UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the fiscal year ended:
or
Commission file number:
(Exact name of small business issuer as specified in its charter) |
(State or other jurisdiction of | (I.R.S. employer | |
incorporation or formation) | Identification No.) |
(Address of principal executive offices) |
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(Issuer’s telephone number) |
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
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 (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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. No
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by the average bid and asked price of such common equity, as of the last business day of the registrant’s completed second fiscal quarter was $
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:
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As used in this registration statement, unless the context otherwise requires, the terms the “Company,” “Registrant,” “we,” “us,” “our,” or “SMCE,” refer to SMC Entertainment, Inc., a Nevada corporation.
FORWARD-LOOKING STATEMENTS
Except for statements of historical fact, some information in this document contains “forward-looking statements” that involve substantial risks and uncertainties. You can identify these forward-looking statements by words such as “may,” “will,” “should,” “anticipate,” “estimate,” “plans,” “potential,” “projects,” “continuing,” “ongoing,” “expects,” “management believes,” “we believe,” “we intend” or the negative of these words or other variations on these words or comparable terminology. The statements that contain these or similar words should be read carefully because these statements discuss our future expectations, contain projections of our future results of operations or of our financial position, or state other forward-looking information. We believe that it is important to communicate our future expectations to our investors. However, there may be events in the future that we are not able accurately to predict or control. Further, we urge you to be cautious of the forward-looking statements which are contained in this registration statement because they involve risks, uncertainties and other factors affecting our operations, market growth, service, products, and licenses. The factors listed in the sections captioned “Risk Factors” and “Description of Business,” as well as other cautionary language in this registration statement and events in the future may cause our actual results and achievements, whether expressed or implied, to differ materially from the expectations we describe in our forward-looking statements. We operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict all of those risks, nor can we assess the impact of all of those risks on our business or the extent to which any factor may cause actual results to differ materially from those contained in any forward-looking statement. The forward-looking statements in this registration statement are based on assumptions management believes are reasonable. However, due to the uncertainties associated with forward-looking statements, you should not place undue reliance on any forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and unless required by law, we expressly disclaim any obligation or undertaking to publicly update any of them in light of new information, future events, or otherwise. The occurrence of any of the events described as risk factors or other future events could have a material adverse effect on our business, results of operations and financial position. Since our common stock is considered a “penny stock,” we are ineligible to rely on the safe harbor for forward-looking statements provided in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”).
WHERE YOU CAN FIND MORE INFORMATION ABOUT US
When this registration statement becomes effective, we will begin to file reports, proxy statements, information statements and other information with the United States Securities and Exchange Commission (the “SEC”). You may read and copy this information, for a copying fee, at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for more information on its Public Reference Room. Our SEC filings will also be available to the public from commercial document retrieval services, and at the Web site maintained by the SEC at http://www.sec.gov.
When this registration statement is effective, we will make available, through a link to the SEC’s Web site, electronic copies of the materials we file with the SEC (including our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, the Section 16 reports filed by our executive officers, directors and 10% stockholders and amendments to those reports). To receive paper copies of our SEC filings, please contact us by mail addressed to Investor Relations, SMC Entertainment, Inc., 9170 Glades Road Suite 150, Boca Raton, FL 33434.
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Item 1. Business
In a marketplace of rapid advancement of Artificial Intelligence (AI), SMC identifies multiple opportunities within the FinTech universe to pursue for its' shareholders. The Company sees itself as a FinTech-Disruptor, seeking businesses that are pioneering the digital world and investing in AI, specifically within the financial services domain. Artificial Intelligence leverages computers and machines to mimic the problem-solving and decision-making capabilities of the expert human mind.
We continue to develop Fyniti Global Equities EBT Index and have integrated this technology into our FYNN AI platform. Fyniti, a fintech platform developer, was founded by veteran Wall Street technologists and investment bankers with experience at Goldman Sachs, JP Morgan Chase, Bank of America (Merrill Lynch), and Citigroup. The Company has a clear focus on developing disruptive technologies for the wealth management and capital markets sectors.
Fyniti owns the IQ Engine and EBT Technology, which together provide AI-driven quantitative investing and AI-based basket trading. While originally intended to generate a standalone revenue stream, we have now combined all legacy platforms into one cohesive platform.
The Platform’s IQ Engine enables the user to see changes occurring on the underlying indexes daily and provides alternatives based on machine learning (“ML”) and artificial intelligence (“AI”) which the user can incorporate into its decision making process.
Our AI and ML Capabilities:
Fyniti Global Equities EBT employs state-of-the-art AI/ML technologies along with Quant algorithms, to enhance our quantitative investing strategies and wealth management solutions. The primary purpose of our AI/ML capabilities is to optimize trading strategies, risk management, and portfolio allocation.
Operation of the IQ Engine:
The IQ Engine operates by continuously analyzing vast amounts of financial data, market indicators, and historical trading patterns. It employs advanced statistical models and machine learning algorithms to identify trends, correlations, and anomalies in the data. These insights are then used to make data-driven decisions regarding the execution of trades, asset allocation, and risk mitigation. By using the IQ engine, Financial Institutions, RIAs, and CPAs will have more access to information flow with which to make better decisions for their clients.
Datasets Utilized:
Our AI/ML algorithms utilize a wide range of datasets to inform their decision-making processes. These datasets include but are not limited to:
We use both public and paid sources for input. Most of the input is correlated by amassing the collective data points at the end of business everyday. Our AI/ML algorithms utilize a wide range of datasets to inform their decision-making processes. The AL/ML Algorithm captures between 20 and 30 thousand data points every day from different places. These data points comprise but are not limited to:
Market Data: Real-time and historical price data, trading volumes, bid-ask spreads, and order book information.
Economic Indicators: Macro-economic data such as GDP, inflation rates, and interest rates.
News and Sentiment Analysis: News articles, social media sentiment, and other textual data sources to gauge market sentiment.
Fundamental Data: Company financials, earnings reports, and analyst recommendations.
Alternative Data: Non-traditional data sources are also incorporated to enhance the capabilities. As an example, regarding the financial sector. Buy now pay later tracking, Credit card usage, M1distribution, and Fed Data.
We obtain those datasets from paid data providers like financial data publishers as well as public sources like corporate SEC filings Edgar and Bloomberg etc. The nature of these datasets is both structured and unstructured data. Depending on the source of the dataset, the cost varies. Regarding the AI, we use 3 broader types of algorithms, supervised learning, unsupervised learning and reinforcement learning.
The SaaS is used to create a projected weighting on each block. In essence creating a customized index basket that is actionable on by the RIA. The institution would have access to alerts on a daily basis showing recommended adjustments within their customized block. The RIA or institution would have the decision to act or not act on the alert.
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We use AI in various capacities including (but not limited to) the following use cases: RAG based Information retrieval from unstructured data like SEC filings, quarterly reports etc., Text summarization and classification, Predictive analytics using financial metrics, Automatic data enrichment and predictions, Autonomous agents to continuously analyze data, identify missing features, rank and assign based on metrics v Analyze and enhance news stories, structured inputs like analyst ratings etc. All these datasets, 3rd party inputs are internally used to predict various ratings and analysis, but those data are not shown directly to the end users.
The mix of data points is designed to provide actionable alerts to financial institutions the exact set of data points is proprietary to the SaaS platform and the company would like to not divulge it publicly.
We obtain those datasets from paid data providers like financial data publishers as well as public sources like corporate SEC filings Edgar and Bloomberg etc. The nature of these datasets is both structured and unstructured data. Depending on the source of the dataset, the cost varies. Regarding the AI, we use 3 broader types of algorithms, supervised learning, unsupervised learning and reinforcement learning.
We use AI in various capacities including (but not limited to) the following use cases: RAG based Information retrieval from unstructured data like SEC filings, quarterly reports etc., Text summarization and classification, Predictive analytics using financial metrics, Automatic data enrichment and predictions, Autonomous agents to continuously analyze data, identify missing features, rank and assign based on metrics Analyze and enhance news stories, structured inputs like analyst ratings etc. All these datasets, 3rd party inputs are internally used to predict various ratings and analysis, but those data are not shown directly to the end users.
Third-Party AI Products:
While we primarily rely on our proprietary AI models and Quant algorithms, we also utilize third-party AI products and services for specialized analyses or data enhancements. These third-party tools are carefully vetted to ensure their accuracy, reliability, and compliance with regulatory standards.
We use the comparable and mention the ETF market because we wanted to draw parallel to how these two differ in the ability to cater to same segment of stock investors.
Fyniti Blocks -- as we call it-- may look similar to ETFs, however these two are different financial products, however the end goal is these two helps professional investors in simplifying their investment strategy. Fyniti Blocks offer Ria’s and Hedge Fund managers the ability to leverage real time trends and events, offering customization etc., Our product is a technology product offered as Software-as-a-Service because it leverages latest technologies to help the RIAs/brokers while giving them the controls they need to manage these by themselves and also without changing how these stocks are traded. It helps them in managing their portfolios better. ETF are set in their weighting the software offers institutions the ability to change their weightings as needed to reflect the underlying sentiment of the machine learning protocol.
We do use data like any other typical technology-based stock trading platform would use, but not necessarily would extrapolate data from ETF markets. For the reasons given above, the way it operates is very different and also, it addresses the gaps in customization that the ETFs currently do not provide.
Going Concern:
Since inception through the present, we have been dependent on raising capital to support our working capital needs. During this same period, we have recorded net accumulated losses and are yet to achieve profitability. Our ability to achieve profitability depends upon many factors, including its ability to develop and commercialize our websites. There can be no assurance that we will ever achieve any significant revenues or profitable operations. The Company has suffered recurring losses since inception and has no assurance of future profitability. The Company will continue to require financing from external sources to finance its operating and investing activities until sufficient positive cash flows from operations can be generated. There is no assurance that financing or profitability will be achieved, accordingly, there is substantial doubt about the Company’s ability to continue as a going concern. The financial statements of the Company do not include any adjustments that may result from the outcome of these uncertainties.
Our auditors have expressed substantial doubt as to our ability to continue as a going concern. The accompanying financial statements have been prepared on a going concern basis. For the year ended December 31, 2024, the Company had a net loss of $8,430,308, had net cash used in operating activities of $195,955, and an accumulated deficit of $26,223,870. 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.
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The accompanying unaudited financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has suffered recurring losses since inception and has no assurance of future profitability. The Company will continue to require financing from external sources to finance its operating and investing activities until sufficient positive cash flows from operations can be generated. There is no assurance that financing or profitability will be achieved, accordingly, there is substantial doubt about the Company’s ability to continue as a going concern.
