Six Months Ended
		December 31,
		2017				2016
Cash Flows from Operating Activities:
Net loss		$	(120,066	)		$	(59,612	)
Adjustments to reconcile net loss to net cash used in operating activities:
Interest receivable			5,159				-
Prepaid expense			(15,916	)			(19,971	)
Film costs			(414,937	)			-
Accrued liabilities			18,933				18,711
Interest payable			12,540				-
Net Cash Used in Operating Activities			(514,287	)			(60,872	)
Cash Flows from Investing Activities:
Issuance of Promissory note receivable			(350,000	)			-
Collection of Promissory note receivable			400,000
Loan receivable			(12,000	)			-
Net Cash Provided by Investing Activities			38,000				-
Cash Flows from Financing Activities:
Proceeds from common stock subscribed			386,000				-
Retirement of Common Stock			(20,000	)			-
Promissory note payable			800,000				-
Payment of Promissory note payable			(200,000	)			-
Payment of Promissory note payable - related party			(200,000	)			-
Proceeds from issuance of stock			-				115,000
Net Cash Provided By Financing Activities			766,000				115,000
Net Increase in Cash and Cash Equivalents			289,713				54,128
Cash and Cash Equivalents, beginning of period			91,590				84,967
Cash and Cash Equivalents, end of period		$	381,303			$	139,095
Supplemental Disclosure Information:
Cash paid for interest		$	10,000			$	-
Cash paid for income taxes		$	-			$	-

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

6

Table of Contents

Almost Never Films Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

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

7

Table of Contents

Almost Never Films Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DecemberMarch 31, 20172019 (Unaudited)

NOTE 1 -– ORGANIZATION OPERATIONS AND BASIS OF ACCOUNTINGOPERATIONS

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 focused on film production, finance and production related services for movies under budgets of $35 million. The Company’s common stock are currently traded on QTCQB under the symbol of “HLWD.”

Share Exchange and Recapitalization

On January 15, 2016, Smack entered into a share exchange agreement with Almost Never Films Inc., a private company incorporated in Indiana on July 8, 2015, and its two shareholders, Danny Chan and Derek Williams.

Pursuant to the agreement, Smack issued 1,000,000 shares of our Series A Convertible Preferred Stock to Mr. Chan and Mr. Williams in exchange for all 2,500,000 shares of issued and outstanding common stock of Almost Never Films Inc. (Indiana). As a result of the share exchange, Almost Never Films Inc. (Indiana) became Smack’s wholly-owned subsidiary, and Mr. Chan and Mr. Williams acquired a controlling interest in the Company.

The share exchange was accounted for as a "reverse“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 inception.

On February 29, 2016, the stockholders of Smack voted to amend the Articles of Incorporation of the Company to (i) increase the authorized capital of the Company to 5,000,000 shares of common stock and (ii) to change the name of the Company to “Almost Never Films Inc.” which took effect on March 2, 2016.

On August 9, 2017, the Company has approved a 1 for 40 reverse split of its issued and outstanding common stock. The common stock accounts and all share related balances have been be applied retroactively for all periods presented.

The new symbol of the Company is HLWD in OTCQB.

7

Table of Contents

Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business. The accompanying consolidated financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern. During the six months ended December 31, 2017, the Company had a net loss from operations of $102,367 and net cash outflows from operating activities of $514,287. As of December 31, 2017, the Company is delinquent in payments of $66,613 of a note payable and has an accumulated deficit of $1,065,323. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

The ability of the Company to continue as a going concern and appropriateness of using the going concern basis is dependent upon, among other things, an additional cash infusion and an identification of new business opportunities.

Management has reviewed the entity’s financial condition, and has improved the Company’s working capital during the past fiscal year. Management believes the Company will be able to fund operations for the next year through cash on hand, and further potential equity and debt offerings. There are no other significant conditions or events that management has identified that will adversely affect the Company’s ability to meet its obligations over the next year of operations.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of the Company is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.

Basis of Consolidation

The unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Team Sports Superstore (Inactive) and Almost Never Films Inc. (Indiana) and FWIL, LLC (Indiana), and its 90 % owned subsidiaries, One HLWD KY LLC (Kentucky), Two HLWD KY LLC (Kentucky), and Three HLWD KY (Kentucky), LLC, as well as the following entities, which are 100 % owned: Virginia Christmas, LLC (New York), Christmas Camp, LLC (New York), and FWIL,Country Christmas, LLC (Indiana)(Ohio). All significant intercompany transactions and balances have been eliminated in consolidation.

