ALL FOR ONE MEDIA CORP. - Quarter Report: 2019 December (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
December 31, 2019
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No.
000-55717
ALL FOR ONE MEDIA CORP. |
(Exact Name of Registrant as Specified in Its Charter) |
Utah | 81-5006786 | |
(State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer Identification Number) | |
236 Sarles Street Mt. Kisco, New York | 10549 | |
(Address of Principal Executive Offices) | (Zip Code) |
914-574-6174
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-3 of the Exchange Act.
Large accelerated filer | o | Accelerated filer | o |
Non-accelerated filer | o | Smaller reporting company | x |
(Do not check if smaller reporting company) | Emerging growth company | x | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of February 17, 2020, there were 1,118,473,025 shares of the registrant’s common stock issued and outstanding.
ALL FOR ONE MEDIA CORP.
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| 2 |
ALL FOR ONE MEDIA CORP. AND SUBSIDIARIES |
December 31, | September 30, | |||||||
2019 | 2019 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 2,687 | $ | 103,036 | ||||
Prepaid expenses and other current assets | 24,300 | 52,550 | ||||||
Total current assets | 26,987 | 155,586 | ||||||
Other assets: | ||||||||
Deposit | - | 25,000 | ||||||
Advances on film rights - related party | 199,000 | 100,000 | ||||||
TOTAL ASSETS | $ | 225,987 | $ | 280,586 | ||||
LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued liabilities | $ | 87,628 | $ | 45,663 | ||||
Accounts payable and accrued liabilities - related party | 139,036 | 128,036 | ||||||
Accrued interest | 405,805 | 282,323 | ||||||
Convertible notes payable, net of unamortized debt discounts | 2,720,942 | 2,075,780 | ||||||
Note payable | 530,000 | 530,000 | ||||||
Note payable - related party | 200,000 | 200,000 | ||||||
Loans payable | 475,000 | 475,000 | ||||||
Due to related parties | 3,201 | 2,701 | ||||||
Derivative liabilities | 6,777,365 | 6,166,273 | ||||||
Total current liabilities | 11,338,977 | 9,905,776 | ||||||
Commitments and Contingencies (see Note 8) | ||||||||
Stockholders' deficit: | ||||||||
Preferred stock, $0.001 par value; 5,000,000 shares authorized Series A Preferred stock ($0.001 Par Value; 51 shares designated; 51 and 51 shares issued and outstanding at December 31, 2019 and September 30, 2019, respectively) | - | - | ||||||
Common stock, $0.001, 4,200,000,000 shares authorized: 650,215,288 shares and 77,114,395 shares issued and outstanding as of December 31, 2019 and September 30, 2019, respectively | 650,215 | 77,114 | ||||||
Additional paid-in capital | 6,313,462 | 6,382,859 | ||||||
Accumulated deficit | (17,714,865 | ) | (15,724,493 | ) | ||||
Total All For One Media Corp. Stockholders' deficit | (10,751,188 | ) | (9,264,520 | ) | ||||
Non-controlling interest in subsidiaries | (361,802 | ) | (360,670 | ) | ||||
Total Stockholders' deficit | (11,112,990 | ) | (9,625,190 | ) | ||||
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ | 225,987 | $ | 280,586 | ||||
See accompanying notes to unaudited interim consolidated financial statements.
| 3 |
ALL FOR ONE MEDIA CORP. AND SUBSIDIARIES | ||||||||
For the Three Months Ended | ||||||||
December 31, | ||||||||
2019 | 2018 | |||||||
Revenues | $ | 2,183 | $ | 2,210 | ||||
Operating expenses: | ||||||||
Compensation expense | 24,160 | 27,268 | ||||||
Professional and consulting expense | 82,276 | 376,844 | ||||||
General and administrative expense | 104,920 | 8,389 | ||||||
Total operating expense | 211,356 | 412,501 | ||||||
Loss from operations | (209,173 | ) | (410,291 | ) | ||||
Other income (expense) | ||||||||
Initial derivative expense | (97,423 | ) | (2,477,407 | ) | ||||
Change in fair value of derivative liabilities | (707,072 | ) | 1,235,577 | |||||
Loss from extinguishment of debt, net | (19,547 | ) | (1,036 | ) | ||||
Interest expense | (958,289 | ) | (1,164,177 | ) | ||||
Total other income (expense) | (1,782,331 | ) | (2,407,043 | ) | ||||
Loss before provision for income taxes | (1,991,504 | ) | (2,817,334 | ) | ||||
Provision for income taxes | - | - | ||||||
Net loss | (1,991,504 | ) | (2,817,334 | ) | ||||
Losses attributable to non-controlling interest | 1,132 | 114,970 | ||||||
Net loss attributable to All For One Media Corp. | $ | (1,990,372 | ) | $ | (2,702,364 | ) | ||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | ||||||||
Basic and Diluted | 216,741,594 | 63,211,878 | ||||||
NET INCOME (LOSS) PER COMMON SHARE OUTSTANDING | ||||||||
Basic and Diluted | $ | (0.01 | ) | $ | (0.04 | ) | ||
See accompanying notes to unaudited interim consolidated financial statements. | ||||||||
| 4 |
ALL FOR ONE MEDIA CORP. AND SUBSIDIARIES |
FOR THE THREE MONTHS ENDED DECEMBER 31, 2019 AND 2018
Preferred Stock | ||||||||||||||||||||||||||||||||
Series A $0.001 Par Value | Common Stock $0.001 Par Value | Additional Paid-in | Accumulated | Non- controlling | Total Stockholders' | |||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Interest | Deficit | |||||||||||||||||||||||||
Balance, September 30, 2019 | 51 | $ | - | 77,114,395 | $ | 77,114 | $ | 6,382,859 | $ | (15,724,493 | ) | $ | (360,670 | ) | $ | (9,625,190 | ) | |||||||||||||||
Sale of common stock | - | - | 3,969,000 | 3,969 | (635 | ) | - | - | 3,334 | |||||||||||||||||||||||
Issuance of common stock for services | - | - | 70,000 | 70 | 86 | - | - | 156 | ||||||||||||||||||||||||
Issuance of common stock in connection with conversion of principal amount and accrued interest on notes payable | - | - | 569,061,893 | 569,062 | (68,848 | ) | - | - | 500,214 | |||||||||||||||||||||||
Net loss for the period | - | - | - | - | - | (1,990,372 | ) | (1,132 | ) | (1,991,504 | ) | |||||||||||||||||||||
Balance, December 31, 2019 | 51 | $ | - | 650,215,288 | $ | 650,215 | $ | 6,313,462 | $ | (17,714,865 | ) | $ | (361,802 | ) | $ | (11,112,990 | ) | |||||||||||||||
Preferred Stock | ||||||||||||||||||||||||||||||||
Series A $0.001 Par Value | Common Stock $0.001 Par Value | Additional Paid-in | Accumulated | Non- controlling | Total Stockholders' | |||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Interest | Deficit | |||||||||||||||||||||||||
Balance, September 30, 2018 | 51 | $ | - | 55,638,122 | $ | 55,638 | $ | 5,352,315 | $ | (8,611,139 | ) | $ | (36,869 | ) | $ | (3,240,055 | ) | |||||||||||||||
Issuance of common stock for services | - | - | 7,653,000 | 7,653 | 297,632 | - | - | 305,285 | ||||||||||||||||||||||||
Sale of membership interest in subsidiary | - | - | - | - | 96,805 | - | 28,195 | 125,000 | ||||||||||||||||||||||||
Issuance of common stock in connection with conversion of principal amount and accrued interest on notes payable | - | - | 6,389,087 | 6,389 | 84,790 | - | - | 91,179 | ||||||||||||||||||||||||
Issuance of common stock in connection with exercise of warrants | - | - | 2,927,619 | 2,928 | (2,928 | ) | - | - | - | |||||||||||||||||||||||
Reclassification of derivative liabilities relating to convertible notes | - | - | - | - | 158,026 | - | - | 158,026 | ||||||||||||||||||||||||
Reclassification of derivative liabilities relating to exercised warrants | - | - | - | - | 3,448 | - | - | 3,448 | ||||||||||||||||||||||||
Cancellations of common stock | - | - | (3,080,000 | ) | (3,080 | ) | 3,080 | - | - | - | ||||||||||||||||||||||
Net loss for the period | - | - | - | - | - | (2,702,364 | ) | (114,970 | ) | (2,817,334 | ) | |||||||||||||||||||||
Balance, December 31, 2018 | 51 | $ | - | 69,527,828 | $ | 69,528 | $ | 5,993,168 | $ | (11,313,503 | ) | $ | (123,644 | ) | $ | (5,374,451 | ) | |||||||||||||||
See accompanying notes to unaudited interim consolidated financial statements.
| 5 |
ALL FOR ONE MEDIA CORP. AND SUBSIDIARIES | ||||||||
For the Three Months Ended | ||||||||
December 31, | ||||||||
2019 | 2018 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (1,991,504 | ) | $ | (2,817,334 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Amortization of debt discounts | 812,395 | 649,834 | ||||||
Stock-based compensation | 156 | 305,285 | ||||||
Loss on extinguishment of debt | 19,547 | 1,036 | ||||||
Initial derivative expense | 97,423 | 2,477,407 | ||||||
Change in fair value of derivative liabilities | 707,072 | (1,235,577 | ) | |||||
Non-cash interest expense | 6,500 | 279,411 | ||||||
Changes in assets and liabilities: | ||||||||
Prepaid expenses and other current assets | 28,250 | (11,211 | ) | |||||
Deposit | 25,000 | - | ||||||
Film production costs | - | (39,700 | ) | |||||
Accounts payable and accrued liabilities | 41,966 | (61,042 | ) | |||||
Accounts payable and accrued liabilities - related party | 11,000 | - | ||||||
Accrued interest | 136,762 | 12,474 | ||||||
NET CASH USED IN OPERATING ACTIVITIES | (105,433 | ) | (439,417 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Advances on film rights | (99,000 | ) | - | |||||
NET CASH USED IN INVESTING ACTIVITIES | (99,000 | ) | - | |||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Advance from a related party | 500 | - | ||||||
Payments on convertible notes payable | - | (898,500 | ) | |||||
Proceeds from convertible notes payable, net of issuance cost | 100,250 | 1,383,250 | ||||||
Proceeds from sale of common stock | 3,334 | - | ||||||
NET CASH PROVIDED BY FINANCING ACTIVITIES | 104,084 | 484,750 | ||||||
NET CHANGE IN CASH AND CASH EQUIVALENTS | (100,349 | ) | 45,333 | |||||
CASH AND CASH EQUIVALENTS - beginning of year | 103,036 | 58,344 | ||||||
CASH AND CASH EQUIVALENTS - end of period | $ | 2,687 | $ | 103,677 | ||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
Cash paid for: | ||||||||
Interest | $ | - | $ | 221,422 | ||||
Income taxes | $ | - | $ | - | ||||
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
Discount on derivative liabilities | $ | 100,250 | $ | 1,383,250 | ||||
Reclassification of derivative liabilities to equity upon exercise of warrants | $ | - | $ | 161,474 | ||||
Issuance of common stock in connection with conversion of note payable and accrued interest | $ | 180,513 | $ | 91,179 | ||||
Proceeds from sale of membership interest paid directly to vendor | $ | - | $ | 125,000 | ||||
Issuance of common stock in connection with exercise of warrants | $ | - | $ | 2,928 | ||||
Cancellation of common stock | $ | - | $ | (3,080 | ) | |||
See accompanying notes to unaudited interim consolidated financial statements.
| 6 |
December 31, 2019
NOTE 1 -
ORGANIZATION AND DESCRIPTION OF BUSINESS
All for One Media Corp. (the “Company”) was incorporated in the State of Utah on March 2, 2004. The Company is a media and entertainment company focused on creating, launching and marketing original pop music groups commonly referred to as “boy bands” and “girl groups.” On October 26, 2015, the Company entered into an Asset Exchange Agreement (the “Asset Exchange”) with Crazy for the Boys, LLC (“CFTB”), a privately held company, and certain members owning membership interest in CFTB whereby the Company acquired certain assets from CFTB in exchange for 5,201,500 shares of the Company’s common stock. The assets that were acquired included a movie screenplay, master song recordings, trademarks, and web domain names (the “CFTB Assets”).
On December 7, 2016, the Company organized a subsidiary in the state of Nevada, Crazy for the Boys Movie, LLC (“CFTB Movie”) which was created for the sole purpose of financing, producing and commercially exploiting (via all distribution sources and other means of revenue generation) one feature-length motion picture as a coming of age, musical dramedy, entitled “Crazy For The Boys” (the “Movie”) and all of its allied, ancillary, subsidiaries and merchandising rights. The Company is the Managing Member of CFTB Movie and will have the sole and exclusive right to operate CFTB Movie. As of September 30, 2019, the Company owns approximately 70% of CFTB Movie, the Company’s majority owned subsidiary.
In May 2017, the Company entered into an Assignment and Transfer Agreement with Crazy for the Boys GA LLC (“CFTB GA”), a company organized in the state of Georgia, whereby CFTB GA assigned and transferred all ownership, asset rights and other interest in CFTB GA to CFTB Movie. CFTB GA was created for the sole purpose of producing the Movie in the State of Georgia, in the city of Savannah, which offers production incentives up to 30% of Georgia production expenditures in transferable tax credits. The Georgia tax incentive program is available for qualifying projects, including feature films, television series, commercials, music videos, animation and game development. Consequently, CFTB GA became a wholly owned subsidiary of CFTB Movie and as of December 31, 2019 the consolidated financial statements of the Company include the accounts of CFTB GA. Filming for the Movie has been completed in July 2017 and the post-production phase was completed in December 2018. The Company started to screen the movie in January 2019 for potential buyers. The Company has been receiving several offers for the distribution of the film and the Company continues to review those offers.
On June 21, 2019, Carmel Valley Productions, Inc. (“CVPI”), a newly formed wholly owned subsidiary, a Florida corporation, was formed for purpose of owning and producing family friendly films (see Note 8). In January 2020, the Company sold 90% of its 100% interest in CVPI for $50,000 (see Note 9).
NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation and principles of consolidation
The accompanying interim unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the United States Securities and Exchange Commission for interim financial information, which includes consolidated unaudited interim financial statements and present the consolidated unaudited interim financial statements of the Company and its wholly- owned subsidiaries as of December 31, 2019. All intercompany transactions and balances have been eliminated. In the opinion of management, all adjustments necessary to present fairly our financial position, results of operations, and cash flows as of December 31, 2019 and 2018, and for the periods then ended, have been made. Those adjustments consist of normal and recurring adjustments. The unaudited financial statements should be read in conjunction with the audited financial statements as of and for the year ended September 30, 2019 and footnotes thereto included in the Company’s Report on Form 10K filed with the SEC on January 14, 2020. The results of operations for the three months ended December 31, 2019 are not necessarily indicative of the results to be expected for the full year.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less when acquired to be cash equivalents. The Company did not have cash equivalents as of September 30, 2019. The Company places its cash with high credit quality financial institutions. The Company’s accounts at these institutions are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. As of December 31, 2019, the Company had not reached bank balances exceeding the FDIC insurance limit on interest bearing accounts. To reduce its risk associated with the failure of such financial institutions, the Company evaluates at least annually the rating of the financial institutions in which it holds deposits.
| 7 |
ALL FOR ONE MEDIA CORP. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS December 31, 2019 |
Prepaid expenses and other current assets
Prepaid expenses and other current assets of $24,300 and $52,550 as of December 31, 2019 and September 30, 2019, respectively, consist primarily of costs paid for future services which will occur within a year. Prepaid expenses typically include prepayments in cash and common stock for consulting which are being amortized over the terms of their respective agreements. Included in other current assets are deposits of $15,216 for both periods, December 31, 2019 and September 30, 2019. The deposits were related to deposit payments with various unions as security for the payments of all performers, background actors and production staff and any unused excess deposits shall be returned once the union has verified that all obligations have been fully satisfied.