History and Prior Operations
SMC Entertainment, Inc. (“SMC” or the “Company”) was incorporated in Nevada on January 23, 1998, under the name of Professional Recovery Systems, Ltd.
SMC is a versatile holding company focused on acquisition and support of proven commercialized technology (Fintech) companies. SMC has assembled a team of individuals adept at solving market needs, primarily within the merger and acquisition business landscape.
SMC and its management are always talking to new companies about their technologies and platforms. The Company is always looking for new complementary businesses to potentially acquire.
On March 1, 2021, the Company rescinded its agreement with FiberSKY Networks, Inc. (“FiberSKY”). The Company issued 2,000,000 shares of common stock to Ted Lasser, a controlling person of FiberSKY, for consideration of the cancellation.
On March 25, 2021, the Company terminated its agreement with WiMundo. The Company received a waiver of share issuance for the 20,000,000 shares of common stock never issued to WiMundo. The Company issued 1,500,000 shares each to two individuals related to WiMundo.
On March 30, 2021, the Company sold, transferred and assigned all rights and ownership to SMC’s wholly owned subsidiary iPTerra Technologies, Inc. (“iPTerra”), iPMine software intellectual property (“iPMine-IP”), and Aktiv-Trak software intellectual property (Aktiv-Trak-IP”) to Wyoming-based privately held company Aktiv-Trak, Inc. (“Aktiv-Trak”).
On October 12, 2021, the Company announced it entered in discussion with the former members of Spectrum Entertainment LLC (“Spectrum”) to rescind SMC’s acquisition of Spectrum. As part of the rescission agreement, SMC is seeking (i) the repayment of $145,274.93 which includes payments made to Spectrum’s lenders, legal and accounting fees paid by the Company; and (ii) the return and cancellation of 40,000,000 common shares issued to Spectrum members as consideration for acquiring Spectrum. The Company’s acquisition of Spectrum was initiated, lead, and concluded by the Company’s former Chief Executive Officer.
On December 12, 2022, the Company entered into a Rescission and Release Agreement with Genesis Financial, Inc (“GFL”), that effectively terminated its Stock Purchase Agreement that was executed on November 18, 2021. Per the terms of the Agreement GFL agreed to pay a rescission fee of $300,000, $50,000 of which was to be paid within 21 days and the balance within 60 days. As certain requirements to complete the acquisition were never completed, there was never a formal closing and the financial statements of the Company were never consolidated, the transaction has been unwound and is not reflected in the financial statements of the Company.
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Present Operations
On April 21, 2023, the Company completed its acquisition of AI-enabled wealth management technology platform provider, Fyniti Global Equities EBT Inc. (“Fyniti”). Summary of acquisition agreement:
| ● | The aggregate purchase price to be paid by the Company to Fyniti will be Twenty-Five Million Dollars ($25,000,000) to be paid by delivery of Two Million Five Hundred Thousand (2,500,000) unregistered shares (the “Shares”) of the Company’s $10.00 Series B Preferred Stock. The Purchase Price was negotiated at arm’s length, and the parties agreed that the $10 par value of the Company’s Series B Preferred Stock would be used to represent the mutually agreed upon fair value of each Share, such that the Company and Fyniti acknowledged the Two Million Five Hundred Thousand (2,500,000) Shares as adequate consideration for the Acquisition Agreement |
| ● | The Preferred Stock was convertible into the Company’s common stock at a discount of ten percent (10%) to the preceding 10-day weighted average price prior to the conversion date, after amendment and restatement the preferred stock is convertible into common stock. |
The Company extends a consulting agreement to Mr. Jayakumar Gopalan; refer to Exhibit 10.9.
The Company does not consider the transaction a related party transaction, as the terms were negotiated at arm’s length and did not result in a change of control. Fyniti operates as a wholly owned subsidiary of the Company.
Our current business operation is conducted through our wholly owned subsidiary, Fyniti Global Equities EBT Inc. (“Fyniti”) (www.fyniti.com, www.fynitiiq.com). Fyniti 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 tools. Fyniti’s IQ Engine is an AI driven contextual analyzer that creates a repository of all equity research.
Recent Developments
On January 7, 2025, we closed 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.
Trends in Our Addressable Market
The company’s SaaS Platform can be used to reflect specific trading strategies. This enables the software to create customized baskets based on the trends entered by a financial professional. The SaaS will create a customized index or baskets using the data from the AI Machine Learning Algorithm. This will provide the financial professional with the ability to track and change the matching criteria to correctly reflect the daily changes represented by trends in the overall market. The AI applies typical equities data as well as analyzing and crunching the data based on over 10,000 data points. Our platform only proposes certain concepts based on trends and events. The financial professionals are in ultimate control on how they would like to invest and utilize the information that our platform facilitates.
The SaaS allows the institutions the ability to see the macro trends evolving on a daily basis. This allows the institutions greater flexibility in managing the underlying portfolio. Compared to an ETF where the weighting is more rigid and set, Basket Trading is a portfolio management strategy used by Investment Firms and Institutional Traders the software creates the basket and gives the institution the ability to adjust the portfolio if they choose.
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In comparison to an ETFs the software offers advantages in its ability to customize the weighting of a trackable portfolio, it is not an ETF, but a customized index represented by the financial professional’s input.
The platform does not operate in the ETF market or wealth management space but gives technological tools to professionals to manage it themselves. Although the platform may seem to have some similarities to that of an ETF, how this operates is totally different from the ETFs, while the end users i.e. the investors or their wealth managers take the final decisions by themselves.
Our Competitive Advantages
With the help of AI and Quant algorithms, Fyniti SaaS Baskets will offer the following advantages:
| ● | Tax Loss Harvesting |
| ● | Reduced Fees |
| ● | 1-Click Order Execution |
| ● | Direct Indexing Investment |
| ● | Event / Trend based Investing |
| ● | Value / Faith based investing |
| ● | Actively managed by Subject Matter Experts |
| ● | Capital gains distributions |
| ● | Gamified risk diversification |
| ● | Highly liquid as good as individual stocks |
| ● | Better Customization |
In order to leverage the trends and events, Fyniti leverages AI / ML & Quant algos to create those Baskets and this further can be highly customized to individual investor scenario.
Fyniti’s SaaS Basket trading charges the institutions a fee to use the platform. It is provided as Software-as-a-Service (SaaS) along with the initial fee subscription fees for using certain advanced features like customization are charged monthly.
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Marketing Strategy
Our go-to market timeline for public launch is the end of Q2/2025. We are currently exploring early adopters to partner with for product beta testing. | ||
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Our marketing strategy is multi-fold and comprises the following components: | ||
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| ● | Direct to retail investors utilizing social media (Twitter, LinkedIn, FB, etc.) |
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| ● | Small-medium CPA firms with clients looking for tax loss harvesting |
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| ● | Financial institutions including banks and broker/dealers exploring to offer our platform to their clients. The Company plans to offer a suite of software as a service to the end user. Each RIA, Financial Institution and CPA will customize the SaaS to their needs. |
It’s critical for us to deploy our platform with early adopters to validate our technology. Equally critical, we will require the capital for the product’s official launch.
Employees
SMC currently has five (5) full-time employees plus seven (7) full-time contractors. Our officers currently work approximately 35 hours per week on the Company’s business.
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Other Corporate Information
General information
Our business address is 9170 Glades Road Suite 150, Boca Raton, FL 33434. Our phone number is (360) 820-5973. Our website is www.smceinc.com. Our email address is ron.hughes.operations@smceinc.com. The information contained in, or that can be accessed through, our website is not part of this registration statement.
Reports to Security Holders.
The Company will file reports with the SEC. The Company is a reporting company and will comply with the requirements of the Exchange Act.
The public may read and copy any materials the Company files with the SEC in the SEC’s Public Reference Section, Room 1580, 100 F Street N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Section by calling the SEC at 1-800-SEC-0330. Additionally, the SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, which can be found at http://www.sec.gov.
Item 1A. Risk Factors.
You should carefully consider the risks described below together with all of the other information included in this registration statement before making an investment decision with regard to our securities. The statements contained in or incorporated herein that are not historic facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. If any of the following risks actually occurs, our business, financial condition or results of operations could be harmed. In that case, you may lose all or part of your investment. In addition to other information in this registration statement and in other filings we make with the Securities and Exchange Commission, the following risk factors should be carefully considered in evaluating our business as they may have a significant impact on our business, operating results and financial condition. If any of the following risks actually occurs, our business, financial condition, results of operations and future prospects could be materially and adversely affected. Because of the following factors, as well as other variables affecting our operating results, past financial performance should not be considered as a reliable indicator of future performance and investors should not use historical trends to anticipate results or trends in future periods.
Risks Related to Our Business
WE HAVE A LIMITED OPERATING HISTORY.
The Company was incorporated under the laws of the State of Nevada on January 23, 1998. The Company has limited operating history with which you can evaluate its business and prospects. An investor in the Company must consider its business and prospects in light of the risks, uncertainties and difficulties frequently encountered by early-stage companies, including limited capital, delays in product development, possible marketing and sales obstacles and delays, inability to gain customer and merchant acceptance or inability to achieve significant distribution of our products and services to customers. The Company cannot be certain that it will successfully address these risks. Its failure to address any of these risks could have a material adverse effect on its business.
WE ARE NOT PROFITABLE AND MAY NEVER BE PROFITABLE.
Since inception through the present, we have been dependent on raising capital to support our working capital needs. During this same period, we have recorded net accumulated losses and are yet to achieve profitability. Our ability to achieve profitability depends upon many factors, including its ability to develop and commercialize our websites. There can be no assurance that we will ever achieve any significant revenues or profitable operations. The Company has suffered recurring losses since inception and has no assurance of future profitability. The Company will continue to require financing from external sources to finance its operating and investing activities until sufficient positive cash flows from operations can be generated. There is no assurance that financing or profitability will be achieved, accordingly, there is substantial doubt about the Company’s ability to continue as a going concern. The financial statements of the Company do not include any adjustments that may result from the outcome of these uncertainties.
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OUR OPERATING EXPENSES EXCEED OUR REVENUES AND WILL LIKELY CONTINUE TO DO SO FOR THE FORESEEABLE FUTURE.
We are in an early stage of our development, and we have not generated any revenues to offset our operating expenses. Our operating expenses will likely continue to exceed our operating income for the foreseeable future, until such time as we are able to monetize our brands and generate substantial revenues, particularly as we undertake payment of the increased costs of operating as a public company.
WE WILL NEED ADDITIONAL CAPITAL, WHICH MAY BE DIFFICULT TO RAISE AS A RESULT OF OUR LIMITED OPERATING HISTORY OR ANY NUMBER OF OTHER REASONS.
