is subject to shareholder approval and approval from FINRA.  In the interim, we registered a Certificate of Assumed Name with the State of New York.  We have been conducting business under the name of VGTel, Inc., dba 360 Entertainment & Productions, Inc.

 

(b) Narrative Description of the Business

Over the first two quarters of the fiscal year, we investigated various potential investments and ventures with the goal of generating revenue including investing in the internet sweepstakes and raffle industry. In March 2012, we purchased from Western Capital Ventures, Inc. its nationwide Distribution Agreement with Visual Entertainment Systems, LLC (VES), a manufacturer, for the distribution of its NetStar Internet Kiosks - arcade style sweepstake gaming systems, software and hardware units. Later that month, we also started purchasing, distributing and installing VES’ Kiosks into designated locations. The purchase and distribution of the Kiosks is expected to establish our entry into one of the hottest growth industries in the country and enhance our entertainment services line of business. As of the close of this quarter, the Company had not yet received revenues from this segment of the Company’s business.

 

 

(c) Plan of Operation

 

(i) Charitable Video Gaming

During this past quarter, the Company had been in negotiations to acquire a company in the charitable video gaming industry. The Ohio-based target company has complete manufacturing capabilities, software licensing for raffle games, distribution and maintenance components in place with staffing and warehousing in Ohio. It also currently enjoys a five-year contract to place charitable video raffle kiosks in participating veterans and fraternal organizations’ locations in Ohio, which will enable the expansion of raffle units and locations to meet and exceed more than 5,000 units in 1500+ locations. Proceeds from these video raffles will benefit the locations and the charities they support. Within the next quarter, we anticipate executing a Letter of Intent with the target company and closing the transaction shortly thereafter. Following this acquisition, we intend to expand similar operations throughout Ohio and into other states where the regulatory and political environments are accommodating. The Company has already started exploring that process in earnest in several other states. (See Part II, Item 5 below)

 

(ii) Internet Sweepstakes café locations

During the past two quarters, the Company had been in negotiations with several large-scale internet sweepstakes operators in six states within the Northeast, Mid-Atlantic and Southeast regions of the US to acquire existing Internet Sweepstakes café locations. One of those groups operates approximately 250 internet sweepstakes outlets with the desire to triple their reach to more than 750 by the end of this year. Some of those locations would include racetracks with 200-500 units per location. Another group operates 325 units in 21 locations with plans to expand to more than 1200 units in about 75 locations in 2012. Our goal is to acquire existing locations and collaborate with these groups to develop rapid expansion and market penetration. Though we did not enter into any contracts for any of these projects in the fiscal year, we are actively pursuing several of these projects for possible investment in the coming twelve (12) months. We are in the formative phase of development. Our plan is to develop a multi-platform entertainment and media company that will allow us to produce and invest in independent films and stage productions, live concerts and events, online streaming video content and internet sweepstakes gaming. We are developing a model to include several different companies to complement each other and provide vertical as well as horizontal reach across media platforms.

 

(d) Financing

 

We had been seeking to raise a minimum of $500,000.00 to pay for our ongoing expenses while investigating opportunities. These expenses include legal, accounting and audit fees as well as general and administrative expenses. These cash requirements are in excess of our current cash and working capital resources. Accordingly, we will require additional financing in order to enable us to startup and maintain a business, continue operations and to repay our liabilities. There is no assurance that any party will advance additional funds to us in order to enable us to sustain our plan of operations or to repay our liabilities.

 

On March 23, 2012, we entered into a funding agreement with TW Ruban Group, Inc., which provides an advance of $500,000.00 in working capital to be paid in over in installments. The funding agreement is strictly a short-term arrangement to provide working capital while the Company continues to negotiate the funding of $5.0 million of additional capital. On May 22, 2012, we entered into an additional funding agreement with Wise & Wise Inc., which provides an advance of $500,000.00 in working capital to be paid in over in installments. These funding agreements are strictly short-term arrangements to provide working capital while the Company continues to negotiate the funding of $5.0 million of additional capital.

