Almost Never Films Inc. - Quarter Report: 2021 December (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
☒ | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED: December 31, 2021
☐ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________ to __________
Commission File Number: ________________
ALMOST NEVER FILMS INC. |
(Exact name of registrant as specified in its charter) |
Nevada |
| 26-1665960 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
8605 Santa Monica Blvd #98258, West Hollywood, CA 90069-4109
(Address of principal executive offices, Zip Code)
(213) 296-3005
(Registrant’s telephone number, including area code)
_____________________________________________________________
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
Common Stock, $.001 par vale |
| HLWD |
| N/A |
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the 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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐ No ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated Filer | ☐ | Smaller reporting company | ☒ |
|
| Emerging growth company | ☐ |
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 ☒
The number of shares of registrant’s common stock outstanding as of January 10, 2022 was 5,798,765
FORM 10-Q
ALMOST NEVER FILMS INC.
(F/K/A SMACK SPORTSWEAR)
December 31, 2021
TABLE OF CONTENTS
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PART I. - FINANCIAL INFORMATION | ||||
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| 4 |
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| Condensed Consolidated Balance Sheets as of December 31, 2021 (Unaudited) and June 30, 2021 |
| 4 |
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| 5 |
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| 7 |
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| 8 |
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Management's Discussion and Analysis of Financial Condition and Results of Operations. |
| 13 |
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| 21 |
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2 |
FORWARD LOOKING STATEMENTS
This report contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and similar expressions or variations of such words are intended to identify forward-looking statements, but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this report. Additionally, statements concerning future matters are forward-looking statements.
Although forward-looking statements in this report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the headings "Risks Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our report on Form 8-K which was filed with the SEC on January 20, 2017 (the "Super 8-K"), in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Form 10-Q and information contained in other reports that we file with the SEC. You are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report.
We file reports with the SEC. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us. You can also read and copy any materials we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, except as required by law. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this quarterly report, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.
3 |
Table of Contents |
Almost Never Films Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
|
| December 31, |
|
| June 30, |
| ||
|
| 2021 |
|
| 2021 |
| ||
ASSETS |
|
|
|
|
|
| ||
Current Assets |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 18,782 |
|
| $ | 138,482 |
|
Total Current Assets |
|
| 18,782 |
|
|
| 138,482 |
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
| 6,115 |
|
|
| - |
|
Film costs |
|
| 85,496 |
|
|
| 85,496 |
|
TOTAL ASSETS |
| $ | 110,393 |
|
| $ | 223,978 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
| $ | 87,548 |
|
| $ | 75,708 |
|
Due to related party |
|
| 31,189 |
|
|
| 83,799 |
|
Interest payable |
|
| 121,713 |
|
|
| 122,673 |
|
Deferred film revenue - related party |
|
| 100,000 |
|
|
| 100,000 |
|
Promissory note payable |
|
| 78,820 |
|
|
| 78,820 |
|
Promissory note payable - related party |
|
| 60,000 |
|
|
| 60,000 |
|
Total Current Liabilities |
|
| 479,270 |
|
|
| 521,000 |
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
| 479,270 |
|
|
| 521,000 |
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity (Deficit) |
|
|
|
|
|
|
|
|
Preferred stock: no par value, 5,000,000 authorized; Series A Preferred stock: 2,000,000 authorized; No shares issued and outstanding |
|
| - |
|
|
| - |
|
Common stock: 25,000,000 authorized; $0.001 par value, 5,798,765 shares issued and outstanding |
|
| 5,799 |
|
|
| 5,799 |
|
Additional paid in capital |
|
| 1,895,486 |
|
|
| 1,895,486 |
|
Accumulated deficit |
|
| (2,270,162 | ) |
|
| (2,196,358 | ) |
Total stockholders' deficit attributable to Almost Never Films Inc. shareholders |
|
| (368,877 | ) |
|
| (295,073 | ) |
Non-controlling interest |
|
| - |
|
|
| (1,949 | ) |
Total stockholders' deficit |
|
| (368,877 | ) |
|
| (297,022 | ) |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
| $ | 110,393 |
|
| $ | 223,978 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements
4 |
Table of Contents |
Almost Never Films Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| December 31, |
|
| December 31, |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administration expenses |
| $ | 21,224 |
|
| $ | 26,562 |
|
| $ | 37,073 |
|
| $ | 47,539 |
|
Professional fees |
|
| 20,714 |
|
|
| 504 |
|
|
| 66,543 |
|
|
| 21,504 |
|
Total operating expenses |
|
| 41,938 |
|
|
| 27,066 |
|
|
| 103,616 |
|
|
| 69,043 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
| (41,938 | ) |
|
| (27,066 | ) |
|
| (103,616 | ) |
|
| (69,043 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (Expense) Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on investment |
|
| 30,000 |
|
|
| - |
|
|
| 30,000 |
|
|
| - |
|
Interest expense |
|
| (6,212 | ) |
|
| (8,665 | ) |
|
| (12,156 | ) |
|
| (17,555 | ) |
Loss on disposal of subsidiaries |
|
| (776 | ) |
|
| - |
|
|
| (776 | ) |
|
| - |
|
Gain on interest payable waived |
|
| - |
|
|
| - |
|
|
| 12,726 |
|
|
| - |
|
Total other income (expense), net |
|
| 23,012 |
|
| (8,665 | ) |
|
| 29,704 |
|
| (17,555 | ) | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss before income taxes |
|
| (18,926 | ) |
|
| (35,731 | ) |
|
| (73,822 | ) |
|
| (86,598 | ) |
Provision for income taxes |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Net loss |
| $ | (18,926 | ) |
| $ | (35,731 | ) |
| $ | (73,822 | ) |
| $ | (86,598 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Almost Never Films Inc. |
|
| (18,908 | ) |
|
| (35,731 | ) |
