ITEM 1. DESCRIPTION OF BUSINESS.
This Report contains summaries of the material terms of various agreements executed in connection with the transactions described herein. The summaries of these agreements are subject to, and are qualified in their entirety by reference to, these agreements, all of which are incorporated herein by reference.
Business Development
Almost Never Films Inc. (the “Company”) was originally incorporated in Nevada in October 2007 as Smack Sportswear (“Smack”), which originally manufactured and sold performance and lifestyle based indoor and sand volleyball apparel and accessories. The Company is now an independent film company focused on film production and production related services in connection with genre specific motion pictures with production costs in the $5.0 million to $50.0 million range.
On January 15, 2016, pursuant to the share exchange agreement, among Almost Never Films Inc. f/k/a Smack Sportswear (the “Company”, “we,” “our” or “us”), Almost Never Films Inc. (“ANF”), an Indiana corporation, and the two shareholders of ANF (the “ANF Shareholders”), we issued to the ANF Shareholders, 1,000,000 shares of our Series A Convertible Preferred Stock (the “Series A Preferred Stock”), par value $0.001 per share in exchange for all 100,000,000 shares of the issued and outstanding common stock of ANF (the “Share Exchange”). As a result of the Share Exchange, ANF became our wholly-owned subsidiary, and our business has become the business of ANF, effective on January 15, 2016.
The share exchange was accounted for as a "reverse acquisition," and resulted in a recapitalization. Almost Never Films Inc. (Indiana) is deemed to be the acquirer for accounting purposes. The assets acquired and liabilities assumed were $6,566 and $598,869, respectively. Consequently, the assets and liabilities and the historical operations that will be reflected in the financial statements prior to the share exchange will be those of Almost Never Films Inc. (Indiana) and will be recorded at the historical cost basis of Almost Never Films Inc. (Indiana), and the combined financial statements after completion of the share exchange include the assets and liabilities of Almost Never Films Inc. (Indiana), historical operations of Almost Never Films Inc. (Indiana), and operations of Almost Never Films Inc. (Indiana) from the closing date of the share exchange. As a result of the issuance of the shares of our Series A Convertible Preferred Stock pursuant to the share exchange, a change in control of the Company occurred as of the date of consummation of the share exchange. All share and per share information in the accompanying consolidated financial statements and footnotes has been retroactively restated to reflect the recapitalization. The Company has not yet generated any revenue since the reverse acquisition.
On February 29, 2016, the stockholders of Smack voted to amend the Articles of Incorporation of the Company to (i) increase the authorized capital of the Company to 200,000,00 shares of common stock and (ii) to change the name of the Company to “Almost Never Films Inc.” which took effect on March 2, 2017.
The Company has 5,000,000 authorized preferred shares with no par value.
Smack issued 1,000,000 shares of our Series A Convertible Preferred Stock to the Mr. Chan and Mr. Williams in exchange for all 100,000,000 shares of issued and outstanding common stock of Almost Never Films Inc. (Indiana), with a value of $10,000.
On March 4, 2016, all 1,000,000 preferred shares were converted into 100,000,000 common shares.
There were no shares of preferred stock issued and outstanding as of June 30, 2019.
On March 8, 2016, the Company executed a Stock Purchase Agreement with a shareholder. Pursuant to the Stock Purchase Agreement, the Company sold, and said shareholder purchased, an aggregate of 49,720,000 shares of the Company’s Common Stock at a price of $0.005 per share in exchange for the cancellation of and discharge of certain promissory notes issued by the Company and payable to said shareholder. The foregoing issuance was deemed to be exempt from registration under Section 4(a)(2) of the Securities Act as not involving any public offering and/or Regulation D promulgated thereunder and in reliance on similar exemptions under applicable state laws.
In March through November 2016, the Company entered into four share purchase agreements with four investors for 12,500,000 common shares at $0.02 per share for total proceeds of $250,000.
On November 16, 2016, the company entered into a collaboration agreement (the “KBM Agreement”) with Konwiser Brothers Media (“KBM”, and together with ANF, the “Parties). Pursuant to the Agreement, the Parties will create an LLC or other entity (the “Company”), for the purpose of developing, producing and exploiting proposed motion picture project currently entitled “Field Trip” (the “Picture”). KBM will contribute its development and producing services to the Company and all rights to the Screenplay, and ANF will make financial contributions, assist in the raising of additional financing and participate in the development and production process as set forth more fully herein. The Company will own 100% of the copyright to the Picture and all other ancillary and related rights, and each of KBM and ANF will own an undivided 50% interest in the Company. KBM will be the managing member of the Company. The operating agreement for the Company will be consistent with the terms of this Agreement. This transaction, and the ones mentioned below, removed the Company from its prior shell status. On September 27, 2017, KBM informed the Company of its intent to terminate the KBM Agreement.
On December 1, 2016, the Company filed a registration statement on Form S-1, registering 10,000,000 shares for certain selling shareholders. The Form S-1 was declared effective on December 9, 2016.
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On December 12, 2016, the Company entered into a collaboration agreement (the “SAE Agreement”) with Saisam Entertainment, LLC (“SAE”, and together with the Company, the “Parties). Pursuant to the Agreement, the Parties will create an LLC or other entity (the “Company”), for the purpose of developing, producing and exploiting proposed motion picture project currently entitled “Love is not Easy” (the “Picture”). The Company owns and controls the rights to the screenplay for the Picture.
On June 6, 2017, the Company issued a 2.5% promissory note (the “ANF Note”) to Weirong Zhang (the “Investor”). Pursuant to the ANF Note, the Company received $200,000, which is due to the Lender ninety (90) days from the date the purchase price of $200,000 was paid. The ANF Note accrues interest at 2.5% per 90 days. Thereafter, on June 7, 2017, The Money Pool, LLC (“Money Pool”) issued a non-transferable promissory note to the Company for $200,000 (the “Money Pool Note”). The Company funded the Money Pool Note with the funds received from the Investor. Money Pool shall use the funds from the Money Pool Note, along with its own funds, in order to provide a bridge loan to Blue Rider San Juan, LLC (“Blue Rider”), in connection with the production of a motion picture known as “Speed Kills”. Blue Rider is the international sales agent for “Speed Kills.” The Money Pool Notes accrues interest of a flat 2.5% for the first 45 days from funding. In the event the Money Pool Note is not paid in full within 45 days, the flat interest rate will increase to 3.5% for each 45-day period any balance or accrued interest remains unpaid. The principal and interest shall be payable by Money Pool to the Company from payments made by Blue Rider on the bridge loan provided by Money Pool. On June 9, 2017, the Company issued a 2.5% promissory note (the “Kruse Note”) to William R. Kruse (the “Kruse”). Pursuant to the Kruse Note, the Company received $200,000, which is due to Kruse ninety (90) days from the date the purchase price of $200,000 was paid. The Kruse Note accrues interest at 2.5% per annum. Thereafter, on June 12, 2017, Money Pool issued a non-transferable promissory note to the Company for $200,000 (the “Pool Note”). The Company shall fund the Pool Note with the funds received from Kruse. Money Pool shall use the funds from the Pool Note, along with its own funds, in order to provide a bridge loan to Blue Rider, in connection with the production of a motion picture known as “Ana”. Blue Rider is the international sales agent for “Ana.” The Pool Notes accrues interest of a flat 2.5% for the first 45 days from funding. In the event the Pool Note is not paid in full within 45 days, the flat interest rate will increase to 3.5% for each 45-day period any balance or accrued interest remains unpaid. The principal and interest shall be payable by Money Pool to the Company from payments made by Blue Rider on the bridge loan provided by Money Pool.
On August 2, 2017, Derek Williams presented the Board of Directors of the Company with his resignation as Chief Operating Officer and a member of the Board of Directors of the Company. Mr. William’s decision to resign was not due to any disagreement with the Company.
On August 24, 2017, the Board of Directors of the Company appointed Daniel Roth as Chief Creative Officer of the Corporation and Damiano Tucci as Chief Operating Officer of the Corporation.
On September 13, 2017, the Company completed a 1 for 40 reverse stock split and changed the authorized capital of the Company to 25,000,000 shares of common stock, par value $.001 per share.
On November 10, 2017 the Company executed a First Amendment Agreement to its 6x picture Production and Distribution Agreement between Big Film Factory LLC (“Big Film” or “Prodco”) and Pure Flix Entertainment LLC (“PFE”), (the “Agreement”). The Agreement memorializes the understanding with respect to the development, packaging, production, post-production and worldwide distribution of the films intended for initial and primary worldwide exhibition. The Company, a Nevada corporation, will be added as a party to the initial agreement by and between Big Film and PFE, wherever Big Film is referenced in connection with providing production services in conjunction with Big Film as well as providing production capital and cash following each of the first six (6) films produced under the Agreement (“6 Pictures”). Both Prodco and PFE agree to expand the defined role of “Prodco” in the Agreement, to add the Company to that definition, and grant the Company equally the same role and responsibilities heretofore only held by Big Film in connection with the 6 Pictures.
