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,
2020.
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 March 31, 2019. 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 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 5,778,765 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.
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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.
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.
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Results of Operations
For the three months ended March 31, 2020 compared to March 31, 2019
Three Months Ended
March 31, Change
2020 2019 Amount
Revenue $ - $ 1,784,846 $ (1,784,846 )
Cost of revenue - 1,762,700 (1,762,700 )
Operating expenses 68,524 116,552 (48,028 )
Other expense (13,613 ) (31,583 ) 17,970
Net loss
$ (82,137 ) $ (125,989 ) $ 43,852
Revenue and cost of revenue. During the three months ended March 31, 2020 and
2019, the Company had $0 and $1,784,846 revenue, respectively. Revenue and cost
of revenue during the three months ended March 31, 2019 was associated with two
films completed under Production Service Agreements.
Operating Expenses. Operating expenses were $68,524 and $116,552 for the three
months ended March 31, 2020, and 2019, respectively. Operating expenses mainly
consisted of professional fees of $11,912 and $6,559 and general administrative
expenses of $56,612 and 109,993 for the three months ended March 31, 2020 and
2019, respectively. The decrease in operating expenses resulted primarily from
the decrease in general and administrative expenses.
Other Expense. During the three months ended March 31, 2020, the Company
incurred interest expenses of $13,613, relating to unsecured promissory notes
payable. During the three months ended March 31, 2019, the Company incurred
interest expenses of $31,583, relating to an unsecured promissory note payable.
Net Loss. For the three months ended March 31, 2020, and 2021, we incurred a
loss from operations of $82,137 and $125,989, respectively. The decrease in loss
from operations was attributable to the decrease in our professional fees and
interest expenses.
For the nine months ended March 31, 2020 compared to March 31, 2019
Nine Months Ended
March 31, Change
2020 2019 Amount
Revenue $ 343,256 $ 1,784,846 $ (1,441,590 )
Cost of revenue 343,256 1,762,700 (1,419,444 )
Operating expenses 235,523 302,910 (67,387 )
Other expense
(40,021 ) (73,424 ) 33,403
Net loss $ (275,544 ) $ (354,188 ) $ 78,644Revenue and cost of revenue. During the nine months ended March 31, 2020 and
2019, the Company had $343,256 and $1,784,846 revenue, respectively. Revenue
during the nine months ended March 31, 2020 was associated with one film
completed under a Production Service Agreement. Revenue during the nine months
ended March 31, 2019 was associated with two films completed under Production
Service Agreements.
Operating Expense. Operating expenses were $235,523 and $302,910 for the nine
months ended March 31, 2020, and 2019, respectively. Operating expenses mainly
consisted of professional fees of $63,896 and $39,236 and general administrative
expenses of $171,627 and $263,674 for the nine months ended March 31, 2020 and
2019, respectively. The decrease in operating expenses resulted primarily from
the decrease in general and administrative expenses offset by an increase in
professional fees.
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Other Expense. During the nine months ended March 31, 2020, the Company incurred
interest expenses of $47,803, relating to unsecured promissory notes payable,
bad debt expenses for loan receivable of $12,000 and gain on modification debt
of $19,782. During the nine months ended March 31, 2019, the Company incurred
interest expenses of $73,424, relating to an unsecured promissory note payable.
Net Loss. For the nine months ended March 31, 2020, and 2021, we incurred a loss
from operations of $275,544 and $354,188, respectively. The decrease in loss
from operations was attributable to the decrease in our general administrative
expenses and interest expenses.
Liquidity and Capital Resources
Working Capital
March 31, June 30, Change
2020 2019 Amount
Cash $ 62,849 57,154 5,695
Current Assets $ 477,231 $ 672,487 $ (195,256 )
Current Liabilities 708,665 1,075,927 (367,262 )
Working Capital $ (231,434 ) $ (403,440 ) $ 172,006Liquidity 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 March 31, 2020 and June 30, 2019, we had a cash balance of $62,849 and
$57,154, 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 March 31, 2020, we had a working capital deficit of $231,434 as compared
to working capital deficit of $403,440 as of June 30, 2019. The decrease in
working capital deficit was mainly due to a decrease in promissory notes
payable, deferred film revenue, accounts receivable, deferred asset and film
cost.
Cash Flows
Nine Months Ended
March 31, Change
2020 2019 Amount
Net Cash Provided by (Used in) Operating
Activities $ 50,195 $ (241,944 ) $ 292,139
Cash used in Investing Activities $ - - -
Net Cash Provided by (Used in) Financing
Activities $ (44,500 ) $ 12,000 (56,500 )
Net Increase (Decrease) in Cash and Cash
Equivalents $ 5,695 $ (229,944 ) $ 235,639
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Cash Flows from (used in) Operating Activities
During the nine months ended March 31, 2021, net cash provided by operating
activities was $50,195, compared to $241,944 net cash used in operating
activities for the nine months ended March 31, 2019. The increase in net cash
provided in operating activities was mainly due an decrease in accounts
receivable, increase in accounts payable and accrued liabilities and timing of
recognition of deferred revenue and reduction of other payable in the prior
year, offset by a decrease in add-backs for adjustments to reconcile net loss to
net cash used in operating activities, film costs, prepaids and interest
payable.
Cash Flows from (used in) Financing Activities
During the nine months ended March 31, 2020, net cash used in financing
activities was $44,500, compared to $12,000 net cash provided by financing
activities for the nine months ended March 31, 2019. During the nine months
ended March 31, 2020 and 2019, the Company paid $45,000 and $0 for settlement of
notes payable, respectively. During the nine months ended March 31, 2020 and
2019, the Company received $500 and $12,000 from a related party, respectively.
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 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, 2020 the Company
reported a net loss of $275,544. As of March 31, 2020, the Company has an
accumulated deficit of $2,031,006 and a working capital deficit of $231,434.
These factors, among others, raise substantial doubt about the Company's ability
to continue as a going concern.
The ability of the Company to continue as a going concern and appropriateness of
using the going concern basis is dependent upon, among other things, an
additional cash infusion and an identification of new business opportunities. No
assurance can be given that any future financing will be available or, if
available, that it will be on terms that are satisfactory to the Company. Even
if the Company is able to obtain additional financing, it may contain undue
restrictions on operations, in the case of debt financing, or cause substantial
dilution for our 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.
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Off-balance sheet arrangements
During the nine months ended March 31, 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.
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ALMOST NEVER FILMS INC. 