|
| (73,804 | ) |
|
| (86,286 | ) |
Non-controlling interest |
|
| (18 | ) |
|
| - |
|
|
| (18 | ) |
|
| (312 | ) |
Comprehensive Loss |
| $ | (18,926 | ) |
| $ | (35,731 | ) |
| $ | (73,822 | ) |
|
| (86,598 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
|
| (18,646 | ) |
|
| (35,371 | ) |
|
| (73,422 | ) |
|
| (82,763 | ) |
Loss from discontinued operations, net of tax |
|
| (280 | ) |
|
| (360 | ) |
|
| (400 | ) |
|
| (3,835 | ) |
Net loss |
| $ | (18,926 | ) |
| $ | (35,731 | ) |
| $ | (73,822 | ) |
| $ | (86,598 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss from continuing operations Per Common Share – Basic and Diluted |
| $ | (0.00 | ) |
| $ | (0.01 | ) |
| $ | (0.01 | ) |
| $ | (0.01 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss from discontinued operations Per Common Share – Basic and Diluted |
| $ | (0.00 | ) |
| $ | (0.00 | ) |
| $ | (0.00 | ) |
| $ | (0.00 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss per share attributable to Common stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of the Company -Basic and Diluted |
| $ | (0.00 | ) |
| $ | (0.01 | ) |
| $ | (0.01 | ) |
| $ | (0.01 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Common Shares Outstanding - Basic and Diluted |
|
| 5,798,765 |
|
|
| 5,798,765 |
|
|
| 5,798,765 |
|
|
| 5,798,765 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements
5 |
Table of Contents |
Almost Never Films Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity (Deficit)
(Unaudited)
|
| Common Stock |
|
| Additional |
|
|
|
|
| Non- |
|
| Total |
| |||||||||
|
| Number of Shares |
|
| Amount |
|
| Paid in Capital |
|
| Accumulated Deficit |
|
| controlling Interest |
|
| Stockholders' Equity |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balance - June 30, 2020 |
|
| 5,798,765 |
|
| $ | 5,799 |
|
| $ | 1,895,486 |
|
| $ | (2,068,521 | ) |
| $ | (1,637 | ) |
| $ | (168,873 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (50,555 | ) |
|
| (312 | ) |
|
| (50,867 | ) |
Balance - September 30, 2020 |
|
| 5,798,765 |
|
| $ | 5,799 |
|
| $ | 1,895,486 |
|
| $ | (2,119,076 | ) |
| $ | (1,949 | ) |
| $ | (219,740 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (35,731 | ) |
|
| - |
|
|
| (35,731 | ) |
Balance - December 31, 2020 |
|
| 5,798,765 |
|
| $ | 5,799 |
|
| $ | 1,895,486 |
|
| $ | (2,154,807 | ) |
| $ | (1,949 | ) |
| $ | (255,471 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - June 30, 2021 |
|
| 5,798,765 |
|
| $ | 5,799 |
|
| $ | 1,895,486 |
|
| $ | (2,196,358 | ) |
| $ | (1,949 | ) |
| $ | (297,022 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (54,896 | ) |
|
| - |
|
|
| (54,896 | ) |
Balance - September 30, 2021 |
|
| 5,798,765 |
|
| $ | 5,799 |
|
| $ | 1,895,486 |
|
| $ | (2,251,254 | ) |
| $ | (1,949 | ) |
| $ | (351,918 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (18,908 | ) |
|
| (18 | ) |
|
| (18,926 | ) |
Derecognition of non-controlling interest upon disposition of subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,967 |
|
|
| 1,967 |
|
Balance - December 31, 2021 |
|
| 5,798,765 |
|
| $ | 5,799 |
|
| $ | 1,895,486 |
|
| $ | (2,270,162 | ) |
| $ | - |
|
| $ | (368,877 | ) |
The accompanying notes are an integral part of these condensed consolidated financial statements
6 |
Table of Contents |
Almost Never Films Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
|
| Six Months Ended |
| |||||
|
| December 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Cash Flows from Operating Activities: |
|
|
|
|
|
| ||
Net loss |
| $ | (73,822 | ) |
| $ | (86,598 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Gain on interest payable waived |
|
| (12,726 | ) |
|
| - |
|
Loss on disposal of subsidiaries |
|
| 776 |
|
|
| - |
|
Depreciation of property and equipment |
|
| 19 |
|
|
| - |
|
Accrued interest on promissory notes payable |
|
| 11,766 |
|
|
| 17,536 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
| 12,538 |
|
|
| 3,604 |
|
Interest paid on promissory notes payable |
|
| - |
|
|
| (6,023 | ) |
Net Cash used in Operating Activities |
|
| (61,449 | ) |
|
| (71,481 | ) |
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
Acquisition of property and equipment |
|
| (6,134 | ) |
|
| - |
|
Net cash paid in disposal of subsidiaries |
|
| (7 | ) |
|
| - |
|
Net Cash Used in Investing Activities |
|
| (6,141 | ) |
|
| - |
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
Borrowing from related party |
|
| 31,189 |
|
|
| - |
|
Repayment of note payable |
|
| - |
|
|
| (3,977 | ) |
Repayment of related party advances |
|
| (83,299 | ) |
|
| - |
|
Net Cash Used in Financing Activities |
|
| (52,110 | ) |
|
| (3,977 | ) |
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
| (119,700 | ) |
|
| (75,458 | ) |
Cash and Cash Equivalents, beginning of period |
|
| 138,482 |
|
|
| 80,510 |
|
Cash and Cash Equivalents, end of period |
| $ | 18,782 |
|
| $ | 5,052 |
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure Information: |
|
|
|
|
|
|
|
|
Cash paid for interest |
| $ | 390 |
|
| $ | 6,023 |
|
Cash paid for income taxes |
| $ | - |
|
| $ | - |
|
The accompanying notes are an integral part of these condensed consolidated financial statements
7 |
Table of Contents |
Almost Never Films Inc. and Subsidiaries
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
NOTE 1 – ORGANIZATION AND OPERATIONS
Nature of the Business
Almost Never Films Inc. (the “Company”) was originally incorporated in Nevada in October 2007 as Smack Sportswear (“Smack”), which originally manufactured and sold performance and lifestyle based indoor and sand volleyball apparel and accessories. The Company is now an independent film company focusing on film production, finance and production related services for movies under budgets of $35 million. The Company’s common stock are currently traded on OTC Pink under the symbol of “HLWD.”
On January 15, 2016, Smack entered into a share exchange agreement with Almost Never Films Inc., a private company incorporated in Indiana on July 8, 2015, and its two shareholders, Danny Chan and Derek Williams. Pursuant to the agreement, Smack issued 1,000,000 shares of our Series A Convertible Preferred Stock to Mr. Chan and Mr. Williams in exchange for all 2,500,000 shares of issued and outstanding common stock of Almost Never Films Inc. (Indiana). As a result of the share exchange, Almost Never Films Inc. (Indiana) became Smack’s wholly-owned subsidiary, and Mr. Chan and Mr. Williams acquired a controlling interest in the Company. The share exchange was accounted for as a “reverse acquisition,” and resulted in a recapitalization. Almost Never Films Inc. (Indiana) is deemed to be the acquirer for accounting purposes.