The Company will be accorded a company credit and producer credits equal to those of Big Film. Furthermore, Prodco will provide the Company, Big Film and PFE with Producer’s E & O Insurance for a term of not less than three (3) years from delivery of any such Picture to PFE, and with limits of $1 million/$3 million/ $25K SIR as are common to the television/SVOD industry.
On April 26, 2018, the Company filed a registration statement on Form S-1, registering 514,822 shares for certain selling shareholders. The Form S-1 was declared effective on May 10, 2018.
On May 23, 2018 the Company executed a Co-Production Agreement with The Media Farm (‘TMF”) with reference to the financing, development, production , and exploitation of up to two (2) feature Length motion picture (each and collectively “Picture(s)”) and TMF’s television series, “The Chair” (“Series”).
On June 19, 2018 the Company executed a Production Services Agreement with MVE Productions, LLC (“MVE”) with respect to production services to be performed by Almost Never Films, Inc for the MVE in connection with the motion picture tentatively titled “Country Christmas Album”.
On October 18, 2018, Damiano Tucci presented the Board of Directors of the Company with his resignation as Chief Operating Officer of the Company. Mr. Tucci’s decision to resign was not due to any disagreement with the Company. On October 18, 2018, the Board of Directors of the Company accepted Mr. Tucci’s resignation. Accordingly, Damiano Tucci ceased to be the Company’s Chief Operating Officer. Daniel Roth, the Company’s current Chief Creative Officer, accepted the additional position of Chief Operating Officer.
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Share Exchange and Recapitalization
On January 15, 2016, Smack entered into a share exchange agreement with Almost Never Films Inc., a private company incorporated in Indiana on July 8, 2015, and its two shareholders, Danny Chan and Derek Williams.
Pursuant to the agreement, Smack issued 1,000,000 shares of our Series A Convertible Preferred Stock to Mr. Chan and Mr. Williams in exchange for all 100,000,000 shares of issued and outstanding common stock of Almost Never Films Inc. (Indiana). As a result of the share exchange, Almost Never Films Inc. (Indiana) became Smack’s wholly-owned subsidiary, and Mr. Chan and Mr. Williams acquired a controlling interest in the Company.
The share exchange was accounted for as a "reverse acquisition," and resulted in a recapitalization. Almost Never Films Inc. (Indiana) was deemed to be the acquirer for accounting purposes. The assets acquired and liabilities assumed were $6,566 and $598,869, respectively. Consequently, the assets and liabilities and the historical operations that would be reflected in the financial statements prior to the share exchange would be those of Almost Never Films Inc. (Indiana) and would be recorded at the historical cost basis of Almost Never Films Inc. (Indiana), and the combined financial statements after completion of the share exchange included the assets and liabilities of Almost Never Films Inc. (Indiana), historical operations of Almost Never Films Inc. (Indiana), and operations of Almost Never Films Inc. (Indiana) from the closing date of the share exchange. As a result of the issuance of the shares of our Series A Convertible Preferred Stock pursuant to the share exchange, a change in control of the Company occurred as of the date of consummation of the share exchange. All share and per share information in the accompanying consolidated financial statements and footnotes have been retroactively restated to reflect the recapitalization
On February 29, 2016, the stockholders of Smack voted to amend the Articles of Incorporation of the Company to (i) increase the authorized capital of the Company to 200,000,00 shares of common stock and (ii) to change the name of the Company to “Almost Never Films Inc.” which took effect on March 2, 2017.
On September 13, 2017, the Company completed a 1 for 40 reverse stock split and changed the authorized capital of the Company to 25,000,000 shares of common stock, par value $.001 per share.
We continue to be a "smaller reporting company," as defined under the Exchange Act, following the Share Exchange.
History
As described above, we were incorporated in Nevada in October 2007 under the name SMACK Sportswear under which we manufactured and sold performance and lifestyle based indoor and sand volleyball apparel and accessories. As a result of the sale of certain inventory from the Company to Mr. Sigler in July 2015, the Company became a “shell company” (as such term is defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended). As a result of the Share Exchange, we acquired the proposed business of Almost Never.
Almost Never, our wholly-owned subsidiary upon the closing of Share Exchange, was incorporated in the State of Indiana on July 8, 2015. As a result of the Share Exchange, the Company amended its Articles of Incorporation to change its name from “Smack Sportswear” to “Almost Never Films Inc.” to more accurately reflect its new business. We also requested a change to the Company’s trading symbol to "HLWD"
We currently have authorized 30,000,000 shares of capital stock, consisting of (i) 25,000,000 shares of Common Stock, and (ii) 5,000,000 shares designated as preferred stock containing such rights, privileges and designations as our Board of directors may, from time to time, determine. As of the date of this Report, an aggregate of 5,798,765 shares of our Common Stock and no shares of our Series A Convertible Preferred Stock are issued and outstanding.
On March 4, 2017, all previously authorized 1,000,000 preferred shares were converted into 2,500,000 common shares. In March through November 2017, the Company entered into four share purchase agreements with three investors for 312,500 common shares at $0.08 per share for total proceeds of $250,000
On March 8, 2017, the Company executed a Stock Purchase Agreement with a shareholder. Pursuant to the Stock Purchase Agreement, the Company sold, and said shareholder purchased, an aggregate of 1,243,000 shares of the Company’s Common Stock at a price of $0.005 per share in exchange for the cancellation of and discharge of certain promissory notes issued by the Company and payable to said shareholder. The foregoing issuance was deemed to be exempt from registration under Section 4(a)(2) of the Securities Act as not involving any public offering and/or Regulation D promulgated thereunder and in reliance on similar exemptions under applicable state laws.
On September 13, 2017, the Company completed a 1 for 40 reverse stock split and changed the authorized capital of the Company to 25,000,000 shares of common stock, par value $.001 per share.
Our principal executive office is located at 8605 Santa Monica Blvd #98258, West Hollywood, California 90069-4109.
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Our Business
We are an independent film company focused on film production and production related services in connection with genre specific motion pictures with production costs in the $5.0 million to $50.0 million range.
Our proposed business is to facilitate relationships (and as such, provide production related services) between creative talent (including writers, actors and directors) and companies who produce, finance and distribute motion pictures. We intend to acquire or license rights to materials upon which we believe motion pictures can be based (screenplays, books, short stories etcetera, which are referred to within the entertainment industry as the “underlying property”). We may further develop an underlying property by contracting for additional writing services and/or by bringing in new writers to perform “polishes” or “rewrites” on a particular underlying property.
If we are satisfied with the creative state of the underlying property, we then intend to make offers to directors and/or actors, to perform services in connection with a particular motion picture based on that underlying property. These offers are very often contingent and subject to the satisfaction of certain production elements, such as financier approval of the screenplay and the financier’s selection of a start date for principal photography.
If a director or actors accepts one of our offers, the director or actors are said to be “attached” to the motion picture project. Armed with the underlying property and the attached creative element(s) (these elements are often called the “package” in Hollywood), we may then approach third party financiers seeking financing as well as distribution for the potential motion picture. Another approach that we may take is to contact the financiers first, seeking first to produce the film, and then with a finished (or nearly finished) motion picture product, obtain distribution for the picture.
Motion Picture Property Acquisition Process
Our acquisition process is the process by which we intend to acquire or license “underlying properties”. In turn, we expect to use those properties to attract creative talent (including writers, actors and directors) to the potential motion picture project. If successful, we will then grant or license out those rights to third party financiers of motion pictures, who will then contract with the creative talent we have attracted to the property as well as finance, produce and distribute/exploit the motion picture.
Almost Never Feature Film Production
Our initial primary involvement with feature film production is in the area of the development of “underlying properties”. We intend to engage third parties to produce, finance and exploit/distribute the motion picture “packages” we put together. We may also provide production expertise (i.e. “production services”) to the third-party producer and/or financier of the motion picture in question. If we do provide production expertise, we, or members of our executive team, Danny Chan and Daniel Roth, may be credited as “producers” or “executive producers” of the particular film in question. We expect to primarily derive our income from producer fees, consulting and service fees as well as our participation in the profits of the various pictures produced by third parties, that were developed and/or “packaged” by us.
Our feature film strategy generally is to perform production services, develop and/or produce feature films when the production budgets for the films are expected to be entirely or substantially covered by a third party. In this way, we believe our risk is, by in large, only the capital required, if any, to develop and package the motion picture project. The entirety of the production budget, as well as any costs associated with distributing and/or exploiting the motion pictures in question, will be expected to be borne by a third party or parties who have the resources and expertise to produce and/or distribute motion pictures.
