Crank Media Inc - Quarter Report: 2021 June (Form 10-Q)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended: June 30, 2021

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

For the transition period from __________ to __________

Commission file number: 000-55824

Crank Media Inc
(Exact name of registrant as specified in its charter)

1720-650 West Georgia Street

Vancouver, British Columbia, Canada V6B 4N8
(Address of principal executive offices and zip code)

(604) 558-2515
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

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 ☒ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
☐ Yes ☒ No

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Crank Media, Inc.

Form 10-Q

For the Six Months Ended June 30, 2021

INDEX

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Crank Media, Inc.

Balance Sheets

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

Crank Media, Inc.

Statements of Operations

(Unaudited)

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

Crank Media, Inc.

Statement of Stockholders’ Deficit

(Unaudited)

For the three and six months ended June 30, 2021

For the three and six months ended June 30, 2020

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

Crank Media, Inc.

Statements of Cash Flows

(Unaudited)

The accompanying notes are integral part of these unaudited financial statements

Crank Media, Inc.

Notes to Unaudited Financial Statements

June 30, 2021

Note 1 – Going Concern

Going Concern and Liquidity Considerations

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has had minimal revenue and has accumulated a deficit of $3,227,635 as of June 30, 2021. The Company requires capital for its contemplated operational and marketing activities. 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. These conditions and the ability to successfully resolve these factors raise substantial doubt about the Company’s ability to continue as a going concern within one year from the date these financial statements are issued. The financial statements of the Company do not include any adjustments that may result from the outcome of these uncertainties.

The Company has discussed ways in order to mitigate conditions or events that may raise substantial doubt about its ability to continue as a going concern, there are no assurances that any of these measures will successfully mitigate or be effective at all. (1) The Company shall pursue financing plans to raise funds to spend towards operational expenses, (2) The Company shall continue to employ low cost measures to operate its business and analyze any unnecessary cost or expense, (3) The Company will seek to avoid unnecessary expenditures, travel, and lodging costs that are not mission critical to its business, (4) The Company shall seek to continuously maximize its assets and business licensing strategies to increase revenue as well as to gain new customers.

COVID-19

A novel strain of coronavirus (COVID-19) was first identified in December 2019, and subsequently declared a global pandemic by the World Health Organization on March 11, 2020. As a result of the outbreak, many companies have experienced disruptions in their operations and in markets served. The Company has instituted some and may take additional temporary precautionary measures intended to help ensure the well-being of its managers and minimize business disruption. The Company considered the impact of COVID-19 on the assumptions and estimates used and determined that the primary adverse impact on the Company’s results of operations and financial position at June 30, 2021 has been a slowdown in the Company’s film and television production activities. The full extent of the future impacts of COVID-19 on the Company’s operations is uncertain. A prolonged outbreak could have a material adverse impact on financial results and business operations of the Company, including the timing and ability of the Company to obtain financing to fund the operation and to develop its business plan

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of the Company’s management, the accompanying unaudited financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of June 30, 2021, and the results of operations and cash flows for the periods presented. The results of operations for the period ended June 30, 2021, are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on April 15, 2021.

Revenue Recognition

The Company records revenue in accordance with FASB Accounting Standards Codification (“ASC”) as topic 606 (“ASC 606”). The revenue recognition standard in ASC 606 outlines a single comprehensive model for recognizing revenue as performance obligations, defined in a contract with a customer as goods or services transferred to the customer in exchange for consideration, are satisfied. The standard also requires expanded disclosures regarding the Company’s revenue recognition policies and significant judgments employed in the determination of revenue.

On November 1, 2016, the Company entered into a Licensing Agreement. The agreement grants the Licensee rights to grant sublicenses to third parties. The license agreement calls for a one-time nonrefundable fee of $10,000 and a $3,000 set up and training fee. The license agreement also calls for a five percent (5%) royalty on further sales by licensees, but no royalty fees have been received to date. All fees and royalty payments are to be recognized over the life of the agreement, which terminates on December 1, 2021.

The setup and training services are essential in allowing the licensee the ability to license the software to third parties. As a result, the license and set up and training fees are not distinct from one another and constitute a single performance obligation under the contract. Therefore, the onetime nonrefundable fee and the set up and training fees are being recognized over time.

The Company recognized $640 and $640 of revenue during the three months ended June 30, 2021, and 2020, respectively. However, the Company recognized $1,279 and $1,279 of revenue during the six months ended June 30, 2021 and 2020, respectively.