In March 2016, the Company increased the authorized capital to 5,000,000 shares of common stock and changed the name of the Company to “Almost Never Films Inc.” upon the approval from stockholders of the company. On August 9, 2017, the Company has approved a 1-for-40 reverse split of its issued and outstanding common stock. The common stock accounts and all share related balances have been applied retroactively for all periods presented.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Team Sports Superstore (Inactive), Almost Never Films Inc. (Indiana), Virginia Christmas, LLC (New York), Christmas Camp, LLC (New York). Its 90% owned subsidiaries are One HLWD KY LLC (Kentucky), Two HLWD KY LLC (Kentucky) and Three HLWD KY (Kentucky), LLC. All significant intercompany transactions and balances have been eliminated in consolidation.
Discontinued operations
On October 18, 2021 both One HLWD KY LLC and Three HLWD KY LLC were dissolved. On December 13, 2021, the Company sold Virginia Christmas and Christmas Camp to an officer of the Company (see Note 7). As a result of such transactions, the Company no longer controls such entities and their historical results are presented as discontinued operations in the consolidated statements of operations and comprehensive loss.
Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, these condensed financial statements do not include all the information and footnotes required for audited annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to make the financial statements not misleading have been included.
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The accompanying audited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”).
Use of Estimates
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the U.S requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. Significant estimates are used in valuing the fair value of common stock issued for services, film costs, among others. Actual results could differ from these estimates.
Film Costs, Net
The Company records film costs in accordance with ASC – 926 - Entertainment – Films. Film costs include direct production costs, production overhead and acquisition costs for both motion picture and television productions and are stated at the lower of unamortized cost or estimated fair value and classified as noncurrent assets. The Company qualifies for certain government programs that provide incentives earned in regard to expenditures on qualifying film production activities. The incentives are recorded as an offset to the related asset balance. Estimates used in calculating the fair value of the film costs are based upon assumptions about future demand and market conditions and are reviewed on a periodic basis.
Revenue Recognition
The Company recognizes revenue from its contracts with customers in accordance with ASC 606 – Revenue from Contracts with Customers. The Company recognizes revenues when satisfying the performance obligation of the associated contract that reflects the consideration expected to be received based on the terms of the contract.
Revenue related to contracts with customers is evaluated utilizing the following steps:
| (i) | Identify the contract, or contracts, with a customer; |
| (ii) | Identify the performance obligations in the contract; |
| (iii) | Determine the transaction price; |
| (iv) | Allocate the transaction price to the performance obligations in the contract; |
| (v) | Recognize revenue when the Company satisfies a performance obligation. |
When the Company enters into a contract, the Company analyses the services required in the contract in order to identify the required performance obligations which would indicate the Company has met and fulfilled its obligations. For the current contracts in place, the Company has identified performance obligations as one single event, the sign-off by both parties that production is completed and the product (film) is ready for distribution. To appropriately identify the performance obligations, the Company considers all of the services required to be satisfied per the contract, whether explicitly stated or implicitly implied. The Company allocates the full transaction price to the single performance obligation being satisfied.
The Company recognizes revenue when the customer confirms to the Company that all of the terms and conditions of the contract has been met, and the sign-off of the project has been completed. The Company derives its revenues from the follows:
| · | Production Service Agreement Revenue is related to films where the Company has been engaged as an independent contractor to provide production services and other elements related to production for individual film projects. |
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| · | Revenue from self-produced films is related to films where the Company has self-produced certain films along with a third party, with the expectation that these films will be distributed in the future. |
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The Company analyses whether gross sales, or net sales should be recorded, has control over establishing price, and has control over the related costs with earning revenues. The Company has recorded all revenues at the gross price.
Cash payments received are recorded as deferred revenue until the conditions, stated above, of revenue recognition have been met, specifically all obligations have been met as specified in the related customer contract.
Recently Issued Accounting Pronouncements
Management has considered all recent accounting pronouncements issued since the last audit of our financial statements. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.
Going Concern
The accompanying consolidated financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business. The accompanying condensed consolidated financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern. During the six months ended December 31, 2021, the Company incurred a net loss of $73,822. As of December 31, 2021, the Company had a working capital deficiency of $460,488 and an accumulated deficit of $2,270,162. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.
The ability of the Company to continue as a going concern and appropriateness of using the going concern basis is dependent upon, among other things, an additional cash infusion and an identification of new business opportunities.
The Company plans on raising the required funds through completion of film projects resulting in revenues, and further potential equity and debt offerings. However, there is no assurance that the Company will be successful in this or any of its endeavors or become financially viable to continue as a going concern.
NOTE 3 – FILM COSTS
Film costs are comprised of the following:
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| December 31, |
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| June 30, |
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| 2021 |
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| 2021 |
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Independent Self-Produced Film Costs |
| $ | 85,496 |
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| $ | 85,496 |
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Film costs include salaries and wages, and all other direct costs associated with the motion pictures and television productions. In addition, the Company qualifies for certain government programs that provide incentives earned in regard to expenditures on qualifying film production activities. The incentives are recorded as an offset to the related asset balance.
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NOTE 4 – GAIN ON INVESTMENT
On December 10, 2021, the Company entered into an investment agreement with Wire Room Movie LLC to investment $170,000 fund in connection with a motion picture project entitled “Wire Room”. As of December 31, 2021, the producer of “Wire Room” returned $200,000 back to the Company including the investment principal and a gain on investment of $30,000.
NOTE 5 – DEFERRED FILM REVENUE – RELATED PARTY
During the year ended June 30, 2021, the Company entered into an agreement with Harley Commodity Co. (“Harley”), a related party, to provide certain development services in connection with a future motion picture project. As of December 31, 2021, the $100,000from Harley, was recorded as deferred film revenue – related party as development at such date had not yet been completed.