8

Table of Contents

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements presented herein have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Qrules and Regulation S-X.regulations of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, thethese unaudited condensed financial statements do not include all of the information and notesfootnotes required by GAAP for completeaudited annual financial statements. In the opinion of management, all adjustments including(consisting of normal recurring adjustments,accruals) considered necessary for a fair statement ofto make the financial statements not misleading have been included. Operating

The unaudited condensed consolidated financial statements included herein should be read in conjunction with the audited financial statements and the notes thereto that are included in the Company’s audited June 30, 2018 financial statements that was filed with the SEC on October 15, 2018. The results of operations for the sixnine months ended DecemberMarch 31, 20172019, are not necessarily indicative of the results that mayto be expected for the year ending June 30, 2018.

These unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended June 30, 2017, which were included in the Company’s 2017 Annual Report on Form 10-K. The accompanying condensed consolidated balance sheet as of June 30, 2017, has been derived from the Company’s audited consolidated financial statements as of that date.full year.

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.

8

Table of Contents

Cash

Cash includes demand deposits with banks or other financial institutions. All cash balances are hold by major banking institutions.

Concentration of Risk

The Company maintains its cash with a financial institution, and at times, amounts may exceed federally insured limits. Currently the FDIC insurance coverage limit is $250,000, and the Company is potentially exposeddoesn’t expose to no un-insured cash balances. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash.

The Company encounters a certain amount of risk as a result of a concentration of revenue from a few significant customers. For the nine months and three months ended March 31, 2019, one of the customers accounted for approximately 99.6% of total revenue. The Company performs ongoing credit evaluations of its customers and records an allowance for potential bad debts based on available information.

Film Costs

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. 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.

9

Table of Contents

Fair Value of Financial Instruments

Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk.

In addition to defining fair value, the standard expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels which are determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are:

Level 1 – inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.

Level 2 – inputs are based upon significant observable inputs other than quoted prices included in Level 1, such as quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.

As of DecemberMarch 31, 2017,2019, the balance reported for cash approximates its fair value because of its short maturities. Notes payable are recorded at agreed values. Debt balances are stated at historical amounts less principal payments, which approximate fair market value. Promissory notes receivable and payable are stated at historical amounts less principal payments. The Company believes interest rates in its debt agreements are commensurate with lender risk profiles for similar companies.

Revenue Recognition

In May 2014, the FASB issued new accounting guidance related to revenue from contracts with customers. The core principle of the Standard is that recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the new guidance requires that companies disclose the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company has chosen to early adopt and apply the standards beginning in the fiscal year ended June 30, 2018, using the modified retrospective approach, which applies the new standard to contracts that are not completed as of the date of adoption. The Company concluded that no adjustment to the opening balance of retained earnings was required upon the adoption of the new standard.

The Company recognizes revenue from its contracts with customers in accordance with ASC 606 – Revenue from Contracts with Customers. The Company recognizes revenues when we satisfy 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.

910

Table of Contents

Revenue RecognitionThe 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 the follows:

The Company recognizes revenue fromanalyses whether gross sales, or net sales should be recorded, has control over establishing price, and has control over the sale of services in accordancerelated costs with ASC 926 - 605 – Entertainment - Films. Revenue is recognized only when all of the following criteria have been met: (i) persuasive evidence of a sale or licensing agreement with a customer exists; (ii) the film is complete and, in accordance with the terms of the arrangement, has been delivered or is available for immediate and unconditional delivery; (iii) the license period of the arrangement has begun and the customer can begin its exploitation, exhibition, or sale; (iv) the arrangement fee is fixed or determinable; and (v) collection of the arrangement fee is reasonably assured.

Stock Repurchase and Cancellation

During the six months ended December 31, 2017, the Company repurchased and cancelled 85,475 shares of common stock. The Company accounted for the transaction in accordance with ASC 505 – Equity – 30 Treasury Stock, Purchase of Treasury Shares or Stock Rights.

Stock Subscription Receivable

earning revenues. The Company has accounted for Stock Subscription Receivablerecorded 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 accordance with ASC – 505 – Equity – 10, and has included the Stock Subscription Receivable balance in equity.related customer contract.

Loss per Share Calculations

Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of common shares available. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. The Company’s diluted loss per share is the same as the basic loss per share for the sixthree and nine months ended DecemberMarch 31, 2017,2019, and 2016,2018, as there are no potential shares outstanding that would have a dilutive effect.

Recently Issued Accounting Pronouncements

In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, or ASU 2018-07. Under this ASU, the accounting for awards issued to nonemployees will be similar to the accounting for employee awards. This includes allowing for the measurement of awards at the grant date and recognition of awards with performance conditions when those conditions are probable, both of which are earlier than under current guidance for nonemployee awards. The Company has early adopted this guidance, specifically related to the tax calculations of consulting services compensation.

