U.S. UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended April 30, 2020

ORJanuary 31, 2021

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

For the transition period from __________ to ____________ Commission file number: 000-32201

Commission file number 000-32201RIVULET MEDIA, INC.

(Exact name of registrant as specified in its charter)

1206 East Warner Road, Suite 101-I
Gilbert, Arizona 85296

(Address of principal executive offices, including Zip Code)

(480) 225-4052

(Registrant’s telephone number, including area code)

Not applicable

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

1204 Tangerine Street

El Cajon, California 92021

(Former Name, Former Address and Former Fiscal year,

If Changed Since Last Report)

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

Indicate by check mark whether the registrant:registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes xNoo

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes xNoo

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): .

Yes oNox

NumberAs of shares outstanding of each ofFebruary 28, 2021, the issuer’s classesCompany had 121,270,171 shares of common equity as of the latest practicable date:stock, $0.0001 par value, issued and outstanding.

PART IRIVULET MEDIA, INC. AND SUBSIDIARIES

FINANCIAL INFORMATION(Formerly known as Bio-Matrix Scientific Group, Inc.)

ITEM 1 – FINANCIAL STATEMENTS.Table of Contents

See accompanying Notesnotes to Condensed Consolidated Financial Statementscondensed consolidated financial statements.

RIVULET MEDIA, INC. AND SUBSIDIARIES
(Formerly known as Bio-Matrix Scientific Group, Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

Three Months and Six Months Ended January 31, 2021

See accompanying Notesnotes to Condensed Consolidated Financial Statementscondensed consolidated financial statements.

RIVULET MEDIA, INC. AND SUBSIDIARIES
(Formerly known as Bio-Matrix Scientific Group, Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIENCY)
(Unaudited)

Three Months and Six Months Ended January 31, 2021

See accompanying Notesnotes to Condensed Consolidated Financial Statementscondensed consolidated financial statements.

RIVULET MEDIA, INC. AND SUBSIDIARIES
(Formerly known as Bio-Matrix Scientific Group, Inc.)

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)

Six Months Ended January 31, 2021

See accompanying Notesnotes to Condensed Consolidated Financial Statementscondensed consolidated financial statements.

RIVULET MEDIA, INC. AND SUBSIDIARIES
(Formerly known as Bio-Matrix Scientific Group, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Three Months and Six Months Ended January 31, 2021

1. ORGANIZATION AND BASIS OF PRESENTATION

OrganizationThe condensed consolidated financial statements of Rivulet Media, Inc., a Delaware corporation, including its wholly-owned subsidiaries (collectively, the “Company”), at January 31, 2021, and for the three months and six months ended January 31, 2021, are unaudited. In the opinion of management of the Company, all adjustments, including normal recurring accruals, have been made that are necessary to present fairly the financial position of the Company as of January 31, 2021, and the results of its operations for the three months and six months ended January 31, 2020, and its cash flows for the six months ended January 31, 2021. Operating results for the interim periods presented are not necessarily indicative of the results to be expected for a full fiscal year. The consolidated balance sheet at July 31, 2020 has been derived from the Company’s audited consolidated financial statements at such date.

The condensed consolidated financial statements and related notes have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with the financial statements and other information included in the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2020, as filed with the SEC.

Bio-Matrix Scientific Group, Inc. (“Bio-Matrix”) was organized on October 6, 1998 in the State of Delaware, originally under the name Tasco International, Inc, which was subsequently changed to Tasco Holdings International, Inc., and then to Bio-Matrix Scientific Group, Inc. in 2006. On May 26, 2020, Bio-Matrix’s name was further changed to Rivulet Media, Inc.

2019 Reverse MergerAcquisition Transaction

On July 31, 2019, Bio-Matrix acquired 100% of the share capital of Pine Hills, Inc., a Wyoming corporation, in exchange for the issuance of 4,080,000 common shares of Bio-Matrix, to Heather Cassady, the sole shareholder of Pine Hills, Inc. In conjunction with this transaction, all of the outstanding shares of Series AA and Series AAA Preferred Stock of Bio-Matrix were cancelled. Pine Hills was in the business of providing data storage and the archiving of corporate documents, and its operations subsequent to that date were nominal.

Upon completion of the transaction, Heather Cassady owned approximately 54% of the voting capital stock of Bio-Matrix immediately after the transaction. For financial accounting purposes, this transaction was considered a reverse acquisition of Bio-Matrix by Pine Hills, Inc. and was treated as a recapitalization with Pine Hills, Inc. as the accounting acquirer. Pine Hills was liquidated on August 13, 2020.

2020 Change in Control Transaction

On March 26, 2020, Debbie Rasmussen and Klusman Family Holdings (together, the “Buyers”) and David Koos and Heather Cassady (together, the “Sellers”) completedclosed a Stock Purchase Agreement (the “SPA”) whereby Buyers purchased from Sellers 4,364,235 shares of the outstanding common stock of Bio-Matrix. This transaction resulted in a change in control of Bio-Matrix, based on the transfer of approximately 55.8% of the outstanding common shares of Bio-Matrix from Sellers to Buyers. The amount of consideration for the purchase of such common shares was $215,000, with the source of the consideration being a loan from an unaffiliated third party.

As a condition of closing of the transaction, each director and officer of Bio-Matrix resigned from their position effective April 6, 2020, and Mike Witherill and Aaron Klusman were appointed as directors of Bio-Matrix to take office effective April 6, 2020. Additionally, effective April 6, 2020, Mr. Klusman was appointed Chairman and Chief Executive Officer of Bio-Matrix and Mr. Witherill was appointed Vice-Chairman and President of Bio-Matrix. At the closing of the transaction, Mike Witherill and Aaron Klusman, directly and indirectly, effectively owned the equivalent of 77,896,200 shares of common stock of Bio-Matrix, representing approximately 89.6% of the outstanding shares of common stock of Bio-Matrix.

In conjunction with the change in control transaction, all current liabilities of Bio-Matrix, including accounts payable and notes payable to related and unrelated parties, plus accrued interest, aggregating $141,936, were paid by the Buyers through a contribution to capital to Bio-Matrix prior to the closing of the reverse recapitalizationacquisition transaction, which became effective on April 13, 2020.

2020 Reverse MergerAcquisition Transaction

On April 13, 2020, Bio-Matrix acquired 100% of the equity capital of Rivulet Films, Inc. (“Rivulet Films”), which was organized on February 11, 2020 in the State of Arizona, in exchange for the issuance of 79,155,765 shares of common stock of Bio-Matrix distributed on a pro rata basis to the shareholders of Rivulet Films. Rivulet Films is a development stage company involved in the arts, entertainment and recreation business.

The current control shareholders of Bio-Matrix (consisting of Mike Witherill, Debbie Rasmussen (the wife of Mike Witherill), and Klusman Family Holdings (controlled by Aaron Klusman), through a series of orchestrated and interdependent transactions over a period of approximately three months, obtained effective control of Bio-Matrix (both a majority of the equity and the board of directors) and caused Rivulet Films to become a wholly-owned subsidiary of Bio-Matrix. Accordingly, for financial accounting purposes, this transaction was considered a reverse acquisition of Bio-Matrix by Rivulet Films and was treated as a recapitalization with Rivulet Films as the accounting acquiror.acquiror and Bio-Matrix as the accounting acquiree. The financial statements presented herein consist of those of Rivulet Films for the period commencing February 11, 2020 (Date of Inception) through April 30, 2020,(inception), with the financial statements of Bio-Matrix included for the period commencing April 13, 2020 through April 30, 2020.

The stockholders’ equity section of Bio-Matrix has been retroactively restated to reflect the accounting effect of the reverse acquisition transaction. All share and per share amounts presented herein also reflect the retroactive restatement of the stockholders’ equity section of Bio-Matrix. All costs associated with the reverse recapitalizationacquisition transaction were expensedcharged to expense as incurred.

On May 26, 2020, Bio-Matrix’s name was changed to Rivulet Media, Inc. (“Rivulet Media”). Unless the context indicates otherwise, Rivulet Media, including its subsidiaries, is hereinafter referred to as the “Company”.

Changes in Capital Structure of Company

On January 29, 2020, the Company filed a Certificate of Amendment to its Certificate of Incorporation with the State of Delaware to (1) reduce the number of shares of common stock that the Company is authorized to issue from 16,000,000,000 shares to 100,000,000 shares, with no change in the $0.0001 per share par value; (2) effect a reverse stock split of the Company’s issued and outstanding shares of common stock and all classes of issued and outstanding preferred stock at an exchange ratio of one new share for every 2,000 old shares, with fractional shares of stock being rounded up to the nearest whole share. All share and per share amounts presented in these financial statements and footnotes for all periods presented have been retroactively restated to reflect the 1-for-2,000 reverse stock split.

On May 26, 2020, the Company filed an Amended and Restated Certificate of Incorporation with the State of Delaware to (1) change the Company’s name to Rivulet Media, Inc.; (2) increase the number of shares of common stock that the Company is authorized to issue from 100,000,000 shares to 200,000,000 shares, par value $0.0001 per share, with the number of shares of preferred stock that the Company is authorized to issue remaining unchanged at 20,000,000 shares, par value $0.0001 per share; and (3) eliminate the class of Non-Voting Preferred Stock, of which 200,000 shares, par value $1.00 per share, had been authorized, andof which none were outstanding.

The Company forms special purpose subsidiaries to produce various programs and music projects.

In June 2020, the Company formed Borderline Productions LLC, an Arizona limited liability company, as a wholly-owned subsidiary of Rivulet Films, to produce a documentary film entitled “It’s Complicated” about the life of former Arizona Sheriff Joe Arpaio. Production activities commenced as of July 31, 2020.

In June 2020, the Company formed PBP Productions LLC, an Arizona limited liability company, as a wholly-owned subsidiary of Rivulet Films, to produce a feature film entitled “Please Baby Please”. Production activities commenced during September 2020.

In August 2020, the Company formed Mistress Movie, LLC, an Arizona limited liability company, as a wholly-owned subsidiary of Rivulet Films, to produce a feature film entitled “Mistress”. Production activities commenced during December 2020.

In October 2020, the Company formed Into the Black Productions LLC, an Arizona limited liability company, as wholly-owned subsidiary of Rivulet Films, to produce a documentary film entitled “Into the Black”. Production activities had not commenced as of January 31, 2021.

In February 2021, the Company formed Storyland Animation Studio, LLC, an Arizona limited liability company, as wholly-owned subsidiary of Rivulet Media, to produce a children’s television series entitled “Storyland”. Production activities commenced during February 2021.