Distributing Almost Never Motion Pictures
Currently, we do not intend to directly distribute motion pictures. Instead, when we seek financing for our motion picture “packages,” the distribution rights are often obtained by the financier as collateral for their investment; in other words, third parties purchase the world-wide exploitation and distribution rights to a motion picture for the cost it takes to produce the motion picture.
Foreign Markets
In general, a very important portion of the financing for “independent” (i.e., not produced by a major studio or one of their subsidiaries) motion pictures comes from the “foreign markets” (i.e., those markets outside of the United States and English-speaking Canada). With respect to productions we are associated with, the third-party financier owns and/or controls the production rights and uses these rights as collateral or purchases the rights outright in connection with the funding of the pictures we develop.
Profit Participation
Our profit participation in motion picture projects will be determined by a calculation that assumes that all “negative costs” (production costs) of the picture (including, but not limited to, costs for development, principal photography and post-production) and “distribution expenses” (including, but not limited to, costs for marketing the film at various international film markets as well as costs associated with the delivery of the film and the physical elements to the various licensees of the film) are recovered by the financier plus interest thereon. After repayment of all negative costs, distribution expenses and interest thereon, the financier/distributor will charge a “distribution fee” (often a percentage of the gross income) for performing any sales or distribution services in connection with the picture. Following the payment of distribution fees and other costs, any amounts payable to creative elements that are contingent compensation (including, but not limited to, deferred compensation and bonuses) are paid to those third parties. Any money remaining is considered net profits from which profit participation is derived.
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Competition
The motion picture industry is intensely competitive. In addition to competing with the major film studios that dominate the motion picture industry, we will also compete with numerous independent motion picture production companies, television networks, pay television systems, and online streaming media companies such as Netflix, Hulu, and Amazon Prime. Virtually all of our competitors who are significantly larger than we are have been in business much longer than we have, and have significantly more resources at their disposal. Our competitors range from small independent producers to well financed established film studios, particularly, major U.S. film studios.
Intellectual Property
We believe that intellectual property will be material to our business and we will expend cost and effort in an attempt to develop and protect our intellectual property and to maintain compliance vis-à-vis other parties' intellectual property. Our ability to protect and enforce our intellectual property rights is subject to certain risks. Enforcement of intellectual property rights is costly and time consuming.
From time to time, we may encounter disputes over rights and obligations concerning intellectual property. We cannot offer any assurances that we will prevail in any intellectual property dispute.
Industry Background
The Feature Film Industry. The feature film industry encompasses the development, production and exhibition of feature-length motion pictures and their subsequent distribution in the online, DVD, television, video on demand and other ancillary markets. The major studios dominate the industry, some of which have divisions that are promoted as "independent" distributors of motion pictures, including Universal Pictures, Warner Bros Entertainment (also known as Warner Bros. Studios, Inc., Warner Bros. Pictures, Inc. commonly called Warner Bros., or simply WB) including subsidiaries New Line Cinema and Castle Rock Entertainment & DC Entertainment, Twentieth Century Fox, Sony Pictures Entertainment (including Columbia Pictures and Tristar Pictures), Paramount Pictures, Walt Disney Studios, MGM Holdings and Lions Gate Entertainment. In recent years, however, true "independent" motion picture production and distribution companies have played an important role in the production of motion pictures for the worldwide feature film market.
Independent Feature Film Production and Financing. Generally, independent production companies do not have access to the extensive capital required to make big budget motion pictures, such as the "blockbuster" product produced by the major studios. They also do not have the capital necessary to maintain the substantial overhead that is typical of such studios' operations. Independent producers target their product at specialized markets and usually produce motion pictures with budgets of less than $25 million. Generally, independent producers do not maintain significant infrastructure. They instead hire only creative and other production personnel and retain the other elements required for development, pre-production, principal photography and post-production activities on a project-by-project basis. Also, independent production companies typically finance their production activities from bank loans, pre-sales, equity offerings, co-productions and joint ventures rather than out of operating cash flow. They generally complete financing of an independent motion picture prior to commencement of principal photography to minimize risk of loss.
Independent Feature Film Distribution. Motion picture distribution encompasses the exploitation of motion pictures in theatres and in markets, such as the DVD, pay-per-view, pay television, free television and ancillary markets, such as hotels, airlines and streaming films on the Internet. Independent producers do not typically have distribution capabilities and rely instead on pre-sales to North American and international distributors. Generally, the local distributor will acquire distribution rights for a motion picture in one or more of the aforementioned distribution channels from an independent producer. The local distributor will agree to advance the producer a non-refundable minimum guarantee. The local distributor will then generally receive a distribution fee of between 20% and 35% of receipts, while the producer will receive a portion of gross receipts in excess of the distribution fees, distribution expenses and monies retained by exhibitors. The local distributor and theatrical exhibitor generally will enter into an arrangement providing for the exhibitor's payment to the distributor of a percentage (generally 40% to 50%) of the box-office receipts for the exhibition period, depending upon the success of the motion picture.
Government Regulation
The Company is not currently subject to any direct government regulations, other than the securities laws and the regulations thereunder applicable to all publicly owned companies and laws and regulations applicable to general businesses. It is possible that certain laws and regulations may be adopted at the local, state, national and international level that could affect the Company's operations. Changes to such laws could create uncertainty in the marketplace which could reduce demand for the Company's products or increase the cost of doing business as a result of costs of litigation or a variety of other such costs, or could in some other manner have a material adverse effect on the Company's business, financial condition, results of operations and prospects. If any such law or regulation is adopted it could limit the Company's ability to operate and could force the business operations to cease, which would have a significantly negative effect on the Company.
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Employees
The Company currently has no employees. Danny Chan, our Chief Executive Officer and Chief Financial Officer, and Daniel Roth our Chief Creative Officer and Chief Operating Officer, are operating the Company.
ITEM 1A.
ITEM 1A. RISK FACTORS
Smaller reporting companies are not required to provide the information required by this Item 1A.
ITEM 1B.
ITEM 1B. Unresolved Staff Comments
None
ITEM 2.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company does not have a principal office, but maintains a mailing address at
8605 SANTA MONICA BLVD #98258
WEST HOLLYWOOD, CA 90069-4109.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
We know of no existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
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PART II
ITEM 5.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES.
Our common stock is quoted on the Financial Industry Regulatory Authority’s OTC Bulletin Board under the symbol “HLWD”. The following quotations obtained from Yahoo! Finance reflect the highs and low bids for our common stock based on inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
The high and low bid prices of our common stock for the previous two fiscal years are as follows:
Transfer Agent
Our transfer agent for our common stock is Empire Stock Transfer, Inc. They are located at 1859 Whitney Mesa Drive, Henderson NV 89014. Tel: 702 818-5898 Fax: 702 974-1444.
Holders of Common Stock
As of October 14, 2019, we have approximately 87 registered shareholders holding 5,798,765 shares of our common stock.
Dividends
We have not declared any dividends since incorporation and do not anticipate that we will do so in the foreseeable future. Our directors will determine if and when dividends should be declared and paid in the future based on our financial position at the relevant time. All shares of our common stock are entitled to an equal share of any dividends declared and paid.
Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities
None.
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ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA.
As a smaller reporting company, we are not required to provide the information required by this Item.
ITEM 7.
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following management's discussion and analysis should be read in conjunction with the historical financial statements and the related notes thereto contained in the exhibits to this Report. The management's discussion and analysis contains forward-looking statements, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words "believe," "plan," "intend," "anticipate," "target," "estimate," "expect" and the like, and/or future tense or conditional constructions ("will," "may," "could," "should," etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties, including those under "Risk Factors" commencing on page 17 above, that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. The Company's actual results and plans could differ materially from those anticipated in these forward-looking statements as a result of several factors, some of which cannot be anticipated or predicted. The Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Report.
As a result of the Share Exchange and the change in business and operations of the Company, a discussion of the past financial results of the Company is not pertinent, and under applicable accounting principles the historical financial results of Almost Never, the accounting acquirer, prior to the Share Exchange are considered the historical financial results of the Company.
Upon the completion of the Share Exchange, Almost Never became a wholly-owned subsidiary of the Company. All references to "Almost Never" shall mean and refer to Almost Never prior to the Share Exchange and to the Company as well as to the business of Almost Never (constituting our only business) after the Share Exchange as required by the context.
The following discussion highlights Almost Never's results of operations and the principal factors that have affected our financial condition as well as our liquidity and capital resources for the periods described, and provides information that management believes is relevant for an assessment and understanding of the statements of financial condition and results of operations presented herein. The following discussion and analysis are based on Almost Never's audited and unaudited financial statements supplied as exhibits to this Report, which we have prepared in accordance with United States generally accepted accounting principles. You should read the discussion and analysis together with such financial statements and the related notes thereto.
