UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the Quarterly Period Ended
OR
For the transition period ________
Commission File No.
(Exact name of the small business issuer as specified in its charter)
(State of either jurisdiction of
Incorporation or Organization)
(Address of principal executive offices)
(
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: None
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.
Indicate by check mark whether the registrant has submitted electronically every Interactive
Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that
the registrant was required to submit such files).
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:
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
|
|
☒ | Smaller reporting Company |
|
| Emerging Growth Company |
|
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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ☐
The number of shares of Common Stock, $0.001 par veralue of the registrant outstanding at December 19, 2023 was
FORM 10-Q
For the Quarterly Period Ended September 30, 2023
INDEX
i
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
INDEX TO FINANCIAL STATEMENTS
1
SMC ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (Unaudited) | (Audited) | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ |
|
$ |
|
||||
| Receivable |
|
|
||||||
| Prepaids and other current assets |
|
|||||||
| Total Current Assets |
|
|
||||||
| Goodwill |
|
|||||||
| Intangible assets. net |
|
|||||||
| Total Assets | $ |
|
$ |
|
||||
| LIABILITIES & STOCKHOLDERS’ DEFICIT | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ |
|
$ |
|
||||
| Accrued compensation |
|
|
||||||
| Due to related parties |
|
|
||||||
| Convertible notes and accrued interest |
|
|
||||||
| Derivative liability |
|
|
||||||
| Total Current Liabilities |
|
|
||||||
| Total Liabilities |
|
|
||||||
| Shareholders’ Deficit : | ||||||||
| Series A Preferred stock, $ par value, shares authorized; shares issued and outstanding |
|
|
||||||
| Series B Preferred stock, $ par value, shares authorized; and shares issued and outstanding, respectively |
|
|||||||
| Common stock $ par value, shares authorized; and shares issued and outstanding, respectively |
|
|
||||||
| Common stock to be issued |
|
|
||||||
| Additional paid-in capital |
|
|
||||||
| Accumulated deficit |
(
|
) |
(
|
) | ||||
| Total Stockholders’ Deficit |
|
(
|
) | |||||
| Total Liabilities and Stockholders’ Deficit | $ |
|
$ |
|
||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
2
SMC ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS
OF OPERATIONS
(Unaudited)
|
For the
Three Months Ended |
For the
Nine Months Ended |
|||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Operating Expenses: | ||||||||||||||||
| General and administrative | $ |
|
$ |
|
$ |
|
$ |
|
||||||||
| Compensation expense – related party |
|
|
|
|
||||||||||||
| Amortization expense |
|
|
||||||||||||||
| Total operating expenses |
|
|
|
|
||||||||||||
| Loss from operations |
(
|
) |
(
|
) |
(
|
) |
(
|
) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense |
(
|
) |
(
|
) |
(
|
) |
(
|
) | ||||||||
| Gain on conversion of debt |
|
|
||||||||||||||
| Change in fair value of derivative |
|
|
(
|
) |
|
|||||||||||
| Loss on conversion of debt |
(
|
) |
(
|
) | ||||||||||||
| Other income |
|
|
||||||||||||||
| Total Other (Expense) Income |
(
|
) |
|
(
|
) |
|
||||||||||
| Net (Loss) Income | $ |
(
|
) | $ |
|
$ |
(
|
) | $ |
(
|
) | |||||
| Net (loss) income per share – basic and diluted | $ | ) | $ | $ | ) | $ | ) | |||||||||
| Weighted average shares outstanding, basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
3
SMC ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
For the Three and Nine Months Ended September 30, 2023 and 2022
(Unaudited)
|
Series
A
Preferred Stock |
Series
B
Preferred Stock |
Common Stock |
Additional
Paid-in |
Common
Stock to Be |
Accumulated | Total Stockholders’ | ||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Issued | Deficit | Deficit | |||||||||||||||||||||||||||||||
| Balance, December 31, 2022 |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | |||||||||||||||||||||||
| Common stock issued for conversion of debt | - | - |
|
|
|
|
||||||||||||||||||||||||||||||||||
