UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended
OR
For the transition period from to
Commission
File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation) | (IRS Employer Identification Number) | |
| (Address of principal executive offices) (Zip Code) | ||
| (Registrant’s telephone number, including area code) | ||
N/A (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) | ||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The
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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 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 (§ 232.405 of this chapter) 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 Exchange Act). ☐ Yes
As of August 6, 2024, the registrant had shares of common stock issued and outstanding.
TABLE OF CONTENTS
| PART I — FINANCIAL INFORMATION | 2 | |
| Item 1. | Financial Statements. | 2 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. | 33 |
| Item 3. | Quantitative and Qualitative Disclosure About Market Risk. | 60 |
| Item 4. | Controls and Procedures. | 60 |
| PART II — OTHER INFORMATION | 61 | |
| Item 1. | Legal Proceedings. | 61 |
| Item 1A. | Risk Factors. | 61 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. | 61 |
| Item 3. | Defaults Upon Senior Securities. | 61 |
| Item 4. | Mine Safety Disclosures. | 61 |
| Item 5. | Other Information. | 61 |
| Item 6. | Exhibits. | 62 |
| Signatures | 63 | |
| 1 |
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements.
LOOP MEDIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, 2024 | September 30, 2023 | |||||||
| (UNAUDITED) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Content assets, current | ||||||||
| Total current assets | ||||||||
| Deposits | ||||||||
| Content assets, non-current | ||||||||
| Deferred costs, non-current | ||||||||
| Property and equipment, net | ||||||||
| Right-of-use assets | ||||||||
| Intangible assets, net | ||||||||
| Total non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Accrued royalties and revenue share | ||||||||
| Equipment financing liability, current | ||||||||
| License content liability, current | ||||||||
| Deferred income | ||||||||
| Lease liability, current | ||||||||
| Revolving line of credit, current | ||||||||
| Non-revolving line of credit - related party, current | ||||||||
| Non-revolving line of credit, current | ||||||||
| Total current liabilities | ||||||||
| License content liability, non-current | ||||||||
| Equipment financing liability, non-current | ||||||||
| Lease liability, non-current | ||||||||
| Non-revolving line of credit | ||||||||
| Non-revolving line of credit, related party | ||||||||
| Revolving line of credit, related party | ||||||||
| Total non-current liabilities | ||||||||
| Total liabilities | ||||||||
| Stockholders’ equity (deficit) | ||||||||
| Common Stock, $ par value, shares authorized, and shares issued and outstanding as of June 30, 2024, and September 30, 2023, respectively | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity (deficit) | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ equity (deficit) | $ | $ | ||||||
See the accompanying notes to the consolidated financial statements
| 2 |
LOOP MEDIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| Three months ended June 30, | Nine months ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of revenue | ||||||||||||||||
| Cost of revenue - Advertising and Legacy and other revenue | ||||||||||||||||
| Cost of revenue - depreciation and amortization | ||||||||||||||||
| Total cost of revenue | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Sales, general and administrative | ||||||||||||||||
| Stock-based compensation | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Restructuring costs | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from Operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss on extinguishment of debt | ( | ) | ||||||||||||||
| Employee retention credits | ||||||||||||||||
| Other expense | ( | ) | ( | ) | ||||||||||||
| Total Other income (expense) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss before income taxes | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Income tax expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic and diluted net loss per common share (Note 2) | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted average number of common shares outstanding | ||||||||||||||||
See the accompanying notes to the consolidated financial statements
| 3 |
LOOP MEDIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE NINE MONTHS ENDED June 30, 2024, and 2023
(UNAUDITED)
| Common Stock | Additional Paid | Accumulated | ||||||||||||||||||
| Shares | Amount | in Capital | Deficit | Total | ||||||||||||||||
| Balances, September 30, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Stock-based compensation | — | |||||||||||||||||||
| Warrants issued for debt | — | |||||||||||||||||||
| Shares issued for consulting fees | ||||||||||||||||||||
| Shares issued for debt conversion | ||||||||||||||||||||
| Shares issued for capital raise costs | ||||||||||||||||||||
| Shares issued upon warrant exercises | ||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Balances, December 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Stock-based compensation | — | |||||||||||||||||||
| Warrants issued for debt | — | |||||||||||||||||||
| Shares issued for vested RSUs | ( | ) | ( | ) | ||||||||||||||||
| Shares issued for capital raise costs | ||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Balances, March 31, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Stock-based compensation | — | |||||||||||||||||||
| Pre-funded warrants issued for cash | — | |||||||||||||||||||
| Shares issued for cash | ||||||||||||||||||||
| Shares issuance cost | — | ( | ) | ( | ||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Balances, June 30, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Common Stock | Additional Paid | Accumulated | ||||||||||||||||||
| Shares | Amount | in Capital | Deficit | Total | ||||||||||||||||
| Balances, September 30, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Balances, December 31, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||
| Short swing profit recovery | — | |||||||||||||||||||
| Issuance costs from uplist of stock | — | ( | ) | ( | ) | |||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Balances, March 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Stock-based compensation | — | |||||||||||||||||||
| Warrants issued for consulting fees | — | |||||||||||||||||||
| Warrants issued in conjunction with debt | — | |||||||||||||||||||
| Shares issued for cash under ATM, net | ||||||||||||||||||||
| Shares issued upon option exercises | ||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Balances, June 30, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
See the accompanying notes to the consolidated financial statements
| 4 |
LOOP MEDIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Nine months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Amortization of debt discount | ||||||||
| Depreciation and amortization expense, PPE | ||||||||
| Amortization of deferred costs, ATM | ||||||||
| Amortization of content assets | ||||||||
| Amortization of right-of-use assets | ||||||||
| Bad debt expense | ||||||||
| Loss on extinguishment of debt converted to equity | ||||||||
| Stock-based compensation | ||||||||
| Stock option exercise | ||||||||
| Shares issued for consulting fees | ||||||||