Upon completion of a production, the Company expects to receive initial revenues from domestic and foreign distribution contracts.

BusinessBusiness

The business of the Company is to produce, distributeengaged in the production, distribution and marketmarketing of feature-length films, television series and mini-series, and television movies, from initial creative development through principal photography, postproduction, distribution and ancillary sales.

The Company’s business activities are subject to significant risks and uncertainties, including the need for additional capital, as described below.below at “Going Concern”. The Company hasdoes not yet commenced any revenue-generating operations, does notcurrently have positive cash flows from operations and will beis dependent on periodic infusions of capital to fund its operating requirements.

Going Concern

The Company’s consolidated financial statements have been presented on the basis that the Company is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As reflected in the accompanying consolidated financial statements, the Company has had no operating revenues to date, and has experienced netsuffered losses from operations and negative operating cash flows.flows since inception. During the period February 11, 2020 (Date of Inception) through April 30, 2020,six months ended January 31, 2021, the Company incurred a net loss of $288,123.$1,000,403. The Company intends to financehas financed its future working capital requirements since inceptionduring this period primarily through the sale of its equity securities and from borrowings.the issuance of convertible debt. Accordingly, management has concluded that these matters raise substantial doubt about the Company’s ability to continue as a going concern.

At April 30, 2020,January 31, 2021, the Company hashad limited cash resources available to fund its operations and will therefore need to raise additional funds in the short-term. The Company estimates that a significant amount of capital will be necessary over a sustained period of time to advance the development of the Company’s business activities to the point at which it can become commercially viable and self-sustaining. However, there can be no assurancesassurance that the Company will be successful in this regard.

As a result, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the accompanying consolidated financial statements are issued. In addition, the Company’s independent registered public accounting firm, in their report on the Company’s consolidated financial statements of Rivulet Films for the period from February 11, 2020 (Date of Inception)(inception) through MarchJuly 31, 2020, has also expressed substantial doubt about the itsCompany’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and successfully implement its business plan, and to ultimately achieve sustainable operating revenues and profitability. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

The development and expansion of the Company’s business in 2020 and thereafter will beis dependent on many factors, including the capital resources available to the Company. No assurances can be given that any future financing will be available or, if available, that itthey will be on terms that are satisfactory to the Company or adequate to fund the development and expansion of the Company’s business operations to a level that is commercially viable and self-sustaining. There is also significant uncertainty as to the affect that the coronavirus pandemic may have on the availability, amount and type of financing in the future.

If cash resources are insufficient to satisfy the Company’s ongoing cash requirements, the Company would be required to scale back or discontinue its operations, obtain funds, if available, although there can be no certainty, through strategic alliances that may require the Company to relinquish rights to any assets, or to discontinue its operations entirely.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Preparation

The accompanying condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”).

Consolidation

The condensed consolidated financial statements include the financial statements of the Company includingand its wholly-owned subsidiaries, at April 30, 2020,subsidiaries. All intercompany balances and for the period February 11, 2020 (Date of Inception) through April 30, 2020, are unaudited. In the opinion of management of the Company, all adjustments, including normal recurring accruals,transactions have been made that are necessary to present fairly the financial position of the Company as of April 30, 2020, and the results of its operations for the period February 11, 2020 (Date of Inception) through April 30, 2020, and its cash flows for the period February 11, 2020 (Date of Inception) through April 30, 2020. Operating results for the interim period presented are not necessarily indicative of the results to be expected for a full fiscal year. The condensed consolidated balance sheet at March 31, 2020 has been derived from the audited consolidated financial statements of Rivulet Films at such date.

The condensed consolidated financial statements and related notes have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, certain information and footnote disclosures normally includedeliminated in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with the Company’s recent filings with the SEC.consolidation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of expenses during the reporting period.

Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates.

The most significant estimates to be made by management in the preparation of the consolidated financial statements are expected to relate to the ultimate revenues realized and costs incurred for films and television programs; valuing equity instruments issued; estimates of sales returns and other allowances and provisions for doubtful accounts; the realization of deferred tax assets; accruals for contingent liabilities; impairment assessments for investments in films and television programs, equity investments and intangible assets.

Revenue RecognitionFilm, Television Programs, and Music Production Costs

SubjectFilm, television program, and music production costs are capitalized in accordance with Accounting Standards Codification 926, Entertainment - Films. Capitalized amounts are stated at the lower of cost, less accumulated amortization, or fair value. These costs represent capitalized costs for the production of films and other entertainment projects. In addition to the specific conditions as described below,films, television programs and music that the Company will recordmay produce, costs of productions in development are capitalized as development costs and are transferred to production costs when the project is set for production. Films, television programs and music in development include costs of acquiring film rights to books, stage plays or original screenplays and costs to adapt such projects, as well as amounts paid to musical artists. Projects in development are written off if they are determined not to be recoverable, and are evaluated for impairment at each reporting period.

Once a project is released to consumers, the capitalized costs are amortized on an individual project basis in the proportion that the current revenue whenfor each project bears to the estimated remaining unrecognized revenue to be received from all sources for each project as of the following criteria have been met: persuasive evidence of an arrangement exists; deliverybeginning of the productcurrent fiscal year. Revenue and cost forecasts are periodically reviewed by management and revised when warranted.

The carrying value of film costs are reviewed for impairment each reporting period on a project-by-project basis. If events or changes in circumstance indicate that the fair value of the capitalized costs on a specific project is less than the carrying value, an impairment charge is recognized in the amount by which the unamortized costs exceed the project’s fair value.

The Company has occurred; the consideration for the arrangement is fixed or determinable;not completed any projects as of January 31, 2021 and collectability is reasonably assured.has not recognized any impairment charges.

Revenue Recognition

Film and Television Program Revenues

The Company’s film and television program business is expected to generate revenues principally from the licensing of content in domestic theatrical exhibition, home entertainment (e.g., digital media and packaged media), television, and international market places.

Revenue will be recognized upon transfer of control of promised services or goods to customers in an amount that reflects the consideration that the Company expects to receive in exchange for those products.services or goods. Revenues do not include taxes collected from customers on behalf of taxing authorities, such as sales tax and value-added tax.

RevenueRevenues from the theatrical releaselicensing of feature filmsfilm and television content and the sales and licensing of music will be recognized when the content has been delivered and the license period has begun, as discussed above. Revenues from the licensing of symbolic intellectual property (i.e., licenses of motion pictures or television characters, brands, storylines, themes or logos) will be recognized over the corresponding license term. Commissions will be recognized as such services are provided.

Licensing Arrangements.The Company’s content licensing arrangements are expected to include fixed fee and minimum guarantee arrangements, and sales or usage-based royalties.

Fixed Fee or Minimum Guarantees.

The Company’s fixed fee or minimum guarantee licensing arrangements may, in some cases, include multiple titles, multiple license periods (windows) with a substantive period in between the windows, rights to exploitation in different media, or rights to exploitation in multiple territories, which may be considered distinct performance obligations. When these performance obligations are considered distinct, the fixed fee or minimum guarantee in the arrangement is allocated to the title, window, media right or territory as applicable, based on estimates of relative standalone selling prices. The amounts related to each performance obligation (i.e., title, window, media or territory) will be recognized when the content has been delivered, and the window for the exploitation right in that territory has begun, which is the point in time at which the customer is able to begin to use and benefit from the content.

Sales or Usage Based Royalties.

Sales or usage based royalties will represent amounts due to the Company based on the “sale” or “usage” of the Company’s content by the customer, and revenues which will be recognized at the timelater of exhibitionwhen the subsequent sale or usage occurs, or the performance obligation to which some or all the sales or usage-based royalty has been allocated and has been satisfied (or partially satisfied). Generally, when the Company licenses completed content (with standalone functionality, such as a movie, or television show), its performance obligation will be satisfied prior to the sale or usage. When the Company licenses intellectual property that does not have stand-alone functionality (e.g., brands, themes, logos, etc.), its performance obligation will generally be satisfied in the same period as the sale or usage. The actual amounts due to the Company under these arrangements will generally not be reported to the Company until after the close of the reporting period. The Company will record revenue under these arrangements for the amounts due and not yet reported to the Company based on estimates of the sales or usage of these customers and pursuant to the terms of the contracts. Such estimates will be based on information from the Company’s participationcustomers, historical experience with similar titles in box office receipts. Revenue fromthat market or territory, the saleperformance of DVDs and Blu-ray discsthe title in other markets, and/or data available in the retailindustry.

Revenues by Market or Product Line.

The following describes the revenues expected to be generated by market net of an allowance for estimated returns and other allowances, is recognized on the later of receipt by the customer or “street date” (when it is available for sale by the customer). Underproduct line.

Digital Transaction Revenue Sharing Arrangements: Will represent primarily revenue sharing arrangements includingwith certain digital media platforms which generally provide that, in exchange for a nominal or no upfront sales price, the Company shares in the rental or sales revenues generated by the platform on a title-by-title basis. These digital media platforms generate revenue from rental and electronic-sell-throughEST arrangements, such as download-to-own, download-to-rent, video-on-demand and subscription video-on-demand,video-on-demand. These revenue issharing arrangements are recognized whenas sales or usage-based royalties based on the Company is entitledperformance of these platforms and pursuant to receipts and such receipts are determinable. Revenues from televisionthe terms of the contract, as discussed above.

Licenses of Content to Digital Platforms: Will represent primarily the licensing of content to subscription-video-on-demand (“SVOD”) or other digital licensingplatforms for a fixed feesfee. As discussed above, revenues are recognized when the feature film or television program is available to the licensee for telecast. For television licenses that include separate availability “windows” during the license period, revenue is allocated over the “windows.” Revenue from sales to international territories are recognized when access to the feature film or television program has been granted or delivery has occurred, as required under the sales contract, and the right to exploit the feature film or television program has commenced. For multiple media rights contracts with a fee for a single film or television program where the contract provides for media holdbacks (defined as contractual media release restrictions), the fee is allocated to the various media based on the Company’s assessment of the relative fair value of the rights to exploit each media and is recognized as each holdback is released. For multiple-title contracts with a fee, the fee is allocated on a title-by-title basis, based on the Company’s assessment of the relative fair value of each title.

Producer Fee Revenues

Producer fee revenues will be recognized when the services have been performed. If all services have not been provided upon receipt of the fees, the fees will be deferred and recognized as revenue on a pro rata basis as the services are performed.

Music Revenues

Music revenues will be recognized when the musical content has been delivered toand the customer.window for the exploitation right in that territory has begun.