Use of estimates
In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheet, and expenses for the period then ended. Actual results may differ significantly from those estimates. Significant estimates made by management include but are not limited to asset valuations including film cost, advances on film rights, the fair value of common stock issued, the valuation of derivative liabilities and the valuation of stock-based compensation.
Film Production Costs
The Company capitalizes costs which were used in the production of films according to ASC 926, Entertainment - Films. For films produced by the Company, capitalized costs include all direct production and financing costs, capitalized interest and production overhead. Production overhead includes the costs of individuals or departments with exclusive or significant responsibility for the production of films. Production overhead does not include general and administrative expenses and marketing, selling and distribution costs. Capitalization of interest costs should generally commence when a film is set for production and end when a film is substantially complete and ready for distribution. Filming the Movie was completed in July 2017 and the post-production phase was completed in December 2018. Generally, the interest eligible for capitalization includes stated interest, imputed interest, and interest related to debt instruments as well as amortization of discounts and other debt issue costs.
Pursuant to ASC 926-20-35, the Company will begin to amortize capitalized film cost when a film is released, and it begins to recognize revenue from the film. These costs for an individual film are amortized and participation costs (see below) are accrued to direct operating expenses in the proportion that current year’s revenues bear to management’s estimates of the ultimate revenue at the beginning of the current year expected to be recognized from the exploitation, exhibition or sale of such film. Ultimate revenue includes estimates over a period not to exceed ten years following the date of initial release of the motion picture.
Parties involved in the production of a film may be compensated in part by contingent payments based on the financial results of a film pursuant to contractual formulas (participations) and by contingent amounts due under provisions of collective bargaining agreements (residuals). Such parties are collectively referred to as participants, and such costs are collectively referred to as participation costs. Participations may be given to creative talent, such as actors or writers, or to entities from whom distribution rights are licensed. Participation costs are typically recognized evenly as the ultimate revenues are earned.
Unamortized film costs are tested for impairment when there is an indication that the fair value of the film may be less than unamortized costs. Consistent with the rules for recognizing impairment of long-lived assets in ASC 926, the standard sets forth examples of events or changes in circumstances that indicate that the entity must assess whether the fair value of the film (whether it has been completed or is still in production) is less than the carrying amount of its unamortized film costs.
1. | An adverse change in the expected performance of the film prior to its release |
2. | Actual costs substantially in excess of budgeted costs |
3. | Substantial delays in completion or release schedules |
4. | Changes in release plans, such as a reduction in the initial release pattern |
5. | Insufficient funding or resources to complete the film and to market it effectively |
6. | Actual performance subsequent to release fails to meet prerelease expectations. (ASC 926-20-35-12) |
| 8 |
ALL FOR ONE MEDIA CORP. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS December 31, 2019 |
As of December 31, 2019 and September 30, 2019, the carrying value of the film costs for both periods was $0. During the fiscal year ended September 30, 2019, the Company determined that the film cost was impaired. Consequently, the Company recorded impairment expense of $3,284,062 during the year ended September 30, 2019.
Fair value of financial instruments
The Company adopted ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements, establishes a framework for measuring fair value and expands disclosure about such fair value measurements. The adoption of ASC 820 did not have an impact on the Company’s financial position or operating results but did expand certain disclosures.
ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:
Level 1: | Observable inputs such as quoted market prices in active markets for identical assets or Liabilities | |
Level 2: | Observable market-based inputs or unobservable inputs that are corroborated by market data | |
Level 3: | Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions. |
The Company analyzes all financial instruments with features of both liabilities and equity under the FASB’s accounting standard for such instruments. Under this standard, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Depending on the product and the terms of the transaction, the fair value of notes payable and derivative liabilities was modeled using a series of techniques, including closed-form analytic formula, such as the Black-Scholes option-pricing model.
The carrying amounts reported in the consolidated balance sheets for cash, prepaid expense and other current assets, accounts payable and accrued liabilities approximate their estimated fair market value based on the short-term maturity of these instruments. The Company did not identify any other assets or liabilities that are required to be presented on the consolidated balance sheets at fair value in accordance with the accounting guidance.
The Company’s notes payable and convertible notes payable approximate the fair value of such instruments based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangements as of December 31, 2019 and September 30, 2019.
Fair Value of Financial Assets and Liabilities Measured on a Recurring Basis
Level 3 Financial Liabilities - Derivative Liability on Conversion Feature
The Company uses Level 3 of the fair value hierarchy to measure the fair value of the derivative liabilities and revalues its derivative liability on the conversion feature at every reporting period and recognizes gains or losses in the statements of operations that are attributable to the change in the fair value of the derivative liabilities.
The following table presents the derivative financial instruments, measured and recorded at fair value on the Company’s consolidated balance sheets on a recurring basis, and their level within the fair value hierarchy as of December 31, 2019:
Amount | Level 1 | Level 2 | Level 3 | |||||||||||||
Derivative liability - Embedded conversion | $ | 6,777,365 | $ | - | $ | - | $ | 6,777,365 | ||||||||
The following table presents the derivative financial instruments, measured and recorded at fair value on the Company’s consolidated balance sheets on a recurring basis, and their level within the fair value hierarchy as of September 30, 2019:
Amount | Level 1 | Level 2 | Level 3 | |||||||||||||
Derivative liability - Embedded conversion | $ | 6,166,273 | $ | - | $ | - | $ | 6,166,273 | ||||||||
Basic and diluted net loss per share
Basic net loss per share is computed by dividing the net loss by the weighted average number of common shares during the period. Diluted net loss per share is computed using the weighted average number of common shares and potentially dilutive securities outstanding during the period. As of December 31, 2019 and September 30, 2019, the Company has 32,778,546,361 and 503,459,521 potentially dilutive securities outstanding, respectively, related to the convertible promissory notes. Additionally, as of December 31, 2019 and September 30, 2019, the Company has 1,600,000 and 400,000 warrants outstanding, respectively.
| 9 |
ALL FOR ONE MEDIA CORP. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS December 31, 2019 |
Income taxes
The Company accounts for income taxes pursuant to the provision of ASC 740-10, “Accounting for Income Taxes” (“ASC 740-10”), which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will not be realized.
The Company follows the provision of ASC 740-10 related to Accounting for Uncertain Income Tax Positions. When tax returns are filed, there may be uncertainty about the merits of positions taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions.
Tax positions that meet the more-likely-than-not recognition threshold are measured at the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefit associated with tax positions taken that exceed the amount measured as described above should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions are all more likely than not to be upheld upon examination. As such, the Company has not recorded a liability for uncertain tax benefits.
The Company has adopted ASC 740-10-25, “Definition of Settlement”, which provides guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively settled upon the completion and examination by a taxing authority without being legally extinguished. For tax positions considered effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open. The federal and state income tax returns of the Company are subject to examination by the IRS and state taxing authorities, generally for three years after they are filed. The Company currently has no federal or state tax examinations nor has it had any federal or state examinations since its inception. The Company’s 2019, 2018, and 2017 tax years may still be subject to federal and state tax examination.
Stock-based compensation
Stock-based compensation is accounted for based on the requirements of ASC 718, Share-Based Payment, which requires recognition in the financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The Financial Accounting Standards Board (“FASB”) also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award. Pursuant to ASC Topic 505-50, for share-based payments non-employees, compensation expense is determined at the measurement date defined as the earlier of; a) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached or; b) the date at which the counterparty's performance is complete.
The expense is recognized over the vesting period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. The Company records compensation expense based on the fair value of the award at the reporting date. The awards to consultants and other third-parties are then revalued, or the total compensation is recalculated, based on the then current fair value, at each subsequent reporting date.
Derivative Liabilities
The Company evaluates all its financial instruments to determine if those contracts or any potential embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with FASB ASC 815-10-05-4 and 815-40. This accounting treatment requires that the carrying amount of any embedded conversion options be recorded at fair value at issuance and marked-to-market at each balance sheet date. In the event that the fair value is recorded as a liability, as is the case with the Company, the change in the fair value during the period is recorded as either other income or expense. Upon conversion, exercise or repayment, the respective derivative liability is marked to fair value at the conversion, repayment or exercise date, and then the related fair value amount is reclassified to other income or expense as part of gain or loss on debt extinguishment. Prior to December 31, 2018, the fair value of the derivative liabilities was reclassified to additional paid in capital.
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ALL FOR ONE MEDIA CORP. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS December 31, 2019 |
Non-controlling interests in consolidated financial statements
In December 2007, the FASB issued ASC 810-10-65, “Non-controlling Interests in Consolidated Financial Statements, an amendment of Accounting Research Bulletin No. 51” (“SFAS No. 160”). This ASC clarifies that a non-controlling (minority) interest in a subsidiary is an ownership interest in the entity that should be reported as equity in the consolidated financial statements. It also requires consolidated net income to include the amounts attributable to both the parent and non-controlling interest, with disclosure on the face of the consolidated income statement of the amounts attributed to the parent and to the non-controlling interest. In accordance with ASC 810-10- 45-21, those losses attributable to the parent and the non-controlling interest in subsidiaries may exceed their interests in the subsidiary’s equity. The excess and any further losses attributable to the parent and the non-controlling interest shall be attributed to those interests even if that attribution results in a deficit non-controlling interest balance. During the year ended September 30, 2017, the Company sold 8 Class A units of membership interest in CFTB Movie and assigned 1 Class B unit in CFTB Movie pursuant to a guarantee agreement which resulted in approximately 27% non-controlling interest. On November 14, 2018, the Company sold 1and ¼ Class A units of membership interest in CFTB Movie to a director of the Company for $125,000 increasing the non-controlling interest to approximately 29.9%. As of December 31, 2019 and September 30, 2019, the Company recorded a non-controlling interest balance of $(361,802) and $(360,670), respectively, in connection with the majority-owned subsidiaries, CFTB Movie and CFTB GA as reflected in the accompanying unaudited consolidated balance sheet and losses attributable to non-controlling interest of $1,132 and $114,970 during the three months ended December 31, 2019 and 2018, respectively, as reflected in the accompanying unaudited consolidated statements of operations.
Revenue Recognition
The Company adopted and implemented on October 1, 2018, ASU Topic 606 - Revenue from Contracts with Customers (“ASU 606”). ASU 606 did not have a material impact on its consolidated financial statements.
Upon implementation of ASU 606, the Company recognizes revenue in accordance with that core principle by applying the following steps:
Step 1: Identify the contract(s) with a customer.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligations in the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.
During the three months ended December 31, 2019 and 2018, the Company recognize revenue of $2,183 and $2,210, respectively, from streaming music sales. The Company markets their master song recordings (see Note 1) through online music streaming websites and recognizes revenues on a net basis once the songs are downloaded by the customer and the performance obligation is satisfied.
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This guidance revises the accounting related to leases by requiring lessees to recognize a lease liability and a right-of-use asset for all leases. The new lease guidance also simplifies the accounting for sale and leaseback transactions. This ASU was effective for annual reporting periods beginning after December 15, 2018 and early adoption is permitted. This guidance did not have a material impact on its consolidated financial statements.
In July 2017, the FASB issued ASU No. 2017-11, “Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Non-controlling Interests with a Scope Exception”. The ASU was issued to address the complexity associated with applying generally accepted accounting principles (GAAP) for certain financial instruments with characteristics of liabilities and equity. The ASU, among other things, eliminates the need to consider the effects of down round features when analyzing convertible debt, warrants and other financing instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. The amendments were effective for fiscal years beginning after December 15, 2018 and should be applied retrospectively. This guidance did not have a material impact on its consolidated financial statements.
In June 2018, the FASB issued ASU No. 2018-07” Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.” These amendments expand the scope of Topic 718, Compensation - Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned. The ASU supersedes Subtopic 505-50, Equity - Equity-Based Payments to Non-Employees. The guidance was effective for public companies for fiscal years, and interim fiscal periods within those fiscal years, beginning after December 15, 2018. This guidance did not have a material impact on its consolidated financial statements.
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ALL FOR ONE MEDIA CORP. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS December 31, 2019 |
In August 2018, the FASB issued ASU 2018-13,” Changes to Disclosure Requirements for Fair Value Measurements”, which will improve the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies, and adds certain disclosure requirements, and is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company will be evaluating the impact this standard will have on the Company’s financial statements.
Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.
NOTE 3 -
GOING CONCERN
The accompanying consolidated financial statements are prepared on a going concern basis which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. As reflected in the accompanying unaudited consolidated financial statements, the Company had a net loss and net cash used in operations of $1,991,504 and $105,433 respectively, for the three months ended December 31, 2019. Additionally, the Company had an accumulated deficit of $17,714,865 and working capital deficit of $11,311,990 as of December 31, 2019. These matters raise substantial doubt about the Company’s ability to continue as a going concern for twelve months from the issuance date of this report. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future such as selling the completed Movie and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. The Company’s ability to raise additional capital through the future issuances of common stock is unknown. The obtainment of additional financing, the successful development of the Company’s contemplated plan of operations, and its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations.
The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. While the Company believes in the viability of its strategy to generate revenues, there can be no assurances to that effect.
NOTE 4 -
CONVERTIBLE NOTES PAYABLE
As of December 31, 2019 and September 30, 2019, convertible notes payable - unrelated party consisted of the following:
December 31, 2019 | September 30, 2019 | |||||||
(Unaudited) | ||||||||
Principal amount | $ | 3,635,798 | $ | 3,690,030 | ||||
Less: unamortized debt discount | (914,856 | ) | (1,614,250 | ) | ||||
Convertible notes payable, net - current | $ | 2,720,942 | $ | 2,075,780 | ||||
In July 2017, the Company issued 12% Convertible Promissory Note for principal borrowings of up to $110,000. The 12% convertible promissory note and all accrued interest were due in April 2018. The note is unsecured and bears interest at the rate of 12% per annum (24% default rate) from the issuance date thereof until the note is paid. The note holder had the right to convert beginning on the date which is 180 days following the issuance date the outstanding principal amount and accrued but unpaid interest into the Company’s common stock at a conversion price equal to a price which is 50% of the volume weighted average price of the Company’s common stock during the 20 trading days immediately preceding the conversion date. During the first 30 to 180 days following the date of the notes, the Company had the right to prepay the principal and accrued but unpaid interest due under these notes, together with any other amounts that the Company may owe the holder under the terms of these notes, at a premium ranging from 115% to 135% as defined in the note agreements. After this initial 180-day period, the Company had no right to prepay the note. The Company paid original issue discount and related loan fees of $11,000 in connection with this note payable which was amortized over the term of the note. Between January 2018 and February 2018, the Company issued an aggregate of 800,000 common stock to the note holder upon the conversion of $4,603 of principal amount, accrued interest of $7,197 and fees of $1,000. Between October 2018 and November 2018, the Company issued an aggregate of 3,324,200 common stock to the note holder upon the conversion of $27,366 of principal amount, accrued interest of $16,621 and fees of $1,000. In April 2018, the Company entered into an amendment agreement with this note holder for the forbearance from converting the notes into shares of common stock of the Company until October 1, 2018 unless an event of default as defined in the note agreements occurs or the Company’s stocks trades at a price less than $0.02 per share. Between October 2019 and November 2019, the Company issued an aggregate of 5,665,900 common stock to the note holder upon the conversion of accrued interest of $5,126 and conversion fees of $1,000. As of December 31, 2019 and September 30, 2019, the principal balance of this note was $78,031, after the repayment and conversions. This note is past maturity, but it is not in default as no notice of default was received by the Company. However default interest of 24% is being accrued from the default date.