In March 2019, the FASB issued new guidance on film production costs ASU 2019-02, Entertainment Films- Other Assets – Film Costs (Subtopic 926-20). The new guidance is effective for fiscal years beginning after December 15, 2019 (for the year ended December 31, 2020 for the Company) and interim periods within those fiscal years and may be early adopted. The new guidance aligns the accounting for the production costs of an episodic series with those of a film by removing the content distinction for capitalization. It also addresses presentation, requires new disclosures for produced and licensed content and addresses cash flow classification for license agreements to better reflect the economics of an episodic series. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

In March 2019, the FASB issued ASU No. 2019-02, Entertainment-Films-Other Assets-Film Costs (Subtopic 926-20) and Entertainment-Broadcasters Intangibles-Goodwill and Other (Subtopic 920-350). The update aligns the accounting for production costs of an episodic television series with the accounting for production costs of films by removing the content distinction for capitalization. The amendments also require that an entity reassess estimates of the use of a film in a film group and account for any changes prospectively. The amendments in this update require that an entity test a film or license agreement for program material within the scope of Subtopic 920-350 for impairment at a film group level when the film or license agreement is predominantly monetized with other films and/or license agreements. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

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.

11

Table of Contents

Going Concern

The accompanying unaudited consolidated financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business. The accompanying consolidated financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern. During the nine months ended March 31, 2019, the Company had a loss from operations of $280,764 and net cash outflows from operating activities of $241,944. As of March 31, 2019, the Company has an accumulated deficit of $1,643,437. As of March 31, 2019, the Company is in default on several promissory notes payable. 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 – PROMISSORY NOTES RECEIVABLE

On June 7, 2017, the Company receivedentered into an agreement for a 2.5% promissory note in exchange for lending $200,000 to a third party. The principal of $200,000 iswas due to the Company forty-five (45) days from receipt of the funds. The principal and interest were received on July 17, 2017.

On June 12, 2017, the Company receivedentered into an agreement for a 2.5% promissory note in exchange for lending $200,000 to a third party. The principal of $200,000 iswas due to the Company forty-five (45) days from receipt of the funds.

The proceeds from the two Promissory Notes Receivableprincipal and interest were utilized in order to provide a Bridge Loan to a third party in connection with the productions of the certain motion pictures.received on July 26, 2017.

During the six months and threenine months ended DecemberMarch 31, 2017,2019 and 2018, a total amount of $nil and $4,841, respectively was recorded as interest income.

The Company received full payments for the two Promissory Notes Receivable and $10,000 of interest income related to the two Promissory Notes Receivable during the six months ended December 31, 2017.

On December 14, 2017, the Company entered into a promissory note agreement for $450,000, for the borrower to utilize the funds for production costs of a motion picture with a non-related party. As of December 31, 2017, the Company had provided the borrower with $350,000. Per the terms of the promissory note, the security for the promissory note is the tax credits and tax credit proceeds of the motion picture. The promissory note is non-interest bearing, and no terms of repayment. The Company expects to collect the full balance by August 2018.

10

Table of Contents

$200,000 notes.

NOTE 4 – FILM COSTS

Film costs are comprised of the following:

		December 31, 2017				June 30, 2016
Motion picture and television productions			414,937				-
Film Costs			414,937				-

Film costs include salaries and wages, and all other direct costs associated with the motion pictures and television productions.

12

Table of Contents

The Company performs fair value measurements related to film costs on an annual basis to evaluate and review indicators of impairment. During the nine months ended March 31, 2019 and 2018, the Company did not recognize impairment loss.

During the nine months ended March 31, 2019, $1,762,700 of capitalized film costs were expensed as cost of revenues, of which $893,951 related to Last Vermont Christmas LLC, and $868,749 related to Christmas Camp LLC.

NOTE 5 – DEFERRED FILM REVENUE

On March 27, 2018, the Company entered into a Production Services Agreement with MVE Productions, LLC to provide production services for a film. In relation to the film, the Company created a Limited Liability Corporation, ‘Christmas Camp LLC.’ The Production Services Agreement was planned to run from April 9, 2018 to August 27, 2018. As of March 31, 2019, all criteria had been met in order for the Company to recognize revenue. During the nine months ended March 31, 2019, deferred revenue of $879,112 has been recognized as revenues.

On March 27, 2018, the Company entered into a Production Services Agreement with MVE Productions, LLC to provide production services for a film. In relation to the film, the Company created a Limited Liability Corporation, ‘Last Vermont Christmas LLC.’ The Production Services Agreement was planned to run from April 9, 2018 to September 28, 2018. As of March 31, 2019, all criteria had been met in order for the Company to recognize revenue. During the nine months ended March 31, 2019, deferred revenue of $899,234 has been recognized as revenues.

