UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 000-55591

LOOP MEDIA, INC.

(Exact name of registrant as specified in its charter)

Nevada		47-3975872
(State or other jurisdiction of incorporation)		(IRS Employer Identification Number)

700 N. Central Ave., Suite 430, Glendale, CA 91203
(Address of principal executive offices) (Zip Code)

(818) 823-4801
(Registrant’s telephone number, including area code)

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 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. [X] Yes [ ] No

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). [X] Yes [ ] No

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 ☐
Non-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. ☐Yes ☒No

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐Yes ☒No

As of August 6, 2021, the registrant had 127,680,014 shares of common stock issued and outstanding.

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TABLE OF CONTENTS


		Page No.
PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements.	2
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	24
Item 3.	Quantitative and Qualitative Disclosure About Market Risk.	31
Item 4.	Controls and Procedures.	31

PART II — OTHER INFORMATION
Item 1.	Legal Proceedings.	33
Item 1A.	Risk Factors.	33
Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds.	33
Item 3	Defaults Upon Senior Securities.	33
Item 4.	Mine Safety Disclosures.	33
Item 5.	Other Information.	33
Item 6.	Exhibits.	34
Signature		35

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PART I — FINANCIAL INFORMATION

Item 1Financial Statements.

LOOP MEDIA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


	June 30,		December 31,
	2021		2020
ASSETS	(UNAUDITED)
Current assets
Cash	$	929,403	$	838,161
Accounts receivable, net		810,594		669,679
Inventory		27,096		90,300
Prepaid expenses and other current assets		516,354		64,765
Prepaid income tax		20,028		21,689
License content assets - current		1,147,853		1,723,569
Note receivable - current		—		10,215
Total current assets		3,451,328		3,418,378
Non-current assets
Deposits		15,649		15,649
License content assets - non current		336,360		371,041
Equipment, net		18,212		24,146
Operating lease right-of-use assets		274,687		347,075
Intangible assets, net		4,741,550		3,169,266
Note receivable		—		96,498
Equity method investments		—		1,613,479
Goodwill		6,412,808		583,086
Total non-current assets		11,799,266		6,220,240
Total assets	$	15,250,594	$	9,638,618
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued liabilities	$	648,502	$	964,276
Payable on acquisition		250,125		250,125
License content liabilities - current		1,024,500		1,251,500
Note payable - current		—		314,829
Deferred Income		195,164		128,622
Convertible debt related party - current, net		599,456		279,705
Convertible debt – current, net		71,578		393,943
Lease liability - current		161,662		145,271
Total current liabilities		2,950,987		3,728,271
Non-current liabilities
Convertible debt – related party, less current portion, net		1,317,501		1,223,768
Convertible debt, less current portion, net		225,994		160,165
Note payable – non-current		486,638		258,671
License content liabilities - non current		—		385,000
Lease liability		119,178		208,625
Total non-current liabilities		2,149,311		2,236,229
Total liabilities		5,100,298		5,964,500

Commitments and contingencies (Note 10)		—		—

Stockholders’ equity
Series B Convertible Preferred stock, $0.0001 par value, 3,333,334 shares authorized, 200,000 and 200,000 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively. Liquidation preference of $1.00 per share before any payment to Series A Preferred or Common stock		20		20
Series A Convertible Preferred stock, $0.0001 par value, 16,666,667 shares authorized, 0 and 30,667 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively. Liquidation preference of $0.10 per share.		—		3
Common Stock, $0.0001 par value, 316,666,667 shares authorized, 127,316,716 and 118,128,008 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively		12,732		11,813
Common stock subscribed and not yet issued		—		485,144
Additional paid in capital		63,853,146		44,721,282
Accumulated deficit		(53,715,602)		(41,544,144)
Total stockholders' equity		10,150,296		3,674,118
Total liabilities and stockholders' equity	$	15,250,594	$	9,638,618

See the accompanying notes to the unaudited condensed consolidated financial statements

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LOOP MEDIA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020