Basis of Presentation
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and the accompanying notes thereto included in Item 8 of Part II, “Financial Statements and Supplementary Data” of this Form 10-K Report. In the opinion of management, all material adjustments necessary to present fairly the results of operations for such periods have been included in these audited financial statements. All such adjustments are of a normal recurring nature.
Overview
Upon the consummation of the transactions contemplated by the Exchange Agreement, on January 15, 2017, we issued 1,000,000 shares of our Series A Convertible Preferred Stock to the Almost Never Shareholders in exchange for all 100,000,000 shares of issued and outstanding common stock of Almost Never. As a result of the Exchange Agreement, Almost Never became our wholly-owned subsidiary, and the two Almost Never Shareholders have voting power equal to approximately 80% of the voting power of the Company.
Almost Never Films Inc. was founded as an Indiana corporation in July 2015. Activities since inception, through October 31, 2015, were devoted primarily to business development that included meetings with producers, actors, directors and screenwriters in the film industry to explore various partnerships and other collaborations. Development consists of meeting with screenwriters, producers, directors, talent agencies, and other motion picture industry executives.
As part of Share Exchange, Doug Samuelson, our sole officer, resigned from all his positions with the Company and Danny Chan was elected as our Chief Executive Officer, Chief Financial Officer and a director on our Board, and Derek Williams was elected as our Chief Operating Officer. Mr. Chan and Mr. Williams held the same executive office positions at Almost Never prior to the Share Exchange. Effectively ten (10) days after the filing and distribution of an Information Statement on Schedule 14f-1, Mr. Williams became a director on our Board and Doug Samuelson, a former director, resigned.
On August 2, 2017, Derek Williams presented the Board of Directors of the Company with his resignation as Chief Operating Officer and a member of the Board of Directors of the Company. Mr. William’s decision to resign was not due to any disagreement with the Company.
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On August 24, 2017, the Board of Directors of the Company appointed Daniel Roth as Chief Creative Officer of the Corporation and Damiano Tucci as Chief Operating Officer of the Corporation.
On September 13, 2017, the Company completed a 1 for 40 reverse stock split and changed the authorized capital of the Company to 25,000,000 shares of common stock, par value $.001 per share.
On October 18, 2018, Damiano Tucci presented the Board of Directors of the Company with his resignation as Chief Operating Officer of the Company. Mr. Tucci’s decision to resign was not due to any disagreement with the Company. On October 18, 2018, the Board of Directors of the Company accepted Mr. Tucci’s resignation. Accordingly, Damiano Tucci ceased to be the Company’s Chief Operating Officer. Daniel Roth, the Company’s current Chief Creative Officer, accepted the additional position of Chief Operating Officer.
Results of Operations for the year ended June 30, 2019 and the year ended June 30, 2018
Revenue and Cost of Revenue
For the year ended June 30, 2019, the Company generated $2,526,346 in revenue. For the year ended June 30, 2018, the Company generated $10,000 revenue. Revenue increased due to the completion of two independent self-produced films which generated a total of $700,000 of revenue, and the completion of two films completed under Production Service Agreements which generated a total of $1,778,346. In addition, the Company recorded $48,000 of revenue associated with producer fees.
Cost of revenues was $2,483,448 compared to $0 for the year ended June 30, 2019, and 2018, respectively. Cost of revenues increased due to the completion of two independent self-produced films and two films completed under Production Service Agreements.
General and Administrative Expenses and Professional Fees
General and administrative expenses for the year ending June 30, 2019, was $348,636. Professional fees for the year ending June 30, 2019 was $56,170. General and administrative expenses for the year ending June 30, 2018, was $124,298. Professional fees for the year ending June 30, 2018 was $82,107. The increase in general and administrative fees was due to consulting fees incurred of $258,186. Professional fees decreased during the year was due to decreased accounting and audit fees.
Other Expense
During the years ended June 30, 2019 and 2018, the Company had interest expense of $105,939 and $90,323, respectively, relating to its notes payable. During the years ended June 30, 2019 and 2018, the Company had interest income of $0 and $16,811, respectively, related to promissory notes receivable. During the year ended June 30, 2018, the Company recorded a loss on settlement of debt of $74,075.
Net Loss
Our net loss for the year ending June 30, 2019 was $467,847. Our net loss for the year ending June 30, 2018 was $343,992.
Liquidity and Capital Resources
For the year ending June 30, 2019 and the year ending June 30, 2018
As of June 30, 2019, we had cash of $57,154, negative working capital of $403,440 and an accumulated deficit of $1,755,486. As of June 30, 2018, we had cash of $270,826, negative working capital of $1,950,406 and an accumulated deficit of $1,289,249.
Cash flows used in operating activities
During the year ended June 30, 2019, the Company provided cash flows by operating activities of $54,328. A net loss of $467,847 was offset by capitalized consulting expense of $258,185, decrease in prepaid expenses $218,658, a decrease in film cost of $2,106,628, as well as an increase in accrued liabilities of $45,424, a increase in interest payable of $67, 534 a decrease in deferred revenue of $1,445,073, a increase in accounts receivable of $583,334, and decrease in other payable of $55,000 contributed to the total net cash provided amount.
During the year ended June 30, 2018, the Company used cash flows in operating activities of $1,004,764. A net loss of $343,992 consulting expense of $2,917, loss on settlement of debt of $74,075, as well as a change in interest receivable of $5,159, increase in prepaid expenses of $202,051, increase in film costs of $2,555,359, increase in accrued liabilities of $89,693, an increase in deferred film revenues of $1,799,471, increase in interest payable of $50,323, and an increase in other payable of $55,000 contributed to the total net cash used amount.
Cash flows provided by investing activities
During the year ended June 30, 2019, the Company was provided $0 through the issuance of promissory notes receivable.
During the year ended June 30, 2018, the Company issued a promissory note receivable of $350,000, collected promissory notes receivable for $750,000, and provided loans of $32,000.
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Cash flows used in financing activities
During the year ended June 30, 2019, the Company used $268,000 of cash flows in financing activities. The Company had borrowing from related party of $12,000 and payment of note payable of $250,000, payment of promissory note payable - related party of $30,000.
During the year ended June 30, 2018, the Company was provided $816,000 of cash flows from financing activities. The Company had proceeds from issuance of promissory notes payable of $780,000, proceeds from issuance of promissory notes payable - related party of $350,000, payment of note payable of $500,000, payment of promissory notes payable - related party of $200,000, proceeds from the issuance of stock of $406,000, and retirement of common stock of $20,000.
Non-Cash Investing and Financing Activity
During the year ended June 30, 2019, the Company had $225,000 deferred consulting expenses paid by issuing restricted stock.
During the year ended June 30, 2018, the Company had $140,000 deferred consulting expenses paid by issuing restricted stock, and $127,716 from the conversion of debt into common stock.
Going Concern
The accompanying consolidated financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business. The accompanying consolidated financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern. During the year ended June 30, 2019 and the Company incurred a net loss of $467,847. As of June 30, 2019, the Company had a working capital deficiency of $403,440 and an accumulated deficit of $1,755,486. The Company also has loans in default as of June 30, 2019. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.
The ability of the Company to continue as a going concern and appropriateness of using the going concern basis is dependent upon, among other things, an additional cash infusion and an identification of new business opportunities. Management believes that future funding will provide the additional cash needed to meet the Company’s obligations as they become due and will allow it to continue looking for opportunities to acquire operating companies or merge with other operational entities. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on operations, in the case of debt financing, or cause substantial dilution for our stockholders, in case of equity financing.
Off-Balance Sheet Arrangements
We have no "off-balance sheet arrangements" (as that term is defined in Item 303(a)(4)(ii) of Regulation S-K).
Critical Accounting Policies, Estimates, and Judgments
Our financial statements are prepared in accordance with accounting principles that are generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, 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. We continually evaluate our estimates and judgments, our commitments to strategic alliance partners and the timing of the achievement of collaboration milestones. We base our estimates and judgments on historical experience and other factors that we believe to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known. Besides the estimates identified above that are considered critical, we make many other accounting estimates in preparing our financial statements and related disclosures. All estimates, whether or not deemed critical, affect reported amounts of assets, liabilities, revenues and expenses, as well as disclosures of contingent assets and liabilities. These estimates and judgments are also based on historical experience and other factors that are believed to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known, even for estimates and judgments that are not deemed critical.
Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
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ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
3230 Fallow Field Drive
Diamond Bar, CA 91765
Tel: +1 (909) 839-0188
Fax: +1 (909) 839-1128
Report of Independent Registered Public Accounting Firm
To the Board of Directors and shareholders of Almost Never Films Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Almost Never Films Inc. and subsidiaries (the “Company”) as of June 30, 2019 and 2018, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity and cash flows for each of the two years in the period ended June 30, 2019, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2019 and 2018, and the results of its operations and its cash flows for each of the two years in the period ended June 30, 2019, in conformity with accounting principles generally accepted in the United States of America.
Going Concern Uncertainty
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses from operations and accumulated deficit that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinions
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Simon & Edward, LLP
Los Angeles, California
October 15, 2019
We have served as the Company's auditor since 2016.
Almost Never Films Inc. and Subsidiaries
Consolidated Balance Sheets
The accompanying notes are an integral part of these financial statements.
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Almost Never Films Inc. and Subsidiaries
Consolidated Statements of Operations and Comprehensive Loss
The accompanying notes are an integral part of these financial statements.
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Almost Never Films Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity
The accompanying notes are an integral part of these financial statements.
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Almost Never Films Inc. and Subsidiaries
Consolidated Statements of Cash Flows
The accompanying notes are an integral part of these financial statements.
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Almost Never Films Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
NOTE 1 - ORGANIZATION AND OPERATIONS
Nature of the Business
Almost Never Films Inc. (the “Company”) was originally incorporated in Nevada in October 2007 as Smack Sportswear (“Smack”), which originally manufactured and sold performance and lifestyle based indoor and sand volleyball apparel and accessories. The Company is now an independent film company focusing on film production, finance and production related services for movies under budgets of $35 million. The Company’s common stock are currently traded on QTCQB under the symbol of “HLWD.”
Share Exchange and Recapitalization
On January 15, 2016, Smack entered into a share exchange agreement with Almost Never Films Inc., a private company incorporated in Indiana on July 8, 2015, and its two shareholders, Danny Chan and Derek Williams.
Pursuant to the agreement, Smack issued 1,000,000 shares of our Series A Convertible Preferred Stock to Mr. Chan and Mr. Williams in exchange for all 2,500,000 shares of issued and outstanding common stock of Almost Never Films Inc. (Indiana). As a result of the share exchange, Almost Never Films Inc. (Indiana) became Smack’s wholly-owned subsidiary, and Mr. Chan and Mr. Williams acquired a controlling interest in the Company.
The share exchange was accounted for as a “reverse acquisition,” and resulted in a recapitalization. Almost Never Films Inc. (Indiana) is deemed to be the acquirer for accounting purposes. The assets acquired and liabilities assumed were $6,566 and $598,869, respectively. Consequently, the assets and liabilities and the historical operations that would be reflected in the financial statements prior to the share exchange would be those of Almost Never Films Inc. (Indiana) and would be recorded at the historical cost basis of Almost Never Films Inc. (Indiana), and the combined financial statements after completion of the share exchange included the assets and liabilities of Almost Never Films Inc. (Indiana), historical operations of Almost Never Films Inc. (Indiana), and operations of Almost Never Films Inc. (Indiana) from the closing date of the share exchange. As a result of the issuance of the shares of our Series A Convertible Preferred Stock pursuant to the share exchange, a change in control of the Company occurred as of the date of consummation of the share exchange. All share and per share information in the accompanying consolidated financial statements and footnotes has been retroactively restated to reflect the recapitalization. The Company has not yet generated any revenue since inception.
On February 29, 2016, the stockholders of Smack voted to amend the Articles of Incorporation of the Company to (i) increase the authorized capital of the Company to 5,000,000 shares of common stock and (ii) to change the name of the Company to “Almost Never Films Inc.” which took effect on March 2, 2016.
On August 9, 2017, the Company has approved a 1 for 40 reverse split of its issued and outstanding common stock. The common stock accounts and all share related balances have been be applied retroactively for all periods presented.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Team Sports Superstore (Inactive), Almost Never Films Inc. (Indiana), FWIL, LLC (Indiana), Virginia Christmas, LLC (New York), Christmas Camp, LLC (New York), and Country Christmas, LLC (Ohio). Its 90 % owned subsidiaries are One HLWD KY LLC (Kentucky), Two HLWD KY LLC (Kentucky) and Three HLWD KY (Kentucky), LLC. All significant intercompany transactions and balances have been eliminated in consolidation.
Basis of Presentation
The accompanying audited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”).
Use of Estimates
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the U.S requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the financial statement date, and reported amounts of revenue and expenses during the reporting period. Significant estimates are used in valuing the fair value of common stock issued for services, film costs, among others. Actual results could differ from these estimates.
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Cash
Cash includes demand deposits with banks or other financial institutions. All cash balances are hold by major banking institutions.
Concentration of Risk
The Company maintains its cash with a financial institution, and at times, amounts may exceed federally insured limits. Currently the FDIC insurance coverage limit is $250,000, and the Company is potentially exposed to no un-insured cash balances. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash.
The Company’s revenue from customer individually accounts for more than 10% of total revenue are as follows:
·Pureflix: $700,000
·MVE Productions, LLC: $1,778,346
The Company’s accounts receivable from customer individually accounts for more than 10% of total receivable are as follows:
·
Pureflix: $583,333
Film Costs, Net
The Company records film costs in accordance with ASC - 926 - Entertainment - Films. Film costs include direct production costs, production overhead and acquisition costs for both motion picture and television productions and are stated at the lower of unamortized cost or estimated fair value and classified as noncurrent assets. The Company qualifies for certain government programs that provide incentives earned in regard to expenditures on qualifying film production activities. The incentives are recorded as an offset to the related asset balance. Estimates used in calculating the fair value of the film costs are based upon assumptions about future demand and market conditions and are reviewed on a periodic basis.
Fair Value of Financial Instruments
Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk.
In addition to defining fair value, the standard expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels which are determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are:
Level 1 - inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.
Level 2 - inputs are based upon significant observable inputs other than quoted prices included in Level 1, such as quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.
As of June 30, 2019, the balance reported for cash and accounts receivable approximates its fair value because of their short maturities. Notes payable are recorded at agreed values. Debt balances are stated at historical amounts less principal payments, which approximate fair market value. Promissory notes receivable, loan receivable and promissory notes payable are stated at historical amounts less principal payments. The Company believes interest rates in its debt agreements are commensurate with lender risk profiles for similar companies.
Revenue Recognition
In May 2014, the FASB issued new accounting guidance related to revenue from contracts with customers. The core principle of the Standard is that recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the new guidance requires that companies disclose the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company has chosen to early adopt and apply the standards beginning in the fiscal year ended June 30, 2018, using the modified retrospective approach, which applies the new standard to contracts that are not completed as of the date of adoption. The Company concluded that no adjustment to the opening balance of retained earnings was required upon the adoption of the new standard.
The Company recognizes revenue from its contracts with customers in accordance with ASC 606 - Revenue from Contracts with Customers. The Company recognizes revenues when satisfying the performance obligation of the associated contract that reflects the consideration expected to be received based on the terms of the contract.
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Revenue related to contracts with customers is evaluated utilizing the following steps: (i) Identify the contract, or contracts, with a customer; (ii) Identify the performance obligations in the contract; (iii) Determine the transaction price; (iv) Allocate the transaction price to the performance obligations in the contract; (v) Recognize revenue when the Company satisfies a performance obligation.
When the Company enters into a contract, the Company analyses the services required in the contract in order to identify the required performance obligations which would indicate the Company has met and fulfilled its obligations. For the current contracts in place, the Company has identified performance obligations as one single event, the sign-off by both parties that production is completed and the product (film) is ready for distribution. To appropriately identify the performance obligations, the Company considers all of the services required to be satisfied per the contract, whether explicitly stated or implicitly implied. The Company allocates the full transaction price to the single performance obligation being satisfied.
The Company recognizes revenue when the customer confirms to the Company that all of the terms and conditions of the contract has been met, and the sign-off of the project has been completed. The Company derives its revenues from the follows:
·
Production Service Agreement Revenue is related to films where the Company has been engaged as an independent contractor to provide production services and other elements related to production for individual film projects. Based on the analysis performed, the Company determined that the performance obligations as of June 30, 2019 had been satisfied for two films, and therefore the Company recognized a portion of revenues associated with the Production Service Agreements.
·
Revenue from self-produced films is related to films where the Company has self-produced certain films along with a third party, with the expectation that these films will be distributed in the future. Based on the analysis performed, the Company determined that the performance obligations as of June 30, 2019 had been satisfied for One HLWD and Three HLWD, and therefore the Company recognized all of revenues associated with these two self-produced films.
The Company analyses whether gross sales, or net sales should be recorded, has control over establishing price, and has control over the related costs with earning revenues. The Company has recorded all revenues at the gross price.
