ITEM I.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Almost Never Films Inc. and Subsidiaries
fka Smack Sportswear
Condensed Consolidated Balance Sheets
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|
September 30,
2016
|
|
|
June 30,
2016
|
|
|
|
(Unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
71,098
|
|
|
$
|
84,967
|
|
Prepaid expense
|
|
|
1,250
|
|
|
|
3,126
|
|
Total Current Assets
|
|
|
72,348
|
|
|
|
88,093
|
|
TOTAL ASSETS
|
|
|
72,348
|
|
|
|
88,093
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
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Current Liabilities
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|
|
|
|
|
|
|
|
Accrued Liabilities
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|
$
|
32,447
|
|
|
$
|
28,988
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|
Payroll taxes and sales taxes payable
|
|
|
271,398
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|
|
|
271,398
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|
Note payable
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|
|
66,613
|
|
|
|
66,613
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|
Total Current Liabilities
|
|
|
370,458
|
|
|
|
366,999
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
370,458
|
|
|
|
366,999
|
|
|
|
|
|
|
|
|
|
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Stockholders’ Deficit
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|
|
|
|
|
|
|
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Preferred stock, no par value, 5,000,000 shares authorized;
Series A voting preferred stock, 2,000,000 shares authorized; No shares issued and outstanding
|
|
|
-
|
|
|
|
-
|
|
Common stock, $0.001 par value, 200,000,000 shares authorized;
177,707,623 shares issued and outstanding
|
|
|
177,708
|
|
|
|
177,708
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|
Common stock subscribed
|
|
|
10,000
|
|
|
|
10,000
|
|
Stock subscription receivable
|
|
|
(65,000
|
)
|
|
|
(65,000
|
)
|
Additional paid-in capital
|
|
|
424,390
|
|
|
|
424,390
|
|
Accumulated deficit
|
|
|
(845,208
|
)
|
|
|
(826,004
|
)
|
Total Stockholders’ Deficit
|
|
|
(298,110
|
)
|
|
|
(278,906
|
)
|
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
$
|
72,348
|
|
|
$
|
88,093
|
|
The accompanying notes are an integral part of these financial statements.
Almost Never Films Inc. and Subsidiaries
fka Smack Sportswear
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
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|
|
|
|
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Three months ended
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|
|
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September 30
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
REVENUE
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
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General and administrative expenses
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|
|
4,060
|
|
|
|
659
|
|
Professional fees
|
|
|
13,465
|
|
|
|
-
|
|
Total Operating Expenses
|
|
|
17,525
|
|
|
|
659
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS
|
|
|
(17,525
|
)
|
|
|
(659
|
)
|
|
|
|
|
|
|
|
|
|
OTHER EXPENSE
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(1,679
|
)
|
|
|
|
|
Loss on debt settlement
|
|
|
-
|
|
|
|
-
|
|
|
|
|
(1,679
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
LOSS BEFORE INCOME TAXES
|
|
|
(19,204
|
)
|
|
|
(659
|
)
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
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|
$
|
(19,204
|
)
|
|
$
|
(659
|
)
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE LOSS
|
|
$
|
(19,204
|
)
|
|
$
|
(659
|
)
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED LOSS PER COMMON SHARE:
|
|
|
|
|
|
|
|
|
Net loss per share
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: BASIC AND DILUTED
|
|
|
177,707,623
|
|
|
|
100,000,000
|
|
The accompanying notes are an integral part of these financial statements.
