UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
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Interlink Plus, Inc.Washington, D.C. 20549
FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 000-55591
LOOP MEDIA, INC.
(Exact name of registrant as specified in its charter)
Nevada | | 47-3975872 |
(State or other jurisdiction of incorporation) |
| (IRS Employer Identification |
700 N. Central Ave.,Suite 430, Glendale, CA91203 | ||
(Address of principal executive offices) (Zip Code) | ||
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(818)823-4801 | ||
(Registrant’s telephone number, including area code) | ||
4952 S Rainbow Blvd, Suite 326
Las Vegas, NV 89118
(AddressSecurities registered pursuant to Section 12(b) of principal executive offices)
the Act:702-824-7047 None
(Registrant’s telephone number)
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days
[X]days. [X] Yes [ ] No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [X] Yes [ ] No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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| Smaller reporting company☒ |
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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. [ ]☐Yes ☒No
StateIndicate by check mark whether the number of shares outstanding of eachregistrant is a shell company (as defined in Rule 12b-2 of the issuer’s classesExchange Act). ☐Yes ☒No
As of August 6, 2021, the registrant had 127,680,014 shares of common stock asissued and outstanding.
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TABLE OF CONTENTS
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Management’s Discussion and Analysis of Financial Condition and Results of |
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Quantitative and Qualitative |
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Unregistered |
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2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Our financial statements included in this Form 10-Q are as follows:
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1
PART I — FINANCIAL INFORMATION
Item 1Financial Statements.
LOOP MEDIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| | | | | |
| June 30, |
| December 31, | ||
| 2021 | | 2020 | ||
ASSETS | (UNAUDITED) |
| |
| |
Current assets | |
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| |
|
Cash | $ | 929,403 | | $ | 838,161 |
Accounts receivable, net |
| 810,594 | |
| 669,679 |
Inventory |
| 27,096 | |
| 90,300 |
Prepaid expenses and other current assets |
| 516,354 | |
| 64,765 |
Prepaid income tax |
| 20,028 | |
| 21,689 |
License content assets - current | | 1,147,853 | | | 1,723,569 |
Note receivable - current |
| — | |
| 10,215 |
Total current assets |
| 3,451,328 | |
| 3,418,378 |
Non-current assets |
|
| |
|
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Deposits |
| 15,649 | |
| 15,649 |
License content assets - non current | | 336,360 | | | 371,041 |
Equipment, net |
| 18,212 | |
| 24,146 |
Operating lease right-of-use assets |
| 274,687 | |
| 347,075 |
Intangible assets, net |
| 4,741,550 | |
| 3,169,266 |
Note receivable |
| — | |
| 96,498 |
Equity method investments | | — | | | 1,613,479 |
Goodwill |
| 6,412,808 | |
| 583,086 |
Total non-current assets |
| 11,799,266 | |
| 6,220,240 |
Total assets | $ | 15,250,594 | | $ | 9,638,618 |
LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities |
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Accounts payable and accrued liabilities | $ | 648,502 | | $ | 964,276 |
Payable on acquisition |
| 250,125 | |
| 250,125 |
License content liabilities - current | | 1,024,500 | | | 1,251,500 |
Note payable - current | | — | | | 314,829 |
Deferred Income |
| 195,164 | |
| 128,622 |
Convertible debt related party - current, net |
| 599,456 | |
| 279,705 |
Convertible debt – current, net |
| 71,578 | |
| 393,943 |
Lease liability - current |
| 161,662 | |
| 145,271 |
Total current liabilities |
| 2,950,987 | |
| 3,728,271 |
Non-current liabilities |
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Convertible debt – related party, less current portion, net |
| 1,317,501 | |
| 1,223,768 |
Convertible debt, less current portion, net |
| 225,994 | |
| 160,165 |
Note payable – non-current |
| 486,638 | |
| 258,671 |
License content liabilities - non current | | — | | | 385,000 |
Lease liability |
| 119,178 | |
| 208,625 |
Total non-current liabilities |
| 2,149,311 | |
| 2,236,229 |
Total liabilities |
| 5,100,298 | |
| 5,964,500 |
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Commitments and contingencies (Note 10) |
| — | |
| — |
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Stockholders’ equity | | | | | |
Series B Convertible Preferred stock, $0.0001 par value, 3,333,334 shares authorized, 200,000 and 200,000 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively. Liquidation preference of $1.00 per share before any payment to Series A Preferred or Common stock | | 20 | | | 20 |
Series A Convertible Preferred stock, $0.0001 par value, 16,666,667 shares authorized, 0 and 30,667 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively. Liquidation preference of $0.10 per share. |
| — | |
| 3 |
Common Stock, $0.0001 par value, 316,666,667 shares authorized, 127,316,716 and 118,128,008 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively |
| 12,732 | |
| 11,813 |
Common stock subscribed and not yet issued |
| — | |
| 485,144 |
Additional paid in capital |
| 63,853,146 | |
| 44,721,282 |
Accumulated deficit |
| (53,715,602) | |
| (41,544,144) |
Total stockholders' equity |
| 10,150,296 | |
| 3,674,118 |
Total liabilities and stockholders' equity | $ | 15,250,594 | | $ | 9,638,618 |
See the accompanying notes to the unaudited condensed consolidated financial statements
2
LOOP MEDIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| | | | | | | | | | | | |
| | Three months ended June 30, | | Six months ended June 30, | ||||||||
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| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
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Revenue | | $ | 1,160,793 | | $ | 635,740 | | $ | 1,954,836 | | $ | 1,462,128 |
Cost of revenue | |
| 763,359 | |
| 172,661 | |
| 1,487,937 | |
| 384,920 |
Gross profit | |
| 397,434 | |
| 463,079 | |
| 466,899 | |
| 1,077,208 |
Operating expenses | |
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Selling, general and administrative | |
| 4,269,169 | |
| 1,638,038 | |
| 12,175,453 | |
| 4,696,691 |
Total operating expenses | |
| 4,269,169 | |
| 1,638,038 | |
| 12,175,453 | |
| 4,696,691 |
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Loss from operations | |
| (3,871,735) | |
| (1,174,959) | |
| (11,708,554) | |
| (3,619,483) |
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Other income (expense) | |
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Interest income | |
| — | |
| 1,175 | |
| 5,657 | |
| 2,459 |
Interest expense | |
| (632,094) | |
| (245,104) | |
| (1,048,012) | |
| (492,545) |
Income from equity investment | |
| — | |
| — | |
| 1,551 | |
| — |
Gain on extinguishment of debt | | | 579,486 | | | | | | 579,486 | | | — |
Inducement expense | |
| — | |
| — | |
| — | |
| (3,793,406) |
Other income | |
| — | |
| 10,000 | |
| — | |
| 10,000 |
Total other income (expense) | |
| (52,608) | |
| (233,929) | |
| (461,318) | |
| (4,273,492) |
Income tax expense | |
| — | |
| — | |
| (1,586) | |
| — |
Net loss | | $ | (3,924,343) | | $ | (1,408,888) | | $ | (12,171,458) | | $ | (7,892,975) |
Deemed dividend | |
| — | |
| — | |
| — | |
| (3,800,000) |
Net loss attributable to common stockholders | | $ | (3,924,343) | | $ | (1,408,888) | | $ | (12,171,458) | | $ | (11,692,975) |
Basic and diluted net loss per common share | | $ | (0.03) | | $ | (0.01) | | $ | (0.10) | | $ | (0.11) |
Weighted average number of common shares outstanding | |
| 124,965,420 | |
| 112,131,578 | | | 122,572,955 | | | 110,424,073 |
See the accompanying notes to the unaudited condensed consolidated financial statements
3
LOOP MEDIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED JUNE 30, 2021
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Preferred Stock Series B | | Preferred Stock Series A | | Common Stock | | Common stock | Additional Paid | | Accumulated | | | | |||||||||||||
| | Shares | | Amount | | Shares | | Amount | | Shares | | Amount | | subscriptions | in Capital | | Deficit | | Total | ||||||||
BALANCES, December 31, 2020 |
| 200,000 |
| $ | 20 |
| 30,667 |
| $ | 3 |
| 118,128,008 |
| $ | 11,813 |
| $ | 485,144 |
| $ | 44,721,282 |
| $ | (41,544,144) |
| $ | 3,674,118 |
Issuance of common stock subscribed |
| — |
| | — |
| — |
| | — |
| 497,429 |
| | 49 |
| | (485,144) |
| | 485,095 |
| | — |
| | — |
Conversion of convertible debenture |
| — |
| | — |
| — |
| | — |
| 1,003,618 |
| | 100 |
| | — |
| | 376,256 |
| | — |
| | 376,356 |
Shares issued for cash |
| — |
| | — |
| — |
| | — |
| 1,564,000 |
| | 156 |
| | — |
| | 1,954,844 |
| | — |
| | 1,955,000 |
Stock-based compensation |
| — |
| | — |
| — |
| | — |
| — |
| | — |
| | — |
| | 5,419,800 |
| | — |
| | 5,419,800 |
Warrants issued in conjunction with debenture |
| — | |
| — |
| — | |
| — |
| — | |
| — | |
| — | |
| 43,654 | |
| — | |
| 43,654 |
Beneficial conversion feature of convertible debenture |
| — |
| | — |
| — |
| | — |
| — |
| | — |
| | — |
| | 306,346 |
| | — |
| | 306,346 |
Net loss |
| — |
| | — |
| — |
| | — |
| — |
| | — |
| | — |
| | — |
| | (8,247,115) |
| | (8,247,115) |
BALANCES, March 31, 2021 |
| 200,000 | | $ | 20 |
| 30,667 | | $ | 3 |
| 121,193,055 | | $ | 12,118 | | $ | — | | $ | 53,307,277 | | $ | (49,791,259) | | $ | 3,528,159 |
Shares issued for cash |
| — | |
| — |
| — | |
| — |
| 960,000 | |
| 96 | |
| — | |
| 1,199,904 | |
| — | |
| 1,200,000 |
Stock-based compensation |
| — | |
| — |
| — | |
| — |
| — | |
| — | |
| — | |
| 1,482,746 | |
| — | |
| 1,482,746 |
Shares issued for consulting fees | | — | | | — | | — | | | — | | 79,051 | | | 8 | | | — | | | 199,992 | | | — | |
| 200,000 |
Shares issued for acquisition | | — | | | — | | — | | | — | | 2,003,435 | | | 200 | | | — | | | 5,689,555 | | | — | | | 5,689,755 |
Warrants issued for severance | | — | | | — | | — | | | — | | — | | | — | | | — | | | 82,000 | | | — | | | 82,000 |
Payment in kind interest stock issuance | | — | | | — | | — | | | — | | 14,475 | | | 3 | | | — | | | 41,976 | | | — | | | 41,980 |
Beneficial conversion feature of convertible debenture | | — | | | — | | — | | | — | | — | |
| — | | | — | | | 1,705,709 | | | — | | | 1,705,709 |
Warrants issued in conjunction with debenture | | — | | | — | | — | | | — | | — | |
| — | | | — | | | 144,291 | | | — | | | 144,291 |
Conversion of series A convertible stock to common stock | �� | — | | | — | | (30,667) | | | (3) | | 3,066,700 | | | 307 | | | — | | | (304) | | | — | | | — |
Net loss |
| — | |
| — |
| — | |
| — |
| — | |
| — | |
| — | |
| — | |
| (3,924,343) | |
| (3,924,343) |
BALANCES, June 30, 2021 |
| 200,000 | | $ | 20 |
| — | | $ | — |
| 127,316,716 | | $ | 12,732 | | $ | — | | $ | 63,853,146 | | $ | (53,715,602) | | $ | 10,150,296 |
See the accompanying notes to the unaudited condensed consolidated financial statements
4
LOOP MEDIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2020
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Preferred Stock B | | Preferred Stock A | | Common Stock | | Common stock | Additional Paid | | Accumulated | | | | |||||||||||||
| | | Shares | | Amount | | Shares | | Amount | | Shares | | Amount | | subscriptions | in Capital | | Deficit | | Total | ||||||||
BALANCES, December 31, 2019 |
| | — |
| $ | — | | — |
| $ | — |
| 101,882,647 |
| $ | 10,188 |
| $ | 150,144 |
| $ | 26,038,546 |
| $ | (26,125,252) |
| $ | 73,626 |
Shares issued for cash | |
| — | |
| — | | — | |
| — | | 1,040,000 | |
| 104 | |
| — | |
| 389,896 | |
| — | |
| 390,000 |
Cash received for common stock subscribed | | | — | | | — | | — | | | — | | — | | | — | | | 20,000 | | | — | | | — | | | 20,000 |
Common stock subscribed issued | |
| — | |
| — | | — | |
| — | | 40,000 | |
| 4 | |
| (15,000) | |
| 14,996 | |
| — | |
| — |
Shares issued for consulting fees | | | — | | | — | | — | | | — | | 4,000,000 | | | 400 | | | — | | | 1,499,600 | | | — | | | 1,500,000 |
Shares issued in connection with reverse merger |
| | — | | | — | | 30,667 | | | 3 | | 5,168,931 | | | 517 | | | — | | | (264,496) | | | — | | | (263,976) |
Shares issued for cash |
|
| 100,000 | |
| 10 | | — | |
| — | | — | |
| — | |
| — | |
| 4,799,990 | |
| — | |
| 4,800,000 |
Shares issued for debt settlement |
| | 100,000 | | | 10 | | — | | | — | | — | | | — | | | — | | | 4,799,990 | | | — | | | 4,800,000 |
Warrants issued for settlement of debt to related party |
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| — | |
| — | | — | |
| — | | — | |
| — | |
| — | |
| 185,563 | |
| — | |
| 185,563 |
Deemed dividend |
|
| — | |
| — | | — | |
| — | | — | |
| — | |
| — | |
| (3,800,000) | |
| — | |
| (3,800,000) |
Net loss |
|
| — | |
| — | | — | |
| — | | — | |
| — | |
| — | |
| — | |
| (6,484,087) | |
| (6,484,087) |
BALANCES, March 31, 2020 |
| $ | 200,000 | | $ | 20 | | 30,667 | | $ | 3 | | 112,131,578 | | $ | 11,213 | | $ | 155,144 | | $ | 33,664,085 | | $ | (32,609,339) | | $ | 1,221,126 |
Stock-based compensation |
| | — |
| | — | | — | |
| — |
| — | | | — | | | — | | | 171,798 | | | — | |
| 171,798 |
Net loss |
| | — |
| | — | | — | |
| — |
| — | | | — | | | — | | | — | | | (1,408,888) | |
| (1,408,888) |
BALANCES, June 30, 2020 |
| $ | 200,000 | | $ | 20 | | 30,667 | | $ | 3 |
| 112,131,578 | | $ | 11,213 | $ | $ | 155,144 | | $ | 33,835,883 | | $ | (34,018,227) | | $ | (15,964) |
See the accompanying notes to the unaudited condensed consolidated financial statements
5
LOOP MEDIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| | | | | | |
| | Six months ended June 30, | ||||
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| 2021 |
| 2020 | ||
CASH FLOWS FROM OPERATING ACTIVITIES |
| |
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| |
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Net loss | | $ | (12,171,458) | | $ | (7,892,975) |
Adjustments to reconcile net loss to net cash used in operating activities: | |
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Amortization of debt discount | |
| 770,546 | |
| 302,104 |
Depreciation and amortization expense | |
| 733,651 | |
| 118,363 |
Amortization of license contract assets | | | 610,397 | | | — |
Amortization of right-of-use assets | |
| 72,388 | |
| 66,165 |
Bad debt expense | | | 146,637 | | | — |
