Fyntechnical Innovations Inc 10-Q for FY2025 Q1
Fyntechnical Innovations Inc (FYNN)
About this 10-Q
Fyntechnical Innovations Inc filed this 10-Q on May 19, 2025, covering the quarter ended March 31, 2025 (FY2025 Q1).
Headline figures
Quarter ended March 31, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $43.65K
- compared with $0 a year earlier
- Net income
- $7.59M
- up 4770.4% from net income of $155.81K a year earlier
- Diluted EPS
- $0.00
- compared with $0.00 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period ________
Commission File No.
(Exact name of the small business issuer as specified in its charter) |
(State of either jurisdiction of
Incorporation or Organization)
(Address of principal executive offices)
(
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting Company | ||
|
| Emerging Growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
The number of shares of Common Stock, $0.001 par value of the registrant outstanding at May 16, 2025 was
FORM 10-Q
For the Quarterly Period Ended March 31, 2025
INDEX
|
| 3 | ||
|
| 3 | ||
| Management’s Discussion and Analysis of Financial Condition and Results of Operations |
| 19 | |
|
| 22 | ||
|
| 22 | ||
|
|
|
|
|
|
| 23 | ||
|
| 23 | ||
|
| 23 | ||
|
| 23 | ||
|
| 23 | ||
|
| 23 | ||
|
| 23 | ||
|
| 23 | ||
|
|
|
|
|
| 24 | |||
| 2 |
| Table of Contents |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
INDEX TO FINANCIAL STATEMENTS
| 3 |
| Table of Contents |
SMC ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS
|
| March 31, |
|
| December 31, |
| ||
|
| 2025 |
|
| 2024 |
| ||
|
| (Unaudited) |
|
|
|
| ||
ASSETS |
|
|
|
|
|
| ||
Current assets: |
|
|
|
|
|
| ||
Cash |
| $ |
|
| $ |
| ||
Accounts receivable, net |
|
|
|
|
|
| ||
Total current assets |
|
|
|
|
|
| ||
Intangible assets, net |
|
|
|
|
|
| ||
Total assets |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
| $ |
|
| $ |
| ||
Accrued compensation - related parties |
|
|
|
|
|
| ||
Due to related party |
|
|
|
|
|
| ||
Notes payable – related parties |
|
|
|
|
|
| ||
Convertible notes - net of debt discount |
|
|
|
|
|
| ||
Convertible notes and interest - abandoned acquisition |
|
|
|
|
|
| ||
Accrued interest |
|
|
|
|
|
| ||
Derivative liability |
|
|
|
|
|
| ||
Loan payable |
|
|
|
|
|
| ||
Total liabilities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' deficit: |
|
|
|
|
|
|
|
|
Series A preferred stock, $ |
|
|
|
|
|
|
|
|
issued and outstanding as of March 31, 2025 and December 31, 2024, respectively |
|
|
|
|
|
| ||
Series B preferred stock, $ |
|
|
|
|
|
|
|
|
issued and outstanding as of both March 31, 2025 and December 31, 2024 |
|
|
|
|
|
| ||
Series C preferred stock, $ |
|
|
|
|
|
|
|
|
issued and outstanding as of March 31, 2025 and December 31, 2024, respectively |
|
|
|
|
|
| ||
Series D preferred stock, $ |
|
|
|
|
|
|
|
|
issued and outstanding as of March 31, 2025 and December 31, 2024, respectively |
|
|
|
|
|
| ||
Common stock, $ |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Additional paid-in capital |
|
|
|
|
|
| ||
Accumulated deficit |
|
| ( | ) |
|
| ( | ) |
Total stockholders' deficit |
|
| ( | ) |
|
| ( | ) |
Total liabilities and stockholders' deficit |
| $ |
|
| $ |
| ||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 4 |
| Table of Contents |
SMC ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
| Three Months Ended |
| |||||
|
| March 31, |
| |||||
|
| 2025 |
|
| 2024 |
| ||
Revenue |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
General and administrative |
|
|
|
|
|
| ||
Compensation expense – related party |
|
|
|
|
|
| ||
Development expense |
|
|
|
|
|
| ||
Total operating expenses |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Loss from operations |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
Interest expense |
|
| ( | ) |
|
| ( | ) |
Gain on extinguishment of debt |
|
|
|
|
|
| ||
Change in fair value of derivative |
|
| ( | ) |
|
|
| |
Total other income (expense), net |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Net income |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Net income per common share - basic |
| $ |
|
| $ |
| ||
Net income per common share - diluted |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding -basic |
|
|
|
|
|
| ||
Weighted average common shares outstanding -diluted |
|
|
|
|
|
| ||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 5 |
| Table of Contents |
SMC ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
For the Three Months Ended March 31, 2025 and 2024
(Unaudited)
|
| Series A |
|
| Series B |
|
| Series C |
|
| Series D Preferred |
|
|
|
|
| Additional |
|
| Common stock |
|
|
|
|
| Total |
| |||||||||||||||||||||||||||||
|
| Preferred Stock |
|
| Preferred Stock |
|
| Preferred Stock |
|
| Stock |
|
| Common Stock |
|
| Paid-in |
|
| To be |
|
| Accumulated |
|
| Stockholders' |
| |||||||||||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Issued |
|
| Deficit |
|
| Deficit |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Balance at December 31, 2023 (restated) |
|
|
|
| $ |
|
|
|
|
| $ |
|
|
| - |
|
| $ |
|
|
| - |
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) | ||||||||||
Common stock issued for services – related party |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
| |||||||||
Common stock issued for services |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Net income |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Balance at March 31, 2024 |
|
|
|
| $ |
|
|
|
|
| $ |
|
|
| - |
|
| $ |
|
|
| - |
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2024 |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | ||||||||||