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ALL FOR ONE MEDIA CORP. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS December 31, 2019 |
In September 2017, the Company issued 12% Convertible Promissory Notes for principal borrowings of up to $110,000. The 12% convertible promissory note and all accrued interest were due in June 2018. The note is unsecured and bears interest at the rate of 12% per annum from the issuance date thereof until the notes are paid. The note holder had the right to convert beginning on the date which is the issuance date the outstanding principal amount and accrued but unpaid interest into the Company’s common stock at a conversion price equal to a price which is the lower of (1) 50% of the volume weighted average price of the Company’s common stock during the last 20 trading days prior to the date of conversion or (2) 50% of the lowest closing price during the last 20 trading days immediately preceding the conversion date. During the first 90 to 180 days following the date of this note, the Company had the right to prepay the principal and accrued but unpaid interest due under this note, together with any other amounts that the Company may owe the holder under the terms of this note, at a premium ranging from 135% to 150% as defined in the note agreement. After this initial 180-day period, the Company had no right to prepay the note. The Company paid original issue discount and related loan fees of $11,000 in connection with this note payable which was amortized over the term of the note. In April 2018, the Company entered into an amendment agreement with this note holder for the forbearance from converting the notes into shares of common stock of the Company until October 1, 2018 unless an event of default as defined in the note agreements occurs or the Company’s stocks trades at a price less than $0.02 per share. As of December 31, 2019 and September 30, 2019, the principal balance of this note was $110,000. This note is past maturity, but it is not in default.
On March 26, 2018, the Company issued 10% Convertible Promissory Notes for principal borrowings of up to $80,000. Additionally, on January 22, 2019, the Company issued another 10% Convertible Promissory Notes for principal borrowings of up to $80,000. The 10% convertible promissory notes and all accrued interest are due one year from the date of issuance. The note is secured and bear interest at the rate of 10% per annum from the issuance date thereof until the note is paid. The note holder shall have the right to convert beginning on the issuance date, the outstanding principal amount and accrued but unpaid interest into the Company’s common stock at a conversion price to a price which is 52% of the lowest trading price of the Company’s common stock during the 18 prior trading days including the day of the conversion date. This note may not be prepaid. The Company paid total original issue discount and related loan fees of $20,000 in connection with these notes payable which are being amortized over the term of the notes. On September 8, 2019, the Company paid off a total principal amount of $80,000 including accrued interest of $4,664 and prepayment penalty of $15,336. Between November 2019 and December 31, 2019, the Company issued an aggregate of 83,980,357 common stock to the note holder upon the conversion of $21,250 of principal amount, and accrued interest of $1,817. As of December 31, 2019 and September 30, 2019, the principal balance of these notes was $58,750 and $80,000, respectively, after the repayments and conversions. The January 22, 2019 note went into default on January 22, 2020 for non-payment of principal whereby a 10% penalty will be accrued to principal.
On June 1, 2018, the Company issued a 10% Convertible Promissory Note with a certain note holder for aggregate principal borrowings of up to $90,000. Additionally, on February 1, 2019 the Company issued another 10% Convertible Promissory Notes for principal borrowings of up to $90,000. The 10% convertible promissory notes and all accrued interest are due one year from the date of issuance. The note are unsecured and bears interest at the rate of 10% per annum from the issuance date thereof until the notes are paid. The note holder shall have the right to convert beginning on the date which is 180 days following the issuance date the outstanding principal amount and accrued but unpaid interest into the Company’s common stock at a conversion price equal to a price which is 54% of the lowest trading price during the 18 prior trading days immediately preceding including the day of the conversion date. The Company does not have a right to prepay the note. Any amount of principal or interest on this note which is not paid when due shall bear interest at the rate of 18% per annum from the due date thereof until the same is paid. The Company paid total original issue discount and related loan fees of $14,000 in connection with these notes payable which will be amortized over the term of the notes. On April 30, 2019 and May 31, 2019, the Company paid off a total principal amount of $62,702 including accrued interest of $6,075 and prepayment penalty of $6,223. On July 25, 2019, the Company paid off a total principal amount of $27,298 including accrued interest of $3,134 and prepayment penalty of $2,457. As of December 31, 2019 and September 30, 2019, the principal balance of this note was $90,000 for both periods. The February 1, 2019 note went into default on February 1, 2020 for non-payment of principal whereby a 10% penalty will be accrued to principal.
On October 31, 2018, the Company issued a 10% Convertible Promissory Note with a certain note holder for principal borrowings of up to $250,000. The 10% convertible promissory note and all accrued interest were due on October 31, 2019. The note is unsecured and bears interest at the rate of 10% per annum from the issuance date thereof until the note is paid. The note holder had the right to convert beginning on the date which is 180 days following the issuance date the outstanding principal amount and accrued but unpaid interest into the Company’s common stock at a conversion price equal to a price which is 55% of the lowest trading price during the 15 prior trading days immediately preceding including the day of the conversion date. During the first 60 to 180 days following the date of the note, the Company had the right to prepay the principal and accrued but unpaid interest due under the note, together with any other amounts that the Company may owe the holder under the terms of the note, at a premium ranging from 115% to 138% as defined in the note agreement. After this initial 180-day period, the Company had no right to prepay the note. The Company paid original issue discount and related loan fees of $16,000 in connection with this note payable which was amortized over the term of the note. As of December 31, 2019 and September 30, 2019, the principal balance of this note was $250,000. This note is past maturity and in default as of December 31, 2019 (see below).
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ALL FOR ONE MEDIA CORP. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS December 31, 2019 |
On November 6, 2018, the Company issued a 10% Convertible Promissory Note with a certain note holder for principal borrowings of up to $120,000. The 10% convertible promissory note and all accrued interest were due on November 6, 2019. The note is unsecured and bears interest at the rate of 10% per annum from the issuance date thereof until the note is paid. The note holder had the right to convert beginning on the date which is 180 days following the issuance date the outstanding principal amount and accrued but unpaid interest into the Company’s common stock at a conversion price equal to a price which is 60% of the lowest trading price during the 18 prior trading days immediately preceding including the day of the conversion date. During the first 60 to 180 days following the date of the note, the Company had the right to prepay the principal and accrued but unpaid interest due under the note, together with any other amounts that the Company may owe the holder under the terms of the note, at a premium ranging from 100% to 136% as defined in the note agreement. After this initial 180-day period, the Company had no right to prepay the note. The Company paid original issue discount and related loan fees of $2,000 in connection with this note payable which was amortized over the term of the note. As of December 31, 2019 and September 30, 2019, the principal balance of this note was $120,000 and past maturity and in default as of December 31, 2019 (see below).
On November 23, 2018, the Company issued a 10% Convertible Promissory Note with a certain note holder for principal borrowings of up to $140,000. The 10% convertible promissory note and all accrued interest were due on November 23, 2019. The note is unsecured and bears interest at the rate of 10% per annum from the issuance date thereof until the note is paid. The note holder had the right to convert beginning on the date which was 180 days following the issuance date the outstanding principal amount and accrued but unpaid interest into the Company’s common stock at a conversion price equal to a price which is 60% of the lowest trading price during the 18 prior trading days immediately preceding including the day of the conversion date. During the first 60 to 180 days following the date of these notes, the Company had the right to prepay the principal and accrued but unpaid interest due under the note, together with any other amounts that the Company may owe the holder under the terms of the note, at a premium ranging from 100% to 136% as defined in the note agreement. After this initial 180-day period, the Company had no right to prepay the note. The Company paid original issue discount and related loan fees of $4,000 in connection with this note payable which was amortized over the term of the note. As of December 31, 2019 and September 30, 2019, the principal balance of this note was $140,000 and past maturity and in default as of December 31, 2019 (see below).
On November 27, 2018, the Company issued a 12% Convertible Promissory Note with a certain note holder for principal borrowings of up to $250,000. The 12% convertible promissory note and all accrued interest were due on May 27, 2019. The note is unsecured and bears interest at the rate of 12% per annum from the issuance date. The note holder had the right to convert beginning on the date which was 180 days following the issuance date the outstanding principal amount and accrued but unpaid interest into the Company’s common stock at a conversion price equal to a price which is 60% of the lowest trading price during the 18 prior trading days immediately preceding including the day of the conversion date. During the first 90 to 180 days following the date of these notes, the Company had the right to prepay the principal and accrued but unpaid interest due under these notes, together with any other amounts that the Company may owe the holder under the terms of these notes, at a premium ranging from 125% to 140% as defined in the note agreement. After this initial 180-day period, the Company had no right to prepay the note. The Company paid original issue discount and related loan fees of $20,750 in connection with this note payable which was amortized over the term of the note. Between November 2019 and December 2019, the Company issued an aggregate of 187,363,355 common stock to the note holder upon the conversion of $19,413 of principal amount, accrued interest of $1,511 and fees of $5,500. As of December 31, 2019 and September 30, 2019, the principal balance of this note was $230,587 and $250,000, respectively, after the conversions. This note is past maturity and in default as of December 31, 2019 (see below).
On December 13, 2018, the Company issued a 10% Convertible Promissory Note with a certain note holder for principal borrowings of up to $150,000. The 10% convertible promissory note and all accrued interest were due on December 13, 2019. The note is unsecured and bears interest at the rate of 10% per annum from the issuance date thereof until the note is paid. The note holder had the right to convert beginning on the date which is 180 days following the issuance date the outstanding principal amount and accrued but unpaid interest into the Company’s common stock at a conversion price equal to a price which is 60% of the lowest trading price during the 18 prior trading days immediately preceding including the day of the conversion date. During the first 60 to 180 days following the date of the note, the Company had the right to prepay the principal and accrued but unpaid interest due under the note, together with any other amounts that the Company may owe the holder under the terms of the note, at a premium ranging from 110% to 134% as defined in the note agreement. After this initial 180-day period, the Company had no right to prepay the note. The Company paid original issue discount and related loan fees of $6,000 in connection with this note payable which was amortized over the term of the note. As of December 31, 2019 and September 30, 2019, the principal balance of this note was $150,000 and past maturity and in default as of December 31, 2019 (see below).
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ALL FOR ONE MEDIA CORP. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS December 31, 2019 |
On December 28, 2018, the Company issued a 10% Convertible Promissory Note with a certain note holder for principal borrowings of up to $240,000. The 10% convertible promissory note and all accrued interest were due on December 28, 2019. The note is unsecured and bears interest at the rate of 10% per annum from the issuance date thereof until the note is paid. The note holder had the right to convert beginning on the date which is 180 days following the issuance date the outstanding principal amount and accrued but unpaid interest into the Company’s common stock at a conversion price equal to a price which is 60% of the lowest trading price during the 18 prior trading days immediately preceding including the day of the conversion date. During the first 60 to 180 days following the date of the note, the Company had the right to prepay the principal and accrued but unpaid interest due under the note, together with any other amounts that the Company may owe the holder under the terms of the note, at a premium ranging from 110% to 134% as defined in the note agreement. After this initial 180-day period, the Company had no right to prepay the note. The Company paid original issue discount and related loan fees of $11,000 in connection with this note payable which was amortized over the term of the note. As of December 31, 2019 and September 30, 2019, the principal balance of this note was $240,000 and past maturity and in default as of December 31, 2019 (see below).
The above notes that became due during the three months ended December 31, 2019 incurred default penalties of $90,000 in total.
On January 9, 2019, the Company issued a 10% Convertible Promissory Note with a certain note holder for principal borrowings of up to $163,000. The 10% convertible promissory note and all accrued interest are due on January 9, 2020. The note is unsecured and bears interest at the rate of 10% per annum from the issuance date thereof until the note is paid. The note holder shall have the right to convert beginning on the date which is 180 days following the issuance date the outstanding principal amount and accrued but unpaid interest into the Company’s common stock at a conversion price equal to a price which is 60% of the lowest trading price during the 18 prior trading days immediately preceding including the day of the conversion date. During the first 60 to 180 days following the date of the note, the Company has the right to prepay the principal and accrued but unpaid interest due under the note, together with any other amounts that the Company may owe the holder under the terms of the note, at a premium ranging from 110% to 134% as defined in the note agreement. After this initial 180-day period, the Company does not have a right to prepay the note. The Company paid original issue discount and related loan fees of $8,000 in connection with this note payable which will be amortized over the term of the note. As of December 31, 2019 and September 30, 2019, the principal balance of this note was $163,000. This note became in default in fiscal 2020 on the maturity date and a 10% default penalty was incurred.
On February 8, 2019, the Company issued a 10% Convertible Promissory Note with a certain note holder for principal borrowings of up to $110,000. The 10% convertible promissory note and all accrued interest are due on February 8, 2020. The note is unsecured and bears interest at the rate of 10% per annum from the issuance date thereof until the note is paid. The note holder shall have the right to convert beginning on the date which is 180 days following the issuance date the outstanding principal amount and accrued but unpaid interest into the Company’s common stock at a conversion price equal to a price which is 60% of the lowest trading price during the 18 prior trading days immediately preceding including the day of the conversion date. During the first 60 to 180 days following the date of the note, the Company has the right to prepay the principal and accrued but unpaid interest due under the note, together with any other amounts that the Company may owe the holder under the terms of the note, at a premium ranging from 110% to 134% as defined in the note agreement. After this initial 180-day period, the Company does not have a right to prepay the note. The Company paid original issue discount and related loan fees of $4,000 in connection with this note payable which will be amortized over the term of the note. As of December 31, 2019 and September 30, 2019, the principal balance of this note was $110,000. This note became in default in fiscal 2020 on the maturity date and a 10% default penalty was incurred.
On March 15, 2019, the Company issued a 10% Convertible Promissory Note with a certain note holder for principal borrowings of up to $350,000. The 10% convertible promissory note and all accrued interest are due on March 15, 2020. The note is unsecured and bears interest at the rate of 10% per annum from the issuance date thereof until the note is paid. The note holder shall have the right to convert beginning on the date which is 180 days following the issuance date the outstanding principal amount and accrued but unpaid interest into the Company’s common stock at a conversion price equal to a price which is 60% of the lowest trading price during the 18 prior trading days immediately preceding including the day of the conversion date. During the first 90 to 180 days following the date of the note, the Company has the right to prepay the principal and accrued but unpaid interest due under the note, together with any other amounts that the Company may owe the holder under the terms of the note, at a premium ranging from 110% to 128% as defined in the note agreement. After this initial 180-day period, the Company does not have a right to prepay the note. The Company paid original issue discount and related loan fees of $15,000 in connection with this note payable which will be amortized over the term of the note. As of December 31, 2019 and September 30, 2019, the principal balance of this note was $350,000.