 

(e) Objectives

We would like to position ourselves as a major player in the charitable video raffle and internet sweepstakes kiosk industries. Capitalizing on our connections to some of the most seasoned, talented and creative people throughout these industries, we are planning acquisitions of companies and products to achieve our goals through the end of 2012 and into 2013.

 

In addition, we remain committed to position the Company as an active producer and partner in various entertainment vehicles and platforms, including the production of film, stage, music, and online content and the streaming of events live and online. Capitalizing on our connections to some of the most seasoned, talented and creative people throughout the entertainment and finance industries, we are fielding an array of potential offerings with plans to announce a full slate of production projects beginning in 2013.

 

 

Our principal business objective for the next 12 months and beyond will be to achieve long-term growth potential through starting up a new business or a combination with a business in addition to immediate, short-term earnings. We will not restrict our potential candidate target companies to any specific business, industry or geographical location and, thus, may acquire any type of business.

 

The analysis of new business opportunities has and will be undertaken by or under the supervision of our officers and directors. We have unrestricted flexibility in seeking, analyzing and participating in potential business opportunities. In our efforts to analyze potential acquisition targets, we will consider the following kinds of factors:

 

·

Potential for growth, indicated by new technology, anticipated market expansion or new products;

·

Competitive position as compared to other firms of similar size and experience within the industry segment as well as within the industry as a whole;

·

Strength and diversity of management, either in place or scheduled for recruitment;

·

Capital requirements and anticipated availability of required funds, to be provided by us or from operations, through the sale of additional securities, through joint ventures or similar arrangements or from other sources;

·

The cost of participation by us as compared to the perceived tangible and intangible values and potentials;

·

The extent to which the business opportunity can be advanced;

·

The accessibility of required management expertise, personnel, raw materials, services, professional assistance and other required items; and

·

Other relevant factors.

 

In applying the foregoing criteria, no one of which will be controlling, we will attempt to analyze all factors and circumstances and make a determination based upon reasonable investigative measures and available data. Potentially available business opportunities may occur in many different industries, and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex. Due to our limited capital available for investigation, we may not discover or adequately evaluate adverse facts about the opportunity to be acquired.

 

(f) Form of Acquisition

The manner in which we participate in an opportunity will depend upon the nature of the opportunity, the respective needs and desires of us and the promoters of the opportunity, and our relative negotiating strength with such promoters.   It is likely that we will require its participation in a business opportunity through the issuance of our common stock or other securities. Although the terms of any such transaction cannot be predicted, it should be noted that in certain circumstances the criteria for determining whether or not an Acquisition is a so-called "tax free" reorganization under Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the "Code"), depends upon whether the owners of the acquired business own 80% or more of the voting stock of the surviving entity. If a transaction were structured to take advantage of these provisions rather than other "tax free" provisions provided under the Code, all prior stockholders would, in such circumstances, retain 20% or less of the total issued and outstanding shares. Under other circumstances, depending upon the relative negotiating strength of the parties, prior stockholders may retain substantially less than 20% of the total issued and outstanding shares of the surviving entity. This could result in substantial additional dilution to the equity of those who were our stockholders prior to such reorganization.

 

Our present stockholders may not be left with control of a majority of our voting shares following the formation of a new business or a reorganization transaction. As part of such a transaction, all or a majority of our directors and officers may resign and new directors may be appointed without any vote by stockholders.

 

In the case of an acquisition, the transaction may be accomplished upon our sole determination without any vote or approval by stockholders. In the case of a statutory merger or consolidation directly involving us, it will likely be necessary to call a stockholders' meeting and obtain the approval of the holders of a majority of the outstanding shares. The necessity to obtain such stockholder approval may result in delay and additional expense in the consummation of any proposed transaction and will also give rise to certain appraisal rights to dissenting stockholders. Most likely, we will seek to structure any such transaction so as not to require stockholder approval.