Gain on extinguishment of debt | | | (579,486) | | | — |
Warrants issued for severance | | | 82,000 | | | — |
Stock-based compensation | |
| 6,902,547 | |
| 1,671,798 |
Inducement expense | |
| — | |
| 3,793,406 |
Equity method investment income | |
| (1,551) | |
| — |
Change in operating assets and liabilities: | |
| | |
|
|
Accounts receivable | |
| (180,839) | |
| 74,896 |
Prepaid income tax | | | 1,661 | | | — |
Inventory | |
| 63,204 | |
| (48,215) |
Prepaid expenses | |
| (251,588) | |
| (70,609) |
Prepaid income tax | |
| — | |
| (260) |
Accounts payable and accrued liabilities | |
| (217,595) | |
| 68,491 |
License content liability | |
| (612,000) | |
| — |
License contract asset | | | — | | | (227,000) |
Operating lease liabilities | |
| (73,056) | |
| (64,735) |
Deferred income | |
| (8,458) | |
| (49,251) |
NET CASH USED IN OPERATING ACTIVITIES | |
| (4,713,000) | |
| (2,257,822) |
| | | | | | |
CASH FLOWS FROM INVESTING ACTIVITIES | |
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Acquisition of EON Media Group, net of cash acquired | |
| (749,937) | |
| — |
Purchase of equipment | | | — | | | (10,599) |
Collection of note receivable | |
| — | |
| 2,872 |
NET CASH USED IN INVESTING ACTIVITIES | |
| (749,937) | |
| (7,727) |
| | | | | | |
CASH FLOWS FROM FINANCING ACTIVITIES | |
|
| |
|
|
Proceeds from issuance of common stock | | | 3,155,000 | | | 390,000 |
Proceeds from issuance of preferred stock | | | — | | | 1,000,000 |
Proceeds from PPP loan | | | 486,638 | | | 573,500 |
Principal payment of convertible debt | | | (36,078) | | | — |
Proceeds from issuance of convertible debt | | | 2,200,000 | | | — |
Repayment of stockholder loans | |
| (251,380) | |
| — |
Reverse merger cost | |
| — | |
| (80,134) |
Proceeds from issuing common stock subscribed | |
| — | |
| 20,000 |
| | | | | | |
NET CASH PROVIDED BY FINANCING ACTIVITIES | |
| 5,554,179 | |
| 1,903,366 |
| | | | | | |
Change in cash and cash equivalents | |
| 91,242 | |
| (362,183) |
| | | | | | |
Cash, beginning of the year | |
| 838,161 | |
| 1,011,445 |
| | | | | | |
Cash, end of the year | | $ | 929,403 | | $ | 649,262 |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW STATEMENTS | |
|
| |
|
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Cash paid for interest | | $ | 192,632 | | $ | 27,175 |
Cash paid for income taxes | | $ | — | | $ | 260 |
SUPPLEMENTAL DISCLOSURES OF NON CASH INVESTING AND FINANCING ACTIVITIES | |
|
| |
|
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Shares issued in connection with reverse merger | | $ | — | | $ | 517 |
Preferred stock issued in connection with reverse merger | | $ | — | | $ | 3 |
Preferred stock issued for debt settlement | | $ | — | | $ | 20 |
Conversion of convertible debenture to common stock | | $ | 376,356 | | $ | — |
Common stock issued for acquisition | | $ | 5,689,755 | | $ | — |
Debt and accrued interest exchanged as part of debt settlement | | $ | — | | $ | 1,006,594 |
Accrued interest rolled into convertible note | | $ | — | | $ | 150,411 |
6
Assumption of lease by related party | | $ | — | | $ | 20,825 |
Assumption of debt as part of reverse merger | | $ | — | | $ | 183,842 |
Warrants issued to extinguish debt with related party | | $ | — | | $ | 185,563 |
Payment in kind common stock payment | | $ | 41,979 | | $ | — |
Warrants issued as debt discount on convertible debenture | | $ | 187,945 | | $ | — |
Beneficial conversion feature recorded as debt discount | | $ | 2,012,055 | | $ | — |
Prepaid common stock paid to consultant | | $ | 200,000 | | $ | — |
Conversion of Preferred Class A stock to common stock | | $ | 307 | | $ | — |
Shares issued for common stock subscribed | | $ | 485,144 | | $ | 15,000 |
Deemed dividend | | $ | — | | $ | 3,800,000 |
See the accompanying notes to the unaudited condensed consolidated financial statements
7
LOOP MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021
(UNAUDITED)
NOTE 1 – BUSINESS
Loop Media, Inc. (the “Company” and formerly, Interlink Plus, Inc.) is a Nevada corporation. The Company was incorporated under the laws of the State of Nevada on May 11, 2015. On February 5, 2020, the Company and the Company’s wholly owned subsidiary, Loop Media Acquisition, Inc. (“Merger Sub”), a Delaware corporation, closed the Agreement and Plan of Merger (the “Merger Agreement”) with Loop Media, Inc. (“Loop”), a Delaware corporation. Pursuant to the Merger Agreement, Merger Sub merged with and into Loop with Loop as surviving entity and becoming a wholly-owned subsidiary of the Company (the “Merger”).
Pursuant to the Merger Agreement, the Company acquired 100% of the outstanding shares of Loop in exchange for 152,823,970 shares of the Company’s common stock at an exchange ratio of 1:1. Loop was incorporated on May 18, 2016 under the laws of the State of Delaware. As a result of such acquisition, the Company’s operations now are focused on premium short-form video for businesses and consumers.
We are a multichannel digital platform media company that offers self-curated, premium videos to customers in OOH venues and D2C on their personal in home and mobile devices. We deliver highly curated music video content from major and independent record labels, as well as movie and television trailers, viral videos, drone footage, lifestyle and atmospheric channels, kid friendly content, sports highlights and news clips. We believe we are the only service in the United States licensed by all three major music labels to provide music video content in both the OOH and D2C markets. We curate content seeking to create a compelling user experience by, among other things, curating our carefully selected Playlists Playlists for OOH venues and thoughtfully developed streaming channels (“Channels”) for delivery to our OTT platform partners and to users of our mobile application. Our digital platform service seeks to surround and engage consumers with a diverse offering of video content on their chosen digital screen wherever they are located. We believe we are the only company offering a digital out of home (“DOOH”) service that also has a consumer mobile application, which increases the connectivity and interactivity of our OOH services.
We operate a “freemium” business model, offering our Service on either a Premium or Ad-Supported basis. We deliver our Service to OOH venues primarily through our proprietary Loop Media-designed Loop Player and to consumers primarily through our fully functional and operational Loop App and across OTT streaming platforms on CTVs. The underlying content that we curate and deliver through our service is predominantly licensed from third parties and consists primarily of music videos. We also offer an increasing range of non-music video content that we are acquiring through additional licenses and producing internally in our Loop Media Studios business division. This additional and diversified content offering is a large part of our business model going forward. We operate almost exclusively in the United States but are looking at further overseas expansion, primarily in Latin America and Asia.
We are an early-stage media operating company, with limited historical revenue and negative cash flow from operations. Our revenue is generated by advertisers who pay for our ad inventory in order to have their advertisements viewed by the end users of our Ad-Supported Service and by business owners and users who pay a subscription fee to access our Subscription Service without advertisements. Our revenue for the fiscal year ended December 31, 2020, consisted almost entirely of revenue from our historic ScreenPlay business, which is a subscription-based OOH focused business, with little to no advertising revenue and no consumer users, and which does not fully reflect revenues expected from our more recent product and Service offerings and business model. We have begun to record increased revenue share for the six months ended June 30, 2021, as our advertising business model has more recently been deployed and operating more fully.
Going Concern and Management’s Plans
As of June 30, 2021, the Company reported a cash balance of $929,403 and an accumulated deficit of $ (53,715,602). During the six months ended June 30, 2021, the Company used net cash in operating activities of
8
($4,713,000). The Company has incurred net losses since inception. These conditions raise substantial doubt about the Company’s ability to continue as a going concern within one year from the issuance date of these unaudited condensed consolidated financial statements.
The Company’s primary source of operating funds since inception has been cash proceeds from debt and equity financing transactions. The ability of the Company to continue as a going concern is dependent upon its ability to generate sufficient revenue and its ability to raise additional funds by way of its debt and equity financing efforts.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally acceptedon a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the United Statesnormal course of America for interimbusiness. These unaudited condensed consolidated financial information andstatements do not include any adjustments relating to the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended December 31, 2017 are not necessarily indicativerecovery of the recorded assets or classification of the liabilities that might be necessary should the Company be unable to continue as a going concern. The ability of the Company to continue as a going concern is dependent on management’s further implementation of the Company’s on-going and strategic plans, which include continuing to raise funds through equity and/or debt raises. Should the Company be unable to raise adequate funds, certain aspects of the on-going and strategic plans may require modification. Management is in the process of identifying sources of capital via strategic partnerships, debt refinancing and equity investments through one or more private placements.
The spread of a novel strain of coronavirus (COVID-19) around the world beginning in the first half of 2020 has caused significant volatility in U.S. and international markets. While the pandemic could ultimately lead to a material adverse impact on the business, results that can be expected forof operations and financial condition of the full year.Company, at the time of issuance, the extent of the impact is uncertain. Due to the rapid development and fluidity of this situation, the magnitude and duration of the pandemic and its impact on the Company's future operations and liquidity is uncertain as of the date of filing this report.
3
INTERLINK PLUS, INC.
BALANCE SHEETS
(unaudited)
|
| December 31, |
| June 30, | ||
|
| 2017 |
| 2017 | ||
|
|
|
|
| ||
ASSETS |
|
|
|
| ||
|
|
|
|
| ||
Current assets: |
|
|
|
| ||
Cash |
| $ | 25,618 |
| $ | 12,201 |
Accounts receivable |
|
| 3,463 |
|
| 11,121 |
Prepaid expenses |
|
| 181,857 |
|
| 58,693 |
Total current assets |
|
| 210,938 |
|
| 82,015 |
|
|
|
|
|
|
|
Other assets: |
|
|
|
|
|
|
Fixed assets, net |
|
| 1,078 |
|
| - |
Website, net |
|
| 1,618 |
|
| 2,201 |
Total other assets |
|
| 2,696 |
|
| 2,201 |
|
|
|
|
|
|
|
Total assets |
| $ | 213,634 |
| $ | 84,216 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
Accounts payable |
| $ | 9,074 |
| $ | 15,891 |
Accounts payable - related party |
|
| 45,312 |
|
| 57,000 |
Customer deposits |
|
| 210,893 |
|
| 60,559 |
Notes payable |
|
| 15,000 |
|
| - |
Notes payable - related party |
|
| - |
|
| 6,000 |
Accrued interest payable |
|
| 4,535 |
|
| 1,521 |
Accrued interest payable - related party |
|
| 1,687 |
|
| 1,759 |
Convertible debt, net |
|
| 15,000 |
|
| 14,167 |
Convertible debt - related party, net |
|
| 6,658 |
|
| 4,000 |
Total current liabilities |
|
| 308,159 |
|
| 160,897 |
|
|
|
|
|
|
|
Total liabilities |
|
| 308,159 |
|
| 160,897 |
|
|
|
|
|
|
|
Stockholders' equity (deficit): |
|
|
|
|
|
|
Series A Convertible Preferred stock, $0.0001 par value, 25,000,000 shares authorized, 2,700,000 and 2,700,000 shares issued and outstanding as of December 31, 2017 and June 30, 2017, respectively |
|
| 270 |
|
| 270 |
Common stock, $0.0001 par value, 475,000,000 shares authorized, 67,373,008 and 67,373,008 shares issued and outstanding as of December 31, 2017 and June 30, 2017, respectively |
|
| 6,737 |
|
| 6,737 |
Additional paid-in capital |
|
| 70,179 |
|
| 62,862 |
Retained deficit |
|
| (171,711) |
|
| (146,550) |
Total stockholders' equity (deficit) |
|
| (94,525) |
|
| (76,681) |
|
|
|
|
|
|
|
Total liabilities and stockholders' equity (deficit) |
| $ | 213,634 |
| $ | 84,216 |
See accompanying notes to financial statements.
F-1
INTERLINK PLUS, INC.
STATEMENTS OF OPERATIONS
(unaudited)
|
| For the |
| For the |
| For the |
| For the | ||||
|
| three months |
| three months |
| six months |
| six months | ||||
|
| ended |
| ended |
| ended |
| ended | ||||
|
| December 31, |
| December 31, |
| December 31, |
| December 31, | ||||
|
| 2017 |
| 2016 |
| 2017 |
| 2016 | ||||
|
|
|
|
|
|
|
|
| ||||
Revenue |
| $ | 34,718 |
| $ | 3,998 |
| $ | 51,812 |
| $ | 9,537 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold |
|
| - |
|
| - |
|
| - |
|
| 109 |
General and administrative |
|
| 5,654 |
|
| 1,014 |
|
| 11,862 |
|
| 1,287 |
Depreciation and amortization |
|
| 389 |
|
| 125 |
|
| 681 |
|
| 250 |
Professional fees |
|
| 26,463 |
|
| 8,697 |
|
| 39,046 |
|
| 13,960 |
Professional fees - related party |
|
| 9,000 |
|
| 9,000 |
|
| 18,000 |
|
| 18,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
| 41,506 |
|
| 18,836 |
|
| 69,589 |
|
| 33,606 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
| (6,788) |
|
| (14,838) |
|
| (17,777) |
|
| (24,069) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses): |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
| (2,632) |
|
| (4,239) |
|
| (3,848) |
|
| (11,569) |
Interest expense - related party |
|
| (1,995) |
|
| (267) |
|
| (3,536) |
|
| (535) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expenses |
|
| (4,627) |
|
| (4,506) |
|
| (7,384) |
|
| (12,104) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
| $ | (11,415) |
| $ | (19,344) |
| $ | (25,161) |
| $ | (36,173) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share - basic |
| $ | (0.00) |
| $ | (0.00) |
| $ | (0.00) |
| $ | (0.00) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share - diluted |
| $ | (0.00) |
| $ | (0.00) |
| $ | (0.00) |
| $ | (0.00) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding - basic and diluted |
|
| 67,373,008 |
|
| 63,242,573 |
|
| 67,373,008 |
|
| 59,827,755 |
See accompanying notes to financial statements.
