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HLWD Almost Never Films

Filed: 23 Sep 21, 3:40pm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

 

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

 

FOR THE QUARTERLY PERIOD ENDED: September 30, 2020

 

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

 

For the transition period from __________ to __________

 

Commission File Number: 000-53049

 

ALMOST NEVER FILMS INC.

(Exact name of registrant as specified in its charter)

 

Nevada

 

26-1665960

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

8605 Santa Monica Blvd #98258

West Hollywood, CA 90069-4109

(Address of principal executive offices, Zip Code)

 

(213) 296-3005

(Registrant’s telephone number, including area code)

 

___________________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act: None

 

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

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which
registered

Common Stock, $.001 par value

 

HLWD

 

N/A

 

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒     No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐     No ☒

 

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

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

 

Indicate by checkmark whether the issuer has filed all documents and reports required to be filed by Section 12, 13 and 15(d) of the Securities Exchange Act of 1934 after the distribution of securities under a plan confirmed by a court. Yes ☐     No ☒

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐     No ☒

 

The number of shares of registrant’s common stock outstanding as of September 7, 2021 was 5,798,765.

 

 

 

    

FORM 10-Q

ALMOST NEVER FILMS INC.

September 30, 2020

TABLE OF CONTENTS

 

 

 

 

Page No.

 

PART I. - FINANCIAL INFORMATION

 

 

 

 

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

 

 

 

 

Condensed Consolidated Balance Sheets as of September 30, 2020 (Unaudited) and June 30, 2020

 

4

 

 

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended September 30, 2020 and 2019

 

5

 

 

Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended September 30, 2020 and 2019.

 

7

 

 

Notes to Condensed Consolidated Financial Statements

 

8

 

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations.

 

16

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

22

 

Item 4.

Controls and Procedures

 

22

 

 

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

 

Item 1.

Legal Proceedings

 

24

 

Item 1A

Risk Factors

 

24

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

24

 

Item 3.

Defaults Upon Senior Securities

 

24

 

Item 4.

Mine Safety Disclosures

 

24

 

Item 5.

Other Information

 

24

 

Item 6.

Exhibits

 

25

 

 

Signature

 

26

 

 

 
2

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FORWARD LOOKING STATEMENTS

 

This report contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and similar expressions or variations of such words are intended to identify forward-looking statements, but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this report. Additionally, statements concerning future matters are forward-looking statements.

 

Although forward-looking statements in this report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the headings "Risks Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our report on Form 8-K which was filed with the SEC on January 20, 2016 (the "Super 8-K"), in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Form 10-Q and information contained in other reports that we file with the SEC. You are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report.

 

We file reports with the SEC. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us. You can also read and copy any materials we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

 

We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, except as required by law. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this quarterly report, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.

 

 
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PART I. FINANCIAL INFORMATION

 

Almost Never Films Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

 

 

 

September 30,

 

 

June 30,

 

 

 

2020

 

 

2020

 

ASSETS

 

(Unaudited)

 

 

 

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$31,474

 

 

$80,510

 

Loan receivable – related party

 

 

20,000

 

 

 

20,000

 

Total Current Assets

 

 

51,474

 

 

 

100,510

 

 

 

 

 

 

 

 

 

 

Film costs

 

 

85,496

 

 

 

85,496

 

TOTAL ASSETS

 

$136,970

 

 

$186,006

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$67,870

 

 

$64,920

 

Due to related party

 

 

500

 

 

 

500

 

Interest payable

 

 

99,520

 

 

 

96,662

 

Promissory note payable

 

 

78,820

 

 

 

82,797

 

Promissory note payable - related party

 

 

110,000

 

 

 

110,000

 

Total Current Liabilities

 

 

356,710

 

 

 

354,879

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

 

356,710

 

 

 

354,879

 

 

 

 

 

 

 

 

 

 

Commitments and Contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' Equity (Deficit)

 

 

 

 

 

 

 

 

Preferred stock: no par value, 5,000,000 authorized; Series A Preferred stock:

 

 

 

 

 

 

 

 

2,000,000 authorized; no shares issued and outstanding

 

 

0

 

 

 

0

 

Common stock: 25,000,000 authorized; $0.001 par value

 

 

 

 

 

 

5,798,765 shares issued and outstanding

 

 

5,799

 

 

 

5,799

 

Additional paid in capital

 

 

1,895,486

 

 

 

1,895,486

 

Accumulated deficit

 

 

(2,119,076)

 

 

(2,068,521)

Total shareholders' deficit attributable to Almost Never Films Inc. shareholders

 

 

(217,791)

 

 

(167,236)

Noncontrolling interest

 

 

(1,949)

 

 

(1,637)

Total shareholders' deficit

 

 

(219,740)

 

 

(168,873)

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$136,970

 

 

$186,006

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements

 

 
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Almost Never Films Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

 

 

 

Three Months Ended

 

 

 

September 30,

 

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

Revenues

 

$0

 

 

 

343,256

 

Cost of Revenues

 

 

0

 

 

 

343,256

 

Gross Profit

 

 

0

 

 

 

0

 

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

General and administration expenses

 

 

20,977

 

 

 

68,251

 

Professional fees

 

 

21,000

 

 

 

34,441

 

Total operating expenses

 

 

41,977

 

 

 

102,692

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(41,977)

 

 

(102,692)

 

 

 

 

 

 

 

 

 

Other (Expense) Income

 

 

 

 

 

 

 

 

Interest expense

 

 

(8,890)

 

 

(19,760)

Gain on modification of debt

 

 

0

 

 

 

19,782

 

Total other (expense) income, net

 

 

(8,890)

 

 

22

 

 

 

 

 

 

 

 

 

 

Net loss before income taxes

 

 

(50,867)

 

 

(102,670)

Provision for income taxes

 

 

0

 

 

 

0

 

Net loss

 

$(50,867)

 

 

(102,670)

 

 

 

 

 

 

 

 

 

Net loss attributable to:

 

 

 

 

 

 

 

 

Almost Never Films Inc.