NOTE 6 – PROMISSORY NOTES PAYABLE
| (i) | On October 11, 2017, the Company issued a $150,000Promissory Note in exchange for receiving $150,000proceeds. The principal of $150,000is due fourteen (14) months from the receipt of the funds. and a total interest charge of ten percent or $15,000is to be recorded over the term of the loan. The proceeds were used by the Company to fund the motion picture known as One HLWD KY LLC. On September 24, 2019, the Company signed amendment agreement with lender for the balance of principal note of $50,000with new maturity date of June 30, 2020. The $50,000principal note was paid off on June 12, 2020, and interest expense of $4,767was recorded for the year ended June 30, 2020. Due to change of maturity date of the loan agreement to June 30, 2020, the default interest at 22% recorded in the previous, adjusted to 10% and the effect of change recognized as of gain on modification of debt. On August 12, 2021, the outstanding interest payable was fully waived by the lender in the amount of $12,726, which was recorded as a gain on modification of debt during the six months ended December 31, 2021. As of December 31, 2021 and June 30, 2021, interest payable was $0 and $12,726, respectively. |
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| (ii) | On January 4, 2018, the Company issued a $80,000Promissory Note in exchange for receiving $80,000proceeds. The principal of $80,000is due twelve (12) months from the receipt of the funds and bears interest at 10% per annum. The proceeds were used by the Company to fund the motion picture known as River Runs Red. On September 24, 2019, the Company signed amendment agreement with lender for the principal note of $80,000with new maturity date of June 30, 2020. The note is in default currently and accrues interest at 22% per annum. For the six months ended December 31, 2021, and 2020, interest expense of $8,187and $8,412were recorded, respectively. As of December 31, 2021 and June 30, 2021 interest payable were $20,601and $12,414, respectively with the outstanding principal amount of $73,820and $73,820, respectively. During the six months ended December 31, 2021 and 2020, the Company repaid principal of $0 and $3,977, respectively, and interest of $0 and $6,023respectively. |
| (iii) | On September 24, 2019, the company issued a $50,000Promissory Note in exchange of settlement loan agreement of February 6, 2018 with another lender for replacing $50,000proceeds. The principal of $50,000is due on June 30, 2020 and bears interest at 10% per annum. The Company did not reach an agreement with note holder for new maturity date and as of June 30, 2020, the note is in default. As of September 24, 2019, unpaid interest of $8,164was due and transferred to a new lender. During the six months ended December 31, 2021 and 2020, interest expenses of $554 and $554, respectively was recorded. As of December 31, 2021 and June 30, 2021, unpaid principal was $5,000and $5,000, respectively and accrued interest payable of $5,665and $5,111, respectively. |
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NOTE 7 – RELATED PARTY TRANSACTIONS
| (i) | During the year ended June 30, 2021, the Company’s CEO provided the Company with a series of advances, totaling $83,799. During the six months ended December 31, 2021, the Company’s CEO provided additional advances to the Company with a cumulative total of $31,189, after the Company repaid $83,299back to the Company’s CEO, and $500 was deconsolidated upon the sale of a subsidiary to a director (Note 6(iv)), resulting in a remaining payable as of December 31, 2021 and June 30, 2021 of $31,189and $83,799, respectively. The funds are unsecured, non-interest bearing and due on demand. |
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| (ii) | On September 19, 2017 the company issued a 10% Promissory Note in exchange for receiving $350,000from Kruse Farms, LP., a Company owned by one of the Company’s principle owners, to fund the production of a motion picture. The principal of $350,000is due in twenty-four (24) months from receipt of the funds. On September 24, 2019, the Company and the lender have extended the maturity date to June 30, 2020. The note is currently in default. During the six months ended December 31, 2021 and 2020, the Company recorded interest expense of $3,025and $3,025, respectively. As of December 31, 2021 and June 30, 2021, the principal balances of note were $60,000and $60,000, respectively, with interest payable of $74,978and $71,953outstanding. |
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| (iii)
(iv)
| On September 24, 2019, the company issued a $50,000Promissory Note to the Company’s Chief Executive Officer in exchange of settlement loan agreement of February 6, 2018 with another lender for $50,000proceeds. The principal of $50,000is due on June 30, 2020 and bears interest at 10% per annum. As of September 24, 2019, unpaid interest of $8,164was due and transferred to lender. The note is currently in default. As of December 31, 2021 and June 30, 2021, unpaid principal totaled nil and nil, respectively with accrued interest of $20,468and $20,468, respectively.
On December 13, 2021, the Company sold its interests in Christmas Camp, LLC and Last Viriginia Christmas, LLC to its Chief Creative Officer for consideration of $1. Within the Company’s loss from disposal of subsidiaries includes a loss of $3,621with respect to this transaction. |
NOTE 8 – COMMITMENTS AND CONTINGENCIES
The Company neither owns nor leases any real or personal property. The Company’s officers have provided office services without charge. There is no obligation for the officer to continue this arrangement. Such costs are immaterial to the financial statements and accordingly are not reflected herein. The officers and directors are involved in other business activities and most likely will become involved in other business activities in the future.
NOTE 9 – SUBSEQUENT EVENTS
The Company has evaluated all subsequent events through the date these consolidated financial statements were issued and determined that there were no subsequent events or transactions that require recognition or disclosures in these condensed consolidated financial statements.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Business Development
SMACK Sportswear (“SMACK or the Company”) was originally incorporated in Nevada in October 2007. Through June 30, 2016, we were a manufacturer and seller of performance and lifestyle based indoor and sand volleyball apparel and accessories. As of July 31, 2015, we completed the disposition of certain assets of the Company to William Sigler, a former director of the Company; in connection with said transactions Mr. Sigler resigned and agreed to sell all his shares of common stock in the Company. As a result of the sale of certain inventory from the Company to Mr. Sigler, the Company was considered a “shell company” (as such term is defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended).
On January 15, 2016, pursuant to the share exchange agreement, among Almost Never Films Inc. f/k/a Smack Sportswear (the “Company”, “we,” “our” or “us”), Almost Never Films Inc. (“ANF”), an Indiana corporation, and the two shareholders of ANF (the “ANF Shareholders”), we issued to the ANF Shareholders, 1,000,000 shares of our Series A Convertible Preferred Stock (the “Series A Preferred Stock”), par value $0.001 per share in exchange for all 100,000,000 shares of the issued and outstanding common stock of ANF (the “Share Exchange”). As a result of the Share Exchange, ANF became our wholly-owned subsidiary, and our business has become the business of ANF, effective January 15, 2016.
The share exchange was accounted for as a "reverse acquisition," and resulted in a recapitalization. Almost Never Films Inc. (Indiana) is deemed to be the acquirer for accounting purposes. The assets acquired and liabilities assumed were $6,566 and $598,869, respectively. Consequently, the assets and liabilities and the historical operations that will be reflected in the financial statements prior to the share exchange will be those of Almost Never Films Inc. (Indiana) and will be recorded at the historical cost basis of Almost Never Films Inc. (Indiana), and the combined financial statements after completion of the share exchange include the assets and liabilities of Almost Never Films Inc. (Indiana), historical operations of Almost Never Films Inc. (Indiana), and operations of Almost Never Films Inc. (Indiana) from the closing date of the share exchange. As a result of the issuance of the shares of our Series A Convertible Preferred Stock pursuant to the share exchange, a change in control of the Company occurred as of the date of consummation of the share exchange. All share and per share information in the accompanying consolidated financial statements and footnotes has been retroactively restated to reflect the recapitalization. The Company has not yet generated any revenue since the reverse acquisition.
