UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act Of 1934

For the quarterly period ended September 30, 2016

[   ] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act Of 1934

For the transition period from __________ to __________

 Commission file number: 000-55595

 

     HD VIEW 360 INC.    

(Exact name of registrant as specified in its charter)

 

                           Florida                 

                      

                    46-4264584

(State or other jurisdiction of incorporation or organization)		(I.R.S Employer Identification No.)

150 S.E. 2nd Ave. Suite 404

                     Miami, Florida 33131  

(Address of principal executive offices, including Zip Code)

 

                (786) 294-0559   

(Issuer’s telephone number, including area code)

 

Check whether the issuer (1) has filed all reports required to be filed by section 13 or 15(d) of the Exchange Act during the past 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 small reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-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]

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

 

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:  9,332,631 shares of common stock as of November 18, 2016.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION	PAGE
Item 1. Financial Statements	F-1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	3
Item 3. Quantitative and Qualitative Disclosures About Market Risk	9
Item 4. Controls and Procedures	9
PART II-- OTHER INFORMATION
Item 1. Legal Proceedings	10
Item 1A. Risk Factors	10
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	10
Item 3. Defaults Upon Senior Securities	10
Item 4. Mine Safety Disclosures	10
Item 5. Other Information	10
Item 6. Exhibits	11
SIGNATURES	12

1

INDEX TO FINANCIAL STATEMENTS

Condensed Consolidated Balance Sheets

F-2

Condensed Consolidated Statements of Income

F-3

Condensed Consolidated Statements of Changes in Cash Flows

F-4

Notes to Condensed Consolidated Financial Statements

F-5

2

HD VIEW 360 INC.

 Condensed Consolidated Balance Sheets

ASSETS	September 30, 2016		December 31, 2015
CURRENT ASSETS	(Unaudited)
Cash	$ 204,972		$ 292,010
Inventory, net of reserve of $13,650 as of September 30, 2016 and $6,010 December 31,        2015, respectively	2,750		10,390
Prepaid expenses and other current assets	12,040		2,200
Total current assets	219,762		304,600
PROPERTY AND EQUIPMENT
Furniture, fixtures and equipment	50,743		15,000
Leasehold improvements	8,212		4,500
Vehicles	22,730		22,730
Total Property and Equipment	81,685		42,230
Less accumulated depreciation	(21,313)		(14,712)
Property and equipment, net	60,372		27,518
Total Assets	$ 280,134		$ 332,118

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses	$ 26,131		$ 5,748
Income taxes payable	-		63,837
Capital lease obligations-current portion	2,462		3,152
Total current liabilities	28,593		72,737
LONG-TERM LIABILITIES
Deferred rent	8,040		-
Capital lease obligations – non-current portion	15,594		17,375
Total long-term debt	23,634		17,375
Total Liabilities	52,227		90,112
Commitments and Contingencies
STOCKHOLDERS’ EQUITY
Preferred stock, $0.001 par value, authorized 10,000,000 shares; 0 issued  and        outstanding	-		-
Common stock, $0.001 par value, authorized 90,000,000 shares; 9,332,631 and 9,285,132        issued and outstanding shares at September 30, 2016 and December 31, 2015, respectively	9,333		9,285
Additional paid-in capital	225,246		196,794
Non-controlling interest	12,164		-
(Accumulated deficit) retained earnings	(18,836)		35,927
Total stockholders’ equity	227,908		242,006
Total Liabilities and Stockholders’ Equity	$ 280,134		$ 332,118

The accompanying notes are an integral part of the condensed consolidated financial statements

F-1

HD VIEW 360 INC.

Condensed Consolidated Statements of Income

(Unaudited)

The accompanying notes are an integral part of the condensed consolidated financial statements

F-2

 HD VIEW 360 INC.

Condensed Consolidated Statements of Changes in Cash Flows

Nine Months Ended September 30,

(Unaudited)

The accompanying notes are an integral part of the condensed consolidated financial statements

F-3

HD VIEW 360 INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(1) NATURE OF OPERATIONS

HD View 360 Inc., (“we” or “the Company”), was formed with an effective date of January 1, 2014, under the laws of the State of Florida. The Company design and installs closed-circuit television (“CCTV”) systems, using Analog, Internet Protocol and Serial Digital Interface technology. The Company also distributes network video recorders, HD cameras and accessories.

HD View Quick Fix Inc., (“HDQF”), was incorporated on May 18, 2016, under the laws of the State of Florida. HDQF will provide installation services and a subscription-based rapid response for computer/surveillance equipment repairs.