We expect that we will have adequate financing for the next 8-10 months. However, in the event that we exceed our expected growth, we would need to raise additional capital. There is no assurance that additional equity or debt financing will be available to us when needed, on acceptable terms or even at all. Our limited operating history makes investor evaluation and an estimation of our future performance substantially more difficult. As a result, investors may be unwilling to invest in us or such investment may be on terms or conditions which are not acceptable. In the event that we are not able to secure financing, we may have to scale back our growth plans or cease operations.
WE HAVE NOT ADOPTED VARIOUS CORPORATE GOVERNANCE MEASURES, AND AS A RESULT STOCKHOLDERS MAY HAVE LIMITED PROTECTIONS AGAINST INTERESTED DIRECTOR TRANSACTIONS, CONFLICTS OF INTEREST AND SIMILAR MATTERS.
Certain Federal legislation, including the Sarbanes-Oxley Act of 2002, has resulted in the adoption of various corporate governance measures designed to promote the integrity of corporate management and the securities markets. Because our securities are not yet listed on a national securities exchange, we are not required to adopt these corporate governance measures and have not done so voluntarily in order to avoid incurring the additional costs associated with such measures. Among these measures is the establishment of independent committees of the Board of Directors. However, to the extent a public market develops for our securities, such legislation will require us to make changes to our current corporate governance practices. Those changes may be costly and time-consuming. Furthermore, the absence of the governance measures referred to above with respect to our Company may leave our shareholders with more limited protection in connection with interested director transactions, conflicts of interest and similar matters.
WE MAY BE UNABLE TO DEVELOP NEW PRODUCTS AND SERVICES AND THE DEVELOPMENT OF NEW PRODUCTS AND SERVICES MAY EXPOSE US TO ADDITIONAL COSTS OR OPERATIONAL RISK.
Our financial performance depends, in part, on its ability to develop, market and manage new products and services. The development and introduction of new products and services require continued innovative efforts and may require significant time and resources as well as ongoing support and investment. Substantial risk and uncertainties are associated with the introduction of new products and services, including the implementation of new and appropriate operational controls and procedures, shifting client and market preferences, the introduction of competing products or services and compliance with regulatory requirements.
WE MAY BECOME SUBJECT TO LEGAL PROCEEDINGS THAT COULD HAVE A MATERIAL ADVERSE IMPACT ON OUR FINANCIAL POSITION AND RESULTS OF OPERATIONS.
From time to time and in the ordinary course of our business, we and certain of our subsidiaries may become involved in various legal proceedings. All such legal proceedings are inherently unpredictable and, regardless of the merits of the claims, litigation may be expensive, time-consuming and disruptive to our operations and distracting to management. If resolved against us, such legal proceedings could result in excessive verdicts, injunctive relief or other equitable relief that may affect how we operate our business. Similarly, if we settle such legal proceedings, it may affect how we operate our business. Future court decisions, alternative dispute resolution awards, business expansion or legislative activity may increase our exposure to litigation and regulatory investigations. In some cases, substantial noneconomic remedies or punitive damages may be sought. We currently do not maintain liability insurance coverage, but even if we had such insurance, there can be no assurance that such coverage will cover any particular verdict, judgment or settlement that may be entered against us, that such coverage will prove to be adequate or that such coverage will continue to remain available on acceptable terms, if at all. If we obtain such insurance, we could still incur liability that exceeds our insurance coverage or that is not within the scope of the coverage in legal proceedings brought against us, it could have an adverse effect on our business, financial condition and results of operations.
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WE INTEND TO CONTINUE STRATEGIC BUSINESS ACQUISITIONS AND OTHER COMBINATIONS, WHICH ARE SUBJECT TO INHERENT RISKS.
We may continue to seek and complete strategic business acquisitions and other combinations that we believe are complementary to our business. Acquisitions have inherent risks which may have a material adverse effect on our business, financial condition, operating results or prospects, including, but not limited to: 1) failure to successfully integrate the business and financial operations, services, intellectual property, solutions or personnel of an acquired business and to maintain uniform standard controls, policies and procedures; 2) diversion of management’s attention from other business concerns; 3) entry into markets in which we have little or no direct prior experience; 4) failure to achieve projected synergies and performance targets; 5) loss of clients or key personnel; 6) incurrence of debt or assumption of known and unknown liabilities; 7) write-off of software development costs, goodwill, client lists and amortization of expenses related to intangible assets; 8) dilutive issuances of equity securities; and, 9) accounting deficiencies that could arise in connection with, or as a result of, the acquisition of an acquired company, including issues related to internal control over financial reporting and the time and cost associated with remedying such deficiencies. If we fail to successfully integrate acquired businesses or fail to implement our business strategies with respect to these acquisitions, we may not be able to achieve projected results or support the amount of consideration paid for such acquired businesses.
IF WE ARE UNABLE TO MANAGE OUR GROWTH IN THE NEW MARKETS IN WHICH WE OFFER SOLUTIONS OR SERVICES, OUR BUSINESS AND FINANCIAL RESULTS COULD SUFFER.
Our future financial results will depend in part on our ability to profitably manage our business in the new markets that we enter. Difficulties in managing future growth in new markets could have a significant negative impact on our business, financial condition and results of operations.
WE RELY HEAVILY ON OUR MANAGEMENT, AND THE LOSS OF THEIR SERVICES COULD ADVERSELY AFFECT OUR BUSINESS.
Our success is highly dependent upon the continued services of our management including our Chief Executive Officer and Director, Erik Blum. The loss of Mr. Blum’s services would have a material adverse effect on the Company and its business operations.
WE MAY NOT BE ABLE TO IMPLEMENT OUR GROWTH AND MARKETING STRATEGY SUCCESSFULLY OR ON A TIMELY BASIS OR AT ALL.
Our future success depends, in large part, on our ability to implement our growth strategy of organic growth along with acquisitions in the Fintech space.
Our sales and operating results will be adversely affected if we fail to implement our growth strategy or if we invest resources in a growth strategy that ultimately proves unsuccessful.
CYBER SECURITY RISKS AND THE FAILURE TO MAINTAIN THE INTEGRITY OF DATA BELONGING TO OUR COMPANY COULD EXPOSE US TO DATA LOSS, LITIGATION AND LIABILITY, AND OUR REPUTATION COULD BE SIGNIFICANTLY HARMED.
We may from time to time collect and retain large volumes of data relating to our business and from our customers for business purposes, including for transactional and promotional purposes, and our various information technology systems enter, process, summarize and report such data. The integrity and protection of this data is critical to our business. Maintaining compliance with the evolving regulations and requirements applicable to data security and information privacy protection could be difficult and may increase our expenses. In addition, a penetrated or compromised data system or the intentional, inadvertent or negligent release or disclosure of data could result in theft, loss or fraudulent or unlawful use of data relating to our company or our employees, independent distributors or preferred customers, which could harm our reputation, disrupt our operations, or result in remedial and other costs, fines or lawsuits.
COMPUTER MALWARE, VIRUSES, HACKING, PHISHING ATTACKS AND SPAMMING COULD HARM OUR BUSINESS AND RESULTS OF OPERATIONS.
Computer malware, viruses, physical or electronic break-ins and similar disruptions could lead to interruption and delays in our services and operations and loss, misuse, or theft of data. Computer malware, viruses, computer hacking and phishing attacks against online networking platforms have become more prevalent and may occur on our systems in the future.
Any attempts by hackers to disrupt our internal systems, if successful, could harm our business, be expensive to remedy and damage our reputation or brand. We currently do not maintain network security business disruption insurance, but even if we obtain such coverage, it may not be sufficient to cover significant expenses and losses related to direct attacks on our website or internal systems. Efforts to prevent hackers from entering our computer systems are expensive to implement and may limit the functionality of our services. Though it is difficult to determine what, if any, harm may directly result from any specific interruption or attack, any failure to maintain performance, reliability, security and availability of our products and services and technical infrastructure may harm our reputation. Any significant disruption to our website or internal computer systems could adversely affect our business and results of operations.
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OUR INABILITY TO PROTECT OUR INTELLECTUAL PROPERTY COULD IMPAIR OUR COMPETITIVE ADVANTAGE, REDUCE OUR REVENUE, AND INCREASE OUR COSTS.
Our success and ability to compete depends and will depend in part on our ability to obtain and maintain the proprietary aspects of our technologies and products. We rely on a combination of trade secrets, patents, copyrights, trademarks, confidentiality agreements, and other contractual provisions to protect our intellectual property, but these measures may provide only limited protection. We may not always be able to enforce these agreements and may fail to enter into any such agreement in every instance when appropriate. We may from time to time license from third party’s their brands or certain technology used in and for our products. These third-party licenses are granted with restrictions; therefore, such third-party technology may not remain available to us on terms beneficial to us. Our failure to enforce and protect our intellectual property rights or obtain from third parties the right to use necessary technology could have a material adverse effect on our business, operating results, and financial condition. In addition, the laws of some foreign countries do not protect proprietary rights as fully as do the laws of the United States.
WE MAY FAIL TO RECRUIT AND RETAIN KEY PERSONNEL, WHICH COULD IMPAIR OUR ABILITY TO MEET KEY OBJECTIVES.
Our success depends on our ability to attract and retain highly skilled technical, managerial, sales, and marketing personnel. Changes in key personnel may be disruptive to our business. It could be difficult, time consuming and expensive to replace key personnel. Integrating new key personnel may be difficult and costly. Volatility, lack of positive performance in our stock price or changes to our overall compensation program including our stock incentive program may adversely affect our ability to retain key employees, many of whom may be compensated, in part, based on the performance of our stock price. The loss of services of any of our key personnel, the inability to retain and attract qualified personnel in the future or delays in hiring required personnel could make it difficult to meet key objectives. Any of these impairments related to our key personnel could negatively affect our business, financial condition, and financial results.
To remain competitive in our market, we must attract, motivate, and retain highly skilled managerial, sales, marketing, consulting and technical personnel, including executives and consultants. Our failure to attract additional qualified personnel to meet our needs could have a material adverse effect on our prospects for long-term growth. Our success is dependent to a significant degree on the continued contributions of key management. The unexpected loss of key personnel could have a material adverse impact on our business and results.
Risks Related to Our Common Stock
OUR STOCK PRICE MAY BE VOLATILE OR MAY DECLINE REGARDLESS OF OUR OPERATING PERFORMANCE, AND YOU MAY LOSE PART OR ALL OF YOUR INVESTMENT.