Almost Never Films Inc. and Subsidiaries
fka Smack Sportswear
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
|
Three months ended
|
|
|
|
September30,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
Net loss
|
|
$
|
(19,204
|
)
|
|
$
|
(659
|
)
|
Adjustments to reconcile net loss to net cash from operating activities:
|
|
|
|
|
|
|
|
|
Loss on debt settlement
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|
|
-
|
|
|
|
-
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Prepaid expense
|
|
|
1,876
|
|
|
|
-
|
|
Accrued liabilities
|
|
|
3,459
|
|
|
|
-
|
|
Net cash used in operating activities
|
|
|
(13,869
|
)
|
|
|
(659
|
)
|
|
|
|
|
|
|
|
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|
CASH FLOWS FROM FINANCING ACTIVITIES
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|
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|
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Proceeds from common share issuance
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|
|
-
|
|
|
|
-
|
|
Proceeds from preferred share issuance
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|
|
-
|
|
|
|
10,000
|
|
Net cash provided by financing activities
|
|
|
-
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
(13,869
|
)
|
|
|
9,341
|
|
Cash and cash equivalents - beginning of period
|
|
|
84,967
|
|
|
|
-
|
|
Cash and cash equivalents - end of period
|
|
$
|
71,098
|
|
|
$
|
9,341
|
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow Disclosures
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
-
|
|
|
$
|
-
|
|
Cash paid for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
The accompanying notes are an integral part of these financial statements.
Almost Never Films Inc. and Subsidiaries
fka Smack Sportswear
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2016
(Unaudited)
NOTE 1
–
ORGANIZATION, OPERATIONS AND BASIS OF ACCOUNTING
Nature of the Business
Almost Never Films Inc. (the “Company”) was originally incorporated in Nevada in October 2007 as Smack Sportswear (“Smack”), which originally manufactured and sold performance and lifestyle based indoor and sand volleyball apparel and accessories. The Company is now an independent film company focused on film production and production related services in connection with genre specific motion pictures with production costs in the $5.0 million to $50.0 million range.
Share Exchange and Recapitalization
On January 15, 2016, Smack entered into a share exchange agreement with Almost Never Films Inc., a private company incorporated in Indiana on July 8, 2015, and its two shareholders, Danny Chan and Derek Williams.
Pursuant to the agreement, Smack issued 1,000,000 shares of our Series A Convertible Preferred Stock to Mr. Chan and Mr. Williams in exchange for all 100,000,000 shares of issued and outstanding common stock of Almost Never Films Inc. (Indiana). As a result of the share exchange, Almost Never Films Inc. (Indiana) became Smack’s wholly-owned subsidiary, and Mr. Chan and Mr. Williams acquired a controlling interest in the Company.
The share exchange was accounted for as a "reverse acquisition," and resulted in a recapitalization. Almost Never Films Inc. (Indiana) is deemed to be the acquirer for accounting purposes. The assets acquired and liabilities assumed were $6,566 and $598,869, respectively. Consequently, the assets and liabilities and the historical operations that will be reflected in the financial statements prior to the share exchange will be those of Almost Never Films Inc. (Indiana) and will be recorded at the historical cost basis of Almost Never Films Inc. (Indiana), and the combined financial statements after completion of the share exchange include the assets and liabilities of Almost Never Films Inc. (Indiana), historical operations of Almost Never Films Inc. (Indiana), and operations of Almost Never Films Inc. (Indiana) from the closing date of the share exchange. As a result of the issuance of the shares of our Series A Convertible Preferred Stock pursuant to the share exchange, a change in control of the Company occurred as of the date of consummation of the share exchange. All share and per share information in the accompanying consolidated financial statements and footnotes has been retroactively restated to reflect the recapitalization. The Company has not yet generated any revenue since inception.
On February 29, 2016, the stockholders of Smack voted to amend the Articles of Incorporation of the Company to (i) increase the authorized capital of the Company to 200,000,00 shares of common stock and (ii) to change the name of the Company to “Almost Never Films Inc.” which took effect on March 2, 2016.
The new symbol of the Company is HLWD.
Going Concern
The accompanying consolidated financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business. The accompanying consolidated financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern. During the three months ended September 30, 2016, the Company incurred a net loss from continuing operations of $19,204 and cash used in operating activities was $13,869. As of September 30, 2016, the Company is delinquent in payments of $271,398 for payroll and sales taxes and of $66,613 of a note payable. As of September 30, 2016, the Company had a working capital deficiency of $298,110 and a shareholders’ deficit of $845,208. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.
The ability of the Company to continue as a going concern and appropriateness of using the going concern basis is dependent upon, among other things, an additional cash infusion and an identification of new business opportunities. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on operations, in the case of debt financing, or cause substantial dilution for our stock holders, in case of equity financing.