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ALL FOR ONE MEDIA CORP. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS December 31, 2019 |
On April 8, 2019, the Company issued a 10% Convertible Promissory Note with a certain note holder for principal borrowings of up to $54,000 and received proceeds of $50,000, net of discount. The 10% convertible promissory note and all accrued interest are due on April 8, 2020. The note is unsecured and bears interest at the rate of 10% per annum from the issuance date thereof until the note is paid. The note holder shall have the right to convert beginning on the date which is 180 days following the issuance date the outstanding principal amount and accrued but unpaid interest into the Company’s common stock at a conversion price equal to a price which is 60% of the lowest trading price during the 18 prior trading days immediately preceding including the day of the conversion date. During the first 90 to 180 days following the date of the note, the Company has the right to prepay the principal and accrued but unpaid interest due under the note, together with any other amounts that the Company may owe the holder under the terms of the note, at a premium ranging from 110% to 128% as defined in the note agreement. After this initial 180-day period, the Company does not have a right to prepay the note. The Company paid an original issuance discount of $4,000 in connection with this note payable which will be amortized over the term of the note. As of December 31, 2019 and September 30, 2019, the principal balance of this note was $54,000.
On April 11, 2019, the Company issued a 12% Convertible Promissory Note with a certain note holder for principal borrowings of up to $78,000 and received proceeds of $75,000, net of discount. The 12% convertible promissory note and all accrued interest is due on February 28, 2020. The note are unsecured and bears interest at the rate of 12% per annum from the issuance date thereof until the note is paid. The note holder shall have the right to convert beginning on the date which is 180 days following the issuance date the outstanding principal amount and accrued but unpaid interest into the Company’s common stock at a conversion price equal to a price which is 58% of the average of the lowest 2 trading prices of the Company’s common stock during the 10 trading days immediately preceding the conversion date. During the first 30 to 180 days following the date of the note, the Company has the right to prepay the principal and accrued but unpaid interest due under the note, together with any other amounts that the Company may owe the holder under the terms of the note, at a premium ranging from 115% to 140% as defined in the note agreement. After this initial 180-day period, the Company does not have a right to prepay the note. The Company paid an original issue discount and related loan fees of $3,000 in connection with this note payable which is being amortized over the term of the note. Between October 2019 and December 2019, the Company issued an aggregate of 107,599,614 common stock to the note holder upon the conversion of $78,000 of principal amount and accrued interest of $4,680. As of December 31, 2019 and September 30, 2019, the principal balance of this note was $0 and $78,000, respectively, after the conversions.
On May 9, 2019, the Company issued a 12% Convertible Promissory Note with a certain note holder for principal borrowings of up to $100,000 and received proceeds of $93,000, net of discount. The 12% convertible promissory note and all accrued interest is due on May 9, 2020. The note are unsecured and bears interest at the rate of 12% per annum from the issuance date thereof until the note is paid. The note holder shall have the right to convert on the issuance date the outstanding principal amount and accrued but unpaid interest into the Company’s common stock at a conversion price equal to a price which is 55% to the lowest trading price during the previous 20 trading days of the conversion date subject to adjustment for stock splits, stock dividends, right offering, combinations, recapitalization, reclassification, extraordinary distributions and similar events. During the first 60 to 120 days following the date of the note, the Company has the right to prepay the principal and accrued but unpaid interest due under the note, together with any other amounts that the Company may owe the holder under the terms of the note, at a premium ranging from 130% to 145% as defined in the note agreement. After this initial 120-day period, the Company does not have a right to prepay the note. The Company paid original issue discount and related loan fees of $7,000 in connection with this note payable which is being amortized over the term of the note. Between November 2019 and December 2019, the Company issued an aggregate of 86,468,510 common stock to the note holder upon the conversion of $25,370 of principal amount. As of December 31, 2019 and September 30, 2019, the principal balance of this note was $74,630 and $100,000, respectively, after the conversions.
On May 20, 2019, the Company issued a 12% Convertible Promissory Note with a certain note holder for principal borrowings of up to $73,000 and received proceeds of $70,000, net of discount. The 12% convertible promissory note and all accrued interest is due on March 15, 2020. The note are unsecured and bears interest at the rate of 12% per annum from the issuance date thereof until the note is paid. The note holder shall have the right to convert beginning on the date which is 180 days following the issuance date the outstanding principal amount and accrued but unpaid interest into the Company’s common stock at a conversion price equal to a price which is 58% of the average of the lowest 2 trading prices of the Company’s common stock during the 10 trading days immediately preceding the conversion date. During the first 30 to 180 days following the date of this note, the Company has the right to prepay the principal and accrued but unpaid interest due under the note, together with any other amounts that the Company may owe the holder under the terms of the note, at a premium ranging from 115% to 140% as defined in the note agreement. After this initial 180-day period, the Company does not have a right to prepay the note. The Company paid original issue discount and related loan fees of $3,000 in connection with this note payable which is being amortized over the term of the note. In December 2019, the Company issued an aggregate of 79,522,399 common stock to the note holder upon the conversion of $20,300 of principal amount. As of December 31, 2019 and September 30, 2019, the principal balance of this note was $52,700 and $73,000, respectively, after the conversions.
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ALL FOR ONE MEDIA CORP. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS December 31, 2019 |
On May 22, 2019, the Company issued a 10% Convertible Promissory Note with a certain note holder for principal borrowings of up to $108,000 and received proceeds of $100,000, net of discount. The 10% convertible promissory note and all accrued interest are due on May 22, 2020. The note is unsecured and bears interest at the rate of 10% per annum from the issuance date thereof until the note is paid. The note holder shall have the right to convert beginning on the date which is 180 days following the issuance date the outstanding principal amount and accrued but unpaid interest into the Company’s common stock at a conversion price equal to a price which is 60% of the lowest trading price during the 18 prior trading days immediately preceding including the day of the conversion date. During the first 90 to 180 days following the date of this note, the Company has the right to prepay the principal and accrued but unpaid interest due under the note, together with any other amounts that the Company may owe the holder under the terms of the note, at a premium ranging from 110% to 128% as defined in the note agreement. After this initial 180-day period, the Company does not have a right to prepay the note. The Company paid original issuance discount of $8,000 in connection with this note payable which will be amortized over the term of the note. As of December 31, 2019 and September 30, 2019, the principal balance of this note was $108,000.
On May 24, 2019, the Company issued a 12% Convertible Promissory Note with a certain note holder for principal borrowings of up to $100,000 and received proceed of $94,000. The 12% convertible promissory note and all accrued interest are due on February 20, 2020. The note is unsecured and bears interest at the rate of 12% per annum from the issuance date thereof until the note is paid. The note holder shall have the right to convert beginning on the date which is 180 days following the issuance date the outstanding principal amount and accrued but unpaid interest into the Company’s common stock at a conversion price equal to a price which is 61% of the average of the lowest 2 trading prices during the 10 prior trading days immediately preceding including the day of the conversion date. During the first 30 to 180 days following the date of the note, the Company has the right to prepay the principal and accrued but unpaid interest due under the note, together with any other amounts that the Company may owe the holder under the terms of the note, at a premium ranging from 110% to 140% as defined in the note agreement. After this initial 180-day period, the Company does not have a right to prepay the note. The Company paid original issue discount and related loan fees of $6,000 in connection with this note payable which will be amortized over the term of the note. As of December 31, 2019 and September 30, 2019, the principal balance of this note was $100,000.
On June 11, 2019, the Company issued a 10% Convertible Promissory Note with a certain note holder for principal borrowings of up to $125,000 and received proceeds of $118,750, net of discount. The 10% convertible promissory note and all accrued interest are due on June 11, 2020. The note is unsecured and bears interest at the rate of 10% per annum from the issuance date thereof until the note is paid. The note holder shall have the right to convert on the issuance date the outstanding principal amount and accrued but unpaid interest into the Company’s common stock at a conversion price equal to a price which is 55% of the lowest trading price during the 20 prior trading days immediately preceding including the day of the conversion date. During the first 60 to 180 days following the date of the note, the Company has the right to prepay the principal and accrued but unpaid interest due under the note, together with any other amounts that the Company may owe the holder under the terms of the note, at a premium ranging from 130% to 145% as defined in the note agreement. After this initial 180-day period, the Company does not have a right to prepay the note. The Company paid original issuance discount of $6,250 in connection with this note payable which will be amortized over the term of the note. In December 2019, the Company issued an aggregate of 18,461,758 common stock to the note holder upon the conversion of $2,900 of principal amount and accrued interest of $146. As of December 31, 2019 and September 30, 2019, the principal balance of this note was $122,100 and $125,000, respectively, after the conversions.
On June 17, 2019, the Company issued a 12% Convertible Promissory Note with a certain note holder for principal borrowings of up to $78,000 and received proceeds of $75,000, net of discount. The 12% convertible promissory note and all accrued interest is due on April 15, 2020. The note are unsecured and bears interest at the rate of 12% per annum from the issuance date thereof until the note is paid. The note holder shall have the right to convert beginning on the date which is 180 days following the issuance date the outstanding principal amount and accrued but unpaid interest into the Company’s common stock at a conversion price equal to a price which is 58% of the average of the lowest 2 trading prices of the Company’s common stock during the 10 trading days immediately preceding the conversion date. During the first 30 to 180 days following the date of the note, the Company has the right to prepay the principal and accrued but unpaid interest due under the note, together with any other amounts that the Company may owe the holder under the terms of the note, at a premium ranging from 115% to 140% as defined in the note agreement. After this initial 180-day period, the Company does not have a right to prepay the note. The Company paid original issue discount and related loan fees of $3,000 in connection with this note payable which is being amortized over the term of the note. As of December 31, 2019 and September 30, 2019, the principal balance of this note was $78,000.
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ALL FOR ONE MEDIA CORP. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS December 31, 2019 |
On July 12, 2019, the Company issued a 10% Convertible Promissory Note with a certain note holder for principal borrowings of up to $125,000 and received proceeds of $118,750, net of discount. The 10% convertible promissory note and all accrued interest are due on June 12, 2020. The note is unsecured and bears interest at the rate of 10% per annum from the issuance date thereof until the note is paid. The note holder shall have the right to convert on the issuance date the outstanding principal amount and accrued but unpaid interest into the Company’s common stock at a conversion price equal to a price which is 55% of the lowest trading price during the 20 prior trading days immediately preceding including the day of the conversion date. During the first 60 to 180 days following the date of the note, the Company has the right to prepay the principal and accrued but unpaid interest due under the note, together with any other amounts that the Company may owe the holder under the terms of the note, at a premium ranging from 130% to 145% as defined in the note agreement. After this initial 180-day period, the Company does not have a right to prepay the note. The Company paid original issuance discount of $6,250 in connection with this note payable which will be amortized over the term of the note. As of September 30, 2019, the principal balance of this note was $125,000.
On July 24, 2019, the Company issued a 10% Convertible Promissory Note with a certain note holder for principal borrowings of up to $145,000 and received proceeds of $135,000, net of discount. The 10% convertible promissory note and all accrued interest are due on July 24, 2020. The note is unsecured and bears interest at the rate of 10% per annum from the issuance date thereof until the note is paid. The note holder shall have the right to convert beginning on the date which is 180 days following the issuance date the outstanding principal amount and accrued but unpaid interest into the Company’s common stock at a conversion price equal to a price which is 60% of the lowest trading price during the 18 prior trading days immediately preceding including the day of the conversion date. During the first 90 to 180 days following the date of these notes, the Company has the right to prepay the principal and accrued but unpaid interest due under the note, together with any other amounts that the Company may owe the holder under the terms of the note, at a premium ranging from 110% to 128% as defined in the note agreement. After this initial 180-day period, the Company does not have a right to prepay the note. The Company paid original issuance discount of $10,000 in connection with this note payable which will be amortized over the term of the note. As of December 31, 2019 and September 30, 2019, the principal balance of this note was $145,000.
On August 12, 2019, the Company issued a 10% Convertible Promissory Note with a certain note holder for principal borrowings of up to $50,000 and received proceeds of $47,500, net of discount. The 10% convertible promissory note and all accrued interest are due on August 12, 2020. The note is unsecured and bears interest at the rate of 10% per annum from the issuance date thereof until the note is paid. The note holder shall have the right to convert the outstanding principal amount and accrued but unpaid interest into the Company’s common stock at a conversion price equal to a price which is 55% of the lowest trading price during the 20 prior trading days immediately preceding including the day of the conversion date. During the first 60 to 180 days following the date of these notes, the Company has the right to prepay the principal and accrued but unpaid interest due under the note, together with any other amounts that the Company may owe the holder under the terms of the note, at a premium ranging from 130% to 150% as defined in the note agreement. After this initial 180-day period, the Company does not have a right to prepay the note. The Company paid original issuance discount of $2,500 in connection with this note payable which will be amortized over the term of the note. As of December 31, 2019 and September 30, 2019, the principal balance of this note was $50,000.
On August 27, 2019, the Company issued a 10% Convertible Promissory Note with a certain note holder for principal borrowings of up to $80,000 and received initial proceeds of $34,500 (“First Tranche”), net of discount. The 10% convertible promissory note and all accrued interest are due 12 months from the date for each tranche funded. The note is unsecured and bears interest at the rate of 10% per annum from the issuance date thereof until the note is paid. The note holder shall have the right to convert the outstanding principal amount and accrued but unpaid interest into the Company’s common stock at a conversion price equal to a price which is 55% of the lowest trading price during the 25 prior trading days immediately preceding the conversion date. During the first 90 to 180 days following the date of these notes, the Company has the right to prepay the principal and accrued but unpaid interest due under the note, together with any other amounts that the Company may owe the holder under the terms of the note, at a premium ranging from 135% to 150% as defined in the note agreement. After this initial 180-day period, the Company does not have a right to prepay the note. The Company paid original issuance discount of $5,500 in connection with this note payable which will be amortized over the term of the note. As of December 31, 2019 and September 30, 2019, the principal balance of this note was $40,000.
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ALL FOR ONE MEDIA CORP. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS December 31, 2019 |
On September 4, 2019, the Company issued a 10% Convertible Promissory Note with a certain note holder for principal borrowings of up to $165,000 and received proceeds of $150,000, net of discount. The 10% convertible promissory note and all accrued interest are due on September 4, 2020. The note is unsecured and bears interest at the rate of 10% per annum from the issuance date thereof until the note is paid. The note holder shall have the right to convert beginning on the date which is 180 days following the issuance date the outstanding principal amount and accrued but unpaid interest into the Company’s common stock at a conversion price equal to a price which is 60% of the lowest trading price during the 18 prior trading days immediately preceding including the day of the conversion date. During the first 90 to 180 days following the date of this note, the Company has the right to prepay the principal and accrued but unpaid interest due under the note, together with any other amounts that the Company may owe the holder under the terms of the note, at a premium ranging from 110% to 128% as defined in the note agreement. After this initial 180-day period, the Company does not have a right to prepay the note. The Company paid original issuance discount of $15,000 in connection with this note payable which will be amortized over the term of the note. As of December 31, 2019 and September 30, 2019, the principal balance of this note was $165,000.