The market price of our common stock may fluctuate widely in response to various factors, some of which are beyond our control, including:
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| · | the public’s response to press releases or other public announcements by us or third parties, including our filings with the SEC; |
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| · | economic, legal and regulatory factors unrelated to our performance; |
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| · | any future guidance we may provide to the public, any changes in such guidance or any difference between our guidance and actual results; |
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| · | changes in financial estimates or recommendations by any securities analysts who follow our common stock; |
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| · | speculation by the press or investment community regarding our business; |
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| · | litigation; |
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| · | changes in key personnel; and |
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| · | future sales of our common stock by our officers, directors and significant shareholders. |
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In addition, the stock markets, including the grey market and the over-the-counter markets where we were quoted, have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These broad market fluctuations may materially affect our stock price, regardless of our operating results. Furthermore, the market for our common stock historically has been limited and we cannot assure you that a larger market will ever be developed or maintained. The price at which investors purchase shares of our common stock may not be indicative of the price that will prevail in the trading market. Market fluctuations and volatility, as well as general economic, market and political conditions, could reduce our market price. As a result, these factors may make it more difficult or impossible for you to sell our common stock for a positive return on your investment. In the past, shareholders have instituted securities class action litigation following periods of market volatility. If we were involved in securities litigation, we could incur substantial costs which will divert our resources and the attention of management from our core business.
FUTURE SALES OF SHARES OF OUR COMMON STOCK, OR THE PERCEPTION IN THE PUBLIC MARKETS THAT THESE SALES MAY OCCUR, MAY DEPRESS OUR STOCK PRICE.
The market price of our common stock could decline significantly as a result of sales of a large number of shares of our common stock. In addition, if our significant shareholders sell a large number of shares, or if we issue a large number of shares, the market price of our stock could decline. Any issuance of additional common stock by us in the future, or warrants or options to purchase our common stock, if exercised, would result in dilution to our existing shareholders. Such issuances could be made at a price that reflects a discount or a premium to the then-current trading price of our common stock. Moreover, the perception in the public market that shareholders might sell shares of our stock or that we could make a significant issuance of additional common stock in the future could depress the market for our shares. These sales, or the perception that these sales might occur, could depress the market price of our common stock or make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.
We have issued shares of common stock, and convertible notes which are convertible into shares of our common stock in connection with our private placements. In addition, we issued shares of our common stock, and convertible notes which are convertible into shares of our preferred stock, in financing transactions that are deemed to be “restricted securities,” as that term is defined in Rule 144 promulgated under the Securities Act. From time to time, certain of our shareholders may be eligible to sell all or some of their restricted shares of common stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144, subject to certain limitations. The resale pursuant to Rule 144 of shares acquired from us in private transactions could cause our stock price to decline significantly.
“PENNY STOCK” RULES MAY MAKE BUYING OR SELLING OUR COMMON STOCK DIFFICULT.
If the market price for our common stock is below $5.00 per share, trading in our common stock may be subject to the “penny stock” rules. The SEC has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. These rules would require that any broker-dealer that would recommend our common stock to persons other than prior customers and accredited investors, must, prior to the sale, make a special written suitability determination for the purchaser and receive the purchaser’s written agreement to execute the transaction. Unless an exception is available, the regulations would require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated with trading in the penny stock market. In addition, broker-dealers must disclose commissions payable to both the broker-dealer and the registered representative and current quotations for the securities they offer. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our common stock, which could severely limit the market price and liquidity of our common stock.
SALES OF OUR CURRENTLY ISSUED AND OUTSTANDING STOCK MAY BECOME FREELY TRADABLE PURSUANT TO RULE 144 AND MAY DILUTE THE MARKET FOR YOUR SHARES AND HAVE A DEPRESSIVE EFFECT ON THE PRICE OF THE SHARES OF OUR COMMON STOCK.
A substantial majority of our outstanding shares of common stock are “restricted securities” within the meaning of Rule 144 under the Securities Act. As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements of Rule 144 or other applicable exemptions from registration under the Act and as required under applicable state securities laws. Rule 144 provides in essence that an Affiliate (as such term is defined in Rule 144(a)(1)) of an issuer who has held restricted securities for a period of at least six months (one year after filing Form 10 information with the SEC for shell companies and former shell companies) may, under certain conditions, sell every three months, in brokerage transactions, a number of shares that does not exceed the greater of 1% of a company’s outstanding shares of common stock or the average weekly trading volume during the four calendar weeks prior to the sale (the four calendar week rule does not apply to companies quoted on the OTC Bulletin Board). Rule 144 also permits, under certain circumstances, the sale of securities, without any limitation, by a person who is not an Affiliate of the Company and who has satisfied a one-year holding period. A sale under Rule 144 or under any other exemption from the Act, if available, or pursuant to subsequent registrations of our shares of common stock, may have a depressive effect upon the price of our shares of common stock in any active market that may develop.
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POTENTIAL FUTURE FINANCINGS MAY DILUTE THE HOLDINGS OF OUR CURRENT SHAREHOLDERS.
In order to provide capital for the operation of our business, in the future we may enter into financing arrangements. These arrangements may involve the issuance of new shares of common stock, preferred stock that is convertible into common stock, debt securities that are convertible into common stock or warrants for the purchase of common stock. Any of these items could result in a material increase in the number of shares of common stock outstanding, which would in turn result in a dilution of the ownership interests of existing common shareholders. In addition, these new securities could contain provisions, such as priorities on distributions and voting rights, which could affect the value of our existing common stock.
WE CURRENTLY DO NOT INTEND TO PAY DIVIDENDS ON OUR COMMON STOCK. AS A RESULT, YOUR ONLY OPPORTUNITY TO ACHIEVE A RETURN ON YOUR INVESTMENT IS IF THE PRICE OF OUR COMMON STOCK APPRECIATES.
We currently do not expect to declare or pay dividends on our common stock. In addition, in the future we may enter into agreements that prohibit or restrict our ability to declare or pay dividends on our common stock. As a result, your only opportunity to achieve a return on your investment will be if the market price of our common stock appreciates and you sell your shares at a profit.
YOU MAY EXPERIENCE DILUTION OF YOUR OWNERSHIP INTEREST DUE TO THE FUTURE ISSUANCE OF ADDITIONAL SHARES OF OUR COMMON STOCK.
We do not have sufficient funds to finance the growth of our business on hand. As a result, we will require additional funds from future equity or debt financings, including tax equity financing transactions or sales of preferred shares or convertible debt, to complete the development of new projects and pay the general and administrative costs of our business. We may in the future issue our previously authorized and unissued securities, resulting in the dilution of the ownership interests of holders of our common stock. We are currently authorized to issue 3,000,000,000 shares of common stock. The potential issuance of such additional shares of common stock or preferred stock or convertible debt may create downward pressure on the trading price of our common stock. We may also issue additional shares of common stock or other securities that are convertible into or exercisable for common stock in future public offerings or private placements for capital raising purposes or for other business purposes. The future issuance of a substantial number of common shares into the public market, or the perception that such issuance could occur, could adversely affect the prevailing market price of our common shares. A decline in the price of our common shares could make it more difficult to raise funds through future offerings of our common shares or securities convertible into common shares.
OUR SHARES OF COMMON STOCK ARE CURRENTLY TRADED ON THE OTC MARKETS PINK MARKET TIER, ARE VERY THINLY TRADED, AND THE PRICE MAY NOT REFLECT OUR VALUE AND THERE CAN BE NO ASSURANCE THAT THERE WILL BE AN ACTIVE MARKET FOR OUR SHARES OF COMMON STOCK EITHER NOW OR IN THE FUTURE.
Our shares of common stock are very thinly traded, and the price, if traded, may not reflect our value. There can be no assurance that there will be an active market for our shares of common stock either now or in the future. The market liquidity will be dependent on the perception of our operating business and any steps that our management might take to increase awareness of our Company with investors. There can be no assurance given that there will be any awareness generated. Consequently, investors may not be able to liquidate their investment or liquidate it at a price that reflects the value of the business. If a more active market should develop, the price may be highly volatile. Because there may be a low price for our shares of common stock, many brokerage firms may not be willing to effect transactions in the securities. Even if an investor finds a broker willing to effect a transaction in the shares of our common stock, the combination of brokerage commissions, transfer fees, taxes, if any, and any other selling costs may exceed the selling price. Further, many lending institutions will not permit the use of such shares of common stock as collateral for loans.
WE HAVE A SIGNIFICANT NUMBER OF SHARES OF OUR COMMON STOCK ISSUABLE UPON CONVERSION OF CERTAIN OUTSTANDING OPTIONS, AND CONVERTIBLE NOTES, AND THE ISSUANCE OF SUCH SHARES UPON EXERCISE OR CONVERSION WILL HAVE A SIGNIFICANT DILUTIVE IMPACT ON OUR STOCKHOLDERS. SALES OF A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON STOCK FOLLOWING THE EXPIRATION OF LOCK-UPS MAY ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON STOCK AND THE ISSUANCE OF ADDITIONAL SHARES WILL DILUTE ALL OTHER STOCKHOLDERS.
As of December 31, 2024, there are 2,754,311,946 shares of Common Stock issuable upon conversion of our convertible notes, subject to the provisions in such convertible notes which limit the holder’s beneficial ownership to a maximum of 4.99% or 9.99% of the issued and outstanding shares of the Company’s Common Stock.
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FUTURE ISSUANCE OF OUR COMMON STOCK, PREFERRED STOCK, OPTIONS AND WARRANTS COULD DILUTE THE INTERESTS OF EXISTING STOCKHOLDERS.
We may issue additional shares of our common stock, preferred stock, options and warrants in the future. The issuance of a substantial amount of common stock, options and warrants could have the effect of substantially diluting the interests of our current stockholders. In addition, the sale of a substantial amount of common stock or preferred stock in the public market, or the exercise of a substantial number of warrants and options either in the initial issuance or in a subsequent resale by the target company in an acquisition which received such common stock as consideration or by investors who acquired such common stock in a private placement could have an adverse effect on the market price of our common stock.
WE DO NOT INTEND TO PAY DIVIDENDS FOR THE FORESEEABLE FUTURE, AND YOU MUST RELY ON INCREASES IN THE MARKET PRICES OF OUR COMMON STOCK FOR RETURNS ON YOUR INVESTMENT.
For the foreseeable future, we intend to retain any earnings to finance the development and expansion of our business, and we do not anticipate paying any cash dividends on our common stock. Accordingly, investors must be prepared to rely on sales of their common stock after price appreciation to earn an investment return, which may never occur. Investors seeking cash dividends should not purchase our common stock. Any determination to pay dividends in the future will be made at the discretion of our Board and will depend on our results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors the Board deems relevant.