On June 19, 2018, the Company entered into a Production Services Agreement with MVE Productions, LLC to provide production services for a film. In relation to the film, the Company created a Limited Liability Corporation, ‘Country Christmas LLC.’ The Production Services Agreement was planned to run from June 25, 2018 to October 15, 2018. The agreement is still ongoing as of the date of this filing. The Company has not recognized any film revenue for the three and nine months ended March 31, 2019. As of March 31, 2019, the Company has recorded $367,719 of deferred revenue in relation to this film.

NOTE 56 – PROMISSORY NOTES PAYABLE

On June 6, 2017, the Company issued a 2.5% promissory note in exchange for receiving $200,000 to an unrelated third party. The principal of $200,000 is due to the lender ninety (90) days from receipt of the funds. The promissory note payable, was fully paid along with interest payable as of December 31, 2017.

During the three and six months ended December 31, 2017, a total amount of $0 and $2,396 was recorded as interest expense, respectively.

On October 11, 2017, the Company issued a $150,000 Promissory Note in exchange for receiving $150,000 proceeds. The principal of $150,000 is due fourteen (14) months from the receipt of the funds, and a total interest charge of ten percent, or $15,000 is to be recorded over the term of the loan. An interest payable of $2,859$24,945 has been recorded as of DecemberMarch 31, 2017.2019. During the three months and sixnine months ended DecemberMarch 31, 2017,2019, interest expense of $2,859$8,137 and $15,698 was recorded.recorded, respectively. During the three months and nine months ended March 31, 2018, interest expense of $3,176 and $6,035 was recorded, respectively. The proceeds will bewere used by the Company to fund the motion picture known as One HLWD KY LLC. The note is currently in default and currently accrues interest at 22% per annum.

On December 17, 2017,January 4, 2018, the Company issued a $300,000$80,000 Promissory Note in exchange for receiving $300,000$80,000 proceeds. The principal of $300,000$80,000 is due twelve (12) months from the receipt of the funds, and bears interest at 10% per annum. An interest payable of $1,342$12,296 has been recorded as of DecemberMarch 31, 2017.2019. During the three months and nine months ended March 31, 2019, interest expense of $4,384 and $8,417 was recorded, respectively. During the three and sixnine months ended DecemberMarch 31, 2017,2018, interest expense of $1,342$1,885, and $1,885 was recorded.recorded, respectively. The proceeds will bewere used by the Company to fund the motion picture known as River Runs Red. The note is currently in default and currently accrues interest at 22% per annum.

On February 6, 2018, the Company issued a $100,000 Promissory Note in exchange for receiving $100,000 proceeds. The principal of $100,000 is due twelve (12) months from the receipt of the funds, and bears interest at 10% per annum. An interest payable of $13,182 has been recorded as of March 31, 2019. During the three months and nine months ended March 31, 2019, interest expense of $4,196 and $9,237 was recorded, respectively. During the three and nine months ended March 31, 2018, interest expense of $1,452 and $1,452 was recorded, respectively. The proceeds were used by the Company to fund the motion picture known as River Runs Red. The note is currently in default and currently accrues interest at 22% per annum.

13

Table of Contents

On February 7, 2018, the Company issued a $150,000 Promissory Note in exchange for receiving $150,000 proceeds. The principal of $150,000 is due twelve (12) months from the receipt of the funds, and bears interest at 10% per annum. An interest payable of $19,674 has been recorded as of March 31, 2019. During the three months and nine months ended March 31, 2019, interest expense of $6,236 and $13,798 was recorded, respectively. During the three and nine months ended March 31, 2018, interest expense of $2,137 and $2,137 was recorded, respectively. The proceeds were used by the Company to fund the motion picture known as River Runs Red. The note is currently in default and currently accrues interest at 22% per annum.

NOTE 67 – RELATED PARTY TRANSACTIONS

On June 9, 2017, the Company issued a 2.5% promissory note in exchange for receiving $200,000 to William R. Kruse, one of the Company’s principle owners. The principal of $200,000 was due to the lender ninety (90) days from receipt of the funds. The note was fully paid along with interest of $5,000, during the six months ended December 31, 2017. During the six months and three months ended December 31, 2017, interest expense of $2,708 and $0, respectively, was recorded.

On September 19, 2017 the company issued a 10% Promissory Note in exchange for receiving $350,000 tofrom Kruse Farms, LP., a Company owned by one of the Company’s principle owners.owners, to fund the production of a motion picture. The principal of $350,000 is due to the lender in twenty fourtwenty-four (24) months from receipt of the funds. An interest payable of $9,877$53,507 has been recorded as of DecemberMarch 31, 2017.2019. During the sixnine months ended March 31, 2019 and 2018, interest expense was $26,274 and $18,507, respectively. During the three months ended DecemberMarch 31, 2017,2019 and 2018, interest expense was $8,630 and $8,630, respectively.