On September 4, 2019, the Company issued a 12% Convertible Promissory Note with a certain note holder for principal borrowings of up to $63,000 and received proceeds of $60,000, net of discount. The 12% convertible promissory note and all accrued interest is due on June 30, 2020. The note are unsecured and bears interest at the rate of 12% per annum from the issuance date thereof until the note is paid. The note holder shall have the right to convert beginning on the date which is 180 days following the issuance date the outstanding principal amount and accrued but unpaid interest into the Company’s common stock at a conversion price equal to a price which is 58% of the average of the lowest 2 trading prices of the Company’s common stock during the 10 trading days immediately preceding the conversion date. During the first 30 to 180 days following the date of the note, the Company has the right to prepay the principal and accrued but unpaid interest due under the note, together with any other amounts that the Company may owe the holder under the terms of the note, at a premium ranging from 115% to 140% as defined in the note agreement. After this initial 180-day period, the Company does not have a right to prepay the note. The Company paid original issue discount and related loan fees of $3,000 in connection with this note payable which is being amortized over the term of the note. As of December 31, 2019 and September 30, 2019, the principal balance of this note was $63,000.
On September 5, 2019, the Company issued a 10% Convertible Promissory Note with a certain note holder for principal borrowings of up to $220,000 and received proceeds of $209,000, net of discount. The 10% convertible promissory note and all accrued interest are due on September 5, 2020. The note is unsecured and bears interest at the rate of 10% per annum from the issuance date thereof until the note is paid. The note holder shall have the right to convert on the issuance date the outstanding principal amount and accrued but unpaid interest into the Company’s common stock at a conversion price equal to a price which is 55% of the lowest trading price during the 20 prior trading days immediately preceding including the day of the conversion date. During the first 60 to 180 days following the date of the note, the Company has the right to prepay the principal and accrued but unpaid interest due under the note, together with any other amounts that the Company may owe the holder under the terms of the note, at a premium ranging from 130% to 145% as defined in the note agreement. After this initial 180-day period, the Company does not have a right to prepay the note. The Company paid original issuance discount of $11,000 in connection with this note payable which will be amortized over the term of the note. As of December 31, 2019 and September 30, 2019, the principal balance of this note was $220,000.
On September 23, 2019, the Company issued a 10% Convertible Promissory Note with a certain note holder for principal borrowings of up to $35,000 and received proceeds of $33,000, net of discount. The 10% convertible promissory note and all accrued interest are due on September 23, 2020. The note is unsecured and bears interest at the rate of 10% per annum from the issuance date thereof until the note is paid. The note holder shall have the right to convert the outstanding principal amount and accrued but unpaid interest into the Company’s common stock at a conversion price equal to a price which is 55% of the lowest trading price during the 20 prior trading days immediately preceding including the day of the conversion date. During the first 60 to 180 days following the date of the note, the Company has the right to prepay the principal and accrued but unpaid interest due under the note, together with any other amounts that the Company may owe the holder under the terms of the note, at a premium ranging from 125% to 145% as defined in the note agreement. After this initial 180-day period, the Company does not have a right to prepay the note. The Company paid original issuance discount of $2,000 in connection with this note payable which will be amortized over the term of the note. As of December 31, 2019 and September 30, 2019, the principal balance of this note was $35,000.
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ALL FOR ONE MEDIA CORP. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS December 31, 2019 |
On October 9, 2019, the Company issued 12% Convertible Promissory Notes for principal borrowings of up to $36,000 and received proceeds of $30,250, net of discount. The 12% convertible promissory note and all accrued interest are due in July 9, 2020. The note is unsecured and bears interest at the rate of 12% per annum from the issuance date thereof until the notes are paid. The note holder has the right to convert beginning on the date which is the issuance date the outstanding principal amount and accrued but unpaid interest into the Company’s common stock at a conversion price equal to a price which is the lesser of (1) lowest 25 trading days prior to the date of this note or (2) 50% of the lowest closing price during the last 25 trading days immediately preceding the conversion date. If the conversion price is less than $0.10 at any time after the issue date, the principal amount of the note shall increase by $15,000 and the conversion price shall decrease to 30% instead of 50%. During the first 90 to 180 days following the date of this note, the Company had the right to prepay the principal and accrued but unpaid interest due under this note, together with any other amounts that the Company may owe the holder under the terms of this note, at a premium ranging from 135% to 150% as defined in the note agreement. After this initial 180-day period, the Company had no right to prepay the note. The Company paid original issue discount and related loan fees of $5,750 in connection with this note payable which was amortized over the term of the note. As of December 31, 2019, the principal balance of this note was $36,000.
Additionally, on October 9, 2019, the Company granted a 5-year 1,200,000 warrants to purchase the Company’s common stock in connection with the issuance of a convertible note (see above). The warrants had a term of 5 year from the date of grant and was exercisable at an exercise price of $0.015. The exercise price and the number of warrants were subject to adjustment upon distribution of assets and anti-dilution protection provision as defined in the stock warrant agreement. The Company accounted for the warrants by using the relative fair value method and recorded debt discount from the relative fair value of the warrants of $10,616 using the Black-Scholes option pricing (see Note 7) and is being amortized over the term of the note.
On October 8, 2019, the Company issued a 12% Convertible Promissory Note with a certain note holder for principal borrowings of up to $39,000 and received proceeds of $35,000, net of discount. The 12% convertible promissory note and all accrued interest is due on October 8, 2020. The note are unsecured and bears interest at the rate of 12% per annum from the issuance date thereof until the note is paid. The note holder shall have the right to convert on the issuance date the outstanding principal amount and accrued but unpaid interest into the Company’s common stock at a conversion price equal to a price which is 50% to the lowest trading price during the previous 20 trading days of the conversion date subject to adjustment for stock splits, stock dividends, right offering, combinations, recapitalization, reclassification, extraordinary distributions and similar events. During the first 60 to 120 days following the date of the note, the Company has the right to prepay the principal and accrued but unpaid interest due under the note, together with any other amounts that the Company may owe the holder under the terms of the note, at a premium ranging from 130% to 145% as defined in the note agreement. After the prepayment date up to the maturity date, this note shall have a cash redemption of 150% of the outstanding principal and accrued interest. The Company paid original issue discount and related loan fees of $4,000 in connection with this note payable which is being amortized over the term of the note. As of December 31, 2019, the principal balance of this note was $39,000.
On November 29, 2019, the Company issued a 12% Convertible Promissory Note with a certain note holder for principal borrowings of up to $38,000 and received proceeds of $35,000, net of discount. The 12% convertible promissory note and all accrued interest is due on September 15, 2020. The note are unsecured and bears interest at the rate of 12% per annum from the issuance date thereof until the note is paid. The note holder shall have the right to convert beginning on the date which is 180 days following the issuance date the outstanding principal amount and accrued but unpaid interest into the Company’s common stock at a conversion price equal to a price which is 58% of the average of the lowest 2 trading prices of the Company’s common stock during the 10 trading days immediately preceding the conversion date. During the first 30 to 180 days following the date of the note, the Company has the right to prepay the principal and accrued but unpaid interest due under the note, together with any other amounts that the Company may owe the holder under the terms of the note, at a premium ranging from 115% to 140% as defined in the note agreement. After this initial 180-day period, the Company does not have a right to prepay the note. The Company paid original issue discount and related loan fees of $3,000 in connection with this note payable which is being amortized over the term of the note. As of December 31, 2019, the principal balance of this note was $38,000.
Accrued interest related to all unrelated party convertible note amounted to $384,697 and $267,516 as of December 31, 2019 and September 30, 2019 respectively, which was included in accrued interest on the accompanying unaudited consolidated balance sheets. The Company recorded interest expense of $130,462 and $56,426 during the three months ended December 31, 2019 and 2018, respectively. The Company paid additional interest expense arising from prepayment and default interest penalties of $0 and $157,996 for the three months ended December 31, 2019 and 2018, respectively.
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ALL FOR ONE MEDIA CORP. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS December 31, 2019 |
The Company evaluated whether or not these convertible promissory notes contain embedded conversion features, which meet the definition of derivatives under ASC 815 and related interpretations. The Company determined that the terms of all the convertible notes and warrants granted discussed above include provisions which cause the embedded conversion options to be accounted for as derivative liabilities. In accordance with ASC 815, the Company has bifurcated the conversion feature of the convertible notes and stock warrants granted and recorded derivative liabilities on their issuance date and adjusted to fair value through earnings at each reporting date. The Company uses the Binomial Lattice Model for the conversion feature of the convertible notes and Black-Scholes option pricing model for the stock warrants granted to value the derivative liabilities.
Amortization of debt discount on convertible notes and derivative liabilities
During fiscal year 2019 and for the three months ended December 31, 2019, at the date of issuance, the notes were discounted in the total amount of $3,966,000 and $113,000. During fiscal year 2019 and the three months ended December 31, 2019, the total $3,740,750 and $100,250, debt discount from the valuation of the derivatives, respectively, and the total of $225,250 and $12,750 debt discounts from original issue discount and related loan fees, respectively, are being amortized over the terms of these notes. During the three months ended December 31, 2019 and 2018, initial derivative expense was $97,423 and $2,477,407, respectively. At the end of each reporting period, the Company revalues the embedded conversion option derivative liabilities. In connection with the revaluation, the Company recorded a loss resulting from the change in fair value of these convertible instruments was $413,419 and $1,235,577, for the three months ended December 31, 2019 and 2018, respectively. Upon conversions during the three months ended December 31, 2019, the respective derivative liability was marked to fair value at the conversion, and then a related fair value amount of $293,653 relating to the portion of debt converted was reclassified to other income as part of gain on debt extinguishment. Additionally, the Company recorded loss on debt extinguishment of $313,200 during the three months ended December 31, 2019 in connection with the conversion of notes. The Company has recorded derivative liabilities of $6,777,365 and $6,166,273 as of December 31, 2019 and September 30, 2019, respectively.
During the three months ended December 31, 2019, the fair value of the derivative liabilities was estimated using the Simple Binomial Lattice Model with the following assumptions:
Dividend rate | 0 | |||
Term (in years) | 0.75 to 5 years | |||
Volatility | 180%to224 | % | ||
Risk-free interest rate | 1.40%to1.69 | % | ||
During the three months ended December 31, 2018, the fair value of the derivative liabilities was estimated using the Simple Binomial Lattice Model with the following assumptions:
Dividend rate | 0 | |||
Term (in years) | 0.01 to 1.00 years | |||
Volatility | 191% to 194 | % | ||
Risk-free interest rate | 2.34% to 2.72 | % | ||
The following is a roll forward for the three months ended December 31, 2019 of the fair value liability of price adjustable derivative instruments:
Fair Value of Liability for Derivative Instruments | ||||
Balance at September 30, 2019 | $ | 6,166,273 | ||
Reductions due to conversions | (293,653 | ) | ||
Reductions due to repayment of debt | -- | |||
Initial fair value of embedded conversion option derivative liability recorded as debt discount | 100,250 | |||
Initial fair value of embedded conversion option derivative liability recorded as expense | 97,423 | |||
Change in fair value included in statements of operations | 707,072 | |||
Balance at December 31, 2019 | $ | 6,777,365 | ||
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ALL FOR ONE MEDIA CORP. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS December 31, 2019 |
NOTE 5 -
NOTES AND LOANS PAYABLE
Notes payable
Notes payable consisted of the following:
December 31, 2019 | September 30, 2019 | |||||||
(Unaudited) | ||||||||
Notes principal amount - related party | $ | 200,000 | $ | 200,000 | ||||
Notes principal amount - unrelated party | 530,000 | 530,000 | ||||||
Loans payable, net | $ | 730,000 | $ | 730,000 | ||||
On April 1, 2018, the Company issued a due on demand 5% promissory note to an affiliated company for $200,000. The Company may prepay the note without a prepayment penalty. The former COO of the Company is a trustee of the affiliated company. As of December 31, 2019 and September 30, 2019, the principal balance of this note was $200,000 and is reflected as note payable - related party in the accompanying unaudited consolidated balance sheet.
On September 27, 2019, the Company, through its wholly owned subsidiary, CVPI, issued a 10% promissory note for $100,000. The 10% promissory note and all accrued interest are due on June 27, 2020. As of December 31, 2019 and September 30, 2019, the principal balance of this note is $100,000. This note may be prepaid without penalty.
On September 16, 2019, the Company entered into a Settlement Agreement and Release with a certain lender of 12% loans payable (see below), whereby the Company agreed to settle the outstanding debt due to lender by issuing a 24-month interest free promissory note with principal balance of $180,000 to the lender and such note is due on September 16, 2021. The note shall incur a default interest rate of 16%. Additionally, the Company paid $250,000 to the lender which was funded by a former director of the Company for $125,000 and a certain note holder for $125,000 (the “Funding”) in exchange for the release of the total principal amount of $509,715 (see Loans payable below) plus the related accrued interest of $258,250 which resulted in a gain from extinguishment of debt of $337,965. In connection with the Funding, the Company, through its majority owned subsidiaries, CFTB Movie and CFTB GA, issued two separate 6% promissory notes for a total principal amount of $250,000 which are both due on July 16, 2021. The 6% notes shall be paid in equal monthly installments of $6,014 including accrued interest with the first installment due on December 1, 2019. The payment of the 6% promissory notes are guaranteed by the Company. In the event, the Company sells the Movie (see Note 1), the 6% notes including the accrued interest shall become immediately due and payable from the proceeds of such sale. If the 6% promissory notes including unpaid interest are not paid in full on maturity date, the Company and Brian Lukow, CEO of the Company, shall transfer and assign any of its rights, title and interest in the Movie equally to each note holder of the 6% promissory notes related to the Funding. As of December 31, 2019 and September 30, 2019, the total principal balance of these notes was $430,000. Currently, the Company has not paid the first, second and third installment payments but has not received notice of default from the lenders.
Accrued interest related to these notes payable amounted to $3,781 and $616 as of September 30, 2019 and 2018, respectively. The Company recorded interest expense of $3,781 and $3,327 during the three months ended December 31, 2019 and 2018, respectively.
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ALL FOR ONE MEDIA CORP. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS December 31, 2019 |
Loans payable
Loans payable consisted of the following:
December 31, 2019 | September 30, 2019 | |||||||
Loans principal amount | $ | 475,000 | $ | 475,000 | ||||
Loans payable | $ | 475,000 | $ | 475,000 | ||||
In June 2017, through the Company’s majority owned subsidiary, CFTB GA, the Company received initial proceeds for a total of $300,000 from an unrelated party (see below). Additionally, in July 2017, the Company entered into a loan agreement whereby the lender shall provide an additional loan up to $500,000 for the purpose of completing the production of the Movie. Such loans bear no interest and is considered due on demand as there was no set maturity. Between July 2017 and August 2017, through the Company’s majority owned subsidiary, CFTB GA, the Company received proceeds from this July 2017 loan agreement for a total of $450,000. The Company provided this lender a senior secured position with all the tax credits that will be due from the state of Georgia and city of Savannah and all excess deposits posted related to the filming of the Movie. In return for providing the additional loan of up to $500,000, the Company agreed to 1) issue a note payable of $25,000 to the lender and 2) the lender shall be entitled to a 50% net profit from the Movie. In the event, the $475,000 gets repaid, the lender’s percentage ownership will decrease to 37%. However, the percentage of ownership shall remain at 50% if such additional loan was not paid within 90 days. During fiscal year 2017, the Company recorded capitalized interest of $25,000 in production film cost and a corresponding increase in debt of $25,000 in connection with the issuance of this loan bringing the loan balance to $475,000. The Company accounted for the above agreement in accordance with ASC 470-10-25, which requires that cash received from an investor in exchange for the future payment of a specified percentage or amount of future revenue shall be classified as debt. The Company does not purport the arrangements to be a sale and the Company has significant continuing involvement in the generation of cash flows due to the loan holder or investor. As of December 31, 2019 and September 30, 2019, loan payable net of unamortized debt discount amounted $475,000.
