ALL FOR ONE MEDIA CORP. Forward Looking Statements
Except for historical information, the following Management's Discussion and
Analysis contains forward-looking statements based upon current expectations
that involve certain risks and uncertainties. Such forward-looking statements
include statements regarding, among other things, (a) discussions about the
entertainment industry and trends, (b) our projected sales and profitability,
(c) our growth strategies, (d) anticipated trends in our industry, (e) our
future financing plans, (f) our anticipated needs for working capital, (g) our
lack of operational experience and (h) the benefits related to ownership of our
common stock. Forward-looking statements, which involve assumptions and describe
our future plans, strategies, and expectations, are generally identifiable by
use of the words "may," "will," "should," "expect," "anticipate," "estimate,"
"believe," "intend," or "project" or the negative of these words or other
variations on these words or comparable terminology. This information may
involve known and unknown risks, uncertainties, and other factors that may cause
our actual results, performance, or achievements to be materially different from
the future results, performance, or achievements expressed or implied by any
forward-looking statements. These statements may be found under "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Description of Business," as well as in this Report generally. Actual events or
results may differ materially from those discussed in forward-looking statements
as a result of various factors, including, without limitation, the following:
economic, social and political conditions, global economic downturns resulting
from extraordinary events such as the COVID-19 pandemic and other securities
industry risks; interest rate risks; liquidity risks; credit risk with clients
and counterparties; systems failures, delays and capacity constraints; network
security risks; competition; reliance on external service providers; new laws
and regulations affecting our business; net capital requirements; extensive
regulation, regulatory uncertainties and legal matters; failure to maintain
relationships with employees, customers, business partners or governmental
entities; the inability to achieve synergies or to implement integration plans
and other consequences associated with risks and uncertainties detailed in our
filings with the
We caution that the foregoing list of factors is not exclusive, and new factors may emerge, or changes to the foregoing factors may occur, that could impact our business. We undertake no obligation to publicly update or revise these statements, whether as a result of new information, future events or otherwise, except to the extent required by the federal securities laws.
Overview
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The Company expects to generate revenues from movie receipts, sales, downloads and streaming of original recorded music, videos, motion pictures, music publishing, live performances, licensed merchandise and corporate sponsorships.
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Our full-length PG13-rated feature film, Drama Drama, was released on
This first window in the release process will be followed by SVOD (Streaming),
International Sales, Cable and Broadcast TV. In addition, the Drama Drama
Official Soundtrack has been released through all major music streaming
platforms on
As previously discussed, Drama Drama, the motion picture, has tested well with our target tween and teen demographic in its own right, but has also been designed to serve as a 100-minute launch vehicle for Drama Drama, the girl group.
Our goal is to generate revenues related to the Drama Drama franchise from the movie, music, merchandising, live concert performances, and additional sources.
Results of Operations
Comparison for the Years Ended
Net Revenues
The Company principally engaged in content development of media targeted at the "tween" demographic consisting of children between the ages of seven and fourteen.
· During the year endedSeptember 30, 2020 , we generated minimal revenues of$9,762 from streaming music sales. · During the year endedSeptember 30, 2019 , we generated minimal revenues of$6,603 from streaming music sales. Operating Expenses For the years endedSeptember 30, 2020 , and 2019, operating expenses consisted of the following: For Years Ended September 30, 2020 2019 Compensation expense$ 98,180 $ 156,972
Professional and consulting expense 124,262 837,811 Impairment expense
15,216 3,284,062
General and administrative expense 136,298 415,321
Total $ 373,956 $ 4,694,166
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Compensation expense:
· For the year ended September 30, 2020 , compensation expense decreased by
$58,792 or 37%, as compared to the year ended September 30, 2019 . The
decrease was primarily attributable to a decrease in stock-based compensation
of $116,792 offset by a decrease in gain on forgiveness of salary of $56,000 .