As of $9,877, and $8,822, respectively, was recorded. The proceeds will be used byMarch 31, 2019, the Company has advanced $20,000 as a loan to fund production of a motion picture.the Company’s Chief Creative Officer, which bears no interest and due on demand.

11

Table of Contents

During the nine months ended March 31, 2019, the Company borrowed a $12,000 from a related party. The amounts are due on demand and non-interest bearing.

NOTE 7 – NOTE PAYABLE

In August 2015, Smack entered into an unsecured promissory note agreement with an individual. The agreement allowed for Smack to borrow up to $66,613 at an interest rate of 10 percent per year. This $66,613 note was assumed byDuring the nine months ended March 31, 21019 and 2018, the Company duringpaid $25,640, and $nil, respectively to the recapitalization. The outstanding principal balance under the agreement at December 31, 2017 was $66,613. The outstanding principal amountChief Creative Officer for fees related to production and all accrued and unpaid interest was due by August 2016 and is currently delinquent. As of December 31, 2017 and June 30, 2017 amounts of $15,530 and $12,172 have recorded as interest payable. Formanaging movie services. During the three and six months ended DecemberMarch 31, 2017, interest expense2019 and 2018, the Company paid $nil and $nil respectively to the Chief Creative Officer for fees related to production and managing of $1,679 and $3,358 was recorded, respectively. For the three and six months ended December 31, 2016, interest expense of $1,679 and $3,358 was recorded, respectively.movie services.

NOTE 8 – SHARE CAPITAL

Common Stock

On July 5, 2017, the Company repurchased and cancelled 85,475 shares of common stock of the company for $20,000.

On August 9, 2017, the Company has approved a 1 for 40 reverse split of its issued and outstanding common stock. The common stock accounts and all share related balances have been applied retroactively for all periods presented.

On September 11, 2017, the Company amended the Articles of Incorporation to increasedecrease the authorized capital to 25,000,000 shares of common stock.

During the six monthsyear ended December 31, 2017,June 30, 2018, the companyCompany entered into threefour share purchase agreements with threefour investors for 386,000406,000 common shares at $1 per share. The company has received a $386,000shares were issued during the year ended June 30, 2018.

During the year ended June 30, 2018, the Company issued 83,822 common shares to settle $132,437 of principal note payable and has recorded as stock subscriptionaccrued interest.

During the year ended June 30, 2018, the Company issued 43,894 common shares to settle $69,352 of $386,000.accounts payable.

During the year ended June 30, 2018, the Company issued 125,000 common shares for consulting services, valued at $140,000.

On July 5, 2017,October 17, 2018, the Company repurchasedissued 250,000 and cancelled 85,475200,000 common shares of common stock of the companyat $0.50 for $20,000.

There were 4,670,049 shares of common stock issuedconsulting services, to two individuals, valued at $125,000, and outstanding as of December 31, 2017.

NOTE 9 – INCOME TAXES

The Company provides for income taxes under ASC 740, "Income Taxes." Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax basis of assets and liabilities and the tax rates in effect when these differences are expected to reverse. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.$100,000, respectively.

1214

Table of Contents

The provision for income taxes differs from the amounts which would be provided by applying the statutory federal income tax rate of 34% to the net loss before provision for income taxes for the following reasons: 

		Three months				Six months				Three months				Six months
		ended				ended				ended				ended
		December 31,				December 31,				December 31,				December 31,
		2017				2017				2016				2016
Federal income tax benefit attributable to:
Net operating loss		$	25,633			$	40,823			$	13,739			$	20,268
Less: valuation allowance			(25,633	)			(40,823	)			(13,739	)			(20,268	)
Net provisions for Federal income taxes		$	-			$	-			$	-			$	-

Net deferred tax assets consist of the following components as of:

The following table reconciles the US statutory rates to the Company’s effective tax rate for the six months ended December 31, 2017 and 2016:

In accordance with Income Tax laws of United States of America, net operating loss carry forwards of $251,835 which expire commencing in fiscal 2036, for federal income tax reporting purposes are subject to annual limitations. When a change in ownership occurs, net operating loss carry forwards may be limited as to use in future years.

13

Table of Contents

NOTE 109 – COMMITMENTS AND CONTINGENCIES

The Company neither owns nor leases any real or personal property. The Company'sCompany’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.

On December 12, 2016,NOTE 10 – INCOME TAXES

The Company provides for income taxes under ASC 740, “Income Taxes.” Under the Company entered into an agreement with Saisam Entertainment, LLCasset and liability method of ASC 740, deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax basis of assets and liabilities and the tax rates in effect when these differences are expected to develop, finance, and produce a motion picture project. Per the terms of the agreement,reverse. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will provide or source equity financingnot realize tax assets through future operations.