Cash payments received are recorded as deferred revenue until the conditions, stated above, of revenue recognition have been met, specifically all obligations have been met as specified in the related customer contract.
Stock Repurchase and Cancellation
During the year ended June 30, 2018, the Company repurchased and cancelled 85,475 shares of common stock. The Company accounted for the transaction in accordance with ASC 505 - Equity - 30 Treasury Stock, Purchase of Treasury Shares or Stock Rights.
Stock Subscription Receivable
The Company has accounted for Stock Subscription Receivable in accordance with ASC - 505 - Equity - 10, and has included the Stock Subscription Receivable balance in equity.
Loss per Share Calculations
Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of common shares available. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. The Company’s diluted loss per share is the same as the basic loss per share for the years ended June 30, 2019, and 2018, as there are no potential shares outstanding that would have a dilutive effect.
Recently Issued Accounting Pronouncements
In June 2018, the FASB issued ASU No. 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, or ASU 2018-07. Under this ASU, the accounting for awards issued to nonemployees will be similar to the accounting for employee awards. This includes allowing for the measurement of awards at the grant date and recognition of awards with performance conditions when those conditions are probable, both of which are earlier than under current guidance for nonemployee awards. The Company has early adopted this guidance, specifically related to the tax calculations of consulting services compensation.
In March 2019, the FASB issued new guidance on film production costs ASU 2019-02, Entertainment Films- Other Assets - Film Costs (Subtopic 926-20). The new guidance is effective for fiscal years beginning after December 15, 2019 (for the year ended December 31, 2020 for the Company) and interim periods within those fiscal years and may be early adopted. The new guidance aligns the accounting for the production costs of an episodic series with those of a film by removing the content distinction for capitalization. It also addresses presentation, requires new disclosures for produced and licensed content and addresses cash flow classification for license agreements to better reflect the economics of an episodic series. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.
In March 2019, the FASB issued ASU No. 2019-02, Entertainment-Films-Other Assets-Film Costs (Subtopic 926-20) and Entertainment-Broadcasters Intangibles-Goodwill and Other (Subtopic 920-350). The update aligns the accounting for production costs of an episodic television series with the accounting for production costs of films by removing the content distinction for capitalization. The amendments also require that an entity reassess estimates of the use of a film in a film group and account for any changes prospectively. The amendments in this update require that an entity test a film or license agreement for program material within the scope of Subtopic 920-350 for impairment at a film group level when the film or license agreement is predominantly monetized with other films and/or license agreements. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Under this guidance, lessees will be required to recognize on the balance sheet a lease liability and a right-of-use asset for all leases, with the exception of short-term leases. The lease liability represents the lessee s obligation to make lease payments arising from a lease, and will be measured as the present value of the lease payments. The right-of-use asset represents the lessee's right to use a specified asset for the lease term, and will be measured at the lease liability amount, adjusted for lease prepayment, lease incentives received and the lessee s initial direct costs. The standard also requires a lessee to recognize a single lease cost allocated over the lease term, generally on a straight-line basis. The new guidance is effective for fiscal years beginning after December 15, 2018. ASU 2016-02 is required to be applied using the modified retrospective approach for all leases existing as of the effective date and provides for certain practical expedients. Early adoption is permitted. The Company does not have any leases and does not expect any material impact related to the new guidance.
Management has considered all recent accounting pronouncements issued since the last audit of our financial statements. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.
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Going Concern
The accompanying financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business. The accompanying consolidated financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern. During the year ended June 30, 2019 the Company had a net loss from operations of $467,847. As of June 30, 2019, the Company has an accumulated deficit of $1,755,486. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The Company also has promissory notes in default as of June 30, 2019.
The ability of the Company to continue as a going concern and appropriateness of using the going concern basis is dependent upon, among other things, an additional cash infusion and an identification of new business opportunities.
The Company plans on raising the required funds through completion of film projects resulting in revenues, and further potential equity and debt offerings. However, there is no assurance that the Company will be successful in this or any of its endeavors or become financially viable to continue as a going concern.
NOTE 3 - PROMISSORY NOTES RECEIVABLE
On June 7, 2017, the Company entered into an agreement for a 2.5% promissory note in exchange for lending $200,000 to a third party. The principal of $200,000 was due to the Company forty-five (45) days from receipt of the funds. The principal and $5,000 interest receivable were received on July 17, 2017.
On June 12, 2017, the Company entered into an agreement for a 2.5% promissory note in exchange for lending $200,000 to a third party. The principal of $200,000 was due to the Company forty-five (45) days from receipt of the funds. The principal and $5,000 interest receivable were received on July 26, 2017.
During the year ended June30, 2019 and 2018, a total amount of $0 and $4,841, respectively was recorded as interest income related to the two $200,000 notes.
NOTE 4 - FILM COSTS, NET
Film costs are comprised of the following:
Film costs include salaries and wages, and all other direct costs associated with the motion pictures and television productions. In addition, the Company qualifies for certain government programs that provide incentives earned in regards to expenditures on qualifying film production activities. The incentives are recorded as an offset to the related asset balance.
As of June 30, 2019, the Company performed fair value measurements related to film costs and determined that there were no indicators of impairment. During the year ended June 30, 2019, the Company did not recognize impairment loss.
On November 10, 2017 the Company executed a First Amendment Agreement to its 6x picture Production and Distribution Agreement between Big Film Factory LLC (“Big Film” or “Prodco”) and Pure Flix Entertainment LLC (“PFE”), (the “Agreement”). The Agreement memorializes the understanding with respect to the development, packaging, production, post-production and worldwide distribution of the films intended for initial and primary worldwide exhibition. The Company, will be added as a party to the initial agreement by and between Big Film and PFE, wherever Big Film is referenced in connection with providing production services in conjunction with Big Film as well as providing production capital and cash following each of the first six (6) films produced under the Agreement (“6 Pictures”). Both Prodco and PFE agree to expand the defined role of “Prodco” in the Agreement, to add the Company to that definition, and grant the Company equally the same role and responsibilities heretofore only held by Big Film in connection with the 6 Pictures.
During the year ended June 30, 2019, $2,483,448 of capitalized film costs were expensed as cost of revenues, of which $889,248 related to Last Vermont Christmas LLC, $868,795 related to Christmas Camp LLC, $354,788 related to One HLWD, and $370,617 related to Three HLWD.
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NOTE 5 - DEFERRED FILM REVENUE
On March 27, 2018, the Company entered into a Production Services Agreement with MVE Productions, LLC to provide production services for a film. In relation to the film, the Company created a Limited Liability Corporation, ‘Christmas Camp LLC.’ The Production Services Agreement was planned to run from April 9, 2018 to August 27, 2018. As of February 28, 2019, all criteria had been met in order for the Company to recognize revenue. During the year ended June 30, 2019 deferred revenue of $879,112 has been recognized as revenues.
On March 27, 2018, the Company entered into a Production Services Agreement with MVE Productions, LLC to provide production services for a film. In relation to the film, the Company created a Limited Liability Corporation, ‘Last Vermont Christmas LLC.’ The Production Services Agreement was planned to run from April 9, 2018 to September 28, 2018. As of March 18, 2019, all criteria had been met in order for the Company to recognize revenue. During the year ended June 30, 2019 deferred revenue of $899,234 has been recognized as revenues.
On June 19, 2018, the Company entered into a Production Services Agreement with MVE Productions, LLC to provide production services for a film. In relation to the film, the Company created a Limited Liability Corporation, ‘Country Christmas LLC.’ The Production Services Agreement will run from June 25, 2018 to October 15, 2018. The agreement is still ongoing as of the date of this filing. The Company has not recognized any film revenue for the year ended June 30, 2019. As of June 30, 2019, the Company has recorded $354,398 of deferred revenue in relation to this film.
NOTE 6 - PROMISSORY NOTES PAYABLE
On October 11, 2017, the Company issued a $150,000 Promissory Note in exchange for receiving $150,000 proceeds. The principal of $150,000 is due fourteen (14) months from the receipt of the funds, and a total interest charge of ten percent, or $15,000 is to be recorded over the term of the loan. An interest payable of $17,510 and $9,247 has been recorded as of June 30, 2019, and 2018, respectively. During the year ended June 30, 2019, and 2018, interest expense of $23,263 and $9,247 was recorded, respectively. The proceeds were used by the Company to fund the motion picture known as One HLWD KY LLC. During the year ended June 30, 2019, The Company paid principal of $100,000 and $15,000 of interest payable. The balance of principal note for amount of $50,000 is currently in default and currently accrues interest at 22% per annum. Subsequent to June 30, 2019, the Company entered into an amendment agreement with the lender to extend the maturity date to June 30, 2020.