 

 

(50,555)

 

 

(102,653)

Noncontrolling interest

 

 

(312)

 

 

(17)

 

 

 

 

 

 

 

 

 

Comprehensive Loss

 

$(50,867)

 

 

(102,670)

 

 

 

 

 

 

 

 

 

Net Loss Per Common Share - Basic and Diluted

 

$(0.01)

 

$(0.02)

Net Income Loss Per Share Attributable to Common Stockholders

 

 

 

 

 

 

 

 

of the Company - Basic and Diluted

 

$(0.01)

 

$(0.02)

 

 

 

 

 

 

 

 

 

Weighted Average Common Shares Outstanding - Basic and Diluted

 

 

5,798,765

 

 

 

5,780,287

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements

 

 
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Almost Never Films Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Additional

 

 

 

 

Non-

 

 

Stockholders'

 

 

 

Number of Shares

 

 

Amount

 

 

Paid in

Capital

 

 

Accumulated

Deficit

 

 

controlling

Interest

 

 

Equity

(Deficit)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - June 30, 2019

 

 

5,778,765

 

 

$5,779

 

 

$1,880,506

 

 

$(1,755,486)

 

$(1,610)

 

$129,189

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common shares issued to settle interest of note payable

 

 

20,000

 

 

 

20

 

 

 

14,980

 

 

 

0

 

 

 

0

 

 

 

15,000

 

Net loss

 

 

-

 

 

 

0

 

 

 

0

 

 

 

(102,653)

 

 

(17)

 

 

(102,670)

Balance - September 30, 2019

 

 

5,798,765

 

 

$5,799

 

 

$1,895,486

 

 

$(1,858,139)

 

$(1,627)

 

$41,519

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - June 30, 2020

 

 

5,798,765

 

 

$5,799

 

 

$1,895,486

 

 

$(2,068,521)

 

$(1,637)

 

$(168,873)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

-

 

 

 

0

 

 

 

0

 

 

 

(50,555)

 

 

(312)

 

 

(50,867)

Balance - September 30, 2020

 

 

5,798,765

 

 

$5,799

 

 

$1,895,486

 

 

$(2,119,076)

 

$(1,949)

 

$(219,740)

 

The accompanying notes are an integral part of these condensed consolidated financial statements

 

 
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Almost Never Films Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Three months ended

 

 

 

September 30,

 

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

Net loss

 

$(50,867)

 

$(102,670)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Consulting expense

 

 

0

 

 

 

48,750

 

Gain on modification of debt

 

 

0

 

 

 

(19,782)

Interest accrued on promissory notes payable

 

 

8,881

 

 

 

19,739

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

0

 

 

 

2,284

 

Film costs

 

 

0

 

 

 

343,235

 

Accounts payable and accrued expenses

 

 

2,950

 

 

 

20,073

 

Deferred film revenue

 

 

0

 

 

 

(354,398)

Interest paid on promissory notes payable

 

 

(6,023)

 

 

(5,120)

Net Cash Used in Operating Activities

 

 

(45,059)

 

 

(47,889)

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

Repayment of note payable

 

 

(3,977)

 

 

0

 

Net Cash Used in Financing Activities

 

 

(3,977)

 

 

0

 

 

 

 

 

 

 

 

 

 

Net Decrease in Cash and Cash Equivalents

 

 

(49,036)

 

 

(47,889)

Cash and Cash Equivalents, beginning of period

 

 

80,510

 

 

 

57,154

 

Cash and Cash Equivalents, end of period

 

$31,474

 

 

$9,265

 

 

 

 

 

 

 

 

 

 

Supplemental Disclosure Information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$6,023

 

 

$5,120

 

Cash paid for income taxes

 

$0

 

 

$0

 

 

 

 

 

 

 

 

 

 

Supplemental Non-cash Disclosure:

 

 

 

 

 

 

 

 

Conversion of debt into common stock

 

$0

 

 

$15,000

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements

 

 
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Almost Never Films Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

 

NOTE 1 – ORGANIZATION AND OPERATIONS

 

Nature of the Business

 

Almost Never Films Inc. (the “Company”) was originally incorporated in Nevada in October 2007 as Smack Sportswear (“Smack”), which originally manufactured and sold performance and lifestyle based indoor and sand volleyball apparel and accessories. The Company is now an independent film company focusing on film production, finance and production related services for movies under budgets of $35 million. The Company’s common stock are currently traded on OTC Pink under the symbol of “HLWD.”

 

On January 15, 2016, Smack entered into a share exchange agreement with Almost Never Films Inc., a private company incorporated in Indiana on July 8, 2015, and its two shareholders, Danny Chan and Derek Williams. Pursuant to the agreement, Smack issued 1,000,000 shares of our Series A Convertible Preferred Stock to Mr. Chan and Mr. Williams in exchange for all 2,500,000 shares of issued and outstanding common stock of Almost Never Films Inc. (Indiana). As a result of the share exchange, Almost Never Films Inc. (Indiana) became Smack’s wholly-owned subsidiary, and Mr. Chan and Mr. Williams acquired a controlling interest in the Company.The share exchange was accounted for as a “reverse acquisition,” and resulted in a recapitalization. Almost Never Films Inc. (Indiana) is deemed to be the acquirer for accounting purposes.

 

In March 2016, the Company increased the authorized capital to 5,000,000 shares of common stock and changed the name of the Company to “Almost Never Films Inc.” upon the approval from stockholders of the company. On August 9, 2017, the Company has approved a 1-for-40 reverse split of its issued and outstanding common stock. The common stock accounts and all share related balances have been applied retroactively for all periods presented.

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Consolidation

 

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

 

The Company dissolved FWIL, LLC on September 16, 2019 and Country Christmas, LLC (CXA) on October 5, 2019.

 

Basis of Presentation

 

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, these condensed financial statements do not include all the information and footnotes required for audited annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to make the financial statements not misleading have been included.

 

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, 2020 financial statements that was filed with the SEC on September 1, 2021. The results of operations for the three months ended September 30, 2020, are not necessarily indicative of the results to be expected for the full year

 

 
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Use of Estimates

 

The preparation of the condensed 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.

 

Cash

 

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

 

Concentration of Risk

 

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

 

The Company’s revenue from customers individually accounting for more than 10% of total revenue are as follows:

 

 

 

Three Months Ended

 

 

 

September 30,

 

 

 

2020

 

 

2019

 

MVE Productions

 

$0

 

 

$343,256

 

 

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. The Company qualifies for certain government programs that provide incentives earned in regard to expenditures on qualifying film production activities. The incentives are recorded as an offset to the related asset balance. Estimates used in calculating the fair value of the film costs are based upon assumptions about future demand and market conditions and are reviewed on a periodic basis.