| Change in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Inventory | ||||||||
| Prepaid expenses | ||||||||
| Deposit | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Accrued liabilities | ( | ) | ( | ) | ||||
| Accrued royalties and revenue share | ( | ) | ||||||
| License content liability | ( | ) | ( | ) | ||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Equipment financing liability | ||||||||
| Deferred income | ( | ) | ||||||
| NET CASH USED IN OPERATING ACTIVITIES | ( | ( | ) | |||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| NET CASH USED IN INVESTING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from issuance of common stock, registered direct offering | ||||||||
| Proceeds from issuance of pre-funded warrants | ||||||||
| Proceeds from issuance of common stock, ATM | ||||||||
| Proceeds from exercise of warrants | ||||||||
| Proceeds from lines of credit | ||||||||
| Repayments on lines of credit | ( | ) | ( | ) | ||||
| Value of shares withheld for taxes | ( | ) | ||||||
| Common stock issuance costs for uplist | ( | ) | ||||||
| Deferred costs | ( | ) | ||||||
| Shares issuance costs | ( | ) | ||||||
| Payment of acquisition related consideration | ( | ) | ||||||
| Debt issuance costs | ( | ) | ||||||
| Short swing profit recovery | ||||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | ||||||||
| Change in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW STATEMENTS | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES OF NON CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Shares issued for debt conversion | $ | $ | ||||||
| Deferred costs for warrants issued for debt | $ | $ | ||||||
| Unpaid additions to licensed content and internally-developed content | $ | $ | ||||||
| Unpaid deferred costs | $ | $ | ||||||
| Unpaid additions to property and equipment | $ | $ | ||||||
| Leased assets obtained in exchange for new operating lease liabilities | $ | |||||||
See the accompanying notes to the consolidated financial statements
| 5 |
LOOP MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2024
(UNAUDITED)
NOTE 1 – BUSINESS
Loop Media, Inc., a Nevada corporation, (collectively, “Loop Media,” the “Company,” “we,” “us” or “our”) is a multichannel digital video platform media company that uses marketing technology, or “MarTech,” to generate our revenue and offer our services. Our technology and vast library of videos and licensed content enable us to curate and distribute short-form videos to connected televisions (“CTV”) in out-of-home (“OOH”) dining, hospitality and retail establishments, convenience stores and other locations and venues to enable them to inform, entertain and engage their customers. Our technology also provides businesses the ability to promote and advertise their products via digital signage and provides third-party advertisers with a targeted marketing and promotional tool for their products and services. We also allow our business clients to access our service without advertisements by paying a monthly subscription fee. In the second and third quarters of fiscal year 2024, we have continued to work toward the expansion of our subscription offerings, including toward the introduction of a two-tier music video service offering, which will include a “primary tier” consisting of fewer than ten music video channels provided under a free ad-based service, and a “premium tier” of the full library of curated music video channels provided under a subscription service. We also recently announced a non-music subscription offering that includes a number of live channels ranging from live sports events to news and culture offerings.
We offer hand-curated music video content licensed from major and independent record labels, including Universal Music Group (“Universal”), Sony Music Entertainment (“Sony”), and Warner Music Group (“Warner” and collectively with Universal and Sony, the “Music Labels”), as well as non-music video content. Our non-music video content is predominantly licensed or acquired from third parties, including action sports clips, drone and nature footage, trivia, news headlines, lifestyle channels and kid-friendly videos, as well as movie, television and video game trailers, amongst other content. We distribute our content and advertising inventory to digital screens located in OOH locations primarily through (i) our owned and operated platform (the “O&O Platform”) of Loop Media-designed “small-box” streaming Android media players (“Loop Players”) and legacy ScreenPlay (as defined below) computers and (ii) through screens (“Partner Screens”) on digital platforms owned and operated by third parties (each a “Partner Platform” and collectively, the “Partner Platforms,” and together with the O&O Platform, the “Loop Platform”).
As
of June 30, 2024, we had approximately
We define an “active unit” as (i) an ad-supported Loop Player or digital out-of-home (“DOOH”) location using our ad- supported service through our “Loop for Business” application or using a DOOH venue-owned computer screening our content, that is online, used on our O&O Platform, playing content and has checked into the Loop Media analytics system at least once in the 90-day period ending on the date of measurement, or (ii) a DOOH location customer using our subscription service on our O&O Platform at any time during the 90-day period. We use “QAU” to refer to the number of such active units during such period. We do not count towards our QAUs any Loop Players or screens used on our Partner Platform.
Liquidity and management’s plan
As shown in the accompanying consolidated financial statements, we have incurred recurring losses resulting in an accumulated deficit. We anticipate further losses in the foreseeable future. We also had negative cash flows used in operations. These factors raise substantial doubt about our ability to continue as a going concern. Our primary source of operating funds since inception has been cash proceeds from the sale of our common stock, par value $ per share (the “Common Stock”) and debt and equity financing transactions. Our ability to continue as a going concern is dependent upon our ability to generate sufficient revenue and our ability to raise additional funds by way of our debt and equity financing efforts.
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. These unaudited consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary if we are unable to continue as a going concern. Our ability to continue as a going concern is dependent on our ability to supplement our cash from revenues with additional cash raised from equity investment or debt transactions while maintaining reduced spending levels. As previously disclosed, we have continued to explore potential strategic alternatives to maximize shareholder value and to evaluate potential financing opportunities.
| 6 |
Shelf Registration ($50 Million ATM)
On
December 22, 2022, we filed a Shelf Registration Statement on Form S-3 that has been declared effective by the SEC. On May 12, 2023,
we entered into an At-the-Market (“ATM”) Issuance Sales Agreement (the “ATM Sales Agreement”) with B. Riley Securities,
Inc. (the “Agent”) pursuant to which we may offer and sell, from time to time through the Agent, shares of our Common Stock,
for aggregate gross proceeds of up to $
As previously disclosed, effective May 31, 2024, the Company and the Agent terminated the ATM Sales Agreement. We are not subject to any termination penalties related to the termination of the ATM Sales Agreement.