F-2
INTERLINK PLUS, INC.
STATEMENTS OF CASH FLOWS
(unaudited)
|
| For the |
| For the | ||
|
| six months |
| six months | ||
|
| ended |
| ended | ||
|
| December 31, |
| December 31, | ||
|
| 2017 |
| 2016 | ||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
| ||
Net loss |
| $ | (25,161) |
| $ | (36,173) |
Adjustments to reconcile to net loss to net cash used in operating activities: |
|
|
|
|
|
|
Depreciation and amortization |
|
| 681 |
|
| 250 |
Amortization of debt discount |
|
| 4,441 |
|
| 10,774 |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
(Increase) in accounts receivable |
|
| 7,658 |
|
| (1,589) |
(Increase) decrease in prepaid expenses |
|
| (123,164) |
|
| (375) |
(Decrease) in accounts payable |
|
| (6,817) |
|
| 187 |
Increase (decrease) in accounts payable - related party |
|
| (11,688) |
|
| 18,000 |
Increase in accrued interest payable - related party |
|
| (72) |
|
| 535 |
Increase (decrease) in accrued interest payable |
|
| 3,014 |
|
| 796 |
Increase in customer deposits |
|
| 150,334 |
|
| 8,757 |
|
|
|
|
|
|
|
Net cash used in operating activities |
|
| (774) |
|
| 1,162 |
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
Purchase fixed assets |
|
| (1,176) |
|
| - |
|
|
|
|
|
|
|
Net cash used in operating activities |
|
| (1,176) |
|
| - |
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
Proceeds from notes payable |
|
| 15,000 |
|
| - |
Proceeds from convertible debt |
|
| - |
|
| 10,000 |
Donated capital |
|
| 367 |
|
| - |
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
| 15,367 |
|
| 10,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CHANGE IN CASH |
|
| 13,417 |
|
| 11,162 |
|
|
|
|
|
|
|
CASH AT BEGINNING OF PERIOD |
|
| 12,201 |
|
| 1,909 |
|
|
|
|
|
|
|
CASH AT END OF PERIOD |
| $ | 25,618 |
| $ | 13,071 |
|
|
|
|
|
|
|
SUPPLEMENTAL INFORMATION: |
|
|
|
|
|
|
Interest paid |
| $ | - |
| $ | - |
Income taxes paid |
| $ | - |
| $ | - |
|
|
|
|
|
|
|
Non-cash investing and financing activities: |
|
|
|
|
|
|
Amortization of debt discount |
| $ | 4,441 |
| $ | 7,024 |
See accompanying notes to financial statements.
F-3
INTERLINK PLUS, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentationInterim Financial Statements
The interimfollowing (a) condensed consolidated balance sheet as of December 31, 2020, which has been derived from audited financial statements, included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by(b) the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have beenunaudited condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.
These statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that theseconsolidated interim financial statements be read in conjunction with the financial statements of the Company for the yearsix months ended June 30, 2017 and notes thereto included2021, have been prepared in accordance with accounting principles generally accepted in the Company’s annual report. The Company followsUnited States ("US GAAP") for interim financial information and the same accounting policies in the preparationinstructions to Form 10-Q and Rule 8-03 of interim reports.
Results of operations for the interim period are not indicative of annual results.
Organization
The Company was incorporated on May 11, 2015 (Date of Inception) under the lawsRegulation S-X of the StateSecurities Act of Nevada, as Interlink Plus, Inc.
Nature of operations
The Company will provide services for oversea travel agents on hotel price quotation and negotiation, contract reviewing, detailed guests’ arrangements, hotel check-in assistance, as well as tradeshow services to domestic and international businesses. Additionally, the Company is offering marketing materials and other products for the tradeshows.
Year end
The Company’s year-end is June 30.
Cash and cash equivalents
For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. The carrying value of these investments approximates fair value.
Accounts receivable
The allowance for uncollectible accounts receivables is determined principally on the basis of past collection experience as well as consideration of current economic conditions and changes in our customer collection trends. Since the inception of the Company through today, the Company has had no material bad debt write offs and believes its current policy is reasonable.
Fixed assets
The Company records all property and equipment at cost less accumulated depreciation. Improvements are capitalized while repairs and maintenance costs are expensed as incurred. Depreciation is calculated using the straight-line method over the estimated useful life of the assets or the lease term, whichever is shorter. Leasehold improvements1933. Accordingly, they do not include the cost of the Company’s internal development and construction department. Depreciation periods are as follows:
Computer equipment: 3 years
F-4
INTERLINK PLUS, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Website
The Company capitalizes the costs associated with the development of the Company’s website pursuant to ASC Topic 350. Other costs related to the maintenance of the website are expensed as incurred. Amortization is provided over the estimated useful lives of 3 years using the straight-line method for financial statement purposes. The Company plans to commence amortization upon completion and release of the Company’s fully operational website.
Revenue recognition
We recognize revenue when all of the following conditions are satisfied: (1) there is persuasive evidenceinformation and footnotes required by US GAAP for complete financial statements. In the opinion of an arrangement; (2) the product or service hasmanagement, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been provided to the customer; (3) the amount of fees to be paid by the customer is fixed or determinable; and (4) the collection of our fees is probable.
The Company will record revenue when it is realizable and earned and the services are completed as part of the service contract.
Advertising costs
Advertising costs are anticipated to be expensed as incurred; however there were no advertising costs included in general and administrative expensesincluded. Operating results for the six months ended June 30, 2021 are not necessarily indicative of results that may be expected for the year ending December 31, 2017.2021.
Fair value ofThese unaudited condensed consolidated financial instruments
Fair value estimates discussed herein are based upon certain market assumptionsstatements should be read in conjunction with the audited consolidated financial statements and pertinent information available to management as ofnotes thereto for the year ended December 31, 2017. The respective carrying value2020 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on April 15, 2021.
Basis of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, prepaid expensesPresentation and accounts payable. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.
Level 1:Principles of Consolidation
The preferred inputs to valuation effortsunaudited condensed consolidated financial statements are “quoted pricesprepared using the accrual basis of accounting in active markets for identical assets or liabilities,”accordance with the caveat that the reporting entity mustUS GAAP. All intercompany transactions and balances have access to that market. Information at this level is basedbeen eliminated on direct observations of transactions involving the same assets and liabilities, not assumptions, and thus offers superior reliability. However, relatively few items, especially physical assets, actually trade in active markets.consolidation.
Level 2:
FASB acknowledged that active markets for identical assets and liabilities are relatively uncommon and, even when they do exist, they may be too thin to provide reliable information. To deal with this shortage of direct data, the board provided a second level of inputs that can be applied in three situations.
Level 3:
If inputs from levels 1 and 2 are not available, FASB acknowledges that fair value measures of many assets and liabilities are less precise. The board describes Level 3 inputs as “unobservable,” and limits their use by saying they “shall be used to measure fair value to the extent that observable inputs are not available.” This category allows “for situations in which there is little, if any, market activity for the asset or liability at the measurement date”. Earlier in the standard, FASB explains that “observable inputs” are gathered from sources other than the reporting company and that they are expected to reflect assumptions made by market participants.
F-5
INTERLINK PLUS, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Stock-based compensationBusiness Combinations
The Company recognizes separately from goodwill the assets acquired and the liabilities assumed in a business combination at the acquisition date fair value. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. The Company uses best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date,
9
however, estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company records stock based compensationadjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to the condensed consolidated statement of operations.
The Company issues cash, equity, or a combination thereof as consideration when consummating business combinations. The Company evaluates the nature of the consideration given and any restrictions on use to determine the appropriate accounting treatment. Cash consideration and equity awards without performance conditions are generally accounted for in accordance with the guidance in ASC Topic 505 and 718 which requires the Company to recognize expenses related to the fair value of its employee stock option awards. This eliminates accounting for share-based compensation transactions using the intrinsic value and requires instead that such transactions be accounted for using a fair-value-based method. The Company recognizes the cost of all share-based awards on a graded vesting basis over the vesting period of the award.805, Business Combinations.
Equity method investments
The Company accounts for investments in unconsolidated entities under the equity instruments issuedmethod of accounting if it could exercise significant influence over the operating and financial policies of an entity but does not have a controlling financial interest. Judgment regarding the level of influence over each equity method investment includes considering key factors such as ownership interest, representation on the board of directors, participation in exchangepolicy-making decisions and material intercompany transactions. The Company’s proportionate share of the net income (loss) resulting from these investments are reported under the line-item captioned equity method investment income in our condensed consolidated statements of operations. The carrying value of our equity method investments is reported in equity method investments in the condensed consolidated balance sheets. The Company’s equity method investments are reported at cost and adjusted each period for the receiptCompany’s share of goodsthe investee’s income or services from other than employeesloss and dividend paid, if any. The Company assesses investments for impairment whenever events or changes in accordance with FASB ASC 718-10 andcircumstances indicate that the conclusions reached by the FASB ASC 505-50. Costs are measured at the estimated fair marketcarrying value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by FASB ASC 505-50.an investment may not be recoverable.
Earnings per share
The Company follows ASC Topic 260 to account for the earnings per share. Basic earning per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earning per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation.
Use of estimatesEstimates
The preparation of the unaudited condensed consolidated financial statements in conformity with generally accepted accounting principlesUS 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 revenue and expenses during the reporting period. Actual results could differ significantly from those estimates. Significant estimates include assumptions used in the fair value of stock-based compensation, the fair value of other equity and debt instruments, fair value of intangible assets, recoverability of license content assets, and useful lives of assets.
License Content Assets
On January 1, 2020, the Company adopted the guidance in Accounting Standards Update (“ASU”) 2019-02, Entertainment—Films—Other Assets—Film Costs (Subtopic 926-20) and Entertainment—Broadcasters—Intangibles—Goodwill and Other (Subtopic 920-350): Improvements to Accounting for Costs of Films and License Agreements for Program Materials, on a prospective basis. The Company capitalizes the fixed content fees and its corresponding liability when the license period begins, the cost of the content is known, and the content is accepted and available for streaming. The Company amortizes licensed content assets into cost of revenue, using the straight-line method over the contractual period of availability. The liability is paid in accordance with the contractual terms of the arrangement.
Fair Value of Financial Instruments
The Company determines the fair value of its assets and liabilities using a hierarchy established by the accounting guidance that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). The three levels of valuation hierarchy are defined as follows:
● | Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets. |
10
● | Level 2 inputs to the valuation methodology included quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in inactive markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. | |
● | Level 3 inputs to the valuation methodology is one or more unobservable inputs which are significant to the fair value measurement. |
The carrying amount of the Company’s financial instruments, including cash, accounts receivable, deposits, short-term portion of notes receivable and notes payable, and current liabilities approximate fair value due to their short-term nature. The Company does not have financial assets or liabilities that are required under US GAAP to be measured at fair value on a recurring basis. The Company has not elected to use fair value measurement option for any assets or liabilities for which fair value measurement is not presently required.
The Company records assets and liabilities at fair value on nonrecurring basis as required by US GAAP. Assets recognized or disclosed at fair value in the condensed consolidated financial statements on a nonrecurring basis include items such as property and equipment, operating lease assets, goodwill, and other intangible assets, which are measured at fair value if determined to be impaired.
Net Loss per Share
The Company accounts for net loss per share in accordance with Accounting Standards Codification (“ASC”) ASC 260-10, Earnings Per Share, which requires presentation of basic and diluted earnings per share ("EPS") on the face of the statement of operations for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS.
Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during each period. It excludes the dilutive effects of any potentially issuable common shares.
Diluted net loss per share is calculated by including any potentially dilutive share issuances in the denominator.
The following securities are excluded from the calculation of weighted average diluted shares at June 30, 2021 and 2020, respectively, because their inclusion would have been anti-dilutive.
| | | | |
|
| June 30, |
| June 30, |
| | 2021 | | 2020 |
Options to purchase common stock |
| 17,708,356 |
| 8,312,307 |
Warrants to purchase common stock |
| 8,891,240 |
| 8,217,376 |
Series A preferred stock |
| — |
| 3,066,700 |
Series B preferred stock |
| 20,000,000 |
| 20,000,000 |
Convertible debentures |
| 6,854,219 |
| 6,788,027 |
Total common stock equivalents |
| 53,453,815 |
| 46,384,410 |
Application of New Accounting Standards
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company elected adoption of this standard on its condensed consolidated financial statements and related disclosures effective January 1, 2021.
11
Recent pronouncementsAccounting Pronouncements
In September 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This guidance requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. This guidance also requires enhanced disclosures regarding significant estimates and judgments used in estimating credit losses. The new guidance is effective for fiscal years beginning after December 15, 2022. While the Company is currently evaluating the impact that the adoption of this guidance will have on its condensed consolidated financial statements, it does not expect the adoption to have a material impact on its condensed consolidated financial statements.
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). This ASU reduces the number of accounting models for convertible debt instruments and convertible preferred stock. As well as amend the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. In addition, this ASU improves and amends the related EPS guidance. The ASU is effective for interim and annual periods beginning after December 15, 2021, with early adoption permitted for periods beginning after December 15, 2020. Adoption of the ASU can either be on a modified retrospective or full retrospective basis. The Company is currently evaluating the impact of this standard on its condensed consolidated financial statements and related disclosures.
NOTE 3 – BUSINESS COMBINATION
Business acquisition of EON Media Group
The Company obtained control of EON Media Group through two investments, which ASC 805 refers to as a “business combination achieved in stages.” On December 1, 2020, the Company acquired from Ithaca EMG Holdco LLC (Ithaca) 1,350 ordinary shares and 1,084 preference shares issued by EON Media Group Pte. Ltd (EON Media Group). The first stage of the transaction resulted in Company acquiring a 20% equity interest in EON Media Group, and was recorded as an equity method investment. The purchase price consideration for the acquired shares consisted of $750,000 in cash and 454,463 shares of the Company’s common stock valued at $863,480. For the six months ended June 30, 2021, the Company recognized equity method income of $1,551.