NOTE 2
–
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of the Company is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.
Basis of Presentation
The unaudited condensed consolidated financial statements presented herein have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Regulation S-X. Accordingly, the financial statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments, including normal recurring adjustments, considered necessary for a fair statement of the financial statements have been included. Operating results for the three months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the year ending June 30, 2017.
These unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended June 30, 2016, which were included in the Company’s 2016 Annual Report on Form 10-K. The accompanying condensed consolidated balance sheet as of June 30, 2016, has been derived from the Company’s audited consolidated financial statements as of that date.
Basis of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Team Sports Superstore (Inactive) and Almost Never Films Inc. (Indiana). All significant intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the U.S requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the financial statement date, and reported amounts of revenue and expenses during the reporting period. Significant estimates are used in valuing the fair value of common stock issued for services, among others. Actual results could differ from these estimates.
Fair Value of Financial Instruments
Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk.
In addition to defining fair value, the standard expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels which are determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are:
Level 1 – inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.
Level 2 – inputs are based upon significant observable inputs other than quoted prices included in Level 1, such as quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.
As of September 30, 2016, the balances reported for cash, accounts payable and accrued expenses approximate their fair value because of their short maturities. Notes payable are recorded at agreed values. Debt balances are stated at historical amounts less principal payments, which approximate fair market value. The Company believes interest rates in its debt agreements are commensurate with lender risk profiles for similar companies.
Stock Subscription Receivable
The stock subscription receivable reflects the sales of common stock in March 2016 for which the Company had not received payment as of September 30, 2016. The Company is continuing communicate with this investor and anticipates that it will receive payment in 2016.
Loss per Share Calculations
Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of common shares available. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. The Company’s diluted loss per share is the same as the basic loss per share for the period ended September 30, 2016, as there are no potential shares outstanding that would have a dilutive effect.
Recently Issued Accounting Pronouncements
Management has considered all recent accounting pronouncements issued since the last audit of our financial statements. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.
NOTE 3 – NOTE PAYABLE
In August 2015, Smack entered into an unsecured promissory note agreement with an individual. The agreement allowed for Smack to borrow up to $66,613 at an interest rate of 10 percent per year. This $66,613 note was assumed by the Company during the recapitalization. The outstanding balance under the agreement at September, 2016 was $66,613. During the three month period ended September 30, 2016, the Company incurred $1,679 of interest expense relating to the unsecured promissory note. The outstanding principal amount and all accrued and unpaid interest was by August 2016 and is currently delinquent.
NOTE 4 – SHARE CAPITAL
Common Stock
In March 2016, the Company entered into three share purchase agreements with three investors for 10,000,000 common shares at $0.02 per share for total proceeds of $200,000, of which $135,000 was received by the Company prior to June 30, 2016 and $65,000 was recorded as stock subscription receivable.
There were 177,707,623 shares of common stock issued and outstanding as of September 30, 2016.
NOTE 5 – INCOME TAX
The Company provides for income taxes under ASC 740, "Income Taxes." Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax basis of assets and liabilities and the tax rates in effect when these differences are expected to reverse. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.