| Common stock issued for services – related party | - | - |
|
|
||||||||||||||||||||||||||||||||||||
| Common stock issued for services | - | - |
|
|
|
(
|
) |
|
||||||||||||||||||||||||||||||||
| Net loss | - | - | - |
(
|
) |
(
|
) | |||||||||||||||||||||||||||||||||
| Balance, March 31, 2023 |
|
|
|
|
|
|
(
|
) |
(
|
) | ||||||||||||||||||||||||||||||
| Common stock issued for services | - | - |
|
|
|
|
||||||||||||||||||||||||||||||||||
| Common stock issued for services – related party | - | - |
|
|
||||||||||||||||||||||||||||||||||||
| Preferred stock issued for acquisition | - |
|
|
- |
|
|
||||||||||||||||||||||||||||||||||
| Common stock issued for conversion of debt | - | - |
|
|
|
|
||||||||||||||||||||||||||||||||||
| Net loss | - | - | - |
(
|
) |
(
|
) | |||||||||||||||||||||||||||||||||
| Balance, June 30, 2023 |
|
|
|
|
|
|
|
|
(
|
) |
|
|||||||||||||||||||||||||||||
| Common stock issued for services – related party | - | - |
|
|
(
|
) |
|
|
||||||||||||||||||||||||||||||||
| Common stock issued for conversion of debt | - | - |
|
|
|
|
||||||||||||||||||||||||||||||||||
| Net loss | - | - | - |
(
|
) |
(
|
) | |||||||||||||||||||||||||||||||||
| Balance, September 30, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
|
||||||||||||||||||||||
|
Series
A
Preferred Stock |
Common Stock |
Additional
Paid-in |
Common
Stock to Be |
Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Issued | Deficit | Deficit | |||||||||||||||||||||||||
| Balance, December 31, 2021 |
|
$ |
|
|
$ |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | ||||||||||||||||
| Common stock issued for conversion of debt | - |
|
|
|
|
|||||||||||||||||||||||||||
| Common stock issued for services – related party | - |
|
|
|
|
|
||||||||||||||||||||||||||
| Common stock issued for services | - |
|
|
|
|
|||||||||||||||||||||||||||
| Common stock cancelled | - |
(
|
) |
(
|
) |
|
||||||||||||||||||||||||||
| Net loss | - | - |
(
|
) |
(
|
) | ||||||||||||||||||||||||||
| Balance, March 31, 2022 |
|
|
|
|
|
|
(
|
) |
(
|
) | ||||||||||||||||||||||
| Common stock issued for services – related party | - | - |
|
|
||||||||||||||||||||||||||||
| Common stock issued for services | - |
|
|
|
|
|||||||||||||||||||||||||||
| Net loss | - | - |
(
|
) |
(
|
) | ||||||||||||||||||||||||||
| Balance, June 30, 2022 |
|
|
|
|
|
|
(
|
) |
(
|
) | ||||||||||||||||||||||
| Common stock issued for services – related party | - |
|
|
|
(
|
) |
|
|||||||||||||||||||||||||
| Common stock issued for services | - |
|
|
|
|
|||||||||||||||||||||||||||
| Net income | - | - |
|
|
||||||||||||||||||||||||||||
| Balance, September 30, 2022 |
|
$ |
|
|
$ |
|
$ |
|
$ | $ |
(
|
) | $ |
(
|
) | |||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
4
SMC ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
For the
Nine Months Ended September 30, |
||||||||
| 2023 | 2022 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net loss | $ |
(
|
) | $ |
(
|
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Common stock issued for services – related party |
|
|
||||||
| Common stock issued for services |
|
|
||||||
| Change in fair value of derivative |
|
(
|
) | |||||
| Gain on conversion of debt |
(
|
) | ||||||
| Loss on conversion of debt |
|
|||||||
| Debt discount |
|
|||||||
| Amortization expense |
|
|||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaids |
|
(
|
) | |||||
| Accounts payable and accrued liabilities |
|
|
||||||
| Accrued interest |
|
|
||||||
| Accrued compensation – related party |
|
|
||||||
| Net cash used in operating activities |
(
|
) |
(
|
) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Cash Flows from Financing Activities: | ||||||||
| Cash overdraft assumed with acquisition |
(
|
) | ||||||
| Proceeds from loan – related party |
|
|||||||
| Proceeds from loans |
|
|
||||||
| Net cash provided by financing activities |
|
|
||||||
| Net change in cash |
|
|
||||||
| Cash at beginning of period |
|
|
||||||
| Cash at end of period | $ |
|
$ |
|
||||
| Supplemental schedule of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for taxes | $ | $ | ||||||
| Supplemental disclosure of non-cash activity | ||||||||
| Debt converted to common stock | $ |
|
$ | |||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
5
SMC ENTERTAINMENT, INC.