Common stock issued for conversion of debt and accrued interest |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Preferred stock C issued for acquisition |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Net income |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Balance at March 31, 2025 |
|
| - |
|
| $ |
|
|
|
|
| $ |
|
|
|
|
| $ |
|
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) | |||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 6 |
| Table of Contents |
SMC ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
| Three Months Ended |
| |||||
|
| March 31, |
| |||||
|
| 2025 |
|
| 2024 |
| ||
Cash flows from operating activities: |
|
|
|
|
|
| ||
Net Income |
| $ |
|
| $ |
| ||
Adjustments to reconcile net income to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Amortization of debt discount |
|
|
|
|
|
| ||
Common stock issued for services – related party |
|
|
|
|
|
| ||
Common stock issued for services |
|
|
|
|
|
| ||
Change in fair value of derivative |
|
|
|
|
| ( | ) | |
Amortization of intangible assets |
|
|
|
|
|
| ||
Gain on extinguishment of debt |
|
| ( | ) |
|
|
| |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
| ( | ) |
|
|
| |
Accounts payable and accrued liabilities |
|
| ( | ) |
|
|
| |
Accrued interest |
|
|
|
|
|
| ||
Accrued compensation - related party |
|
|
|
|
|
| ||
Net cash used in operating activities |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Cash acquired pursuant to business acquisition |
|
|
|
|
|
| ||
Net cash provided by investing activities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Repayment- related parties |
|
| ( | ) |
|
|
| |
Proceeds from loan – related party |
|
|
|
|
|
| ||
Proceeds from loans |
|
|
|
|
|
| ||
Net cash provided by financing activities |
|
|
|
|
|
| ||
Net change in cash and cash equivalents |
|
|
|
|
| ( | ) | |
Cash at beginning of period |
|
|
|
|
|
| ||
Cash at end of period |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
Cash paid for interest |
| $ |
|
| $ |
| ||
Cash paid for taxes |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
Preferred stock C issued for acquisition |
| $ |
|
| $ |
| ||
Common stock issued for conversion of debt and accrued interest |
| $ |
|
| $ |
| ||
Convertible notes issued pursuant to business combination |
| $ | |
|
| $ | |
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 7 |
| Table of Contents |
SMC ENTERTAINMENT, INC.
Notes to Consolidated Financial Statements
March 31, 2025
(Unaudited)
NOTE 1 — DESCRIPTION OF BUSINESS AND HISTORY
SMC Entertainment, Inc. (the “Company” or “SMC”) was incorporated in the State of Nevada on January 23, 1998, under the name of Professional Recovery Systems, Ltd.
On April 21, 2023, the Company completed its acquisition of AI-enabled wealth management technology platform provider, Fyniti Global Equities EBT Inc. (“Fyniti”) for
Fyniti (www.fyniti.com, www.fynitiiq.com) is a Fintech developer and provider of technology that combines Artificial Intelligence/Machine Learning (AI/ML) driven Quantitative investing (IQ Engine) with AI-enabled wealth management Electronic Block Trading (“EBT”) technology.
On January 7, 2025, the Company completed closing on the acquisition agreement dated November 2, 2024 (the “Acquisition Agreement”) with Bateau Asset Management Pty, Ltd., an Australia company and the Bateau Shareholders (“Bateau”) to purchase
Bateau is a boutique investment manager founded in 2016 based in Australia with offices in Singapore. Bateau follows an absolute-return investment philosophy and a multi-manager approach to investing.
The Company is in the process of consolidating all of its current and legacy technologies (Fyniti) under one technology platform which will be referred to as FYNN AI. This consolidation will help SMC to effectively manage and streamline product offering, removal of product/feature redundancies and reduce development. With this consolidation, SMC will be more agile in deploying future features faster to meet the ever-expanding AI marketspace.
NOTE 2 — SUMMARY OF SIGNIFICANT POLICIES
Basis of Presentation
The Company’s unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The accompanying unaudited consolidated financial statements reflect all adjustments, consisting of only normal recurring items, which, in the opinion of management, are necessary for a fair statement of the results of operations for the periods shown and are not necessarily indicative of the results to be expected for the full year ending December 31, 2025. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes for the year ended December 31, 2024.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. These estimates and judgments are based on historical information that is currently available to the Company and on various other assumptions that the Company believes to be reasonable under the circumstances. Significant estimates include the fair value for derivatives, calculations used for stock based compensation, fair value of net assets acquired in a business combination and the estimate of the valuation allowance on deferred taxes. Actual results could differ from those estimates.
| 8 |
| Table of Contents |
Concentrations of Credit Risk
We maintain our cash in bank deposit accounts, the balances of which at times may exceed federally insured limits. We continually monitor our banking relationships and consequently have not experienced any losses in our accounts. At times, such deposits may be in excess of the Federal Deposit Insurance Corporation insurable amount (“FDIC”).