The provision for income taxes differs from the amounts which would be provided by applying the statutory federal income tax rate of 34% to the net loss before provision for income taxes for the following reasons:
|
|
Three Months
ended
September 30,
2016
|
|
|
Three Months
ended
September 30,
2015
|
|
Federal income tax benefit attributable to:
|
|
|
|
|
|
|
Current Operations
|
|
$
|
6,529
|
|
|
$
|
224
|
|
Less: valuation allowance
|
|
|
(6,529
|
)
|
|
|
(224
|
)
|
Net provisions for Federal income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
Net deferred tax assets consist of the following components as of:
|
|
(Inception) to
|
|
|
|
September 30
|
|
|
|
2016
|
|
|
2015
|
|
Deferred tax asset attributable to:
|
|
|
|
|
|
|
Net operating loss carry over
|
|
$
|
287,370
|
|
|
$
|
280,841
|
|
Less: valuation allowance
|
|
|
(287,370
|
)
|
|
|
(280,841
|
)
|
Net deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
The following table reconciles the US statutory rates to the Company’s effective tax rate for three months ended September 30, 2016:
|
|
Three months ended
September 30,
2016
|
|
|
Three months ended
September 30,
2015
|
|
Effective tax rate attributable to:
|
|
|
|
|
|
|
US statuary rate
|
|
|
34
|
%
|
|
|
34
|
%
|
Less: change in unrecognized tax benefit from uncertain tax provision
|
|
|
(34
|
%)
|
|
(34
|
%)
|
Tax per Financial Statement
|
|
|
-
|
|
|
|
-
|
|
Due to the change in ownership provisions of the Income Tax laws of United States of America, net operating loss carry forwards of $845,208 which expire commencing in fiscal 2035, for federal income tax reporting purposes are subject to annual limitations. When a change in ownership occurs, net operating loss carry forwards may be limited as to use in future years.
NOTE 6 – COMMITMENTS AND CONTINGENCIES
The Company neither owns nor leases any real or personal property. The Company's officers have provided office services without charge. There is no obligation for the officer to continue this arrangement. Such costs are immaterial to the financial statements and accordingly are not reflected herein. The officers and directors are involved in other business activities and most likely will become involved in other business activities in the future.
NOTE 7 – SUBSEQUENT EVENTS
Management has evaluated subsequent events through the date these financial statements were issued. Based on our evaluation no additional events have occurred that require disclosure.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Business Development
SMACK Sportswear (“SMACK or the Company”) was originally incorporated in Nevada in October 2007. Through June 30, 2016, we were a manufacturer and seller of performance and lifestyle based indoor and sand volleyball apparel and accessories. As of July 31, 2015 we completed the disposition of certain assets of the Company to William Sigler, a former director of the Company; in connection with said transactions Mr. Sigler resigned and agreed to sell all his shares of common stock in the Company. As a result of the sale of certain inventory from the Company to Mr. Sigler, the Company is now considered a “shell company” (as such term is defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended).
The Company is now focusing its efforts on seeking a business opportunity. The Company will attempt to locate and negotiate with a business entity for the merger of that target company into the Company. In certain instances, a target company may wish to become a subsidiary of the Company or may wish to contribute assets to the Company rather than merge. No assurances can be given that the Company will be successful in locating or negotiating with any target company. The Company will provide a method for a foreign or domestic private company to become a reporting (“public”) company whose securities are qualified for trading in the United States secondary market. We are now considered a “blank check” company.
The selection of a business opportunity in which to participate is complex and extremely risky and will be made by management in the exercise of its business judgment. There is no assurance that we will be able to identify and acquire any business opportunity which will ultimately prove to be beneficial to our company and shareholders.
On January 15, 2016, pursuant to the share exchange agreement, among Almost Never Films Inc. f/k/a Smack Sportswear (the “Company”, “we,” “our” or “us”), Almost Never Films Inc. (“ANF”), an Indiana corporation, and the two shareholders of ANF (the “ANF Shareholders”), we issued to the ANF Shareholders, 1,000,000 shares of our Series A Convertible Preferred Stock (the “Series A Preferred Stock”), par value $0.001 per share in exchange for all 100,000,000 shares of the issued and outstanding common stock of ANF (the “Share Exchange”). As a result of the Share Exchange, ANF became our wholly-owned subsidiary, and our business has become the business of ANF, effective January 15, 2016.
The share exchange was accounted for as a "reverse acquisition," and resulted in a recapitalization. Almost Never Films Inc. (Indiana) is deemed to be the acquirer for accounting purposes. The assets acquired and liabilities assumed were $6,566 and $598,869, respectively. Consequently, the assets and liabilities and the historical operations that will be reflected in the financial statements prior to the share exchange will be those of Almost Never Films Inc. (Indiana) and will be recorded at the historical cost basis of Almost Never Films Inc. (Indiana), and the combined financial statements after completion of the share exchange include the assets and liabilities of Almost Never Films Inc. (Indiana), historical operations of Almost Never Films Inc. (Indiana), and operations of Almost Never Films Inc. (Indiana) from the closing date of the share exchange. As a result of the issuance of the shares of our Series A Convertible Preferred Stock pursuant to the share exchange, a change in control of the Company occurred as of the date of consummation of the share exchange. All share and per share information in the accompanying consolidated financial statements and footnotes has been retroactively restated to reflect the recapitalization. The Company has not yet generated any revenue since the reverse acquisition.