 

Fair Value of Financial Instruments

 

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

 

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

 

 
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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 September 30, 2020, the balance reported for cash and accounts receivable approximates its fair value because of their short maturities. Accounts payable and accrued expenses are recorded at purchase amounts. Loan receivable and promissory notes and interest 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

 

The Company recognizes revenue from its contracts with customers in accordance with ASC 606 – Revenue from Contracts with Customers. The Company recognizes revenues when satisfying the performance obligation of the associated contract that reflects the consideration expected to be received based on the terms of the contract.

 

Revenue related to contracts with customers is evaluated utilizing the following steps:

 

 

(i)

Identify the contract, or contracts, with a customer;

 

(ii)

Identify the performance obligations in the contract;

 

(iii)

Determine the transaction price;

 

(iv)

Allocate the transaction price to the performance obligations in the contract;

 

(v)

Recognize revenue when the Company satisfies a performance obligation.

 

When the Company enters into a contract, the Company analyses the services required in the contract in order to identify the required performance obligations which would indicate the Company has met and fulfilled its obligations. For the current contracts in place, the Company has identified performance obligations as one single event, the sign-off by both parties that production is completed and the product (film) is ready for distribution. To appropriately identify the performance obligations, the Company considers all of the services required to be satisfied per the contract, whether explicitly stated or implicitly implied. The Company allocates the full transaction price to the single performance obligation being satisfied.

 

The Company recognizes revenue when the customer confirms to the Company that all of the terms and conditions of the contract has been met, and the sign-off of the project has been completed. The Company derives its revenues from the follows:

 

·

Production Service Agreement Revenue is related to films where the Company has been engaged as an independent contractor to provide production services and other elements related to production for individual film projects.

 

·

Revenue from self-produced films is related to films where the Company has self-produced certain films along with a third party, with the expectation that these films will be distributed in the future.

 

The Company analyses whether gross sales, or net sales should be recorded, has control over establishing price, and has control over the related costs with earning revenues. The Company has recorded all revenues at the gross price.

 

Cash payments received are recorded as deferred revenue until the conditions, stated above, of revenue recognition have been met, specifically all obligations have been met as specified in the related customer contract.

 

 
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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 three months ended September 30, 2020, and 2019, as there are no potential shares outstanding that would have a dilutive effect.

 

Recently Issued Accounting Pronouncements

 

On July 1, 2020, the Company adopted 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 June 30, 2021 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 and account for any changes on a prospective basis. The new guidance 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 impact of adoption of this standard did not impact the condensed consolidated financial statements.

 

On July 1, 2020, the Company adopted 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. The impact of adoption of this standard did not impact the condensed 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.

 

COVID-19

 

In early 2020, the World Health Organization declared the rapidly spreading coronavirus disease (“COVID-19”) outbreak a pandemic. This pandemic has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. The Company considered the impact of COVID-19 on the assumptions and estimates used and determined that there were no retroactive material adverse impacts on the Company’s results of operations and financial position at September 30, 2020. 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 in the future. The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of the date of issuance of these condensed consolidated financial statements. These estimates may change, as new events occur and additional information is obtained.

 

Going Concern

 

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 three months ended September 30, 2020, the Company incurred a net loss of $50,867. As of September 30, 2020, the Company had a working capital deficiency of $305,236 and an accumulated deficit of $2,119,366. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

 

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

 

The Company plans on raising the required funds through completion of film projects resulting in revenues, and further potential equity and debt offerings. However, there is no assurance that the Company will be successful in this or any of its endeavors or become financially viable to continue as a going concern.

 

NOTE 3 – FILM COSTS

 

Film costs are comprised of the following:

 

 

 

September 30,

 

 

June 30,

 

 

 

2020

 

 

2020

 

Independent Self-Produced Film Costs, Net

 

$85,496

 

 

$85,496

 

 

Film costs include salaries and wages, and all other direct costs associated with the motion pictures and television productions. In addition, the Company qualifies for certain government programs that provide incentives earned in regard to expenditures on qualifying film production activities. The incentives are recorded as an offset to the related asset balance.

 

The Company performs fair value measurements related to film costs on an annual basis to evaluate and review indicators of impairment. During the three months ended September 30, 2020 and 2019, the Company did not recognize an impairment loss.

 

On November 10, 2017 the Company executed a First Amendment Agreement to its 6x picture Production and Distribution Agreement between Big Film Factory LLC (“Big Film” or “Prodco”) and Pure Flix Entertainment LLC (“PFE”), (the “Agreement”). The Agreement memorializes the understanding with respect to the development, packaging, production, post-production and worldwide distribution of the films intended for initial and primary worldwide exhibition. The Company will be added as a party to the initial agreement by and between Big Film and PFE, wherever Big Film is referenced in connection with providing production services in conjunction with Big Film as well as providing production capital and cash following each of the first six (6) films produced under the Agreement (“6 Pictures”). In accordance with the Agreement, 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.

 

On July 16, 2019, the Company received notice that Country Christmas Album has been confirmed as completed and delivered in accordance with the agreement terms.

 

During the three months ended September 30, 2020 and 2019, nil and $343,256, respectively, of capitalized film costs were expensed as cost of revenues.

 

NOTE 4 – DEFERRED FILM REVENUE

 

On March 27, 2018, the Company entered into a Production Services Agreement with MVE Productions, LLC to provide production services for a film. In relation to the film, the Company created a Limited Liability Corporation, ‘Christmas Camp LLC.’ The Production Services Agreement was planned to run from April 9, 2018 to August 27, 2018. As of February 28, 2019, all criteria had been met in order for the Company to recognize revenue.

 

On March 27, 2018, the Company entered into a Production Services Agreement with MVE Productions, LLC to provide production services for a film. In relation to the film, the Company created a Limited Liability Corporation, ‘Last Vermont Christmas LLC.’ The Production Services Agreement was planned to run from April 9, 2018 to September 28, 2018. As of March 18, 2019, all criteria had been met in order for the Company to recognize revenue.