Film, Television Programs, and Music Production CostsDeferred Revenue

Film,Deferred revenue is expected to relate primarily to customer cash advances or deposits received prior to when the Company satisfies the corresponding performance obligation.

Payment terms are expected to vary by location and type of customer and the nature of the licensing arrangement, however, other than multi-year license arrangements; payments will generally be due within 60 days after revenue is recognized. For certain multi-year licensing arrangements, primarily in the television, program,digital media, and music production costsinternational markets, payments may be due over a longer period. When the Company expects the period between fulfillment of the Company’s performance obligation and the receipt of payment to be greater than a year, a significant financing component will be capitalized in accordance with Accounting Standards Codification 926, Entertainment - Films. The capitalized amountpresent. In these cases, such payments will be stateddiscounted to present value based on a discount rate reflective of a separate financing transaction between the customer and the Company, at contract inception. The significant financing component will be recorded as a reduction to revenue and accounts receivable initially, with such accounts receivable discount amortized to interest income over the lowerperiod to receipt of cost, less accumulated amortization,payment. The Company does not assess contracts with deferred payments for significant financing components if, at contract inception, the Company expects the period between fulfillment of the performance obligation and subsequent payment to be one year or fair value.less.

In other cases, customer payments may be made in advance of when the Company fulfills its performance obligation and recognizes revenue. This may primarily occur under television production contracts, in which payments may be received as the production progresses, international motion picture contracts, where a portion of the payments are received prior to the completion of the movie and prior to license rights start dates, and pay television contracts with multiple windows with a portion of the revenues deferred until the subsequent exploitation windows commence. These costsarrangements will represent capitalized costsnot contain significant financing components because the reason for the productionpayment structure is not for the provision of films and other entertainment projects. In additionfinancing to the films, television programsCompany, but rather to mitigate the Company’s risk of customer non-performance and music that may be produced, costs of productions in development will be capitalized as development costs and will be transferredincentivize the customer to production costs whenexploit the project is set for production. Films, television programs and music in development will include costs of acquiring film rights to books, stage plays or original screenplays and costs to adapt such projects, as well as amounts paid to musical artists. Projects in development will be written off at the earlier of the date they are determined not to be recoverable or when abandoned, or three years from the date of the initial investment.

Once a project is released to consumers, the capitalized costs will be amortized on an individual project basis in the proportion that the current revenue for each project bears to the estimated remaining unrecognized revenue to be received from all sources for each project as of the beginning of the current year. Revenue and cost forecasts will be periodically reviewed by management and revised when warranted.

The carrying value of the film costs will be reviewed for impairment each reporting period on a project-by-project basis. If events or changes in circumstance indicate that the fair value of the capitalized costs on a specific project is less than their carrying value, an impairment charge will be recognized in an amount by which the unamortized costs exceed the project’s fair value.

The Company had no feature films or music projects in development as of April 30, 2020.Company’s content.

Cash

Cash includesThe Company maintains its cash depositsbalances with financial institutions with high credit ratings and in accounts insured by the Federal Deposit Insurance Corporation (the “FDIC”). The Company may periodically have cash balances in banks in excess of FDIC insurance limits. The Company has not experienced any losses to date resulting from this practice.

Investment in Marketable Securities

The Company’s investment in marketable securities consists primarily of corporate equities with a quoted market price that are classified as trading securities. Marketable securities are stated at financial institutions.fair value as determined by the closing price of each security at each balance sheet date. Unrealized gains and losses on these securities are included in operations for the applicable period.

Concentration of Risk

The Company may periodically contract with consultants and vendors to provide services related to the Company’s business activities. Agreements for these services may be for a specific time period or for a specific project or task. The Company did not have any such agreements at April 30, 2020.

Costs and expenses incurred that represented 10% or more of costs for the three months ended January 31, 2021 consist of legal fees of $90,142 incurred with the Company’s corporate law firm, which represented 17% of total general and administrative costs for such period, and an area standards agreement of $63,738 incurred with the Company’s IATSE union liaison, which represented 12% of total general and administrative costs for such period

Costs and expenses incurred that represented 10% or more of costs for the six months ended January 31, 2021 consist of legal fees of $147,287 incurred with the Company’s corporate law firm, which represented 15% of total general and administrative costs for such period, audit fees of $92,665 incurred with the Company corporate audit firm, which represented 9% of total general and administrative cost for such period, and an area standards agreement of $63,738 incurred with the Company’s IATSE union liaison, which represented 6% of total general and administrative costs for such period.

Income Taxes

The Company accounts for income taxes under an asset and liability approach for financial accounting and reporting for income taxes. Accordingly, the Company recognizes deferred tax assets and liabilities for the expected impact of differences between the financial statements and the tax basis of assets and liabilities.

The Company records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. In the event the Company was to determine that it would be able to realize its deferred tax assets in the future in excess of its recorded amount, an adjustment to the deferred tax assets would be credited to operations in the period such determination was made. Alternatively, should the Company determine that it would not be able to realize all or part of its deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to operations in the period such determination was made.

The Company’s wholly-owned subsidiary, Rivulet Films, converted from a pass-through limited liability corporation to a “C” corporation effective April 13, 2020.

As the Company’s net operating losses in the respective jurisdictions in which it operates have yet to be utilized, all previous tax years remain open to examination by the respective taxing authorities.

The Company had no unrecognized tax benefits as of April 30, 2020January 31, 2021 and does not anticipate any material amount of unrecognized tax benefits within the next 12 months.

The Company accounts for uncertainties in income tax law under a comprehensive model for the financial statement recognition, measurement, presentation, and disclosure of uncertain tax positions taken or expected to be taken in income tax returns as prescribed by GAAP. The tax effects of a position are recognized only if it is “more-likely-than-not” to be sustained by the taxing authority as of the reporting date. If the tax position is not considered “more-likely-than-not” to be sustained, then no benefits of the position are recognized. As of April 30, 2020,January 31, 2021, the Company had no uncertain tax positions, and will continue to evaluate for uncertain tax positions in subsequent periods. In future periods, any interest and penalties related to uncertain tax positions will be recognized as a component of income tax expense.

Stock-Based Compensation

The Company intends to issueperiodically issues common stock and stock options to officers, directors, employees, contractors and consultants for services rendered. Options will vest and expire according to terms established at the issuance date of each grant. Stock grants, which are generally time vested, will beare measured at the grant date fair value and charged to operations ratably over the vesting period.

The Company accounts for stock-based payments to officers, directors, employees, contractors and consultants by measuring the cost of services received in exchange for equity awards utilizing the grant date fair value of the awards, with the cost recognized as compensation expense over the period during which the individual is required to perform services in exchange for the award, which is generally over the vesting period of the award.

The fair value of stock options granted as stock-based compensation will beis determined utilizing the Black-Scholes option-pricing model, and can beis affected by several variables, the most significant of which are the life of the equity award, the exercise price of the stock option as compared to the fair market value of the common stock on the grant date, and the estimated volatility of the common stock. Estimated volatility will beis based on the historical volatility of the Company’s common stock over an appropriate calculation period, or, if not available, by reference to the volatility of a representative sample of comparable public companies. The risk-free interest rate will beis based on the U.S. Treasury yield curve in effect at the time of grant. The fair market value of the common stock will beis determined by reference to the quoted market price of the Company’s common stock on the grant date, or, if not available, by reference to an appropriate alternative valuation methodology.date.

The Company will recognizerecognizes the fair value of stock-based compensation awards in in the Company’s statementconsolidated statements of operations. Through January 31, 2021, stock-based compensation costs have been included in general and administrative costs. The Company will issueissues new shares of common stock to satisfy stock option exercises.

Fair Value of Financial Instruments

The authoritative guidance with respect to fair value established a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels and requires that assets and liabilities carried at fair value be classified and disclosed in one of three categories, as presented below. Disclosure as to transfers in and out of Levels 1 and 2, and activity in Level 3 fair value measurements, is also required.

Level 1. Observable inputs such as quoted prices in active markets for an identical asset or liability that the Company has the ability to access as of the measurement date. Financial assets and liabilities utilizing Level 1 inputs include active-exchange traded securities and exchange-based derivatives.

Level 2. Inputs, other than quoted prices included within Level 1, which are directly observable for the asset or liability or indirectly observable through corroboration with observable market data. Financial assets and liabilities utilizing Level 2 inputs include fixed income securities, non-exchange-based derivatives, mutual funds, and fair-value hedges.

Level 3. Unobservable inputs in which there is little or no market data for the asset or liability which requires the reporting entity to develop its own assumptions. Financial assets and liabilities utilizing Level 3 inputs include infrequently-traded non-exchange-based derivatives and commingled investment funds and are measured using present value pricing models.

The Company will determine the level in the fair value hierarchy within which each fair value measurement falls in its entirety, based on the lowest level input that is significant to the fair value measurement in its entirety. In determining the appropriate levels, the Company will perform an analysis of the assets and liabilities at each reporting period end.

The Company’s financial instruments are expected to include investment in marketable securities, prepaid expenses, deposits, accounts payable, accrued expenses, and due to related parties. The estimated fair value of these instruments is expected to approximateapproximates their respective carrying amounts due to the short-term nature of these instruments.

Earnings (Loss) Per Share

The Company’s computation of earnings (loss) per share (“EPS”) includes basic and diluted EPS. Basic EPS is measured as the income (loss) attributable to common stockholders divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible notes payable, convertible preferred stock warrants and stock options) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.

Loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the respective periods. Basic and diluted loss per common share is the same for all periods presented because there is no convertible debt convertible preferred stock, warrants orand stock options outstanding.outstanding were anti-dilutive.

The 11,000,000At January 31, 2021, the Company excluded the outstanding securities summarized below, which entitle the holders thereof to acquire shares of common stock, associated with the outstanding common stock subscription receivable at April 30, 2020from its calculation of earnings per share, as their effect would have been excluded from the calculation of basic and diluted EPS.anti-dilutive.

Weighted average common shares outstanding has been retroactively restated for all periods presented to reflect the accounting effect of the reverse recapitalization transaction2020 Reverse Acquisition Transaction (see Note 1).

Property and Equipment

Property and equipment will be recorded at cost. Major improvements will beare capitalized, while maintenance and repairs that do not improve or extend the useful life of the respective assets are charged to expense as incurred. Gains and losses from disposition of property and equipment will be included in income and expense when realized. Depreciation of property and equipment will be provided using the straight-line method over an estimated useful life of three years. The Company will recognize depreciation of property and equipment in the Company’s consolidated statement of operations.