On February 29, 2016, the stockholders of Smack voted to amend the Articles of Incorporation of the Company to (i) increase the authorized capital of the Company to 200,000,00 shares of common stock and (ii) to change the name of the Company to “Almost Never Films Inc.” which took effect on March 2, 2016.
The Company has 5,000,000 authorized preferred shares with no par value.
Smack issued 1,000,000 shares of our Series A Convertible Preferred Stock to the Mr. Chan and Mr. Williams in exchange for all 100,000,000 shares of issued and outstanding common stock of Almost Never Films Inc. (Indiana), with a value of $10,000.
On March 4, 2016, all 1,000,000 preferred shares were converted into 100,000,000 common shares.
There were no shares of preferred stock issued and outstanding as of March 31, 2019.
On March 8, 2016, the Company executed a Stock Purchase Agreement with a shareholder. Pursuant to the Stock Purchase Agreement, the Company sold, and said shareholder purchased, an aggregate of 49,720,000 shares of the Company’s Common Stock at a price of $0.005 per share in exchange for the cancellation of and discharge of certain promissory notes issued by the Company and payable to said shareholder. The foregoing issuance was deemed to be exempt from registration under Section 4(a)(2) of the Securities Act as not involving any public offering and/or Regulation D promulgated thereunder and in reliance on similar exemptions under applicable state laws.
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In March through November 2016, the Company entered into four share purchase agreements with four investors for 12,500,000 common shares at $0.02 per share for total proceeds of $250,000
On November 16, 2016, the company entered into a collaboration agreement (the “KBM Agreement”) with Konwiser Brothers Media (“KBM”, and together with ANF, the “Parties). Pursuant to the Agreement, the Parties will create an LLC or other entity (the “Company”), for the purpose of developing, producing and exploiting proposed motion picture project currently entitled “Field Trip” (the “Picture”). KBM will contribute its development and producing services to the Company and all rights to the Screenplay, and ANF will make financial contributions, assist in the raising of additional financing and participate in the development and production process as set forth more fully herein. The Company will own 100% of the copyright to the Picture and all other ancillary and related rights, and each of KBM and ANF will own an undivided 50% interest in the Company. KBM will be the managing member of the Company. The operating agreement for the Company will be consistent with the terms of this Agreement. This transaction, and the ones mentioned below, removed the Company from its prior shell status. On September 27, 2017, KBM informed the Company of its intent to terminate the KBM Agreement.
On December 1, 2016, the Company filed a registration statement on Form S-1, registering 10,000,000 shares for certain selling shareholders. The Form S-1 was declared effective on December 9, 2016.
On December 12, 2016, the Company entered into a collaboration agreement (the “SAE Agreement”) with Saisam Entertainment, LLC (“SAE”, and together with the Company, the “Parties). Pursuant to the Agreement, the Parties will create an LLC or other entity (the “Company”), for the purpose of developing, producing and exploiting proposed motion picture project currently entitled “Love is not Easy” (the “Picture”). The Company owns and controls the rights to the screenplay for the Picture.
On June 6, 2017, the Company issued a 2.5% promissory note (the “ANF Note”) to Weirong Zhang (the “Investor”). Pursuant to the ANF Note, the Company received $200,000, which was due to the Lender ninety (90) days from the date the purchase price of $200,000 was paid. The ANF Note accrues interest at 2.5% per 90 days. Thereafter, on June 7, 2017, The Money Pool, LLC (“Money Pool”) issued a non-transferable promissory note to the Company for $200,000 (the “Money Pool Note”). The Company funded the Money Pool Note with the funds received from the Investor. Money Pool shall use the funds from the Money Pool Note, along with its own funds, in order to provide a bridge loan to Blue Rider San Juan, LLC (“Blue Rider”), in connection with the production of a motion picture known as “Speed Kills”. Blue Rider is the international sales agent for “Speed Kills.” The Money Pool Notes accrues interest of a flat 2.5% for the first 45 days from funding. In the event the Money Pool Note is not paid in full within 45 days, the flat interest rate will increase to 3.5% for each 45-day period any balance or accrued interest remains unpaid. The principal and interest shall be payable by Money Pool to the Company from payments made by Blue Rider on the bridge loan provided by Money Pool. On June 9, 2017, the Company issued a 2.5% promissory note (the “Kruse Note”) to William R. Kruse (the “Kruse”). Pursuant to the Kruse Note, the Company received $200,000, which is due to Kruse ninety (90) days from the date the purchase price of $200,000 was paid. The Kruse Note accrues interest at 2.5% per annum. Thereafter, on June 12, 2017, Money Pool issued a non-transferable promissory note to the Company for $200,000 (the “Pool Note”). The Company shall fund the Pool Note with the funds received from Kruse. Money Pool shall use the funds from the Pool Note, along with its own funds, in order to provide a bridge loan to Blue Rider, in connection with the production of a motion picture known as “Ana”. Blue Rider is the international sales agent for “Ana.” The Pool Notes accrues interest of a flat 2.5% for the first 45 days from funding. In the event the Pool Note is not paid in full within 45 days, the flat interest rate will increase to 3.5% for each 45-day period any balance or accrued interest remains unpaid. The principal and interest shall be payable by Money Pool to the Company from payments made by Blue Rider on the bridge loan provided by Money Pool.
On August 2, 2017, Derek Williams presented the Board of Directors of the Company with his resignation as Chief Operating Officer and a member of the Board of Directors of the Company. Mr. William’s decision to resign was not due to any disagreement with the Company.
On August 24, 2017, the Board of Directors of the Company appointed Daniel Roth as Chief Creative Officer of the Corporation and Damiano Tucci as Chief Operating Officer of the Corporation.
On September 13, 2017, the Company completed a 1 for 40 reverse stock split and changed the authorized capital of the Company to 25,000,000 shares of common stock, par value $.001 per share.
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On November 10, 2017 the Company executed a First Amendment Agreement to its 6x picture Production and Distribution Agreement between Big Film Factory LLC (“Big Film” or “Prodco”) and Pure Flix Entertainment LLC (“PFE”), (the “Agreement”). The Agreement memorializes the understanding with respect to the development, packaging, production, post-production and worldwide distribution of the films intended for initial and primary worldwide exhibition. The Company, a Nevada corporation, will be added as a party to the initial agreement by and between Big Film and PFE, wherever Big Film is referenced in connection with providing production services in conjunction with Big Film as well as providing production capital and cash following each of the first six (6) films produced under the Agreement (“6 Pictures”). Both Prodco and PFE agree to expand the defined role of “Prodco” in the Agreement, to add the Company to that definition, and grant the Company equally the same role and responsibilities heretofore only held by Big Film in connection with the 6 Pictures.