During the nine months ended June 30, 2024, we did not raise any funds through sales under the ATM Sales Agreement.
GemCap Revolving Line of Credit
Effective
as of July 29, 2022, we entered into a Loan and Security Agreement with Industrial Funding Group, Inc. (the “Initial Lender”)
for a revolving loan credit facility for the initial principal sum of up to $
Effective
as of October 27, 2022, we entered into Amendment Number 1 to the Loan and Security Agreement and to the Revolving Loan Agreement Schedule,
and the Amended and Restated Secured Promissory Note (Revolving Loans) with the Senior Lender to increase the principal sum available
under the GemCap Revolving Line of Credit Agreement from $
Effective July 29, 2024, we entered into Amendment Number 2 to the Loan and Security Agreement, the Loan Agreement Schedule, the Revolving Loan Note and to the other Loan Documents to amend certain material terms, including to (i) extend the maturity date of the GemCap Revolving Line of Credit Agreement by one (1) year, from July 29, 2024, to July 29, 2025, and (ii) to make Retail Media TV, Inc., our wholly-owned subsidiary, a co-borrower thereunder.
The
GemCap Revolving Line of Credit had an original maturity date of July 29, 2024, and began accruing interest on the unpaid principal balance
of advances, payable monthly in arrears, on September 7, 2022, at an annual rate equal to the greater of (I) the sum of (i) the “Prime
Rate” as reported in the “Money Rates” column of The Wall Street Journal, adjusted as and when such Prime Rate changes,
plus (ii) zero (
Under
the GemCap Revolving Line of Credit Agreement, we have granted to the Senior Lender a first-priority security interest in all of our
present and future property and assets, including products and proceeds thereof. In connection with the loan, our existing secured
lenders, some of whom are the RAT Lenders under our RAT Non-Revolving Line of Credit (each as defined below) (collectively, the
“Subordinated Lenders”) delivered subordination agreements (the “GemCap Subordination Agreements”) to the
Senior Lender. We are permitted to make regularly scheduled payments, including payments upon maturity, to such subordinated lenders
and potentially other payments subject to a measure of cash flow and receiving certain financing activity proceeds, in accordance
with the terms of the GemCap Subordination Agreements. In connection with the delivery of the GemCap Subordination Agreements by the
Subordinated Lenders, on July 29, 2022, we issued warrants to each Subordinated Lender on identical terms for an aggregate of up to
As
of June 30, 2024, the GemCap Revolving Line of Credit had a balance, including accrued interest, amounting to $
The Registered Offering and the Concurrent Private Placement Offering
On May 31, 2024, we entered into a Securities Purchase Agreement (the “Institutional Purchase Agreement”) with the purchaser named therein (the “Institutional Investor”) and a Securities Purchase Agreement (the “Private Placement Purchase Agreement,” and together with the Institutional Purchase Agreement, the “Purchase Agreements”) with Excel (the “Private Placement Entity,” together with the Institutional Investor, the “Investors”).
Pursuant
to the Institutional Purchase Agreement, we agreed to sell and issue, in a registered direct offering (the “Registered Offering”)
shares (the “Registered Shares”) of our Common Stock at a purchase price per share of $ and pre-funded warrants
(the “Registered Pre-Funded Warrants”) to purchase up to an aggregate of
| 7 |
Pursuant
to the Private Placement Purchase Agreement, in a concurrent private placement (the “Concurrent Private Placement Offering,”
together with the Registered Offering, the “Offerings”), we agreed to sell and issue to the Private Placement Entity pre-funded
warrants (the “Private Pre-Funded Warrants”) to purchase up to an aggregate of
The Purchase Agreements contain customary representations, warranties and agreements of the Company and the Investors and customary indemnification rights and obligations of the parties. Pursuant to the terms of the Institutional Purchase Agreement, we have agreed to certain restrictions, subject to certain exceptions, on the issuance and sale of its Common Stock and securities convertible into shares of Common Stock during the 90-day period following the closing of the Registered Offering. We also agreed not to effect or enter into an agreement to effect any issuance of Common Stock or any securities convertible into or exercisable or exchangeable for shares of Common Stock involving a variable rate transaction (as defined in the Institutional Purchase Agreement), subject to certain exceptions, until the six-month anniversary of the closing of the Registered Offering.
In addition, until the date that is the eighteen-month anniversary of the closing of the Registered Offering, the Institutional Investor is entitled to a participation right in any subsequent financing (as defined in the Institutional Purchase Agreement ) effected by the Company or any of its subsidiaries of Common Stock or Common Stock equivalents for cash consideration, or a combination of units thereof, up to an amount equal to 35% of such subsequent financing on the same terms, conditions and price provided for in the subsequent financing, subject to certain carve-outs as set forth in the Institutional Purchase Agreement.
In
connection with the Offerings, on May 31, 2024, we also entered into a placement agency agreement (the “Placement Agency Agreement”)
with Roth Capital Partners, LLC (the “Placement Agent”). Pursuant to the terms of the Placement Agency Agreement, the Placement
Agent agreed to use its reasonable best efforts to arrange for the sale of the Registered Shares, the Registered Pre-Funded Warrants,
the Registered Pre-Funded Warrant Shares, the Private Pre-Funded Warrants and the Private Pre-Funded Warrant Shares (the “Securities”).
We paid the Placement Agent a cash fee equal to
Pursuant
to the terms of the Placement Agency Agreement, we issued to the Placement Agent warrants (“Placement Agent Warrants”) to
purchase up to
The Registered Offering closed on June 3, 2024, and on July 1, 2024, the Institutional Investor delivered a Notice of Exercise to us to purchase the Registered Pre-Funded Warrant Shares.