Leases

Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) (“ASU 2016-02”) requires a lessee to record a right-of-use asset and a corresponding lease liability at the inception of the lease initially measured at the present value of the lease payments. ASU 2016-02 requires recognition in the statement of operations of a single lease cost that is calculated as a total cost of the lease allocated over the lease term, generally on a straight-line basis. ASU 2016-02 excludes short-term operating leases with a lease term of 12 months or less at the commencement date, and that do not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise. The Company did not have any leases within the scope of ASU 2016-02 at April 30, 2020.January 31, 2021.

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”(the “FASB”) issued Accounting Standards Update (“ASU”)ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”).ASU 2016-13 significantly changes how entities measure credit losses for most financial assets, including accounts and notes receivables.receivable. ASU 2016-13 will replace the current “incurred loss” approach with an “expected loss” model, under which companies will recognize allowances based on expected rather than incurred losses. Entities will apply the provisions of ASU 2016-13 as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which ASU 2016-13 is effective. ASU 2016-13 will be effective for the Company for interim and annual reporting periods beginning after December 15, 2022. Management is currently inhas not yet evaluated the processeffect that the adoption of assessing the impact of adopting ASU-2016-13ASU 2016-13 will have on the Company’s consolidated financial statementsstatement presentation or disclosures subsequent to its adoption.

In March 2019, the FASB issued ASU 2019-02, Entertainment—Films—Other Assets—Film Costs (Subtopic 926-20) and related disclosures.Entertainment—Broadcasters— Intangibles—Goodwill and Other (Subtopic 920-350): Improvements to Accounting for Costs of Films and License Agreements for Program Materials (“ASU 2019-02”). ASU 2019-02 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. Accordingly, the capitalization of production costs for episodic television series is no longer constrained until persuasive evidence of secondary market revenues exists. This new guidance also updates certain presentation and disclosure requirements for capitalized film and television costs and requires impairment testing to be performed at a group level for capitalized film and television costs when the content is predominantly monetized with other owned or licensed content. A film group is defined as the lowest level at which identifiable cash flows are largely independent of the cash flows of other films and/or license agreements. In addition, under previous guidance, film and television programs accounted for under the broadcasting accounting standard were carried on the balance sheet at the lower of cost or net realizable value. This new guidance requires that an entity test a film or television program for impairment, when impairment indicators are present, at a film group level when the film or license agreement is predominantly monetized with other films and/or license agreements. The impairment would be measured as the difference between the carrying value of the film group and its fair value rather than its net realizable value. This new guidance requires that an entity provide new disclosures about content that is either produced or licensed, and classify cash flows for licensed content as cash flows from operating activities in the statement of cash flows. ASU 2019-02 was effective for the Company’s fiscal year beginning August 1, 2020, and was required to be adopted on a prospective basis. The adoption of ASU 2019-02 did not have any impact on the Company’s consolidated financial statement presentation or disclosures subsequent to its adoption. The Company will continue to present all project development costs, including capitalized costs of acquired programming rights, as non-current assets in its consolidated balance sheet.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions and enhances and simplifies various aspects of the income tax accounting guidance in ASC 740. ASU 2019-12 is effective for interim and annual reporting periods beginning after December 15, 2020. The adoption of ASU 2019-12 is not expected to have any impact on the Company’s consolidated financial statement presentation or disclosures subsequent to its adoption.

In August 2020, the FASB issued ASU 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06). ASU 2020-06 will simplify the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. ASU 2020-06 also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. ASU 2020-06 will be effective for public companies for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Management has not yet evaluated the effect that the adoption of ASU 2020-06 will have on the Company’s consolidated financial statement presentation or disclosures subsequent to its adoption.

Management does not believe that any other recently issued, but not yet effective, authoritative guidance, if currently adopted, would have a material impact on the Company’s financial statement presentation or disclosures.

3. CHANGE IN CONTROL AND REVERSE RECAPITALIZATIONACQUISITION TRANSACTIONS

The change in control transaction effective March 26, 2020 and the reverse recapitalizationacquisition transaction effective April 13, 2020 are described at Note 1.

A summary of the current assets acquired from Bio-Matrix and the stockholders’ equity accounts adjusted as a result of the reverse recapitalizationacquisition transaction effective as of April 13, 2020 is presented below. There were no liabilities assumed.assumed in conjunction with the reverse acquisition transaction. In conjunction with the change in control transaction, all current liabilities of Bio-Matrix, including accounts payable and notes payable to related and unrelated parties, plus accrued interest, aggregating $141,936, were paid by the Buyers through a contribution to capital to Bio-Matrix prior to the closing of the reverse recapitalizationacquisition transaction, which became effective on April 13, 2020. All amounts recorded were at historical (predecessor) cost basis.

For the period April 13, 2020 through April 30, 2020, Bio-Matrix recorded a net loss of $129, which was included in the consolidated net loss of $288,123 that was reported in the Company’s consolidated statement of operations for the period February 11, 2020 (Date of Inception) through April 30, 2020.

4. INVESTMENT IN MARKETABLE SECURITIES

On April 13, 2020, in conjunction with the reverse recapitalizationacquisition (see Note 1)Notes 1 and 3), the Company recorded thean initial investment in marketable securities as presented below.

The Company’s investment in marketable securities consists primarily of corporate equities with a quoted market price that are classified as trading securities at January 31, 2021 and July 31, 2020. Marketable securities are stated at fair value as determined by the closing price of each security at each balance sheet date. Unrealized gains and losses on these securities are included in operations for the applicable period.

5. INTELLECTUAL PROPERTY

At April 30,July 31, 2020, intellectual property consisted of rights for various program and property rights. TheseThe agreements underlying these rights were entered into with related parties during February 2020. The Company issued 62,531,965 shares of common stock in exchange for assignment of such rights. As such rights were acquired from related parties, the Company recorded such rights at their historical (predecessor) cost basis reflecting an aggregate value of $300.

6. ARPAIO LIFE STORY RIGHTS AGREEMENT

On May 20, 2020, the Company and Joseph M. Arpaio (“Arpaio”), who served as the 36th Sheriff of Maricopa County, Arizona for 24 years (from 1993 to 2017), entered into a Life Story Rights Agreement (the “Arpaio Agreement”), pursuant to which the Company was granted an exclusive option to acquire the motion picture, television, home-video, allied, subsidiary, and ancillary rights to Arpaio’s life story, including his name, likeness, and biography. The rights to be granted upon exercise of the option include the right to write, produce, distribute, advertise, publicize, and record soundtracks for one or more motion pictures, including remakes and sequels. The option period extends for 12 months, with a 12-month extension at the Company’s option. Prior to exercise of the option, the Company may prepare screenplays and budgets, and engage in other customary development and pre-production activities.

Arpaio was entitled to a consulting fee of $10,000 due within 10 days of the earlier of exercise of the option or commencement of principal photography of the first motion picture produced under the Arpaio Agreement, which has been accrued at January 31, 2021 and recorded as an addition to project development costs. Additionally, as consideration for the rights granted under the Arpaio Agreement, Arpaio will be entitled to compensation of $20,000 for each 30 minutes that the motion picture(s) is/are expected to run (payable pro-rata at $675 per minute), payable upon the earlier of exercise of the option or commencement of principal photography of the first motion picture produced under the Arpaio Agreement. Pursuant to an amendment to the Arpaio Agreement dated June 1, 2020, Arpaio will be entitled to compensation for a 3-season series POD CAST at the rate of $2,000 per episode and 25% of the net profits.

7. PROJECT DEVELOPMENT COSTS

At January 31, 2021, the Company had one documentary film in development related to the Arpaio Agreement (see Note 6) and two feature films in development.

During the three months and six months ended January 31, 2021, the Company paid producer fees to an officer of the Company aggregating $0 and $25,000, respectively, which are accounted for as project development costs in the accompanying consolidated balance sheet at January 31, 2021.

8. PROMISSORY NOTES PAYABLE

SHORT-TERM NOTES PAYABLE

On June 9, 2020, the Company issued a short-term unsecured convertible promissory note in the amount of $25,000, with interest at 12% interest per annum and maturing on September 7, 2020. The unsecured convertible promissory note was convertible into shares of common stock of the Company at $0.20 per share, which was in excess of the closing market price of the Company’s common stock on June 9, 2020 of $0.07 per share. On August 31, 2020, the principal balance of the unsecured convertible promissory note of $25,000, plus accrued interest payable of $682, was repaid through conversion into 128,410 shares of common stock.

On October 29, 2020, the Company issued a short-term unsecured promissory note to Daniel Crosser, who is an approximate 13% shareholder of the Company, in the amount of $100,000, with interest at 10% per annum. The note matures on April 29, 2021, with the principal balance outstanding, plus accrued but unpaid interest, being due and payable on the maturity date. As of January 31, 2021, accrued interest related to the unsecured promissory note was $2,611.

On November 10, 2020, the Company issued a short-term unsecured promissory note to Daniel Crosser, who is an approximate 13% shareholder of the Company, in the amount of $200,000, with interest at 5% per annum. The note was scheduled to mature on February 8, 2021, with the principal balance outstanding, plus accrued but unpaid interest, being due and payable on the maturity date. As of January 31, 2021, accrued interest related to the unsecured promissory note was $2,236. On February 8, 2021, the maturity date of this note was extended to June 30, 2021.

On December 10, 2020, the Company issued a short-term unsecured promissory note to Daniel Crosser, who is an approximate 13% shareholder of the Company, in the amount of $160,000, with interest at 5% per annum. The proceeds under this promissory note were received by the Company in November 2020. The note was scheduled to mature on March 10, 2021, with the principal balance outstanding, plus accrued but unpaid interest, being due and payable on the maturity date. As of January 31, 2021, accrued interest related to the unsecured promissory note was $1,518. On February 26, 2021, the maturity date of this note was extended to June 30, 2021.

On December 21, 2020, the Company issued a short-term promissory note to Daniel Crosser, who is an approximate 13% shareholder of the Company, in the amount of $40,000, without interest, with a scheduled maturity date of January 31, 2021. On January 31, 2021, the maturity date of this note was extended to June 30, 2021.

On December 23, 2020, the Company issued a short-term promissory note to John Morgan, an officer of the Company, in the amount of $20,000, without interest. The note was repaid on January 7, 2020.