The Company will be accorded a company credit and producer credits equal to those of Big Film. Furthermore, Prodco will provide the Company, Big Film and PFE with Producer’s E & O Insurance for a term of not less than three (3) years from delivery of any such Picture to PFE, and with limits of $1 million/$3 million/ $25K SIR as are common to the television/SVOD industry.
On April 26, 2018, the Company filed a registration statement on Form S-1, registering 514,822 shares for certain selling shareholders. The Form S-1 was declared effective on May 10, 2018.
Criteria
The Company was originally incorporated in Nevada in October 2007 as Smack Sportswear (“Smack”), which originally manufactured and sold performance and lifestyle based indoor and sand volleyball apparel and accessories. The Company is now an independent film company focused on film production and production related services in connection with genre specific motion pictures with production costs in the $5.0 million to $50.0 million range.
History
As described above, we were incorporated in Nevada in October 2007 under the name SMACK Sportswear under which we manufactured and sold performance and lifestyle based indoor and sand volleyball apparel and accessories. As a result of the sale of certain inventory from the Company to Mr. Sigler in July 2015, the Company became a “shell company” (as such term is defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended). As a result of the Share Exchange, we acquired the proposed business of Almost Never.
Almost Never, our wholly-owned subsidiary upon the closing of Share Exchange, was incorporated in the State of Indiana on July 8, 2015. As a result of the Share Exchange, the Company amended its Articles of Incorporation to change its name from “Smack Sportswear” to “Almost Never Films Inc.” to more accurately reflect its new business. We also request changed the Company’s OTCQB trading symbol to "HLWD"
We currently have authorized 30,000,000 shares of capital stock, consisting of (i) 25,000,000 shares of Common Stock, and (ii) 5,000,000 shares designated as preferred stock containing such rights, privileges and designations as our Board of directors may, from time to time, determine. As of the date of this Report, an aggregate of 5,203,765 shares of our Common Stock and no shares of our Series A Convertible Preferred Stock are issued and outstanding.
On March 4, 2017, all previously authorized 1,000,000 preferred shares were converted into 2,500,000 common shares. In March through November 2017, the Company entered into four share purchase agreements with three investors for 312,500 common shares at $0.08 per share for total proceeds of $250,000
On March 8, 2017, the Company executed a Stock Purchase Agreement with a shareholder. Pursuant to the Stock Purchase Agreement, the Company sold, and said shareholder purchased, an aggregate of 1,243,000 shares of the Company’s Common Stock at a price of $0.005 per share in exchange for the cancellation of and discharge of certain promissory notes issued by the Company and payable to said shareholder. The foregoing issuance was deemed to be exempt from registration under Section 4(a)(2) of the Securities Act as not involving any public offering and/or Regulation D promulgated thereunder and in reliance on similar exemptions under applicable state laws.
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On September 13, 2017, the Company completed a 1 for 40 reverse stock split and changed the authorized capital of the Company to 25,000,000 shares of common stock, par value $.001 per share.
Our principal executive office is located at 8605 Santa Monica Blvd #98258, West Hollywood, California 90069-4109.
Our Business
We are an independent film company focused on film production and production related services in connection with genre specific motion pictures with production costs in the $5.0 million to $50.0 million range.
Our business is to facilitate relationships (and as such, provide production related services) between creative talent (including writers, actors and directors) and companies who produce, finance and distribute motion pictures. We intend to acquire or license rights to materials upon which we believe motion pictures can be based (screenplays, books, short stories etcetera, which are referred to within the entertainment industry as the “underlying property”). We may further develop an underlying property by contracting for additional writing services and/or by bringing in new writers to perform “polishes” or “rewrites” on a particular underlying property.
If we are satisfied with the creative state of the underlying property, we then intend to make offers to directors and/or actors, to perform services in connection with a particular motion picture based on that underlying property. These offers are very often contingent and subject to the satisfaction of certain production elements, such as financier approval of the screenplay and the financier’s selection of a start date for principal photography.
If a director or actors accepts one of our offers, the director or actors are said to be “attached” to the motion picture project. Armed with the underlying property and the attached creative element(s) (these elements are often called the “package” in Hollywood), we may then approach third party financiers seeking financing as well as distribution for the potential motion picture. Another approach that we may take is to contact the financiers first, seeking first to produce the film, and then with a finished (or nearly finished) motion picture product, obtain distribution for the picture.
We entered into our first two collaboration agreements to produce the films “Field Trip” and “Love is not Easy” during the quarter ended December 31, 2019.
Critical accounting policies and estimates
Our condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. We continually evaluate our estimates and judgments, our commitments to strategic alliance partners and the timing of the achievement of collaboration milestones. We base our estimates and judgments on historical experience and other factors that we believe to be reasonable under the circumstances. All estimates, whether or not deemed critical, affect reported amounts of assets, liabilities, revenues and expenses, as well as disclosures of contingent assets and liabilities. These estimates and judgments are also based on historical experience and other factors that are believed to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known, even for estimates and judgments that are not deemed critical.
Going Concern
The accompanying financial statements have been prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern. The Company has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time. These conditions raise substantial doubt as to our ability to continue as a going concern.
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Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund operating expenses. The Company intends to position itself so that it may be able to raise additional funds through the capital markets. In light of management's efforts, there are no assurances that the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern.
Results of Operations
Results of Operations for the three months ended December 31, 2021 and 2020
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| December 31, |
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| Change |
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| 2021 |
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| 2020 |
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| % |
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Operating expenses |
| $ | 41,938 |
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| 27,066 |
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| $ | 14,872 |
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| 55 | % |
Other income (expenses), net |
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| 23,012 |
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| (8,665 | ) |
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| 31,677 |
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| 366 | % | |
Net loss from continuing operations |
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| (18,646 | ) |
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| (35,371 | ) |
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| 16,725 |
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| 47 | % |
Net loss from discontinued operations |
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| (280 | ) |
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| (360 | ) |
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| 80 |
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| (22 | %) | |
Net loss |
| $ | (18,926 | ) |
| $ | (35,731 | ) |
| $ | (16,805 | ) |
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| 47 | % |
Revenue. The Company did not recognize any revenue during the three months ended December 31, 2021 or 2020.