Concentrations
During the three months ended and as of March 31, 2025, all revenues and accounts receivable attributable to Bateau were with one customer, who is a related party to Bateau.
Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents as of March 31, 2025 or December 31, 2024.
Accounts Receivable
Accounts receivable primarily consists of management fees earned for services provided to managed funds and investment vehicles. Accounts receivable are recorded when services are rendered and are typically due within 30 to 90 days. The Company assesses the collectability of receivables on an ongoing basis. An allowance for doubtful accounts is established when there is substantial evidence that the Company will not collect the full amount due under the contractual terms. Factors considered in the assessment include the age of the receivable, the financial condition of the customer, and historical collection experience. As of the reporting date, the Company has determined that all accounts receivable is collectible and, therefore, no allowance for doubtful accounts has been recorded
Business Combinations
The Company accounts for acquisitions in which it obtains control of one or more businesses as a business combination. The purchase price of the acquired businesses is allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. The excess of the purchase price over those fair values is recognized as goodwill. During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments, in the period in which they are determined, to the assets acquired and liabilities assumed with the corresponding offset to goodwill. If the assets acquired are not a business, the Company accounts for the transaction or other event as an asset acquisition. Under both methods, the Company recognizes the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquired entity. In addition, for transactions that are business combinations, the Company evaluates the existence of goodwill or a gain from a bargain purchase.
Intangible Assets
The Company accounts for its intangible assets in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 350-30, General Intangibles Other Than Goodwill. ASC Subtopic 350-30, which requires assets to be measured based on the fair value of the consideration given or the fair value of the assets (or net assets) acquired, whichever is more clearly evident and, thus, more reliably measurable. Under ASC Subtopic 350-30 any intangible asset with a useful life is required to be amortized over that life and the useful life is to be evaluated every reporting period to determine whether events or circumstances warrant a revision to the remaining period of amortization. If the estimate of useful life is changed the remaining carrying amount of the intangible asset is amortized prospectively over the revised remaining useful life. Costs to renew or extend the term of an intangible assets are recognized as an expense when incurred.
Impairment of Long-Lived Assets
The Company continually monitors events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell.
| 9 |
| Table of Contents |
Basic and Diluted Earnings Per Share
Net income (loss) per common share is computed pursuant to ASC 260-10-45. Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially outstanding shares of common stock during the period. The weighted average number of common shares outstanding and potentially outstanding common shares assumes that the Company incorporated as of the beginning of the first period presented. As of March 31, 2025, there are
The Company is aware that the current number of potentially dilutive common shares exceeds its authorized shares and has taken the appropriate steps to remediate the situation.
Stock-Based Compensation
We account for equity-based transactions with employees and non-employees under the provisions of FASB ASC Topic 718, “Compensation – Stock Compensation” (Topic 718), which establishes that equity-based payments to employees and non-employees are recorded at the grant date fair value of the equity instruments the entity is obligated to issue when the employees and non-employees have rendered the requisite service and satisfied any other conditions necessary to earn the right to benefit from the instruments. Topic 718 also states that observable market prices of identical or similar equity or liability instruments in active markets are the best evidence of fair value and, if available, should be used as the basis for the measurement for equity and liability instruments awarded in these share-based payment transactions. However, if observable market prices of identical or similar equity or liability instruments are not available, the fair value shall be estimated by using a valuation technique or model that complies with the measurement objective, as described in FASB ASC Topic 718.
Revenue Recognition
The Company recognizes revenue under ASC 606, “Revenue from Contracts with Customers” (“ASC 606”). The Company determines revenue recognition through the following steps:
| ● | Identification of a contract with a customer; |
| ● | Identification of the performance obligations in the contract; |
| ● | Determination of the transaction price; |
| ● | Allocation of the transaction price to the performance obligations in the contract; and |
| ● | Recognition of revenue when or as the performance obligations are satisfied. |
Revenue is recognized when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. As a practical expedient, the Company does not adjust the transaction price for the effects of a significant financing component if, at contract inception, the period between customer payment and the transfer of goods or services is expected to be one year or less.
Bateau generates management fee revenue from its investment advisory services. Management fees are generally based on a percentage of assets under management (“AUM”) and are recognized as revenue over time in accordance with the terms of the respective management agreements, typically on a monthly or quarterly basis. The fees are based on the underlying assets which Bateau manages for services provided to managed funds and investment vehicles.
| 10 |
| Table of Contents |
Derivative Financial Instruments
The Company evaluates all its contracts to determine if such instruments have derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses a weighted-average Black-Scholes-Merton option pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period.
Fair value of Financial Instruments
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP) and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
Level 1: Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2: Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3: Pricing inputs that are generally unobservable inputs and not corroborated by market data.
The carrying amount of the Company’s financial assets and liabilities, such as cash, prepaid expenses and accrued expenses approximate their fair value because of the short maturity of those instruments. The Company’s notes payable approximates the fair value of such instruments as the notes bear interest rates that are consistent with current market rates.