 

 
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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.

 

On July 16, 2019, the Company received notice that Country Christmas Album has been confirmed as completed and delivered in accordance with the agreement terms and therefore the Company has recorded $343,256 revenues during the three months ended September 30, 2019.

 

NOTE 5 – PROMISSORY NOTES PAYABLE

 

 

(i)

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. The proceeds were used by the Company to fund the motion picture known as One HLWD KY LLC. On September 24, 2019, the Company signed amendment agreement with lender over the unpaid balance of principal note of $50,000 with new maturity date of June 30, 2020. The $50,000 principal note was paid off on June 12, 2020. Due to change of maturity date of the loan agreement to June 30, 2020, the default interest at 22% recorded in the previous, adjusted to 10% and the effect of change recognized as of gain on modification of debt.

 

During the three months ended September 30, 2020, and 2019, interest expense of nil and $1,260 was recorded, respectively, and interest payable was $12,726 and $12,726, respectively, as of September 30, 2020 and June 30, 2020. Subsequently on August 12, 2021, the outstanding interest payable was fully waived by the lender in the amount of $12,726.

 

 

 

 

(ii)

On January 4, 2018, the Company issued a $80,000 Promissory Note in exchange for receiving $80,000 proceeds. The principal of $80,000 is due twelve (12) months from the receipt of the funds, and bears interest at 10% per annum. The proceeds were used by the Company to fund the motion picture known as River Runs Red. On September 24, 2019, the Company signed amendment agreement with lender for the principal note of $80,000 with new maturity date of June 30, 2020. The note is in default currently and accrues interest at 22% per annum.  

During the three months ended September 30, 2020, and 2019, interest expense of $4,318 and $2,016 were recorded, respectively, and interest payable were $267 and $1,979, respectively, as of September 30, 2020 and June 30, 2020. During the three months ended September 30, 2020 and 2019, the Company repaid principal of $3,977 and nil, respectively and interest of $6,023 and nil. As of September 30 and June 30, 2020, the principal amounts of the note payable were of $73,820 and $77,797, respectively.

 

 

 

 

(iii)

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. The proceeds were used by the Company to fund the motion picture known as River Runs Red. On September 24, 2019, the Company signed amendment agreements with lender with maturity date of June 30, 2020 and transferred the principal of note and interest payable equally to two new lenders. An interest payable of $16,328 has been recorded as of date of transfer. During the three months ended September 30, 2020 and 2019, interest expenses of nil and $2,521was recorded, respectively. According to amendment agreement, the default interest at 22% recorded in the previous, adjusted to 10% and the effect of change recognized as of gain on modification of debt. On September 24, 2019, the principal balance of the loan was transferred to a new lender [see note 5(v)] who assumed $50,000 of the outstanding principal balance and the Company’s Chief Executive Officer (“CEO”) [see note 6(ii)] who assumed the remaining $50,000 outstanding principal balance. As of September 30, 2020 and June 30, 2020, there was no remaining interest or principal payable to the holder of this note.

 

 
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(iv)

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. The proceeds were used by the Company to fund the motion picture known as River Runs Red. During the three months ended June 30, 2019, the Company repaid $150,000 of principal. On September 24, 2019, the Company singed a general and mutual release agreement with the lender, to pay the remaining $15,000 the balance of due via issuance of 20,000 shares of common stock of the Company. According to general and mutual release agreement, the default interest at 22% recorded in the previous, adjusted to 10% and the effect of change recognized as of gain on modification of debt. During the three months ended June 30, 2020 and 2019, interest expenses of nil and $4,955 was recorded, respectively.

 

 

 

 

(v)

On September 24, 2019, the company issued a $50,000 Promissory Note in exchange of settlement loan agreement of February 6, 2018 with another lender for replacing $50,000 proceeds. The principal of $50,000 is due on June 30, 2020, and bears interest at 10% per annum. The Company did not reach an agreement with note holder for new maturity date and as of June 30, 2020, the note is in default. As of September 24, 2019, unpaid interest of $8,164 was due and transferred to a new lender.

 

During the three months ended September 30, 2020 and 2019, the Company repaid nil and $45,000 of principal note, and nil and $5,000 of interest payable, respectively. During the three months ended September 30, 2020 and 2019, interest expenses of $277 and $87, respectively, were recorded, with interest payable of $4,288 and $4,011 outstanding as of September 30 and June 30, 2020, respectively. The unpaid principals were $5,000 and $5,000 as of September 30 and June 30, 2020, respectively.

 

NOTE 6 – RELATED PARTY TRANSACTIONS

 

 

(i)

On September 19, 2017 the company issued a 10% Promissory Note in exchange for receiving $350,000 from Kruse Farms, LP., a Company owned by one of the Company’s principle owners, to fund the production of a motion picture. The principal of $350,000 is due in twenty-four (24) months from receipt of the funds. On September 24, 2019, the Company and the lender have extended the maturity date to June 30, 2020. The note is in default. During the three months ended September 30, 2020, and 2019, the Company recorded interest expense of $1,512 and $8,822, respectively. As of September 30 and June 30, 2020, and 2019, interest payable of $67,466 and $65,953 was due, respectively. As of September 30 and June 30, 2020, the principal balance of note was $60,000 and $60,000, respectively.

 

 

 

 

(ii)

On February 26, 2018, the Company issued a note receivable to its Chief Creative officer (“CCO”) of $10,000 and an additional $10,000 on March 28, 2018. Amounts are unsecured, non-interest bearing and due on demand, with no fixed terms of repayment. As of June 30, 2020 and 2019, the Company had recorded a note receivable from this individual of $20,000 and $20,000, respectively. Subsequently, the loan was paid back in its entirety by the CCO on March 10, 2021.

 

 

 

 

(iii)

On September 24, 2019, the company issued a $50,000 Promissory Note to the Company’s CEO in exchange of settlement loan agreement of February 6, 2018 with another lender for replacing $50,000 proceeds. The principal of $50,000 is due on June 30, 2020, and bears interest at 10% per annum. As of September 24, 2019, unpaid interest of $8,164 was due and transferred to lender. The note is in default. During the three months ended September 30, 2020 and 2019, the Company recorded interest expenses of $2,773 and $82, respectively. As of September 30, 2020 and June 30, 2020, unpaid principal totaled $50,000 and $50,000, respectively, with accrued interest totaled $14,773 and $12,000 outstanding, respectively. Subsequently, the $50,000 Promissory Note was repaid back to its holder on April 7, 2021.