Notes to Consolidated Unaudited Financial Statements
September 30, 2023
NOTE 1 — DESCRIPTION OF BUSINESS AND HISTORY
SMC Entertainment, Inc. (the “Company” or “SMC”) was incorporated in the State of Nevada on January 23, 1998, under the name of Professional Recovery Systems, Ltd.
On April 21, 2023, the Company completed its acquisition of AI-enabled wealth management technology platform provider, Fyniti Global Equities EBT Inc. (“Fyniti”) for shares of Series B $ Preferred Stock.
Fyniti, (www.fyniti.com, www.fynitiiq.com) is a Fintech developer and provider of technology that combines Artificial Intelligence/Machine Learning (AI/ML) driven Quantitative investing (IQ Engine) with AI-enabled wealth management Electronic Block Trading (“EBT”) technology.
NOTE 2 — SUMMARY OF SIGNIFICANT POLICIES
Basis of presentation
The Company’s unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The accompanying unaudited consolidated financial statements reflect all adjustments, consisting of only normal recurring items, which, in the opinion of management, are necessary for a fair statement of the results of operations for the periods shown and are not necessarily indicative of the results to be expected for the full year ending December 31, 2023. These unaudited financial statements should be read in conjunction with the financial statements and related notes for the year ended December 31, 2022.
Use of estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. These estimates and judgments are based on historical information, information that is currently available to the Company and on various other assumptions that the Company believes to be reasonable under the circumstances. Significant estimates include the fair value for derivatives. Actual results could differ from those estimates.
Concentrations of Credit Risk
We maintain our cash in bank deposit accounts, the balances of which at times may exceed federally insured limits. We continually monitor our banking relationships and consequently have not experienced any losses in our accounts. At times, such deposits may be in excess of the Federal Deposit Insurance Corporation insurable amount (“FDIC”).
6
Cash equivalents
The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents as of September 30, 2023 and December 31, 2022.
Net income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially outstanding shares of common stock during the period. The weighted average number of common shares outstanding and potentially outstanding common shares assumes that the Company incorporated as of the beginning of the first period presented. Diluted amounts are not presented when the effect of the computations are anti-dilutive due to the losses incurred. Accordingly, there is no difference in the amounts presented for basic and diluted loss per share.
Stock-based Compensation
We account for equity-based transactions with employees and non-employees under the provisions of FASB ASC Topic 718, “Compensation – Stock Compensation” (Topic 718) , which establishes that equity-based payments to employees and non-employees are recorded at the grant date the fair value of the equity instruments the entity is obligated to issue when the employees and non-employees have rendered the requisite service and satisfied any other conditions necessary to earn the right to benefit from the instruments. Topic 718 also states that observable market prices of identical or similar equity or liability instruments in active markets are the best evidence of fair value and, if available, should be used as the basis for the measurement for equity and liability instruments awarded in these share-based payment transactions. However, if observable market prices of identical or similar equity or liability instruments are not available, the fair value shall be estimated by using a valuation technique or model that complies with the measurement objective, as described in FASB ASC Topic 718.
Derivative Financial Instruments
The Company evaluates its convertible notes to determine if such instruments have derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses a weighted-average Black-Scholes-Merton option pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period.
Fair value of financial instruments
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP) and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
Level 1: Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2: Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3: Pricing inputs that are generally unobservable inputs and not corroborated by market data.
7
The carrying amount of the Company’s financial assets and liabilities, such as cash, prepaid expenses and accrued expenses approximate their fair value because of the short maturity of those instruments. The Company’s notes payable amates the fair value of such instruments as the notes bear interest rates that are consistent with current market rates.