Revenue	$	1,160,793	$	635,740	$	1,954,836	$	1,462,128
Cost of revenue		763,359		172,661		1,487,937		384,920
Gross profit		397,434		463,079		466,899		1,077,208
Operating expenses
Selling, general and administrative		4,269,169		1,638,038		12,175,453		4,696,691
Total operating expenses		4,269,169		1,638,038		12,175,453		4,696,691

Loss from operations		(3,871,735)		(1,174,959)		(11,708,554)		(3,619,483)

Other income (expense)
Interest income		—		1,175		5,657		2,459
Interest expense		(632,094)		(245,104)		(1,048,012)		(492,545)
Income from equity investment		—		—		1,551		—
Gain on extinguishment of debt		579,486				579,486		—
Inducement expense		—		—		—		(3,793,406)
Other income		—		10,000		—		10,000
Total other income (expense)		(52,608)		(233,929)		(461,318)		(4,273,492)
Income tax expense		—		—		(1,586)		—
Net loss	$	(3,924,343)	$	(1,408,888)	$	(12,171,458)	$	(7,892,975)
Deemed dividend		—		—		—		(3,800,000)
Net loss attributable to common stockholders	$	(3,924,343)	$	(1,408,888)	$	(12,171,458)	$	(11,692,975)
Basic and diluted net loss per common share	$	(0.03)	$	(0.01)	$	(0.10)	$	(0.11)
Weighted average number of common shares outstanding		124,965,420		112,131,578		122,572,955		110,424,073

See the accompanying notes to the unaudited condensed consolidated financial statements

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LOOP MEDIA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED JUNE 30, 2021

(UNAUDITED)


	Preferred Stock Series B			Preferred Stock Series A			Common Stock			Common stock		Additional Paid		Accumulated
	Shares	Amount		Shares	Amount		Shares	Amount		subscriptions		in Capital		Deficit		Total
BALANCES, December 31, 2020	200,000	$	20	30,667	$	3	118,128,008	$	11,813	$	485,144	$	44,721,282	$	(41,544,144)	$	3,674,118
Issuance of common stock subscribed	—		—	—		—	497,429		49		(485,144)		485,095		—		—
Conversion of convertible debenture	—		—	—		—	1,003,618		100		—		376,256		—		376,356
Shares issued for cash	—		—	—		—	1,564,000		156		—		1,954,844		—		1,955,000
Stock-based compensation	—		—	—		—	—		—		—		5,419,800		—		5,419,800
Warrants issued in conjunction with debenture	—		—	—		—	—		—		—		43,654		—		43,654
Beneficial conversion feature of convertible debenture	—		—	—		—	—		—		—		306,346		—		306,346
Net loss	—		—	—		—	—		—		—		—		(8,247,115)		(8,247,115)
BALANCES, March 31, 2021	200,000	$	20	30,667	$	3	121,193,055	$	12,118	$	—	$	53,307,277	$	(49,791,259)	$	3,528,159
Shares issued for cash	—		—	—		—	960,000		96		—		1,199,904		—		1,200,000
Stock-based compensation	—		—	—		—	—		—		—		1,482,746		—		1,482,746
Shares issued for consulting fees	—		—	—		—	79,051		8		—		199,992		—		200,000
Shares issued for acquisition	—		—	—		—	2,003,435		200		—		5,689,555		—		5,689,755
Warrants issued for severance	—		—	—		—	—		—		—		82,000		—		82,000
Payment in kind interest stock issuance	—		—	—		—	14,475		3		—		41,976		—		41,980
Beneficial conversion feature of convertible debenture	—		—	—		—	—		—		—		1,705,709		—		1,705,709
Warrants issued in conjunction with debenture	—		—	—		—	—		—		—		144,291		—		144,291
Conversion of series A convertible stock to common stock	—		—	(30,667)		(3)	3,066,700		307		—		(304)		—		—
Net loss	—		—	—		—	—		—		—		—		(3,924,343)		(3,924,343)
BALANCES, June 30, 2021	200,000	$	20	—	$	—	127,316,716	$	12,732	$	—	$	63,853,146	$	(53,715,602)	$	10,150,296

See the accompanying notes to the unaudited condensed consolidated financial statements