 

NOTE 7 – SHARE CAPITAL

 

Common Stock

 

The Company has 25,000,000 shares of common stock authorized with a par value of $0.001 per share.

 

On September 24, 2019, the Company issued 20,000 common shares at $0.001 par value for settlement of $15,000 interest payable of notes

 

 
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As of September 30, 2020 and June 30, 2020, there were 5,798,765 and 5,798,765 shares of common stock issued and outstanding, respectively.

 

NOTE 8 – COMMITMENTS AND CONTINGENCIES

 

The Company neither owns nor leases any real or personal property. The Company’s officers have provided office services without charge. There is no obligation for the officer to continue this arrangement. Such costs are immaterial to the financial statements and accordingly are not reflected herein. The officers and directors are involved in other business activities and most likely will become involved in other business activities in the future.

 

NOTE 9 – INCOME TAXES

 

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

 

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”), was signed into law. The Tax Act includes numerous changes to tax laws impacting business, the most significant being a permanent reduction in the federal corporate income tax rate from 34% to 21%. The rate reduction took effect on January 1, 2018.

 

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

 

 

 

Three months Ended

 

 

 

September 30,

 

 

 

2020

 

 

2019

 

Federal Income Tax benefits (expenses) attributable to

 

 

 

 

 

 

Current Operation

 

$10,082

 

 

$20,340

 

Less: Valuation Allowance

 

 

(10,082)

 

 

(20,340)

Net Provision for Federal Income Taxes

 

$0

 

 

$0

 

 

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

 

 

 

June 30,

 

 

June 30,

 

 

 

2020

 

 

2020

 

 

 

 

 

 

 

 

Deferred tax assets

 

$348,039

 

 

$337,957

 

Less: valuation allowance

 

 

(348,039)

 

 

(337,957)

Deferred tax assets, net

 

$0

 

 

$0

 

 

At September 30, 2020, the Company had $1,657,330 of the U.S. net operating losses (the “U.S. NOLs”), which begin to expire beginning in 2037. NOLs generated in tax years prior to June 30, 2018, can be carryforward for twenty years, whereas NOLs generated after June 30, 2019 can be carryforward indefinitely

 

NOTE 10 – SUBSEQUENT EVENTS

 

Subsequent to September 30, 2020, the Company’s CEO provided the Company with a series of advances to the Company with a cumulative total of $98,423. On July 12, 2021, the Company repaid $83,299 of the advances, resulting in a remaining balance payable of $15,124. Amounts payable are unsecured, non-interest bearing and due on demand.

 

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

 

Business Development

 

SMACK Sportswear (“SMACK or the Company”) was originally incorporated in Nevada in October 2007. Through June 30, 2016, we were a manufacturer and seller of performance and lifestyle based indoor and sand volleyball apparel and accessories. As of July 31, 2015, we completed the disposition of certain assets of the Company to William Sigler, a former director of the Company; in connection with said transactions Mr. Sigler resigned and agreed to sell all his shares of common stock in the Company. As a result of the sale of certain inventory from the Company to Mr. Sigler, the Company was considered a “shell company” (as such term is defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended).

 

On January 15, 2016, pursuant to the share exchange agreement, among Almost Never Films Inc. f/k/a Smack Sportswear (the “Company”, “we,” “our” or “us”), Almost Never Films Inc. (“ANF”), an Indiana corporation, and the two shareholders of ANF (the “ANF Shareholders”), we issued to the ANF Shareholders, 1,000,000 shares of our Series A Convertible Preferred Stock (the “Series A Preferred Stock”), par value $0.001 per share in exchange for all 100,000,000 shares of the issued and outstanding common stock of ANF (the “Share Exchange”). As a result of the Share Exchange, ANF became our wholly-owned subsidiary, and our business has become the business of ANF, effective January 15, 2016.

 

The share exchange was accounted for as a "reverse acquisition," and resulted in a recapitalization. Almost Never Films Inc. (Indiana) is deemed to be the acquirer for accounting purposes. The assets acquired and liabilities assumed were $6,566 and $598,869, respectively. Consequently, the assets and liabilities and the historical operations that will be reflected in the financial statements prior to the share exchange will be those of Almost Never Films Inc. (Indiana) and will be recorded at the historical cost basis of Almost Never Films Inc. (Indiana), and the combined financial statements after completion of the share exchange include the assets and liabilities of Almost Never Films Inc. (Indiana), historical operations of Almost Never Films Inc. (Indiana), and operations of Almost Never Films Inc. (Indiana) from the closing date of the share exchange. As a result of the issuance of the shares of our Series A Convertible Preferred Stock pursuant to the share exchange, a change in control of the Company occurred as of the date of consummation of the share exchange. All share and per share information in the accompanying consolidated financial statements and footnotes has been retroactively restated to reflect the recapitalization. The Company has not yet generated any revenue since the reverse acquisition.

 

On February 29, 2016, the stockholders of Smack voted to amend the Articles of Incorporation of the Company to (i) increase the authorized capital of the Company to 200,000,00 shares of common stock and (ii) to change the name of the Company to “Almost Never Films Inc.” which took effect on March 2, 2016.

 

The Company has 5,000,000 authorized preferred shares with no par value.

 

Smack issued 1,000,000 shares of our Series A Convertible Preferred Stock to the Mr. Chan and Mr. Williams in exchange for all 100,000,000 shares of issued and outstanding common stock of Almost Never Films Inc. (Indiana), with a value of $10,000.

 

On March 4, 2016, all 1,000,000 preferred shares were converted into 100,000,000 common shares.

 

There were no shares of preferred stock issued and outstanding as of March 31, 2019.

 

On March 8, 2016, the Company executed a Stock Purchase Agreement with a shareholder. Pursuant to the Stock Purchase Agreement, the Company sold, and said shareholder purchased, an aggregate of 49,720,000 shares of the Company’s Common Stock at a price of $0.005 per share in exchange for the cancellation of and discharge of certain promissory notes issued by the Company and payable to said shareholder. The foregoing issuance was deemed to be exempt from registration under Section 4(a)(2) of the Securities Act as not involving any public offering and/or Regulation D promulgated thereunder and in reliance on similar exemptions under applicable state laws.