The following table classifies the Company’s asset measured at fair value on a recurring basis into the fair value hierarchy as of September 30, 2023:
| Description | Level 1 | Level 2 | Level 3 | |||||||||
| Derivative | $ | $ | $ |
|
||||||||
| Total | $ | $ | $ |
|
||||||||
The following table classifies the Company’s liabilities measured at fair value on a recurring basis into the fair value hierarchy as of December 31, 2022:
| Description | Level 1 | Level 2 | Level 3 | |||||||||
| Derivative | $ | $ | $ |
|
||||||||
| Total | $ | $ | $ |
|
||||||||
Recently issued accounting pronouncements
The Company has implemented all new applicable accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
NOTE 3 — GOING CONCERN
The accompanying unaudited financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has suffered recurring losses since inception and has no assurance of future profitability. The Company will continue to require financing from external sources to finance its operating and investing activities until sufficient positive cash flows from operations can be generated. There is no assurance that financing or profitability will be achieved, accordingly, there is substantial doubt about the Company’s ability to continue as a going concern. The financial statements of the Company do not include any adjustments that may result from the outcome of these uncertainties.
NOTE 4 — MATERIAL TRANSACTION
On December 12, 2022, the
NOTE 5 — CONVERTIBLE NOTES PAYABLE
On January 12, 2022, Kanno entered into a Debt Purchases and Assignment Agreement with Mammoth
Corporation, whereby Kanno assigned the remaining principal balance of $
8
On January 21, 2022, the Company issued a Convertible Promissory Note to Mammoth Corporation in
the amount of $
A summary of all the Company’s convertible loans is as follows.
|
Date
Issued |
Maturity
Date |
Rate |
Balance
12/31/2022 |
Additions |
Conversions/
Payments |
Balance
9/30/2023 |
Conv
Terms |
|||||||||||||||||||
| FV Investments |
|
|
|
$ |
|
$ | $ | $ |
|
$ |
|
|||||||||||||||
| FV Investments |
|
|
|
$ |
|
$ | $ | $ |
|
$ |
|
|||||||||||||||
| Christopher Whitcomb |
|
|
|
$ |
|
$ | $ | $ |
|
(1) | ||||||||||||||||
| Christopher Whitcomb |
|
|
|
$ |
|
$ | $ |
(
|
) | $ |
|
(1) | ||||||||||||||
| Christopher Whitcomb |
|
|
|
$ |
|
$ | $ | $ |
|
(1) | ||||||||||||||||
| Kanno Group Holdings ll Ltd |
|
|
n/a | $ |
|
$ | $ | $ |
|
$ |
|
|||||||||||||||
| Kanno Group Holdings ll Ltd |
|
|
n/a | $ |
|
$ | $ | $ |
|
$ |
|
|||||||||||||||
| Kanno Group Holdings ll Ltd |
|
|
n/a | $ |
|
$ | $ | $ |
|
$ |
|
|||||||||||||||
| Kanno Group Holdings ll Ltd |
|
|
n/a | $ |
|
$ | $ | $ |
|
$ |
|
|||||||||||||||
| Kanno Group Holdings ll Ltd |
|
|
n/a | $ |
|
$ | $ | $ |
|
$ |
|
|||||||||||||||
| Kanno Group Holdings ll Ltd |
|
|
n/a | $ |
|
$ | $ | $ |
|
$ |
|
|||||||||||||||
| Kanno Group Holdings ll Ltd |
|
|
n/a | $ |
|
$ | $ | $ |
|
$ |
|
|||||||||||||||
| Kanno Group Holdings ll Ltd |
|
|
n/a | $ |
|
$ | $ | $ |
|
$ |
|
|||||||||||||||
| Mammoth Corporation |
|
|
n/a | $ |
|
$ | $ |
(
|
) | $ |
|
(3) | ||||||||||||||
| Mammoth Corporation |
|
|
$ |
|
$ | $ | $ |
|
(4) | |||||||||||||||||
| Kanno Group Holdings ll Ltd |
|
|
n/a | $ |
|
$ | $ | $ |
|
$ |
|
|||||||||||||||
| Kanno Group Holdings ll Ltd |
|
|
n/a | $ |
|
$ | $ | $ |
|
$ |
|
|||||||||||||||
| Kanno Group Holdings ll Ltd |
|
|
n/a | $ |
|
$ | $ | $ |
|
$ |
|
|||||||||||||||
| Kanno Group Holdings ll Ltd - |
|
|
n/a | $ |
|
$ | $ | $ |
|
$ |
|
|||||||||||||||
| Kanno Group Holdings ll Ltd |