Between December 15, 2020 and December 26, 2020, the Company’s subsidiary Mistress Movie LLC issued six short-term promissory notes to Cross Entertainment, LLC, a related party, aggregating $170,000, without interest, with a scheduled maturity date of February 28, 2021. As of January 31, 2021, $60,000 had been repaid and the remaining principal amount of $110,000 was due on these notes. On February 26, 2021, the maturity date of the $110,000 principal amount of the notes were extended to June 30, 2021.

On December 26, 2020, the Company issued a short-term promissory note to Cross Entertainment, LLC, a related party, in the amount of $110,000, without interest, with a scheduled maturity date of June 30, 2021. The Company received proceeds of $10,000 on this note through January 31, 2021. On January 31, 2021, the balance of the January 7, 2021 note of $85,000 was transferred to this note. As of January 31, 2021, a principal amount of $95,000 was due on this note.

On January 5, 2020, the Company issued a short-term promissory note to Lawrence M. Silver, who is an approximate 9% shareholder of the Company, in the amount of $70,000, without interest, with a scheduled maturity date of January 31, 2021. On January 31, 2021, the maturity date of this note was extended to June 30, 2021.

On January 7, 2021, the Company issued a short-term promissory note to Cross Entertainment, LLC, a related party, in the amount of $145,000, without interest, with a scheduled maturity date of January 31, 2021. Proceeds on this note were $145,000, of which $60,000 was repaid and the balance of $85,000 was transferred to the December 26, 2020 note as described above. As of January 31, 2021, there was no amounts due and payable on this note.

On January 29, 2021, the Company issued a short-term promissory note to Cross Entertainment, LLC, a related party, in the amount of $85,000, without interest, with a scheduled maturity date of February 28, 2021. As of January 31, 2021, principal of $85,000 was due on this note. On February 26, 2021, the maturity date of this note was extended to June 30, 2021.

LONG-TERM NOTES PAYABLE

On September 16, 2020, the Company issued a two-year unsecured convertible promissory note payable in the amount of $100,000, with interest at 5% per annum and maturing on September 15, 2022. The note was originally convertible into shares of common stock of the Company at $0.80 per share, which was above the closing market price of the Company’s common stock of $0.26 per share on September 16, 2020.

This note was amended on December 15, 2020 to make it convertible into shares of common stock of the Company at $0.40 per share, which was below the closing market price of the Company’s common stock of $0.59 per share on December 15, 2020.

As a result of the December 15, 2020 amendment to this convertible promissory note payable, the Company recognized a beneficial conversion feature on such date to recognize the difference between the closing market price of the common stock and the amended conversion price, which resulted in the Company recording a discount on debt aggregating $48,010. This debt discount is being presented as a reduction to the carrying amount of the related convertible promissory note payable in the consolidated balance sheet and is being amortized to operations as interest expense from December 15, 2020 through September 16, 2022, the maturity date of the note. For the three months and six months ended January 31, 2021, debt discount charged to operations as interest expense was $3,430, which resulted in unamortized debt discount of $44,580 at January 31, 2021.

If the closing price of the Company’s common stock reaches $0.60 per share or greater (decreased from $1.20 per share as part of the December 15, 2020 amendment to the note), the outstanding principal and all accrued interest on this note shall automatically convert into common stock at the specified conversion rate. As of January 31, 2021, accrued interest payable related to the unsecured convertible promissory note payable was $1,877.

On October 26, 2020, Rivulet Films, Inc., a wholly-owned subsidiary of the Company (“Rivulet Films”), issued a multiple advance promissory note (the “Note”) to Lawrence Silver, an approximate 11% shareholder of the Company, in the amount of up to $1,000,000, with interest at 10% per annum. The Note matures on October 6, 2022, with the principal balance outstanding, plus accrued but unpaid interest, being due and payable on the maturity date. The Note is secured by a first lien security interest on all of the assets of Rivulet Films (including its equity interest in PBP Productions LLC), personal guarantees of the Company’s officers, Michael Witherill and Aaron Klusman, and a corporate guarantee of the Company. Rivulet Films is required to use borrowings under the Note primarily to pay production costs associated with the movie production currently entitled “Please Baby Please”. Borrowings under this Note may be repaid at any time and reborrowed until the maturity date. Rivulet Films is required to apply any other funds received by it for the purpose of film financing and then any excess proceeds to pay any principal and interest owing under this Note. As of January 31, 2021, principal borrowings outstanding under the Note were $1,000,000, and related accrued interest was $27,444, which has been capitalized as project development cost (see Note 7).

9. STOCKHOLDERS’ EQUITY (DEFICIENCY)

Preferred Stock

The Company is authorized to issue a total of 20,000,000 shares of preferred stock, par value $1.00$0.0001 per share.

In conjunction with the reverse recapitalizationacquisition transaction (see Note 1), the Company recorded issued and outstanding preferred stock of Bio-Matrix consisting of 1,4351,434 shares of Preferred Stock with a carrying value of $202 and 1,3621,347 shares of Series B Preferred Stock with a carrying value of $72.

The class of Non-Voting Preferred Stock, of which 200,000 shares, par value $1.00 per share, had been authorized, butof which none were outstanding, were eliminated effective May 26, 2020.

Common Stock

The Company is authorized to issue a total of 200,000,000 shares of common stock, par value $0.0001 per share.

ForDuring the period ending,from February 11, 2020 (inception) through March 31, 2020, the Company hadRivulet Films entered into four common stock subscription agreements aggregating $700,000, three$700,000. Three of whichthe subscriptions receivable aggregating $150,000 for 5,023,800 shares of common stock were paid duringin April 2020. The remaining $550,000 subscriptionof subscriptions receivable is withfrom Blue Scout Enterprises LLC (“Blue Scout”), a related party, and has beento purchase 11,000,000 shares of common stock was presented as a reduction to stockholders’ equity (deficiency)deficiency in the accompanying consolidated balance sheet at April 30,July 31, 2020.

The $550,000 subscription receivable from a related partyBlue Scout dated February 11, 2020 for 11,000,000 shares of common stock is unsecured and includesprovides for interest at 2% per annum, with interest and principal due on March 7, 2023. Interest income is being recognized on a cash basis as and when received by the Company. Interest income as of January 31, 2021 that had not been recognized by the Company was $10,186.

The Company issued 62,531,965On August 24, 2020, a principal payment of $17,400 was received with respect to the $550,000 common stock subscription receivable, as a result of which 348,000 shares of common stock in exchange for intellectual property which was valued at their historical (predecessor) cost basis of $300 (see Note 5) and included in other assets in the consolidated balance sheet at April 30, 2020.were issued.

The Company issuedOn September 2, 2020, a principal payment of $20,000 was received with respect to the $550,000 common stock subscription receivable, as a result of which 400,000 shares of common stock were issued.

On September 16, 2020, a principal payment of $30,000 was received with respect to the $550,000 common stock subscription receivable, as a result of which 600,000 shares of common stock were issued.

On October 14, 2020, Blue Scout entered into assignment agreements with its respective LLC members to distribute such equity interests through note agreements secured by the underlying common shares, based on the original purchase price of $0.05 per share. As a result of this distribution of equity interests in exchangethe subscription receivable, a director of the Company and an employee of the Company received 1,000,000 shares and 400,000 shares, respectively.

 On August 13, 2020, the Company sold 2,000,000 shares of common stock to an existing note holder and shareholder at $0.05 per share for services rendered,total proceeds of $100,000.

On August 26, 2020, the Company sold 1,200,000 shares of common stock to an existing note holder and shareholder at $0.05 per share for total proceeds of $60,000.

On September 30, 2020, the Company sold 1,000,000 shares of common stock to an existing note holder and shareholder at $0.05 per share for total proceeds of $50,000.

On September 30, 2020, the Company sold 1,000,000 shares of common stock to an unrelated party at $0.05 per share for total proceeds of $50,000.

On October 8, 2020, the Company sold 2,000,000 shares of common stock to an existing note holder and shareholder at $0.05 per share for total proceeds of $100,000.

On October 13, 2020, the Company sold 1,000,000 shares of common stock to an existing note holder and shareholder at $0.05 per share for total proceeds of $50,000.

On October 15, 2020, the Company sold 5,000,000 shares of common stock to an existing note holder and shareholder at $0.05 per share for total proceeds of $250,000.

On November 26, 2020, the Company sold 1,000,000 shares of common stock to a convertible promissory note holder at $0.10 per share for total proceeds of $100,000.

On November 30, 2020, the Company sold an aggregate of 2,200,000 shares of common stock to two existing note holders and shareholders at $0.10 per share for total proceeds of $220,000.

On December 3, 2020, the Company entered into a Subscription Agreement to sell 4,800,000 shares of common stock to an unrelated party at $0.10 per share for total proceeds of $480,000 which were recordedwas received by the Company in late November and early December 2020.

On December 22, 2020, the Company sold 250,000 shares of common stock to an unrelated party at $0.10 per share for total proceeds of $25,000.

On January 21, 2021, the Company sold 2,000,000 shares of common stock to an unrelated party at $0.10 per share for total proceeds of $200,000.

On January 29, 2021, the Company sold 1,000,000 shares of common stock to an unrelated party at $0.10 per share for total proceeds of $100,000.

Additional information with respect to shares of common stock issued is provided at Notes 1 and 5.

10. STOCK-BASED COMPENSATION

On May 26, 2020, the Board of Directors of the Company approved and adopted the 2020 Equity Incentive Plan, with an aggregate of 16,000,000 shares issuable under the plan, with a ten-year expiration, and providing that options for no more than 10,000,000 shares be granted as Incentive Stock Options. As of January 31, 2021, stock options for 9,000,000 shares of common stock had been granted.

For stock options issued during the six months ended January 31, 2021, the fair value of each stock option award was estimated using the Black-Scholes option-pricing model utilizing the following assumptions:

Stock-based compensation cost of $17,914for the three months and includedsix months ended January 31, 2021 was $22,239 and $44,478, respectively, and was recorded in general and administrative expensescosts in the consolidated statementaccompanying statements of operationsoperations.

A summary of stock option activity during the six months ended January 31, 2021 is presented below.

Total deferred compensation expense for the outstanding value of unvested stock options was approximately $72,300 as of January 31, 2021, which will be recognized subsequent to January 31, 2021 over a weighted-average period February 11, 2020 (Date of Inception) through April 30, 2020.approximately 1.5 years.

The intrinsic value of exercisable but unexercised in-the-money stock options at January 31, 2021 was approximately $1,900,000 based on a fair market value of $0.48 per share on January 31, 2021.

The Company expects to satisfy such stock obligations through the issuance of authorized but unissued shares of common stock.