Professional and consulting expense:
· For the year endedSeptember 30, 2020 , professional and consulting expense decreased by$713,549 or 85%, as compared to the year endedSeptember 30, 2019 . The decrease was primarily attributable to a decrease in stock-based consulting fees of$440,936 , decrease in consulting fees of$185,462 , decrease in professional fees of$20,628 , decrease in in legal fees of$60,793 offset by increase in accounting fee of$5,730 . Impairment expense: · For the year endedSeptember 30, 2020 , impairment expense decreased by$3,268,846 or 99.54%, as compared to the year endedSeptember 30, 2019 . The decrease was primarily attributable to the impairment of film cost of$3,284,062 in 2019.
General and administrative expense:
· For the year endedSeptember 30, 2020 , general and administrative expense decreased by$279,023 or 67%, as compared to the year endedSeptember 30, 2019 . The decrease was primarily attributable to decrease in marketing expense of$163,766 , a decrease in office expense of$33,393 , a decrease in public company filing fees of$18,396 , a decrease in travel and entertainment expense of$54,509 and a decrease in utilities expense of$7,226 . Other Income (Expenses), net
· For the year ended
$8,379,106 as compared to$2,810,944 for the year endedSeptember 30, 2019 , an increase of$5,568,162 or 198%. This increase was primarily due to the increase in loss on change in fair value of derivative liabilities of$7,369,999 , increase in loss on extinguishment of debt of$2,466,545 , increase in loss from sale of a subsidiary of$45,840 and increase on gain on sale of investment of$20,000 offset by a decrease in initial derivative expense of$4,571,703 , decrease in offering cost of$40,000 , decrease in interest expense of$907,292 , decrease in profit interest recovery of$1,224,773 . Net Loss
· For the year ended
Media Corp. amounted to$8,734,244 or$(0.01) per share (basic and diluted), compared to$7,113,354 or$(0.10) per share (basic and diluted) for the year endedSeptember 30, 2019 , an increase of$1,620,890 or 23% resulting from changes discussed above.
Liquidity and Capital Resources
Liquidity is the ability of an enterprise to generate adequate amounts of cash
to meet its needs for cash requirements. We had a working capital deficit of
September 30, September 30, Percentage
2020 2019 Change Change
Working capital
deficit:
Total current assets $ 10,103 $ 155,586 $ (145,483 ) 94 %
Total current
liabilities (17,603,423 ) (9,905,776 ) (7,697,647 ) 78 %
Working capital
deficit: $ (17,593,320 ) $ (9,750,190 ) $ (7,843,130 ) 80 %
The increase in working capital deficit was primarily attributable to a decrease
in current assets of
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Cash Flows
Changes in our cash balance are summarized as follows:
Years Ended
September 30,
2020 2019
Net cash used in operating activities $ (189,617 ) $ (1,824,645 ) Net cash provided by (used in) investing activities (179,100 ) 25,000 Net cash provided by financing activities
267,784 1,844,337
Net change in cash $ (100,933 ) $ 44,692
Net cash used in operating activities was
· Net cash used in operating activities for the year ended
primarily reflected our net loss of $8,743,300 adjusted for the add-back on
non-cash items such as amortization of debt discounts of $1,732,387 ,
stock-based compensation expense of $176 , loss from extinguishment of debt of
$29,590 , impairment of deposits of $15,216 , loss from sale of subsidiary of
$45,840 , gain on sale of investment of $(20,000) , initial derivative expense
of $120,078 , loss on change in fair value of derivative liabilities of
$5,064,135 , non-cash interest expense of $10,500 , non-cash default penalty
interest of $657,715 and changes in operating asset and liabilities
consisting primarily of a decrease in prepaid expenses of $29,334 , decrease
in deposits of $25,000 , increase in accounts payable and accrued liabilities
of $41,571 , increase in accounts payable and accrued liabilities - related
party of $60,020 and increase in accrued interest of $742,122 .