The Registered Shares and the Registered Pre-Funded Warrants were offered pursuant to our effective Shelf Registration Statement on Form S-3 (File No. 333-268957), which was previously filed and declared effective by the SEC, the accompanying base prospectus dated January 11, 2023, and a prospectus supplement dated May 31, 2024.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Statements
The following (a) condensed consolidated balance sheet as of September 30, 2023, which has been derived from our audited financial statements, and (b) our unaudited condensed consolidated interim financial statements for the nine months ended June 30, 2024, have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) for interim financial information and the instructions to Form 10-Q and Rule 8-03 of Regulation S-X of the Securities Act of 1933. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended June 30, 2024, are not necessarily indicative of results that may be expected for the year ending September 30, 2024.
These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended September 30, 2023, included in our Annual Report on Form 10-K filed with the SEC on December 19, 2023.
| 8 |
Basis of presentation
The consolidated financial statements include our accounts and our wholly-owned subsidiaries, EON Media Group Pte. Ltd. and Retail Media TV, Inc. The unaudited condensed consolidated financial statements are prepared using the accrual basis of accounting in accordance with US GAAP. All inter-company transactions and balances have been eliminated on consolidation.
Use of estimates
The preparation of the unaudited condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include assumptions used in the revenue recognition of performance obligations, allowance for doubtful accounts, fair value of stock-based compensation awards, income taxes and going concern.
Segment reporting
We report as one reportable segment. Our business activities, revenues and expenses are evaluated by management as one reportable segment.
Cash
Cash
and cash equivalents include all highly liquid monetary instruments with original maturities of three months or less when purchased.
These investments are carried at cost, which approximates fair value. Financial instruments that potentially subject us to concentrations
of credit risk consist primarily of cash deposits. We maintain our cash in institutions insured by the Federal Deposit Insurance Corporation
(“FDIC”). At times, our cash and cash equivalent balances may be uninsured or in amounts that exceed the FDIC insurance limits.
We have not experienced any losses on such accounts. On June 30, 2024, and September 30, 2023, we had
As
of June 30, 2024, and September 30, 2023, approximately $
| 9 |
Accounts receivable
Accounts
receivable represent amounts due from customers. We assess the collectability of receivables on an ongoing basis. A provision for the
impairment of receivables involves significant management judgment and includes the review of individual receivables based on individual
customers, current economic trends and analysis of historical bad debts. As of June 30, 2024, and September 30, 2023, we had recorded
an allowance for doubtful accounts of $
Concentration of credit risk
During
the nine months ended June 30, 2024, we had two customers that each individually comprised greater than 10% of net revenue, representing
During
the nine months ended June 30, 2023, we had two customers that each individually comprised greater than 10% of net revenue, representing
As
of June 30, 2024, two customers accounted for a total of
As
of June 30, 2023, one customer accounted for a total of
We grant credit in the normal course of business to our customers. Periodically, we review past due accounts and make decisions about future credit on a customer-by-customer basis. Credit risk is the risk that one party to a financial instrument will cause a loss for the other party by failing to discharge an obligation.
Prepaid expenses
Expenditures paid in one accounting period which will not be consumed until a future period such as insurance premiums and annual subscription fees are accounted for on the balance sheet as a prepaid expense. When the asset is eventually consumed, it is charged to expense.
Content Assets
We capitalize the fixed content fees and corresponding liability when the license period begins, the cost of the content is known, and the content is accepted and available for streaming. If the licensing fee is not determinable or reasonably estimable, no asset or liability is recorded, and licensing costs are expensed as incurred. We amortize licensed content assets into cost of revenue, using the straight-line method over the contractual period of availability. The liability is paid in accordance with the contractual terms of the arrangement. Internally-developed content costs are capitalized in the same manner as licensed content costs, when the cost of the content is known and the content is ready and available for streaming. We amortize internally-developed content assets into cost of revenue, using the straight-line method over the estimated period of streaming.
Long-lived assets
We
evaluate the recoverability of long-lived assets, including intangible assets, for impairment when events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Conditions that would necessitate an impairment assessment include
a significant decline in the observable market value of an asset, a significant change in the extent or manner that an asset is used,
or a significant adverse change that would indicate that the carrying amount of an asset or group of assets is not recoverable. For long-lived
assets to be held and used, we recognize an impairment loss only if their carrying amount is not recoverable through the undiscounted
cash flows. The impairment loss is based on the difference between the carrying amount and estimated fair value as determined by discounted
future cash flows. Our finite long-lived intangible assets are amortized on a straight-line basis over their estimated useful lives,
which range from to
| 10 |
Property and equipment, net
Property
and equipment are stated at cost, less accumulated depreciation. Depreciation is calculated using the straight-line method over the asset’s
estimated useful life. Our capitalization policy is to capitalize property and equipment purchases greater than $
Loop Players are capitalized as fixed assets and depreciated over the estimated period of use.
See below for estimated useful lives:
| Loop Players | years | |
| Equipment | - years | |
| Software | years |
Operating leases
We determine if an arrangement is a lease at inception. Operating lease right-of-use assets (“ROU assets”) and short-term and long-term lease liabilities are included on the face of the consolidated balance sheet.
ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. We have lease agreements with lease and non-lease components, which are accounted for as a single lease component. For lease agreements with terms less than twelve months, we have elected the short-term lease measurement and recognition exemption, and we recognize such lease payments on a straight-line basis over the lease term.