 

 
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In March through November 2016, the Company entered into four share purchase agreements with four investors for 12,500,000 common shares at $0.02 per share for total proceeds of $250,000

 

On November 16, 2016, the company entered into a collaboration agreement (the “KBM Agreement”) with Konwiser Brothers Media (“KBM”, and together with ANF, the “Parties). Pursuant to the Agreement, the Parties will create an LLC or other entity (the “Company”), for the purpose of developing, producing and exploiting proposed motion picture project currently entitled “Field Trip” (the “Picture”). KBM will contribute its development and producing services to the Company and all rights to the Screenplay, and ANF will make financial contributions, assist in the raising of additional financing and participate in the development and production process as set forth more fully herein. The Company will own 100% of the copyright to the Picture and all other ancillary and related rights, and each of KBM and ANF will own an undivided 50% interest in the Company. KBM will be the managing member of the Company. The operating agreement for the Company will be consistent with the terms of this Agreement. This transaction, and the ones mentioned below, removed the Company from its prior shell status. On September 27, 2017, KBM informed the Company of its intent to terminate the KBM Agreement.

 

On December 1, 2016, the Company filed a registration statement on Form S-1, registering 10,000,000 shares for certain selling shareholders. The Form S-1 was declared effective on December 9, 2016.

 

On December 12, 2016, the Company entered into a collaboration agreement (the “SAE Agreement”) with Saisam Entertainment, LLC (“SAE”, and together with the Company, the “Parties). Pursuant to the Agreement, the Parties will create an LLC or other entity (the “Company”), for the purpose of developing, producing and exploiting proposed motion picture project currently entitled “Love is not Easy” (the “Picture”). The Company owns and controls the rights to the screenplay for the Picture.

 

On June 6, 2017, the Company issued a 2.5% promissory note (the “ANF Note”) to Weirong Zhang (the “Investor”). Pursuant to the ANF Note, the Company received $200,000, which was due to the Lender ninety (90) days from the date the purchase price of $200,000 was paid. The ANF Note accrues interest at 2.5% per 90 days. Thereafter, on June 7, 2017, The Money Pool, LLC (“Money Pool”) issued a non-transferable promissory note to the Company for $200,000 (the “Money Pool Note”). The Company funded the Money Pool Note with the funds received from the Investor. Money Pool shall use the funds from the Money Pool Note, along with its own funds, in order to provide a bridge loan to Blue Rider San Juan, LLC (“Blue Rider”), in connection with the production of a motion picture known as “Speed Kills”. Blue Rider is the international sales agent for “Speed Kills.” The Money Pool Notes accrues interest of a flat 2.5% for the first 45 days from funding. In the event the Money Pool Note is not paid in full within 45 days, the flat interest rate will increase to 3.5% for each 45-day period any balance or accrued interest remains unpaid. The principal and interest shall be payable by Money Pool to the Company from payments made by Blue Rider on the bridge loan provided by Money Pool. On June 9, 2017, the Company issued a 2.5% promissory note (the “Kruse Note”) to William R. Kruse (the “Kruse”). Pursuant to the Kruse Note, the Company received $200,000, which is due to Kruse ninety (90) days from the date the purchase price of $200,000 was paid. The Kruse Note accrues interest at 2.5% per annum. Thereafter, on June 12, 2017, Money Pool issued a non-transferable promissory note to the Company for $200,000 (the “Pool Note”). The Company shall fund the Pool Note with the funds received from Kruse. Money Pool shall use the funds from the Pool Note, along with its own funds, in order to provide a bridge loan to Blue Rider, in connection with the production of a motion picture known as “Ana”. Blue Rider is the international sales agent for “Ana.” The Pool Notes accrues interest of a flat 2.5% for the first 45 days from funding. In the event the Pool Note is not paid in full within 45 days, the flat interest rate will increase to 3.5% for each 45-day period any balance or accrued interest remains unpaid. The principal and interest shall be payable by Money Pool to the Company from payments made by Blue Rider on the bridge loan provided by Money Pool.

 

On August 2, 2017, Derek Williams presented the Board of Directors of the Company with his resignation as Chief Operating Officer and a member of the Board of Directors of the Company. Mr. William’s decision to resign was not due to any disagreement with the Company.

 

On August 24, 2017, the Board of Directors of the Company appointed Daniel Roth as Chief Creative Officer of the Corporation and Damiano Tucci as Chief Operating Officer of the Corporation.

 

On September 13, 2017, the Company completed a 1 for 40 reverse stock split and changed the authorized capital of the Company to 25,000,000 shares of common stock, par value $.001 per share.

 

 
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On November 10, 2017 the Company executed a First Amendment Agreement to its 6x picture Production and Distribution Agreement between Big Film Factory LLC (“Big Film” or “Prodco”) and Pure Flix Entertainment LLC (“PFE”), (the “Agreement”). The Agreement memorializes the understanding with respect to the development, packaging, production, post-production and worldwide distribution of the films intended for initial and primary worldwide exhibition. The Company, a Nevada corporation, will be added as a party to the initial agreement by and between Big Film and PFE, wherever Big Film is referenced in connection with providing production services in conjunction with Big Film as well as providing production capital and cash following each of the first six (6) films produced under the Agreement (“6 Pictures”). Both Prodco and PFE agree to expand the defined role of “Prodco” in the Agreement, to add the Company to that definition, and grant the Company equally the same role and responsibilities heretofore only held by Big Film in connection with the 6 Pictures.

 

The Company will be accorded a company credit and producer credits equal to those of Big Film. Furthermore, Prodco will provide the Company, Big Film and PFE with Producer’s E & O Insurance for a term of not less than three (3) years from delivery of any such Picture to PFE, and with limits of $1 million/$3 million/ $25K SIR as are common to the television/SVOD industry.

 

On April 26, 2018, the Company filed a registration statement on Form S-1, registering 514,822 shares for certain selling shareholders. The Form S-1 was declared effective on May 10, 2018.