As of June 30, 2021, and December 31, 2020, there was deferred revenue of $1,066 and $2,345, respectively.

Earnings (loss) per share

Basic earnings (loss) per share calculations are determined by dividing net income (loss) by the weighted average number of shares outstanding during each period. Diluted earnings (loss) per share calculations are determined by dividing net income (loss) by the weighted average number of shares. For the six months ended June 30, 2021, the Company did not have any liabilities to be settled in stock and convertible debt and accrued interest. For the six months ended June 30, 2020, the Company had $350,000 in liabilities to be settled in stock, $100,164 in convertible debt and accrued interest, representing 350,000 and 20,032,804 shares of common stock not yet issued, which are potentially dilutive. Since the Company has incurred losses for all periods, the impact of the common stock equivalents would be anti- dilutive and therefore are not included in the calculation.

Fair Value Measurements

As defined in ASC 820” Fair Value Measurements,” fair value is 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 (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement).

The Company’s financial instruments consist of cash, accounts payable and accrued liabilities, deferred revenue, loan payable, and due to related parties. The carrying amounts of these financial instruments approximate fair value due to either length of maturity or interest rates that approximate prevailing rates unless otherwise disclosed in these financial statements.

Note 3 – Liability to be Settled in Stock

On October 31, 2019, the Company acquired the rights to four domain names from a third party. The cost to acquire the domain names was 350,000 shares of common stock valued at $1.00 per share for a total value of $350,000. During six months ended June 30, 2021, the Company settled this commitment by issuing 350,000 shares of common stock.

Note 4 – Loan Payable – Related Party

On March 1, 2021, the Company entered into an agreement with a note holder, for settlement of the outstanding balance of principal and accrued interest as of December 31, 2020. According to the agreement and approval of the board of directors, the outstanding balance of a $91,240 face amount promissory note and a loan totaling $21,849 were settled in exchange with issuance of a new promissory note of $134,000 and issuance of 1,500,000 shares of common stock valued for $30,000. The Company’s Chief Executive Officer as purchaser of the convertible note of $91,240 and accrued interest payable of $13,523, converted the note into 20,000,000 shares of common stock.

In conjunction with settlement of liability by issuance and issuance of shares, the Company recognized $142,150 loss on settlement of debt during the six months ended June 30, 2021.

The loan payable was cash paid for settlement of vendors’ invoices on behalf of the Company, at an interest rate of 10% per annum and matures on demand. During the six months ended June 30, 2021 and 2020, the total of $0 and $13,774 was paid to vendors on behalf of the Company, respectively. For the six months ended June 30, 2021, and 2020, the Company recorded $0 and $2,414 of interest expense, respectively. The outstanding balance as of June 30, 2021, and December 31, 2020, was $0 and $21,849, which included $0 and $16,203 of principal and $0 and $5,646 in accrued interest, respectively.

Note 5 – Convertible Note Payable – Related Party

On July 9, 2019, the Company entered into a convertible note agreement with the holder of the promissory note, whereby the holder agreed to refinance for an aggregate principal amount of $66,240 and $25,000 for administrative and consulting fees for a total note amount of $91,240.

The note earns an interest rate equal to 10% per annum and matures on January 1, 2021. The Company recorded a debt discount of $25,000 as result of the original issue discount. The note is convertible at fixed rate of $0.005 of common stock. Because of the fixed nature of the conversion the Company determined that there was no beneficial conversion feature which would have qualified it for derivative accounting under ASC 815-15, “Derivatives and Hedging.”

On January 12, 2021, pursuant to a general agreement dated December 21, 2020, the Company’s President, Chief Executive Officer, Chief Financial Officer purchased the outstanding balance of the note and accrued interest totaling $104,764 from note holder. On March 1, 2021, the Company’s Board of directors approved issuance of 20,000,000 shares of common stock (pursuant to the original conversion terms of the note) for settlement of convertible note outstanding balance of $104,764 to the Company’s officer.

For the six months ended June 30, 2021, and 2020, the Company recorded $0 and $695 amortization of the debt discount on the note, respectively. For the six months ended June 30, 2021, and 2020, the Company recorded interest expense of $0 and $1,130, respectively. For the six months ended June 30, 2020, the Company recorded a recovery of interest expense of $3,317, to reconcile accrued interest to actual.

As of June 30, 2021, and December 31, 2020, the Company had convertible note of $0 and $91,240 and accrued interest of $0 and $13,524, respectively.