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”), was signed into law. The Tax Act includes numerous changes to tax laws impacting business, the most significant being a permanent reduction in the federal corporate income tax rate from 34% to 21%. The rate reduction took effect on January 1, 2018. As the Company’s 2018 fiscal year ended on June 30, 2018, the Company’s federal blended corporate tax rate for fiscal year 2018 is 26.9%, based on the applicable tax rates before and after the Tax Act and the number of days in the fiscal year to which the two different rates applied.

The provision for income taxes differs from the amounts which would be provided by applying the statutory federal income tax rate of 21% and 34% to the net loss before provision for income taxes for the project infollowing reasons:

Net deferred tax assets consist of the amountfollowing components as of:

In accordance with Income Tax laws of United States of America, net operating loss carry forwards of approximately $1,300,000. Per the terms of the agreement, the Company and Saisam Entertainment, LLC will create an LLC or other entity$1,277,000 which expire commencing in fiscal 2036, for the project currently entitled “Love is not Easy”. Saisam Entertainment, LLC owns and controls the rightsfederal income tax reporting purposes are subject to the screenplay, and will assign all rightsannual limitations. When a change in andownership occurs, net operating loss carry forwards may be limited as to the project, pursuant to the terms of an option purchase agreement between the two parties, which includes an initial option fee of $10,000 for an option period of 18 months, a lien for all of the Company’s out of pocket costs, and will assistuse in additional funding. The Company will make or source financial contributions in accordance with the terms of the agreement, assist in the raising of additional financing, and will participate in the development and production. The Company and Saisam Entertainment, LLC will own an undivided 50% interest in the LLC or entity that is formed. The Company will be the managing member of the LLC or entity. The approved budget for the project is approximately $2,000,000. In consideration, the Company will receive a return of 20% of its investment, and will subsequently receive its portion of the net profits per the terms of the agreement. The LLC or entity has not been formed to date.future years.

NOTE 11 – SUBSEQUENT EVENTS

Management has evaluated subsequent events through the date thesethe consolidated financial statements were issued. Based on our evaluation no events have occurred that require recognition or disclosure.

1415

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Business Development

Almost Never Films Inc. (the “Company”SMACK Sportswear (“SMACK or the Company”) was originally incorporated in Nevada in October 2007 as Smack Sportswear (“Smack”), which originally manufactured2007. Through June 30, 2016, we were a manufacturer and soldseller of performance and lifestyle based indoor and sand volleyball apparel and accessories. TheAs 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 now an independent film company focused on independent film company focused on film production, finance and production related services for movies under budgetsdefined in Rule 12b-2 of $35 million.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, 2017.2016.

The share exchange was accounted for as a "reverse“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 50,000,000200,000,00 shares of common stock and (ii) to change the name of the Company to “Almost Never Films Inc.” which took effect on March 2, 2017.2016.

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 2,500,000100,000,000 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 2,500,000100,000,000 common shares.

There were no shares of preferred stock issued and outstanding as of DecemberMarch 31, 2017 or June 30, 2017.2019.

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 1,243,00049,720,000 shares of the Company’s Common Stock at a price of $0.20$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.

1516

Table of Contents

In March through November 2016, the Company entered into four share purchase agreements with four investors for 312,50012,500,000 common shares at $0.80$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 250,00010,000,000 shares for certain selling shareholders. The Form S-1 was declared effective on December 9.9, 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 iswas 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 August 9,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.

1617

Table of Contents

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.

CriteriaOn 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.

We are a film company focused on film production, finance and production related services for movies under budgets of $35 million.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.March 31, 2018. 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"“HLWD”

We hadcurrently have authorized 6,750,00030,000,000 shares of capital stock, consisting of (i) 1,750,00025,000,000 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 5,778,765 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.

18

Table of Contents

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. As of the date of this Report, an aggregate of 4,670,049 shares of our Common Stock On March 4, 2016, all 1,000,000 preferred shares were converted into 100,000,000 common shares (pre-split basis).

Our principal executive office is now located at 8605 Santa Monica Blvd #98258, West Hollywood, CACalifornia 90069-4109.

Our Business

The Company isWe are an independent film company focused on film production finance and production related services for movies under budgets of $35 million.

17

Table of Contents

in connection with genre specific motion pictures with production costs in the $5.0 million to $50.0 million range.

Our proposed business is to facilitate relationships (and as such, provide production related services) between creative talent (including writers, actors and directors) and companies who produce, finance and distribute motion pictures. We intend to acquire or license rights to materials upon which we believe motion pictures can be based (screenplays, books, short stories etcetera, which are referred to within the entertainment industry as the “underlying property”). We may further develop an underlying property by contracting for additional writing services and/or by bringing in new writers to perform “polishes” or “rewrites” on a particular underlying property.