HD View Technologies Inc., (“HDVT”), was incorporated on May 26, 2016, under the laws of the State of Florida. HDVT will be a credit card/debit card merchant processor.

SimpleFone Inc., (“SFI”), was incorporated on June 17, 2016, under the laws of the State of Florida. SFI plans to offer lease telephone equipment and telephone services.

(2) BASIS OF PRESENTATION AND USE OF ESTIMATES

a) Basis of Presentation

The accompanying condensed consolidated financial statements comprise the Company and its newly formed wholly owned subsidiaries, HDQF and HDVT, and a 60% majority owned subsidiary SFI. All intercompany activity is eliminated in consolidation.

The accompanying condensed consolidated financial statements have been prepared in accordance with Generally Accepted Accounting Principles ("GAAP") in the United States of America ("U.S.") as promulgated by the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") and with the rules and regulations of the U.S Securities and Exchange Commission ("SEC"). The consolidated financial statements reflect all normal recurring adjustments, which, in the opinion of management, are considered necessary for a fair presentation of the results for the periods shown. The results of operations for the periods presented are not necessarily indicative of the results expected for any future period. The information included in the December 31, 2015 consolidated financial statements should be read in conjunction with Management’s Discussion and Analysis and Results of Operations contained elsewhere in this report and the audited consolidated financial statements and accompanying notes filed in Form 10-K filed on March 30, 2016 with the U.S. Securities and Exchange Commission.

b) Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

c) Reclassifications

Certain reclassifications have been made to the 2015 interim financial information to conform with the current period. These reclassifications did not impact financial condition or results of operations.

F-4

HD VIEW 360 INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

     

d) Property and Equipment

All property and equipment are recorded at cost and depreciated over their estimated useful lives, generally three, five or seven years, using the straight-line method.  Upon sale or retirement, the cost and related accumulated depreciation are eliminated from their respective accounts, and the resulting gain or loss is  included in the results of operations. Repairs and maintenance charges, which do not increase the useful lives of the assets, are charged to operations as incurred.

e) Net Income Per Share

Basic income per share excludes dilution and is computed by dividing the income attributable to stockholders by the weighted-average number of shares outstanding for the period. Diluted income per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that shared in the earnings of the Company.

There were no common stock equivalents for the nine months ended September 30, 2016, and  2015.

The 9,000,000 founders shares were not physically issued until September 1, 2015, however for purposes of the net income per share calculation, they were deemed issued on January 1, 2014.

f) Income Taxes

The Company follows the provisions of ASC 740-10, Accounting for Uncertain Income Tax Positions. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for unrecognized tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

As of September 30, 2016, the tax years 2015 and 2014 for the Company remain open for IRS audit. The Company has received no notice of audit or any notifications from the IRS for any of the open tax years.

g) Cash and Cash Equivalents

The Company considers all highly liquid securities with original maturities of three months or less when acquired, to be cash equivalents. The Company had no financial instruments that qualified as cash equivalents at September 30, 2016, or December 31, 2015.

h) Financial Instruments and Fair Value Measurements

FASB ASC 820 “Fair Value Measurement” clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. It also requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy for which these assets and liabilities must be grouped, based on significant levels of inputs as follows:

F-5

HD VIEW 360 INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Level 1:

Quoted prices in active markets for identical assets or liabilities.

Level 2:

Quoted prices in active markets for similar assets and liabilities and inputs that are observable for the   asset or liability.

Level 3:

Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

ASC 825 also requires disclosures of the fair value of financial instruments. The carrying value of the Company’s current financial instruments, which include cash and cash equivalents, accounts payable and accrued liabilities approximates their fair values because of the short-term maturities of these instruments.

i) Impairment of Long-Lived Assets

A long-lived asset is tested for impairment whenever events or changes in circumstances indicate that its carrying value amount may not be recoverable. An impairment loss is recognized when the carrying amount of the asset exceeds the sum of the undiscounted cash flows resulting from its use and eventual disposition. The impairment loss is measured as the amount by which the carrying amount of the long-lived assets exceeds its fair value.

j) Related Party Transactions

All transactions with related parties are in the normal course of operations and are measured at the exchange amount.

k) Recent Accounting Pronouncements

Recent accounting pronouncements not yet effective issued by the FASB, including the Emerging Issues Task Force, the American Institute of Certified Public Accountants and the U.S. Securities and Exchange Commission are not believed by management to have a significant impact on the Company’s future financial statements.

l) Revenue Recognition

The Company recognizes revenues when persuasive evidence of an arrangement exists, shipment has occurred, price is fixed or determinable, and collectability is reasonably assured. Product revenues are recognized when shipped to the customer. Revenues for installation services are recognized upon customer acceptance at completion of installation.

m) Shipping and Handling Costs

The Company generally does not charge its customers separately for shipping and handling. Shipping and handling costs are included in cost of product  in the accompanying statements of income.

n) Inventories

Inventories are valued using the weighted average method. Cost is determined by the first-in, first-out

method. Management establishes a valuation reserve for slow-moving items.