On April 27, 2021, the Company acquired from Far West Entertainment 3,650 ordinary shares, from a private individual 3,650 ordinary shares and from Ithaca EMG Holdco LLC (Ithaca) 1,350 ordinary shares and 1,084 preference shares issued by EON Media Group Pte. Ltd (EON Media Group). The second stage of the transaction resulted in the Company acquiring the remaining 80% equity interest in EON Media Group. The purchase price consideration for the acquired shares consisted of $750,000 in cash and 2,003,435 shares of the Company’s common stock valued at $5,689,755.
The allocation of the purchase consideration is as follows:
| | | |
|
| April 27, | |
| | 2021 | |
Fair value of shares issued | | $ | 5,689,755 |
Cash consideration | |
| 750,000 |
Fair value of prior investment in EON Media Group | |
| 1,615,030 |
Total consideration paid | | $ | 8,054,785 |
| | | |
For the period ended June 30, 2021, the Company incurred transaction costs of $42,507, included in Selling, general and administrative expense on the unaudited condensed consolidated statement of operations. Certain estimated values for the acquisition, including intangible assets, goodwill and deferred taxes are not yet finalized.
12
The preliminary purchase price allocation is as follows:
| | | |
|
| April 27, | |
| | 2021 | |
Cash and cash equivalents | | $ | 63 |
Goodwill | |
| 5,829,722 |
Brand name intangible asset | |
| 2,300,000 |
Current liabilities | | | (75,000) |
Total purchase price allocation | | $ | 8,054,785 |
The proforma disclosures were not materially different from the historical results of the Company.
NOTE 4 – GOODWILL AND OTHER INTANGIBLE ASSETS
As of June 30, 2021, and December 31, 2020, the balance of goodwill was $6,412,808 and $583,086, respectively. On April 27, 2021, the EON Media Group acquisition value of goodwill was $5,754,785 (see Note 3). EON Media Group’s post-acquisition adjustments were $74,937.
The Company’s other intangible assets consisted of the following at June 30, 2021 and December 31, 2020:
| | | | | | | | |
| | | | June 30, |
| December 31, | ||
|
| Useful life |
| 2021 |
| 2020 | ||
Screenplay brand | | not applicable | | $ | — | | $ | 130,000 |
Customer relationships | | nine years | |
| 1,012,000 | |
| 1,012,000 |
Content library | | two years | |
| 198,000 | |
| 198,000 |
Brand name | | twenty years | | | 2,300,000 | | | — |
Technology | | two years | | | 2,671,233 | | | 2,671,233 |
Total intangible assets, gross | | | |
| 6,181,233 | |
| 4,011,233 |
| | | | | | | | |
Less: Impairment of intangible assets | | | |
| — | |
| (130,000) |
Less: accumulated amortization | | | |
| (1,439,683) | |
| (711,967) |
Total intangible accumulated amortization | | | |
| (1,439,683) | |
| (841,967) |
Total intangible assets, net | | | | $ | 4,741,550 | | $ | 3,169,266 |
Amortization expense charged to operations amounted to $373,933 and $56,292 respectively, for the three months ended June 30, 2021 and 2020, and $727,715 and $112,583, respectively, for the six months ended June 30, 2021 and 2020.
NOTE 5 – LICENSE CONTENT ASSETS
License Content Assets
To stream video content to the users, the Company generally secures intellectual property rights to such content by obtaining licenses from, and paying royalties or other consideration to, rights holders or their agents. The licensing arrangements can be for a fixed fee, variable fee, or combination of both. The licensing arrangements specify the period when the content is available for streaming. The license content assets are two years in duration and include prepayments to distributors for customer subscription revenues, per play usage fees, and ad supported fees.
As of June 30, 2021, license content assets were $1,484,213 classified as $1,147,853 License content asset, net – current and $336,360 recorded as License content asset, net – noncurrent.
The Company recorded amortization expense of $610,397 and $0 for the periods ended June 30, 2021 and 2020, respectively, in cost of revenue, in the condensed consolidated statements of operations, related to capitalized license
13
content assets. The amortization expense for the remaining six months ended December 31, 2021, is $627,353 and for year ended December 31, 2022, is $856,860.
License Content Liabilities
At June 30, 2021, the Company had $1,024,500 of obligations comprised of $1,024,500 in License content liability – current and $0 in License content liability – noncurrent on the condensed consolidated balance sheets. The expected timing of payments for these content obligations is $639,500 payable in 2021 and $385,000 payable by June 30, 2022 or thereafter.
NOTE 6 – LEASES
Operating leases
The Company has evaluatedoperating leases for office space. Many leases include one or more options to renew, some of which include options to extend the recent accounting pronouncements through February 2018leases for a long-term period, and believes that nonesome leases include options to terminate the leases within 30 days. In certain of them will have a material effect on the company’s financial statements.
NOTE 2 - GOING CONCERN
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business. Since its inception, the Company has been engaged substantially in financing activities and developing its business plan and incurring start up costs and expenses. As a result, the Company had a retained deficit as of December 31, 2017 of ($171,711). In addition, the Company’s activities since inception have been financially sustained through debt and equity financing.lease agreements, the rental payments are adjusted periodically to reflect actual charges incurred for capital area maintenance, utilities, inflation and/or changes in other indexes.
Lease liability is summarized below:
| | | | | | |
|
| June 30, |
| December 31, | ||
| | 2021 | | 2020 | ||
Short term portion | | $ | 161,662 | | $ | 145,271 |
Long term portion | |
| 119,178 | |
| 208,625 |
Total lease liability | | $ | 280,840 | | $ | 353,896 |
The ability of the Company to continueMaturity analysis under these lease agreements are as a going concern is dependent upon its ability to raise additional capital from the sale of common stock and, ultimately, the achievement of significant operating revenues. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.follows:
| | | |
|
| | |
Six months ending December 31, 2021 |
| $ | 84,390 |
2022 | |
| 170,185 |
2023 | |
| 53,233 |
Total undiscounted cash flows | |
| 307,808 |
Less: 10% Present value discount | |
| (26,968) |
Lease liability | | $ | 280,840 |
F-6
INTERLINK PLUS, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3 - PREPAID EXPENSES
As of December 31, 2017, the Company had prepaid transfer agent expenses totaling $750. The prepaid professional fees will be expensed on a straight-line basis over the remaining life of the service period. During the nine months ended December 31, 2017 the Company incurred an additional $750 of prepaid transfer agent fees and amortized transfer agent expenses of $375.
Additionally, the Company had prepaid expense related to deposits at hotels totaling $181,107. The prepaid expenses will be reclassified against revenue when our clients complete their stay at the hotel.
NOTE 4 - FIXED ASSETS
The following is a summary of fixed asset costs:
|
| December 31, | |
|
| 2017 | |
Fixed asset |
| $ | 1,176 |
Less: accumulated amortization |
|
| (98) |
Fixed asset, net |
| $ | 1,078 |
DepreciationLease expense for the six months ended December 31, 2017June 30, 2021 and 2020 was $98.comprised of the following:
| | | | | | |
| | Six Months Ended | ||||
| | June 30, | ||||
|
| 2021 |
| 2020 | ||
Operating lease expense | | $ | 88,888 | | $ | 88,888 |
Short-term lease expense | |
| 8,398 | |
| 4,587 |
Total lease expense | | $ | 97,286 | | $ | 93,475 |
Lease expense is included in selling, general and administration expenses in the condensed consolidated statement of operations.
NOTE 5 - WEBSITE
The following is a summary of website costs:
|
| December 31, | |
|
| 2017 | |
Website |
| $ | 3,500 |
Less: accumulated amortization |
|
| (1,882) |
Website, net |
| $ | 1,618 |
Amortization expense forFor the six months ended June 30, 2021, cash payments against lease liabilities totaled $90,121, accretion on lease liability of $17,065.
For the six months ended June 30, 2020, cash payments against lease liabilities totaled $87,976, accretion on lease liability of $23,242 and non-cash transactions totaled $20,825 to recognize assumption of lease by a related party.
14
Weighted-average remaining lease term and discount rate for operating leases are as follows:
| | | |
Weighted-average remaining lease term | 1.69 years | | |
Weighted-average discount rate | 10 | % |
NOTE 7 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of the following as of June 30, 2021 and December 31, 2017 was $583.2020:
| | | | | | |
|
| June 30, |
| December 31, | ||
| | 2021 | | 2020 | ||
Accounts payable | | $ | 422,484 | | $ | 683,845 |
Interest payable | |
| 43,482 | |
| 59,818 |
Accrued liabilities | |
| 162,596 | |
| 193,500 |
Payroll liabilities | |
| 19,940 | |
| 27,113 |
Total accounts payable and accrued expenses | | $ | 648,502 | | $ | 964,276 |
NOTE 6 - NOTES8 – NOTE PAYABLE
PPP loan round 1
On October 11, 2017,May 10, 2021, the Company executedreceived a notification from the Small Business Association for the full forgiveness of the PPP loan of $573,500 received on April 27, 2020. The first round of PPP loans forgiven consisted of $573,500 principal and $5,986 accrued interest; are included in other income for the period ending June 30, 2021.
PPP loan round 2
On April 26, 2021, the Company received the proceeds from a loan in the amount of $486,638, pursuant to the Paycheck Protection Program of the CARES Act (“PPP”). The loan matures on April 19, 2026, and bears interest at a rate of 1% per annum. The loan is evidenced by a promissory note, with an entity for $15,000. The unsecured note hasdated as of April 19, 2021, which contains customary events of default relating to, among other things, payment defaults and breaches of representations and warranties. All or a flat interest paymentportion of $2,250 and is due in forty-five days of issuing the note or two business days after demand for payment. As of December 31, 2017,loan may be forgiven by the principal balance is $15,000 and accrued interest is $2,250.
NOTE 7 - NOTES PAYABLE AND CONVERTIBLE DEBT - RELATED PARTY
Short term
On December 23, 2015,U.S. Small Business Administration (the “SBA”) upon application by the Company executedbeginning 8 weeks but not later than 24 weeks (“covered period”) after loan approval and upon documentation of expenditures in accordance with the SBA requirements. The loan may be prepaid by the Company at any time prior to maturity with no prepayment penalties. Repayment begins 10 months after the covered period (any length between eight and 24 weeks) with payments to begin July 31, 2022. The current portion of the loan is $0, assuming payments will begin on July 31, 2022. Principal payments are $0 in 2021, $57,330 in 2022, $127,295 in 2023, $128,566 in 2024, and $173,447 in 2025 and thereafter. Interest expense for the period ending June 30, 2021, is $960.
In the event the loan, or any portion thereof, is forgiven pursuant to the PPP, the amount forgiven is applied to outstanding principal. While the Company intends to apply for the forgiveness of the loan, there is no assurance that the Company will obtain forgiveness of the loan in whole or in part. The Company intends to use the proceeds from the loan for qualifying expenses.
The application for these funds requires the Company to, in good faith, certify that the current economic uncertainty made the loan request necessary to support the ongoing operations of the Company. This certification further requires the Company to consider its current business activity and its ability to access other sources of liquidity sufficient to support ongoing operations in a promissory note with amanner that is not significantly detrimental to the business. The receipt of these funds, and the forgiveness of the loan attendant to these funds, is dependent on the Company having initially qualified for the loan and qualifying for the forgiveness of such loan based on its future adherence to the forgiveness criteria.
15
NOTE 9 – CONVERTIBLE DEBENTURES PAYABLE
| | | | | | | | | |
Convertible debentures as of June 30, 2021: | | | | | | | | | |
| | | | Unpaid | Contractual | | | | |
| | Net Carrying Value | Principal | Interest Rates | Contractual | | Warrants | ||
Related party convertible debentures: | | Current | Long Term | Balance | Cash | PIK | Maturity Date | | issued |
$3,000,000 convertible debenture amended October 23, 2020 | (1) | $ 599,456 | $ 920,567 | $ 2,980,855 | 10% | | 12/1/2023 | | 3,550,709 |
$750,000 convertible debenture, December 1, 2020 | (2) | - | 216,781 | 750,000 | 4% | 6% | 12/1/2022 | | 68,182 |
$800,000 convertible debenture, April 1, 2021 | (2) | - | 118,227 | 800,000 | 4% | 6% | 12/1/2022 | | 72,727 |
$400,000 convertible debenture, May 1, 2021 | (2) | - | 41,451 | 400,000 | 4% | 6% | 12/1/2022 | | 36,364 |
| (2) | - | 20,475 | 400,000 | 4% | 6% | 12/1/2022 | | 36,364 |
$400,000 convertible debenture, June 2, 2021 | | $ 599,456 | $ 1,317,501 | $ 5,330,855 | | | | | |
| | | | | | | | | |
Convertible debentures: | | | | | | | | | |
$287,000 convertible debenture amended October 22, 2020 | (3) | $ 71,578 | $ 123,383 | $ 209,967 | 10% | | 12/1/2023 | | |
$400,000 convertible debenture converted January 8, 2021 | (4) | - | - | - | 11% | | 1/8/2021 | | |
$350,000 convertible debenture, January 12, 2021 | (2) | - | 85,974 | 350,000 | 4% | 6% | 12/1/2022 | | 87,500 |
$250,000 convertible debenture, May 21, 2021 | (2) | - | 16,637 | 250,000 | 4% | 6% | 12/1/2022 | | 22,727 |
Total convertible debentures, net | | $ 71,578 | $ 225,994 | $ 809,967 | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Convertible debentures as of December 31, 2020: | | | | | | | | | |
| | | | Unpaid | Contractual | | | | |
| | Net Carrying Value | Principal | Interest Rates | Contractual | | Warrants | ||
Related party convertible debentures: | | Current | Long Term | Balance | Cash | PIK | Maturity Date | | issued |
$3,000,000 convertible debenture amended October 23, 2020 | (1) | $ 279,705 | $ 1,192,946 | $ 3,232,235 | 10% | | 12/1/2023 | | 3,550,709 |
$750,000 convertible debenture, December 1, 2020 | (2) | - | 30,822 | 750,000 | 4% | 6% | 12/1/2022 | | 68,182 |
Total related party convertible debentures, net | | $ 279,705 | $ 1,223,768 | $ 3,982,235 | | | | | |
| | | | | | | | | |
Convertible debentures: | | | | | | | | | |
$287,000 convertible debenture amended October 22, 2020 | (3) | $ 67,800 | $ 160,165 | $ 246,044 | 10% | | 12/1/2023 | | |
$400,000 convertible debenture amended August 20, 2019 | (4) | 326,143 | - | 326,143 | 11% | | 1/8/2021 | | |
Total convertible debentures, net | | $ 393,943 | $ 160,165 | $ 572,187 | | | | | |
1) Unsecured convertible debentures (at $0.60 per common share) issued to related party for $5,000. The unsecured note bearsparties, amended October 23, 2020, interest at 10% per annum and is due upon demand. During July 2017, the termsbeginning November 1, 2020, monthly payments of the loan were negotiated. Theunpaid interest rate is 20%accrued at 12.5% per annum starting Augustwill be paid in arrears through March 31, 2021, beginning April 1, 2017 and is convertible at a fixed conversion rate equal to $0.005 per share. The loan has a prepayment penalty. On December 22, 2017, the note was sold to an unrelated third party.