|
|
n/a | $ |
|
$ | $ | $ |
|
$ |
|
|||||||||||||||
| Kanno Group Holdings ll Ltd |
|
|
n/a | $ | $ |
|
$ | $ |
|
$ |
|
|||||||||||||||
| Kanno Group Holdings ll Ltd |
|
|
n/a | $ | $ |
|
$ | $ |
|
$ |
|
|||||||||||||||
| Kanno Group Holdings ll Ltd |
|
|
n/a | $ | $ |
|
$ | $ |
|
$ |
|
|||||||||||||||
| $ |
|
$ |
|
$ |
(
|
) | $ |
|
||||||||||||||||||
| Kanno Group Holdings ll Ltd – accrued interest | n/a | n/a | n/a | $ |
|
$ |
|
$ |
(
|
) | $ |
|
(5) | |||||||||||||
| Other accrued interest | n/a | n/a | n/a | $ |
|
$ |
|
|||||||||||||||||||
| Total convertible debt and accrued interest | $ |
|
$ |
|
||||||||||||||||||||||
| (1) |
|
|
| (2) | Note was assigned to Mammoth Corporation | |
| (3) |
|
|
| (4) |
|
|
| (5) |
|
A summary of the activity of the derivative liability for the notes above and for amounts due under the consulting agreements with Mr. Hughes and Mr. Blum (Note 8) is as follows:
| Balance at December 31, 2021 | $ |
|
||
| Derivative (gain) due to mark to market adjustment |
(
|
) | ||
| Balance at December 31, 2022 | $ |
|
||
| Decrease to derivative due to conversion |
(
|
) | ||
| Derivative loss due to mark to market adjustment |
|
|||
| Balance at September 30, 2023 | $ |
|
9
A summary of quantitative information about significant unobservable inputs (Level 3 inputs) used in measuring the Company’s derivative liability that are categorized within Level 3 of the fair value hierarchy as of September 30, 2023 is as follows:
| Inputs |
September 30,
2023 |
Initial
Valuation |
||||||
| Stock price | $ |
|
$ |
|
||||
| Conversion price | $ |
|
$ |
|
||||
| Volatility (annual) | % | % – | % | |||||
| Risk-free rate | % | % – | % | |||||
| Dividend rate | ||||||||
| Years to maturity |
|
|
||||||
The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s management.
NOTE 6 — COMMON STOCK
On January 20, 2022, shares of common stock previously issued were cancelled and returned to the Company.
On January 20, 2022, the shares of common stock originally issued to Spectrum were cancelled and returned to the Company.
During the year ended December 31, 2022, Mammoth converted $
During the year ended December 31, 2022, the Company granted
shares of common stock to a service provider
for services. The shares were valued at the closing stock price on the date of grant
for total non-cash stock compensation expense of $
During Q1 2023, the Company granted
shares of common stock to a service
provider for services. The shares were valued at the closing stock price on the date
of grant for total non-cash stock compensation expense of $
During Q2 2023, the Company granted
shares of common stock to a service
provider for services. The shares were valued at the closing stock price on the date
of grant for total non-cash stock compensation expense of $
During the nine months ended September 30, 2023, Kanno Group Holdings converted $
During the nine months ended September 30, 2023, Christopher Whitcomb converted $
During the nine months ended September 30, 2023, Mammoth converted $
On August 14, 2023, the Company amended its Articles of Incorporation increasing its authorized common shares to (3 Bil).
Refer to Note 8 for shares issued to related parties.
10
NOTE 7 — PREFERRED STOCK
Series A Preferred Stock
The Company has shares of preferred stock designated as Series A. The Series A preferred stock, par value $ , are entitled to dividends, if declared, and are convertible into common stock by dividing the issue price of $ by a 20% discount to the current market price.