7.11. RELATED PARTY TRANSACTIONS

As of April 30, 2020,During the three months and six months ended January 31, 2021, the Company owed two related party entities a total of $341paid producer fees to an officer totaling $0 and $25,000, respectively, which were accounted for funds advanced to or on behalf of the Company.

As of April 30, 2020, the Company has a $550,000 subscription receivable with a related party (see Note 6) that has been presented as a reduction to stockholders’ equity (deficiency)project development costs in the accompanying consolidated balance sheet at April 30, 2020.January 31, 2021 (see Note 8).

Information with respect to the issuance of promissory notes to related parties is provided at Note 8. Information with respect to the collection of common stock subscriptions receivable from related parties is provided at Note 9.

Information with respect to employee compensation is provided at Note 12.

8.12. COMMITMENTS AND CONTINGENCIES

Lease Commitments

On May 1, 2020, the Company entered into a short-term lease agreement with an unrelated party for office space in Gilbert, Arizona through December 31, 2020 at the rate of approximately $800 per month. On January 1, 2021, the Company renewed the short-term lease agreement for three months through March 31, 2021. During the three months and six months ended January 31, 2021, the Company charged $2,448 and $4,896, respectively, to general and administrative costs with respect to this lease agreement.

On February 3, 2021, the Company entered into a short-term lease agreement for 2,716 square feet of office. The lease is month-to-month. Through March 12, 2021 the cost is $5,000 per month, at which time the cost increases to $8,148 per month.

Employment Agreements

On May 27, 2020, the Company, didand Paris Film, Inc. and Rob Paris (together, “Paris”) entered into an Employment Agreement (the “Paris Agreement”), pursuant which the Company agreed to employ Paris in the position of President of Rivulet Films, a subsidiary of the Company. The employment of Paris began on June 1, 2020, for a guaranteed term of six months, following which time the employment relationship may be terminated with or without good cause or for any reason or no reason by either the Paris or the Company.

Paris was paid $10,000 per month commencing June 1, 2020 through November 30, 2020, which was guaranteed by the Company. Additionally, upon execution of the Paris Agreement, the Company issued stock options to purchase 9,000,000 shares of common stock at an exercise price of $0.10 per share, which was the fair market value of the Company’s common stock on such date, of which options for 5,000,000 shares vested on May 27, 2020, options for 2,000,000 shares will vest on June 1, 2021, and the remaining options for 2,000,000 shares will vest on June 1, 2022. The fair value of these stock options, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $300,227 ($0.03336 per share), of which $166,793 was attributable to the stock options fully-vested on May 27, 2020 and was therefore was charged to operations on that date. The remaining unvested portion of the fair value of the stock options is being charged to operations ratably from May 27, 2020 through June 1, 2022.

During the three months and six months ended January 31, 2021, the Company recorded a charge to operations of $22,239 and $44,478, respectively, with respect to stock options issued pursuant to the Paris Agreement. Paris also has the right to participate in all equity stock option plans and programs established for employees by Rivulet Films in all aspects and benefits to that of any other similarly situated C-suite employee of Rivulet Films, including its Chief Executive Officer. Rivulet Films will also provide Paris with other benefits, such as bonuses, perk packages, preferred stock positions, box office bonuses, and back-end/contingent compensation made generally available to similarly situated employees, including its Chief Executive Officer. Paris will be attached as producer, subject to a separate producer agreement to be negotiated, to all projects sourced by Paris during the term of his employment. The Paris Agreement subjects Paris to certain restrictive covenants and a standard confidentiality provision. During the three months and six months ended January 31, 2021, the Company recorded a charge to operations of $30,000 and $60,000, respectively, with respect to the cash portion of the Paris Agreement, which was charged to general and administrative costs. The Paris Agreement was amended effective March 1, 2021 to increase Paris’ salary to $15,000 per month.

In connection with the employment, to the extent controlled by Paris and so long as Paris remains attached to each project in perpetuity, Paris grants to Rivulet Films a right of first refusal to all rights, title, and interest to the film projects known as “Please Baby Please” and “Acolyte”, as well as to all other film, story, or other production concepts which Paris creates, develops, or otherwise originates during the term of employment and not havepassed on by Rivulet Films.

On August 12, 2020, the Company, and Michael J. Witherill entered into an Employment Agreement with respect to his positions as President, Chief Financial Officer, Principal Accounting Officer, and a member of the Board of Directors of the Company. Mr. Witherill is to devote his full time and attention to his duties, and receives an annual salary of $360,000, payable in accordance with the Company’s standard payroll practices, provided that such amount may be deferred as determined by Mr. Witherill or the Board of Directors as needed to cover other Company expenses, and provided further that Mr. Witherill is permitted to serve as a director of not-for-profit and for-profit businesses that do not compete with the Company. The Employment Agreement was amended on January 26, 2021 to additionally allow Mr. Witherill to serve as an officer and director of Chee Corp. During the three months and six months ended January 31, 2021, the Company recorded a charge to operations of $90,000 and $180,000, respectively, with respect to this Employment Agreement, which was charged to general and administrative costs.

On August 14, 2020, the Company and Aaron Klusman entered into an Employment Agreement with respect to his positions as Chief Executive Officer and a member of the Board of Directors of the Company. Mr. Klusman is to devote as much time and attention to his duties as is necessary, and receives an annual salary of $360,000, payable in accordance with the Company’s standard payroll practices, provided that such amount may be deferred as determined by Mr. Klusman or the Board of Directors as needed to cover other Company expenses, and provided further that Mr. Klusman is permitted to purchase, sell, oversee, manage, and develop real estate properties and projects; and serve as a director of not for profit and for profit businesses that do not compete with the Company. During the three months and six months ended January 31, 2021, the Company recorded a charge to operations of $90,000 and $180,000, respectively, with respect to this Employment Agreement, which was charged to general and administrative costs.

Both Mr. Witherill and Mr. Klusman (together, the “Executives”) are eligible for a quarterly and an annual discretionary bonus as periodically established by the Board of Directors based upon metrics that will be established by the Board of Directors in its sole discretion. The Executives are also eligible to participate in and receive stock options under the Company’s 2020 Equity Incentive Plan. These Employment Agreements provide that notwithstanding anything to the contrary in the Company’s existing or future incentive plans or any lease commitmentsaward agreement, upon a Change of Control, as defined in the Employment Agreements, all of the Executives’ outstanding unvested equity-based awards shall, at their option, vest and become immediately exercisable and unrestricted.

The employment of the Executives under the Employment Agreements commenced effective April 30, 2020.1, 2020, and will continue for two years, subject to successive one-year renewals. Each Executive is an “at-will” employee. Either the Executive or the Company may terminate his employment with or without cause, for any reason or no reason, and at any time. The Executives are each subject to standard confidentiality provisions and a non-compete, non-solicitation covenant for a one-year period following termination of employment.

Legal Matters

The Company may, from time to time, be involved in legal proceedings, regulatory actions, claims and litigation arising in the ordinary course of business. These mattersbusiness, which are not expected to have a material adverse effect upon the Company’s financial statements. As of April 30, 2020,January 31, 2021, the Company was not a party to any pending or threatened legal proceedings.

Impact of COVID-19Novel Coronavirus (COVID-19) on the CompanyCompany’s Business Operations

The global outbreak of COVID-19the novel coronavirus (COVID-19) has led to severe disruptions in general economic activities, as businesses and governments have taken broad actions to mitigate this public health crisis. Although the Company has not experienced any significant disruption to its business to date, these conditions could significantly negatively impact the Company’s business in the future. The Company intends to continue to monitor the situation and may adjust its current business plans as more information and guidance become available.

The extent to which the COVID-19 outbreak ultimately impacts the Company’s business, future revenues, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity and longevity, the actions to curtail the virus and treat its impact (including an effective vaccine), and how quickly and to what extent normal economic and operating conditions can resume. Even after the COVID-19 outbreak has subsided, the Company may be at risk of experiencing a significant impact to its business as a result of the global economic impact, including any economic downturn or recession that has occurred or may occur in the future.

Currently, capital marketsThere is also significant uncertainty as to the effect that the coronavirus may have been disrupted byon the crisis, as a result of which the availability, amount and type of financing available to the Company in the near future is uncertain and cannot be assured and is largely dependent upon evolving market conditions and other factors.

The Company intends to continue to monitor the situation and may adjust its current business plans as more information and guidance become available.future.

9.13. INCOME TAXES

During the three months and six months ended January 31, 2021, the Company did not provide any provision for income taxes, as the Company incurred losses during such periods. Deferred tax assets and liabilities reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company recorded a full valuation allowance against its deferred tax assets as the Company believes it is more likely than not that the deferred tax assets will not be realized.

14. SUBSEQUENT EVENTS

The Company performed an evaluation of subsequent events through the date on whichof filing of these consolidated financial statements were issued.with the SEC. There were no material subsequent events which affected, or could affect, the amounts or disclosures in the consolidated financial statements, other than those as described below.

Lease AssignmentSale of Common Stock

On May 1, 2020,February 24, 2021, the Company entered into a short-term lease assignment with a related partysold 1,000,000 shares of common stock to an existing shareholder at $0.10 per share for office space in Gilbert, Arizona through December 31, 2020total proceeds of $100,000.

On February 26, 2021, the Company sold 500,000 shares of common stock to an existing shareholder at $0.10 per share for total proceeds of $50,000.

On March 11, 2021, the rateCompany sold 3,000,000 shares of $800common stock to an existing shareholder at $0.10 per month.share for total proceeds of $300,000.

Arpaio AgreementIssuance of Promissory Notes

On May 20, 2020,February 11, 2021, the Company and Josephissued a short-term promissory note to Lawrence M. Arpaio (“Arpaio”),Silver, who served as the 34th Sheriffis an approximate 9% shareholder of Maricopa County, entered into a Life Story Rights Agreement (the “Arpaio Agreement”), pursuant to which the Company, was granted an exclusive option to acquirein the motion picture, television, home-video, allied, subsidiary, and ancillary rights to Arpaio’s life story, including his name, likeness, and biography. The rights to be granted upon exerciseamount of the option include the right to write, produce, distribute, advertise, publicize, and record soundtracks for one or more motion pictures, including remakes and sequels. The option period extends for 12 months,$100,000, without interest, with a 12-month extension atscheduled maturity date of June 30, 2021.

Increase in Compensation Arrangement

Effective March 1, 2021, the Company’s option. Priorcompensation under the Paris Agreement was increased from $10,000 to exercise of the option, the Company may prepare screenplays, budgets, and engage in other customary development and pre-production activities.$15,000 per month (see Note 12).