NOTE 6 -
RELATED PARTY TRANSACTIONS
Parties are considered to be related to the Company if the parties directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal stockholders of the Company, its management, members of the immediate families of principal stockholders of the Company and its management and other parties with which the Company may deal where one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all related party transactions. All transactions shall be recorded at fair value of the goods or services exchanged. Property purchased from a related party is recorded at the cost to the related party and any payment to or on behalf of the related party in excess of the cost is reflected as compensation or distribution to related parties depending on the transaction.
In December 2015, the Company through its wholly owned subsidiaries, Tween Entertainment, executed a month to month operating lease agreement with the CEO of the Company. The lease premise is located in Mt. Kisco, New York and the initial term was for a period of 12 months commencing in December 2015 and expiring in December 2016. The lease is currently on a month to month lease. The lease requires the Company to pay a monthly base rent of $1,000. The Company has recorded rent expense of $3,000 for both periods for the three months ended December 31, 2019 and 2018.
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ALL FOR ONE MEDIA CORP. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS December 31, 2019 |
During April 2016, the CEO and a former director of the Company loaned $201 and $2,500, respectively, to the Company for working capital purposes which is reflected as due to related parties. In October 2019, the CEO loaned an additional $500 for working capital purposes. These loans are non-interest bearing and are due on demand.
The CEO of the Company, who is the creator, writer and also acted as a producer of the Movie is entitled to receive a writer’s fee of $25,000 and producer’s fee of $100,000 to be paid from gross revenues derived from the Movie or the sale of ancillary products. As of December 31, 2019 and September 30, 2019, the Company has an accrued balance of $125,000 in accrued expenses - related party for services rendered by the CEO of the Company and a corresponding increase in film cost.
On April 1, 2018, the Company issued a due on demand 5% promissory note to an affiliated company for $200,000. The Company may prepay the note without a prepayment penalty. The former COO of the Company is a trustee of the affiliated company. The Company and former COO entered into separation agreement in January 2018 (see Note 8).
In September 2019, the Company advanced $100,000 to a related party vendor (see Note 8).
NOTE 7 -
STOCKHOLDERS’ DEFICIT
In March 2017, the Board of Directors of the Company approved to increase the authorized shares of the Company to 205,000,000 shares of authorized capital stock. In July 2017, the Board of Directors of the Company approved and increase the authorized shares to 705,000,000 shares of authorized capital stock. In November 2018, the Board of Directors of the Company approved and increase the authorized shares to 1,505,000,000 shares of authorized capital stock. In December 2019, the Board of Directors of the Company approved an increase in the authorized shares to 4,205,000,000 shares of authorized capital stock. Consequently, the authorized capital stock consists of 4,200,000,000 shares of common stock and 5,000,000 shares of preferred stock.
Common stock
Between October 2019 and December 2019, the Company issued an aggregate of 12,000 shares of the Company’s common stock to two directors of the Company as payment for services rendered pursuant to corporate director agreements (see Note 8). The Company valued these common shares at the fair value ranging from $0.001 to $0.007 per common share or $32 based on the quoted trading price on the dates of grants. The Company recorded stock-based compensation of $32 during the three months ended December 31, 2019. In October 2019, the Company reversed a prior grant from September 2019 to a director who resigned. The reversal was for 2,000 shares of common stock and $36 was credited to compensation expense.
Between October 2019 and December 2019, the Company issued an aggregate of 60,000 shares of the Company’s common stock to the CEO as payment for services rendered pursuant to an Employment agreement (see Note 8). The Company valued these common shares at the fair value ranging from $0.001 to $0.007 per common share or $160 based on the quoted trading price on the dates of grants. The Company recorded stock-based compensation of $160 during the three months ended December 31, 2019.
Between October 2019 and December 2019, the Company issued an aggregate of 569,061,893 common stock to various note holders upon the conversion of $167,233 of principal amount, $13,280 accrued interest and conversion fee of $6,500 pursuant to the conversion terms of the convertible notes which contained embedded derivatives (see Note 4). The Company valued these common shares at the fair value ranging from $0.001 to $0.002 per common share or $500,214 based on the quoted trading price on the dates of grants. Additionally, the Company recorded loss on debt extinguishment of $313,200 in connection with the conversion of notes.
On November 14, 2019, the Company sold 3,969,000 shares of the Company’s common stock for cash proceeds of $3,334 under the Equity Financing Agreement with GHS.
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ALL FOR ONE MEDIA CORP. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS December 31, 2019 |
Stock Warrants
A summary of the Company’s outstanding stock warrants as of December 31, 2019 and changes during the period ended are presented below:
Number of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (Years) | ||||||||||
Balance at September 30, 2019 | 400,000 | $ | 0.20 | 3.52 | ||||||||
Granted | 1,200,000 | 0.015 | 5.00 | |||||||||
Cancelled | - | - | - | |||||||||
Exercised | - | - | - | |||||||||
Forfeited | - | - | - | |||||||||
Balance as of December 31, 2019 | 1,600,000 | $ | 0.061 | 4.40 | ||||||||
Warrants exercisable as of December 31, 2019 | 1,600,000 | $ | 0.061 | 4.40 | ||||||||
Weighted average fair value of warrants granted during the period | $ | 0.0125 | ||||||||||
In October 2019, the Company granted a 5 year 1,200,000 warrants to purchase the Company’s common stock in connection with the issuance of a convertible note (see Note 4). The warrants had a term of 5 year from the date of grant and was exercisable at an exercise price of $0.015. The exercise price and the number of warrants were subject to adjustment upon distribution of assets and anti-dilution protection provision as defined in the stock warrant agreement. The Company accounted for the 1,200,000 warrants by using the relative fair value method and recorded debt discount from the relative fair value of the warrants of $10,616 using a Black-Scholes option pricing model with the following assumptions: stock price of $0.013 per share (based on the quoted trading price on the dates of grants), volatility of 190%, expected term of 5 years, and a risk free interest rate of 1.40%. During the three months ended December 31, 2019, the Company recorded a debt discount of $10,616 and a corresponding increase in derivative liabilities.
NOTE 8 -
COMMITMENTS AND CONTINGENCIES
Employment agreement
In October 2015, the Company entered into an Employment Agreement (the “Employment Agreement”) with Mr. Brian Lukow, the CEO of the Company. As compensation for his services per the terms of the Employment Agreement, the Company shall pay $5,000 per month and 20,000 shares of the Company’s common stock per month calculated at $0.25 per share (see Note 7). The Employment Agreement may be terminated by either party upon two months written notice. On February 16, 2018, the Company amended this Employment Agreement to increase Mr. Lukow’s base salary from $5,000 to $8,000 per month. As of December 31, 2019 and September 30, 2019, accrued salaries to Mr. Lukow amounted to $4,536 and $3,036, respectively, and was included in accounts payable and accrued liabilities as reflected in the accompanying unaudited consolidated balance sheets.
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ALL FOR ONE MEDIA CORP. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS December 31, 2019 |
Corporate director agreements
In October 2015, the Company entered into three corporate director agreements with Mr. Brian Lukow, Mr. Brian Gold and Ms. Aimee O’Brien to serve as members of the Company’s board of directors. The term of the agreements shall continue until September 30, 2016 unless earlier terminated by the Company. The term shall be automatically renewed for as long as the board of directors are re-elected or otherwise serve as members of the board of directors of the Company. As compensation for their services per the terms of their respective corporate director agreements, the Company pays fees to i) Mr. Lukow of 2,000 shares of the Company’s common stock per month ii) Ms. O’Brien of 2,000 shares of the Company’s common stock per month and iii) Mr. Gold of 2,000 shares of the Company’s common stock per month during the month of service. Pursuant to the agreement, the director who will introduce and arrange for equity funding and acquisitions shall be entitled with a 10% commission fee as defined in the agreement.
On August 29, 2019, the Company accepted the resignation of Brian Gold as a director of the Company.
Consulting agreements
In October 2016, the Company entered into a video production agreement with a third-party vendor. The vendor provided production and post production services to the Company. The fees for such services were cash payment of $15,000 and 100,000 shares of the Company’s common stock. The Company has paid $15,000 during the fiscal year ended September 30, 2017. The Company has not issued the 100,000 shares as of December 31, 2019 and September 30, 2019, but has accrued the value of the 100,000 shares of common stock upon completion of the services which amounted to $4,000 which was included in accounts payable and accrued liabilities as reflected in the accompanying unaudited consolidated balance sheets.
On October 25, 2019, the Company entered into a sales agency agreement with a third party who will act as a sales agent for the purpose of seeking distribution for the motion picture project, Crazy for the Boys. The initial term of this agreement commences from November 1, 2019 to June 30, 2020 subject to automatic renewals upon achievement of certain sales goal as defined in the agreement. Both parties agree that if sales agent does not deliver during the initial term period, both parties will reassess the terms and the Company will have the sole option to terminate the agreement. In consideration for the services rendered hereunder, the Sales Agent shall receive 20% on international sales, 15% on domestic sales, and for Netflix sale commission will be 10% for worldwide deal and 7.5% for domestic deal.
Operating Lease
In December 2015, the Company through its wholly owned subsidiaries, Tween Entertainment, executed a month to month operating lease agreement with the CEO of the Company. The lease premise is located in Mt. Kisco, New York and the initial term was for a period of 12 months commencing in December 2015 and expiring in December 2016. The lease is currently on a month to month lease. The lease requires the Company to pay a monthly rent of $1,000. Rent expense was $3,000 for both periods for the three months ended December 31, 2019 and 2018.
Equity Financing Agreement
On April 11, 2018, the Company entered into an Equity Financing Agreement and Registration Rights with GHS Investments LLC (“GHS”), who is also a note holder. Although the Company is not mandated to sell shares under the Financing Agreement, the Financing Agreement gives the Company the option to sell to the note holder, up to $4,000,000 worth of the Company’s common stock over the period ending twenty-four (24) months after the date the Registration Statement is deemed effective in August 2018. The $4,000,000 was stated as the total amount of available funding in the Financing Agreement because this was the maximum amount that GHS agreed to offer the Company in funding. The purchase price of the common stock will be set at eighty percent (80%) of the lowest trading price of the common stock during the ten (10) consecutive trading day period immediately preceding the date on which the Company delivers a put notice to GHS. In addition, there is an ownership limit for GHS of 9.99%. GHS is not permitted to engage in short sales involving the Company’s common stock during the term of the commitment period. Additionally, the Company issued to GHS a $40,000 promissory note dated July 2018 as a commitment fee which shall mature 6 months from execution (see Note 5). The Company recorded the commitment fee initially as deferred offering cost which was expensed during the fiscal year 2019 due to indefinite delay in the equity offering.
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ALL FOR ONE MEDIA CORP. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS December 31, 2019 |
Co-Production and Finance Agreement
On June 19, 2019, the Company entered into a Memorandum of Understanding (“MOU”) with Jeff Deverett which laid out the framework of producing, owning and distributing 20 films in the future over the course of five calendar years and as such entered into a definitive agreement. Under the framework, the Company shall establish a new company to be formed for the purpose of owning, financing, and in some instances distributing such films. Additionally, pursuant to the MOU, Jeff Deverett will enter into a 5-year employment agreement as President of the new company, and the initial board of Directors will consist of Brian Lukow, Jeff Deverett, and Elliot Bellen.
On July 24, 2019, CVPI entered into a Co-Production and Finance Agreement to produce and own Full Out 2 (“FO2”), a full-length motion picture that has been licensed by NetFlix Global LLC. Under the terms of the Agreement, the Company’s parent entity will provide its subsidiary, CVPI, a total of $650,000 over the course of period from July 24, 2019 to December 24, 2019 (the “Funding”) for the production of FO2. The film will be distributed by Gravitas Ventures, LLC. In July 2019, the parent entity disbursed $100,000 to CVPI under the funding schedule which was then advanced to a related party production company controlled by Jeff Deverett to be used in the production of the film. In October 2019, another $99,000 was advanced by CVPI. The advance of $199,000 as of December 31, 2019 was recorded as an advance on film rights - related party as reflected in the accompanying unaudited consolidated balance sheets.
NOTE 9 -
SUBSEQUENT EVENTS
Between January 14, 2020 and February 11, 2020, the Company issued an aggregate of 381,021,607 common stock to various note holders upon the conversion of $24,322 total principal amount, $1,258 total accrued interest and $1,500 conversion fees pursuant to the conversion terms of the convertible notes which contained embedded derivatives (see Note 4). The Company valued these common shares at the fair value ranging from $0.001 per common share or $76,267 based on the quoted trading price on the date of grant resulting in a loss on debt extinguishment of $49,186. Upon these conversions, the respective derivative liability was marked to fair value at the conversion, and then a related fair value amount of $44,347 relating to the portion of debt converted was reclassified to other income or expense as part of gain or loss on debt extinguishment. The net result was a loss on debt extinguishment of $4,839.
On January 17, 2020, our parent entity entered into a Stock Purchase and Sale Agreement with our subsidiary, Carmel Valley Productions Inc. (see Note 8) whereby the Company sold 90% of its 100% interest in CVPI and any of the Company’s right to receive revenues or repayment from the $100,000 advance on film rights under the terms of the Co-Production and Finance Agreement dated on July 24, 2019 for a total purchase price of $50,000.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements
Except for historical information, the following Management’s Discussion and Analysis contains forward-looking statements based upon current expectations that involve certain risks and uncertainties. Such forward-looking statements include statements regarding, among other things, (a) discussions about mineral resources and mineralized material, (b) our projected sales and profitability, (c) our growth strategies, (d) anticipated trends in our industry, (e) our future financing plans, (f) our anticipated needs for working capital, (g) our lack of operational experience and (h) the benefits related to ownership of our common stock. Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. This information may involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from the future results, performance, or achievements expressed or implied by any forward-looking statements. These statements may be found under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Description of Business,” as well as in this Report generally. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks outlined under “Risk Factors” and matters described in this Report generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this Report will in fact occur as projected.
Introduction to Interim Unaudited Consolidated Financial Statements.
Certain statements made in this Form 10-Q are “forward-looking statements” regarding the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. The Company’s plans and objectives are based, in part, on assumptions involving the continued expansion of business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate and, therefore, there can be no assurance the forward-looking statements included in this report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved.
The forward-looking statements included in this Form 10-Q and referred to elsewhere are related to future events or our strategies or future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “believe,” “anticipate,” “future,” “potential,” “estimate,” “encourage,” “opportunity,” “growth,” “leader,” “expect,” “intend,” “plan,” “expand,” “focus,” “through,” “strategy,” “provide,” “offer,” “allow,” commitment,” “implement,” “result,” “increase,” “establish,” “perform,” “make,” “continue,” “can,” “ongoing,” “include” or the negative of such terms or comparable terminology. All forward-looking statements included in this Form 10-Q are based on information available to us as of the filing date of this report, and the Company assumes no obligation to update any such forward-looking statements, except as required by law. Our actual results could differ materially from the forward-looking statements.
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The interim unaudited consolidated financial statements included herein have been prepared by All for One Media Corp. (“AFOM” or the “Company”) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “Commission”). Certain information and footnote disclosure normally included in interim unaudited consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) which are duplicate to the disclosures in the audited consolidated financial statement have been omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These interim unaudited consolidated financial statements should be read in conjunction with the financial statements and notes thereto in the Form 10 Registration Statement filed with the SEC.