F-6

HD VIEW 360 INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(3) STOCKHOLDERS’ EQUITY

At September 30, 2016 and December 31, 2015, the Company has 90,000,000 shares of par value $0.001 common stock authorized and 9,332,631 and 9,285,132 issued and outstanding, respectively. At September 30, 2016 and December 31, 2015, the Company has 10,000,000 shares of par value $0.001 preferred stock and zero issued and outstanding.

In January 2016, the Company issued 47,499 shares of common stock in exchange for $28,500 in cash.

(4) COMMITMENTS AND CONTINGENCIES

a) Real Property Lease

The Company leases office and warehouse space with unrelated parties. During 2014, the Company executed a 1-year lease, with base rent of $2,200 per month, which was renewed on July 1, 2015. The new lease required a monthly base rent payment of $2,310. This lease expired July 1, 2016, and was extended for one month. The Company relocated under a new two year lease effective July 1, 2016. The Company received a three month abatement in rent payments in exchange for completing certain leasehold improvements. These improvements were completed and the Company relocated on August 1, 2016. This lease requires a base rent of $3,063 per month and increases by 4% on the anniversary.

Rent expense of $23,697 and $23,257 was incurred during the nine months ended September 30, 2016 and 2015, respectively. Rent expense of $8,040 and $8,029 was incurred during the three months ended September 30, 2016 and 2015, respectively.

Future minimum lease payments under the office lease agreement are as follows:

For the Years Ending December 31,
2016 (3 months remaining)	$ 9,188
2017	$ 37,121
2018	$ 28,668
Total minimum lease payments	$ 74,977

F-7

HD VIEW 360 INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

b) Vehicle Lease

The Company leases a certain vehicle under an agreement which is accounted for on the balance sheet as a capital lease and expires in May 2021. The lease calls for monthly payments of $366, which commenced in July 2015.

Future minimum lease payments under the capital lease agreement are as follows:

For the Years Ending December 31,
2016 (3 months remaining)	$ 1,799
2017	$ 4,392
2018	$ 4,392
2019	$ 4,392
2020	$ 4,392
Thereafter	$ 934
Total minimum lease payments	$ 20,301
Less: amount representing interest	$ 2,245
Present value of net minimum lease payments	$ 18,056

c) Other

The Company is subject to asserted claims and liabilities that arise in the ordinary course of business. The Company maintains insurance policies to mitigate potential losses from these actions. In the opinion of management, the amount of the ultimate liability with respect to those actions will not materially affect the Company’s financial position or results of operations.

(5) CONCENTRATIONS OF CREDIT RISK

a) Cash

The Company maintains its cash in bank deposit accounts, which may, at times, may exceed federally insured limits. The Company had cash balances in excess of FDIC insured limits of $0 and $42,010 at September 30, 2016, and December 31, 2015, respectively.

F-8

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATION

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the unaudited interim Financial Statements and related notes included in Item 1. Interim Financial Statements of this report and in Item 8. Financial Statements and Supplementary Data in our most recent Annual Report on Form 10-K, as well as the sections entitled “Risk Factors” in Item 1A. of our most recent Annual Report on Form 10-K and Part II, Item 1A. of this report, as well as other cautionary statements and risks described elsewhere in this report and our most recent Annual Report on Form 10-K. Our actual results could differ materially from those discussed in the forward-looking statements.

Overview

We were formed on January 1, 2014, to provide security surveillance products and systems to commercial users. We have had increasing revenues, and have an accumulated deficit of approximately $18,800 at September 30, 2016.

During the second quarter of 2016, we incorporated three new wholly owned subsidiaries: HD View Technologies Inc., HD View Quick Fix Inc. and SimpleFone Inc. During the third quarter we sold 40% of SimpleFone Inc in exchange for the telephone switch needed for SimpleFone to conduct its business.