Arpaio shall be entitled to a consulting fee of $10,000, payable within 10 days of the earlier of exercise of the option or commencement of principal photography of the first motion picture produced under the Arpaio Agreement. If the option is not exercised, this fee does not become due. Additionally, as consideration for the rights granted under the Arpaio Agreement, Arpaio shall be entitled to compensation of $20,000 for each 30 minutes that the motion picture(s) is/are expected to run (payable pro-rata at $675 per minute), payable upon the earlier of exercise of the option or commencement of principal photography of the first motion picture produced under the Arpaio Agreement.

During May 2020, in connection with entering into the Arpaio Agreement, Rivulet Films formed a wholly-owned subsidiary, Borderline Productions, LLC, an Arizona limited liability company, to facilitate this project.

On May 27, 2020, the Company, Rivulet Films (a wholly-owned subsidiary of the Company), and Paris Film, Inc. and Rob Paris (together, “Employee”) entered into an Employment Agreement (the “Paris Agreement”, and together with the Arpaio Agreement, the “Agreements”), pursuant which Rivulet Films agreed to employ Employee in the position as President of Rivulet Films. The employment of Employee begins on June 1, 2020, for a guaranteed term of six months, following which the employment relationship may be terminated with or without good cause or for any or no reason by either Employee or Rivulet Films.

As compensation, Employee will be paid $10,000 per month, guaranteed for the first six months. Additionally, upon execution of the Paris Agreement, the Company issued options to purchase 9,000,000 shares of common stock at an exercise price of $0.10 per share, which was the closing price of the common stock on such date. Of such amount, 5,000,000 vested immediately, 2,000,000 will vest on June 1, 2021, and the remaining 2,000,000 will vest on June 1, 2022. Employee will also have the right to participate in all equity stock option plans and programs established for employees by Rivulet Films in all aspects and benefit to that of any other similarly situated C-suite employee of Rivulet Films, including its CEO. Rivulet Films will also provide Employee with other benefits, such as bonuses, perk packages, preferred stock positions, box office bonuses, and back-end/contingent compensation made generally available to similarly situated employees, including its CEO. Employee will be attached as producer, subject to a separate producer agreement to be negotiated, to all projects sourced by Employee during the term of employment. The Paris Agreement subjects Employee to certain restrictive covenants and a standard confidentiality provision.

In connection with the employment, to the extent controlled by Employee and so long as Employee remains attached to each project in perpetuity, Employee grants to Rivulet Films a right of first refusal to all rights, title, and interest to the film projects known as Please Baby Please and Acolyte, as well as to all other film, story, or other production concepts which Employee creates, develops, or otherwise originates during the term employment and not passed on by Rivulet Films.

Maughan Music, Inc. Agreement

As of May 28, 2020, the Company, Maughan Music, Inc., a Delaware corporation and a wholly owned subsidiary of the Company formed May 26, 2020 to facilitate this transaction (“Merger Sub”), and Maughan Music Group LLC, an Arizona limited liability company (the “Target”), entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which, subject to the terms and conditions therein, the Target shall be merged with and into Merger Sub (the “Merger”) and the separate existence of the Target shall cease. Following the effective time of the Merger, Merger Sub shall continue as the surviving corporation of the Merger (the “Surviving Corporation”). It is intended that the Merger qualify as a tax-free reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended. The Merger closed on June 12, 2020.

Effective upon the closing of the Merger (i) all equitable interests of the Target (“Target Equity”) then outstanding were converted into the right to receive a total of 925,000 shares of common stock of the Company, $0.0001 par value per share (“Shares”), to be distributed pro rata to the members of the Target, and (ii) each share of common stock, $0.0001 par value per share, of Merger Sub then outstanding effectively remained one share of common stock of the Surviving Corporation. Holders of Target Equity received cash in lieu of fractional shares, if applicable.

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

Caution Regarding Forward-Looking InformationOPERATIONS

In addition to historical information, thisForward-Looking Statements

This Quarterly Report on Form 10-Q of Rivulet Media, Inc. (the “Company”) contains certain “forward-looking statements”forward-looking statements within the meaning of Section 27A of the Private Securities Litigation Reform Act of 1995 (PSLRA). This statement is included for the express purpose of availing Rivulet Media, Inc.1933, and Section 21E of the protectionsSecurities Exchange Act of the safe harbor provisions of the PSLRA.

All statements contained in this Form 10-Q, other than statements of historical facts, that address future activities, events or developments are1934. These might include forward-looking statements regarding the Company’s financial position, strategy and other plans and objectives for future operations, including assumptions and predictions related thereto. These statements are generally accompanied by words such as “intend”, “anticipate”, “believe”, “estimate”, “potential(ly)”, “continue”, “forecast”, “predict”, “plan”, “may”, “will”, “could”, “would”, “should”, “expect” or the negative of such terms or other comparable terminology. The Company believes that the assumptions and expectations reflected in such forward-looking statements are reasonable, based on information available to it on the date hereof, but the Company cannot provide assurances that these assumptions and expectations will prove to have been correct or that the Company will take any action that the Company may presently be planning. These forward-looking statements are inherently subject to known and unknown risks and uncertainties. Actual results or experience may differ materially from those expected, anticipated or implied in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, available cash resources, competition from other similar businesses, changes in the entertainment and media industry, and market and general economic factors. This discussion should be read in conjunction with the condensed consolidated financial statements containing the words “believe,” “expect,” “anticipate,” “intends,” “estimate,” “forecast,” “project,” and similar expressions. All statements other than statementsnotes thereto included in Item 1 of historical fact are statements that could be deemed forward-looking statements, including any statements of the plans, strategies, and objectives of management for future operations; any statements concerning proposed new products, services, developments, or industry rankings; any statements regarding future revenue, economic conditions, or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. These statements are basedthis Quarterly Report on certain assumptions and analyses made by us in light of our experience and our assessment of historical trends, current conditions and expected future developments as well as other factors we believe are appropriate under the circumstances. However, whether actual results will conform to the expectations and predictions of management is subject to a number of risks and uncertainties described under Part II Item 1A - Risk Factors below that may cause actual results to differ materially.

Consequently, all of the forward-looking statements made in this Form 10-Q are qualified by these cautionary statements and there can be no assurance that the actual results anticipated by management will be realized or, even if substantially realized, that they will have the expected consequences to or effects on our business operations. Readers are cautioned not to place undue reliance on such forward-looking statements as they speak only of the Company’s views as ofAnnual Report on Form 10-K for the datefiscal year ended July 31, 2020, including the statement was made.section entitled “Item 1A. Risk Factors”. The Company undertakes no obligationdoes not intend to publicly update or revise any forward-looking statements whether as a result ofto reflect new information, future events or otherwise.

Critical Accounting Policies and Estimates

Recent Accounting Pronouncements

Information with respect to recent accounting pronouncements is provided at Note 2 to the condensed consolidated financial statements for the period February 11, 2020 (Inception) through April 30, 2020 included elsewhere in this document.

Concentration of Risk

Information with respect to concentration of risk is provided at Note 2 to the condensed consolidated financial statements for the period February 11, 2002 (Inception) through April 30, 2020 included elsewhere in this document.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of expenses during the reporting period.

Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates.

The most significant estimates to be made by management in the preparation of the financial statements are expected to relate to the ultimate revenues realized and costs incurred for films and television programs; valuing equity instruments issued; estimates of sales returns and other allowances and provisions for doubtful accounts; the realization of deferred tax assets; accruals for contingent liabilities; impairment assessments for investments in films and television programs, equity investments and intangible assets.

The following critical accounting policies affect the more significant judgements and estimates used in the preparation of the Company’s condensed consolidated financial statements for the period February 11, 2020 (Inception) through April 30, 2020.

Income TaxesOverview

The Company accounts for income taxes under an asset and liability approach for financial accounting and reporting for income taxes. Accordingly, the Company recognizes deferred tax assets and liabilities for the expected impact of differences between the financial statements and the tax basis of assets and liabilities.

The Company records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. In the event the Company was to determine that it would be able to realize its deferred tax assets in the future in excess of its recorded amount, an adjustment to the deferred tax assets would be credited to operations in the period such determination was made. Alternatively, should the Company determine that it would not be able to realize all or part of its deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to operations in the period such determination was made.

The Company’s wholly-owned subsidiary, Rivulet Films, converted from a pass-through limited liability corporation to a “C” corporation effective April 13, 2020.

As the Company’s net operating losses in the respective jurisdictions in which it operates have yet to be utilized, all previous tax years remain open to examination by the respective taxing authorities.

The Company had no unrecognized tax benefits as of April 30, 2020 and does not anticipate any material amount of unrecognized tax benefits within the next 12 months.

The Company accounts for uncertainties in income tax law under a comprehensive model for the financial statement recognition, measurement, presentation, and disclosure of uncertain tax positions taken or expected to be taken in income tax returns as prescribed by GAAP. The tax effects of a position are recognized only if it is “more-likely-than-not” to be sustained by the taxing authority as of the reporting date. If the tax position is not considered “more-likely-than-not” to be sustained, then no benefits of the position are recognized. As of April 30, 2020, the Company had no uncertain tax positions, and will continue to evaluate for uncertain tax positions in subsequent periods. In future periods, any interest and penalties related to uncertain tax positions will be recognized as a component of income tax expense.

Stock-Based Compensation

The Company intends to issue common stock and stock options to officers, directors and consultants for services rendered. Options will vest and expire according to terms established at the issuance date of each grant. Stock grants, which are generally time vested, will be measured at the grant date fair value and charged to operations ratably over the vesting period.

The fair value of stock options granted as stock-based compensation will be determined utilizing the Black-Scholes option-pricing model, and can be affected by several variables, the most significant of which are the life of the equity award, the exercise price of the stock option as compared to the fair market value of the common stock on the grant date, and the estimated volatility of the common stock. Estimated volatility will be based on the historical volatility of the Company’s common stock over an appropriate calculation period, or, if not available, by reference to the volatility of a representative sample of comparable public companies. The risk-free interest rate will be based on the U.S. Treasury yield curve in effect at the time of grant. The fair market value of the common stock will be determined by reference to the quoted market price of the Company’s common stock on the grant date, or, if not available, by reference to an appropriate alternative valuation methodology.

The Company will recognize the fair value of stock-based compensation awards in the Company’s statement of operations. The Company will issue new shares of common stock to satisfy stock option exercises.