In the opinion of management, all adjustments have been made consisting of normal recurring adjustments and consolidating entries, necessary to present fairly the unaudited interim consolidated financial position of the Company and subsidiaries as of December 31, 2019, the results of their unaudited interim consolidated statements of operations for the three months ended December 31, 2019 and 2018, and their unaudited interim consolidated cash flows for the three months ended December 31, 2019 and 2018. The results of consolidated operations for the interim periods are not necessarily indicative of the results for the full year.
The preparation of interim unaudited consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Overview
All for One Media Corp. (the “Company”) was incorporated in the State of Utah on March 2, 2004. The Company is a media and entertainment company focused on creating, launching and marketing original pop music groups commonly referred to as “boy bands” and “girl groups.” The Company’s former operations were in the business of acquiring, training, and reselling horses with an emphasis in the purchase of thoroughbred weanlings or yearlings that were resold as juveniles.
On October 26, 2015, the Company entered into an Asset Exchange Agreement (the “Asset Exchange”) with Crazy For The Boys, LLC (“CFTB”), a privately held company, and certain members owning membership interest in CFTB whereby the Company acquired certain assets from CFTB in exchange for 5,201,500 shares of the Company’s common stock. The assets that were acquired included a movie screenplay, master recordings, trademarks, and web domain names (the “CFTB Assets”).
On December 7, 2016, the Company organized a subsidiary in the state of Nevada, Crazy for the Boys Movie, LLC (“CFTB Movie”) which was created for the sole purpose of financing, producing and commercially exploiting (via all distribution sources and other means of revenue generation) one feature-length motion picture as a coming of age, musical dramedy, entitled “Crazy For The Boys” and all of its allied, ancillary, subsidiary and merchandising rights. The Company is the Managing Member of CFTB Movie and will have the sole and exclusive right to operate CFTB Movie.
In May 2017, the Company entered into an Assignment and Transfer Agreement with Crazy for the Boys GA LLC (“CFTB GA”), a company organized in the state of Georgia, whereby CFTB GA assigned and transferred all ownership, asset rights and other interest in CFTB GA to CFTB Movie. CFTB GA was created for the sole purpose of producing the one feature-length motion picture entitled “Crazy For The Boys” in the State of Georgia, in the city of Savannah, which offers production incentives up to 30% of Georgia production expenditures in transferable tax credits. The Georgia tax incentive program is available for qualifying projects, including feature films, television series, commercials, music videos, animation and game development. Consequently, CFTB GA became a wholly owned subsidiary of CFTB Movie and as of December 31, 2018, the interim unaudited consolidated financial statements of the Company include the accounts of CFTB GA. Filming for the Movie was completed in July 2017 and the post-production phase was completed in December 2018. The Company has been receiving several offers for the distribution of the film and the Company continues to review those offers.
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All For One Media Corp. is in the business of targeting the lucrative tween demographic across a multitude of entertainment platforms. The Company’s primary business objective is to embark on creating, launching and marketing original pop music groups, commonly referred to as “boy bands” and “girl groups,” by utilizing both traditional and social media models. All For One Media owns over fifty completed professionally produced master recordings, as well as a full-length motion picture tentatively entitled
Drama Drama
(formerly with a working title of “Crazy For the Boys”)(the “Film”) that is ready for release. This musical comedy’s backstory creates a fictional girl group by the name of “Drama Drama”, and the Company intends to launch a new girl group with the same name simultaneous to the release of the Film. The Company expects to generate revenues from movie receipts, sales, downloads and streaming of original recorded music, videos, motion pictures, music publishing, live performances, licensed merchandise and corporate sponsorships.
On June 19, 2019, the Company entered into a Memorandum of Understanding (“MOU”) with Jeff Deverett which laid out the framework of producing, owning and distributing 20 films in the future over the course of five calendar years and as such entered into a definitive agreement. Under the framework, the Company shall establish a new company to be formed for the purpose of owning, financing, and in some instances distributing such films. Additionally, pursuant to the MOU, Jeff Deverett will enter into a 5-year employment agreement as President of the new company, and the initial board of Directors will consist of Brian Lukow, Jeff Deverett, and Elliot Bellen.
On July 24, 2019, CVPI entered into a Co-Production and Finance Agreement to produce and own Full Out 2 (“FO2”), a full-length motion picture that has been licensed by NetFlix Global LLC. Under the terms of the Agreement, the Company’s parent entity will provide its subsidiary, CVPI, a total of $650,000 over the course of period from July 24, 2019 to December 24, 2019 (the “Funding”) for the production of FO2. The film will be distributed by Gravitas Ventures, LLC. In July 2019, the parent entity disbursed $100,000 to CVPI under the funding schedule which was then advanced to a related party production company controlled by Jeff Deverett to be used in the production of the film. In October 2019, another $99,000 was advanced by CVPI.
On January 17, 2020, our parent entity, entered into a Stock Purchase and Sale Agreement with, our subsidiary, Carmel Valley Productions Inc. whereby the Company sold 90% of its 100% interest in CVPI and any of the Company’s right to receive revenues or repayment from the $100,000 advance on film rights under the terms of the CO-Production and Finance Agreement dated on July 24, 2019 for a total purchase price of $50,000.
Results of Operations
For the three months ended December 31, 2019 compared to the three months ended December 31, 2018
Net Revenues
The Company principally engaged in content development of media targeted at the “tween” demographic consisting of children between the ages of seven and fourteen. During the three months ended December 31, 2019 we generated minimal revenues of $2,183, from streaming music sales as compared to $2,210 for the three months ended December 31, 2018.
Operating Expenses
Total operating expenses for the three months ended December 31, 2019 as compared to the three months ended December 31, 2018, were approximately $211,000 and $413,000, respectively. The $202,000 decrease in operating expenses for the three months ended December 31, 2019 is primarily comprised of a decrease in consulting fees of approximately $295,000 primarily related to decrease in stock based consulting fees, decrease in compensation of $3,000 during the three months ended December 31, 2019 offset by an increase of approximately of $97,000 increase in general and administrative expenses primarily due to increase in marketing expenses.
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Other Expenses, net
Total other expense, net, for the three months ended December 31, 2019 and 2018 were approximately $1,782,000 and $2,407,000, respectively, a decrease of $625,000. The decrease in other expense is the primary result of the decrease in recognition of initial derivative expense of $2,380,000, a decrease in interest expense of $206,000 in connection with the issuance of convertible notes offset by the increase in change in fair value of derivative liabilities of approximately $1,943,000 and increase in loss from extinguishment of debt of $19,000.
Net Loss
We reported a net loss attributable to All For One Media Corp. of approximately $1,990,000 and $2,702,000 for the three months ended December 31, 2019 and 201, respectively, as a result of the discussion above.
Working Capital
December 31, 2019 | September 30, 2019 | |||||||
Current assets | $ | 26,987 | $ | 155,586 | ||||
Current liabilities | 11,338,977 | 9,905,776 | ||||||
Working capital deficit | $ | 11,311,990 | $ | 9,750,190 | ||||
We anticipate generating losses and, therefore, may be unable to continue operations in the future. If we require additional capital, we would have to issue debt or equity or enter into a strategic arrangement with a third party.
Going Concern Consideration
As reflected in the accompanying unaudited consolidated financial statements, the Company has minimal revenues generating operations and has an accumulated deficit of approximately $17.7 million. In addition, there is a working capital deficiency of approximately $11,312,000 and a stockholder’s deficiency of approximately $11,113,000 as of December 31, 2019. This raises substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Management believes that actions presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to continue as a going concern.
Liquidity and Capital Resources
Three months ended December 31, | ||||||||
2019 | 2018 | |||||||
Net Cash Used in Operating Activities | $ | (105,433 | ) | $ | (439,417 | ) | ||
Net Cash Used in Investing Activities | (99,000 | ) | - | |||||
Net Cash Provided by Financing Activities | 104,084 | 484,750 | ||||||
Net Increase (Decrease) in Cash | $ | (100,349 | ) | $ | 45,333 | |||
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Net cash used in operating activities was approximately $105,000 for the three months ended December 31, 2019 as compared to approximately $439,000 for the three months ended December 31, 2018. During the three months ended December 31, 2019 cash was used as follows:
· | net loss was approximately $1,991,000, and | |
· | A decrease in our deposit of approximately $25,000, | |
· | A decrease in our prepaid expenses and other current assets of approximately $28,000, | |
· | an increase in our total accounts payable and accrued liabilities of approximately 53,000, | |
· | an increase in total accrued interest of approximately $137,000, and | |
· | non-cash operating expense of amortization of approximately $812,000, non-cash interest of $6,500, stock-based compensation of approximately $156, initial derivative expense of $97,000, loss on extinguishment of debt of $19,500 and | |
· | Non-cash other expense resulting from the change in fair value of derivative liabilities of $707,000. |
During the three months ended December 31, 2018 cash was used as follows:
· | net loss was approximately $2,817,000, and | |
· | an increase in our film cost of approximately $40,000, | |
· | An increase in our prepaid expenses and other current assets of approximately $11,000, | |
· | a decrease in our total accounts payable and accrued liabilities of approximately 61,000, partially offset by, | |
· | an increase in total accrued interest of approximately $12,000, and | |
· | non-cash operating expense of amortization of approximately $650,000, non-cash interest of $279,000, stock-based compensation of approximately $305,000, initial derivative expense of $2,477,000 and | |
· | Non-cash other income resulting from the change in fair value of derivative liabilities of $1,236,000. |
Net cash used in investing activities for the three months ended December 31, 2019 was approximately $99,000 as compared to approximately $0 for the three months ended December 31, 2018. We paid $99,000 for advances on film rights.
Net cash provided by financing activities for the three months ended December 31, 2019 was approximately $104,000 as compared to approximately $485,000 for the three months ended December 31, 2018. During the three months ended December 31, 2019, we received proceeds of approximately $100,000 from the issuance of convertible notes and $3,000 from sale of stock. During the three months ended December 31, 2018, we received proceeds of approximately $1,383,000 from the issuance of convertible notes offset by repayments of $899,000 on our loans, convertible notes and nonconvertible note.
We currently have no external sources of liquidity, such as arrangements with credit institutions or off-balance sheet arrangements that will have or are reasonably likely to have a current or future effect on our financial condition or immediate access to capital. We expect to require additional financing to fund our current operations for fiscal 2020. There is no assurance that we will be able to obtain additional financing on acceptable terms or at all.
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If we are unable to raise the funds required to fund our operations, we will seek alternative financing through other means, such as borrowings from institutions or private individuals. There can be no assurance that we will be able to raise the capital we need for our operations from the sale of our securities. We have not located any sources for these funds and may not be able to do so in the future. We expect that we will seek additional financing in the future. However, we may not be able to obtain additional capital or generate sufficient revenues to fund our operations. If we are unsuccessful at raising sufficient funds, for whatever reason, to fund our operations, we may be forced to cease operations. If we fail to raise funds, we expect that we will be required to seek protection from creditors under applicable bankruptcy laws.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Management believes the following critical accounting policies affect the significant judgments and estimates used in the preparation of the financial statements.
Use of Estimates
In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheet, and revenues and expenses for the period then ended. Actual results may differ significantly from those estimates. Significant estimates made by management include, but are not limited to, stock-based compensation, valuation of derivative liabilities, and fair value of common stock issued.
Fair value of financial instruments
The Company adopted ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements, establishes a framework for measuring fair value and expands disclosure about such fair value measurements. The adoption of ASC 820 did not have an impact on the Company’s financial position or operating results but did expand certain disclosures.
ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:
Level 1: | Observable inputs such as quoted market prices in active markets for identical assets or liabilities | |
Level 2: | Observable market-based inputs or unobservable inputs that are corroborated by market data | |
Level 3: | Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions. |
The Company analyzes all financial instruments with features of both liabilities and equity under the FASB’s accounting standard for such instruments. Under this standard, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Depending on the product and the terms of the transaction, the fair value of notes payable and derivative liabilities was modeled using a series of techniques, including closed-form analytic formula, such as the Simple Binomial Lattice Model.
Stock-Based Compensation
Stock-based compensation is accounted for based on the requirements of ASC 718, Share-Based Payment, which requires recognition in the financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The Financial Accounting Standards Board (“FASB”) also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award. Pursuant to ASC Topic 505-50, for share-based payments non-employees, compensation expense is determined at the measurement date defined as the earlier of; a) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached or; b) the date at which the counterparty's performance is complete.
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The expense is recognized over the vesting period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. The Company records compensation expense based on the fair value of the award at the reporting date. The awards to consultants and other third-parties are then revalued, or the total compensation is recalculated, based on the then current fair value, at each subsequent reporting date.
Film Costs
The Company capitalizes costs which were used in the production of films according to ASC 926, Entertainment - Films. For films produced by the Company, capitalized costs include all direct production and financing costs, capitalized interest and production overhead. Production overhead includes the costs of individuals or departments with exclusive or significant responsibility for the production of films. Production overhead does not include general and administrative expenses and marketing, selling and distribution costs. Capitalization of interest costs should generally commence when a film is set for production and end when a film is substantially complete and ready for distribution. Generally, the interest eligible for capitalization includes stated interest, imputed interest, and interest related to debt instruments as well as amortization of discounts and other debt issue costs.
Pursuant to ASC 926-20-35, the Company will begin to amortize capitalized film cost when a film is released, and it begins to recognize revenue from the film. These costs for an individual film are amortized and participation costs are accrued to direct operating expenses in the proportion that current year’s revenues bear to management’s estimates of the ultimate revenue at the beginning of the current year expected to be recognized from the exploitation, exhibition or sale of such film. Ultimate revenue includes estimates over a period not to exceed ten years following the date of initial release of the motion picture.
Parties involved in the production of a film may be compensated in part by contingent payments based on the financial results of a film pursuant to contractual formulas (participations) and by contingent amounts due under provisions of collective bargaining agreements (residuals). Such parties are collectively referred to as participants, and such costs are collectively referred to as participation costs. Participations may be given to creative talent, such as actors or writers, or to entities from whom distribution rights are licensed. Participation costs are typically recognized evenly as the ultimate revenues are earned.
Unamortized film costs are tested for impairment when there is an indication that the fair value of the film may be less than unamortized costs. Consistent with the rules for recognizing impairment of long-lived assets in ASC 926, the standard sets forth examples of events or changes in circumstances that indicate that the entity must assess whether the fair value of the film (whether it has been completed or is still in production) is less than the carrying amount of its unamortized film costs.
1. | An adverse change in the expected performance of the film prior to its release |
2. | Actual costs substantially in excess of budgeted costs |
3. | Substantial delays in completion or release schedules |
4. | Changes in release plans, such as a reduction in the initial release pattern |
5. | Insufficient funding or resources to complete the film and to market it effectively |
6. | Actual performance subsequent to release fails to meet prerelease expectations. (ASC 926-20-35-12) |
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This guidance revises the accounting related to leases by requiring lessees to recognize a lease liability and a right-of-use asset for all leases. The new lease guidance also simplifies the accounting for sale and leaseback transactions. This ASU was effective for annual reporting periods beginning after December 15, 2018 and early adoption is permitted. This guidance did not have a material impact on its consolidated financial statements.