Cost of revenue. The Company did not recognize any cost of revenue during the three months ended December 31, 2021 or 2020.
Operating expenses. Operating expenses were $41,938 and $27,066 for the three months ended December 31, 2021, and 2020, respectively. During the three months ended December 31, 2021 and 2020, operating expenses consisted of professional fees of $20,714 and $504, respectively; and general administrative expenses of $21,224 and $26,562 respectively. The increase in operating expenses during the three months ended December 31, 2021 compared to the same period in the prior year was primarily related to an increase in audit fees as a result of several periods processed during the quarter ended December 31, 2021, of which there was no similar expense incurred during the quarter ended December 31, 2021, offset by a reduction in general and administrative expenses as a result of reductions in the Company’s insurance provided to certain employees of the Company.
Other income (expense), net. During the three months ended December 31, 2021, the Company incurred other income of $23,012, consisting of gain on an investment of $30,000, interest expense of $6,212, relating to accrued interest on unsecured promissory notes payable and a loss of $776 related to the disposition of several of the Company’s subsidiaries. During the three months ended December 31, 2020, the Company incurred interest expenses of $8,865, relating to accrued interest on unsecured promissory notes payable.
Net loss from continuing operations. For the three months ended December 31, 2021, and 2020, we incurred a loss from continuing operations of $18,646 and $35,371, respectively. The decrease in loss was attributable to a contribution of $30,000 from the gain on investment from the completion of a producer agreement production during the period and increased professional fees due to the processing of several periods during the three months ended December 31, 2021.
Net loss from discontinued operations. During the three months ended December 31, 2021, the Company occurred a loss from discontinued operations of $280 compared to $360 in the same period during the prior year. The Company’s discontinued operations reflect the operations of One HLWD KY, LLC; Three HLWD KY, LLC; Christmas Camp, LLC; and Last Virginia Christmas, LLC, all of which were former subsidiaries of the Company that were disposed during the three months ended December 31, 2021.
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Table of Contents |
Results of Operations for the six months ended December 31, 2021 and 2020
|
| Six Months Ended |
|
|
|
|
| |||||||||
|
| December 31, |
|
| Change |
|
|
| ||||||||
|
| 2021 |
|
| 2020 |
|
| Amount |
|
| % |
| ||||
Operating expenses |
| $ | 103,616 |
|
| $ | 69,043 |
|
| $ | 34,573 |
|
|
| 50 | % |
Other income (expenses), net |
|
| 29,794 |
|
|
| (17,555 | ) |
|
| 47,349 |
|
| (270 | %) | |
Net loss from continuing operations |
|
| (73,422 | ) |
|
| (82,763 | ) |
|
| (9,341 | ) |
| (11 | %) | |
Net loss from discontinued operations |
|
| (400 | ) |
|
| (3,835 | ) |
|
| 3,435 |
|
| (90 | %) | |
Net loss |
| $ | (73,822 | ) |
| $ | (86,598 | ) |
| $ | 12,776 |
|
|
| 15 | % |
Revenue. The Company did not recognize any revenue during the six months ended December 31, 2021 or 2020.
Cost of revenue. The Company did not recognize any cost of revenue during the three months ended December 31, 2021 or 2020.
Operating Expenses. Operating expenses were $103,616 and $69,043 for the six months ended December 31, 2021, and 2020, respectively. During the six months ended December 31, 2021 and 2020, operating expenses consisted of professional fees of $66,543 and $21,504, respectively; and general administrative expenses of $37,073 and $47,539 respectively. The increase in operating expenses during the six months ended December 31, 2021 compared to the same period in the prior year was primarily related to an increase in audit fees as a result of several periods processed during the six months ended December 31, 2021, of which there was no similar expense incurred during the six months ended December 31, 2021, and increased corporate activity, offset by a reduction in general and administrative expenses as a result of reductions in the Company’s insurance provided to certain employees of the Company.
Other income (expense), net. During the six months ended December 31, 2021, the Company incurred other income of $29,794, consisting of gain on an investment of $30,000, interest expense of $12,156, relating to accrued interest on unsecured promissory notes payable, a loss of $776 related to the disposition of several of the Company’s subsidiaries, and a gain on modification of debt of $12,726 related to the forgiveness of outstanding accrued interest payable by a formal promissory note holder. During the six months ended December 31, 2020, the Company incurred interest expenses of $17,555, relating to accrued interest on unsecured promissory notes payable.
Net loss from continuing operations. For the six months ended December 31, 2021, and 2020, we incurred a loss from continuing operations of $73,422 and $82,763, respectively. The decrease in loss was mainly attributable to a contribution of $30,000 from the gain on investment from the completion of a producer agreement production during the period and offset by increased professional fees due to an increase in audit fees as a result of several periods processed during the six months ended December 31, 2021.
Net loss from discontinued operations. During the three months ended December 31, 2021, the Company occurred a loss from discontinued operations of $400 compared to $3,835 in the same period during the prior year. The Company’s discontinued operations reflect the operations of One HLWD KY, LLC; Three HLWD KY, LLC; Christmas Camp, LLC; and Last Virginia Christmas, LLC, all of which were former subsidiaries of the Company that were disposed during the three months ended December 31, 2021.
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Table of Contents |
Liquidity and Capital Resources
Working Capital
|
| December 31, |
|
| June 30, |
|
| Change |
|
| |||||
|
| 2021 |
|
| 2021 |
|
| Amount |
|
| % | ||||
Cash |
| $ | 18,782 |
|
| $ | 138,482 |
|
| $ | (119,700 | ) |
| (86 | %) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Current Assets |
|
| 18,782 |
|
|
| 138,482 |
|
|
| (119,700 | ) |
| (86 | %) |
Current Liabilities |
|
| 479,270 |
|
|
| 521,000 |
|
|
| (41,730 | ) |
| (8 | %) |
Working Capital |
| $ | (460,488 | ) |
| $ | (382,518 | ) |
| $ | (77,970 | ) |
| (20 | %) |
Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures.
As of December 31, 2021 and June 30, 2021, we had a cash balance of $18,782 and $138,482, respectively. We do not have sufficient funds to operate for the next twelve months. There can be no assurance that additional capital will be available to the Company. We currently have no agreements, arrangements or understandings with any person or entity to obtain funds through bank loans, lines of credit or any other sources. Since the Company has no such arrangements or plans currently in effect, its inability to raise funds for the above purposes will have a severe negative impact on its ability to remain a viable company.