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LOOP MEDIA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2020

(UNAUDITED)


		Preferred Stock B			Preferred Stock A			Common Stock				Common stock		Additional Paid		Accumulated
		Shares	Amount		Shares	Amount		Shares	Amount			subscriptions		in Capital		Deficit		Total
BALANCES, December 31, 2019		—	$	—	—	$	—	101,882,647	$	10,188		$	150,144	$	26,038,546	$	(26,125,252)	$	73,626
Shares issued for cash		—		—	—		—	1,040,000		104			—		389,896		—		390,000
Cash received for common stock subscribed		—		—	—		—	—		—			20,000		—		—		20,000
Common stock subscribed issued		—		—	—		—	40,000		4			(15,000)		14,996		—		—
Shares issued for consulting fees		—		—	—		—	4,000,000		400			—		1,499,600		—		1,500,000
Shares issued in connection with reverse merger		—		—	30,667		3	5,168,931		517			—		(264,496)		—		(263,976)
Shares issued for cash		100,000		10	—		—	—		—			—		4,799,990		—		4,800,000
Shares issued for debt settlement		100,000		10	—		—	—		—			—		4,799,990		—		4,800,000
Warrants issued for settlement of debt to related party		—		—	—		—	—		—			—		185,563		—		185,563
Deemed dividend		—		—	—		—	—		—			—		(3,800,000)		—		(3,800,000)
Net loss		—		—	—		—	—		—			—		—		(6,484,087)		(6,484,087)
BALANCES, March 31, 2020	$	200,000	$	20	30,667	$	3	112,131,578	$	11,213		$	155,144	$	33,664,085	$	(32,609,339)	$	1,221,126
Stock-based compensation		—		—	—		—	—		—			—		171,798		—		171,798
Net loss		—		—	—		—	—		—			—		—		(1,408,888)		(1,408,888)
BALANCES, June 30, 2020	$	200,000	$	20	30,667	$	3	112,131,578	$	11,213	$	$	155,144	$	33,835,883	$	(34,018,227)	$	(15,964)

See the accompanying notes to the unaudited condensed consolidated financial statements

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LOOP MEDIA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Six months ended June 30,
	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(12,171,458)	$	(7,892,975)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount		770,546		302,104
Depreciation and amortization expense		733,651		118,363
Amortization of license contract assets		610,397		—
Amortization of right-of-use assets		72,388		66,165
Bad debt expense		146,637		—
Gain on extinguishment of debt		(579,486)		—
Warrants issued for severance		82,000		—
Stock-based compensation		6,902,547		1,671,798
Inducement expense		—		3,793,406
Equity method investment income		(1,551)		—
Change in operating assets and liabilities:
Accounts receivable		(180,839)		74,896
Prepaid income tax		1,661		—
Inventory		63,204		(48,215)
Prepaid expenses		(251,588)		(70,609)
Prepaid income tax		—		(260)
Accounts payable and accrued liabilities		(217,595)		68,491
License content liability		(612,000)		—
License contract asset		—		(227,000)
Operating lease liabilities		(73,056)		(64,735)
Deferred income		(8,458)		(49,251)
NET CASH USED IN OPERATING ACTIVITIES		(4,713,000)		(2,257,822)

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of EON Media Group, net of cash acquired		(749,937)		—
Purchase of equipment		—		(10,599)
Collection of note receivable		—		2,872
NET CASH USED IN INVESTING ACTIVITIES		(749,937)		(7,727)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock		3,155,000		390,000
Proceeds from issuance of preferred stock		—		1,000,000
Proceeds from PPP loan		486,638		573,500
Principal payment of convertible debt		(36,078)		—
Proceeds from issuance of convertible debt		2,200,000		—
Repayment of stockholder loans		(251,380)		—
Reverse merger cost		—		(80,134)
Proceeds from issuing common stock subscribed		—		20,000

NET CASH PROVIDED BY FINANCING ACTIVITIES		5,554,179		1,903,366

Change in cash and cash equivalents		91,242		(362,183)