 

 

It is anticipated that the investigation of specific business opportunities and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require substantial time and attention and substantial cost for accountants, attorneys and others. If a decision were made not to participate in a specific business opportunity, the costs theretofore incurred in the related investigation would not be recoverable. Furthermore, even if an agreement is reached for the participation in a specific business opportunity, the failure to consummate that transaction may result in the loss to us of the related costs incurred.

 

We presently have no employees apart from our management.  We have several consultants who currently provide services to us. Some of them are compensated for their services through the issuance of our shares to them, which may result in further dilution to our stockholders.  We may hire additional employees, consultants, and recruit senior executive members as officers and directors, which employees may be instrumental in forming a new business or we may acquire another business with a full management team already on board.

 

(g) Reports to Security Holders:

We are required to file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission and our filings are available to the public over the internet at the Securities and Exchange Commission’s website at http://www.sec.gov. The public may read and copy any materials filed by us with the Securities and Exchange Commission at the Securities and Exchange Commission’s Public Reference Room at 100 F Street N.E. Washington D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the Securities and Exchange Commission at 1-800-732-0330. The SEC also maintains an Internet site that contains reports, proxy and formation statements, and other information regarding issuers that file electronically with the SEC, at http://www.sec.gov.

 

Other than as discussed above, none of our Officers or our Directors has had any preliminary contact or discussions with any representative of any other entity regarding a business combination with us. Any target business that is selected may be a financially unstable company or an entity in its early stages of development or growth, including entities without established records of sales or earnings. In that event, we will be subject to numerous risks inherent in the business and operations of financially unstable and early stage or potential emerging growth companies. In addition, we may effect a business combination with an entity in an industry characterized by a high level of risk, and, although our management will endeavor to evaluate the risks inherent in a particular target business, there can be no assurance that we will properly ascertain or assess all significant risks.

 

We anticipate that the selection of a business combination will be complex and extremely risky. Because of general economic conditions, rapid technological advances being made in some industries and shortages of available capital, our management believes that there are numerous firms seeking even the limited additional capital that we will have and/or the perceived benefits of becoming a publicly traded corporation. Such perceived benefits of becoming a publicly traded corporation include, among other things, facilitating or improving the terms on which additional equity financing may be obtained, providing liquidity for the principals of and investors in a business, creating a means for providing incentive stock options or similar benefits to key employees, and offering greater flexibility in structuring acquisitions, joint ventures and the like through the issuance of stock. Potentially available business combinations may occur in many different industries and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex.

 

(h) Available Information

The Company’s web site address is http://360entertainmentandproductions.com. The information contained on the Company’s web site is not included as a part of, or incorporated by reference into, this Annual Report on Form 10-K. The Company makes available, free of charge, on its web site its annual reports on Form 10-K, its quarterly reports on Form 10-Q, its current reports on Form 8-K and amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the Exchange Act) as soon as reasonably practicable after the Company has electronically filed such material with, or furnished it to, the United States Securities and Exchange Commission (the "SEC").

 

 

Results of Operations: 

 

Total operating expenses for the three months ended September 30, 2012 was $2,955,309, as compared to $1,337,911 for the three month period that ended September 30, 2011.   During the three months ended September 30, 2012, we had $7,235 in administrative expenses, as compared to $259,550 for the three month period ended September 30, 2011. During the three month period ended September 30, 2012 we had $9,096 in professional services expenses as compared to $172,528 for the three months ended September 30, 2011.   Professional services in 2011 consisted of legal and advisory services generated in connection with the discontinuation of the GMG assets, the failed transaction with Venture, and the restructuring of the Company. During the three months ended September 30, 2012, we had $22,850 in officers’ compensation & rent as compared to $905,833 for the three month period ended September 30, 2011.

 

The Company reported a net loss for the three month period ended September 30, 2012 of $2,994,288, as compared to $1,337,911 for the three month period ended September 30, 2011.

 

The Company incurred $2,916,128 in settlement of accounts payable during the three-month period ended September 30, 2012, as compared to $0 in settlement of accounts payable during the three-month period ending September 30, 2011. The Company incurred a $38,979 loss on derivative liabilities during the three-month period ended September 30, 2012, as compared to a $0 loss on derivative liabilities during the three-month period ending September 30, 2011.