F-7
INTERLINK PLUS, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 7 - NOTES PAYABLE AND CONVERTIBLE DEBT - RELATED PARTY (CONTINUED)
Short term (continued)
On February 26, 2016,2021, the Company executed a promissory note with a related party for $1,000. The unsecured note bearsbegan paying equal monthly installments of principal and interest at 10% per annum and is due upon demand. During July 2017,through December 1, 2023. The debentures are convertible at any time prior to the termsmaturity in whole or in parts into common shares of the loan were negotiated.Company at a price of $0.60 per common share. The Company issued 3,550,709 common share
16
purchase warrants, with each warrant exercisable at $0.86 for a period of 10 years. The beneficial conversion feature totaled $612,313 and was recorded as a debt discount. The Company also recorded the allocated fair value of the warrants $2,387,687 as additional debt discount.
(2) On December 1, 2020, the Company offered, in a private placement, the aggregate offering amount of up to $3,000,000 of Senior Secured Promissory Debentures, with a minimum subscription amount of $250,000 and common stock warrants with an aggregate exercise price of $750,000 and aggregate exercisable warrant shares of 272,727 shares. The Senior Secured Promissory Debentures under the offering accrue cash interest rate is 20%at 4% per annum starting Augustand payment in kind (PIK) interest at 6% payable in the Company’s common stock, determined on a 360-day basis. Cash interest is payable in advance for the period from the issue date to November 30, 2021, and then is payable six months in arrears on June 1, 2017 and2022, then six months in arrears on December 1, 2022. The accrued PIK interest is convertible at a fixed conversion ratepayable in shares of common stock in an amount equal to $0.005the amount of PIK Interest accrued as of such date, divided by the volume weighted average price (VWAP) of common stock during each trading day during the ten-trading day period ending one trading day prior to the PIK Interest Payment due dates of June 1, 2021, December 1, 2021, June 1, 2022, and December 1, 2022. The debenture discount for each tranche was initially recorded as follows:
| ● | $750,000 December 1, 2020 debenture the beneficial conversion feature of $713,051 and the allocated fair value of the warrants of $36,949 were recorded as debenture discount. |
| ● | $350,000 January 12, 2021 debenture the beneficial conversion feature of $306,346 and the allocated fair value of the warrants of $43,654 were recorded as debenture discount. |
| ● | $800,000 April 1, 2021 debenture the beneficial conversion feature of $736,402 and the allocated fair value of the warrants of $63,598 were recorded as debenture discount. |
| ● | $400,000 May 1, 2021 debenture the beneficial conversion feature of $366,972 and the allocated fair value of the warrants of $33,028 were recorded as debenture discount. |
| ● | $250,000 May 21, 2021 debenture the beneficial conversion feature of $234,442 and the allocated fair value of the warrants of $15,558 were recorded as debenture discount. |
| ● | $400,000 June 2, 2020 debenture the beneficial conversion feature of $367,893 and the allocated fair value of the warrants of $32,107 were recorded as debenture discount. |
(3) Convertible debentures (at $0.60 per share. The loan is due on July 31, 2018. The loan hascommon share) issued to a prepayment penalty. On December 22, 2017,former officer of the note was sold to an unrelated third party.
Convertible debt short term
On May 22, 2015, the Company, executed a convertible promissory note with a related party for $4,000. The unsecured note bears interest at 10% per annum, amended as of October 22, 2020, provides those monthly payments of $7,939 including principal and is due on May 22, 2017. This noteinterest are to be made beginning December 1, 2020 through its maturity date of December 1, 2023; secured by 5,000,000 shares of the Company’s common stock which are owned by the Company’s Chief Executive Officer. At the option of the debenture holder, the debenture is convertible at $0.005any time prior to December 1, 2023 in whole or in parts into common stock of the Company at a price of $0.60 per common share. As the effective conversion rate based on the principal $287,000 was $0.60 per share and can be convertedwhich was less than the Company’s stock price on or before the maturity date of May 22, 2017. During July 2017,issuance, a beneficial conversion feature was present at the partied agreed to extendissuance date. The beneficial conversion feature totaled $30,996 and was recorded as a debt discount.
(4) Secured convertible debenture (primary interest in all Company assets), interest at 11% per annum, accrued monthly and the maturity date to July 31, 2018. On December 22, 2017, the note was sold to an unrelated third party.
As of December 31, 2017, the balance ofoutstanding principal and unpaid accrued interest was $1,687.due January 8, 2021. $326,143 total debenture and $50,213 of unpaid accrued interest was converted into 1,003,618 shares of common stock on January 8, 2021. The lender received 1,003,618 shares of common stock from this conversion and the Company recognized no gain or loss.
17
The following table presents the interest expense forrelated to the six months ended September 30, 2017 was $3,536 includingcontractual interest coupon and the amortization of debt discountdiscounts on the convertible debentures:
| | | | | | | | | | | |
| | Three months ended June 30, | | Six months ended June 30, | |||||||
| | 2021 | | | 2020 | | | 2021 | | | 2020 |
Interest expense | $ | 142,066 | | $ | 93,001 | | $ | 274,463 | | $ | 189,387 |
Amortization of debt discounts | | 488,440 | | | 151,052 | | | 770,546 | | | 302,104 |
Total | $ | 630,506 | | $ | 244,053 | | $ | 1,045,009 | | $ | 491,491 |
Maturity analysis as of $2,683.June 30, 2021 under total convertible debentures, net are as follows:
| | | |
Six months remaining 2021 | | $ | 667,873 |
2022 | |
| 4,202,270 |
2023 | |
| 1,270,681 |
Convertible debentures payable, related and non related party | |
| 6,140,824 |
Less: Debt discount on convertible debentures payable | |
| (3,926,294) |
Total convertible debentures payable, related and non related party, net | | $ | 2,214,530 |
18
NOTE 8 - CONVERTIBLE DEBT
Convertible debt short term
On April 25, 2016, the Company executed a convertible promissory note with an entity for $5,000. The unsecured note bears interest at 10% per annum and is due on April 25, 2017. This note is convertible at $0.005 per share and can be converted on or before the maturity date of April 25, 2017. During July 2017, the partied agreed to extend the maturity date to July 31, 2018. On December 22, 2017, the note was sold to an unrelated third party.
On July 15, 2016, the Company executed a convertible promissory note with an entity for $5,000. The unsecured note bears interest at 10% per annum and is due on July 15, 2017. This note is convertible at $0.005 per share and can be converted on or before the maturity date of July 15, 2017. During July 2017, the partied agreed to extend the maturity date to July 31, 2018. On December 22, 2017, the note was sold to an unrelated third party.
On August 18, 2016, the Company executed a convertible promissory note with an entity for $5,000. The unsecured note bears interest at 10% per annum and is due on August 18, 2017. This note is convertible at $0.005 per share and can be converted on or before the maturity date of September 27, 2018. On December 22, 2017, the note was sold to an unrelated third party.
As of December 31, 2017, the balance of accrued interest was $2,285. The interest expense for the six months ended December 31, 2017 was $3,848 including amortization of debt discount of $833.
NOTE 9 - STOCKHOLDERS’ EQUITY (DEFICIT)
10 – COMMITMENTS AND CONTINGENCIES
The Company is authorized to issue 475,000,000 shares of its $0.0001 par value common stock and 25,000,000 shares of its $0.0001 par value preferred stock. The Series A convertible preferred stock have a liquidation preference of $0.10 per share, have super voting rights of 100 votes per share, and each share of Series A may be converted into 100 sharesinvolved in legal proceedings, claims and assessments arising in the ordinary course of common stock.
Preferred stock
Duringbusiness. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. There are no loss contingencies that are included in the six months ended December 31, 2017, there have been no other issuancesfinancial statements as of preferred stock.June 30, 2021.
Common stock
During the six months ended December 31, 2017, there have been no other issuances of common stock.
F-8
INTERLINK PLUS, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 9 - STOCKHOLDERS’ EQUITY (DEFICIT) (CONTINUED)
Common stock
During the six months ended December 31, 2017, the Company recorded $6,950 to additional paid in capital for beneficial conversion feature on the convertible debt and $367 in donated capital.
NOTE 10 - WARRANTS AND OPTIONS
As of December 31, 2017, there were no warrants or options outstanding to acquire any additional shares of common stock.
NOTE 11 -– RELATED PARTY TRANSACTIONS
Related parties are natural persons or other entities that have the ability, directly or indirectly, to control another party or exercise significant influence over the party making financial and operating decisions. Related parties include other parties that are subject to common control or that are subject to common significant influences.
The Company borrowed funds for business operations from certain shareholders through convertible debenture agreements and has remaining balances, including accrued interest amounting to $5,370,729 and $3,988,693 as of June 30, 2021, and December 31, 2020, respectively. The Company incurred interest expense for these convertible notes in the amounts of $125,251 and $78,130 for the three months ended June 30, 2021, and 2020, respectively, and in the amounts of $243,368 and $152,925 for the six months ended June 30, 2021 and 2020, respectively.
NOTE 12 –STOCKHOLDERS’ EQUITY
Convertible Preferred Stock
The Company is authorized to issue 16,666,667 shares of its $0.0001 par value preferred stock. The Series A convertible preferred stock have a liquidation preference of $0.10 per share, have super voting rights of 100 votes per share, and each share of Series A may be converted into 100 shares of common stock.
The Series B Convertible Preferred Stock is convertible at any time at the discretion of the holder thereof into shares of common stock at a conversion rate of one hundred (100) shares of common stock for every one (1) share of Series B Convertible Preferred Stock. Furthermore, the holders of Series B Convertible Preferred Stock have the right to cast one hundred (100) votes for each one (1) share of Series B Convertible Preferred Stock held of record on all matters submitted to a vote of holders of the common stock, including the election of directors, and all other matters as required by law.
On July 11, 2015,January 31, 2020, the Company executedfiled a consulting agreementcertificate of designation with the Nevada Secretary of State and designated 3,333,334 shares of Series B Convertible Preferred Stock. The terms of the Series B Convertible Preferred Stock are substantially similar to those of the Series A Convertible Preferred Stock, except that in the event of the liquidation, dissolution or winding up of the affairs of the Company, whether voluntary or involuntary, the holders of the Series B Convertible Preferred Stock then outstanding shall be entitled to receive, out of the assets of the Company available for distribution to its stockholders, an amount equal to $1.00 per share of Series B Convertible Preferred Stock before any payment shall be made or any assets distributed to the holders of common stock or Series A Convertible Preferred Stock.
In May, shareholders owning 30,667 shares of series A convertible preferred stock converted the shares into 3,066,700 shares of the Company’s common stock. As a periodresult, the Company had 0 shares of three yearsSeries A convertible preferred stock outstanding as of June 30, 2021. As of December 31, 2020, the Company had 30,667 shares of Series A convertible preferred stock issued and outstanding.
As of June 30, 2021, and December 31, 2020, the Company had 200,000 and 200,000 shares of Series B convertible preferred stock issued and outstanding, respectively.
19
Change in Number of Authorized and Outstanding Shares
On June 8, 2020, a 1 for 1.5 reverse stock split of the Company’s common stock became effective. All share and per share information in the accompanying unaudited condensed consolidated financial statements and footnotes was retroactively adjusted for the effects of the reverse split for all periods presented.
Common stock
The Company is authorized to issue 316,666,667 shares of its $0.0001 par value common stock. As of June 30, 2021 and December 31, 2020, there were 127,316,716 and 118,128,008, respectively, shares of common stock issued and outstanding
Six months ended June 30, 2021
The Company issued an aggregate of 2,524,000 shares of its common stock for gross cash proceeds of $3,154,935. The Company recorded no offering costs.
The Company issued 497,429 shares of its common stock in satisfaction of a common stock subscription of $485,144.
The Company converted a convertible note plus accrued interest in the amount of $376,356 into 1,003,618 shares of its common stock.
The Company issued 2,003,435 shares of its common stock with a former officervalue of $5,689,755 for the purchase of remaining 80% ownership in EON Media Group.
The Company issued 3,066,700 shares of its common stock in connection with the conversion of series A convertible preferred stock.
The Company issued 14,475 shares of its common stock for $41,978 payment in kind interest payable in the Company’s common stock.
The Company issued 79,051 shares of its common stock for consulting services valued at $200,000.
Six months ended June 30, 2020
The Company issued an aggregate of 1,040,000 shares of its common stock for gross cash proceeds of $390,000. The Company recorded no offering costs.
The Company issued 40,000 shares of its common stock to satisfy common stock subscribed of $15,000.
The Company issued 4,000,000 shares of its common stock for consulting services valued at $1,500,000.
The Company issued 5,168,931 shares of its common stock and director30,667 shares of Preferred A shares as part of the merger with Interlink. The Company also assumed debt to a related party of $180,000 and current shareholderaccrued interest of $3,842 and charged $80,134 of legal expenses related to the reverse merger to additional paid in capital.
The Company issued 200,000 shares of its Series B convertible preferred stock in exchange for (i) $1,000,000 in cash and (ii) cancellation of loan and accrued interest of $1,006,594. The fair value of the common stock into which the Series B convertible preferred stock is convertible was $9,600,000 on the date of issuance.
The allocated fair value of the Series B convertible preferred stock exceeded the $1,000,000 cash proceeds by $3,800,000 which was recorded by the Company as a deemed dividend.
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The Company received $20,000 for common stock subscribed of 53,333 shares.
NOTE 13 – STOCK OPTIONS AND WARRANTS
Options
Option valuation models require the input of highly subjective assumptions. The fair value of stock-based payment awards was estimated using the Black-Scholes option model with a volatility figure derived from using the Company’s historical stock prices. The Company accounts for the expected life of options based on the contractual life of options for non-employees. For employees, the Company accounts for the expected life of options in accordance with the "simplified" method, which is used for "plain-vanilla" options, as defined in the accounting standards codification. The risk-free interest rate was determined from the implied yields of U.S. Treasury zero-coupon bonds with a remaining life consistent with the expected term of the options.