On February 29, 2016, the stockholders of Smack voted to amend the Articles of Incorporation of the Company to (i) increase the authorized capital of the Company to 200,000,00 shares of common stock and (ii) to change the name of the Company to “Almost Never Films Inc.” which took effect on March 2, 2016.
The Company has 5,000,000 authorized preferred shares with no par value.
Smack issued 1,000,000 shares of our Series A Convertible Preferred Stock to the Mr. Chan and Mr. Williams in exchange for all 100,000,000 shares of issued and outstanding common stock of Almost Never Films Inc. (Indiana), with a value of $10,000.
On March 4, 2016, all 1,000,000 preferred shares were converted into 100,000,000 common shares.
There were no shares of preferred stock issued and outstanding as of September 30, 2016.
Criteria
We are a film company focused on film production and production related services in connection with genre specific motion pictures with production costs in the $5.0 million to $50.0 million range.
The Company was originally incorporated in Nevada in October 2007 as Smack Sportswear (“Smack”), which originally manufactured and sold performance and lifestyle based indoor and sand volleyball apparel and accessories. The Company is now an independent film company focused on film production and production related services in connection with genre specific motion pictures with production costs in the $5.0 million to $50.0 million range.
History
As described above, we were incorporated in Nevada in October 2007 under the name SMACK Sportswear under which we manufactured and sold performance and lifestyle based indoor and sand volleyball apparel and accessories. As a result of the sale of certain inventory from the Company to Mr. Sigler in July 2015, the Company became a “shell company” (as such term is defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended). As a result of the Share Exchange, we acquired the proposed business of Almost Never.
Almost Never, our wholly-owned subsidiary upon the closing of Share Exchange, was incorporated in the State of Indiana on July 8, 2015. As a result of the Share Exchange, the Company amended its Articles of Incorporation to change its name from “Smack Sportswear” to “Almost Never Films Inc.” to more accurately reflect its new business. We also request changed the Company’s OTCQB trading symbol to "HLWD"
We currently have authorized 75,000,000 shares of capital stock, consisting of (i) 70,000,000 shares of Common Stock, and (ii) 5,000,000 shares designated as preferred stock containing such rights, privileges and designations as our Board of directors may, from time to time, determine. As of the date of this Report, an aggregate of 177,707,623 shares of our Common Stock and 1,000,000 shares of our Series A Convertible Preferred Stock are issued and outstanding. On March 4, 2016, all 1,000,000 preferred shares were converted into 100,000,000 common shares
After the Share Exchange, our principal executive office is now located at 13636 Ventura Blvd #475, Sherman Oaks, CA 91423.
Our Business
We are an independent film company focused on film production and production related services in connection with genre specific motion pictures with production costs in the $5.0 million to $50.0 million range.
Our proposed business is to facilitate relationships (and as such, provide production related services) between creative talent (including writers, actors and directors) and companies who produce, finance and distribute motion pictures. We intend to acquire or license rights to materials upon which we believe motion pictures can be based (screenplays, books, short stories etcetera, which are referred to within the entertainment industry as the “underlying property”). We may further develop an underlying property by contracting for additional writing services and/or by bringing in new writers to perform “polishes” or “rewrites” on a particular underlying property.
If we are satisfied with the creative state of the underlying property, we then intend to make offers to directors and/or actors, to perform services in connection with a particular motion picture based on that underlying property. These offers are very often contingent and subject to the satisfaction of certain production elements, such as financier approval of the screenplay and the financier’s selection of a start date for principal photography.