HD View Technologies Inc. will be a credit card/debit card merchant processor. HD View Quick Fix Inc. will provide installation services and a subscription-based rapid response for computer/surveillance equipment repairs. SimpleFone Inc. will sell/lease telephone equipment and voice over internet (VOIP) telephone service.

We expect that our research, sales and marketing costs will continue to increase as a percentage of revenues in the short-term.

Liquidity and Capital Resources

We derive revenues from the sale and installation of our security related surveillance system products and services.

For the nine months ended September 30, 2016 and 2015, our net sales were $772,044 and $507,543, respectively.

We have experienced and expect an increasing trend in sales due to our ability to fulfill more orders that will come from greater brand acceptance due to previous and continuing expenditures in marketing and sales. Most of our revenues derive from the sale and installation of security and surveillance systems which are generally non-recurring. We sell surveillance products and install security systems primarily for commercial customers and generate revenues from the sale of these systems to our customers and, to a lesser extent, from maintenance of these systems for our customers. After we have installed a system at any particular customer site, we have generated the majority of revenues from that particular client location. We would not expect to generate significant revenues from any existing client in future years unless that client has additional installation sites for which our services might be required. Therefore, in order to maintain a level of revenues each year that is at or in excess of the level of revenues we generated in prior years, we must identify and be retained by new clients. If our business development, marketing and sales techniques do not result in an equal or greater number of projects of at least comparable size and value for us in a given year compared to the prior year, then we may be unable to increase our revenues and earnings or even sustain current levels in the future. To address this issue, we plan to target businesses which are franchisees with multiple locations.

3

We do not anticipate any increase in the base cost of our products, but do expect increased labor cost in proportion to an increase in installation revenues. Increased sales in 2016 are attributable to a strategic shift in our business model, where in 2015 we transitioned into providing installation services, which is a higher margin line of revenues. We began the transition to installation early in 2015.

THREE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015

Revenues

Our net revenues for the three months ended September 30, 2016 and 2015 were $226,564 and $214,846, respectively. Our installation revenues were 48.8% of total revenues in 2016 and 55.4% in 2015. Overall our net revenues grew 5.5% in 2016 over 2015, with the majority of this growth occurring in product revenue.

Costs and Expenses

For the three months ended September 30, 2016 and 2015, our cost of sales was $202,927 and $138,582, respectively. Our cost of sales, as a percentage of sales, was 89.6% for the three months ended September 30, 2016 and 64.5% for the three months ended September 30, 2015. This percentage increase directly resulted from the change of our business model to incorporate the sale of installation services, which has a higher profit margin. However, during the third quarter of 2016 costs were actually higher due to lengthy out-of-town stays for our installation personnel and utilizing higher cost installation personnel for higher quality work. Installation, (and charging for installation service), also aids us in an increased level of satisfaction of our products by our customers because of our standardized installation policies and procedures.

Our cost of sales of product decreased from 76.3% to 70.5%, and cost of sales of installation increased to 109.5% for the three months ended September 30, 2016 from 55.0% for the three months ended September 30, 2015.

Our gross profit was $23,637 and $76,264 for the three months ended September 30, 2016 and 2015, respectively. Our gross profit as a percentage of sales was 10.4% and 35.5% for the three months ended September 30, 2016 and 2015, respectively.

During the three months ended September 30, 2016 and 2015, we spent $91,619 and $35,062, respectively, on general and administrative expenses inclusive of professional fees. Our general and administrative expenses increased by $56,558, or 378.9%, for the three months ended September 30, 2016 over the three months ended September 30, 2015. This increase was mainly attributable to a $6,196 decrease in professional fees and a $62,753 increase in our general and administrative expenses, both of which were related to our becoming a public company.

We had net loss of $61,348 for the three months ended September 30, 2016 compared to net income of $3,028 for three months ended September 30, 2015.

4

Results of Operations

The following tables set forth selected unaudited statement of operations data for each of the periods indicated:

Statements of Operations	Three Months Ended September 30, 2016	Three Months Ended September 30, 2015
Sales	$ 226,564	$ 214,846
Cost of Sales	$ 202,927	$ 138,582
Gross Profit	$ 23,637	$ 76,264
Operating Expenses	$ 95,696	$ 37,785
Net (Loss) Income Attributable to HD View 360 Inc.	$ (61,348)	$ 3,028

Financing Activities

During the three months ended September 30, 2016 compared to three months ended September 30, 2015, the Company had become independent from loans/capital contributions from its principal shareholder as it is generating sufficient cash flows from operations. During the first quarter of 2016 the Company sold 47,499 shares of common stock in exchange for $28,500 in cash.

