Notes to Condensed Consolidated Financial Statements
For the period ended November 30, 2017
(Unaudited)
NOTE 1 NATURE OF OPERATIONS AND PRINCIPLES OF CONSOLIDATION
Ethos Media Network, Inc. (“Ethos”, “EOMN” or the “Company”) was incorporated in Florida on August 2, 2013, with an objective to acquire, or merge with, an operating business. On January 22, 2014 the Company acquired an operating company, Eye on South Florida in a reverse merger.
Eye on South Florida, Inc. (ETHOS), a corporation, was chartered in the State of Florida on January 18, 2013 as a media organization for the purpose of providing television services as an independent producer and distributor of television programming locally and nationally. The programming is based on content that is produced and filmed in South Florida, on subjects that are relevant to the South Florida area. The operations of Eye on South Florida ceased in January of 2015.
As of January 22, 2014, the Company is in the business of providing television services to areas around the state and the country.
These financial statements include the balances of Ethos Media Network, Inc. and subsidiary. All intercompany balances have been eliminated in the financial statements.
NOTE 2
: GOING CONCERN
The Company’s financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating cost and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced, to cease operations.
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plan to obtain such resources for the Company include, obtaining capital from management and significant stockholders sufficient to meet its minimal operating expenses. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.
There is no assurance that the Company will be able to obtain sufficient additional funds when needed or that such funds, if available will be obtainable on terms satisfactory to the Company. In addition, profitability will ultimately depend upon the level of revenues received from business operations. However, there is no assurance that the Company will attain profitability. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE
3: SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
Unaudited Interim Financial Statements
The accompanying unaudited condensed financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for interim financial statements. Therefore, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The interim financial statements should be read in conjunction with the annual financial statements included in the Form 10K as of August 31, 2017 and filed with the Securities and Exchange Commission on October 31, 2017.
In the opinion of management, all adjustments consisting of normal recurring entries necessary for a fair statement of the periods presented for: (a) the financial position; (b) the result of operations; and (c) cash flows, have been made in order to make the financial statements presented not misleading. The results of operations for such interim periods are not necessarily indicative of operations for a full year.
ETHOS
MEDIA NETWORK INC.
Notes to Condensed Consolidated Financial Statements
For the period ended November 30, 2017
(Unaudited)
Basis of Presentation and Use of Estimates
The Company prepares its financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP"), which require 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 reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Fiscal Year End
The Company elected August 31 as its fiscal year ending date.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less at the date of acquisition to be cash equivalents. Cash and cash equivalents totaled $31,413 at November 30, 2017 and $68,931 at August 31, 2017.
Credit risk associated with cash deposits are insured under FDIC up to $250,000 per depositor, per FDIC insured bank, per ownership category. At such time, as the Company’s cash deposits exceed FDIC limits, the Company will reassess their credit risk.
Cash Flows Reporting
The Company follows ASC 230, Statement of Cash Flows, for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by ASC 230, Statement of Cash Flows, to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments.
Financial Instruments
The Company’s balance sheet includes certain financial instruments, including cash and accounts payable. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization.
ASC 820,
Fair Value Measurements and Disclosures
, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
Level 1
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Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
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Level 2
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Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
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Level 3
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Inputs that are both significant to the fair value measurement and unobservable.
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ETHOS
MEDIA NETWORK INC.
Notes to Condensed Consolidated Financial Statements
For the period ended November 30, 2017
(Unaudited)
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of November 30, 2017. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments.
Revenue Recognition
The Company recognizes revenue when it is realized or realizable and earned.
The Company considers revenue realized or realizable and earned when all of the following criteria are met:
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persuasive evidence of an arrangement exists
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o
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the product has been shipped or the services have been rendered to the customer
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o
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the sales price is fixed or determinable
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o
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collectability is reasonably assured.
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The Company generates revenue through four processes: (1) Media Production, (2) Commercial Production, Distribution and (3) Advertising Sales and Distribution (4) Live Broadcasting of Events.
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·
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Revenue for media production of original content. The company recognizes a sale when the production is completed and ready for distribution. The burden of distribution and risk of loss has passed to the customer.
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·
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Revenue for production of television grade HD Commercials. Revenue is recognized when the services have been performed and passed on to the customer.