If a director or actors accepts one of our offers, the director or actors are said to be “attached” to the motion picture project. Armed with the underlying property and the attached creative element(s) (these elements are often called the “package” in Hollywood), we may then approach third party financiers seeking financing as well as distribution for the potential motion picture. Another approach that we may take is to contact the financiers first, seeking first to produce the film, and then with a finished (or nearly finished) motion picture product, obtain distribution for the picture.
Critical accounting policies and estimates
Our condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. We continually evaluate our estimates and judgments, our commitments to strategic alliance partners and the timing of the achievement of collaboration milestones. We base our estimates and judgments on historical experience and other factors that we believe to be reasonable under the circumstances. All estimates, whether or not deemed critical, affect reported amounts of assets, liabilities, revenues and expenses, as well as disclosures of contingent assets and liabilities. These estimates and judgments are also based on historical experience and other factors that are believed to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known, even for estimates and judgments that are not deemed critical.
Going Concern
The accompanying financial statements have been prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern. The Company has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time. These conditions raise substantial doubt as to our ability to continue as a going concern.
Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund operating expenses. The Company intends to position itself so that it may be able to raise additional funds through the capital markets. In light of management's efforts, there are no assurances that the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern.
Results of Operations
For the three months ended September 30, 2016 compared to September 30, 2015
During the three months ended September 30, 2016, the Company had no revenue and incurred $4,060 on general and administrative expenses and $13,465 on professional fees. The Company’s professional fees were primarily for ongoing regulatory requirements. During the three months ended September 30, 2015, the Company had no revenue and incurred $659 on general and administrative expenses.
Other Expense
During the three months ended September 30, 2016, the Company incurred interest expenses of $1,679, relating to an unsecured promissory notes payable. During the three months ended September 30, 2015, the Company incurred no interest expenses.
Net Loss
The Company’s net loss for the three months ended September 30, 2016 was $19,204. The Company’s net loss for the three months ended September 30, 2015 was $659.
Liquidity and Capital Resources
Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures.
As of September 30, 2016, we had a cash balance of $71,098. We do not have sufficient funds to operate for the next twelve months. There can be no assurance that additional capital will be available to the Company. We currently have no agreements, arrangements or understandings with any person or entity to obtain funds through bank loans, lines of credit or any other sources. Since the Company has no such arrangements or plans currently in effect, its inability to raise funds for the above purposes will have a severe negative impact on its ability to remain a viable company.
Going Concern Consideration
The accompanying condensed consolidated financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business. The accompanying condensed consolidated financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern. During the three months ended September 30, 2016, the Company incurred a net loss from continuing operations of $19,204 and cash used in operating activities was $13,869. As of September 30, 2016, the Company is delinquent in payments of $271,398 for payroll and sales taxes and of $66,613 of a note payable. As of September 30, 2016, the Company had a working capital deficiency of $298,110 and a shareholders’ deficit of $845,208. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.
The ability of the Company to continue as a going concern and appropriateness of using the going concern basis is dependent upon, among other things, an additional cash infusion and an identification of new business opportunities. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on operations, in the case of debt financing, or cause substantial dilution for our stock holders, in case of equity financing.
There were no cash flows used in investing activities or financing in the three months ended September 30, 2016.
We do not have any material commitments for capital expenditures during the next twelve months. Although our proceeds from the issuance of debt and our offering of shares of common stock is currently sufficient to fund our operating expenses, we anticipate we will need to raise additional funds in the future so that we can expand our operations. Therefore, our future operations are dependent on our ability to secure additional financing. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, the trading price of our common stock and a downturn in the U.S. equity and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. The inability to obtain additional capital may restrict our ability to grow and may reduce our ability to continue to conduct business operations. If we are unable to obtain additional financing, we may have to curtail our marketing and development plans and possibly cease our operations.
Off-balance sheet arrangements
During the three months ended September 30, 2016, we did not have any "off-balance sheet arrangements" (as that term is defined in Item 303(a)(4)(ii) of Regulation S-K).
Recent accounting pronouncements
Management has considered all recent accounting pronouncements issued since the last audit of our financial statements. The Company's management believes that these recent pronouncements will not have a material effect on the Company's financial statements.