Series B Preferred Stock
On December 16, 2021, the Company amended its Articles of Incorporation, creating a series of Preferred Stock designating shares of Series B Convertible Preferred Stock, par value $ per share. The Series B preferred stock are entitled to dividends, if declared, and are convertible into common stock at a rate of 10% to the preceding ten day weighted average price.
On April 21, 2023, the Company completed its acquisition of AI-enabled wealth management technology platform provider, Fyniti Global Equities EBT Inc. (“Fyniti”) for shares of Series B $ Preferred Stock.
NOTE 8 — RELATED PARTY TRANSACTIONS
On January 18, 2022, the Company issued
shares of common stock to JW Price LL for
services. The shares were valued at $
, the closing price of on the date of grant,
for total non-cash compensation expense of $
On January 18, 2022, the Company issued
shares of common stock to Rony Hughes for services.
The shares were valued at $
, the closing price of on the date of grant, for
total non-cash compensation expense of $
On October 1, 2021, the Company entered into a consulting agreement with Ronald Hughes and North
Arm Capital LLC, in which Mr. Hughes was appointed CEO and Chairman of the Company. Per the terms of the agreement
Mr. Hughes is to be compensated $17,500 per month through October 1, 2022, increasing to $20,000 per month thereafter. In addition to his consulting
fee Mr. Hughes will be granted 500,000 shares of common stock per month. During the year ended
December 31, 2022, the Company granted Mr. Hughes
Per the terms of the agreement Mr. Hughes has the right to convert all or a portion of any accrued amount of compensation
into shares of common stock at a 10% discount to the VWAP of the average of the last
five trading days before conversion. As of September 30, 2023 and December 31, 2022, there is $
On November 15, 2021, the Company entered into a consulting agreement with Erik Blum and J W Price
LLC, in which Mr. Blum was appointed President of the Company. Per the terms of the agreement Mr. Blum is to be compensated $20,000 per month through November 15, 2022, increasing to $25,000 per month through November 15, 2023. During the year ended December 31, 2022, the Company granted Mr. Blum
Per the terms of the agreement Mr. Blum has the right to convert all or a portion of any accrued amount of compensation
into shares of common stock at a 10% discount to the VWAP of the average of the last
five trading days before conversion. As of September 30, 2023 and December 31, 2022, there is $
On August 1, 2023, the Company issued
shares of common stock to JW Price LL for services.
The shares were valued at $
, the closing price of on the date of grant, for
total non-cash compensation expense of $
11
NOTE 9 — BUSINESS COMBINATIONS
On April 21, 2023, the Company completed its acquisition of AI-enabled wealth management technology platform provider, Fyniti Global Equities EBT Inc. (“Fyniti”) for shares of Series B $ Preferred Stock.
The Company accounted for the transaction as a business combination under ASC 805
and as a result, allocated the fair value of the book value of identifiable assets
acquired and liabilities assumed as of the acquisition date as outlined in the table
below. The consolidated income statement for the three and nine months ended September 30, 2023, includes $
The excess of the purchase price over the estimated fair values of the underlying identifiable assets acquired and liabilities assumed was allocated to goodwill.
| Consideration | ||||
| Consideration issued | $ |
|
||
| Identified assets, liabilities, and noncontrolling interest | ||||
| Cash overdraft |
(
|
) | ||
| Intangible assets, net |
|
|||
| Accounts payable |
(
|
) | ||
| Accrued Expenses |
(
|
) | ||
| Total identified assets, liabilities, and noncontrolling interest |
|
|||
| Excess purchase price allocated to goodwill | $ |
|
NOTE 10 — SUBSEQUENT EVENTS
Management has evaluated subsequent events pursuant to the requirements of ASC Topic 855, Subsequent Events , from the balance sheet date through the date the financial statements were issued and has determined that the following material subsequent events exist.
On November 10, 2023, Mammoth Corporation loaned the Company $
12
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Our Management’s Discussion and Analysis should be read in conjunction with our unaudited consolidated financial statements and related notes thereto included elsewhere in this quarterly report.