OUR EXECUTIVE OFFICERS AND DIRECTORS POSSESS SIGNIFICANT VOTING POWER WITH RESPECT TO OUR COMMON STOCK, WHICH WILL LIMIT YOUR INFLUENCE ON CORPORATE MATTERS.
As of December 31, 2024, our directors and executive officers collectively beneficially own approximately 553,490,740 of the shares of our common stock; 227,000,000 which is beneficially owned by Ronald Hughes, 25,000,000 which is beneficially owned by Jayakumar Gopalan and 301,490,740 which is beneficially owned by Erik Blum, representing 40.9% of the shares of our common stock.
As a result, our insiders have the ability to significantly influence our management and affairs through the election and removal of our Board and all other matters requiring stockholder approval, including any future merger, consolidation or sale of all or substantially all of our assets. This concentrated voting power could discourage others from initiating any potential merger, takeover or other change-of-control transaction that may otherwise be beneficial to our stockholders. Furthermore, this concentrated control will limit the practical effect of your influence over our business and affairs, through any stockholder vote or otherwise. Any of these effects could depress the price of our common stock.
OUR ARTICLES OF INCORPORATION GRANTS OUR BOARD THE POWER TO ISSUE ADDITIONAL SHARES OF COMMON AND PREFERRED SHARES AND TO DESIGNATE OTHER CLASSES OF PREFERRED SHARES, ALL WITHOUT STOCKHOLDER APPROVAL.
Our authorized capital consists of 3,000,000,000 shares of common stock and 30,600,000 shares preferred stock. Our Board, without any action by our stockholders, may designate and issue shares of preferred stock in such series as it deems appropriate and establish the rights, preferences, and privileges of such shares, including dividends, liquidation and voting rights, provided it is consistent with Nevada law.
The rights of holders of our preferred stock that may be issued could be superior to the rights of holders of our shares of common stock. The designation and issuance of shares of capital stock having preferential rights could adversely affect other rights appurtenant to shares of our common stock. Furthermore, any issuances of additional stock (common or preferred) will dilute the percentage of ownership interest of then-current holders of our capital stock and may dilute our book value per share.
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
We use, store and process data for and about our customers, employees, partners and suppliers. We have implemented a
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Cyber Risk Management and Strategy
Under the oversight of the Board of Directors, since we do not currently have an Audit Committee, we have implemented and maintain a risk management program that includes processes for the systematic identification, assessment, management, and treatment of cybersecurity risks. Our cybersecurity oversight and operational processes are integrated into our overall risk management processes, and cybersecurity is one of our designated risk categories. We use the National Institute of Standards and Technology Cybersecurity Framework to guide our approach, ensuring a structured and comprehensive strategy for managing cybersecurity risks. We implement a risk-based approach to the management of cyber threats, supported by cybersecurity technologies, including automated tools, designed to monitor, identify, and address cybersecurity risks. In support of this approach, our IT security team implements processes to assess, identify, and manage security risks to the company, including in the pillar areas of security and compliance, application security, infrastructure security, and data privacy. This process includes regular compliance and critical system access reviews. In addition, we conduct application security assessments, vulnerability management, penetration testing, security audits, and ongoing risk assessments as part of our risk management process. We also maintain an incident response plan to guide our processes in the event of an incident. We also have a process to require corporate employees to undertake cybersecurity training and compliance programs annually.
We utilize third parties and consultants to assist in the identification and assessment of risks, including to support table top exercises and to conduct security testing.
Further, we have processes in place to evaluate potential risks from cybersecurity threats associated with our use of
We continue to evaluate and enhance our systems, controls, and processes where possible, including in response to actual or perceived threats specific to us or experienced by other companies.
Although risks from cybersecurity threats have to date not materially affected us, our business strategy, results of operations or financial condition, we have, from time to time, experienced threats to and breaches of our and our third-party vendors’ data and systems.
Item 2. Properties
We maintain our current principal office at 9170 Glades Road Suite 150, Boca Raton, FL 33434. Our telephone number at this office is (360) 820-5973. We do not currently lease office space as it is provided by our CEO.
Item 3. Legal Proceedings
There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our Company or any of our subsidiaries, threatened against or affecting our Company, our common stock, any of our subsidiaries or of our Company’s or our Company’s subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
Item 4. Mine Safety Disclosures
None.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information.
Our common stock is quoted on the OTC Markets-OTC Pink under the symbol “SMCE” There currently is no liquid trading market for our common stock. There can be no assurance that a significant active trading market in our common stock will develop, or if such a market develops, that it will be sustained.
The ability of individual stockholders to trade their shares in a particular state may be subject to various rules and regulations of that state. Several states require that an issuer’s securities be registered in their state or appropriately exempted from registration before the securities are permitted to trade in that state. At present, we have no plans to register our securities in any particular state. Further, our shares may be subject to the provisions of Section 15(g) and Rule 15g-9 of the Exchange Act, commonly referred to as the “penny stock” rule. Section 15(g) sets forth certain requirements for transactions in penny stocks and Rule 15g-9(d)(1) incorporates the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act.
The SEC generally defines penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. Rule 3a51-1 provides that any equity security is considered to be a penny stock unless that security is: registered and traded on a national securities exchange meeting specified criteria set by the SEC; authorized for quotation on The NASDAQ Stock Market; issued by a registered investment company; excluded from the definition on the basis of price (at least $5.00 per share) or the issuer’s net tangible assets; or exempted from the definition by the SEC. Broker-dealers who sell penny stocks to persons other than established customers and accredited investors (generally persons with assets in excess of $1,000,000 or annual income exceeding $200,000 by an individual, or $300,000 together with his or her spouse), are subject to additional sales practice requirements.
For transactions covered by these rules, broker-dealers must make a special suitability determination for the purchase of such securities and must have received the purchaser’s written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the first transaction, of a risk disclosure document relating to the penny stock market. A broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, and current quotations for the securities. Finally, monthly statements must be sent to clients disclosing recent price information for the penny stocks held in the account and information on the limited market in penny stocks. Consequently, these rules may restrict the ability of broker-dealers to trade and/or maintain a market in our common stock and may affect the ability of stockholders to sell their shares.
We have not previously filed a registration statement under the Securities Act. Shares sold pursuant to exemptions from registration are deemed to be “restricted” securities as defined by the Securities Act. As of December 31, 2024, out of a total of 3,000,000,000 shares authorized, 701,264,015 shares are issued as restricted securities and can only be sold or otherwise transferred pursuant to a registration statement under the Securities Act or pursuant to an available exemption from registration. Of such restricted shares, 580,990,740 shares are held by affiliates (directors, officers and 10% holders), with the balance of 120,273,275 restricted shares being held by non-affiliates.
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In general, under Rule 144 as currently in effect, a person (or persons whose shares are aggregated) who has beneficially owned restricted shares of a reporting company for at least six months, including any person who may be deemed to be an “affiliate” of the company (as the term “affiliate” is defined under the Securities Act), is entitled to sell, within any three-month period, an amount of shares that does not exceed the greater of (i) the average weekly trading volume in the company’s common stock, as reported through the automated quotation system of a registered securities association, during the four calendar weeks preceding such sale or (ii) 1% of the shares then outstanding. In order for a stockholder to rely on Rule 144, adequate current public information with respect to the company must be available. A person who is not deemed to be an affiliate of the company and has not been an affiliate for the most recent three months, and who has held restricted shares for at least one year is entitled to sell such shares without regard to the various resale limitations under Rule 144. Under Rule 144, the requirements of paragraphs (c), (e), (f), and (h) of such Rule do not apply to restricted securities sold for the account of a person who is not an affiliate of an issuer at the time of the sale and has not been an affiliate during the preceding three months, provided the securities have been beneficially owned by the seller for a period of at least one year prior to their sale.
Holders
As of December 31, 2024, we had 189 shareholders of common stock per transfer agent’s shareholder list.
Dividends
The Company has not paid any cash dividends to date and does not anticipate or contemplate paying any dividends in the foreseeable future. It is the present intention of management to utilize all available funds for the growth of the Registrant’s business.
Equity Compensation Plan Information
The Company has not yet adopted an equity compensation plan but plans to do so in the near future.
Recent Sales of Unregistered Securities.
Unless otherwise noted, all of the securities discussed below were issued in reliance on the exemption under Section 4(a)(2) of the Securities Act. Section 4(a)(2) of the Securities Act exempts from registration transactions by an issuer not involving any public offering. Each transaction discussed below involved the issuance of common stock as consideration for specific transactions named, as compensation to service providers for services performed for the Company, and for the conversion of promissory notes into common stock per the conversion terms therein.
For January through June 2023, Buckman, Buckman & Reid, received 29,774,913 shares of common stock to Buckman, Buckman & Reid for legal services. The shares were issued pursuant to the terms of the Advisory Agreement dated December 6, 2021, which required monthly instalments of $7,500 to be paid in shares of common stock valued on the first day of each month. The shares were valued at the closing stock price on the date of grant for total non-cash stock compensation expense of $37,500.
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On February 15, 2023, and November 7, 2023, Kanno Group Holdings II Ltd. converted $24,255 and $13,440 of accrued interest into 63,000,000 and 64,000,000 shares of common stock, respectively. The interest was accrued on the note payable issued on May 10, 2013, with $1,087,500 of the balance of the Note being assumed by SMC Entertainment lnc. On February 3, 2018, the remaining principal balance of $399,046 was transferred to Mammoth Corporation by the note holder, Kanno Group Holdings II LTD. Kanno Group Holdings II LTD maintained the accrued interest balance of $338,079. The interest is convertible into shares of common stock at a 35% discount to the lowest closing price in the 90 days preceding the conversion.
During the second quarter of 2023, the Company granted 19,318,182 shares of common stock to a service provider for services. The shares were valued at the closing stock price on the date of grant for total non-cash stock compensation expense of $15,000.
On June 2, 2023, Christopher Whitcomb converted $12,500 of accrued interest into 50,000,000 shares of common stock.
During the year ended December 31, 2023, Mammoth converted $36,714 of principal into 103,900,000 shares of common stock.
During the first quarter of 2024, the Company granted 75,000,000 shares of common stock to a service provider. The shares were valued at $0.001, the closing stock price on the date of grant for total non-cash stock compensation expense of $75,000.
During the second quarter of 2024, the Company issued 7,000,000 shares of common stock for conversion of accrued compensation of $14,000. The shares were valued at $0.002, the closing stock price on the date of grant
On June 7, 2024, the Company cancelled 250,000,000 shares of common stock.
On March 25, 2024, the Company issued 9,500,000 shares of common stock to JW Price LLC. 2,000,000 shares are for shares earned in the current period. Those shares were valued at $0.0006, the closing price on the date of grant, for total non-cash compensation expense of $1,200. All other shares issued were earned in the prior period and had been disclosed as common stock to be issued.