The following table classifies the Company’s asset measured at fair value on a recurring basis into the fair value hierarchy as of March 31, 2025:
Description |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| |||
Derivative liability |
| $ |
|
| $ |
|
| $ |
| |||
Total |
| $ |
|
| $ |
|
| $ |
| |||
The following table classifies the Company’s liabilities measured at fair value on a recurring basis into the fair value hierarchy as of December 31, 2024:
Description |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| |||
Derivative liability |
| $ |
|
| $ |
|
| $ |
| |||
Total |
| $ |
|
| $ |
|
| $ |
| |||
Segment Information
In accordance with ASC 280, Segment Reporting (“ASC 280”), we identify our operating segments according to how our business activities are managed and evaluated. As of March 31, 2025 our operating segments included: Corporate and Fyniti. As the Company integrates its acquisition of Bateau, it may reevaluate its operating and reporting segments in the second quarter of 2025. Each operating segment currently reports to the Chief Executive Officer, the chief operating decision-maker. The results of our operating segments are aggregated into one reportable segment. All of the operating segments have met the aggregation criteria and have been aggregated and are presented as one reportable segment, as permitted by ASC 280. We continually monitor and review our segment reporting structure in accordance with authoritative guidance to determine whether any changes have occurred that would impact our reportable segments.
| 11 |
| Table of Contents |
Recently issued accounting pronouncements
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures, which requires disclosure of incremental segment information on an annual and interim basis, primarily disclosure of significant segment expense categories and amounts for each reportable segment. The new standard is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company adopted ASU 2023-07 in the annual financial statements for the year ended December 31, 2024, and for interim periods beginning in 2025. The adoption of ASU 2023-07 did not have a significant impact on the Company’s consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures, which requires greater disaggregation of income tax disclosures related to the income tax reconciliation and income taxes paid. The amendments improve the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. The new standard is effective for annual periods beginning after December 15, 2024, and early adoption is permitted. The Company believes the amendments of ASU 2023-09 will not have a significant impact on the Company’s consolidated financial statements and will include all required disclosures upon adoption.
The Company has implemented all new applicable accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
NOTE 3 — GOING CONCERN
The accompanying unaudited 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. The Company has suffered recurring losses since inception, has an accumulated deficit of $
NOTE 4 — INTANGIBLE ASSETS
Intangible assets as of March 31, 2025 and December 31, 2024 consisted of the following:
|
| March 31, |
|
| December 31, |
| ||
|
| 2025 |
|
| 2024 |
| ||
Developed technology |
| $ |
|
| $ |
| ||
Customer relationships |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
Less: Accumulated amortization |
|
| ( | ) |
|
|
| |
|
| $ |
|
| $ |
| ||
See Note 9 for further detail on the customer relationships acquired pursuant to the Bateau acquisition in January 2025.
In connection with the Fyniti acquisition, the Company identified intangible assets of $
| 12 |
| Table of Contents |
During the three months ended March 31, 2025 and 2024, the Company recorded amortization expense of $
The estimated future amortization expense for the next five years and thereafter is as follows:
Year ending December 31, |
|
|
| |
2025 |
| $ |
| |
2026 |
|
|
| |
2027 |
|
|
| |
2028 |
|
|
| |
Thereafter |
|
|
| |
Total |
| $ |
| |
NOTE 5 — DEBT
Convertible Notes Payable
A summary of all the Company’s convertible loans is as follows.
|
| Date Issued |
|
| Maturity Date |
|
| Interest Rate |
|
| Balance 12/31/2024 |
|
| Additions |
|
| Conversions/ Payments |
|
| Balance 3/31/2025 |
|
| Conversion Terms |
| ||||||||
Christopher Whitcomb |
|
|
|
|
|
| % |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
|
| ( | ) | |||||||||
Christopher Whitcomb |
|
|
|
|
|
| % |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
|
| ( | ) | |||||||||
Christopher Whitcomb |
|
|
|
|
|
| % |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
|
| ( | ) | |||||||||
Kanno Group Holdings ll Ltd |
|
|
|
|
|
| % |
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
|
| $ |
| |||||||||
Kanno Group Holdings ll Ltd |
|
|
|
|
|
| % |
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
|
| $ |
| |||||||||
Kanno Group Holdings ll Ltd |
|
|
|
|
|
| % |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||||||||
Kanno Group Holdings ll Ltd |
|
|
|
|
|
| % |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||||||||
Kanno Group Holdings ll Ltd |
|
|
|
|
|
| % |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||||||||
Kanno Group Holdings ll Ltd |
|
|
|
|
|
| % |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||||||||
Kanno Group Holdings ll Ltd |