Property and Equipment

We occupied approximately 850 square feet of space located in Miami Florida. This location consisted of approximately 400 square feet of warehouse space and approximately 450 square feet of office and retail space. We occupied this location pursuant to a lease agreement that required us to pay $2,471 monthly. The lease expired on June 1, 2016, and was extended for one month.  We relocated to new space during the first week of August 2016, as described below.

We do not intend to renovate, improve, or develop properties. We are not subject to competitive conditions for property and currently have no property to insure. We have no policy with respect to investments in real estate or interests in real estate and no policy with respect to investments in real estate mortgages. Further, we have no policy with respect to investments in securities of or interests in persons primarily engaged in real estate activities.

During the second quarter of 2016, we incorporated three new wholly owned subsidiaries: HD View Technologies Inc., HD View Quick Fix Inc., and SimpleFone Inc. During the third quarter we sold 40% of SimpleFone Inc. in exchange for the telephone switch needed for SimpleFone Inc. to conduct its business.

HD View Technologies Inc. will be a credit/debit card merchant processor. HD View Quick Fix Inc. will provide installation services and a subscription-based rapid response for computer/surveillance equipment repairs. SimpleFone Inc. will sell/lease telephone equipment and voice over internet (VOIP) telephone service.

5

As a direct result of founding these three new entities we determined that we required additional office space to house all four lines of business and entered into a lease for a replacement location which encompasses approximately 1,600 square feet. This new lease will require us to pay $3,063 per month in rent.

In June 2015 we added a cargo van to allow for the delivery of product packages to the shipping carrier as well as for around town supplies collection. This vehicle was financed through a capital lease.

NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015

Revenues

Our net revenues for the nine months ended September 30, 2016 and 2015 were $772,044 and $507,543, respectively. Our installation revenues were 52.1% of total revenues in 2016 and 46.7% in 2015. Overall our net revenues grew 52.1% in 2016 over 2015, with the majority of this growth occurring in installation revenues.

Costs and Expenses

For the nine months ended September 30, 2016 and 2015, our cost of sales was $554,937 and $304,763, respectively. Our cost of sales, as a percentage of sales, was 71.9% for the nine months ended September 30, 2016 and 60.0% for the nine months ended September 30, 2015. This percentage increase directly resulted from the change of our business model to incorporate the sale of installation services, which has a higher profit margin. However, during the third quarter of 2016 costs were actually higher due to lengthy out-of-town stays for our installation personnel and utilizing higher cost installation personnel for higher quality work. Installation, (and charging for installation service), also aids us in an increased level of satisfaction of our products by our customers because of our standardized installation policies and procedures.

Our cost of sales of product increased to 70.2% for the nine months ended September 30, 2016 from 67.5% for the nine months ended September 30, 2015, and cost of sales of installation increased to 73.4% for the nine months ended September 30, 2016 from 51.5% for the nine months ended September 30, 2015.

Our gross profit was $217,107 and $202,780 for the nine months ended September 30, 2016 and 2015, respectively. Our gross profit as a percentage of sales was 28.1% and 40.0% for the nine months ended September 30, 2016 and 2015, respectively.

During the nine months ended September 30, 2016 and 2015, we spent $273,772 and $72,330, respectively, on general and administrative expenses inclusive of professional fees. Our general and administrative expenses increased by $201,442, or 278.5%, for the nine months ended September 30, 2016 over the nine months ended September 30, 2015. This increase was mainly attributable to a $48,225 increase in professional fees and a $153,217 increase in our general and administrative expenses, both of which were related to our becoming a public company.

We had net loss of $54,763 for the nine months ended September 30, 2016 compared to net income of $89,406 for nine months ended September 30, 2015.

If we continue to generate revenues consistent with the nine (9) month period, we will have sufficient liquidity and capital resources to meet our operating costs of approximately $39,000 per month. As of September 30, 2016, we had cash on hand of approximately $205,000, which we believe is sufficient to meet our operating expenses for approximately five (5) months.