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In July 2017, the FASB issued ASU No. 2017-11, “Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Non-controlling Interests with a Scope Exception”. The ASU was issued to address the complexity associated with applying generally accepted accounting principles (GAAP) for certain financial instruments with characteristics of liabilities and equity. The ASU, among other things, eliminates the need to consider the effects of down round features when analyzing convertible debt, warrants and other financing instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. The amendments were effective for fiscal years beginning after December 15, 2018 and should be applied retrospectively. This guidance did not have a material impact on its consolidated financial statements.
In June 2018, the FASB issued ASU No. 2018-07” Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.” These amendments expand the scope of Topic 718, Compensation - Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned. The ASU supersedes Subtopic 505-50, Equity - Equity-Based Payments to Non-Employees. The guidance was effective for public companies for fiscal years, and interim fiscal periods within those fiscal years, beginning after December 15, 2018. This guidance did not have a material impact on its consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13,” Changes to Disclosure Requirements for Fair Value Measurements”, which will improve the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies, and adds certain disclosure requirements, and is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company will be evaluating the impact this standard will have on the Company’s financial statements.
Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we are not required to include disclosure under this item.
ITEM
4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that material information required to be disclosed in our periodic reports filed under the Securities Exchange Act of 1934, as amended, or 1934 Act, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to ensure that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer as appropriate, to allow timely decisions regarding required disclosure. We carried out an evaluation, under the supervision and with the participation of our management, including the principal executive officer and the principal financial officer (principal financial officer), of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13(a)-15(e) under the 1934 Act, as of the end of the period covered by this report. Based on this evaluation, because of the Company’s limited resources and limited number of employees, management concluded that our disclosure controls and procedures were not effective as of December 31, 2019.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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II - OTHER INFORMATION
We may be involved from time to time in ordinary litigation, negotiation and settlement matters that will not have a material effect on our operations or finances. We are not aware of any pending legal proceedings against us or our officers and directors in their capacity as such that could have a material impact on our operations or finances.
As a smaller reporting company, we are not required to include disclosure under this item.
Issuance of Notes
On November 29, 2019, the Company issued a 12% Convertible Promissory Note with Power UP Lending Group Ltd. for principal borrowings of up to $38,000. The 12% convertible promissory note and all accrued interest are due on September 15, 2020. The note is unsecured and bears interest at the rate of 12% per annum from the issuance date thereof until the note is paid. The note holder shall have the right to convert on the issuance date the outstanding principal amount and accrued but unpaid interest into the Company’s common stock at a conversion price equal to a price which is 55% of the lowest trading price during the 20 prior trading days immediately preceding including the day of the conversion date. During the first 60 to 180 days following the date of the note, the Company has the right to prepay the principal and accrued but unpaid interest due under the note, together with any other amounts that the Company may owe the holder under the terms of the note, at a premium ranging from 130% to 145% as defined in the note agreement. After this initial 180-day period, the Company does not have a right to prepay the note. The note was issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act, and Rule 506(b) promulgated thereunder, as the noteholder was an accredited investor, there was no general solicitation, and the transactions did not involve a public offering.
Issuance of Shares
On January 14, 2020, the Company issued 29,556,346 shares of common stock to GS Capital Partners, LLC upon the conversion of $2,800 in principal and $273.86 in accrued interest pursuant to the conversion terms of the convertible notes. The issuance was made in reliance on the exemption from registration provided by Sections 3(a)(9) and 4(a)(2) of the Securities Act as the common stock was issued in exchange for debt securities of the Company held by each shareholder, there was no additional consideration for the exchange, there was no remuneration for the solicitation of the exchange, there was no general solicitation, and the transactions did not involve a public offering. The holders provided legal opinions pursuant to Rule 144 promulgated under Section 4(a)(1) of the Securities Act. The note was issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act, and Rule 506(b) promulgated thereunder, as the noteholder was an accredited investor, there was no general solicitation, and the transactions did not involve a public offering.
On January 15, 2020, the Company issued 29,166,667 shares of common stock to Power UP Lending Group, Ltd. upon the conversion of $3,500 in principal pursuant to the conversion terms of the convertible notes. The issuance was made in reliance on the exemption from registration provided by Sections 3(a)(9) and 4(a)(2) of the Securities Act as the common stock was issued in exchange for debt securities of the Company held by each shareholder, there was no additional consideration for the exchange, there was no remuneration for the solicitation of the exchange, there was no general solicitation, and the transactions did not involve a public offering. The holders provided legal opinions pursuant to Rule 144 promulgated under Section 4(a)(1) of the Securities Act. The note was issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act, and Rule 506(b) promulgated thereunder, as the noteholder was an accredited investor, there was no general solicitation, and the transactions did not involve a public offering.
On January 21, 2020, the Company issued 33,837,692 shares of common stock to GS Capital Partners, LLC upon the conversion of $3,200 in principal and $319.12 in accrued interest pursuant to the conversion terms of the convertible notes. The issuance was made in reliance on the exemption from registration provided by Sections 3(a)(9) and 4(a)(2) of the Securities Act as the common stock was issued in exchange for debt securities of the Company held by each shareholder, there was no additional consideration for the exchange, there was no remuneration for the solicitation of the exchange, there was no general solicitation, and the transactions did not involve a public offering. The holders provided legal opinions pursuant to Rule 144 promulgated under Section 4(a)(1) of the Securities Act. The note was issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act, and Rule 506(b) promulgated thereunder, as the noteholder was an accredited investor, there was no general solicitation, and the transactions did not involve a public offering.
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On January 21, 2020, the Company issued 35,026,000 shares of common stock to Auctus Fund, LLC upon the conversion of $2,302.08 in principal pursuant to the conversion terms of the convertible notes. The issuance was made in reliance on the exemption from registration provided by Sections 3(a)(9) and 4(a)(2) of the Securities Act as the common stock was issued in exchange for debt securities of the Company held by each shareholder, there was no additional consideration for the exchange, there was no remuneration for the solicitation of the exchange, there was no general solicitation, and the transactions did not involve a public offering. The holders provided legal opinions pursuant to Rule 144 promulgated under Section 4(a)(1) of the Securities Act. The note was issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act, and Rule 506(b) promulgated thereunder, as the noteholder was an accredited investor, there was no general solicitation, and the transactions did not involve a public offering.
On January 21, 2020, the Company issued 34,395,058 shares of common stock to JSJ Investments Inc. upon the conversion of $3,783.46 in principal pursuant to the conversion terms of the convertible notes. The issuance was made in reliance on the exemption from registration provided by Sections 3(a)(9) and 4(a)(2) of the Securities Act as the common stock was issued in exchange for debt securities of the Company held by each shareholder, there was no additional consideration for the exchange, there was no remuneration for the solicitation of the exchange, there was no general solicitation, and the transactions did not involve a public offering. The holders provided legal opinions pursuant to Rule 144 promulgated under Section 4(a)(1) of the Securities Act. The note was issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act, and Rule 506(b) promulgated thereunder, as the noteholder was an accredited investor, there was no general solicitation, and the transactions did not involve a public offering.
On January 27, 2020, the Company issued 40,179,250 shares of common stock to Auctus Fund, LLC upon the conversion of $1,107.17 in principal pursuant to the conversion terms of the convertible notes. The issuance was made in reliance on the exemption from registration provided by Sections 3(a)(9) and 4(a)(2) of the Securities Act as the common stock was issued in exchange for debt securities of the Company held by each shareholder, there was no additional consideration for the exchange, there was no remuneration for the solicitation of the exchange, there was no general solicitation, and the transactions did not involve a public offering. The holders provided legal opinions pursuant to Rule 144 promulgated under Section 4(a)(1) of the Securities Act. The note was issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act, and Rule 506(b) promulgated thereunder, as the noteholder was an accredited investor, there was no general solicitation, and the transactions did not involve a public offering.
On January 31, 2020, the Company issued 42,184,250 shares of common stock to Auctus Fund, LLC upon the conversion of $1,187.37 in principal pursuant to the conversion terms of the convertible notes. The issuance was made in reliance on the exemption from registration provided by Sections 3(a)(9) and 4(a)(2) of the Securities Act as the common stock was issued in exchange for debt securities of the Company held by each shareholder, there was no additional consideration for the exchange, there was no remuneration for the solicitation of the exchange, there was no general solicitation, and the transactions did not involve a public offering. The holders provided legal opinions pursuant to Rule 144 promulgated under Section 4(a)(1) of the Securities Act. The note was issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act, and Rule 506(b) promulgated thereunder, as the noteholder was an accredited investor, there was no general solicitation, and the transactions did not involve a public offering.
On January 29, 2020, the Company issued 42,063,653 shares of common stock to GS Capital Partners, LLC upon the conversion of $1,985 in principal and $202.31 in accrued interest pursuant to the conversion terms of the convertible notes. The issuance was made in reliance on the exemption from registration provided by Sections 3(a)(9) and 4(a)(2) of the Securities Act as the common stock was issued in exchange for debt securities of the Company held by each shareholder, there was no additional consideration for the exchange, there was no remuneration for the solicitation of the exchange, there was no general solicitation, and the transactions did not involve a public offering. The holders provided legal opinions pursuant to Rule 144 promulgated under Section 4(a)(1) of the Securities Act. The note was issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act, and Rule 506(b) promulgated thereunder, as the noteholder was an accredited investor, there was no general solicitation, and the transactions did not involve a public offering.
On February 3, 2020, the Company issued 45,982,307 shares of common stock to GS Capital Partners, LLC upon the conversion of $2,167.23 in principal and $223.85 in accrued interest pursuant to the conversion terms of the convertible notes. The issuance was made in reliance on the exemption from registration provided by Sections 3(a)(9) and 4(a)(2) of the Securities Act as the common stock was issued in exchange for debt securities of the Company held by each shareholder, there was no additional consideration for the exchange, there was no remuneration for the solicitation of the exchange, there was no general solicitation, and the transactions did not involve a public offering. The holders provided legal opinions pursuant to Rule 144 promulgated under Section 4(a)(1) of the Securities Act. The note was issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act, and Rule 506(b) promulgated thereunder, as the noteholder was an accredited investor, there was no general solicitation, and the transactions did not involve a public offering.
On February 6, 2020, the Company issued 48,630,384 shares of common stock to GS Capital Partners, LLC upon the conversion of $2,289.77 in principal and $239.01 in accrued interest pursuant to the conversion terms of the convertible notes. The issuance was made in reliance on the exemption from registration provided by Sections 3(a)(9) and 4(a)(2) of the Securities Act as the common stock was issued in exchange for debt securities of the Company held by each shareholder, there was no additional consideration for the exchange, there was no remuneration for the solicitation of the exchange, there was no general solicitation, and the transactions did not involve a public offering. The holders provided legal opinions pursuant to Rule 144 promulgated under Section 4(a)(1) of the Securities Act. The note was issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act, and Rule 506(b) promulgated thereunder, as the noteholder was an accredited investor, there was no general solicitation, and the transactions did not involve a public offering.
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The Company is in default upon several convertible notes.
Auctus Fund, LLC
A convertible note to Auctus Fund, LLC entered into on July 18, 2017 and due on April 18, 2018 is now past maturity. The total amount in arrearage, including principal and accrued interest is $86,974. A convertible note to Auctus Fund, LLC entered into on September 25, 2017 and due on June 25, 2018 is now past maturity. The total amount in arrearage, including principal and accrued interest is $160,495. A convertible note to Auctus Fund, LLC entered into on November 27, 2018 and due on May 27, 2019 is now past maturity. The total amount in arrearage, including principal and accrued interest is $281,054. These notes are past maturity, but it is not in default as no notice of default was received by the Company. However, default interest of 24% is being accrued from the default date.
Coolidge Capital, LLC
A convertible note to Coolidge Capital, LLC entered into on November 20, 2018 and due on August 20, 2019 is now in default. The total amount in arrearage, including accrued interest is $6,082.
GS Capital Partners, LLC
A convertible note to GS Capital Partners, LLC entered into on October 31, 2018 and due on October 31, 2019 is now in default. The total amount in arrearage, including principal and accrued interest is $285,096. A convertible note to GS Capital Partners, LLC entered into on November 6, 2018 and due on November 6, 2019 is now in default. The total amount in arrearage, including principal and accrued interest is $136,373. A convertible note to GS Capital Partners, LLC entered into on November 23, 2018 and due on November 23, 2019 is now in default. The total amount in arrearage, including principal and accrued interest is $155,496. A convertible note to GS Capital Partners, LLC entered into on December 13, 2018 and due on December 13, 2019 is now in default. The total amount in arrearage, including principal and accrued interest is $167,967. A convertible note to GS Capital Partners, LLC entered into on December 28, 2018 and due on December 28, 2019 is now in default. The total amount in arrearage, including principal and accrued interest is $264,539. These notes that became due during the three months ended December 31, 2019 incurred default penalties of $90,000 in total.
Not applicable.
Between January 14, 2020 and February 11, 2020, the Company issued an aggregate of 381,021,607 common stock to various note holders upon the conversion of $24,322 total principal amount, $1,258 total accrued interest and $1,500 conversion fees pursuant to the conversion terms of the convertible notes which contained embedded derivatives (see Note 4). The Company valued these common shares at the fair value ranging from $0.001 per common share or $76,267 based on the quoted trading price on the date of grant resulting in a loss on debt extinguishment of $49,186. Upon these conversions, the respective derivative liability was marked to fair value at the conversion, and then a related fair value amount of $44,347 relating to the portion of debt converted was reclassified to other income or expense as part of gain or loss on debt extinguishment. The net result was a loss on debt extinguishment of $4,839.
On January 17, 2020, our parent entity entered into a Stock Purchase and Sale Agreement with our subsidiary, Carmel Valley Productions Inc. (see Note 8) whereby the Company sold 90% of its 100% interest in CVPI and any of the Company’s right to receive revenues or repayment from the $100,000 advance on film rights under the terms of the Co-Production and Finance Agreement dated on July 24, 2019 for a total purchase price of $50,000.
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Exhibit Number | Description | |
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101 | Interactive data files pursuant to Rule 405 of Regulation S-T |
________________________
(1) | As filed with our Form 10 on January 3, 2017, as amended, and incorporated herein by reference. |
(2) | As filed with our Form 10-Q filed on May 11, 2017 and incorporated herein by reference. |
(3) | As filed with our form 10-K filed on January 16, 2018 and incorporated herein by reference. |
(4) | As filed with our Form 10-Q filed on May 14, 2018 and incorporated herein by reference. |
(5) | As filed with our Form S-1 Registration Statement filed on May 29, 2018 and incorporated herein by reference. |
(6) | As filed with our Form S-1/A Registration Statement filed on July 17, 2018. |
(7) | As filed with our Form S-1/A Registration Statement filed on August 3, 2018. |
(8) | As filed with our Form 10-Q filed on August 14, 2018. |
(9) | As filed with our Form 10-K filed on January 15, 2019. |
(10) | As filed with our Form 10-Q filed on May 17, 2019. |
(11) | As filed with our Form 10-Q filed on August 14, 2019. |
(12) | As filed with our Form 10-K filed on January 14, 2020. |
| * | Filed herewith |
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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.
ALL FOR ONE MEDIA CORP. | |||
Date: February 19, 2020 | By: | /s/ Brian Lukow | |
Name: | Brian Lukow | ||
Title: | Chief Executive Officer (Principal Executive Officer) | ||
Chief Financial Officer (Principal Financial and Accounting Officer) | |||
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