Fair value measurement
We determine the fair value of our assets and liabilities using a hierarchy established by the accounting guidance that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). The three levels of valuation hierarchy are defined as follows:
| ● | Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets. | |
| ● | Level 2 inputs to the valuation methodology included quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in inactive markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. | |
| ● | Level 3 inputs to the valuation methodology is one or more unobservable inputs which are significant to the fair value measurement. |
| 11 |
The carrying amount of our financial instruments, including cash, accounts receivable, deposits, short-term portion of notes receivable and notes payable, and current liabilities approximate fair value due to their short-term nature. We do not have financial assets or liabilities that are required under US GAAP to be measured at fair value on a recurring basis. We have not elected to use fair value measurement option for any assets or liabilities for which fair value measurement is not presently required.
We record assets and liabilities at fair value on a nonrecurring basis as required by US GAAP. Assets recognized or disclosed at fair value in the condensed consolidated financial statements on a nonrecurring basis include items such as property and equipment, operating lease assets, goodwill, and other intangible assets, which are measured at fair value if determined to be impaired.
On
September 26, 2022, our convertible debentures converted to Common Stock as part of our public offering and uplist to The NYSE
American, LLC (the “NYSE American”), in accordance with the terms of the original debt agreements. As of September 30, 2022, the remaining balance of the
Derivative Liability was written off as part of the conversion to equity. Thus, there is
Advertising costs
We expense all advertising costs as incurred.
Advertising
and marketing costs for the three months ended June 30, 2024, and 2023, were $
Advertising
and marketing costs for the nine months ended June 30, 2024, and 2023, were $
Revenue recognition
We recognize revenue in accordance with ASC 606, Revenue from Contracts with Customers, when it satisfies a performance obligation by transferring control over a product to a customer. Revenue is measured based on the consideration we expect to receive in exchange for those products. In instances where final acceptance of the product is specified by the client, revenue is deferred until all acceptance criteria have been met. For example, we bill subscription services in advance of when the service is performed and revenue is treated as deferred revenue until the service is performed and/or the performance obligation is satisfied. Revenues are recognized under Topic 606 in a manner that reasonably reflects the delivery of our products and services to clients in return for expected consideration and includes the following elements:
| ● | executed contracts with our customers that we believe are legally enforceable; | |
| ● | identification of performance obligations in the respective contract; | |
| ● | determination of the transaction price for each performance obligation in the respective contract; | |
| ● | allocation of the transaction price to each performance obligation; and | |
| ● | recognition of revenue only when we satisfy each performance obligation. |
Our revenue can be categorized into two revenue streams: Advertising revenue and Legacy and other revenue.
| 12 |
The following table disaggregates our revenue by major type for each of the periods indicated:
| Three months ended June 30, | Nine months ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Advertising revenue | $ | $ | $ | $ | ||||||||||||
| Legacy and other revenue | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
Performance obligations and significant judgments
Our performance obligations and recognition patterns for each revenue stream are as follows:
Advertising revenue
For
the three months ended June 30, 2024, and 2023, advertising revenue accounted for
For
the nine months ended June 30, 2024, and 2023, advertising revenue accounted for
For all advertising revenue sources, we evaluate whether we should be considered the principal (i.e., report revenues on a gross basis) or an agent (i.e., report revenues on a net basis). Our role as principal or agent differs based on our performance obligation for each revenue share arrangement.
For both the O&O and Partner Platforms businesses, advertising inventory provided to advertisers through the use of an advertising demand partner or agency, with whose fees or commission is calculated based on a stated percentage of gross advertising spending, we are considered the agent and our revenues are reported net of agency fees and commissions. We are considered the agent because the demand partner or agency controls all aspects of the transaction (pricing risk, inventory risk, obligation for fulfillment) except for the devices used to show the advertisements, therefore we report this advertising revenue net of agency fees and commissions.
We are considered the principal in our arrangements with content providers in our O&O Platform business and with our arrangements with our third-party partners in our Partner Platforms business and thus report revenues on a gross basis (net of agency fees and commissions), wherein the amounts billed to our advertising demand partners, advertising agencies, and direct advertisers and sponsors are recorded as revenues, and amounts paid to content providers and third-party partners are recorded as expenses. We are considered the principal because we control the advertising space, are primarily responsible to our advertising demand partners and other parties filling our advertising inventory, have discretion in pricing and advertising fill rates and typically have an inventory risk.
For advertising revenue, we recognize revenue at the time the digital advertising impressions are filled and the advertisements are played and, for sponsorship revenue, we generally recognize revenue ratably over the term of the sponsorship arrangement as the sponsored advertisements are played.
Legacy and other business revenue
For
the three months ended June 30, 2024, and 2023, legacy and other business revenue accounted for the remaining
For
the nine months ended June 30, 2024, and 2023, legacy and other business revenue accounted for the remaining
| ● | Delivery of streaming services including content encoding and hosting. We recognize revenue over the term of the service based on bandwidth usage. Revenue from streaming services is insignificant. |
| 13 |
| ● | Delivery of subscription content services in customized formats. We recognize revenue straight-line over the term of the service. |
| ● | Delivery of hardware for ongoing subscription content delivery through software. We recognize revenue at the point of hardware delivery. Revenue from hardware sales is insignificant. |
Transaction prices for performance obligations are explicitly outlined in relevant agreements; therefore, we do not believe that significant judgments are required with respect to the determination of the transaction price, including any variable consideration identified.
Customer acquisition costs
Customer acquisition costs consist of marketing costs and affiliate fees associated with the O&O Platform business. They are included in operating expenses and expensed as incurred.
Cost of revenue
Cost of revenue for the O&O Platform and legacy businesses represents the amortized cost of ongoing licensing and hosting fees, which is recognized over time based on usage patterns. The depreciation expense associated with the Loop Players is not included in cost of sales.
Cost of revenue for the Partner Platform business represents hosting fees, amortized costs of internally-developed content, and the revenue share with third party partners (after deduction of allocated infrastructure costs). The cost of revenue is higher with partners within the Partner Platform versus those within the O&O Platform because we leverage our Partner Platform partners’ network of customers and their screens to deliver content and advertising inventory, rather than using our own Loop Players.