   

Total operating expenses for the six month period ended September 30, 2012 was $3,137,845, as compared to $1,698,698 for the six month period ended September 30, 2011.  During the six month period ended September 30, 2012 we had $36,048 in administrative expenses, as compared to $274,485 for the six month period ended September 30, 2011.   During the six month period ended September 30, 2012 we had $10,419 in professional services expenses, as compared to $518,380 for the six month period ended September 30, 2011. During the six months ended September 30, 2012, we had $175,250 in officers’ compensation & rent as compared to $905,833 for the three month period ended September 30, 2011.

 

We reported a net loss for the six month period ended September 30, 2012 of $3,176,824, as compared to $1,698,698 for the six month period ended September 30, 2011.

 

The Company incurred $2,916,128 in settlement of accounts payable during the six-month period ended September 30, 2012, as compared to $0 in settlement of accounts payable during the six-month period ending September 30, 2011. The Company incurred a $38,979 loss on derivative liabilities during the six-month period ended September 30, 2012, as compared to a $0 loss on derivative liabilities during the six-month period ending September 30, 2011.

  

As reflected in the accompanying financial statements, we had an accumulated deficit of $924,363 from discontinued operations, a deficit accumulated since re-entering the development stage on April 1, 2011 of $4,949,512 and a net loss for the six month period ended September 30, 2012 of $3,176,824, raising substantial doubt about our ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company's ability to raise additional capital and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

Liquidity and Capital Resources:

 

As of September 30, 2012, the Company had $9,988 in cash, compared to $753 as of September 30, 2011.

 

Net cash used in operating activities was $58,526 for the three month period ended September 30, 2012, compared to $69,505 for the period ended September 30, 2011.

 

The company received shareholder loans amounting to $70,300 during the six month periods ended September 30, 2012 as compared to $67,399 during the six month periods ended September 30, 2011.

 

 

The Company intends to meet its long-term liquidity needs through available cash and cash flow as well as through additional financing from outside sources.   Additional issuances of equity or convertible debt securities will result in dilution to the current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to execute fully our Plan of Operations to expand our business, which could significantly and materially restrict our business operations. If additional capital is raised through the sale of additional equity or convertible securities, substantial dilution to our stockholders is likely to occur which may result in a partial or substantial loss to your investment in our common stock.

 

We presently do not have any arrangements for additional financing, and no potential lines of credit or sources of financing are currently available for the purpose of proceeding with our plan of operations.

 

If the Company fails to raise additional funds to execute its expansion plan, it is likely that the Company will not be able to operate as a viable entity and may be forced to go out of business.

  

Off-Balance Sheet Arrangements

 

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

 

ITEM 3.    Quantitative and Qualitative Disclosures about Market Risk.

 

Not applicable.

 

ITEM 4.    Controls and Procedures.

 

(a) Evaluation of Disclosure Controls and Procedures

 

Under the supervision of our sole executive officer, who is also the principal financial officer, we have evaluated the effectiveness of the design and operation of the Company’s “disclosure controls and procedures,” as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this annual report (the “Evaluation Date”).

 

Based on that evaluation, our principal executive officer concluded that our disclosure controls and procedures were not effective because of certain deficiencies involving internal controls which constituted a material weakness as discussed below.

 

The material weakness relates to the monitoring and review of work performed by our limited accounting staff in the preparation of financial statements, footnotes and financial data provided to our independent registered public accounting firm in connection with the annual audit. More specifically, the material weakness in our internal control over financial reporting is due to the fact that:

 

 • The Company lacks proper segregation of duties. We believe that the lack of proper segregation of duties is due to our limited resources.

 

• The Company does not have a comprehensive and formalized accounting and procedures manual.

 

Management has concluded that until we have sufficient financial resources to supplement our accounting personnel, this material weakness will continue.