The following table summarizes the stock option activity for the six months ended June 30, 2021:
| | | | | | | | | | |
| | | | Weighted | | Weighted Average | | | | |
| | | | Average | | Remaining | | Aggregate | ||
|
| Options |
| Exercise Price |
| Contractual Term |
| Intrinsic Value | ||
Outstanding at December 31, 2020 |
| 8,312,307 | | $ | 0.76 |
| 8.03 | | $ | 20,397,450 |
Grants |
| 9,520,216 | | | 1.27 |
| 9.43 | | | 12,678,074 |
Exercised |
| — | |
| — |
| — | |
| — |
Expired |
| — | |
| — |
| — | |
| — |
Forfeited |
| (124,167) | |
| 1.10 |
| — | |
| — |
Outstanding at June 30, 2021 |
| 17,708,356 | | $ | 1.03 |
| 8.54 | | $ | 28,005,016 |
Exercisable at June 30, 2021 |
| 10,583,562 | | $ | 0.88 |
| 7.98 | | $ | 18,283,665 |
The aggregate intrinsic value in the preceding tables represents the total pretax intrinsic value, based on options with an exercise price less than the Company’s stock price of $2.60 as of June 30, 2021, which would have been received by the option holders had those option holders exercised their options as of that date.
The following table presents information related to stock options at a rateJune 30, 2021:
| | | | | | |
Options outstanding | ||||||
| | | | Weighted | | Options |
| | | | average | | exercisable |
Exercise | | Number of | | remaining life | | number of |
price |
| options |
| in years |
| options |
$0.86 |
| 1,148,372 |
| 5.17 |
| 1,148,372 |
0.66 |
| 4,663,935 |
| 7.34 |
| 4,663,935 |
0.89 | | 2,500,000 | | 8.96 | | 1,504,000 |
0.57 | | 300,000 | | 9.67 | | 300,000 |
1.10 | | 8,046,049 | | 9.37 | | 2,700,588 |
2.84 | | 450,000 | | 9.83 | | 250,000 |
2.75 |
| 600,000 | | 9.85 | | 16,667 |
Total |
| 17,708,356 |
| 8.54 |
| 10,583,562 |
Stock-based compensation
The Company recognizes compensation expense for all stock options granted using the fair value-based method of $3,000 per month.accounting. During the six months ended December 31, 2017,June 30, 2021, the Company had professional fees -issued 9,520,216 options valued at $1.47 per option. The Company recorded stock-based compensation of $6,902,547 for the above options.
In March 2021, the Company awarded 16,045,216 options under its 2020 Equity Incentive Compensation Plan to certain employees and non-employees hired before March 5, 2021. Subsequently, the total number of options awarded
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was adjusted to 8,470,216. On April 27, 2021, the plan was approved by the Company’s shareholders and is fully effective and increased the underlying common stock of 14,600,000. Stock options cannot be exercised until nine months after the Company’s common stock is listed on a national exchange.
The Company calculated the fair value of options issued using the Black-Scholes option pricing model, with the following assumptions:
| | | | | |
|
| June 30, 2021 |
|
| |
| | | | | |
Weighted average fair value of options granted | | $ | 1.47 | | |
Expected life | |
| 5.00 – 10.00 years | | |
Risk-free interest rate | |
| 0.01 - 1.56 | % | |
Expected volatility | |
| 50.00 - 58.65 | % | |
Expected dividends yield | |
| 0 | % | |
Forfeiture rate | |
| 0 | % | |
The stock-based compensation expense related party totalingto option grants was $1,482,747 and $0 respectively for the three months ended June 30, 2021, and expenses totaling $0. 2020, and $6,902,547 and $0 respectively for the six months ended June 30, 2021, and 2020.
Warrants
The following table summarizes the changes in warrants outstanding and the related prices for the shares of the Company’s common stock:
| | | | | | | | | | | | |
Warrants outstanding | | Warrants exercisable | ||||||||||
| | | | | Weighted | | | | | | | Weighted |
| | | | | average | | | | | | | average |
| | | | | remaining | | Weighted | | | | remaining | |
| | | | | contractual | | average | | | | contractual | |
| | | Number | | life | | exercise | | Number | | life | |
Exercise prices |
| outstanding |
| (years) | | price |
| exercisable |
| (years) | ||
$ | 0.86 | | 3,850,709 | | 5.87 | | $ | 0.86 | | 3,850,709 | | 5.87 |
| 0.38 | | 2,000,000 | | 5.44 | | | 0.38 | | 2,000,000 | | 5.44 |
| 0.75 | | 2,666,667 | | 8.70 | | | 0.75 | | 2,666,667 | | 8.70 |
| 2.75 | | 323,864 | | 1.42 | | | 2.75 | | 323,864 | | 1.42 |
| 2.80 | | 50,000 | | 9.82 | | | 2.80 | | 50,000 | | 9.82 |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
The following table summarizes the warrant activity for the six months ended June 30, 2021:
| | | | | |
|
| |
| Weighted | |
| | | | average | |
| | | | exercise | |
| | Number of | | price per | |
| | shares | | share | |
Outstanding at December 31, 2020 | | 8,585,558 | | $ | 0.73 |
Issued | | 305,682 | | | 2.76 |
Exercised | | — | | | — |
Expired | | — | | | — |
Outstanding at June 30, 2021 |
| 8,891,240 | | $ | 0.80 |
There was no intrinsic value for warrants as of June 30, 2021, and 2020, respectively.
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During the six months ended December 31, 2017,June 30, 2021, the Company issued 110,227 warrants in conjunction with the issues of senior secured convertible debentures in the total amount of $600,000 and recorded the allocated fair values of the warrants of $59,212 as additional debt discounts. Further, the Company issued 145,455 warrants in conjunction with the issues of related party senior secured convertible debentures in the total amount of $1,600,000 and recorded the allocated fair values of the related party warrants of $128,733 as additional related party debt discounts. Finally, the Company issued 50,000 warrants with a reductionfair value of $11,188 related$82,000, as severance.
The Company calculated the fair value of warrants issued using the Black-Scholes option pricing model, with the following assumptions:
| | | | |
|
| June 30, 2021 |
| |
| | | | |
Weighted average fair value of warrants granted | | $ | 1.09 | |
Expected life | |
| 1.75 - 10 years | |
Risk-free interest rate | |
| 0.15% to 1.58% | |
Expected volatility | |
| 57.30% to 61.43% | |
Expected dividends yield | |
| 0 | |
Forfeiture rate | |
| 0 | |
NOTE 14 – SUBSEQUENT EVENTS
Securities private placement
On July 16, 2021, the Company offered, in a private placement, the aggregate offering amount of up to repayment$10,000,000 for both 8,000,000 common stock and 8,000,000 warrants, whereas the Company sells one share of personal charges on the credit card.common stock and one warrant excersiable at $2.75 for an aggregate purchase price of $1.25. As of August 5, 2021, the Company raised $2,750,000 from the offering.
Senior secured convertible promissory debentures
On December 31, 2017,1, 2020, the accounts payable -Company offered, in a private placement, the aggregate offering amount of up to $3,000,000 of Senior Secured Promissory Debentures, with a minimum subscription amount of $250,000 and common stock warrants with an aggregate exercise price of $750,000 and aggregate exercisable warrant shares of 272,727 shares. In April 2021, the Board of Directors increased the offering amount of the Senior Secured Promissory Debentures to $3,100,000 and the aggregate exercise price to $903,125 and the aggregate exercisable warrant shares to 328,409. The Company entered into a senior secured promissory debenture agreement with a related party balance was $30,312. Onunder this offering on July 1, 2017,2021, in the parties mutually agreedamount of $400,000. The related party received 36,364 warrants to terminatepurchase the agreement.Company’s common stock at $2.75 per share, in conjunction with the promissory debenture.
Convertible debenture conversion
On July 1, 2017, the Company executed2020, a consulting agreement Company ownedconvertible debenture holder (see (3) in Note 9) converted principal of $216,156 and controlled with a former officer and director and current shareholder at a rateaccrued interest of $3,000 per month. The Company or entity may terminate with 30 days written notice. During the six months ended December 31, 2017, the Company had professional fees - related party totaling $18,000. As$1,750 into 363,176 shares of December 31, 2017, the accounts payable - related party balance was $15,000.common stock.
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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of OperationsOperations.
STATEMENT ON FORWARD-LOOKING INFORMATION
Forward-Looking Statements
CertainThis report on Form 10-Q contains certain forward-looking statements. All statements other than purelystatements of historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based,fact are “forward-looking statements” within the meaningfor purposes of these provisions, including any projections of earnings, revenues, or other financial items; any statements of the Private Securities Litigation Reform Actplans, strategies, and objectives of 1995, Section 27Amanagement for future operations; any statements concerning proposed new products, services, or developments; any statements regarding future economic conditions or performance; statements of belief; and any statement of assumptions underlying any of the Securities Act of 1933foregoing. Such forward-looking statements are subject to inherent risks and Section 21E ofuncertainties, and actual results could differ materially from those anticipated by the Securities Exchange Act of 1934. forward-looking statements.
These forward-looking statements generally are identified byinvolve significant risks and uncertainties, including, but not limited to, the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,”following: competition, promotional costs and similar expressions. We intendrisk of declining revenues. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of a number of factors. These forward-looking statements are made as of the date of this filing, and we assume no obligation to update such forward-looking statements. The following discusses our financial condition and results of operations based upon our financial statements which have been prepared in conformity with accounting principles generally accepted in the United States of America. It should be read in conjunction with our financial statements and the notes thereto included elsewhere herein.
The following discussion and analysis provides information which our management believes to be coveredrelevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read together with our financial statements and the notes to the financial statements, which are included in this report.
Overview
Loop Media, Inc. (the “Company” or “Loop” and formerly Interlink Plus, Inc.) is a Nevada corporation. The Company was incorporated under the laws of the State of Nevada on May 11, 2015. On February 5, 2020, the Company and the Company’s wholly owned subsidiary, Loop Media Acquisition, Inc., a Delaware corporation (“Merger Sub”), closed the Agreement and Plan of Merger (the “Merger Agreement”) with Loop Media, Inc., a Delaware corporation (“Predecessor Loop”). Pursuant to the Merger Agreement, Merger Sub merged with and into Predecessor Loop with Predecessor Loop as surviving entity and becoming a wholly-owned subsidiary of the Company (the “Merger”).
Pursuant to the Merger Agreement, the Company acquired 100% of the outstanding shares of Predecessor Loop in exchange for 152,823,970 shares of the Company’s common stock at an exchange ratio of 1:1. Predecessor Loop was incorporated on May 18, 2016 under the laws of the State of Delaware. As a result of such acquisition, the Company’s operations now are focused on premium short-form video for businesses and consumers.
We are a multichannel digital platform media company that offers self-curated, premium videos to customers in OOH venues and D2C on their personal in home and mobile devices. We deliver highly curated music video content from major and independent record labels, as well as movie and television trailers, viral videos, drone footage, lifestyle and atmospheric channels, kid friendly content, sports highlights and news clips. We believe we are the only service in the United States licensed by all three major music labels to provide music video content in both the OOH and D2C markets. We curate content seeking to create a compelling user experience by, among other things, curating our carefully selected Playlists Playlists for OOH venues and thoughtfully developed streaming channels (“Channels”) for delivery to our OTT platform partners and to users of our mobile application. Our digital platform service seeks to surround and engage consumers with a diverse offering of video content on their chosen digital screen wherever they are located. We believe we are the only company offering a digital out of home (“DOOH”) service that also has a consumer mobile application, which increases the connectivity and interactivity of our OOH services.
We operate a “freemium” business model, offering our Service on either a Premium or Ad-Supported basis. We deliver our Service to OOH venues primarily through our proprietary Loop Media-designed Loop Player and to consumers primarily through our fully functional and operational Loop App and across OTT streaming platforms on CTVs. The underlying content that we curate and deliver through our service is predominantly licensed from third parties and consists primarily of music videos. We also offer an increasing range of non-music video content that we are acquiring through
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additional licenses and producing internally in our Loop Media Studios business division. This additional and diversified content offering is a large part of our business model going forward. We operate almost exclusively in the United States but are looking at further overseas expansion, primarily in Latin America and Asia.
We are an early-stage media operating company, with limited historical revenue and negative cash flow from operations. Our revenue is generated by advertisers who pay for our ad inventory in order to have their advertisements viewed by the safe-harbor provisionsend users of our Ad-Supported Service and by business owners and users who pay a subscription fee to access our Subscription Service without advertisements. Our revenue for forward-looking statements containedthe fiscal year ended December 31, 2020, consists almost entirely of revenue from our historic ScreenPlay business, which is a subscription-based OOH focused business, with little to no advertising revenue and no consumer users, and which does not fully reflect revenues expected from our more recent product and Service offerings and business model. We have begun to record increased revenue share for the six months ended June 30, 2021, as our advertising business model has more recently been deployed and operating more fully.
Off-Balance Sheet Arrangements
We have no off balance sheet arrangements.
Recent Developments
Impact of COVID-19
The spread of COVID-19 around the world is continuing to affect the United States and global economies and may affect our operations and those of third parties on which we rely, including by causing disruptions in staffing, order fulfillment, and demand for product. In addition, the COVID-19 pandemic may affect our revenue significantly in 2021, as it had in 2020. Additionally, while the potential ongoing negative economic impact brought by, and the duration of, the COVID-19 pandemic is still difficult to assess or predict, the impact of the COVID-19 pandemic on the global financial markets may reduce our ability to access capital, which could negatively impact our short-term and long-term liquidity. The ultimate impact of the COVID-19 pandemic in 2021 is highly uncertain and subject to change.
As COVID-19 continues to evolve, the extent to which COVID-19 continues to impact operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration and changes in the Private Securities Litigation Reform Actseverity of 1995,the outbreak, and are includingthe actions that may be required to try and contain COVID-19 or treat its impact. The Company continues to monitor the ongoing pandemic and, the extent to which the continued spread of the virus adversely affects our customer base and therefore revenue. As the COVID-19 pandemic is complex and rapidly evolving, the Company’s plans as described above may change. At this statement for purposespoint, the Company cannot reasonably estimate the duration and severity of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. FactorsCOVID-19 pandemic in 2021, which could have a material adverse affectimpact on ourthe business, results of operations, financial position, and future prospects on a consolidated basis include, but are not limited to: changescash flows.