On January 4, 2018, the Company issued a $80,000 Promissory Note in exchange for receiving $80,000 proceeds. The principal of $80,000 is due twelve (12) months from the receipt of the funds, and bears interest at 10% per annum. An interest payable of $8,684 and $3,879 has been recorded as of June 30, 2019 and June 30, 2018, respectively. During the year ended June 30, 2019, and 2018, interest expense of $12,805 and $3,879 was recorded, respectively. The proceeds were used by the Company to fund the motion picture known as River Runs Red. During the year ended June 30, 2019, The Company paid $8,000 interest. The note was in default as of June 30, 2019. Subsequent to June 30, 2019, the Company entered into an amendment agreement with the lender to extend the maturity date to June 30, 2020.
On February 6, 2018, the Company issued a $100,000 Promissory Note in exchange for receiving $100,000 proceeds. The principal of $100,000 is due twelve (12) months from the receipt of the funds, and bears interest at 10% per annum. An interest payable of $19,216 and $3,945 has been recorded as of June 30, 2019, and 2018. During the year ended June 30, 2019 and 2018, interest expense of $15,271 and $3,945 was recorded, respectively. The proceeds were used by the Company to fund the motion picture known as River Runs Red. The note was in default as of June 30, 2019. Subsequent to June 30, 2019, the Company entered into an amendment agreement with the lender to extend the maturity date to June 30, 2020.
On February 7, 2018, the Company issued a $150,000 Promissory Note in exchange for receiving $150,000 proceeds. The principal of $150,000 is due twelve (12) months from the receipt of the funds, and bears interest at 10% per annum. An interest payable of $10,045 and $5,877 has been recorded as of June 30, 2019 and 2018, respectively. During the year ended June 30, 2019 and 2018, interest expense of $19,168 and $5,877 was recorded, respectively. The proceeds were used by the Company to fund the motion picture known as River Runs Red.
During the year ended June 30, 2019, The Company paid $150,000 of principal and $15,000 of interest payable. As of June 30, 2019, unpaid interest of $10,045 is due. Subsequent to June 30, 2019, the Company entered into an amendment agreement with the lender to extinguish the debt in exchange for the issuance of 20,000 common shares.
NOTE 7 - RELATED PARTY TRANSACTIONS
On September 19, 2017 the company issued a 10% Promissory Note in exchange for receiving $350,000 from Kruse Farms, LP., a Company owned by one of the Company’s principle owners, to fund the production of a motion picture. The principal of $350,000 is due in twenty-four (24) months from receipt of the funds. The Company and the lender have extended the maturity date to June 30, 2020. Interest payable of $62,142 and $27,233 has been recorded as of June 30, 2019, and 2018, respectively. During the year ended June 30, 2019, and 2018, interest expense was $34,910 and $27,233, respectively. During the year ended June 30, 2019, The Company paid a part of principal of $30,000 and as of June 30, 2019, the principal balance of note is $320,000.
As of June 30, 2019, the Company has advanced $20,000 as a loan to the Company’s Chief Creative Officer.
During the year ended June 30, 2019, the Company borrowed a $12,000 from a related party. The amounts are due on demand and non-interest bearing.
During the year ended June 30, 2019, and 2018, the Company paid $27,500, and $95,636, respectively to the Chief Creative Officer for fees related to production and managing movie services.
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NOTE 8 - NOTE PAYABLE
In August 2015, Smack entered into an unsecured promissory note agreement with an individual. The agreement allowed Smack to borrow up to $66,613 at an interest rate of 10 percent per year. This $66,613 note was assumed by the Company during the recapitalization. During the year ended June 30, 2018, the Company settled the principal amount of $66,613 and interest payable of $17,209 for a total of $83,822 through issuance of 83,822 common shares. For the year ended June 30, 2019, and 2018, interest expense of $0, and $5,037 were recorded, respectively.
NOTE 9 - SHARE CAPITAL
Common Stock
On July 5, 2017, the Company repurchased and cancelled 85,475 shares of common stock of the company for $20,000.
On August 9, 2017, the Company has approved a 1 for 40 reverse split of its issued and outstanding common stock. The common stock accounts and all share related balances have been applied retroactively for all periods presented.
On September 11, 2017, the Company amended the Articles of Incorporation to decrease the authorized capital to 25,000,000 shares of common stock.
During the year ended June 30, 2018, the Company entered into four share purchase agreements with four investors for 406,000 common shares at $1 per share. The shares were issued during the year ended June 30, 2018.
During the year ended June 30, 2018, the Company issued 83,822 common shares to settle $132,437 of principal note payable and accrued interest.
During the year ended June 30, 2018, the Company issued 43,894 common shares to settle $69,352 of accounts payable.
During the year ended June 30, 2018, the Company issued 125,000 common shares for consulting services, valued at $140,000.
On October 17, 2018, the Company issued 250,000 and 200,000 common shares at $0.50 for consulting services, to two individuals, valued at $125,000, and $100,000, respectively.
NOTE 10 - COMMITMENTS AND CONTINGENCIES
The Company neither owns nor leases any real or personal property. The Company’s officers have provided office services without charge. There is no obligation for the officer to continue this arrangement. Such costs are immaterial to the financial statements and accordingly are not reflected herein. The officers and directors are involved in other business activities and most likely will become involved in other business activities in the future.
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NOTE 11 - INCOME TAXES
The Company provides for income taxes under ASC 740, “Income Taxes.” Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax basis of assets and liabilities and the tax rates in effect when these differences are expected to reverse. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.
On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”), was signed into law. The Tax Act includes numerous changes to tax laws impacting business, the most significant being a permanent reduction in the federal corporate income tax rate from 34% to 21%. The rate reduction took effect on January 1, 2018.
The provision for income taxes differs from the amounts which would be provided by applying the statutory federal income tax rate of 21% and 27.5% to the net loss before provision for income taxes for the following reasons:
Net deferred tax assets consist of the following components as of:
At June 30, 2019 and 2018, the Company had $1,755,486 and $1,289,249, respectively of the U.S. net operating losses (the “U.S. NOLs”), which begin to expire beginning in 2036. NOLs generated in tax years prior to June 30, 2018, can be carryforward for twenty years, whereas NOLs generated after June 30, 2018 can be carryforward indefinitely.
NOTE 12 - SUBSEQUENT EVENTS
Management has evaluated subsequent events through the date the consolidated financial statements were issued. Based on our evaluation no events have occurred that require disclosure, other than those disclosed below.
On July 16, 2019, the Company received notice that Country Christmas Album has been confirmed as completed and delivered in accordance with the agreement terms.
Subsequent to year end, the Company dissolved CXA Movie, LLC on October 5, 2019. In addition, the Company dissolved FWIL, LLC on September 16, 2019.
Subsequent to June 30, 2019, the Company amended the following terms of promissory notes:
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Promissory note of $150,000, dated February 7, 2018, $15,000 of interest payable to be paid through the issuance of 20,000 common shares. The shares have been issued as of the date of this report.
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Promissory note of $80,000, dated January 4, 2018. Maturity date has been extended to June 30, 2020. Amended interest payable is 10% of the loan payable in common stock of Almost Never Films. The shares have not yet been issued as of the date of this report.
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Promissory note of $100,000, dated February 6, 2018. New principal amount is $0. As part of the amendment, the lender transferred $50,000 of the promissory note to one new lender, and $50,000 to another new lender.
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Promissory note of $350,000, dated September 19, 2017. Maturity date has been extended to June 30, 2020.
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Promissory note of $150,000, dated October 11, 2017. Maturity date has been extended to June 30, 2020. New principal amount is $50,000 with interest of 10%, as $100,000 has been paid.
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Two new promissory notes of $50,000 each were entered, bearing interest at 10%. These new notes replaced amounts due on previously issued promissory notes.
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Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
There were no disagreements with our accountants related to accounting principles or practices, financial statement disclosure, internal controls or auditing scope or procedure during the two fiscal years and subsequent interim periods.
Item 9A.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including chief executive officer (our principal executive officer) and our chief financial officer (our principal financial officer and principal accounting officer), we have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as of the end of the period covered by this report. Based on this evaluation, our chief executive officer (our principal executive officer) and our chief financial officer (our principal financial officer and principal accounting officer) concluded as of the evaluation date that our disclosure controls and procedures were not effective such that the material information required to be included in our SEC reports is accumulated and communicated to our management, including our chief executive officer (our principal executive officer) and our chief financial officer (our principal financial officer and principal accounting officer), recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to our company, particularly during the period when this report was being prepared.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, for the company.
Internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of its management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Management recognizes that there are inherent limitations in the effectiveness of any system of internal control, and accordingly, even effective internal control can provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect material misstatements. In addition, effective internal control at a point in time may become ineffective in future periods because of changes in conditions or due to deterioration in the degree of compliance with our established policies and procedures.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in there being a more than remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.