 

Notwithstanding our principal executive officer’s conclusion, the material weakness identified did not result in the restatement of any previously reported financial statements or any other related financial disclosures, nor does Management believe that the accuracy of our financial statements for the current reporting period were affected.

 

 

(b) Changes in Internal Controls.

 

There was no change in our internal controls over financial reporting that has materially affected, or is reasonable likely to materially affect, our internal control over financial reporting during the quarter covered by this Report.

 

PART II    OTHER INFORMATION

 

Item 1 Legal Proceedings:

 

None

 

Item 1A Risk Factors

 

As of the date of this filing, there have been no material changes from the risk factors previously disclosed in Item 1A to Part I of the Company’s Annual Report on Form 10-K for the year ended March 31, 2011. An investment in the Company’s common stock involves various risks. When considering an investment in the Company, you should carefully consider all of the risk factors described herein and in the Company’s Annual Report. These matters specifically identified are not the only risks and uncertainties facing the Company and there may be additional matters that are not known to the Company or that the Company currently considers immaterial. All of these risks and uncertainties could adversely affect the Company’s business, financial condition or future results and, thus, the value of an investment in the Company.

 

Item 2 Unregistered Sales of Equity Securities

 

On September 11, 2012, the Company exchanged 3,940,714 shares of common stock for $394,071.35 of debt owed to Horner & Associates, Law Offices of Bruce W. Minsky, PC and The TW Ruban Group, Inc. These debt conversions were approved by the disinterested members of the Company’s Board of Directors.

 

The shares of common stock issued in the debt conversions were exempt from registration under Section 4(2) of the Securities Act of 1933 as a sale by an issuer not involving a public offering.  Such shares may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements and certificates evidencing such shares contain a legend stating the same.

 

Item 3 Default Upon Senior Securities

 

None

 

Item 4 (Reserved)

 

None

 

Item 5. Other Events

 

None

 

 

ITEM 6. EXHIBITS

 

EXHIBIT INDEX

 TO

QUARTERLY REPORT ON FORM 10-Q

 

Exhibit Number		Description		Incorporated by Reference to:		Filed Herewith
1		Articles of Incorporation		Exhibit 3.1 to the Company’s Registration Statement on Form SB-2, filed May 23, 2006
2		By Laws		Exhibit 3.3 to the Company’s Registration Statement on Form SB-2, filed May 23, 2006
3		Amended Articles of Incorporation		Exhibit 3.2 to the Company’s Current Report on Form 8-K, filed on January 3, 2011
4		Stock Purchase Agreement		Exhibit 10.1 to the Company’s Current Report on Form  8K/A, filed on February 11, 2011
5		2011 Equity Incentive Plan		Exhibit 10.2 to the Company’s Form 10-K for the period ending March 31, 2011, filed August 17, 2011
6		Amended Articles of Incorporation		Exhibit 3.4 to the Company’s Form 10-K for the period ending March 31, 2011, filed August 17, 2011
7		Letter from Venture to VGTel		Exhibit 99.1 to the Company’s Current Report on Form 8-K, filed on July 29, 2011
8		Letter to Larry Harris from VGTel		Exhibit 99.2. to the Company’s Current Report on Form 8-K, filed on July 29, 2011
9		Certificate of Assumed Name dba		Exhibit 3.5 to the Form 8K filed September 1, 2011
10		Employment Agreement Peter Shafran		Exhibit 10.4 to the Form 8K filed September 1, 2011
31.1		Certification of Peter Shafran Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X
32.1		Certification of Peter Shafran Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				X

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

VGTel, Inc.
Date:  November 14, 2012	By:	/s/ Peter Shafran
		Peter Shafran
		Chief Executive Officer , Principal Executive Officer

 

VGTel, Inc.
Date:  November 14, 2012	By:	/s/ Peter Shafran
		Peter Shafran
		Principal Financial Officer

 

VGTel, Inc.
Date:  November 14, 2012	By:	/s/ Peter Shafran
		Peter Shafran
		Principal Accounting Officer