On March 25, 2024, the Company issued 9,500,000 shares of common stock to Ronald Hughes for services. 1,000,000 shares are shares earned in the current period. Those shares were valued at $0.0006, the closing price on the date of grant, for total non-cash compensation expense of $600. All other shares issued were earned in the prior period and had been disclosed as common stock to be issued.
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 $5,000 per month. In addition, the Company issued to Mr. Hughes a convertible promissory note for all accrued compensation as of December 31, 2023. The note for $517,000 is non-interest bearing and convertible into shares of common stock at $0.0006 per share. On June 15, 2024, Mr. Hughes converted $25,000 of accrued compensation into 12,500,000 shares of common stock. As of December 31, 2024 and 2023, there is $35,000 and $0 due to Mr. Hughes, respectively, for accrued consulting services.
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 $26,666 per month. In addition, the Company issued to Mr. Blum a convertible promissory note for all accrued compensation as of December 31, 2023. The note for $594,460 is non-interest bearing and convertible into shares of common stock at $0.00055 per share. During the year ended December 31, 2024, Mr. Blum converted $124,500 of accrued compensation into 81,990,740 shares of common stock. As of December 31, 2024 and 2023, there is $177,710 and $0 due to Mr. Blum, respectively, for accrued consulting services.
In October 2024, the Company exchanged $546,895 of debt and accrued interest for Series D Preferred Shares (“Preferred Shares”). The Company issued 55,000 shares of Series D Preferred Stock. The Preferred Shares shall convert into the Company’s common stock at a share price of the lesser of $0.005 or 65% of the average closing price in the preceding 90 trading sessions. The conversion of Preferred Shares to common stock is permitted after two years from Preferred Share issuance with a maximum of 4.99% per conversion. As of the issuance date of these consolidated financial statements, the parties are currently amending the Series D Certificate of Designation to include a conversion floor price of $0.015 per share.
In June 2024, the Company agreed to settle obligations related to a convertible note issued on February 3, 2018, with an original principal of $1,087,500, which had been fully repaid, leaving $300,384 in accrued interest as of June 24, 2024. The investor forgave $150,384 of accrued interest and converted the remaining $150,000 into 15,000 shares of Series D Convertible Preferred Stock, effectively resolving all outstanding obligations related to the note.
Item 6. Issuer Purchases of Equity Securities
Smaller reporting companies are not required to provide the information required by this Item 6.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This registration statement on Form 10 and other reports filed by the Company from time to time with the SEC (collectively, the “Filings”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the Filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks relating to the Company’s business, industry, and the Company’s operations and results of operations. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.
Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.
| 20 |
| Table of Contents |
Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. The following discussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this report.
Management’s discussion and analysis of results of operations and financial condition (“MD&A”) is a supplement to the accompanying consolidated financial statements and provides additional information on SMC Entertainment, Inc.’s (“SMC” or the “Company’) business, current developments, financial condition, cash flows and results of operations.
Overview
SMC Entertainment, Inc. (“SMC” or the “Company”) was incorporated in Nevada on January 23, 1998, under the name of Professional Recovery Systems, Ltd.
On December 12, 2022, the Company entered into a Rescission and Release Agreement with Genesis Financial, Inc (“GFL”), that effectively terminated its Stock Purchase Agreement that was executed on November 18, 2021. Per the terms of the Agreement GFL agreed to pay a rescission fee of $300,000, $50,000 of which was to be paid within 21 days and the balance within 60 days. As certain requirements to complete the acquisition were never completed, there was never a formal closing and the financial statements of the Company were never consolidated, the transaction has been unwound and is not reflected in the financial statements of the Company.
On April 21, 2023, the Company completed its acquisition of AI-enabled wealth management technology platform provider, Fyniti Global Equities EBT Inc. (“Fyniti”) for 2,500,000 shares of Series B $10.00 Preferred Stock.
Fyniti, (www.fyniti.com, www.fynitiiq.com) is a Fintech developer and provider of technology that combines Artificial Intelligence/Machine Learning (AI/ML) driven Quantitative investing (IQ Engine) with AI-enabled wealth management Electronic Block Trading (“EBT”) technology.
On January 7, 2025, we closed 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.
| 21 |
| Table of Contents |
Results of Operations
For the Years Ended December 31, 2024 Compared to December 31, 2023
Revenue
We had no revenue for the years ended December 31, 2024 or 2023.
General and Administrative Expenses
General and administrative expenses for the year ended December 31, 2024, was $261,153 as compared to $246,317 for the year ended December 31, 2023, an increase of $14,836 or 6%. The increase in the current period is largely due to an increase in professional fees.
Compensation Expense – Related Party
Compensation expense – related party for the year ended December 31, 2024, was $465,800 as compared to $677,500 for the year ended December 31, 2023, a decrease of $211,700. The decrease is the result of a new consulting agreement for Ronald Hughes, that decreased his monthly compensation, as well as $1,800 in common stock issued for services in 2024 as compared to $103,500 in 2023.
Development Expense
During the year ended December 31, 2024, we had development expense of $71,300, which were payments to a third party contractor to develop our platform.
Other Income (Expense)
Total other expense for the year ended December 31, 2024, was $7,632,055 as compared to total other expense of $569,741 for the year ended December 31, 2023. In the current period we had interest expense of $301,111, a gain on extinguishment debt of $150,384, transaction expenses of an abandoned acquisition of $8,037,500 and a gain of $556,172 related to the change in fair value of derivatives. In the prior period we had interest expense of $56,770, a loss on conversion of convertible debt of $95,553, a gain on extinguishment debt of $70,125 and a loss of $487,543 related to the change in fair value of derivatives.
Net Loss
Our net loss for the year ended December 31, 2024, was $8,430,308 as compared with a net loss of $1,493,558 for the year ended December 31, 2023, an increase of $6,936,750. The increase in net operating loss is primarily due to transaction expenses of our abandoned acquisition, partially offset by lower operating expenses.
Liquidity and Capital Resources
As of December 31, 2024, our total current assets were $11,661 and our total current liabilities were $11,075,904, resulting in a working capital deficit of $11,064,243, compared to a working capital deficit of $3,626,130 as of December 31, 2023.
We suffered recurring losses from operations. The continuation of our company is dependent upon our company attaining and maintaining profitable operations and raising additional capital as needed. In this regard, we have historically raised additional capital through equity offerings and loan transactions.
| 22 |
| Table of Contents |
Cash Flows
|
| Year Ended |
| |||||
|
| December 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Net cash used in operating activities |
| $ | (195,955 | ) |
| $ | (191,763 | ) |
Net cash provided by investing activities |
| $ | - |
|
| $ | - |
|
Net cash provided by financing activities |
| $ | 203,347 |
|
| $ | 193,682 |
|
Change in cash |
| $ | 7,392 |
|
| $ | 1,919 |
|
For the year ended December 31, 2024, cash increased $7,392, compared to an increase in cash of $1,919 for the same period of 2023. The primary cash inflows during the year ended December 31, 2024, were net proceeds from loans payable of $206,347. The net loss from continuing operations of $8,430,308 was offset by total non-cash transactions of $7,375,911 (includes transaction expense of abandoned acquisition of $8,000,000) and a net cash inflow from changes in operating assets and liabilities of $858,442.
In order to improve our liquidity, we intend to pursue additional equity financing from private placement sales of our equity securities or shareholders’ loans. Issuance of additional shares will result in dilution to our existing shareholders. There is no assurance that we will be successful in completing any further private placement financings. If we are unable to achieve the necessary additional financing, then we plan to reduce the amounts that we spend on our business activities and administrative expenses in order to preserve our liquidity.
As of December 31, 2024, we had cash of $11,661 compared to $4,269 as of December 31, 2023.
Indebtedness
A summary of all the Company’s convertible loans is as follows.