Critical Accounting Policies and Use of Estimates
Use of estimates and assumptions
The preparation of the financial statements in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, andconformity with generally accepted accounting principles. These risksprinciples requires management to make estimates and uncertainties should also be considered in evaluating forward-lookingassumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and undue reliance shouldthe reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Fair value measurements
The Company determines the fair value of its assets and liabilities using a hierarchy established by the accounting guidance that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1
25
measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). The three levels of valuation hierarchy are defined as follows:
● | Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets; |
| ||
● | Level 2 inputs to the valuation methodology included quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in inactive markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument; and |
● | Level 3 inputs to the valuation methodology is one or more unobservable inputs which are significant to the fair value measurement. |
The carrying amount of the Company’s financial instruments, including cash, accounts receivable, deposits, short-term portion of notes receivable and notes payable, and current liabilities approximate fair value due to their short-term nature. The Company does not have financial assets or liabilities that are required under the US GAAP to be placedmeasured at fair value on a recurring basis. The Company has not elected to use fair value measurement option for any assets or liabilities for which fair value measurement is not presently required.
The Company records assets and liabilities at fair value on nonrecurring basis as required by the US GAAP. Assets recognized or disclosed at fair value in the condensed consolidated financial statements on a nonrecurring basis include items such statements. We undertakeas property and equipment, operating lease assets, goodwill, and other intangible assets, which are measured at fair value if determined to be impaired.
License Content Assets
On January 1, 2020, the Company adopted the guidance in ASU 2019-02, Entertainment—Films—Other Assets—Film Costs (Subtopic 926-20) and Entertainment—Broadcasters—Intangibles—Goodwill and Other (Subtopic 920-350): Improvements to Accounting for Costs of Films and License Agreements for Program Materials, on a prospective basis. The Company capitalizes the fixed content fees and its corresponding liability when the license period begins, the cost of the content is known, and the content is accepted and available for streaming. If the licensing fee is not determinable or reasonably estimable, no obligation to updateasset or revise publicly any forward-looking statements, whetherliability is recorded, and licensing costs are expenses as a resultincurred. The Company amortizes licensed content assets into cost of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results,revenue, using the straight-line method over the contractual period of availability. The liability is included herein andpaid in our other filingsaccordance with the SEC.contractual terms of the arrangement.
26
Company OverviewResults of Operations
Our business is divided into two major segments: travel agency assistance services and convention services.
We have signed services contract with multiple travel agents to assist with hotel room price quotation and negotiation and communicating with hotels to ensure that accurate reservations are made with Chinese clientele. Through December 31, 2017, we have generated some revenue from our agreement with our clients. We earned $34,718 and $3,998 in revenues forFor the three months ended December 31, 2017 and 2016, respectively. We are also hopeful that we will engage in other contracts for the services outlined below.
We require additional capital necessary for usJune 30, 2021 compared to grow our business. Our initial plans include: hiring necessary personnel, marketing our business, completing our website, purchasing equipment and software and further developing the service offering. Our business plan calls for capital of approximately $250,000 in the next twelve months. There is no assurance that we will be successful in these endeavors or that if we accomplish all of these steps we will be able to operate profitably. We intend to fulfill the service needs of our potential customers by utilizing resources and employees in the United States, but, as we grow, we believe we can reduce costs and increase margins by utilizing personnel in foreign countries, such as China, to fulfill the services on behalf of our customers.
Through our services, we believe that clients will be able to gain the advantage of maintaining their growth goals without the need to sacrifice precious resources to address standard business bottlenecks. Our goal is to allow firms to retain their entrepreneurial speed and agility, advantages they would otherwise sacrifice in dealing with logistics rather than the specific focus of the client’s business. We plan to allow clients to grow at a faster pace as they will be less constrained by large capital expenditures for people, training, equipment, or mistakes made from lack of experience in areas which are unrelated to the client’s specific business purpose.
Since our inception, we have been attempting to raise money to implement our business plan, but have not been able to secure the funds necessary to do so. The lack of funds have prevented us from growing the business as we had hoped. As we have been unable to raise the capital necessary to develop and market our services, we have recently been engaged in a search for other business opportunities which may benefit our shareholders and allow us to raise capital and operate. Recent negotiations with what we believe is a more viable business opportunity leads us to believe that we will be revising our business plan and focus over the next quarter. If this opportunity does not develop, however, we will continue to both seek new opportunities and look for capital to further our existing business plan.
4
Travel Agency Assistance
We provide services for overseas travel agents on hotel price quotation and negotiation, contract reviewing, detailed guests’ arrangements, hotel check-in assistance and tradeshow assistance. Overseas travel agents often encounter language barriers and time differences on office hours when dealing with U.S. based hotels and U.S. based conventions. We believe that our bilingual language services, flexible office hours, and reasonable fee structure will help our clients to increase accuracy and efficiency levels, and reduce costs.
Currently, we service 7 overseas and domestic travel agents. These travel agencies work with exhibition service agents in China to coordinate the travel plans of tour groups that plan on attending exhibitions in the U.S. Depending on the exhibition, these tour groups can range from 20 to over 700 people. It is vital for the travel agents and exhibition services agents to provide their clients - Chinese businesses who exhibit in the trade show, a seamless and worry-free trip.
Our role is to help the travel agencies communicate with hotels and convention staff timely and accurately, including finding and negotiating hotel rate, reviewing and updating contracts, submitting and revising guest lists, group check-in (pick up and sorting the room keys for different groups), communicating on bill differences, etc. We currently have bilinguals that are fluent in English and Chinese. We plan to expand our staff of bilinguals to cater to other languages and countries other than China. Our main focus at the present time is to establish a presence in China and we intend to branch out to other Asian countries from there as resources permit.
In November 2016, we became a certified travel agency. Additionally, we became an affiliate partner with booking.com and the Expedia TAAP program. We hope these recent events will help us increase revenue in the future.
Convention Services
Our second business segment is catering to the individual exhibitors at the exhibitions. Exhibitors/ attendees often have temporary assistance needs at conventions and trade shows. We assist these clients on booth set up, tradeshow promotion material preparing, entourage interpreter and/or exhibitor booth personnel arrangements, including bilingual spokespersons, sales associates, narrators and demonstrators, hostesses/hosts, promoters and models.
We are also able to provide custom and pre-made booths, booth graphic design, and exhibit booth setup services to our clients. For clients looking for complete tradeshow exhibit booths, we provide turnkey solutions for sale. We offer top of the range Tablets, TV screens with stands, tables, and chairs, storage bins among others, to ensure that your tradeshow booth is highly inviting. We are able to work with clients on their required specifications and our staff is capable of delivery and assembly of attractive booth designs.
We have limited clients in this business segment. We plan to utilize our travel agency and exhibition service agent contacts to reach out to these exhibitors and establish direct connections for our exhibition services. We may also work though these vital contacts as an extension of their services to these clientele. Furthermore, because we have a U.S. presence, we plan to reach out to the U.S. exhibitions to offer our services to these clientele.
Results of operations for the three and six months ended December 31, 2017 and 2016
We have earned revenues of $34,718 for the three months ended December 31, 2017, as compared with $3,998 forJune 30, 2020
| | | | | | | | | | | | |
Three months ended June 30, |
| 2021 |
| 2020 |
| $ variance |
| % variance |
| |||
| | | | | | | | | | | | |
Content and streaming services | | $ | 719,458 | | $ | 376,216 | | $ | 343,242 |
| 91 | % |
Content subscription services | |
| 409,984 | |
| 234,212 | |
| 175,772 |
| 75 | % |
Hardware for ongoing subscription content | |
| 31,351 | |
| 25,312 | |
| 6,039 |
| 24 | % |
Total revenue | |
| 1,160,793 | |
| 635,740 | |
| 525,053 |
| 83 | % |
| | | | | | | | | | | | |
Cost of revenue | |
| 763,359 | |
| 172,661 | |
| 590,698 |
| 342 | % |
| | | | | | | | | | | | |
Gross Profit | |
| 397,434 | |
| 463,079 | |
| (65,645) |
| (14) | % |
| | | | | | | | | | | | |
Operating expenses: | |
|
| |
|
| |
|
|
|
| |
Selling, general and administration | |
| 4,269,169 | |
| 1,638,038 | |
| 2,631,131 |
| 161 | % |
Total Operating expenses | |
| 4,269,169 | |
| 1,638,038 | |
| 2,631,131 |
| 161 | % |
| | | | | | | | | | | | |
Loss from Operations | |
| (3,871,735) | |
| (1,174,959) | |
| (2,696,776) |
| 230 | % |
| | | | | | | | | | | | |
Other income (expense): | |
|
| |
|
| |
|
|
|
| |
Interest income | |
| — | |
| 1,175 | |
| (1,175) |
| (100) | % |
Interest expense | |
| (632,094) | |
| (245,104) | |
| (386,990) |
| 158 | % |
Other income | | | — | | | 10,000 | | | (10,000) |
| (100) | % |
Gain on extinguishment of debt | | | 579,486 | | | — | | | 579,486 | | 0 | % |
| | | | | | | | | | | | |
Total Other income (expense) | |
| (52,608) | |
| (233,929) | |
| 181,321 |
| (78) | % |
| | | | | | | | | | | | |
Provision for income taxes | |
| — | |
| — | |
| — |
| 0 | % |
| | | | | | | | | | | | |
Net loss | | $ | (3,924,343) | | $ | (1,408,888) | | $ | (2,515,455) |
| 179 | % |
Revenues
Content and streaming services increased $343,242 and 91% quarter over quarter primarily due to advertising revenue share of $365,835. Content subscription services increased $175,772 and 75% quarter over quarter due to the same period ended 2016. We have earnedintroduction of Loop Stick revenues of $51,812$58,076 and the increase in ScreenCast subscription revenues of $140,813. In Q2 2021 two larger bar and gym chain customers resulted in increase in ScreenCast subscription revenues.
Cost of revenue
The increase of $590,698 and 342% in Cost of revenues was due to $308,590 in license content asset amortization, not amortized in previous year, in addition to $110,791 in licensing cost actuals, as well as Loop player inventory costs of sales of $134,286.
Total Operating Expenses
Total operating expenses increased $2,631,131 Q2 21 vs Q2 20 primarily due to personnel costs along with increased marketing activities.
27
Other income and expenses
The interest expense increased $ (386,990) quarter over quarter due to the increase in convertible debenture borrowings period over period. The $579,486 gain on extinguishment is due to loan forgiveness on the first PPP loan (see Note 8).
For the six months ended June 30, 2021 compared to the six months ended June 30, 2020
| | | | | | | | | | | | |
Six months ended June 30, | | 2021 |
| 2020 |
| $ variance |
| % variance |
| |||
| | | | | | | | | | | | |
Content and streaming services | | $ | 1,094,873 | | $ | 759,757 | | $ | 335,116 |
| 44 | % |
Content subscription services | |
| 800,274 | |
| 645,241 | |
| 155,033 |
| 24 | % |
Hardware for ongoing subscription content | |
| 59,689 | |
| 57,130 | |
| 2,559 |
| 4 | % |
Total revenue | |
| 1,954,836 | |
| 1,462,128 | |
| 492,708 |
| 34 | % |
| | | | | | | | | | | | |
Cost of revenue | |
| 1,487,937 | |
| 384,920 | |
| 1,103,017 |
| 287 | % |
| | | | | | | | | | | | |
Gross Profit | |
| 466,899 | |
| 1,077,208 | |
| (610,309) |
| (57) | % |
| | | | | | | | | | | | |
Operating expenses: | |
|
| |
|
| |
|
|
| | |
Selling, general and administration | |
| 12,175,453 | |
| 4,696,691 | |
| 7,478,762 |
| 159 | % |
Total Operating expenses | |
| 12,175,453 | |
| 4,696,691 | |
| 7,478,762 |
| 159 | % |
| | | | | | | | | | | | |
Loss from Operations | |
| (11,708,554) | |
| (3,619,483) | |
| (8,089,071) |
| 223 | % |
| | | | | | | | | | | | |
Income from equity investment | |
| 1,551 | |
| — | |
| 1,551 |
| 100 | % |
Interest income | |
| 5,657 | |
| 2,459 | |
| 3,198 |
| 130 | % |
Interest expense | |
| (1,048,012) | |
| (492,545) | |
| (555,467) |
| 113 | % |
Gain on extinguishment of debt | | | 579,486 | | | — | | | 579,486 | | 100 | % |
Other income | | | — | | | 10,000 | | | (10,000) |
| (100) | % |
Inducement expense | |
| — | |
| (3,793,406) | |
| 3,793,406 |
| (100) | % |
Total Other income (expense) | |
| (461,318) | |
| (4,273,492) | |
| 3,812,174 |
| (89) | % |
| | | | | | | | | | | | |
Provision for income taxes | |
| (1,586) | |
| — | |
| (1,586) |
| — | % |
| | | | | | | | | | | | |
Net loss | | $ | (12,171,458) | | $ | (7,892,975) | | $ | (4,278,483) |
| 54 | % |
Revenues
The Company’s revenue increased for the six months ended December 31, 2017, as compared with $9,537 for the same period ended 2016.June 30, 2021, from June 30, 2020, by $492,708 or 34%. Content and streaming services increased $335,116 and 44% driven by advertising revenue share of $365,835. The year over year increase of $155,033 and 24% in Content subscription services is due to Screencast subscription revenue increase due to bar and gym customer revenue growth and Loop stick subscription revenues of $42,506 verses $0 year over year.
Cost of revenue
We expect to continue to achieve steadily increasing revenues within the coming months. However, as we are a start-up, we have limited operating history to rely uponThe cost of revenue increased by 287% and we cannot guarantee that our business plan will be successful. To date, we only have 7 travel agencies as our main clients that we contracted to assist with hotel room price quotation and negotiation and communicating with hotels to ensure that accurate reservations are made with Chinese clientele. Our management is actively working to secure additional contracts to grow the business. We are also looking at other business opportunities that would better serve our shareholders.
5
Operating expenses were $41,506 for the three months ended December 31, 2017, as compared with $18,836 for the same period ended 2016. Operating expenses were $69,589$1,103,017 for the six months ended December 31, 2017, asJune 30, 2021, compared with $33,606 forto the same comparable period in 2020 primarily due license content asset amortization, contractor costs, and inventory costs. License content amortization was $610,397 verses $0 over the same period last year. Actual licensing costs increased $104,648 as well. Loop player equipment inventory costs increased $193,156 versus $0 period over period due to the introduction of the product in Q3 2020.
28
Total Operating Expenses
Total Selling, General and Administration increased in the six months ended 2016. OurJune 30, 2021, over the same comparable period in prior year by $7,478,762 or 159% because of significant increase in non-cash stock compensation expense and personnel costs.
Other income and expenses
There was a decrease in other income and expense of $3,812,174. This was primarily due to recording of inducement expense of $3,793,406 related to the issuance of Series B convertible preferred stock for cash and induced debt extinguishment in 2020. Interest expense increased $ (555,467) and 113% due to additional debt raised from a related party. The $579,486 gain on extinguishment is due to loan forgiveness on the first PPP loan (see Note 8).