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·
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Revenue for distribution of commercials and content service fees is recognized ratably over the term of the advertising agreement.
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·
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Revenue for live broadcasting of original content. The company recognizes a sale when the live broadcast / production is contracted and completed. The burden of distribution and risk of loss has passed to the customer.
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Property and Equipment
Property and equipment is stated at cost. Depreciation is computed by the straight-line method over estimated useful lives.
Long-lived assets such as property, equipment and identifiable intangibles are reviewed for impairment at least annually or whenever facts and circumstances indicate that the carrying value may not be recoverable. When required, impairment losses on assets to be held and used are recognized based on the fair value of the asset. The fair value is determined based on estimates of future cash flows, market value of similar assets, if available, or independent appraisals, if required. If the carrying amount of the long-lived asset is not recoverable, an impairment loss is recognized for the difference between the carrying amount and fair value of the asset. The Company recognized impairment losses of $0 and $495,241 for the periods ending November 30, 2017 and August 31, 2017, respectively.
ETHOS
MEDIA NETWORK INC.
Notes to Condensed Consolidated Financial Statements
For the period ended November 30, 2017
(Unaudited)
Impairment of Long- Lived Assets
The Company reviews and evaluates long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The assets are subject to impairment consideration under FASB ASC 360-10-35-17 if events or circumstances indicate that their carrying amount might not be recoverable. When the Company determines that an impairment analysis should be done, the analysis will be performed using the rules of FASB ASC 930-360-35, Asset Impairment, and 360-0 through 15-5, Impairment or Disposal of Long- Lived Assets.
Deferred Income Taxes and Valuation Allowance
The Company accounts for income taxes under ASC 740,
Income Taxes
. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. 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. No deferred tax assets or liabilities were recognized as of November 30, 2017.
Net Income (Loss) Per Common Share
Net income (loss) per share is calculated in accordance with ASC 260, “Earnings Per Share.” The weighted-average number of common shares outstanding during each period is used to compute basic earning or loss per share. Diluted earnings or loss per share is computed using the weighted average number of shares and diluted potential common shares outstanding. Dilutive potential common shares are additional common shares assumed to be exercised. Total dilutive common shares at November 30, 2017 were 143,147,017 which consist of 44,348,151 shares issued and outstanding and 98,798,866 shares for convertible debt. Total diluted common shares at August 31, 2017 were 33,670,404 which consist of 28,789,541 shares issued and outstanding and 4,880,953 shares for convertible debt.
Basic (loss) income per share is computed by dividing income available to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted (loss) income per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the income of the Company.
At November 30, 2017, there were 50,000,000 of preferred convertible shares that were not included because they would be anti-dilutive.
Share-Based Expense
ASC 718,
Compensation – Stock Compensation
, prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).
The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50,
Equity – Based Payments to Non-Employees.
Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable:(a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.
Share-based expense for the three months ended November 30, 2017 and 2016 was $9,000 and $0 respectively.
ETHOS
MEDIA NETWORK INC.
Notes to Condensed Consolidated Financial Statements
For the period ended November 30, 2017
(Unaudited)
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued that we adopt as of the specified effective date. We believe that the impact of recently issued standards that are not yet effective may have an impact on our results of operations and financial statements.
In February 2016, the FASB issued ASU No. 2016-02,
Leases
, which is intended to improve financial reporting on leasing transactions. This standard requires a lessee to record on the balance sheet the assets and liabilities for the rights and obligations created by lease terms of more than 12 months. This standard will be effective for the Company on September 1, 2019. The Company is currently evaluating the impact the adoption of this ASU will have on its consolidated financial statements.
ASU Update 2014-09
Revenue from Contracts with Customers
(Topic 606) issued May 28, 2014 by FASB and IASB converged guidance on recognizing revenue in contracts with customers on an effective date after December 31, 2017 will be evaluated as to impact and implemented accordingly.
NOTE
4:
PROPERTY, PLANT AND EQUIPMENT
The Company has capitalized costs for property, plant and equipment as follows:
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November 30,
2017
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August 31,
2017
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Production equipment
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$
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535,480
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$
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535,480
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Office furniture and equipment
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7,899
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7,899
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Leasehold improvements
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34,321
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34,321
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Vehicles
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75,260
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75,260
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652,960
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652,960
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Accumulated depreciation
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529,112
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504,812
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PP&E, net accumulated depreciation
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$
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123,849
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$
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148,148
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Depreciation for the three months ended November 30, 2017 and 2016 was $24,300, and $84,797, respectively.