|
| Date Issued |
|
| Maturity Date |
|
| Balance 12/31/2023 |
|
| Additions |
|
| Conversions/ Payments |
|
| Balance 12/31/2024 |
|
| Conversion Terms |
| |||||||||||
Christopher Whitcomb |
| 7/7/2016 |
|
| 7/7/2017 |
|
|
| 18 | % |
| $ | 2,393 |
|
| $ | - |
|
| $ | - |
|
| $ | 2,393 |
|
|
| (1 | ) | ||
Christopher Whitcomb |
| 1/25/2017 |
|
| 1/25/2018 |
|
|
| 18 | % |
| $ | 29,050 |
|
| $ | - |
|
| $ | - |
|
| $ | 29,050 |
|
|
| (1 | ) | ||
Christopher Whitcomb |
| 5/30/2017 |
|
| 5/30/2018 |
|
|
| 18 | % |
| $ | 32,640 |
|
| $ | - |
|
| $ | - |
|
| $ | 32,640 |
|
|
| (1 | ) | ||
Kanno Group Holdings ll Ltd |
| 10/1/2019 |
|
| 10/1/2020 |
|
|
| 12 | % |
| $ | 42,601 |
|
| $ | - |
|
| $ | - |
|
| $ | 42,601 |
|
| $ | 0.00466 |
| ||
Kanno Group Holdings ll Ltd |
| 1/6/2020 |
|
| 1/6/2021 |
|
|
| 12 | % |
| $ | 14,977 |
|
| $ | - |
|
| $ | - |
|
| $ | 14,987 |
|
| $ | 0.00615 |
| ||
Kanno Group Holdings ll Ltd |
| 6/30/2020 |
|
| 6/30/2021 |
|
|
| 12 | % |
| $ | 7,732 |
|
| $ | - |
|
| $ | - |
|
| $ | 7,732 |
|
| $ | 0.00615 |
| ||
Kanno Group Holdings ll Ltd |
| 12/31/2020 |
|
| 12/31/2021 |
|
|
| 12 | % |
| $ | 9,527 |
|
| $ | - |
|
| $ | - |
|
| $ | 9,527 |
|
| $ | 0.00185 |
| ||
Kanno Group Holdings ll Ltd |
| 3/31/2021 |
|
| 3/31/2022 |
|
|
| 12 | % |
| $ | 5,112 |
|
| $ | - |
|
| $ | - |
|
| $ | 5,112 |
|
| $ | 0.00628 |
| ||
Kanno Group Holdings ll Ltd |
| 7/24/2021 |
|
| 7/24/2022 |
|
|
| 12 | % |
| $ | 5,406 |
|
| $ | - |
|
| $ | - |
|
| $ | 5,406 |
|
| $ | 0.00603 |
| ||
Kanno Group Holdings ll Ltd |
| 11/1/2021 |
|
| 11/1/2022 |
|
|
| 12 | % |
| $ | 2,828 |
|
| $ | - |
|
| $ | - |
|
| $ | 2,828 |
|
| $ | 0.00544 |
| ||
Kanno Group Holdings ll Ltd |
| 12/31/2021 |
|
| 12/31/2022 |
|
|
| 12 | % |
| $ | 37,391 |
|
| $ | - |
|
| $ | - |
|
| $ | 37,391 |
|
| $ | 0.00509 |
| ||
Mammoth Corporation |
| 1/12/2022 |
|
| 1/12/2023 |
|
|
| 12 | % |
| $ | 231,652 |
|
| $ | - |
|
| $ | (231,652 | ) |
| $ | - |
|
|
| (3 | ) | ||
Mammoth Corporation |
| 1/21/2022 |
|
| 1/21/2023 |
|
|
| 12 | % |
| $ | 157,300 |
|
| $ | - |
|
| $ | (157,300 | ) |
| $ | - |
|
|
| (4 | ) | ||
Kanno Group Holdings ll Ltd |
| 3/31/2022 |
|
| 3/31/2023 |
|
|
| 12 | % |
| $ | 7,606 |
|
| $ | - |
|
| $ | - |
|
| $ | 7,606 |
|
| $ | 0.00222 |
| ||
Kanno Group Holdings ll Ltd |
| 4/25/2022 |
|
| 4/25/2023 |
|
|
| 12 | % |
| $ | 50,000 |
|
| $ | - |
|
| $ | - |
|
| $ | 50,000 |
|
| $ | 0.00206 |
| ||
Kanno Group Holdings ll Ltd |
| 7/12/2022 |
|
| 7/12/2023 |
|
|
| 12 | % |
| $ | 2,388 |
|
| $ | - |
|
| $ | - |
|
| $ | 2,388 |
|
| $ | 0.00163 |
| ||
Kanno Group Holdings ll Ltd |
| 11/3/2022 |
|
| 11/3/2023 |
|
|
| 12 | % |
| $ | 11,357 |
|
| $ | - |
|
| $ | - |
|
| $ | 11,357 |
|
| $ | 0.00167 |
| ||
Kanno Group Holdings ll Ltd |
| 12/31/2022 |
|
| 12/31/2023 |
|
|
| 12 | % |
| $ | 6,407 |
|
| $ | - |
|
| $ | - |
|
| $ | 6,407 |
|
| $ | 0.00096 |
| ||
Kanno Group Holdings ll Ltd |
| 3/31/2023 |
|
| 3/31/2024 |
|
|
| 12 | % |
| $ | 13,312 |
|
| $ | - |
|
| $ | - |
|
| $ | 13,312 |
|
| $ | 0.00054 |
| ||
Kanno Group Holdings ll Ltd |
| 6/30/2023 |
|
| 6/30/2024 |
|
|
| 12 | % |
| $ | 89,038 |
|
| $ | - |
|
| $ | - |
|
| $ | 89,038 |
|
| $ | 0.00084 |
| ||
Kanno Group Holdings ll Ltd |
| 9/30/2023 |
|
| 9/30/2024 |
|
|
| 12 | % |
| $ | 36,230 |
|
| $ | - |
|
| $ | - |
|
| $ | 36,230 |
|
| $ | 0.00042 |
| ||
Kanno Group Holdings ll Ltd |
| 12/31/2023 |
|
| 9/30/2024 |
|
|
| 12 | % |
| $ | 19,726 |
|
| $ | - |
|
| $ | - |
|
| $ | 19,726 |
|
| $ | 0.00035 |
| ||
Kanno Group Holdings ll Ltd |
| 3/31/2024 |
|
| 3/31/2025 |
|
|
| n/a |
|
| $ | - |
|
| $ | 9,918 |
|
| $ | - |
|
| $ | 9,918 |
|
| $ | 0.0003 |
| ||
Kanno Group Holdings ll Ltd |
| 6/30/2024 |
|
| 6/30/2025 |
|
|
| n/a |
|
| $ | - |
|
| $ | 67,584 |
|
| $ | - |
|
| $ | 67,584 |
|
| $ | 0.00117 |
| ||
ChainTrade, Ltd |
| 5/30/2024 |
|
| 11/30/2025 |
|
|
| 5 | % |
| $ | - |
|
| $ | 8,000,000 |
|
| $ | - |
|
| $ | 8,000,000 |
|
| $ | 1.00 |
| ||
Proactive Capital Partners |
| 7/1/2024 |
|
| demand |
|
|
| 10 | % |
| $ | - |
|
| $ | 35,000 |
|
|
| - |
|
| $ | 35,000 |
|
| $ | 0.002 |
| ||
Kanno Group Holdings ll Ltd |
| 9/30/2024 |
|
| 9/30/2025 |
|
|
| n/a |
|
| $ | - |
|
| $ | 48,845 |
|
| $ | - |
|
| $ | 48,845 |
|
| $ | 0.0011 |
| ||
Proactive Capital Partners |
| 11/12/2024 |
|
| 8/1/2025 |
|
|
| 10 | % |
| $ | - |
|
| $ | 15,000 |
|
| $ | - |
|
| $ | 15,000 |
|
| $ | 0.001 |
| ||
Red Road Holdings Corp |
| 12/6/2025 |
|
| 9/15/2024 |
|
|
| 12 | % |
| $ | - |
|
| $ | 51,000 |
|
| $ | - |
|
| $ | 51,000 |
|
| $ | (5 | ) | ||
Kanno Group Holdings ll Ltd |
| 12/31/2024 |
|
| 12/31/2025 |
|
|
| n/a |
|
| $ | - |
|
| $ | 35,824 |
|
| $ | - |
|
| $ | 35,824 |
|
| $ | 0.00066 |
| ||
|
|
|
|
|
|
|
|
|
|
|
| $ | 814,673 |
|
| $ | 8,263,171 |
|
| $ | (388,952 | ) |
| $ | 8,688,892 |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Kanno Group Holdings ll Ltd – accrued interest |
|
| n/a |
|
|
| n/a |
|
|
| n/a |
|
| $ | 339,077 |
|
| $ | 72,228 |
|
| $ | (339,077 | ) |
| $ | 72,228 |
|
|
|
|
|
Other accrued interest |
|
| n/a |
|
|
| n/a |
|
|
| n/a |
|
| $ | 87,458 |
|
| $ | 126,680 |
|
| $ | - |
|
| $ | 309,272 |
|
|
|
|
|
Less discount |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | (5,333 | ) |
|
|
|
|
Total convertible debt and accrued interest |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 1,241,208 |
|
|
| 8,462,079 |
|
| $ | (728,029 | ) |
| $ | 9,065,059 |
|
|
|
|
|
(1) | 75% discount to the lowest closing price within the 60 previous trading sessions. | |
(2) | Note was assigned to Mammoth Corporation | |
(3) | Conversion rate depends on what part of the loan and when the conversion occurs. | |
(4) | 50% of market price. | |
| (5) | greater of 1) $0.0003, or 65% of the lowest trading price for 10 days prior to conversion date. |
| 23 |
| Table of Contents |
On July 16, 2024, Kanno agreed to forgive $150,384 of that amount due. On December 30, 2024, Kanno converted $150,000 in accrued interest into 15,000 shares of Preferred D stock.
On December 30, 2024, Mammoth Corporation converted all amounts due into 55,000 shares of Preferred D stock.
All notes past their maturity date are considered to be default.
The following is a summary of the convertible notes:
|
| December 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Total convertible notes, principal outstanding |
| $ | 688,892 |
|
| $ | 814,673 |
|
Less: unamortized debt discount |
|
| (5,333 | ) |
|
| - |
|
Convertible notes - net of debt discount |
| $ | 683,559 |
|
| $ | 814,673 |
|
|
| December 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Convertible notes, principal - abandoned acquisition |
| $ | 8,000,000 |
|
| $ | - |
|
Convertible notes, accrued interest - abandoned acquisition |
|
| 235,617 |
|
|
| - |
|
Convertible notes and interest - abandoned acquisition |
| $ | 8,235,617 |
|
| $ | - |
|
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 8). The Company has abandoned this acquisition due to nonperformance of the seller, and is currently working to relieve itself of this obligation.
Going Concern
Our auditors have expressed substantial doubt as to our ability to continue as a going concern. The accompanying financial statements have been prepared on a going concern basis. For the year ended December 31, 2024, the Company had a net loss of $8,430,308, had net cash used in operating activities of $195,955, and has an accumulated deficit of $26,223,870. These matters raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the date of this filing. The Company’s ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due, to fund possible future acquisitions, and to generate profitable operations in the future. Management plans to provide for the Company’s capital requirements by continuing to issue additional equity and debt securities. The outcome of these matters cannot be predicted at this time and there are no assurances that, if achieved, the Company will have sufficient funds to execute its business plan or generate positive operating results. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Off-Balance Sheet Arrangements
As of December 31, 2024, the Company had no off-balance sheet arrangements.
Critical Accounting Policies
Our significant accounting policies are summarized in Note 2 to our audited financial statements for the years ended December 31, 2024 and 2023. Certain of our accounting policies require the application of significant judgment by our management, and such judgments are reflected in the amounts reported in our financial statements. In applying these policies, our management uses judgment to determine the appropriate assumptions to be used in the determination of estimates. Those estimates are based on our historical experience, terms of existing contracts, our observance of market trends, information provided by our strategic partners and information available from other outside sources, as appropriate. Actual results may differ significantly from the estimates contained in our consolidated financial statements.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.
| 24 |
| Table of Contents |
Item 8. Financial Statements
INDEX TO FINANCIAL STATEMENTS
| 25 |
| Table of Contents |
|
New York Office:
805 Third Avenue New York, NY 10022 212.838-5100
www.rbsmllp.com |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of SMC Entertainment, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of SMC Entertainment, Inc. (the Company) as of December 31, 2024 and 2023 (restated), and the related consolidated statements of operations, changes in stockholders’ deficit, and cash flows for the years then ended, and the related notes (collectively referred to as the financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023 (restated), and the result of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph – Going Concern
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the accompanying financial statements, the Company has suffered recurring losses from operations, generated negative cash flows from operating activities, has an accumulated deficit and has stated that substantial doubt exists about Company’s ability to continue as a going concern. Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/
We have served as the Company’s auditor since 2024.