· Net cash used in operating activities for the year ended
primarily reflected our net loss of $7,498,507 adjusted for the add-back on
non-cash items such as amortization of debt discounts of $3,056,096 ,
stock-based compensation expense of $560,635 , gain from extinguishment of
debt of $(2,436,955) , impairment of offering cost of $40,000 , impairment of
film cost of $3,284,062 , profit interest recovery of $(1,224,773) , initial
derivative expense of $4,691,781 , gain on change in fair value of derivative
liabilities of $(2,305,865) , non-cash interest expense of $1,000 and changes
in operating asset and liabilities consisting primarily of an increase in
prepaid expenses of $19,045 , increase in deposits of $25,000 , increase in
film production cost of $67,995 , decrease in accounts payable and accrued
liabilities of $167,939 offset by increase in accounts payable and accrued
liabilities - related party of $1,036 , increase in accrued interest of
$286,824 .
Net cash used in investing activities was
· Net cash used in investing activities for the year ended
consisted of proceeds from sale of subsidiary of
of investment of
cash disposed from sale of subsidiary of
· Net cash used in investing activities for the year ended
consisted of proceeds from sale of membership interest of $125,000 offset by
advance on film rights of $100,000 .
Net Cash Provided by Financing Activities
Net cash provided by financing activities was
· Net cash used in investing activities for the year endedSeptember 30, 2020 , consisted of proceeds from advance from a related party of$12,000 , proceeds from sale of common stock of$3,334 , proceeds from note payable of$150,000 and net proceeds from convertible notes payable of$107,450 , offset by$5,000 payment of advance from a related party. · Net cash used in investing activities for the year endedSeptember 30, 2019 , consisted of proceeds from sale of common stock of$5,087 , proceeds from notes payable$100,000 , net proceeds from convertible notes payable of$3,740,750 offset by payments on convertible notes payable of$1,961,500 and payments on note payable of$40,000 . Cash Requirements
We currently have no external sources of liquidity, such as arrangements with credit institutions or off-balance sheet arrangements that will have or are reasonably likely to have a current or future effect on our financial condition or immediate access to capital. We expect to require additional financing to fund our current operations for fiscal 2021. There is no assurance that we will be able to obtain additional financing on acceptable terms or at all.
If we are unable to raise the funds required to fund our operations, we will seek alternative financing through other means, such as borrowings from institutions or private individuals. There can be no assurance that we will be able to raise the capital we need for our operations from the sale of our securities. We have not located any sources for these funds and may not be able to do so in the future. We expect that we will seek additional financing in the future. However, we may not be able to obtain additional capital or generate sufficient revenues to fund our operations. If we are unsuccessful at raising sufficient funds, for whatever reason, to fund our operations, we may be forced to cease operations. If we fail to raise funds, we expect that we will be required to seek protection from creditors under applicable bankruptcy laws.
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Going Concern
The accompanying consolidated financial statements are prepared on a going
concern basis which contemplates the realization of assets and satisfaction of
liabilities and commitments in the normal course of business As reflected in the
accompanying consolidated financial statements, the Company had a net loss and
net cash used in operations of
The condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. While the Company believes in the viability of its strategy to generate revenues, there can be no assurances to that effect.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations
are based upon our financial statements, which have been prepared in accordance
with
Use of Estimates
In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheet, and expenses for the period then ended. Actual results may differ significantly from those estimates. Significant estimates made by management include but are not limited to asset valuations including film cost, deposits, advances on film rights, the fair value of common stock issued, the valuation of derivative liabilities, the valuation of stock-based compensation and the valuation of deferred tax assets.
Fair Value Measurements and Fair Value of Financial Instruments
FASB ASC 820 - Fair Value Measurements and Disclosures, defines fair value as
the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the
measurement date. FASB ASC 820 requires disclosures about the fair value of all
financial instruments, whether or not recognized, for financial statement
purposes. Disclosures about the fair value of financial instruments are based on
pertinent information available to the Company on
The three levels of the fair value hierarchy are as follows:
Level 1: Inputs are unadjusted quoted prices in active markets for identical
assets or liabilities available at the measurement date.
Level 2: Inputs are unadjusted quoted prices for similar assets and liabilities
in active markets, quoted prices for identical or similar assets and
liabilities in markets that are not active, inputs other than quoted
prices that are observable, and inputs derived from or corroborated by
observable market data.