Deferred income
Deferred income represents our accounting for the timing difference between when fees are received and when the performance obligation is satisfied.
We account for net loss per share in accordance with ASC subtopic 260-10, Earnings Per Share (“ASC 260-10”), which requires presentation of basic and diluted earnings per share (“EPS”) on the face of the statement of operations for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS.
Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of Common Stock outstanding during each period. It excludes the dilutive effects of any potentially issuable common shares.
Diluted net loss per share is calculated by including any potentially dilutive share issuances in the denominator.
| June 30, 2024 | September 30, 2023 | |||||||
| Options to purchase common stock | ||||||||
| Warrants to purchase common stock | ||||||||
| Restricted Stock Units (RSUs) | ||||||||
| Series A preferred stock | ||||||||
| Series B preferred stock | ||||||||
| Convertible debentures | ||||||||
| Total common stock equivalents | ||||||||
On
December 14, 2023, we entered into Warrant Reprice Letter Agreements with certain holders to amend the exercise price of existing exercisable
warrants to $
On May 31, 2024, we entered into a Securities Purchase Agreement (the “Institutional Purchase Agreement”) with the purchaser named therein (the “Institutional Investor”) and a Securities Purchase Agreement (the “Private Placement Purchase Agreement,” and together with the Institutional Purchase Agreement, the “Purchase Agreements”) with Excel (the “Private Placement Entity,” together with the Institutional Investor, the “Investors”).
| 14 |
Pursuant
to the Institutional Purchase Agreement, we agreed to sell and issue, in a registered direct offering (the “Registered Offering”)
shares (the “Registered Shares”) of our Common Stock at a purchase price per share of $ and pre-funded warrants
(the “Registered Pre-Funded Warrants”) to purchase up to an aggregate of
Pursuant
to the Private Placement Purchase Agreement, in a concurrent private placement (the “Concurrent Private Placement Offering,”
together with the Registered Offering, the “Offerings”), we agreed to sell and issue to the Private Placement Entity pre-funded
warrants (the “Private Pre-Funded Warrants”) to purchase up to an aggregate of
The Purchase Agreements contain customary representations, warranties and agreements of the Company and the Investors and customary indemnification rights and obligations of the parties. Pursuant to the terms of the Institutional Purchase Agreement, we have agreed to certain restrictions, subject to certain exceptions, on the issuance and sale of its Common Stock and securities convertible into shares of Common Stock during the 90-day period following the closing of the Registered Offering. We also agreed not to effect or enter into an agreement to effect any issuance of Common Stock or any securities convertible into or exercisable or exchangeable for shares of Common Stock involving a variable rate transaction (as defined in the Institutional Purchase Agreement), subject to certain exceptions, until the six-month anniversary of the closing of the Registered Offering.
In addition, until the date that is the eighteen-month anniversary of the closing of the Registered Offering, the Institutional Investor is entitled to a participation right in any subsequent financing (as defined in the Institutional Purchase Agreement ) effected by the Company or any of its subsidiaries of Common Stock or Common Stock equivalents for cash consideration, or a combination of units thereof, up to an amount equal to 35% of such subsequent financing on the same terms, conditions and price provided for in the subsequent financing, subject to certain carve-outs as set forth in the Institutional Purchase Agreement.
In
connection with the Offerings, on May 31, 2024, we also entered into a placement agency agreement (the “Placement Agency Agreement”)
with Roth Capital Partners, LLC (the “Placement Agent”). Pursuant to the terms of the Placement Agency Agreement, the Placement
Agent agreed to use its reasonable best efforts to arrange for the sale of the Registered Shares, the Registered Pre-Funded Warrants,
the Registered Pre-Funded Warrant Shares, the Private Pre-Funded Warrants and the Private Pre-Funded Warrant Shares (the “Securities”).
We paid the Placement Agent a cash fee equal to
Pursuant
to the terms of the Placement Agency Agreement, we issued to the Placement Agent warrants (“Placement Agent Warrants”) to
purchase up to
The Registered Offering closed on June 3, 2024, and on July 1, 2024, the Institutional Investor delivered a Notice of Exercise to us to purchase the Registered Pre-Funded Warrant Shares.
The Registered Shares and the Registered Pre-Funded Warrants were offered pursuant to our effective Shelf Registration Statement on Form S-3 (File No. 333-268957), which was previously filed and declared effective by the SEC, the accompanying base prospectus dated January 11, 2023, and a prospectus supplement dated May 31, 2024.
| Three months ended June 30, | Nine months ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Numerator: | ||||||||||||||||
| Net loss | $ | ( |
) | $ | ( |
) | $ | ( | ) | $ | ( | ) | ||||
| Plus: Deemed dividend on warrants | ( | ) | ||||||||||||||
| Net loss attributable to common stockholders | $ | ( |
) | $ | ( |
) | $ | ( | $ | ( | ) | |||||
| Denominator: | ||||||||||||||||
| Weighted average number of common shares outstanding | ||||||||||||||||
| Basic and diluted net loss per common share | ) | ) | $ | ) | $ | ) | ||||||||||
Shipping and handling costs
Loop Players are provided free to our customers. Loop Media absorbs any associated costs of shipping and handling and records as an operational expense at the time of service.
Income taxes
We account for income taxes in accordance with ASC Topic 740, Income Taxes (“ASC 740”). ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effect of changes in tax laws and rates on the date of enactment.
Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. We have no material uncertain tax positions for any of the reporting periods presented.