Forward-Looking Statements
The information in this report contains forward-looking statements. All statements other than statements of historical fact made in this report are forward-looking. In particular, the statements herein regarding industry prospects and future results of operations or financial position are forward-looking statements. These forward-looking statements can be identified by the use of words such as “believes,” “estimates,” “could,” “possibly,” “probably,” anticipates,” “projects,” “expects,” “may,” “will,” or “should” or other variations or similar words. No assurances can be given that the future results anticipated by the forward-looking statements will be achieved. Forward-looking statements reflect management’s current expectations and are inherently uncertain. If underlying assumptions prove inaccurate or unknown risks or uncertainties materialize, our actual results may differ significantly from management’s expectations. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q or, in the case of documents referred to or incorporated by reference, the date of those documents.
The following discussion and analysis should be read in conjunction with our unaudited financial statements, included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management.
Company Overview and Description of Business
On April 21, 2023, the Company completed its acquisition of AI-enabled wealth management technology platform provider, Fyniti Global Equities EBT Inc. (“Fyniti”) for 2,500,000 shares of Series B $10.00 Preferred Stock.
Fyniti, (www.fyniti.com, www.fynitiiq.com) is a Fintech developer and provider of technology that combines Artificial Intelligence/Machine Learning (AI/ML) driven Quantitative investing (IQ Engine) with AI-enabled wealth management Electronic Block Trading (“EBT”) technology.
On August 14, 2023, the Company filed a Certificate of Change with the Nevada Secretary of State to increase the authorized shares of the Company’s common stock to 3,000,000,000.
Results of Operations
Management’s discussion and analysis of financial condition and results of operations (“MD&A”) includes a discussion of the consolidated results from operations of SMC Entertainment, Inc. and its subsidiary for the three and nine months ended September 30, 2023 and 2022.
Three Months Ended September 3 0, 2023 Compared to the Three Months Ended September 3 0, 2022
Revenue
We had no revenue for the three months ended September 30, 2023 and 2022.
13
General and Administrative Expenses
General and Administrative expenses for the three months ended September 30, 2023 was $110,904 as compared to $41,355 for the comparable prior period, an increase of $69,549 or 168.2%. The increase in the current period is primarily due to additional expense for Fyniti.
Compensation Expense – Related Party
Compensation Expense – Related Party for the three months ended September 30, 2023 was $233,100 as compared to $144,600 for the comparable prior period, an increase of $88,500 or 61.2%. We incur compensation expenses for our CEO and COO. In the current period we accrued a total of $140,000 per the terms of their consulting agreements and granted shares of common stock for total non-cash expense of $93,000. In the prior period we accrued a total of $127,500 per the terms of their consulting agreements and granted shares of common stock for total non-cash expense of $17,100.
Amortization Expense
For the current three months period ended September 30, 2023, we recognized $727,500 of amortization expense for our intangible assets acquired with the acquisition of Fyniti.
Other Income (Expense)
Total other expense for the three months ended September 30, 2023, was $22,097 as compared to total other income of $229,984 for the comparable prior period. In the current period we had interest expense of $8,002, a gain on conversion of convertible debt of $7,638, a loss on conversion of debt of $45,815 and a gain of $24,082 related to the change in fair value of derivatives. In the prior period we had interest expense of $24,451, a gain of $234,435 related to the change in the fair value of derivatives and other income of $20,000.
Net Loss
Our net loss for the three months ended September 30, 2023, was $1,093,601 as compared with a net income of $44,029 for the comparable prior period, an increase to our net loss of $1,137,630. The change from net income to the net loss is due to the decrease in other income for the change in the fair value of derivatives and to the addition of the amortization expense for intangible assets.
Nine Months Ended September 3 0, 2023 Compared to the Nine Months Ended September 3 0, 2022
Revenue
We had no revenue for the nine months ended September 30, 2023 and 2022.
General and Administrative Expenses
General and Administrative expenses for the nine months ended September 30, 2023 was $245,754 as compared to $201,462 for the comparable prior period, an increase of $44,292 or 22%. The increase in the current period is primarily due to the additional G&A expense for Fyniti of approximately $49,000. In the current period we also had decrease in investor relation expense of $93,000, which was offset with an increase in legal fees of $31,750 and public relation expense of $18,000.