If we are satisfied with the creative state of the underlying property, we then intend to make offers to directors and/or actors, to perform services in connection with a particular motion picture based on that underlying property. These offers are very often contingent and subject to the satisfaction of certain production elements, such as financier approval of the screenplay and the financier’s selection of a start date for principal photography.

If a director or actors accepts one of our offers, the director or actors are said to be “attached” to the motion picture project. Armed with the underlying property and the attached creative element(s) (these elements are often called the “package” in Hollywood), we may then approach third party financiers seeking financing as well as distribution for the potential motion picture. Another approach that we may take is to contact the financiers first, seeking first to produce the film, and then with a finished (or nearly finished) motion picture product, obtain distribution for the picture.

Motion Picture Property Acquisition Process

Our acquisition process is the process by which we intend to acquire or license “underlying properties”. In turn, we expect to use those properties to attract creative talent (including writers, actors and directors) to the potential motion picture project. If successful, we will then grant or license out those rights to third party financiers of motion pictures, who will then contract with the creative talent we have attracted to the property as well as finance, produce and distribute/exploit the motion picture. 

Almost Never Feature Film Production

Our initial primary involvement with feature film production is in the area of the development of “underlying properties”. We intend to engage third parties to produce, finance and exploit/distribute the motion picture “packages” we put together. We may also provide production expertise (i.e. “production services”) to the third party producer and/or financier of the motion picture in question. If we do provide production expertise, we, or members of our executive team, Danny Chan, Daniel Roth, and Damiano Tucci, may be credited as “producers” or “executive producers” of the particular film in question. We expect to primarily derive our income from producer fees, consulting and service fees as well as our participation in the profits of the various pictures produced by third parties, that were developed and/or “packaged” by us.

Our feature film strategy generally is to perform production services, develop and/or produce feature films when the production budgets for the films are expected to be entirely or substantially covered by a third party. In this way, we believe our risk is, by in large, only the capital required, if any, to develop and package the motion picture project. The entirety of the production budget, as well as any costs associated with distributing and/or exploiting the motion pictures in question, will be expected to be borne by a third party or parties who have the resources and expertise to produce and/or distribute motion pictures.

Distributing Almost Never Motion Pictures

Currently, we do not intend to directly distribute motion pictures. Instead, when we seek financing for our motion picture “packages,” the distribution rights are often obtained by the financier as collateral for their investment; in other words, third parties purchase the world-wide exploitation and distribution rights to a motion picture for the cost it takes to produce the motion picture.

Foreign Markets

In general, a very important portion of the financing for “independent” (i.e., not produced by a major studio or one of their subsidiaries) motion pictures comes from the “foreign markets” (i.e., those markets outside of the United States and English-speaking Canada). With respect to productions we are associated with, the third party financier owns and/or controls the production rights and uses these rights as collateral or purchases the rights outright in connection with the funding of the pictures we develop.

18

Table of Contents

Profit Participation

Our profit participation in motion picture projects will be determined by a calculation that assumes that all “negative costs” (production costs) of the picture (including, but not limited to, costs for development, principal photography and post-production) and “distribution expenses” (including, but not limited to, costs for marketing the film at various international film markets as well as costs associated with the delivery of the film and the physical elements to the various licensees of the film) are recovered by the financier plus interest thereon. After repayment of all negative costs, distribution expenses and interest thereon, the financier/distributor will charge a “distribution fee” (often a percentage of the gross income) for performing any sales or distribution services in connection with the picture. Following the payment of distribution fees and other costs, any amounts payable to creative elements that are contingent compensation (including, but not limited to, deferred compensation and bonuses) are paid to those third parties. Any money remaining is considered net profits from which profit participation is derived.

Competition

The motion picture industry is intensely competitive. In addition to competing with the major film studios that dominate the motion picture industry, we will also compete with numerous independent motion picture production companies, television networks, pay television systems, and online streaming media companies such as Netflix, Hulu, and Amazon Prime. Virtually all of our competitors are significantly larger than we are, have been in business much longer than we have, and have significantly more resources at their disposal. Our competitors range from small independent producers to well financed established film studios, particularly, major U.S. film studios.

Intellectual Property

We believe that intellectual property will be material to our business and we will expend cost and effort in an attempt to develop and protect our intellectual property and to maintain compliance vis-à-vis other parties' intellectual property. Our ability to protect and enforce our intellectual property rights is subject to certain risks. Enforcement of intellectual property rights is costly and time consuming.

From time to time, we may encounter disputes over rights and obligations concerning intellectual property. We cannot offer any assurances that we will prevail in any intellectual property dispute.

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.

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.