As of December 31, 2021, we had a working capital deficit of $460,488 as compared to working capital deficit of $382,518 as of June 30, 2021. The increase in working capital deficit was mainly due to net settlement of advances from the Company’s Chief Executive Officer (“CEO”) of $52,110, which was the result of advances from the CEO of $31,189 and repayments of prior advances of $83,299, purchases of equipment and a net loss incurred during the six months ended December 31, 2021.
Cash Flows
Cash flows used in operating activities
Cash flows used in operating activities were during the six months ended December 31, 2021 was $61,449 compared to net cash flow used in operations of $71,481 for the six months ended December 31, 2020. The increase in cash flows used in operating activities during the six months ended December 31, 2021 compared to same period in the prior year was primarily a result of a net loss of $73,822 adjusted for a gain on interest payable waived of $12,726 and accrued interest of $11,766 and an increase in accounts payable and accruals of $12,538, and deferred revenue of $171,429, compared to a net loss of $86,598 adjusted for accrued interest of $17,536 during the six months ended December 31, 2020.
Cash flows used in investing activities
During the six months ended December 31, 2021, net cash used in investing activities of $6,141 was the result of the acquisition of property and equipment of $6,134 and the net cash paid in disposition of subsidiaries of $7. The Company did not have any cash flows from investing activities during the six months ended December 31, 2020.
Cash flows used in financing activities
During the six months ended December 31, 2021, net cash used in financing activities was $52,110, compared to cash used in financing activities of $3,977 for the six months ended December 31, 2020. During the six months ended December 31, 2021, cash flows provided financing activities were the result of the repayment of $83,299 of advances from the Company’s Chief Executive Officer in addition to an additional $31,189 in advances provided. During the six months ended December 31, 2020, cash flows used in financing activities were the result of repayment of a note payable totaling $3,977.
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Table of Contents |
Going Concern Consideration
The accompanying consolidated financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business. The accompanying condensed consolidated financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern. During the six months ended December 31, 2021, the Company incurred a net loss of $73,822. As of December 31, 2021, the Company had a working capital deficiency of $460,488 and an accumulated deficit of $2,270,162. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.
The ability of the Company to continue as a going concern and appropriateness of using the going concern basis is dependent upon, among other things, an additional cash infusion and an identification of new business opportunities. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on operations, in the case of debt financing, or cause substantial dilution for our stock holders, in case of equity financing.
We do not have any material commitments for capital expenditures during the next twelve months. Although our proceeds from the issuance of debt and our offering of shares of common stock is currently sufficient to fund our operating expenses, we anticipate we will need to raise additional funds in the future so that we can expand our operations. Therefore, our future operations are dependent on our ability to secure additional financing. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, the trading price of our common stock and a downturn in the U.S. equity and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. The inability to obtain additional capital may restrict our ability to grow and may reduce our ability to continue to conduct business operations. If we are unable to obtain additional financing, we may have to curtail our marketing and development plans and possibly cease our operations.
Off-balance sheet arrangements
During the six months ended December 31, 2021, we did not have any "off-balance sheet arrangements" (as that term is defined in Item 303(a)(4)(ii) of Regulation S-K).
Recent accounting pronouncements
Management has considered all recent accounting pronouncements issued since the last audit of our financial statements. The Company's management believes that these recent pronouncements will not have a material effect on the Company's financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
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Table of Contents |
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e)) under the Exchange Act) that is designed to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time specified in the Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Pursuant to Rule 13a-15(b) under the Exchange Act, the Company carried out an evaluation with the participation of the Company's management, including the Company's Chief Executive Officer ("CEO") and the Company's Chief Financial Officer ("CFO"), of the effectiveness of the Company's disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of December 31, 2021. Based upon that evaluation, the Company's CEO and CFO concluded that the Company's disclosure controls and procedures were not effective as of December 31, 2021 due to the Company’s limited internal resources and lack of ability to have multiple levels of transaction review.
Management is in the process of determining how best to change our current system and implement a more effective system to insure that information required to be disclosed in the reports that we file or submit under the Exchange Act have been recorded, processed, summarized and reported accurately. Our management intends to develop procedures to address the current deficiencies to the extent possible given limitations in financial and manpower resources. While management is working on a plan, no assurance can be made at this point that the implementation of such controls and procedures will be completed in a timely manner or that they will be adequate once implemented.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal controls over financial reporting that occurred during the quarter ended December 31, 2021, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
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Table of Contents |
PART II
ITEM 1. LEGAL PROCEEDINGS
There are no pending legal proceedings to which the Company is a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the Company or has a material interest adverse to the Company. The Company’s property is not the subject of any pending legal proceedings.
ITEM 1A. RISK FACTORS
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
22 |
Table of Contents |
ITEM 6. EXHIBITS
|
|
|
| Incorporated by Reference |
| Filed | ||||||
Exhibit No. |
| Description |
| Form |
| SEC File No. |
| Exhibit |
| Filing Date |
| Herewith |
|
|
|
|
|
|
| ||||||
|
| SB2 |
| 333-148510 |
| 3.1 |
| 1/7/2008 |
|
| ||
|
| 8-K |
| 000-53049 |
| 3.2 |
| 4/13/2012 |
|
| ||
|
| 8-K |
| 000-53049 |
| 3.1 |
| 2/29/2017 |
|
| ||
|
| SB2 |
| 333-148510 |
| 3.2 |
| 1/7/2008 |
|
| ||
4.1 |
| Certificate of Designation of Series A Convertible Preferred Stock |
| 8-K |
| 000-53049 |
| 4.1 |
| 1/18/2017 |
|
|
10.1 |
| Share Exchange Agreement dated January 15, 2017 by and among SMACK Sportswear, Inc., Almost Never Films Inc., and the Shareholders of Almost Never Films Inc. |
| 8-K |
| 000-53049 |
| 2.1 |
| 1/18/2017 |
|
|
|
|
|
|
|
|
| ☒ | |||||
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|
| ☒ | |||||
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|
|
101.INS |
| XBRL Instance Document.* |
|
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101.SCH |
| XBRL Taxonomy Extension Schema.* |
|
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101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase.* |
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101.DEF |
| XBRL Taxonomy Extension Definition Linkbase.* |
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101.LAB |
| XBRL Taxonomy Extension Label Linkbase.* |
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101.PRE |
| XBRL Extension Presentation Linkbase. |
|
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|
_________
23 |
Table of Contents |
SIGNATURE
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.
| ALMOST NEVER FILMS INC. | ||
| |||
Date: March 2, 2022 | By: | /s/ Danny Chan | |
| Danny Chan, Chief Executive Officer and Chief Financial Officer (principal executive officer and principal financial and accounting officer) |
24 |