|
|
|
|
|
| % |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||||||||
Kanno Group Holdings ll Ltd |
|
|
|
|
|
| % |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||||||||
Kanno Group Holdings ll Ltd |
|
|
|
|
|
| % |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||||||||
Kanno Group Holdings ll Ltd |
|
|
|
|
|
| % |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||||||||
Kanno Group Holdings ll Ltd |
|
|
|
|
|
| % |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||||||||
Kanno Group Holdings ll Ltd |
|
|
|
|
|
| % |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||||||||
Kanno Group Holdings ll Ltd |
|
|
|
|
|
| % |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||||||||
Kanno Group Holdings ll Ltd |
|
|
|
|
|
| % |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||||||||
Kanno Group Holdings ll Ltd |
|
|
|
|
|
| % |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||||||||
Kanno Group Holdings ll Ltd |
|
|
|
|
|
| % |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||||||||
Kanno Group Holdings ll Ltd |
|
|
|
|
|
| % |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||||||||
Kanno Group Holdings ll Ltd |
|
|
|
|
|
| n/a |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||||
Kanno Group Holdings ll Ltd |
|
|
|
|
|
| n/a |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||||
ChainTrade, Ltd |
|
|
|
|
|
| % |
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
|
| $ |
| |||||||||
Proactive Capital Partners |
|
|
| demand |
|
|
| % |
| $ |
|
| $ |
|
|
|
|
| $ |
|
| $ |
| |||||||||
Kanno Group Holdings ll Ltd |
|
|
|
|
|
| n/a |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||||
Proactive Capital Partners |
|
|
|
|
|
| % |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||||||||
Red Road Holdings Corp |
|
|
|
|
|
| % |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) | |||||||||
Kanno Group Holdings ll Ltd |
|
|
|
|
|
| n/a |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||||
Stuart Haley* |
|
|
|
|
|
| % |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||||||||
Red Road Holdings Corp |
|
|
|
|
|
| % |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||||||||
Red Road Holdings Corp |
|
|
|
|
|
| 12 | % |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||||
Kanno Group Holdings ll Ltd |
|
|
|
|
|
| n/a |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
|
|
| ||
Kanno Group Holdings ll Ltd – accrued interest |
|
| n/a |
|
|
| n/a |
|
|
| n/a |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
|
|
|
|
| |||
Other accrued interest |
|
| n/a |
|
|
| n/a |
|
|
| n/a |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
|
|
|
|
| |||
Less discount |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | ( | ) |
| $ | ( | ) |
| $ |
|
| $ | ( | ) |
|
|
|
| |
Total convertible debt and accrued interest |
|
|
|
|
|
|
|
|
|
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
|
|
|
|
| |||
(1) | 25% discount to the lowest closing price within the 60 previous trading sessions. | |
| (2) | greater of 1) $0.0003, or 65% of the lowest trading price for 10 days prior to conversion date. |
*Represents the seller of Bateau (see Note 9).
On January 9, 2025, the Company issued two convertible promissory notes to the sellers of Bateau for an aggregate principal of $
On March 16, 2025, Kanno converted $
All notes past their maturity date are considered to be in default.
| 13 |
| Table of Contents |
The following is a summary of the convertible notes:
|
| March 31, 2025 |
|
| December 31, 2024 |
| ||
Total convertible notes, principal outstanding |
| $ |
|
| $ |
| ||
Less: unamortized debt discount |
|
| ( | ) |
|
| ( | ) |
Convertible notes - net of debt discount |
| $ |
|
| $ |
| ||
|
| March 31, 2025 |
|
| December 31, 2024 |
| ||
Convertible notes, principal - abandoned acquisition |
| $ |
|
| $ |
| ||
Convertible notes, accrued interest - abandoned acquisition |
|
|
|
|
|
| ||
Convertible notes and interest - abandoned acquisition |
| $ |
|
| $ |
| ||
Convertible notes and interest – abandoned acquisition per the consolidated balance sheet represents the promissory note and accrued interest with ChainTrade, LTD (“ChainTrade”) pursuant to its May 2024 acquisition agreement (see Note 9). The Company has abandoned this acquisition due to nonperformance of the seller. In March 2025, the Company extinguished the note and accrued interest. See Note 9 for details.
Derivative Liability
A summary of the activity of the derivative liability for the notes above is as follows:
|
| Derivative |
| |
|
| Liability |
| |
Balance at December 31, 2024 |
| $ |
| |
Derivative loss due to mark to market adjustment |
|
|
| |
Balance at March 31, 2025 |
| $ |
| |
A summary of quantitative information about significant unobservable inputs (Level 3 inputs) used in measuring the Company’s derivative liability that are categorized within Level 3 of the fair value hierarchy as of March 31, 2025, is as follows:
Inputs |
| March 31, 2025 |
|
| December 31, 2024 |
|
| Initial Valuation |
| |||
Stock price |
| $ |
|
| $ |
|
| $ |
| |||
Conversion price |
| $ |
|
| $ |
|
| $ |
| |||
Volatility (annual) |
|
|
|
|
|
| ||||||
Risk-free rate |
|
|
|
|
|
| ||||||
Dividend rate |
|
|
|
|
|
|
|
|
| |||
Years to maturity |
|
|
|
|
|
|
| |||||
The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s management.