Level 3: Inputs are unobservable inputs which reflect the reporting entity's own
assumptions on what assumptions the market participants would use in
pricing the asset or liability based on the best available information.
The carrying amounts reported in the consolidated balance sheets for cash, due from and to related parties, prepaid expenses, accounts payable and accrued liabilities approximate their fair market value based on the short-term maturity of these instruments.
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Film Production Costs
The Company capitalizes costs which were used in the production of films
according to ASC 926, Entertainment - Films. For films produced by the Company,
capitalized costs include all direct production and financing costs, capitalized
interest and production overhead. Production overhead includes the costs of
individuals or departments with exclusive or significant responsibility for the
production of films. Production overhead does not include general and
administrative expenses and marketing, selling and distribution costs.
Capitalization of interest costs should generally commence when a film is set
for production and end when a film is substantially complete and ready for
distribution. Filming the Movie was completed in
Pursuant to ASC 926-20-35, the Company will begin to amortize capitalized film cost when a film is released, and it begins to recognize revenue from the film. These costs for an individual film are amortized and participation costs (see below) are accrued to direct operating expenses in the proportion that current year's revenues bear to management's estimates of the ultimate revenue at the beginning of the current year expected to be recognized from the exploitation, exhibition or sale of such film. Ultimate revenue includes estimates over a period not to exceed ten years following the date of initial release of the motion picture.
Parties involved in the production of a film may be compensated in part by contingent payments based on the financial results of a film pursuant to contractual formulas (participations) and by contingent amounts due under provisions of collective bargaining agreements (residuals). Such parties are collectively referred to as participants, and such costs are collectively referred to as participation costs. Participations may be given to creative talent, such as actors or writers, or to entities from whom distribution rights are licensed. Participation costs are typically recognized evenly as the ultimate revenues are earned.
Unamortized film costs are tested for impairment when there is an indication that the fair value of the film may be less than unamortized costs. Consistent with the rules for recognizing impairment of long-lived assets in ASC 926, the standard sets forth examples of events or changes in circumstances that indicate that the entity must assess whether the fair value of the film (whether it has been completed or is still in production) is less than the carrying amount of its unamortized film costs.
1. An adverse change in the expected performance of the film prior to its
release,
2. Actual costs substantially in excess of budgeted costs,
3. Substantial delays in completion or release schedules,
4. Changes in release plans, such as a reduction in the initial release
pattern,
5. Insufficient funding or resources to complete the film and to market it
effectively,
6. Actual performance subsequent to release fails to meet prerelease
expectations. (ASC 926-20-35-12)
Derivative Liabilities
The Company has certain financial instruments that are embedded derivatives associated with capital raises. The Company evaluates all its financial instruments to determine if those contracts or any potential embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC 815-10 - Derivative and Hedging - Contract in Entity's Own Equity. This accounting treatment requires that the carrying amount of any derivatives be recorded at fair value at issuance and marked-to-market at each balance sheet date. In the event that the fair value is recorded as a liability, as is the case with the Company, the change in the fair value during the period is recorded as either other income or expense. Upon conversion, exercise or repayment, the respective derivative liability is marked to fair value at the conversion, repayment, or exercise date and then the related fair value amount is reclassified to other income or expense as part of gain or loss on debt extinguishment.
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Stock-Based Compensation
Stock-based compensation is accounted for based on the requirements of ASC 718,
Share-Based Payment, which requires recognition in the financial statements of
the cost of employee and director services received in exchange for an award of
equity instruments over the period the employee or director is required to
perform the services in exchange for the award (presumptively, the vesting
period). The
The expense is recognized over the vesting period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. The Company records compensation expense based on the fair value of the award at the reporting date. The awards to consultants and other third parties are then revalued, or the total compensation is recalculated, based on the then current fair value, at each subsequent reporting date.
Revenue Recognition
The Company adopted and implemented on
Upon implementation of ASU 606, the Company recognizes revenue in accordance with that core principle by applying the following steps:
Step 1: Identify the contract(s) with a customer.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligations in the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.
Recent Accounting Pronouncements
Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
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