As of April 30, 2020, the Company did not have any outstanding stock options.

Overview

Rivulet Media, Inc. is engaged in the business of producing, distributing,production, distribution and marketing of feature-length films, television series and mini-series, and television movies, and music from initial creative development through principal photography, postproduction, distribution and ancillary sales.sales, as well as the music production and distribution industry.

Rivulet Media, Inc. was organizedThe Company’s activities are subject to significant risks and uncertainties, including the need for additional capital, as described below at “Going Concern”. The Company does not currently have positive cash flows from operations and is dependent on October 6, 1998, in the Stateperiodic infusions of Delaware, originally under the name Tasco International, Inc, which was subsequently changedcapital to Tasco Holdings International, Inc., and then to Bio-Matrix Scientific Group, Inc. (“Bio-Matrix”) in 2006. On May 26, 2020, Bio-Matrix’s name was further changed to Rivulet Media, Inc. (“Rivulet Media”).fund its operating requirements.

Unless the context indicates otherwise, Rivulet Media, including its subsidiaries, is hereinafter referred to as the “Company”.

On January 29,At July 31, 2020, the Company, filedthrough its subsidiary Borderline Productions LLC, had commenced production of a Certificatedocumentary film related to the life of Amendmentformer Arizona Sheriff Joe Arpaio entitled “It’s Complicated”. During the three months ended October 31, 2020, the Company, through its subsidiary PBP Productions LLC, commenced the filming of its first film production, “Please Baby Please”. In December 2020, the Company, through its subsidiary Mistress Movie, LLC, commenced the filming of its second film production, “Mistress”. These films are now in post-production. Upon completion of a production, the Company expects to its Certificate of Incorporation withreceive initial revenues from domestic and foreign distribution contracts. At January 31, 2021 and July 31, 2020, project development costs aggregated $3,046,634 and $134,413, respectively.

Going Concern

The Company’s consolidated financial statements have been presented on the State of Delaware to (1) reduce the number of shares of common stockbasis that the Company is authorized to issue from 16,000,000,000 shares to 100,000,000 shares, with no changea going concern, which contemplates the realization of assets and satisfaction of liabilities in the $0.0001 per share par value; (2) effect a reverse stock splitnormal course of business. As reflected in the Company’s issued and outstanding shares of common stock and all classes of issued and outstanding preferred stock at an exchange ratio of one new share for every 2,000 old shares.

On March 26, 2020, Debbie Rasmussen and Klusman Family Holdings (together, the “Buyers”) and David Koos and Heather Cassady (together, the “Sellers”) completed a Stock Purchase Agreement (the “SPA”) whereby Buyers purchased from Sellers 4,364,235 shares of the outstanding common stock of the Company. This transaction resulted in a change in control ofaccompanying consolidated financial statements, the Company based onhas suffered losses from operations and negative operating cash flows since inception. During the transfer of approximately 55.8% of the outstanding common shares ofsix months ended January 31, 2021, the Company from Sellers to Buyers.incurred a net loss of $1,000,403 The amountCompany has financed its working capital requirements during this period primarily through the sale of consideration for the purchase of such common shares was $215,000, with the source of the consideration being a loan from an unaffiliated third party.

As a condition of closing of the transaction, each directorits equity securities and officer of the Company resigned from their position effective April 6, 2020, and Mike Witherill and Aaron Klusman were appointed as directors of the Company to take office effective April 6, 2020. Additionally, effective April 6, 2020, Mr. Klusman was appointed Chairman and Chief Executive Officer of the Company and Mr. Witherill was appointed Vice-Chairman and President of the Company. At the closing of the transaction, Mike Witherill and Aaron Klusman, directly and indirectly, effectively owned the equivalent of 77,896,200 shares of common stock of the Company, representing approximately 89.6% of the outstanding shares of common stock of the Company.

On April 13, 2020, the Company acquired 100% of the equity capital of Rivulet Films, Inc. (“Rivulet Films”) (which was organized on February 11, 2020, in the State of Arizona) in exchange for the issuance of 79,155,765 shares of common stock ofconvertible debt. Accordingly, management has concluded that these matters raise substantial doubt about the Company distributed onCompany’s ability to continue as a pro rata basis to the shareholders of Rivulet Films. Rivulet Films is a development stage company involved in the arts, entertainment, and recreation business. Because Rivulet Films was incorporated on February 11, 2020, there are no comparable financial statements for 2019.going concern.

On May 26, 2020, the Company filed an Amended and Restated Certificate of Incorporation with the State of Delaware to (1) change the Company’s name to Rivulet Media, Inc.; (2) increase the number of shares of common stock that the Company is authorized to issue from 100,000,000 shares to 200,000,000 shares, par value $0.0001 per share, with the number of shares of preferred stock that the Company is authorized to issue remaining unchanged at 20,000,000 shares, par value $0.0001 per share; and (3) eliminate the class of Non-Voting Preferred Stock, of which 200,000 shares, par value $1.00 per share, had been authorized, and none were outstanding.

Material Changes in Financial Condition

At April 30, 2020,January 31, 2021, the Company had nolimited cash resources available to fund its operations and iswill therefore need to raise additional funds in the process of raising additional funds.short-term. The Company estimates that a significant amount of capital will be necessary over a sustained period of time to advance the development of the Company’s business activities to the point at which it can become commercially viable and self-sustaining. However, there can be no assurances that the Company will be successful in this regard.

The Company intends to finance its future working capital requirements through the sale of its equity securities and from borrowings.

As a result, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the accompanying consolidated financial statements are issued. In addition, the Company’s independent registered public accounting firm, in their report on the Company’s consolidated financial statements of Rivulet Films for the period from February 11, 2020 (Date of Inception)(inception) through MarchJuly 31, 2020, has also expressed substantial doubt about the itsCompany’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and successfully implement its business plan, and to ultimately achieve sustainable operating revenues and profitability. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

The development and expansion of the Company’s business in 2020 and thereafter will beis dependent on many factors, including the capital resources available to the Company. No assurances can be given that any future financing will be available or, if available, that itthey will be on terms that are satisfactory to the Company or adequate to fund the development and expansion of the Company’s business operations to a level that is commercially viable and self-sustaining. There is also significant uncertainty as to the affect that the coronavirus pandemic may have on the availability, amount and type of financing in the future.

If cash resources are insufficient to satisfy the Company’s ongoing cash requirements, the Company would be required to scale back or discontinue its operations, obtain funds, if available, although there can be no certainty, through strategic alliances that may require the Company to relinquish rights to itsany assets, or to discontinue its operations entirely.

Material ChangesRecent Accounting Pronouncements

Information with respect to recent accounting pronouncements is provided at Note 3 to the condensed consolidated financial statements for the three months and six months ended January 31, 2021 included elsewhere in Resultsthis document.

Concentration of OperationsRisk

Information with respect to concentration of risk is provided at Note 3 to the condensed consolidated financial statements for the three months and six months ended January 31, 2021 included elsewhere in this document.

Critical Accounting Policies and Estimates

The discussion and analysis of financial condition and results of operations presented below is based on the Company’s consolidated financial statements for the three months and six months ended January 31, 2021 presented elsewhere in this document, which have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Certain accounting policies and estimates are particularly important to the understanding of the Company’s financial position and results of operations and require the application of significant judgment by management or can be materially affected by changes from period to period in economic factors or conditions that are outside of the Company’s control. As a result, these issues are subject to an inherent degree of uncertainty. In applying these policies, management uses its judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Those estimates are based on the Company’s historical operations, the future business plans and the projected financial results, the terms of existing contracts, trends in the industry, and information available from other outside sources. For a more complete description of the Company’s significant accounting policies, see Note 2 to the consolidated financial statements.

Film, Television Programs, and Music Production Costs

Film, television program, and music production costs are capitalized in accordance with Accounting Standards Codification 926, Entertainment - Films. Capitalized amounts are stated at the lower of cost, less accumulated amortization, or fair value. These costs represent capitalized costs for the production of films and other entertainment projects. In addition to the films, television programs and music that the Company may produce, costs of productions in development are capitalized as development costs and are transferred to production costs when the project is set for production. Films, television programs and music in development include costs of acquiring film rights to books, stage plays or original screenplays and costs to adapt such projects, as well as amounts paid to musical artists. Projects in development are written off if they are determined not to be recoverable, and are evaluated for impairment at each reporting period.

Once a project is released to consumers, the capitalized costs are amortized on an individual project basis in the proportion that the current revenue for each project bears to the estimated remaining unrecognized revenue to be received from all sources for each project as of the beginning of the current fiscal year. Revenue and cost forecasts are periodically reviewed by management and revised when warranted.

The carrying value of film costs are reviewed for impairment each reporting period on a project-by-project basis. If events or changes in circumstance indicate that the fair value of the capitalized costs on a specific project is less than the carrying value, an impairment charge is recognized in the amount by which the unamortized costs exceed the project’s fair value.

The Company has not completed any projects as of January 31, 2021 and, accordingly, has not recognized any impairment charges.

Revenue Recognition

Film and Television Program Revenues

The Company’s film and television program business is expected to generate revenues principally from the licensing of content in domestic theatrical exhibition, home entertainment (e.g., digital media and packaged media), television, and international market places.

Revenue will be recognized upon transfer of control of promised services or goods to customers in an amount that reflects the consideration that the Company expects to receive in exchange for those services or goods. Revenues do not include taxes collected from customers on behalf of taxing authorities, such as sales tax and value-added tax.

Results of Operations

At January 31, 2021, the Company had nocommenced business operations, but did not have positive cash flows from operations and will be dependent on periodic infusions of capital to fund its operating requirements.

Operating Expenses

The Company generally recognizes operating costs and expenses as they are incurred in two general categories, sales and marketing costs and expenses and general and administrative costs and expenses. The Company’s operating costs and expenses also include non-cash components related to depreciation and amortization of property and equipment which are allocated, as appropriate, to sales and marketing costs and expenses and general and administrative costs and expenses.

Sales and marketing costs and expenses consist primarily of press releases, web design and photo shoots and related one-time use equipment.

General and administrative costs and expenses consist of stock-based compensation, payroll to officers and employees, accounting fees, audit fees, legal fees, transfer agent fees, insurance, investor relations and other general corporate expenses. Management expects general and administrative costs and expenses to increase in future periods as the Company adds personnel and incurs additional costs related to its operation as a public company for a full fiscal year, including higher legal, accounting, insurance, compliance, compensation and other costs.

The Company’s consolidated statements of operations as discussed herein are presented below.