Cash, beginning of the year		838,161		1,011,445

Cash, end of the year	$	929,403	$	649,262
SUPPLEMENTAL DISCLOSURES OF CASH FLOW STATEMENTS
Cash paid for interest	$	192,632	$	27,175
Cash paid for income taxes	$	—	$	260
SUPPLEMENTAL DISCLOSURES OF NON CASH INVESTING AND FINANCING ACTIVITIES
Shares issued in connection with reverse merger	$	—	$	517
Preferred stock issued in connection with reverse merger	$	—	$	3
Preferred stock issued for debt settlement	$	—	$	20
Conversion of convertible debenture to common stock	$	376,356	$	—
Common stock issued for acquisition	$	5,689,755	$	—
Debt and accrued interest exchanged as part of debt settlement	$	—	$	1,006,594
Accrued interest rolled into convertible note	$	—	$	150,411

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Assumption of lease by related party	$	—	$	20,825
Assumption of debt as part of reverse merger	$	—	$	183,842
Warrants issued to extinguish debt with related party	$	—	$	185,563
Payment in kind common stock payment	$	41,979	$	—
Warrants issued as debt discount on convertible debenture	$	187,945	$	—
Beneficial conversion feature recorded as debt discount	$	2,012,055	$	—
Prepaid common stock paid to consultant	$	200,000	$	—
Conversion of Preferred Class A stock to common stock	$	307	$	—
Shares issued for common stock subscribed	$	485,144	$	15,000
Deemed dividend	$	—	$	3,800,000

See the accompanying notes to the unaudited condensed consolidated financial statements

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LOOP MEDIA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2021

(UNAUDITED)

NOTE 1 – BUSINESS

Loop Media, Inc. (the “Company” and formerly, Interlink Plus, Inc.) is a Nevada corporation. The Company was incorporated under the laws of the State of Nevada on May 11, 2015. On February 5, 2020, the Company and the Company’s wholly owned subsidiary, Loop Media Acquisition, Inc. (“Merger Sub”), a Delaware corporation, closed the Agreement and Plan of Merger (the “Merger Agreement”) with Loop Media, Inc. (“Loop”), a Delaware corporation. Pursuant to the Merger Agreement, Merger Sub merged with and into Loop with Loop as surviving entity and becoming a wholly-owned subsidiary of the Company (the “Merger”).

Pursuant to the Merger Agreement, the Company acquired 100% of the outstanding shares of Loop in exchange for 152,823,970 shares of the Company’s common stock at an exchange ratio of 1:1. Loop was incorporated on May 18, 2016 under the laws of the State of Delaware. As a result of such acquisition, the Company’s operations now are focused on premium short-form video for businesses and consumers.

We are a multichannel digital platform media company that offers self-curated, premium videos to customers in OOH venues and D2C on their personal in home and mobile devices. We deliver highly curated music video content from major and independent record labels, as well as movie and television trailers, viral videos, drone footage, lifestyle and atmospheric channels, kid friendly content, sports highlights and news clips. We believe we are the only service in the United States licensed by all three major music labels to provide music video content in both the OOH and D2C markets. We curate content seeking to create a compelling user experience by, among other things, curating our carefully selected Playlists Playlists for OOH venues and thoughtfully developed streaming channels (“Channels”) for delivery to our OTT platform partners and to users of our mobile application. Our digital platform service seeks to surround and engage consumers with a diverse offering of video content on their chosen digital screen wherever they are located. We believe we are the only company offering a digital out of home (“DOOH”) service that also has a consumer mobile application, which increases the connectivity and interactivity of our OOH services.

We operate a “freemium” business model, offering our Service on either a Premium or Ad-Supported basis. We deliver our Service to OOH venues primarily through our proprietary Loop Media-designed Loop Player and to consumers primarily through our fully functional and operational Loop App and across OTT streaming platforms on CTVs. The underlying content that we curate and deliver through our service is predominantly licensed from third parties and consists primarily of music videos. We also offer an increasing range of non-music video content that we are acquiring through additional licenses and producing internally in our Loop Media Studios business division. This additional and diversified content offering is a large part of our business model going forward. We operate almost exclusively in the United States but are looking at further overseas expansion, primarily in Latin America and Asia.