Compensation Expense – Related Party
Compensation Expense – Related Party for the nine months ended September 30, 2023 was $521,200 as compared to $2,813,075 for the comparable prior period, a decrease of $2,291,875 or 81.5%. We incur compensation expenses for our CEO and COO. In the current period we accrued a total of $420,000 per the terms of their consulting agreements and granted shares of common stock for total non-cash expense of $101,200. In the prior period we accrued a total of $382,500 per the terms of their consulting agreements and granted shares of common stock for total non-cash expense of $2,430,575.
14
Other Income (Expense)
Total other expense for the nine months ended September 30, 2023, was $318,633 as compared to total other income of $1,332,089 for the comparable prior period. In the current period we had interest expense of $21,428, a gain on conversion of convertible debt of $7,638 and a loss of 259,028 related to the change in fair value of derivatives. In the prior period we had interest expense of $64,291 and a gain of $1,376,380 related to the change in the fair value of derivatives.
Amortization Expense
For the current period ended September 30, 2023, we recognized $1,455,000 of amortization expense for our intangible assets acquired with the acquisition of Fyniti.
Net Loss
Our net loss for the nine months ended September 30, 2023, was $2,540,587 as compared with a net loss of $1,682,448 for the comparable prior period, an increase to our net loss of $858,139. The increase in net loss is due to the decrease in other income for the change in the fair value of derivatives and to the addition of the amortization expense for intangible assets.
Liquidity and Capital Resources
During the nine months ended September 30, 2023, we used $127,589 of cash in operations compared to $170,501 used in the prior period.
As of September 30, 2023, we had convertible notes, including accrued interest, due of $1,225,090.
Off-Balance Sheet Arrangements
As of September 30, 2023, the Company had no off-balance sheet arrangements.
Going Concern
Our auditors have expressed substantial doubt as to our ability to continue as a going concern. The accompanying financial statements have been prepared on a going concern basis. For the nine months ended September 30, 2023, the Company had a net loss of $2,540,587, had net cash used in operating activities of $127,589 and an accumulated deficit of $18,540,591. These matters raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the date of this filing. The Company’s ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to meet its obligations and repay its 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 the Company’s capital requirements by continuing to issue additional equity and debt securities. The outcome of these matters cannot be predicted at this time and there are no assurances that, if achieved, the Company will have sufficient funds to execute its business plan or generate positive operating results. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Off Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements.
Critical Accounting Policies
Refer to Note 2 for a condensed discussion of our critical accounting policies and to our Form 10, which includes our audited financial statements for the year ended December 31, 2022, for a full discussion of our critical accounting policies.
15
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this Item.
ITEM 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation of the effectiveness of disclosure controls and procedures as of the end of the period covered by this report under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. Based on that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures during the nine months ended September 30, 2023 were not effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. The term “disclosure controls and procedures,” as defined under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Notwithstanding the identified material weaknesses, management believes the financial statements included in this quarterly report on Form 10-Q fairly represent in all material respects our financial condition, results of operations and cash flows at and for the periods presented in accordance with U.S. GAAP.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the Exchange Act that occurred during quarter ended September 30, 2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
16
PART II
ITEM 1. Legal Proceedings
There are no claims, actions, suits, proceedings, or investigations that are currently pending or, to the Company’s knowledge, threatened by or against the Company or respecting its operations or assets, or by or against any of the Company’s officers, directors, or affiliates.
Item 1A. Risk Factors.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this Item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None
Item 3. Defaults Upon Senior Securities .
None
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None
17
Item 6. Exhibits.
(a) Exhibits.
| Exhibit No. | Description | |
| 31.1 | Rule 13a14(a)/15d-14(a) Certification of Chief Executive Officer | |
| 32.1 | Section 1350 Certification of Chief Executive Officer and Chief Financial Officer | |
| 101.INS* | Inline XBRL Instance Document(1) | |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document(1) | |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document(1) | |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document(1) | |
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document(1) | |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document(1) |
18
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: December 22, 2023 | SMC ENTERTAINMENT, INC. | ||
| By: | /s/ Erik Blum | ||
| Name: | Erik Blum | ||
| Title: | Chief Executive Officer & Chief Financial Officer | ||
| (Principal Executive Officer, Principal Financial Officer) and Director | |||
19