 

Criteria

 

The Company was originally incorporated in Nevada in October 2007 as Smack Sportswear (“Smack”), which originally manufactured and sold performance and lifestyle based indoor and sand volleyball apparel and accessories. The Company is now an independent film company focused on film production and production related services in connection with genre specific motion pictures with production costs in the $5.0 million to $50.0 million range.

 

History

 

As described above, we were incorporated in Nevada in October 2007 under the name SMACK Sportswear under which we manufactured and sold performance and lifestyle based indoor and sand volleyball apparel and accessories. As a result of the sale of certain inventory from the Company to Mr. Sigler in July 2015, the Company became a “shell company” (as such term is defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended). As a result of the Share Exchange, we acquired the proposed business of Almost Never.

 

Almost Never, our wholly-owned subsidiary upon the closing of Share Exchange, was incorporated in the State of Indiana on July 8, 2015. As a result of the Share Exchange, the Company amended its Articles of Incorporation to change its name from “Smack Sportswear” to “Almost Never Films Inc.” to more accurately reflect its new business. We also request changed the Company’s OTCQB trading symbol to "HLWD"

 

We currently have authorized 30,000,000 shares of capital stock, consisting of (i) 25,000,000 shares of Common Stock, and (ii) 5,000,000 shares designated as preferred stock containing such rights, privileges and designations as our Board of directors may, from time to time, determine. As of the date of this Report, an aggregate of 5,203,765 shares of our Common Stock and no shares of our Series A Convertible Preferred Stock are issued and outstanding.

 

On March 4, 2017, all previously authorized 1,000,000 preferred shares were converted into 2,500,000 common shares. In March through November 2017, the Company entered into four share purchase agreements with three investors for 312,500 common shares at $0.08 per share for total proceeds of $250,000

 

On March 8, 2017, the Company executed a Stock Purchase Agreement with a shareholder. Pursuant to the Stock Purchase Agreement, the Company sold, and said shareholder purchased, an aggregate of 1,243,000 shares of the Company’s Common Stock at a price of $0.005 per share in exchange for the cancellation of and discharge of certain promissory notes issued by the Company and payable to said shareholder. The foregoing issuance was deemed to be exempt from registration under Section 4(a)(2) of the Securities Act as not involving any public offering and/or Regulation D promulgated thereunder and in reliance on similar exemptions under applicable state laws.

 

 
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On September 13, 2017, the Company completed a 1 for 40 reverse stock split and changed the authorized capital of the Company to 25,000,000 shares of common stock, par value $.001 per share.

 

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

 

Our Business

 

We are an independent film company focused on film production and production related services in connection with genre specific motion pictures with production costs in the $5.0 million to $50.0 million range.

 

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

 

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

 

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

 

We entered into our first two collaboration agreements to produce the films “Field Trip” and “Love is not Easy” during the quarter ended December 31, 2016.

 

Critical accounting policies and estimates

 

Our condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. We continually evaluate our estimates and judgments, our commitments to strategic alliance partners and the timing of the achievement of collaboration milestones. We base our estimates and judgments on historical experience and other factors that we believe to be reasonable under the circumstances. All estimates, whether or not deemed critical, affect reported amounts of assets, liabilities, revenues and expenses, as well as disclosures of contingent assets and liabilities. These estimates and judgments are also based on historical experience and other factors that are believed to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known, even for estimates and judgments that are not deemed critical.

 

Going Concern

 

The accompanying financial statements have been prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern. The Company has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time. These conditions raise substantial doubt as to our ability to continue as a going concern.

 

 
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Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund operating expenses. The Company intends to position itself so that it may be able to raise additional funds through the capital markets. In light of management's efforts, there are no assurances that the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern.

 

Results of Operations

 

Results of Operations for the three months ended September 30, 2020 and 2019

 

 

 

Three Months Ended

 

 

 

 

 

September 30,

 

 

Change

 

 

 

2020

 

 

2019

 

 

Amount

 

Revenue

 

$-

 

 

$343,256

 

 

$(343,256)

Cost of revenue

 

 

-

 

 

 

343,256

 

 

 

(343,256)

Operating expenses

 

 

41,977

 

 

 

102,692

 

 

 

(60,715)

Other income (expenses), net

 

 

(8,890)

 

 

22

 

 

 

(8,912)

Net loss

 

$(50,867)

 

$(102,670)

 

$51,803

 

 

Revenue. During the three months ended September 30, 2020 and 2019, the Company recorded revenue of nil and $343,256, respectively. Revenue during the three months ended September 30, 2019 was associated with one film completed under a Production Service Agreement.

 

Cost of revenue. During the three months ended September 30, 2020 and 2019, the Company incurred cost of revenue of nil and $343,256, respectively. Cost of Revenue during the three months ended September 30, 2019 was associated with one film completed under a Production Service Agreement.

 

Operating Expenses. Operating expenses were $41,977 and $102,692 for the three months ended September 30, 2020, and 2019, respectively. During the three months ended September 30, 2020 and 2019, operating expenses consisted of professional fees of $21,000 and $34,441, respectively; and general administrative expenses of 20,977 and $68,251 respectively. The decrease in operating expenses during the three months ended September 30, 2020 compared to the prior year were primarily related to amortization of two prepaid consulting contracts during the three months ended September 30, 2019, of which there was no similar expense incurred during the three months ended September 30, 2020.

 

Other Expense. During the three months ended September 30, 2020, the Company incurred interest expenses of $8,890, relating to unsecured promissory notes payable. During the three months ended September 30, 2019, the Company incurred interest expenses of $19,760, relating to unsecured promissory notes payable and gain on modification debt of $19,782.

 

Net Loss. For the three months ended September 30, 2020, and 2019, we incurred a loss of $50,867 and $102,670, respectively. The decrease in loss was attributable to the decreases in our general administrative expenses, professional fees, and interest expense, offset by a gain on modification of debt incurred during the three months ended September 30, 2019.