We are an early-stage media operating company, with limited historical revenue and negative cash flow from operations. Our revenue is generated by advertisers who pay for our ad inventory in order to have their advertisements viewed by the end users of our Ad-Supported Service and by business owners and users who pay a subscription fee to access our Subscription Service without advertisements. Our revenue for the fiscal year ended December 31, 2020, consisted almost entirely of revenue from our historic ScreenPlay business, which is a subscription-based OOH focused business, with little to no advertising revenue and no consumer users, and which does not fully reflect revenues expected from our more recent product and Service offerings and business model. We have begun to record increased revenue share for the six months ended June 30, 2021, as our advertising business model has more recently been deployed and operating more fully.

Going Concern and Management’s Plans

As of June 30, 2021, the Company reported a cash balance of $929,403 and an accumulated deficit of $ (53,715,602). During the six months ended June 30, 2021, the Company used net cash in operating activities of

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($4,713,000). The Company has incurred net losses since inception. These conditions raise substantial doubt about the Company’s ability to continue as a going concern within one year from the issuance date of these unaudited condensed consolidated financial statements.

The Company’s primary source of operating funds since inception has been cash proceeds from debt and equity financing transactions. The ability of the Company to continue as a going concern is dependent upon its ability to generate sufficient revenue and its ability to raise additional funds by way of its debt and equity financing efforts.

The accompanying unaudited condensed consolidated 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. These unaudited condensed consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or classification of the liabilities that might be necessary should the Company be unable to continue as a going concern. The ability of the Company to continue as a going concern is dependent on management’s further implementation of the Company’s on-going and strategic plans, which include continuing to raise funds through equity and/or debt raises. Should the Company be unable to raise adequate funds, certain aspects of the on-going and strategic plans may require modification. Management is in the process of identifying sources of capital via strategic partnerships, debt refinancing and equity investments through one or more private placements.

The spread of a novel strain of coronavirus (COVID-19) around the world beginning in the first half of 2020 has caused significant volatility in U.S. and international markets. While the pandemic could ultimately lead to a material adverse impact on the business, results of operations and financial condition of the Company, at the time of issuance, the extent of the impact is uncertain. Due to the rapid development and fluidity of this situation, the magnitude and duration of the pandemic and its impact on the Company's future operations and liquidity is uncertain as of the date of filing this report.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Interim Financial Statements

The following (a) condensed consolidated balance sheet as of December 31, 2020, which has been derived from audited financial statements, and (b) the unaudited condensed consolidated interim financial statements of the Company for the six months ended June 30, 2021, 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 six months ended June 30, 2021 are not necessarily indicative of results that may be expected for the year ending December 31, 2021.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on April 15, 2021.

Basis of Presentation and Principles of Consolidation

The unaudited condensed consolidated financial statements are prepared using the accrual basis of accounting in accordance with US GAAP. All intercompany transactions and balances have been eliminated on consolidation.

Business Combinations

The Company recognizes separately from goodwill the assets acquired and the liabilities assumed in a business combination at the acquisition date fair value. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. The Company uses best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date,

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however, estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to the condensed consolidated statement of operations.

The Company issues cash, equity, or a combination thereof as consideration when consummating business combinations. The Company evaluates the nature of the consideration given and any restrictions on use to determine the appropriate accounting treatment. Cash consideration and equity awards without performance conditions are generally accounted for in accordance with ASC 805, Business Combinations.

Equity method investments

The Company accounts for investments in unconsolidated entities under the equity method of accounting if it could exercise significant influence over the operating and financial policies of an entity but does not have a controlling financial interest. Judgment regarding the level of influence over each equity method investment includes considering key factors such as ownership interest, representation on the board of directors, participation in policy-making decisions and material intercompany transactions. The Company’s proportionate share of the net income (loss) resulting from these investments are reported under the line-item captioned equity method investment income in our condensed consolidated statements of operations. The carrying value of our equity method investments is reported in equity method investments in the condensed consolidated balance sheets. The Company’s equity method investments are reported at cost and adjusted each period for the Company’s share of the investee’s income or loss and dividend paid, if any. The Company assesses investments for impairment whenever events or changes in circumstances indicate that the carrying value of an investment may not be recoverable.