Liquidity and Capital Resources
As of June 30, 2021, the Company had cash of $929,403. The following table provides a summary of the Company’s net cash flows from operating, expensesinvesting, and financing activities.
| | | | | | |
| | Six months ended | ||||
|
| June 30, |
| June 30, | ||
| | 2021 | | 2020 | ||
Net cash used in operating activities | | $ | (4,713,000) | | $ | (2,257,822) |
Net cash provided by investing activities | |
| (749,937) | |
| (7,727) |
Net cash provided by financing activities | |
| 5,554,179 | |
| 1,903,366 |
Change in cash | |
| 91,242 | |
| (362,183) |
| | | | | | |
Cash, beginning of period | |
| 838,161 | |
| 1,011,445 |
Cash, end of period | | $ | 929,403 | | $ | 649,262 |
The Company has historically sought and continues to seek financing from private sources to implement its business plans. In order to satisfy its financial commitments, the Company has historically relied on private party financing, but that has inherent risks in terms of availability and adequacy of funding.
For the next twelve months, the Company anticipates that it will need to supplement its cash from revenues with additional cash raised from equity investment or debt transactions to ensure that the Company will have adequate cash to support its minimum operating cash requirements and thus to continue as a going concern.
There can be no guarantee or assurance that the Company can raise adequate capital from outside sources. If the Company is unable to raise funds when required or on acceptable terms, it may have to significantly reduce, or discontinue its operations.
Net Cash Flow from Operating Activities
Net cash flows used in operating activities for the six months ended December 31, 2017 consisted mainlyJune 30, 2021, were $ (4,713,000) primarily due to the net loss of professional fees$ (12,171,458) offset by amortization of debt discount of $770,546, depreciation and related party professional fees. Ouramortization of $733,651, amortization of license contract assets of $610,397, amortization of right-of-use assets of $72,388, stock-based compensation expense of $6,902,547, bad debt expense of $146,637, and net decrease in operating expenses for all periods mainly consistedassets and liabilities of professional fees and related party professional fees.$1,278,671.
We anticipate ourNet cash flows used in operating expenses will increase as we undertake our plan of operations, including increased costs associated with marketing, personnel, and other general and administrative expenses, along with increased professional fees associated with SEC compliance as our business grows more complex and more expensive to maintain.
We incurred other expenses of $4,627 for the three months ended December 31, 2017, as compared with other expenses of $4,506 for the same period ended 2016. We incurred other expenses of $7,384activities for the six months ended December 31, 2017, as compared with other expenses of $12,104 forJune 30, 2020, were $2,257,822 primarily due to the same period ended 2016. Our other expenses for all periods consisted of interest expense and related party interest expense. We expect that our other expenses will increase in 2018 as a result of our outstanding debt, and any additional debt we take on in our financing efforts.
We recorded a net loss of $11,415 for the three months ended December 31, 2017, as compared with a$7,892,975 offset by amortization of debt discount of $302,104, depreciation and amortization expense of $118,363, amortization of right-of-use assets of $66,165, stock-based compensation expense of $1,671,798, inducement expense of $3,793,406, and net lossdecrease in operating assets and liabilities of $19,344 for the same period ended 2016. We recorded a net loss$316,683.
29
Net Cash Flow from Investing Activities
Net cash flows used in investing activities for the six months ended December 31, 2017, as compared with a net lossJune 30, 2021, was $749,937 due to the cash portion of $36,173the acquisition for the same period ended 2016.EON Media Group.
Net Cash Flow from Financing Activities
Liquidity and Capital Resources
As of December 31, 2017, we had current assets of $210,938, consisting ofNet cash accounts receivable and prepaid expenses. Our total current liabilities as of December 31, 2017 were $308,159. As a result, we had working capital deficit of $97,221 as of December 31, 2017.
Operatingprovided by financing activities used $774 in cash for the six months ended December 31, 2017, as compared withJune 30, 2021, was $5,554,179 primarily due to $3,155,000 of cash proceeds received from issuance of common stock, repayment of $ (251,380) of a stockholder’s loan, and cash proceeds of $2,200,000 received for issuance of convertible promissory notes and $486,638 from the second PPP loan.
Net cash provided of $1,162 for the same period ended 2016. Our negative operating cash flow in 2017 was mainly the result of an increase in prepaid expenses of $123,164 and our net loss of $25,161, offset by increase in customer deposits of $150,334.
Investingfinancing activities used $1,176 in cash for the six months ended December 31, 2017, as compared with $0June 30, 2020, was $1,903,366 primarily due to $390,000 of cash proceeds received from issuance of common stock, cash payment of reverse merger costs of $80,134, cash proceeds of $20,000 received from issuance of common stock subscriptions, proceeds from the first PPP loan of $573,500, and cash proceeds of $1,000,000 received for preferred shares.
As a result of the same period ended 2016. Our negative investingabove activities, the Company recorded a net increase in cash flowof $91,242 for the six months ended June 30, 2021. The Company reported a cash balance of $929,403 at June 30, 2021.
Future Capital Requirements
Our current available cash and cash equivalents are insufficient to satisfy our liquidity requirements. Our capital requirements for the fiscal year ending December 31, 2017 was a result2021 will depend on numerous factors, including management’s evaluation of the purchasetiming of fixed assets.
Financing activities provided $15,367 inprojects to pursue. Subject to our ability to generate revenues and cash for the six months ended December 31, 2017, as compared with $10,000 for the same period ended 2016.
Because offlow from operations and our limited operating history, it is difficult to predict our capital needs on a monthly, quarterly or annual basis. We will have no capital available to us if we are unableability to raise money from this offering additional capital (including through possible joint ventures and/or find alternate forms of financing, whichpartnerships), we do not have in place at this time.
During the current reporting period, we have been ableexpect to extend the maturity date on several promissory notes in the aggregate principal amount of $24,000 through July 31, 2018 with some concessions, as previously reported.
On October 11, 2017, we executed a demand promissory note for $15,000 with a flat interest of $2,250 on or before 45 days from the note issuing date or on the date two business days after receipt of demand for payment.
There can be no assurance that we will be successful in raising additional funding. If we are not ableincur substantial expenditures to secure additional funding, the implementation ofcarry out our business plan, willas well as costs associated with our capital raising efforts and being a public company.
Our plans to finance our operations include seeking equity and debt financing, alliances or other partnership agreements, or other business transactions, that would generate sufficient resources to ensure continuation of our operations.
The sale of additional equity or debt securities may result in additional dilution to our shareholders. If we raise additional funds through the issuance of debt securities or preferred stock, these securities could have rights senior to those of our common stock and could contain covenants that would restrict our operations. Any such required additional capital may not be impaired. There can be no assurance that suchavailable on reasonable terms, if at all. If we were unable to obtain additional financing, willwe may be availablerequired to usreduce the scope of, delay or eliminate some or all of our planned activities and limit our operations which could have a material adverse effect on acceptable terms or at all.
Our plan specifies a minimum amount of $250,000 in additional operating capital to operate for the next twelve months. If we are unable to raise $250,000 from this offering, our business, will be in jeopardyfinancial condition and we could be formed to suspend our operations or go outresults of business. As such, there can be no assurance that this offering will be successful. You may lose your entire investment.operations.
6
Off Balance Sheet Arrangements
As of December 31, 2017, there were no off balance sheet arrangements.
Going Concern
The accompanying unaudited condensed financial statements have been prepared assuming thaton a going concern basis. For the six months ended June 30, 2021, we willhad a net loss of $ (12,171,458), had net cash used in operating activities of $(4,713,000), had working capital of $500,341, and accumulated deficit of $ (53,715,602). These matters raise substantial doubt about our ability to continue as a going concern which contemplatesfor a period of one year from the recoverabilitydate of assets and the satisfaction of liabilities in the normal course of business. As noted above, we are a start-up and, accordingly, have generated slight revenues from operations. Since our inception, we have been engaged substantially in financing activities and developing our business plan and incurring startup costs and expenses. As a result, we incurred accumulated net losses from Inception (May 11, 2015) through the period ended December 31, 2017 of ($171,711). In addition, our development activities since inception have been financially sustained through debt and equity financing.
this filing. Our ability to continue as a going concern is dependent upon our ability to raiseobtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due, to fund possible future acquisitions, and to generate profitable operations in the future. Management plans to provide for our capital requirements by continuing to issue additional capital from the saleequity and debt securities. The outcome of common stockthese matters cannot be predicted at this time and ultimately, the achievement of significantthere are no assurances that, if achieved, we will have sufficient funds to execute our business plan or generate positive operating revenues. Theseresults. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from the outcome of this uncertainty.
30
Recent Accounting Pronouncements
See the Company’s discussion under Note 2-Significant Accounting Policies in its financial statements.
Item 3.Quantitative and Qualitative DisclosuresDisclosure About Market RiskRisk.
Not required.
A smaller reporting company is not required to provide the information required by this Item.
Item 4.Controls and Procedures.
(i)Evaluation of Disclosure Controls and Procedures
Disclosure Controls and Procedures
We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2017. This evaluation was carried out under the supervision andOur management, with the participation of our Chief Executive Officer and our Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer(“CEO”) and Chief Financial Officer concluded that,(“CFO”), evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of December 31, 2017,June 30, 2021. Our disclosure controls and procedures are designed to provide reasonable assurance that information we are required to disclose in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosures, and is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.
Based on this evaluation, and as a result of the material weaknesses described below, our CEO and CFO have concluded that our disclosure controls and procedures were not effective due toat the presencereasonable assurance level as of June 30, 2021. Notwithstanding the material weaknesses that were identified and continued to exist at June 30, 2021, management believes that the financial statements included in internal control overthis report present fairly in all material respects our financial reporting.position, results of operations and cash flows for the period presented.
Material Weaknesses and Management’s Remediation Plan
A material weakness is a deficiency, or a combination of deficiencies, within the meaning of Public Company Accounting Oversight Board (“PCAOB”) Auditing Standard AS 2201, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’sCompany’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified
Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with US GAAP. The following material weaknesses which have caused managementin our internal control over financial reporting were identified in the normal course and continued to conclude that,exist as of December June 30, 2021:
● | the Company’s management and the governance had insufficient oversight of the design and operating effectiveness of the Company’s disclosure controls and internal controls over financial reporting; |
| ||
● | the Company failed to maintain effective controls over the period-end financial reporting process, including controls with respect to preparation and disclosure of provision for income taxes, valuation and presentation of asset acquisition, content assets and liabilities, and investments; and | |
● | the Company failed to maintain effective controls over journal entries, both recurring and nonrecurring, and account reconciliations and did not maintain proper segregation of duties. Journal entries were not always accompanied by sufficient supporting documentation and were not adequately reviewed and approved for validity, completeness and accuracy. In most instances, persons responsible for reviewing journal entries and account reconciliations for validity, completeness and accuracy were also responsible for preparation. |
We have concluded that these material weaknesses arose because, as previously a private company, we did not have the necessary business processes, systems, personnel, and related internal controls.
31 2017,
We have conducted an evaluation of third parties to assist us with formalizing our disclosure controlsinternal control documentation and procedures were not effective: (i) inadequate segregationimplementation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting andenhancements to our internal control over financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.have recently engaged a qualified firm who has started work in July, 2021.
|
Remediation Plan to Address the Material Weaknesses in Internal Control over Financial Reporting(ii)
Our company plans to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes during our fiscal year ending June 30, 2018: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.
We are unable to remedy our controls related to the inadequate segregation of duties and ineffective risk management until we receive financing to hire additional employees.
7
Changes in Internal ControlControls over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Exchange Act Rule 13a-15(f)) that occurred during the three months ended December 31, 2017our most recent quarter that have materially affected, or are reasonablereasonably likely to materially affect, our internal control over financial reporting. Management intends to implement certain remediation steps to address the material weaknesses described above. However, management has not yet implemented those remediation steps and expects remediation efforts to continue through the remainder of fiscal year 2021.
Limitations on the Effectiveness32
Table of Internal ControlsContents
Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.
8
PART II -— OTHER INFORMATION
Item 1.Legal Proceedings
We are currently not a party toinvolved in any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us orlitigation that we believe could have a material interest adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to us.the knowledge of the executive officers of our Company, threatened against or affecting our Company, or our common stock, in which an adverse decision could have a material adverse effect.
Item 1A. Risk Factors
There have been no material changes to the factors disclosed in Item 1A. Risk Factors
See risk factors included in our Annual Report on Form 10-K for 2017.the year ended December 31, 2020.
Item 2.Unregistered Sales of Equity Securities and Use of ProceedsProceeds.
For the six months ended June 30, 2021, we sold and issued an aggregate of 2,524,000 shares of our common stock at a price of $1.25 per share for an aggregate cash proceeds of $3,155,000. The offers, sales and issuances of such common stock were deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a public offering.
The recipients of securities in each of these transactions acquired the securities for investment purposes only and not with a view to or for sale in connection with any distribution thereof and represented to us that they could bear the risks of the investment and could hold the securities for an indefinite period of time, and appropriate legends were affixed to the securities issued in these transactions. Each of the recipients of securities in these transactions represented to us in connection with their purchase that they were an accredited investor within the meaning of Rule 501 of Regulation D under the Securities Act.
None
Item 3.Defaults uponUpon Senior SecuritiesSecurities.
There were no material defaults regarding payments of principal and interest that exceeded 5% of the total assets of the Company.
None
Item 4.Mine Safety Disclosures
Disclosure.
Not applicable.
Item 5.Other InformationInformation.
None.
None
33
Item 6. Exhibits
Exhibit
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| Exhibit Description | |
10.1+ | |||
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10.2 | | ||
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10.3 | |||
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31.1 |
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31.2 |
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32.1 |
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101.INS | | XBRL Instance Document -the instance document does not appear in the | |
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101.SCH | | XBRL Taxonomy Extension Schema | |
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101.CAL | | XBRL Taxonomy Extension Calculation Linkbase | |
| | | |
101.DEF | | XBRL Taxonomy Extension Definition Linkbase | |
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101.LAB | | XBRL Taxonomy Extension Label Linkbase | |
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101.PRE | | XBRL Taxonomy Extension Presentation Linkbase | |
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104 | | Cover Page Interactive Data File (formatted as inline XBRL and contained in |
**Provided herewith
34
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the ExchangeSecurities Act of 1934, as amended, the registrant has duly caused this quarterly report to be signed on its behalf by the undersigned thereunto duly authorized.
authorized on August 9, 2021.
| | |
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| (Registrant) | |
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| | |
| By: | /s/
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| | Jon Niermann |
| | Chief Executive Officer |
| | (Principal Executive Officer) |
| | |
| | |
| By: | /s/ James Cerna |
| | James Cerna |
| | Chief Financial Officer |
| | (Principal Financial and |
35
10