We recognize accrued interest and penalties related to unrecognized tax benefits as part of income tax expense. We have also made a policy election to treat the income tax with respect to global intangible low-tax income as a period expense when incurred.
| 15 |
In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes, as part of its initiative to reduce complexity in accounting standards. The amendments in the ASU are effective for fiscal years beginning after December 15, 2020, including interim periods therein. The adoption of this standard in the first quarter of 2022 had no impact on our consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 address investor requests for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information. ASU 2023-09 will be effective for us in the annual period beginning October 1, 2025, though early adoption is permitted. We are still evaluating the presentational effect that ASU 2023-09 will have on our consolidated financial statements, but we expect considerable changes to our income tax footnote.
Stock-based compensation issued to employees is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the requisite service period. We measure the fair value of the stock-based compensation issued to non-employees using the stock price observed in the trading market (for stock transactions) or the fair value of the award (for non-stock transactions), which were more reliably determinable measures of fair value than the value of the services being rendered.
Deferred financing costs
Deferred financing costs represent legal, accounting and other direct costs related to our efforts to raise capital through a public or private sale of our Common Stock. Costs related to the public sale of our Common Stock are deferred until the completion of the applicable offering, at which time such costs are reclassified to additional paid-in-capital as a reduction of the proceeds. Costs related to the private sale of our Common Stock are deferred until the completion of the applicable offering, at which time such costs are amortized over the term of the applicable purchase agreement.
Employee retention credits
In March 2020, the Coronavirus Aid, Relief, and Economic Security Act was signed into law, providing numerous tax provisions and other stimulus measures, including the Employee Retention Credit (“ERC”): a refundable tax credit against certain employment taxes. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the American Rescue Plan Act of 2021 extended and expanded the availability of the ERC. We qualified for the ERC in the third and fourth quarters of 2020 and the first, second and third quarters of 2021. During the nine months ended June 30, 2024, we recorded no aggregate benefit in our condensed combined income statement to reflect the ERC.
Reclassifications
Certain prior year amounts have been reclassified to conform to current year presentation. These reclassifications have no effect on the previously reported financial position, results of operations, or cash flows.
Restructuring costs
As previously disclosed, we began taking steps in fiscal year 2023 to increase efficiency and cut costs, while still maintaining our focus on, and dedication to, the continued growth of our business. These cuts and adjustments across several aspects of our business, including reductions in headcount and organizational restructuring, continued in the first three quarters of fiscal year 2024 and continue as of the date of this Report.
Recently adopted accounting pronouncements
In September 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This guidance requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. This guidance also requires enhanced disclosures regarding significant estimates and judgments used in estimating credit losses. The new guidance is effective for fiscal years beginning after December 15, 2022. We are currently evaluating the impact of this standard on our condensed consolidated financial statements and related disclosures. We adopted this ASU as of October 1, 2023, and there is no material impact to our financial statements as of June 30, 2024.
| 16 |
Recent accounting pronouncements
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, that would enhance disclosures for significant segment expenses for all public entities required to report segment information in accordance with ASC 280. ASC 280 requires a public entity to report for each reportable segment a measure of segment profit or loss that its chief operating decision maker (“CODM”) uses to assess segment performance and to make decisions about resource allocations. The amendments in ASU 2023-07 improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis for all public entities to enable investors to develop more useful financial analyses. Currently, Topic 280 requires that a public entity disclose certain information about its reportable segments. For example, a public entity is required to report a measure of segment profit or loss that the CODM uses to assess segment performance and make decisions about allocating resources. ASC 280 also requires other specified segment items and amounts such as depreciation, amortization and depletion expense to be disclosed under certain circumstances. The amendments in ASU 2023-07 do not change or remove those disclosure requirements. The amendments in ASU 2023-07 also do not change how a public entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. A public entity should apply the amendments in ASU 2023-07 retrospectively to all prior periods presented in the financial statements. We are currently evaluating the impact of this standard on our condensed consolidated financial statements and related disclosures.
In
December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”).
ASU 2023-09 is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09
address investor requests for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid
information. ASU 2023-09 will be effective for us in the annual period beginning October 1, 2025, though early adoption is permitted.
We are still evaluating the presentational effect that ASU 2023-09 will have on our consolidated financial statements, but we expect
considerable changes to our income tax footnote.
NOTE 3 – CONTENT ASSETS
Content Assets
The
content we stream to our users is generally acquired by securing the intellectual property rights to the content through licenses from,
and paying royalties or other consideration to, rights holders or their agents. The licensing can be for a fixed fee or can be a revenue
sharing arrangement. The licensing arrangements specify the period when the content is available for streaming, the territories, the
platforms, the fee structure and other standard content licensing terms defining the rights and/or restrictions for how the licensed
content can be used by Loop Media. We also develop original content internally, which is capitalized when the content is ready and available
for streaming, and generally amortized over a period of to
As
of June 30, 2024, content assets were $
We recorded amortization expense in cost of revenue, in the consolidated statements of operations, related to capitalized content assets:
| Three months ended June 30, | Nine months ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Licensed content assets | $ | $ | $ | $ | ||||||||||||
| Internally-developed assets | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| 17 |
Our
content license contracts are typically to
| Remaining in Fiscal Year 2024 | Fiscal Year 2025 | Fiscal Year 2026 | ||||||||||
| Licensed content assets | $ | $ | $ | |||||||||
| Internally-developed assets | ||||||||||||
| Total | $ | $ | $ | |||||||||
License Content Liabilities
As
of June 30, 2024, we had $
NOTE 4. PROPERTY AND EQUIPMENT
Our property and equipment, net consisted of the following as of June 30, 2024, and September 30, 2023:
| June 30, 2024 | September 30, 2023 | |||||||
| Loop Players | $ | $ | ||||||
| Equipment | ||||||||
| Software | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Total, equipment net | $ | $ | ||||||
For
the three months ended June 30, 2024, and 2023, depreciation expense, calculated using straight line method, charged to operations amounted
to $
For
the nine months ended June 30, 2024, and 2023, depreciation expense, calculated using straight line method, charged to operations amounted
to $
NOTE 5. INTANGIBLE ASSETS
Our intangible assets, each definite lived assets, consisted of the following as of June 30, 2024, and September 30, 2023:
| Useful life | June 30, 2024 | September 30, 2023 | ||||||||
| Customer relationships | $ | $ | ||||||||
| Content library | ||||||||||
| Total intangible assets, gross | ||||||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||||
| Total | ( | ) | ( | ) | ||||||
| Total intangible assets, net | $ | $ | ||||||||
| 18 |
Amortization
expense charged to operations amounted to $
Amortization
expense charged to operations amounted to $
Annual
amortization expense for the next five years and thereafter is estimated to be $
NOTE 6 – OPERATING LEASES
Operating leases
We have operating leases for office space and office equipment. Many of our leases include one or more options to renew, some of which included options to extend the leases for a long-term period, and some leases included options to terminate the leases within 30 days. In certain of our lease agreements, the rental payments were adjusted periodically to reflect actual charges incurred for capital area maintenance, utilities, inflation and/or changes in other indexes.