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 fair value of stock-based compensation, the fair value of other equity and debt instruments, fair value of intangible assets, recoverability of license content assets, and useful lives of assets.

License Content Assets

On January 1, 2020, the Company adopted the guidance in Accounting Standards Update (“ASU”) 2019-02, Entertainment—Films—Other Assets—Film Costs (Subtopic 926-20) and Entertainment—Broadcasters—Intangibles—Goodwill and Other (Subtopic 920-350): Improvements to Accounting for Costs of Films and License Agreements for Program Materials, on a prospective basis. The Company capitalizes the fixed content fees and its corresponding liability when the license period begins, the cost of the content is known, and the content is accepted and available for streaming. The Company amortizes 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.

Fair Value of Financial Instruments

The Company determines the fair value of its 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.

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	●	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.

The carrying amount of the Company’s 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. The Company does not have financial assets or liabilities that are required under US GAAP to be measured at fair value on a recurring basis. The Company has not elected to use fair value measurement option for any assets or liabilities for which fair value measurement is not presently required.

The Company records assets and liabilities at fair value on 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.

Net Loss per Share

The Company accounts for net loss per share in accordance with Accounting Standards Codification (“ASC”) ASC 260-10, Earnings Per Share, 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.

The following securities are excluded from the calculation of weighted average diluted shares at June 30, 2021 and 2020, respectively, because their inclusion would have been anti-dilutive.


	June 30,	June 30,
	2021	2020
Options to purchase common stock	17,708,356	8,312,307
Warrants to purchase common stock	8,891,240	8,217,376
Series A preferred stock	—	3,066,700
Series B preferred stock	20,000,000	20,000,000
Convertible debentures	6,854,219	6,788,027
Total common stock equivalents	53,453,815	46,384,410

Application of New Accounting Standards

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company elected adoption of this standard on its condensed consolidated financial statements and related disclosures effective January 1, 2021.

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Recent 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. While the Company is currently evaluating the impact that the adoption of this guidance will have on its condensed consolidated financial statements, it does not expect the adoption to have a material impact on its condensed consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40). This ASU reduces the number of accounting models for convertible debt instruments and convertible preferred stock. As well as amend the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. In addition, this ASU improves and amends the related EPS guidance. The ASU is effective for interim and annual periods beginning after December 15, 2021, with early adoption permitted for periods beginning after December 15, 2020. Adoption of the ASU can either be on a modified retrospective or full retrospective basis. The Company is currently evaluating the impact of this standard on its condensed consolidated financial statements and related disclosures.

NOTE 3 – BUSINESS COMBINATION

Business acquisition of EON Media Group

The Company obtained control of EON Media Group through two investments, which ASC 805 refers to as a “business combination achieved in stages.” On December 1, 2020, the Company acquired from Ithaca EMG Holdco LLC (Ithaca) 1,350 ordinary shares and 1,084 preference shares issued by EON Media Group Pte. Ltd (EON Media Group). The first stage of the transaction resulted in Company acquiring a 20% equity interest in EON Media Group, and was recorded as an equity method investment. The purchase price consideration for the acquired shares consisted of $750,000 in cash and 454,463 shares of the Company’s common stock valued at $863,480. For the six months ended June 30, 2021, the Company recognized equity method income of $1,551.

On April 27, 2021, the Company acquired from Far West Entertainment 3,650 ordinary shares, from a private individual 3,650 ordinary shares and from Ithaca EMG Holdco LLC (Ithaca) 1,350 ordinary shares and 1,084 preference shares issued by EON Media Group Pte. Ltd (EON Media Group). The second stage of the transaction resulted in the Company acquiring the remaining 80% equity interest in EON Media Group. The purchase price consideration for the acquired shares consisted of $750,000 in cash and 2,003,435 shares of the Company’s common stock valued at $5,689,755.