Loan Payable
In connection with the Bateau acquisition in January 2025 (see Note 9), the Company assumed two outstanding loans payable. The loans are with Bateau’s management and shareholders. One loan totaling $
NOTE 6 — COMMON STOCK
On March 16, 2025, Kanno converted $
| 14 |
| Table of Contents |
NOTE 7 — PREFERRED STOCK
Series B Preferred Stock
On December 16, 2021, the Company amended its Articles of Incorporation, creating a series of Preferred Stock designating
As of March 31, 2025 and December 31, 2024, there were
Series C Preferred Stock
On November 6, 2024, the Company Amended its Articles of Incorporation to authorize and designate
On January 9, 2025, the Company issued
As of March 31, 2025, there were
Series D Preferred Stock
On October 25, 2024, the Company Amended its Articles of Incorporation to authorize and designate
In October 2024, the Company exchanged $
On December 30, 2024, Kanno converted $
As of March 31, 2025 and December 31, 2024, there were
NOTE 8 — RELATED PARTY TRANSACTIONS
On March 31, 2024, the Company entered into a new consulting agreement with Ronald Hughes and North Arm Capital LLC. Per the terms of the agreement, effective January 1, 2024, Mr. Hughes is to be compensated $
| 15 |
| Table of Contents |
On March 31, 2024, the Company entered into a new consulting agreement with Erik Blum and J W Price LLC. Per the terms of the agreement, effective January 1, 2024, Mr. Blum is to be compensated $
As of December 31, 2024, there is $
The following is a summary of notes payable to related parties as of March 31, 2025:
Convertible note to Mr. Hughes for accrued compensation |
|
|
| |
as of March 31, 2025. Non-interest bearing and convertible |
|
|
| |
into shares of common stock at $0.0006 per share. |
| $ |
| |
|
|
|
|
|
Convertible note to Mr. Blum for accrued compensation |
|
|
|
|
as of March 31, 2025. Non-interest bearing and convertible |
|
|
|
|
into shares of common stock at $0.00055 per share. |
|
|
| |
|
| $ |
| |
NOTE 9 — ACQUISITIONS
ChainTrade, LTD
On June 21, 2024, the Company closed on the May 30, 2024 Acquisition Agreement (the “Acquisition Agreement”) with ChainTrade, LTD (“ChainTrade”), to purchase
On June 25, 2024, as required by the Acquisition Agreement, Paul (Prem) Couture, CEO of ChainTrade, and Red Matter Capital, was appointed as the Company’s Chief Technology Officer. Mr. Couture and the Company entered into an Employment Agreement under which he is to be paid a salary of $
On March 5, 2025, the Company formed FYNX, Inc., a Nevada corporation, which is the Company’s wholly-owned subsidiary (“FYNX”). On March 7, FYNX entered into an Assignment Agreement with Plato Technologies, Inc. (“Plato”), the majority holder of the equity in ChainTrade, under which Plato assigned all of its rights, title and interest in ChainTrade to FYNX in exchange for a mutual release of claims. Upon the execution of the Assignment Agreement, FYNX acquired 50% voting control of ChainTrade and became Chain trade’s Manager.
On March 17, 2025, the Company filed a lawsuit (Case No. A-25-914825-C) in the District Court of Clark County Nevada, against ChainTrade and FYNX, related to certain representations and warranties made by Chaintrade in the Acquisition Agreement. ChainTrade and FYNX accepted service of the complaint on March 24, 2025.
On April 18, 2025, the Nevada Court ruled in favor of the Company and issued an Entry of Stipulation and Order for Dismissal under which the Acquisition Agreement dated May 30, 2024 was unwound and terminated, and the $
| 16 |
| Table of Contents |
As a result of the legal proceedings, the Company extinguished the full promissory note and accrued interest totaling $
Bateau Asset Management Pty, Ltd
On November 2, 2024, the Company entered into an Acquisition Agreement (the “Bateau Acquisition Agreement”) with Bateau Asset Management Pty, Ltd., an Australia company (“Bateau”), and the Shareholders of Bateau to purchase
The Company accounted for the transaction as a business combination under ASC 805 and as a result, allocated the fair value of the identifiable assets acquired and liabilities assumed as of the acquisition date as outlined in the table below.
Provisional Purchase Price Allocation
Consideration |
|
|
| |
Series C Preferred stock |
| $ |
| |
Convertible notes |
|
|
| |
Total consideration issued |
| $ |
| |
Identified assets, liabilities, and noncontrolling interest |
|
|
|
|
Cash |
|
|
| |
Intangible assets - customer relationships |
|
|
| |
Accounts receivable, net |
|
|
| |
Accounts payable and accrued liabilities |
|
| ( | ) |
Loan payable |
|
| ( | ) |
Total identified assets, liabilities, and noncontrolling interest |
|
|
| |
Excess purchase price allocated to goodwill |
| $ |
| |
| 17 |
| Table of Contents |
Unaudited Pro Forma Financial Information
The following unaudited pro forma financial information presents the Company’s financial results as if the Bateau acquisition had occurred as of January 1, 2024. The unaudited pro forma financial information is not necessarily indicative of what the financial results actually would have been had the acquisitions been completed on this date. In addition, the unaudited pro forma financial information is not indicative of, nor does it purport to project, the Company’s future financial results. The unaudited pro forma information does not give effect to any estimated and potential cost savings or other operating efficiencies that could result from the acquisition:
|
| Three Months Ended |
| |||||
|
| March 31, |
| |||||
|
| 2025 |
|
| 2024 |
| ||
Net revenues |
| $ | 43,653 |
|
| $ | 64,249 |
|
Net income |
| $ | 7,588,731 |
|
| $ | 115,275 |
|
Net income per common share |
| $ | 0.01 |
|
| $ | 0.00 |
|
NOTE 10 — SUBSEQUENT EVENTS
Management has evaluated subsequent events pursuant to the requirements of ASC Topic 855, Subsequent Events, from the balance sheet date through the date the consolidated financial statements were issued and has determined that there are the following material subsequent events.