6

Results of Operations

The following tables set forth selected unaudited statement of operations data for each of the periods indicated:

 

	Nine Months Ended September 30, 2016	Nine Months Ended September 30, 2015
Statements of Operations
Sales	$ 772,044	$ 507,543
Cost of Sales	$ 554,937	$ 304,763
Gross Profit	$ 217,107	$ 202,780
Operating Expenses	$ 284,403	$ 78,303
Net (Loss) Income Attributable to HD View 360 Inc	$ (54,763)	$ 89,406

Cash Flow Activities

Cash decreased $87,038 at September 30, 2016, from $292,010 at December 31, 2015. This decrease was principally a result of a net loss of $54,763 for the nine months ended September 30, 2016; payment of accrued income taxes of $50,000; the sale of common stock in exchange for $28,500 in cash in the first quarter of 2016 and the acquisition of $31,755 in fixed assets directly related to the office relocation and up fitting of the telephone switch for SimpleFone.

Inventory decreased at September 30, 2016 as compared with December 31, 2015, due to our increasing our valuation reserve by $7,640. In early 2015 the Company revised its business model to purchase product only when a customer order had been placed and paid for. The inventory balance is composed of older product which is generally a generation behind current easily salable product.

Financing Activities

During the nine months ended September 30, 2016 compared to nine months ended September 30, 2015, the Company had become independent from loans/capital contributions from its principal shareholder as it is generating sufficient cash flows from operations.  During the first quarter of 2016 the Company sold 47,499 shares of common stock in exchange for $28,500 in cash.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported in the financial statements, including the notes thereto, and related disclosures of commitments and contingencies, if any. We consider our critical accounting policies to be those that require the more significant judgments and estimates in the preparation of financial statements, including the following:

7

Income Taxes

We account for income taxes under ASC 740 “Income Taxes” which codified SFAS 109, “Accounting for Income Taxes” and FIN 48 “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109.” Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements 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. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that we will not realize tax assets through future operations.

Per Share Information

We compute net income per share accordance with FASB ASC 205 “Earnings per Share”. FASB ASC 205 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement.

Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all potentially dilutive common shares outstanding during the period. Diluted EPS excludes all potentially dilutive shares if their effect is anti-dilutive.

Stock Option Grants

We have not granted any stock options to our officers and directors since our inception. Upon the further development of our business, we will likely grant options to directors and officers consistent with industry practice.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Fair Value of Financial Instruments

Our financial instruments consist of cash and cash equivalents, prepaid expenses, payables and accrued expenses. Fair value estimates are made at a specific point in time, based on relevant market information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. We consider the carrying values of our financial instruments in the financial statements to approximate fair value, due to their short-term nature.

Property and Equipment

Property and equipment are recorded at cost, less accumulated depreciation. Depreciation is provided for using straight-line methods over the estimated useful lives of the respective assets.

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Valuation of Long-Lived Assets

We periodically evaluate long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If the estimated future cash flows (undiscounted and without interest charges) from the use of an asset were less than the carrying value, a write-down would be recorded to reduce the related asset to its estimated fair value.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements as defined in Regulation S-K Item 303(a)(4).

ITEM 3.

QUANTITATIVE AND QUALITAIVE DISCLOSURES ABOUT MARKET RISK

Not required.

ITEM 4.

CONTROLS AND PROCEDURES

 

Under the direction and with the participation of the Company’s management, the Company carried out an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures as of September 30, 2016.  The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its periodic reports with the Securities and Exchange Commission is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and regulations, and that such information is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.  The Company’s disclosure controls and procedures are designed to provide a reasonable level of assurance of reaching its desired disclosure control objectives.  Based upon this evaluation, management concluded that the Company’s disclosure controls and procedures were not effective as of September 30, 2016 primarily based on these criteria, due to material weaknesses resulting from our failure to 1) provide correct responsibilities to adequately segregate activity in the area of cash receipts and cash disbursements, 2) effectively implement comprehensive entity level internal controls, and 3) adequately segregate duties within the accounting department due to an insufficient number of staff.

There were no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2016, that materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

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PART II

ITEM 1. Legal Proceedings

From time to time, the Company may become involved in litigation relating to claims arising out of its operations in the normal course of business.  To the best of our knowledge, no governmental authority is contemplating any proceeding to which we are a party or to which any of our properties is subject, which would reasonably be likely to have a material adverse effect on the Company.

ITEM 1A.   Risk Factors

Smaller reporting companies are not required to provide the information required by this item.

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

None

ITEM 3.     Defaults Upon Senior Securities

None.

ITEM 4.     Mine Safety Disclosures

Not applicable.

ITEM 5.    Other Information

None

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Item 6.  Exhibits

Exhibits

31.1

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32

Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

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

HD VIEW 360 INC.  

November 21, 2016

By: Dennis Mancino

Dennis Mancino, Principal Executive and Financial Officer

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