Our lease liability consisted of the following as of June 30, 2024, and September 30, 2023:
| June 30, 2024 | September 30, 2023 | |||||||
| Short term portion | $ | $ | ||||||
| Long term portion | ||||||||
| Total lease liability | $ | $ | ||||||
Maturity analysis under these lease agreements are as follows:
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Total undiscounted cash flows | ||||
| Less: | ( | ) | ||
| Lease liability | $ |
We recorded lease expense in sales, general and administrative expenses in the consolidated statement of operations:
| Three months ended June 30, | Nine months ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Operating lease expense | $ | $ | $ | $ | ||||||||||||
| Short-term lease expense | ||||||||||||||||
| Total lease expense | $ | $ | $ | $ | ||||||||||||
For
the three months ended June 30, 2024, and 2023, cash payments against lease liabilities totalled $
For
the nine months ended June 30, 2024, and 2023, cash payments against lease liabilities totalled $
Weighted-average remaining lease term and discount rate for operating leases are as follows:
| Weighted-average remaining lease term | ||||
| Weighted-average discount rate | % |
| 19 |
NOTE 7 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of the following as of June 30, 2024, and September 30, 2023:
| June 30, 2024 | September 30, 2023 | |||||||
| Accounts payable | $ | $ | ||||||
| Performance bonuses | ||||||||
| Interest payable | ||||||||
| Professional fees | ||||||||
| Marketing | ||||||||
| Insurance liabilities | ||||||||
| Other accrued liabilities | ||||||||
| Accrued Liabilities | ||||||||
| Accrued royalties and revenue share | ||||||||
| Total accounts payable and accrued expenses | $ | $ | ||||||
NOTE 8 – DEBT
Lines of Credit as of June 30, 2024:
| Net Carrying Value | Unpaid | Contractual | Contractual | |||||||||||||||||||
| Related party lines of credit: | Current | Long Term |
Principal Balance | Interest Rates | Maturity Date |
Warrants issued | ||||||||||||||||
| $ | $ | — | $ | $ | % | 12 months prior written notice | ||||||||||||||||
| $ | — | % | — | |||||||||||||||||||
| Total related party non-revolving lines of credit, net | $ | $ | $ | |||||||||||||||||||
| Lines of credit: | ||||||||||||||||||||||
| $non-revolving line of credit, May 13, 2022 | $ | $ | — | $ | % | |||||||||||||||||
| $revolving line of credit, July 29, 2022 | — | Greater
of Prime + 0, or | % | — | ||||||||||||||||||
| $non-revolving line of credit, May 10, 2023 | — | % | ||||||||||||||||||||
| Total lines of credit, net | $ | $ | — | $ | ||||||||||||||||||
Lines of Credit as of September 30, 2023:
| Net Carrying Value | Unpaid | Contractual | Contractual | |||||||||||||||||||
| Related party lines of credit: | Current | Long Term |
Principal Balance | Interest Rates Cash | Maturity Date |
Warrants issued | ||||||||||||||||
| $ | $ | — | $ | $ | % | |||||||||||||||||
| Total related party lines of credit, net | $ | — | $ | $ | ||||||||||||||||||
| Lines of credit: | ||||||||||||||||||||||
| $ non-revolving line of credit, May 13, 2022 | $ | $ | — | $ | % | |||||||||||||||||
| $ revolving line of credit, July 29, 2022 | — | Greater
of Prime +0, or | % | — | ||||||||||||||||||
| $ revolving line of credit, May 10, 2023 | — | % | ||||||||||||||||||||
| Total lines of credit, net | $ | $ | $ | | ||||||||||||||||||
| 20 |
The following table presents the interest expense related to the contractual interest coupon and the amortization of debt discounts on the lines of credit:
| Three months ended June 30, | Nine months ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Interest expense | $ | $ | $ | $ | ||||||||||||
| Amortization of debt discounts | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
Maturity analysis under the line of credit agreements for the fiscal years ended September 30,
| For the fiscal years ended September 30, | ||||
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Lines of credit, related and non-related party | ||||
| Less: Debt discount on lines of credit payable | ( | ) | ||
| Total Lines of credit payable, related and non-related party, net | $ |
Revolving Lines of Credit
Excel Revolving Line of Credit
Effective
as of December 14, 2023, we entered into a Revolving Line of Credit Loan Agreement with Excel Family Partners, LLLP, an entity
managed by Bruce Cassidy, Executive Chairman of our Board of Directors, (“Excel” and the “Excel Revolving Line of
Credit Agreement”) for up to a principal sum of $
Under
the terms of the Excel Revolving Line of Credit Agreement, on December 14, 2023, we issued to Excel a warrant to purchase up to an aggregate
of
The
Excel Revolving Line of Credit had a balance, including accrued interest, amounting to $