On April 18, 2025, the Nevada Court ruled in favor of the Company and issued an Entry of Stipulation and Order for Dismissal under which the Acquisition Agreement dated May 30, 2024 was unwound and terminated, and the $
| 18 |
| Table of Contents |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Our Management’s Discussion and Analysis should be read in conjunction with our unaudited consolidated financial statements and related notes thereto included elsewhere in this quarterly report.
Forward-Looking Statements
The information in this report contains forward-looking statements. All statements other than statements of historical fact made in this report are forward-looking. In particular, the statements herein regarding industry prospects and future results of operations or financial position are forward-looking statements. These forward-looking statements can be identified by the use of words such as “believes,” “estimates,” “could,” “possibly,” “probably,” anticipates,” “projects,” “expects,” “may,” “will,” or “should” or other variations or similar words. No assurances can be given that the future results anticipated by the forward-looking statements will be achieved. Forward-looking statements reflect management’s current expectations and are inherently uncertain. If underlying assumptions prove inaccurate or unknown risks or uncertainties materialize, our actual results may differ significantly from management’s expectations. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q or, in the case of documents referred to or incorporated by reference, the date of those documents.
The following discussion and analysis should be read in conjunction with our unaudited financial statements, included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management.
Company Overview and Description of Business
On April 21, 2023, the Company completed its acquisition of AI-enabled wealth management technology platform provider, Fyniti Global Equities EBT Inc. (“Fyniti”) for 2,500,000 shares of Series B $10.00 Preferred Stock.
Fyniti, (www.fyniti.com, www.fynitiiq.com) is a Fintech platform developer founded by veteran Wall Street technologists and investment bankers who worked for Goldman Sachs, JP Morgan Chase, Bank of America (Merrill Lynch) and Citigroup. Fyniti has a clear focus on developing disruptive technologies in the Wealth Management and capital markets domains. Fyniti owns the IQ Engine and EBT Technology.
| 19 |
| Table of Contents |
Fintech developer and provider of technology that combines Artificial Intelligence/Machine Learning (AI/ML) driven Quantitative investing (IQ Engine) with AI-enabled wealth management Electronic Block Trading (“EBT”) technology.
On August 14, 2023, the Company filed a Certificate of Change with the Nevada Secretary of State to increase the authorized shares of the Company’s common stock to 3,000,000,000.
On January 7, 2025, the Company completed closing on the acquisition agreement dated November 2, 2024 (the “Acquisition Agreement”) with Bateau Asset Management Pty, Ltd., an Australia company and the Bateau Shareholders (“Bateau”), and the Shareholders of Bateau to purchase 100% of the outstanding ordinary shares of Bateau (the “Bateau Equity”).
Bateau is a boutique investment manager founded in 2016 based in Australia with offices in Singapore. Bateau follows an absolute-return investment philosophy and a multi-manager approach to investing.
The Company is in the process of consolidating all of its current and legacy technologies (Fyniti) under one technology platform which will be referred to as FYNN AI. This consolidation will help SMC to effectively manage and streamline product offering, removal of product/feature redundancies and reduce development. With this consolidation, SMC will be more agile in deploying future features faster to meet the ever-expanding AI marketspace.
Results of Operations
Management’s discussion and analysis of financial condition and results of operations (“MD&A”) includes a discussion of the consolidated results from operations of SMC Entertainment, Inc. and its subsidiaries.
Three Months Ended March 31, 2025 Compared to the Three Months Ended March 31, 2024
Revenue
For the three months ended March 31, 2025 and 2024, we recognized $43,653 and $0 revenue, respectively. In the current period our revenue came via management fees from the newly acquired Bateau Asset Management Pty, Ltd.
General and Administrative Expenses
General and Administrative expenses (“G&A”) for the three months ended March 31, 2025 were $101,856 as compared to $87,083 for the comparable prior period, an increase of $14,773 or 16.9%. In the current period we had G&A expense for Bateau of $33,372. This added G&A expense was offset by a decrease in consulting expense during the period.
| 20 |
| Table of Contents |
Compensation Expense – Related Party
Compensation Expense – Related Party for the three months ended March 31, 2025, was $112,000 as compared to $117,800 for the comparable prior period, a decrease of $5,800 or 4.9%.
Development Expense
During the three months ended March 31, 2025, we have new development expense of $20,000 for payments made to Plato Technologies.
Other Income (Expense)
Total other income for the three months ended March 31, 2025, was $7,778,934 compared to $360,696 for the comparable prior period. In the current period we had interest expense of $459,854, of which $344,448 was for the amortization of debt discount, a gain on extinguishment of debt of $8,308,360 and a loss of $69,572 related to the change in the fair value of derivatives. In the prior period we had interest expense of $15,751 and a gain of $376,447 related to the change in the fair value of derivatives.
Net Income
For the three months ended March 31, 2025, we had net income of $7,588,731, mainly due to the gain from the extinguishment of debt. For the three months ended March 31, 2024, we had net income of $155,813.
Liquidity and Capital Resources
During the three months ended March 31, 2025, we used $128,757 of cash in operations compared to $13,001 used in the prior period.
During the three months ended March 31, 2025, we netted $19,113 of cash from investing activities compared to $0 received in the prior period resulting from cash acquired pursuant to the Bateau acquisition.
During the three months ended March 31, 2025, we netted $113,633 of cash from financing activities compared to $9,954 received in the prior period.