Note 6 – Promissory Note Payable

(i) On February 26, 2021, the Company issued a promissory note of $134,000. The note shall be due and payable as follows:

The Company’s President, Chief Executive Officer, Chief Financial Officer guaranteed the note personally. Note is interest free, with a default rate from maturity date of 10% per annum. As of June 30, 2021, the first obligation of $54,667; second obligation of $ 39,667 and third obligation of $39,666 were not paid and it is in default. During the six months ended June 30, 2021, the Company recorded $2,928 default interest.

As of June 30, 2021, the outstanding balance of promissory note and accrued interest were $134,000 and $2,928, respectively.

(ii) On January 4, 2021, the Company issued a promissory note of $17,000 for a cash loan advance from a related party The note shall be due on or after February 5, 2021. The note shall bear interest from January 1, 2022 at the rate of 5% per annum. There shall be no interest accruing during 2021. The note was in default on June 30, 2021 and no default interest applicable.

(ii) On June 30, 2021, the Company issued a promissory note of $7,928 (CAD10,000) for a cash loan advance from an unrelated party. The note is interest free and was due on April 7, 2021 which was not paid and it is in default. The amount due is $13,478 (CAD17,000) and issuance of $3,000 worth of common stock at conversion price of $0.02 per share. Further, the Company recorded common stock payable of $3,000, interest expense of $8,550 for finance cost of $3,000 and amortized debt discount of $5,550.

Note 7 – Related Party Transactions

Compensation

Due to related party

Note 8 - Equity

The Company has authorized 100,000,000 common shares with a par value of $0.001 per share. Each common share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholders of the corporation is sought.

During the six months ended June 30, 2021, the Company issued the following shares of common stock:

As of June 30, 2021, and December 31, 2020, the Company had 40,106,612 and 5,756,612 common shares issued and outstanding, respectively.

Note 9 – SUBSEQUENT EVENTS

During the period ended September 30, 2021, the Company issued 400,000 shares as stock-based compensation to employees. The Company has also entered in a loan agreement with HPIL Holding as on November 1, 2021 wherein the borrowed amount is USD 808,500 and interest is payable at the rate of 5% beginning on May 1, 2022.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

FORWARD-LOOKING STATEMENTS

This Report on Form 10-Q contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Reference is made in particular to the description of our plans and objectives for future operations, assumptions underlying such plans and objectives, and other forward-looking statements included in this report. Such statements may be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “believe,” “estimate,” “anticipate,” “intend,” “continue,” or similar terms, variations of such terms or the negative of such terms. Such statements are based on management’s current expectations and are subject to a number of factors and uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements. Such statements address future events and conditions concerning, among others, capital expenditures, earnings, litigation, regulatory matters, liquidity and capital resources, and accounting matters. Actual results in each case could differ materially from those anticipated in such statements by reason of factors such as future economic conditions, changes in consumer demand, legislative, regulatory and competitive developments in markets in which we operate, results of litigation, and other circumstances affecting anticipated revenues and costs, and the risk factors set forth in the financial statements and related notes included on the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, which was filed on April 15, 2021.

As used in this Form 10-Q, “we,” “us,” and “our” refer to Crank Media Inc., which is also sometimes referred to as the “Company.”

General Overview

We were incorporated in Nevada on February 26, 2013, and on April 4, 2016, amended the Articles of Incorporation to change the name of the Company to Team 360 Sports Inc, on April 4, 2016, and then to Crank Media Inc, on December 22, 2020.

The Company has its Nevada registered office at 711 S. Carson Street, Suite 4, Carson City, Nevada 89701. The Company’s main phone number is 604-558-2515. Its principal operations are conducted from its office at 1720 - 650 West Georgia Street, Vancouver, British Columbia, Canada V6B 4N8. The Company’s website on the Internet at www.crankmedia.ca.

The Company’s primary business activities are related to (i) the planning and development for the production and distribution of music recordings, with four different music recording artists currently under contract, (ii) the planning and development of the production and distribution of movies, with two films currently in pre-production and two other film scripts currently being completed, and (iii) the planning and development of the production and distribution of television shows, with two shows currently in pre-production, one show in the phase of having the rights to certain of its episodes being marketed, and a fourth show in a very preliminary stage of development. The Company also is attempting to develop and build its virtual studio, and also intends to further develop its easy to use platform digital administration management systems for amateur sport s clubs, leagues and teams.

At June 30, 2021, the Company has had minimal revenues as the activities described above are primarily in planning and development stages. The Company’s fiscal-year end is December 31.