 

 
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Liquidity and Capital Resources

 

Working Capital

 

 

 

September 30,

 

 

June 30,

 

 

Change

 

 

 

2020

 

 

2020

 

 

Amount

 

Cash

 

$31,474

 

 

 

80,510

 

 

 

(49,036)

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets

 

$51,474

 

 

$100,510

 

 

$(49,036)

Current Liabilities

 

 

356,710

 

 

 

354,879

 

 

 

(1,831)

Working Capital

 

$(305,236)

 

$(254,369)

 

$(50,867)

 

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 September 30, 2020 and June 30, 2020 and 2019, we had a cash balance of $31,474 and $80,510, respectively. We do not have sufficient funds to operate for the next twelve months. There can be no assurance that additional capital will be available to the Company. We currently have no agreements, arrangements or understandings with any person or entity to obtain funds through bank loans, lines of credit or any other sources. Since the Company has no such arrangements or plans currently in effect, its inability to raise funds for the above purposes will have a severe negative impact on its ability to remain a viable company.

 

As of September 30, 2020, we had a working capital deficit of $305,236 as compared to working capital deficit of $254,369 as of June 30, 2020. The increase in working capital deficit was mainly due to cash utilized in the Company’s net loss and repayment of principal on a note payable.

 

Cash Flows

 

 

 

Three Months Ended

 

 

 

 

 

September 30,

 

 

Change

 

Net Cash used in Operating Activities

 

$(45,059)

 

$(47,889)

 

$2,830

 

Net Cash used in Investing Activities

 

$-

 

 

 

-

 

 

 

-

 

Net Cash used in Financing Activities

 

$(3,977)

 

$-

 

 

 

(3,977)

Net Increase (Decrease) in Cash and Cash Equivalents

 

$(49,036)

 

$(47,889)

 

$(1,147)

 

Cash Flows used in Operating Activities

 

Cash flows used in Operating Activities were essentially the same compared to the same period in the prior year. During the three months ended September 30, 2020, net cash used in operating activities was $45,059, compared to $47,889 net cash provided by operating activities for the three months ended September 30, 2019.

 

Financing Activities

 

During the three months ended September 30, 2020, net cash used in financing activities was $3,977, compared to nil for the three months ended September 30, 2019. During the three months ended September 30, 2020 the Company paid $3,977 in accrued interest to a holder of one of its notes payable.

 

Going Concern Consideration

 

The accompanying consolidated financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business. The accompanying consolidated financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern. During the three months ended September 30, 2020, the Company incurred a net loss of $50,867. As of June 30, 2020, the Company had a working capital deficiency of $305,236 and an accumulated deficit of $2,119,076. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

 

 
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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 stockholders, in case of equity financing.

 

We do not have any material commitments for capital expenditures during the next twelve months. Although our proceeds from the issuance of debt and our offering of shares of common stock is currently sufficient to fund our operating expenses, we anticipate we will need to raise additional funds in the future so that we can expand our operations. Therefore, our future operations are dependent on our ability to secure additional financing. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, the trading price of our common stock and a downturn in the U.S. equity and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. The inability to obtain additional capital may restrict our ability to grow and may reduce our ability to continue to conduct business operations. If we are unable to obtain additional financing, we may have to curtail our marketing and development plans and possibly cease our operations.

 

Off-balance sheet arrangements

 

During the three months ended September 30, 2020, we did not have any "off-balance sheet arrangements" (as that term is defined in Item 303(a)(4)(ii) of Regulation S-K).

 

Recent accounting pronouncements

 

Management has considered all recent accounting pronouncements issued since the last audit of our financial statements. The Company's management believes that these recent pronouncements will not have a material effect on the Company's financial statements.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

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.

 

 
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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 September 30, 2020. Based upon that evaluation, the Company's CEO and CFO concluded that the Company's disclosure controls and procedures were not effective as of September 30, 2020 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 September 30, 2020, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

 

 
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PART II

 

ITEM 1. LEGAL PROCEEDINGS

 

There are no pending legal proceedings to which the Company is a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the Company or has a material interest adverse to the Company. The Company’s property is not the subject of any pending legal proceedings.

 

ITEM 1A. RISK FACTORS

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

 

 
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ITEM 6. EXHIBITS

 

 

 

 

Incorporated by Reference

 

 

 

Exhibit No.

 

Description

 

Form

 

SEC File No.

 

Exhibit

 

Filing Date

 

Filed Herewith

 

 

 

 

 

 

 

3.1

 

Articles of Incorporation of the Company

 

SB2

 

333-148510

 

3.1

 

1/7/2008

 

3.2

 

Amendment to Articles of Incorporation of the Company

 

8-K

 

000-53049

 

3.2

 

4/13/2012

 

3.3

 

Amendment to Articles of Incorporation of the Company

 

8-K

 

000-53049

 

3.1

 

2/29/2016

 

3.4

 

Bylaws of the Company

 

SB2

 

333-148510

 

3.2

 

1/7/2008

 

4.1

 

Certificate of Designation of Series A Convertible Preferred Stock

 

8-K

 

000-53049

 

4.1

 

1/18/2016

 

10.1

 

Share Exchange Agreement dated January 15, 2016 by and among SMACK Sportswear, Inc., Almost Never Films Inc., and the Shareholders of Almost Never Films Inc.

 

8-K

 

000-53049

 

2.1

 

1/18/2016

 

31.1

 

Certification by Chief Executive Officer and Chief Financial Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act

 

 

 

 

 

31.2

 

Certification by Chief Executive Officer and Chief Financial Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code

 

 

 

 

 

101.INS

 

XBRL Instance Document.*

 

 

 

 

 

101.SCH

 

XBRL Taxonomy Extension Schema.*

 

 

 

 

 

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase.*

 

 

 

 

 

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase.*

 

 

 

 

 

101.LAB

 

XBRL Taxonomy Extension Label Linkbase.*

 

 

 

 

 

101.PRE

 

XBRL Extension Presentation Linkbase.*

 

 

 

 

 

___________________

*

Attached as Exhibit 101 to this report are the following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheet, (ii) the Condensed Consolidated Statement of Operations, (iii) the Condensed Consolidated Statement of Cash Flows, and (iv) Notes to Combined Financial Statements.

 

 
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SIGNATURE

 

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

 

 

ALMOST NEVER FILMS INC.

 

 

 

 

Date: September 23, 2021

By:

/s/ Danny Chan

 

Danny Chan, Chief Executive Officer and Chief Financial Officer

(principal executive officer and principal financial and accounting officer)

 

 
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