Impairment of long-lived assets
The Company had tested the four asset groups and determined that impairment indicators were present for the production equipment group, specifically for software, server and vehicle components. As a result, software, server and vehicle were written down to their estimated fair value of $241,656, $97,758 and $55,301, respectively; resulting in an impairment charge of $495,241 for the period ending August 31, 2017. Impairment for the three months ended November 30, 2017 was $0.
NOTE
5: ACCOUNTS PAYABLE
At November 30, 2017 and August 31, 2017, accounts payable was $9,661 and $7,186, respectively.
ETHOS
MEDIA NETWORK INC.
Notes to Condensed Consolidated Financial Statements
For the period ended November 30, 2017
(Unaudited)
NOTE 6 – CONVERTIBLE NOTE PAYABLE
AUCTUS FUND, LLC
On March 22, 2017, the Company executed a convertible promissory note with Auctus Fund, LLC. The note carries a principal balance of $80,000 together with an interest rate of twelve percent (12%) per annum and a maturity date of December 22, 2017. All payments due hereunder (to the extent not converted into common stock, $0.001 par value per share in accordance with the terms of the note agreement shall be made in lawful money of the United States of America. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty-four percent (24%) per annum from the due date thereof until the same is paid.
The holder shall have the right from time to time, and at any time during the period beginning on the date which is one hundred eighty-one (181) days following the date of this note, to convert all or any part of the outstanding and unpaid principal amount into Common Stock. The conversion shall equal sixty-one percent (61%) of the average of the lowest two (2) trading prices for the Common Stock during the previous twenty-five (25) trading period ending on the latest complete trading day prior to the conversion date, representing a discount rate of forty-five percent (45%).
EMA FINANCIAL, LLC
On March 22, 2017, the Company executed a convertible promissory note with EMA Financial, LLC. The note carries a principal balance of $85,000 together with an interest rate of ten percent (10%) per annum and a maturity date of March 22, 2018. All payments due hereunder (to the extent not converted into common stock, $0.001 par value per share in accordance with the terms of the note agreement shall be made in lawful money of the United States of America. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty-four percent (24%) per annum from the due date thereof until the same is paid.
The holder shall have the right, in its sole and absolute discretion, at any time from time to time, to convert all or any part of the outstanding amount due under this note. The conversion shall equal sixty percent (60%) of the average of the lowest two (2) trading prices for the Common Stock during the previous twenty (20) trading period ending on the latest complete trading day prior to the conversion date, representing a discount rate of forty percent (40%).
POWER UP LENDING GROUP
On April 20, 2017, The Company executed a convertible promissory note with Power Up Lending Group, Ltd. The note carries a principal balance of $30,000 together with an interest rate of twelve percent (12%) per annum and a maturity date of January 30, 2018. All payments due hereunder (to the extent not converted into common stock, $0.001 par value per share in accordance with the terms of the note agreement shall be made in lawful money of the United States of America. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid.
The holder shall have the right from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of this note, to convert all or any part of the outstanding and unpaid principal amount into Common Stock. The conversion shall equal fifty-five percent (55%) of the average of the lowest two (2) trading prices for the Common Stock during the twenty (20) day trading period ending on the latest complete trading day prior to the conversion date, representing a discount rate of forty-five percent (45%).
The Company accounts for this embedded conversion feature as a derivative under ASC 815-10-15-83 and valued separately from the note at fair value. The embedded conversion feature of the note is revalued at each subsequent reporting date at fair value and any changes in fair value will result in a gain or loss in those periods. At November 30, 2017, the derivative liability associated with Auctus Fund, LLC was $76,077; EMA Financial, LLC was $89,444 and Power up lending was $37,677.
ETHOS
MEDIA NETWORK INC.