19

Table of Contents

Results of Operations

For the three months ended DecemberMarch 31, 20172019 compared to DecemberMarch 31, 20162018

During the three months ended DecemberMarch 31, 2017,2019, the Company had no$1,784,846 in revenue and incurred $25,130cost of revenue of $1,762,700, $109,993 on general and administrative expenses and $35,558$6,559 on professional fees. The Company’s professional fees were primarily for ongoing regulatory requirements. During the three months ended DecemberMarch 31, 2016,2018, the Company had no$10,000 of revenue and incurred $5,864$47,905 on general and administrative expenses and $32,865$5,309 on professional fees. The increase in general and administration fees were primarily due to an increase in filing fees, insurance expenses, and travel expenses.

Other Expense

During the three months ended DecemberMarch 31, 2017,2019, the Company incurred interest expenses of $14,702.$31,583 relating to an unsecured promissory note payable. During the three months ended DecemberMarch 31, 2016,2018, the Company incurred interest expenses of $1,679.$26,147, relating to an unsecured promissory note payable.

Net Loss

The Company’s net loss for the three months ended DecemberMarch 31, 20172019 was $75,390.$125,989. The Company’s net loss for the three months ended DecemberMarch 31, 20162018 was $40,408.$69,361.

For the sixnine months ended DecemberMarch 31, 20172019 compared to DecemberMarch 31, 20162018

During the sixnine months ended DecemberMarch 31, 2017,2019, the Company had no revenues$1,784, 846 in revenue and incurred $47,106cost of revenue of $1,762,700, $263,674 on general and administrative expenses and $55,261$39,236 on professional fees. The Company’s professional fees were primarily for ongoing regulatory requirements.requirements and the negotiation of the collaborations entered into by the Company. During the sixnine months ended DecemberMarch 31, 2016,2018, the Company had no$10,000 in revenue and incurred $9,924$95,011 on general and administrative expenses and $46,330$60,570 on professional fees. The Company’s professional fees were primarily for ongoing regulatory requirements. The increase in general and administration fees were primarily due to an increase in filing fees, insurance expenses, and travel expenses.

Other Expense

During the sixnine months ended DecemberMarch 31, 2017,2019, the Company incurred interest expenses of $22,540, and interest income of $4,841.$73,424, relating to an unsecured promissory note payable. During the sixnine months ended DecemberMarch 31, 2016,2018, the Company incurred interest expenses of $3,358.$48,687 relating to promissory notes payable, and interest income of $4,841.

Net Loss

The Company’s net loss for the sixnine months ended DecemberMarch 31, 20172019 was $120,066.$354,188. The Company’s net loss for the sixnine months ended DecemberMarch 31, 20162018 was $59,612.$189,427.

Liquidity and Capital Resources

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 DecemberMarch 31, 2017,2019, we had a cash balance of $381,303.$40,882. As of June 30, 2017,2018, we had a cash balance of $91,590.$270,826. 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.

20

Table of Contents

Financing Activities

During the sixnine months ended DecemberMarch 31, 2017,2019, the Company received $386,000 for$12,000 from a loan to a related party. During the nine months ended March 31, 2018, the Company received $1,130,000 proceeds from issuance of promissory note payable, and $386,000 proceeds from common stock subscribed, pursuantand cash outflows related to Regulation Dfinancing activities were $200,000 for payment of the Securities Act.promissory note payable, $200,000 for payment of promissory note payable – related party, and $20,000 for retirement of common stock.

Going Concern Consideration

The accompanying condensed 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 sixnine months ended DecemberMarch 31, 2017,2019, the Company incurred a net loss from continuing operations of $120,066$354,188 and cash used in operating activities was $514,287.$241,944. As of March 31, 2019, the Company is in default on several promissory notes payable. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The Company also has several promissory notes payable in default.

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,stockholders, in case of equity financing.

There was $38,000 cash inflow from investing activities, and $766,000 cash flows from financing activities in the six months ended December 31, 2017.

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 sixnine months ended DecemberMarch 31, 2017,2019, we did not have any "off-balance“off-balance sheet arrangements"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'sCompany’s management believes that these recent pronouncements will not have a material effect on the Company'sCompany’s financial statements.

21

Table of Contents

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.

21

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'sCommission’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'sissuer’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'sCompany’s management, including the Company'sCompany’s Chief Executive Officer ("CEO"(“CEO”) and the Company'sCompany’s Chief Financial Officer ("CFO"(“CFO”), of the effectiveness of the Company'sCompany’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of DecemberMarch 31, 2017.2019. Based upon that evaluation, the Company'sCompany’s CEO and CFO concluded that the Company'sCompany’s disclosure controls and procedures were not effective as of DecemberMarch 31, 20172019 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 DecemberMarch 31, 2017,2019, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

22

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

On November 14, 2017, Howard and Ruth Weiss purchased 136,000 shares at a price per share of $1.00 pursuant to Regulation D of the Securities Act. The proceeds of such purchase are being used for general and administrative purposes.None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

23

Table of Contents

ITEM 6. EXHIBITS