As of March 31, 2025, we have convertible notes, including accrued interest, due of $2,917,599. We also have notes payable to related parties of $1,111,460.
The following is a summary of the convertible notes:
|
| March 31, 2025 |
|
| December 31, 2024 |
| ||
Total convertible notes, principal outstanding |
| $ | 2,761,447 |
|
| $ | 688,892 |
|
Less: unamortized debt discount |
|
| (1,671,085 | ) |
|
| (5,333 | ) |
Convertible notes - net of debt discount |
| $ | 1,090,362 |
|
| $ | 683,559 |
|
Off-Balance Sheet Arrangements
As of March 31, 2025, the Company had no off-balance sheet arrangements.
| 21 |
| Table of Contents |
Going Concern
Our auditors have expressed substantial doubt as to our ability to continue as a going concern. The accompanying unaudited consolidated financial statements have been prepared on a going concern basis. For the three months ended March 31, 2025, the Company had net income of $7,588,731; however, this was largely due to the extinguishment of debt. We had net cash used in operating activities of $128,757 and an accumulated deficit of $18,635,139. These matters raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the date of this filing. The Company’s ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due, to fund possible future acquisitions, and to generate profitable operations in the future. Management plans to provide for the Company’s capital requirements by continuing to issue additional equity and debt securities. The outcome of these matters cannot be predicted at this time and there are no assurances that, if achieved, the Company will have sufficient funds to execute its business plan or generate positive operating results. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Critical Accounting Policies
Refer to Note 2 for a condensed discussion of our critical accounting policies and to our Form 10K, which includes our audited financial statements for the year ended December 31, 2024, for a full discussion of our critical accounting policies.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this Item.
ITEM 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation of the effectiveness of disclosure controls and procedures as of the end of the period covered by this report under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. Based on that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures during the three months ended March 31, 2025 were not effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. The term “disclosure controls and procedures,” as defined under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Notwithstanding the identified material weaknesses, management believes the financial statements included in this quarterly report on Form 10-Q fairly represent in all material respects our financial condition, results of operations and cash flows at and for the periods presented in accordance with U.S. GAAP.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the Exchange Act that occurred during quarter ended March 31, 2025, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
| 22 |
| Table of Contents |
PART II
ITEM 1. Legal Proceedings
There are no claims, actions, suits, proceedings, or investigations that are currently pending or, to the Company’s knowledge, threatened by or against the Company or respecting its operations or assets, or by or against any of the Company’s officers, directors, or affiliates.
Item 1A. Risk Factors.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this Item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits.
(a) Exhibits.
Exhibit No. |
| Description |
| Rule 13a14(a)/15d-14(a) Certification of Chief Executive Officer | |
| Section 1350 Certification of Chief Executive Officer and Chief Financial Officer | |
101.INS* |
| Inline XBRL Instance Document(1) |
101.SCH* |
| Inline XBRL Taxonomy Extension Schema Document(1) |
101.CAL* |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document(1) |
101.DEF* |
| Inline XBRL Taxonomy Extension Definition Linkbase Document(1) |
101.LAB* |
| Inline XBRL Taxonomy Extension Label Linkbase Document(1) |
101.PRE* |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document(1) |
| 23 |
| Table of Contents |
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: May 15, 2025 | SMC ENTERTAINMENT, INC. | ||
|
|
|
|
By: | /s/ Erik Blum | ||
|
| Name: Erik Blum |
|
|
| Title: Chief Executive Officer |
|
|
| (Principal Executive Officer) and Director |
|
|
|
|
|
| By: | /s/ Eric Sherb |
|
|
| Name: Eric Sherb |
|
|
| Title: Chief Financial Officer |
|
|
| (Principal Financial Officer and Principal Accounting Officer) |
|
| 24 |
EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Erik Blum, certify that:
| 1. | I have reviewed this report on Form 10-Q. |
|
|
|
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
|
|
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
|
|
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
| a) | Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
|
|
|
|
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
|
|
|
|
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
|
|
|
|
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
|
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
|
|
|
|
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: May 15, 2025 | By: | /s/ Erik Blum |
|
|
|
| A. Erik Blum |
|
|
|
| Chief Executive Officer |
|
EXHIBIT 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Eric Sherb, certify that:
| 1. | I have reviewed this report on Form 10-Q. |
|
|
|
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
|
|
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
|
|
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
| a) | Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
|
|
|
|
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
|
|
|
|
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
|
|
|
|
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
|
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
|
|
|
|
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: May 15, 2025 | By: | /s/ Eric Sherb |
|
|
|
| Eric Sherb |
|
|
|
| Chief Financial Officer |
|
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES—OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of SMC Entertainment Inc. (the “Company”) for the period ended March 31, 2025, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Erik Blum, as Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
|
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
|
|
|
|
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: May 15, 2025 | By: | /s/ Erik Blum |
|
|
|
| Erik Blum |
|
|
|
| Chief Executive Officer |
|
In connection with the Quartetly Report on Form 10-Q of SMC Entertainment Inc. (the “Company”) for the period ended March 31, 2025, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Eric Sherb, as Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
|
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
|
|
|
|
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: May 15, 2025 | By: | /s/ Eric Sherb |
|
|
|
| Eric Sherb |
|
|
|
| Chief Financial Officer |
|