Notes to Condensed Consolidated Financial Statements
For the period ended November 30, 2017
(Unaudited)
Convertible Notes payable consisted of the following:
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November 30,
2017
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August 31,
2017
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Convertible notes payable:
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$
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161,331
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$
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195,000
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Debt discount
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(17,429
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)
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(24,731
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)
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Convertible notes payable net of debt discount
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$
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143,902
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$
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170,269
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Accrued interest
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8,426
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9,345
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Current portion of convertible note payable and interest
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$
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152,328
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$
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179,614
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NOTE
7:
EQUITY
Preferred Stock
The Company has been authorized to issue 750,000,000 shares of $.001 par value Preferred Stock. The Board of Directors is expressly vested with the authority to divide any or all of the Preferred Stock into series and to fix and determine the relative rights and preferences of the shares of each series so established, within certain guidelines established in the Articles of Incorporation. As of November 30, 2017 and August 31, 2017 there are 50,000,000 and 50,000,000 shares of Series “A” Convertible Preferred Stock issued and outstanding, respectively. The Series A Convertible Preferred Stock converts at a rate of 10 common shares per each share of preferred for a total of 500,000,000 shares of common.
Common Stock
The Company has been authorized to issue 900,000,000 shares of common stock, $.001 par value. Each share of issued and outstanding common stock shall entitle the holder thereof to fully participate in all shareholder meetings, to cast one vote on each matter with respect to which shareholders have the right to vote, and to share ratably in all dividends and other distributions declared and paid with respect to common stock, as well as in the net assets of the corporation upon liquidation or dissolution.
On January 27, 2017, the Company sold 62,500 shares of common stock to a non-related party in exchange for cash proceeds of $2,500. The shares were issued at $0.04 per share.
On February 6, 2017, the Company sold 150,000 shares of common stock to a non-related party in exchange for cash proceeds of $10,000. The shares were issued at $0.066 per share.
During the three months ended November 30, 2017, the Company issued 10,910,000 shares of common stock to EMA Financial, LLC in exchange for principal reduction of $24,339. The shares were issued on various dates during the three months ended November 30, 2017. The shares were issued at a discount to the fair market value, per the conversion agreement dated March 22, 2017.
During the three months ended November 30, 2017, the Company issued 4,648,700 shares of common stock to Auctus Fund, LLC. in exchange for principal reduction of $9,330 and a reduction to accrued interest of $6,017 for a total of $15,347. The shares were issued on various dates during the three months ended November 30, 2017. The shares were issued at a discount to the fair market value, per the conversion agreement dated March 22, 2017.
As of November 30, 2017, there are 44,348,151 shares of common stock issued and outstanding.
ETHOS
MEDIA NETWORK INC.
Notes to Condensed Consolidated Financial Statements
For the period ended November 30, 2017
(Unaudited)
Options and Warrants
There are no warrants or options outstanding to acquire any additional shares of common stock of the Company as of November 30, 2017.
NOTE
8:
RELATED PARTY TRANSACTION
The Company has been provided office space by a member of the Board of Directors at no cost. The management determined that such cost is nominal and did not recognize the rent expense in its financial statements.
The above amount is not necessarily indicative of the amount that would have been incurred had a comparable transaction been entered into with independent parties.
NOTE 9: COMMITMENTS AND CONTINGENCIES
From time to time the Company may be a party to litigation matters involving claims against the Company. Management believes that there are no current matters that would have a material effect on the Company’s financial position or results of operations.
NOTE
10:
SUBSEQUENT EVENTS
Subsequent to the three months ended November 30, 2017, the Company issued 4,600,000 shares of common stock to EMA Financial, LLC in exchange for principal reduction of $3,450. The shares were issued on various dates subsequent to the three months ended November 30, 2017. The shares were issued at a discount to the fair market value, per the conversion agreement dated March 22, 2017.
Subsequent to the three months ended November 30, 2017, the Company issued 4,541,000 shares of common stock to Auctus Fund, LLC. in exchange for principal reduction of $3,300, reduction to accrued interest of $507 and conversion fees of $1,000 for a total of $4,807. The shares were issued at a discount to the fair market value, per the conversion agreement dated March 22, 2017.
Management has evaluated subsequent events through the date the financial statements were available to be issued, considered to be the date of filing with the Securities and Exchange Commission. Based on our evaluation no events have occurred in addition to those stated that require adjustment to or disclosure in the financial statements.