COVID-19

A novel strain of coronavirus (COVID-19) was first identified in December 2019, and subsequently declared a global pandemic by the World Health Organization on March 11, 2020. As a result of the outbreak, many companies have experienced disruptions in their operations and in markets served. The primary adverse impact of COVID-19 on the Company’s results of operations and financial position as of June 30, 2021 has been a slowdown in the Company’s film and television production activities. The full extent of the future impacts of COVID-19 on the Company’s plan of operations is uncertain. A prolonged outbreak could have a material adverse impact on the Company’s ability to pursue its business plan in the manner and timing anticipated.

Results of Operations

The following discussion and analysis should be read in conjunction with the Company’s unaudited financial statements for the six months ended June 30, 2021, and 2020, and accompanying notes appended thereto that are included in this quarterly report.

For the Six Months Ended June 30, 2021 and 2020

Our operating results for the six months ended June 30, 2021 and 2020, are as follows:

Revenues are related to the Licensing Agreement dated November 1, 2016. The onetime nonrefundable fee and the set up and training fees are being recognized over the life of the agreement, which terminates on December 1, 2021.

Operating Expenses

For the six months ended June 30, 2021, operating expenses were $346,000 for related party compensation expenses and $111,295 for general and administration expenses.

For the six months ended June 30, 2020, operating expenses were $250,000 for related party compensation expenses and $17,753 for general and administration expenses.

Other Expenses

For the six months ended June 30, 2021, and 2020, other expenses were $2,948 and $3,067 for interest on loans, respectively and $8,550 and $0 for finance cost of note payable, respectively.

For the six months ended June 30, 2021 and 2020, other expenses were $142,150 and $0 for loss on settlement of debt, respectively.

Liquidity and Capital Resources

The following table provides selected financial data about the Company as of June 30, 2021 and December 31, 2020, respectively:

Working Capital

Cash Flows

As of June 30, 2021, and December 31, 2020, our current assets were $24,928 and $358, respectively.

As of June 30, 2021, our current liabilities and working capital deficiency decreased as compared to December 31, 2020, primarily from settlement of domain names liabilities.

As of June 30, 2021, current liabilities consisted primarily of $164,478 to promissory note payable, $26,346 due to related party, $197,177 to accounts payable and accrued liabilities and $1,066 to deferred revenue.

As of December 31, 2020, our current liabilities consisted primarily of $350,000 to liabilities to be settled in stock, $91,240 to convertible notes, $21,849 to loan payable, $12,450 due to related party, $14,713 to accounts payable and $2,345 to deferred revenue.

Operating Activities

During the six months ended June 30, 2021, net cash used in operating activities was ($358), compared to $144 for the six months ended June 30,2020.

The net cash used in operating activities for the six months ended June 30, 2021, was attributed to a net loss of $609,664, decreased by an accrued related party compensation of $96,000 for officers’ salary, loss of settlement of debts of $142,150, stock issued for reimbursement of expenses paid by related party of $250,000, accounts payable and accrued liabilities of $99,989 and increased by a change in deferred revenue of $1,279.

The net cash used in operating activities for the six months ended June 30,2020, was attributed to a net loss of $269,541, decreased by an accrued related party compensation of $250,000, amortization of discount on convertible note of $695, increased by a change in accounts payable and accrued liabilities of $622 and increased by a deferred revenue of $1,278.

Investing Activities

The Company did not use any funds for investing activities during the three months ended June 31, 2021, and 2020.

Financing Activities

During the six months ended June 30, 2021, net cash provided by financing activities was $0, compared to $20,089 for the six months ended June 30, 2020, from loans.

Off-Balance Sheet Arrangements

As of June 30, 2021, the Company had no material off-balance sheet arrangements

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions and estimates that affect the amounts reported. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates, and such differences may be material.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

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 June 30, 2021. Based upon that evaluation, the Company’s CEO concluded that the Company’s disclosure controls and procedures were not effective as of June 30, 2021 due to the Company’s limited internal resources and lack of ability to have segregation of duties and 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 ensure 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 control over financial reporting that occurred during the quarter ended June 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

Not applicable.

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

None, other than as reported in the Forms 8-K filed on March 15, 2021 and April 5, 2021.

Item 3. Defaults Upon Senior Securities

The promissory note payable, which is described in Note 6 to the financial statements herein and which is incorporated by reference to this Item 3, is in default in the amount of $164,478 in principal and approximately $ 12,400 in interest at March 15, 2022 (which is anticipated to be the date of filing this Report).

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits.

* Filed herewith.

** Furnished herewith.

SIGNATURES

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