Under the supervision and with the participation of our chief executive officer (our principal executive officer) and our chief financial officer (our principal financial officer and principal accounting officer), management conducted an evaluation of the effectiveness of our internal control over financial reporting, as of June 30, 2019, based on the framework set forth in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our evaluation under this framework, management concluded that our internal control over financial reporting was not effective as of the evaluation date due to the factors stated below.
Management assessed the effectiveness of our company’s internal control over financial reporting as of evaluation date and identified the following material weaknesses:
·
Lack of proper segregation of duties due to limited personnel;
·Lack of a formal review process that includes multiple levels of review from adequate personnel with requisite expertise.
We do not have a functioning audit committee or outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures.
Management is committed to improving its internal controls and will (1) continue to use third party specialists to address shortfalls in staffing and to assist our company with accounting and finance responsibilities, (2) increase the frequency of independent reconciliations of significant accounts which will mitigate the lack of segregation of duties until there are sufficient personnel and (3) may consider appointing outside directors and audit committee members in the future.
Management has discussed the material weakness noted above with our independent registered public accounting firm. Due to the nature of this material weakness, there is a more than remote likelihood that misstatements which could be material to the annual or interim financial statements could occur that would not be prevented or detected.
This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this annual report.
Changes in Internal Controls Over Financial Reporting
There have been no changes in our internal controls over financial reporting that occurred during the year ended June 30, 2019 that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.
Item 9B.
Item 9B. Other Information
None.
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PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Directors and Executive Officers
Effective as of the consummation of the transactions contemplated by the Exchange Agreement, Doug Samuelson resigned as our Interim Chief Executive Officer and Chief Financial Officer and Director. Danny Chan became our Chief Executive Officer and Chief Financial Officer and a director of the Company. Derek Williams became our Chief Operating Officer.
Below are the names of and certain information regarding the Company's current executive officers and directors:
The principal occupation and business experience during the past five years for our executive officers and directors are as follows:
Danny Chan, 40, Chief Executive Officer, Chief Financial Officer, Director. Danny Chan joined us as Chief Executive Officer, Chief Financial Officer and a director of our Board on January 15, 2017. Since October of 2012 to Present, Mr. Chan serves as a managing director of Iconic Private Equity Partners. From July of 2010 to September of 2012 Mr. Chan served as managing director of Raider Capital Corporation. Mr. Chan earned a bachelor's degree in finance from Indiana University.
Daniel T Roth, 48, Chief Creative Officer. has over 20 years of experience in the film and television industry. specializing in developing, financing and producing content for film. Previously, from September of 2012 until August 24, 2017, Mr. Roth was a co-founder and partner of Parkside Pictures. Mr. Roth began his career in 1997 as a casting director, eventually opening his company Casting House in 2002 with offices in New York and Los Angeles.
Mr. Roth has produced over 30 movies over his career, including producing “LBJ” directed by Rob Reiner and starring Woody Harrelson, which premiered in September 2016 at the Toronto Film Festival. Also producing the Rob Cohen (“Fast & Furious”) film Hurricane Heist.” Mr. Roth is a graduate of the Ohio State University.
Directors are elected to serve until the next annual meeting of stockholders and until their successors are elected and qualified. Directors are elected by a plurality of the votes cast at the annual meeting of stockholders and hold office until the expiration of the term for which he or she was elected and until a successor has been elected and qualified.
A majority of the authorized number of directors constitutes a quorum of the Board for the transaction of business. The directors must be present at the meeting to constitute a quorum. However, any action required or permitted to be taken by the Board may be taken without a meeting if all members of the Board individually or collectively consent in writing to the action.
Other Key Personnel
We have no significant employees other than the officers and directors described above.
Family Relationships
There are no family relationships among our directors or executive officers.
Involvement in Certain Legal Proceedings
No executive officer or director of ours has been involved in the last ten years in any pending legal proceedings to which the Company is a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the Company or has a material interest adverse to the Company. The Company’s property is not the subject of any pending legal proceedings.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires our directors, executive officers and greater than ten percent beneficial owners of our Common Stock to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Directors, executive officers and greater than ten percent stockholders are required by the rules and regulations of the Securities and Exchange Commission to furnish us with copies of all Section 16(a) reports they file. Based solely on a review of the copies of these reports furnished to us and written representations from such directors, executive officers and stockholders with respect to the period from June 30, 2017, through June 30, 2019, we are not aware of any required Section 16(a) reports that were not filed on a timely basis.
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Board Committees
The Board currently does not have any committees. Until further determination by the Board, the full Board will undertake the duties of the audit committee, compensation committee and nominating committee.
Code of Ethics
The Company currently has not adopted a written code of ethics. We intend to implement a comprehensive corporate governance program, including adopting a Code of Ethics.
Director Independence
We are not currently subject to listing requirements of any national securities exchange or inter-dealer quotation system which has requirements that a majority of the Board be "independent" and, as a result, we are not at this time required to have our Board comprised of a majority of "Independent Directors."
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
Summary Compensation Table
The following table summarizes the compensation of our executive officers, directors and President during the fiscal years ended June 30, 2019 and 2018. No other officers or directors received annual compensation in excess of $100,000 during the last fiscal year.
___________(1)
Damiano Tucci resigned on October 18, 2018.
Stock-Based Compensation
The Company periodically issues Common Stock to employees for services. The Company accounts for stock payments to employees by measuring the cost of services received in exchange for equity on the grant date fair value of the awards, with the cost recognized as compensation expense in the Company’s financial statements over the vesting period of the awards.
Director Compensation
No director has been compensated for his role as a Director in the fiscal years ended June 30, 2019 or 2018.
We have no plans in place and have never maintained any plans that provide for the payment of retirement benefits or benefits that will be paid primarily following retirement including, but not limited to, tax qualified deferred benefit plans, supplemental executive retirement plans, tax-qualified deferred exchange plans and nonqualified deferred exchange plans. Similarly, we have no contracts, agreements, plans or arrangements, whether written or unwritten, that provide for payments to the named executive officers or any other persons following, or in connection with the resignation, retirement or other termination of a named executive officer, or a change in control of us or a change in a named executive officer's responsibilities following a change in control.
We have no contracts, agreements, plans or arrangements, whether written or unwritten, that provide for payments to the named executive officers listed above.
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Employment Agreement
We have no employment agreements with any of our officers, and have not issued any incentive or other stock options, profit sharing or similar benefits.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. In accordance with SEC rules, shares of our Common Stock which may be acquired upon exercise of stock options or warrants which are currently exercisable or which become exercisable within 60 days of the date of the applicable table below are deemed beneficially owned by the holders of such options and warrants and are deemed outstanding for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage of ownership of any other person. Subject to community property laws, where applicable, the persons or entities named in the tables below have sole voting and investment power with respect to all shares of our Common Stock indicated as beneficially owned by them.
Beneficial Ownership of Our Common Stock
The following table sets forth information with respect to the beneficial ownership of our Common Stock as of September 18, 2019 by (i) each stockholder known by us to be the beneficial owner of more than 5% of our Common Stock, (ii) each of our directors and executive officers, and (iii) all of our directors and executive officers as a group. To the best of our knowledge, except as otherwise indicated, each of the persons named in the table has sole voting and investment power with respect to the shares of our Common Stock beneficially owned by such person, except to the extent such power may be shared with a spouse. To our knowledge, none of the shares listed below are held under a voting trust or similar agreement, except as noted. Other than the Share Exchange, to our knowledge, there is no arrangement, including any pledge by any person of securities of the Company or any of its parents, the operation of which may at a subsequent date result in a change in control of the Company.
Unless otherwise indicated in the following table, the address for each person named in the table is c/o 8605 Santa Monica Blvd #98258 West Hollywood, California 90069-4109.
____________
(1)1340 S Main Ste 300, Grapevine TX 76051
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Transactions with Related Persons
During our last fiscal year and except as disclosed below, none of the following persons has had any direct or indirect material interest in any transaction worth more than $120,000 to which our company was or is a party, or in any proposed transaction to which our company proposes to be a party:
(a)any director or officer of our company;
(b)any proposed director of officer of our company;
(c)any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to our common stock; or,
(d)any member of the immediate family of any of the foregoing persons (including a spouse, parents, children, siblings, and in-laws).
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ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees
The following table sets forth the fees billed to the Company for professional services rendered by the Company's independent registered public accounting firm, for the years ended June 30, 2019 and June 30, 2018:
Audit Fees. Consist of fees billed for professional services rendered for the audits of our financial statements and reviews of our interim consolidated financial statements included in quarterly reports.
Tax Fees Somerset CPAs did not provide us with professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal, state and local tax compliance and consultation in connection with various transactions and acquisitions.
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Item. 15. EXHIBITS
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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.