The allocation of the purchase consideration is as follows:


	April 27,
	2021
Fair value of shares issued	$	5,689,755
Cash consideration		750,000
Fair value of prior investment in EON Media Group		1,615,030
Total consideration paid	$	8,054,785

For the period ended June 30, 2021, the Company incurred transaction costs of $42,507, included in Selling, general and administrative expense on the unaudited condensed consolidated statement of operations. Certain estimated values for the acquisition, including intangible assets, goodwill and deferred taxes are not yet finalized.

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The preliminary purchase price allocation is as follows:


	April 27,
	2021
Cash and cash equivalents	$	63
Goodwill		5,829,722
Brand name intangible asset		2,300,000
Current liabilities		(75,000)
Total purchase price allocation	$	8,054,785

The proforma disclosures were not materially different from the historical results of the Company.

NOTE 4 – GOODWILL AND OTHER INTANGIBLE ASSETS

As of June 30, 2021, and December 31, 2020, the balance of goodwill was $6,412,808 and $583,086, respectively. On April 27, 2021, the EON Media Group acquisition value of goodwill was $5,754,785 (see Note 3). EON Media Group’s post-acquisition adjustments were $74,937.

The Company’s other intangible assets consisted of the following at June 30, 2021 and December 31, 2020:


		June 30,		December 31,
	Useful life	2021		2020
Screenplay brand	not applicable	$	—	$	130,000
Customer relationships	nine years		1,012,000		1,012,000
Content library	two years		198,000		198,000
Brand name	twenty years		2,300,000		—
Technology	two years		2,671,233		2,671,233
Total intangible assets, gross			6,181,233		4,011,233

Less: Impairment of intangible assets			—		(130,000)
Less: accumulated amortization			(1,439,683)		(711,967)
Total intangible accumulated amortization			(1,439,683)		(841,967)
Total intangible assets, net		$	4,741,550	$	3,169,266

Amortization expense charged to operations amounted to $373,933 and $56,292 respectively, for the three months ended June 30, 2021 and 2020, and $727,715 and $112,583, respectively, for the six months ended June 30, 2021 and 2020.

NOTE 5 – LICENSE CONTENT ASSETS

License Content Assets

To stream video content to the users, the Company generally secures intellectual property rights to such content by obtaining licenses from, and paying royalties or other consideration to, rights holders or their agents. The licensing arrangements can be for a fixed fee, variable fee, or combination of both. The licensing arrangements specify the period when the content is available for streaming. The license content assets are two years in duration and include prepayments to distributors for customer subscription revenues, per play usage fees, and ad supported fees.

As of June 30, 2021, license content assets were $1,484,213 classified as $1,147,853 License content asset, net – current and $336,360 recorded as License content asset, net – noncurrent.

The Company recorded amortization expense of $610,397 and $0 for the periods ended June 30, 2021 and 2020, respectively, in cost of revenue, in the condensed consolidated statements of operations, related to capitalized license

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content assets. The amortization expense for the remaining six months ended December 31, 2021, is $627,353 and for year ended December 31, 2022, is $856,860.

License Content Liabilities

At June 30, 2021, the Company had $1,024,500 of obligations comprised of $1,024,500 in License content liability – current and $0 in License content liability – noncurrent on the condensed consolidated balance sheets. The expected timing of payments for these content obligations is $639,500 payable in 2021 and $385,000 payable by June 30, 2022 or thereafter.

NOTE 6 – LEASES

Operating leases

The Company has operating leases for office space. Many leases include one or more options to renew, some of which include options to extend the leases for a long-term period, and some leases include options to terminate the leases within 30 days. In certain of the Company’s lease agreements, the rental payments are adjusted periodically to reflect actual charges incurred for capital area maintenance, utilities, inflation and/or changes in other indexes.

Lease liability is summarized below:


	June 30,		December 31,
	2021		2020
Short term portion	$	161,662	$	145,271
Long term portion		119,178		208,625
Total lease liability	$	280,840	$	353,896

Maturity analysis under these lease agreements are as follows:



Six months ending December 31, 2021	$	84,390
2022		170,185
2023		53,233