April 15, 2025
PCAOB ID:
New York, NY Washington DC Mumbai & Pune, India Boca Raton, FL
Houston, TX San Francisco, CA Las Vegas, NV Beijing, China Athens, Greece
Member: ANTEA International with affiliated offices worldwide
| F-1 |
| Table of Contents |
SMC ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS
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| December 31, |
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| 2024 |
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| 2023 |
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| (Restated) |
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ASSETS |
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Current assets: |
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Cash |
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Total current assets |
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Intangible assets |
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Total assets |
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LIABILITIES AND STOCKHOLDERS' DEFICIT |
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Current liabilities: |
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Accounts payable and accrued liabilities |
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Accrued compensation - related parties |
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Due to related party |
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Notes payable – related parties |
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Convertible notes - net of debt discount |
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Convertible notes and interest - abandoned acquisition |
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Accrued interest |
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Derivative liability |
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Total liabilities |
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Commitments and contingencies |
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Stockholders' deficit: |
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Series A preferred stock, $ |
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Series B preferred stock, $ |
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Series C preferred stock, $ |
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Series D preferred stock, $ |
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Common stock, $ |
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Common stock to be issued |
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Additional paid-in capital |
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Accumulated deficit |
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Total stockholders' deficit |
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Total liabilities and stockholders' deficit |
| $ |
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| $ |
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The accompanying notes are an integral part of these consolidated financial statements.
| F-2 |
| Table of Contents |
SMC ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
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| Year Ended |
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| December 31, |
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| 2024 |
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| 2023 |
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Revenue |
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Operating expenses: |
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General and administrative |
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Compensation expense – related party |
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Development expense |
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Total operating expenses |
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Loss from operations |
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Other income (expense): |
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Interest expense |
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Transaction expense - abandoned acquisition |
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Gain on extinguishment of debt |
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Gain (loss) on conversion of debt |
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Change in fair value of derivative |
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Total other income (expense), net |
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Net loss |
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Net loss per common share - basic and diluted |
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Weighted average common shares outstanding - basic and diluted |
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The accompanying notes are an integral part of these consolidated financial statements.
| F-3 |
| Table of Contents |
SMC ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
For the Years Ended December 31, 2024 and 2023 (restated)
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| Series A |
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| Series B |
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| Series C |
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| Series D |
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| Additional |
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| Common stock |
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| Total |
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| Preferred Stock |
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| Preferred Stock |
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| Preferred Stock |
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| Preferred Stock |
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| Common Stock |
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| Paid-in |
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| To be |
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| Accumulated |
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| Stockholders' |
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| Shares |
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| Amount |
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| Amount |
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| Shares |
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| Amount |
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| Amount |
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| Capital |
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| Deficit |
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Balances at December 31, 2022 (as restated) |
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| $ |
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| $ |
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Common stock issued for conversion of debt |
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| - |
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Common stock issued for services – related party |
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Common stock issued for services |
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Preferred stock issued for acquisition |
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Net loss |
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Balance at December 31, 2023 |
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Preferred stock D issued for conversion of debt and accrued interest |
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Common stock issued for services – related party |
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Common stock issued for accrued compensation |
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Common stock issued for services |
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Cancellation of Series A preferred |
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Common stock cancelled |
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Net loss |
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Balance at December 31, 2024 |
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| $ |
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| $ |
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| - |
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| $ |
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| $ |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) | ||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-4 |
| Table of Contents |
SMC ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
| Year Ended |
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|
| December 31, |
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| 2024 |
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| 2023 |
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Cash flows from operating activities: |
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Net loss |
| $ | ( | ) |
| $ | ( | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
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Amortization of debt discount |
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Common stock issued for services – related party |
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Common stock issued for services |
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Change in fair value of derivative |
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| ( | ) |
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Transaction expense - abandoned acquisition |
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Gain on extinguishment of debt |
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| ( | ) |
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Gain / loss on conversion of debt |
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Changes in operating assets and liabilities: |
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Prepaid expenses |
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Accounts payable and accrued liabilities |
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Accrued interest |
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Accrued compensation - related party |
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Net cash used in operating activities |
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Cash flows from financing activities: |
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Cash overdraft assumed with acquisition |
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Repayment - related parties |
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Proceeds from loan – related party |
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Proceeds from loans |
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Net cash provided by financing activities |
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Net change in cash and cash equivalents |
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Cash at beginning of year |
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Cash at end of year |
| $ |
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Supplemental disclosure of cash flow information: |
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Cash paid for interest |
| $ |
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| $ |
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Cash paid for taxes |
| $ |
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| $ |
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Supplemental disclosure of non-cash investing and financing activities: |
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Common stock issued for accrued compensation |
| $ |
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| $ |
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Notes payable – related parties issued for accrued compensation |
| $ |
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| $ |
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Preferred stock D issued for conversion of debt and accrued interest |
| $ |
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| $ |
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Intangible assets acquired in business combination |
| $ |
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| $ |
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Debt converted to common stock |
| $ |
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| $ |
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The accompanying notes are an integral part of these consolidated financial statements.
| F-5 |
| Table of Contents |
SMC ENTERTAINMENT, INC.
Notes to Consolidated Financial Statements
December 31, 2024
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”), and the Shareholders of 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.
NOTE 2 — SUMMARY OF SIGNIFICANT POLICIES
Basis of Presentation
The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
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.
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”).
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 December 31, 2024 and 2023.
| F-6 |
| Table of Contents |
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.
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 December 31, 2024, 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.
| F-7 |
| 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 December 31, 2024:
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, 2023:
Description |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| |||
Derivative liability |
| $ |
|
| $ |
|
| $ |
| |||
Total |
| $ |
|
| $ |
|
| $ |
| |||
| F-8 |
| Table of Contents |
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 December 31, 2024 our operating segments included: Corporate and Fyniti. 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.
Income Taxes
Income taxes are provided for the tax effects of the transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to tax net operating loss carryforwards. The deferred tax assets and liabilities represent the future tax return consequences of these differences, which will either be taxable or deductible when assets and liabilities are recovered or settled, as well as operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is established against deferred tax assets when in the judgment of management, it is more likely than not that such deferred tax assets will not become available. Because the judgment about the level of future taxable income is dependent to a great extent on matters that may, at least in part, be beyond the Company’s control, it is at least reasonably possible that management’s judgment about the need for a valuation allowance for deferred taxes could change in the near term.
Tax benefits are recognized only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon settlement. A liability for “unrecognized tax benefits” is recorded for any tax benefits claimed in the Company’s tax returns that do not meet these recognition and measurement standards. As of December 31, 2023 and 2022, no liability for unrecognized tax benefits was required to be reported.
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 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 $
| F-9 |
| Table of Contents |
NOTE 4 — CONVERTIBLE NOTES PAYABLE
A summary of all the Company’s convertible loans is as follows.
|
| Date Issued |
|
| Maturity Date |
|
| Balance 12/31/2023 |
|
| Additions |
|
| Conversions/ Payments |
|
| Balance 12/31/2024 |
|
| 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 |
|
|
|
|
|
| % |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||||||||
Mammoth Corporation |
|
|
|
|
|
| % |
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
|
|
| ( | ) | ||||||||
Mammoth Corporation |
|
|
|
|
|
| % |
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
|
|
| ( | ) | ||||||||
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 |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
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) | Note was assigned to Mammoth Corporation | |
(3) | Conversion rate depends on what part of the loan and when the conversion occurs. | |
(4) | 50% of market price. | |
| (5) | greater of 1) $0.0003, or 65% of the lowest trading price for 10 days prior to conversion date. |
On July 16, 2024, Kanno agreed to forgive $
On December 30, 2024, Mammoth Corporation converted all amounts due into
During the year ended December 31, 2023, the Company recognized a gain on extinguishment of debt of $
| F-10 |
| Table of Contents |
All notes past their maturity date are considered to be in default.
The following is a summary of the convertible notes:
|
| December 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Total convertible notes, principal outstanding |
| $ |
|
| $ |
| ||
Less: unamortized debt discount |
|
| ( | ) |
|
|
| |
Convertible notes - net of debt discount |
| $ |
|
| $ |
| ||
|
| December 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
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 8). The Company has abandoned this acquisition due to nonperformance of the seller, and is currently working to relieve itself of this obligation.
Derivative Liability
A summary of the activity of the derivative liability for the notes above is as follows:
|
| Derivative |
| |
|
| Liability |
| |
Balance at December 31, 2022 |
| $ |
| |
Decrease to derivative due to conversion |
|
| ( | ) |
Derivative loss due to mark to market adjustment |
|
|
| |
Balance at December 31, 2023 |
|
|
| |
Decrease to derivative due to conversion |
|
| ( | ) |
Derivative gain due to mark to market adjustment |
|
| ( | ) |
Balance at December 31, 2024 |
| $ |
| |
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 December 31, 2024, is as follows:
|
| December 31, |
|
| Initial |
| ||||||
Inputs |
| 2024 |
|
| 2023 |
|
| 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.
| F-11 |
| Table of Contents |
NOTE 5 — COMMON STOCK
During the first quarter of 2023, the Company granted
During the second quarter of 2023, the Company granted
During the year ended December 31, 2023, Kanno Group Holdings converted $
During the year ended December 31, 2023, Christopher Whitcomb converted $
During the year ended December 31, 2023, Mammoth converted $
As noted in Note 7, on August 1, 2023, the Company issued
On August 14, 2023, the Company amended its Articles of Incorporation increasing its authorized common shares to
During the first quarter of 2024, the Company granted
During the second quarter of 2024, the Company issued
On June 7, 2024, the Company cancelled
On March 25, 2024, the Company issued
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 $
On March 25, 2024, the Company issued
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 $
On December 26, 2023, Xuqiang (Adam) Yang, was appointed as Chief Financial Officer (“CFO”) of the Company to replace Mr. Blum, who was serving as the Interim CFO. Per the terms of the consulting agreement to serve as the Company’s CFO Mr. Yang will be compensated $
NOTE 6 — PREFERRED STOCK
Series A Preferred Stock
The Company has
As of December 31, 2024, all outstanding shares of Series A have been cancelled as the shares were never physically received by the transfer agent and no consideration was ever provided for these shares.
Series B Preferred Stock
On December 16, 2021, the Company amended its Articles of Incorporation, creating a series of Preferred Stock designating
On April 21, 2023, the Company completed its acquisition of AI-enabled wealth management technology platform provider, Fyniti Global Equities EBT Inc. (“Fyniti”) for
As of December 31, 2024 and 2023, there were
| F-12 |
| Table of Contents |
Series C Preferred Stock
On November 6, 2024, the Company Amended its Articles of Incorporation to authorize and designate
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 December 31, 2024, there were
NOTE 7 — RELATED PARTY TRANSACTIONS
On October 1, 2021, the Company entered into a consulting agreement with Ronald Hughes and North Arm Capital LLC, in which Mr. Hughes was appointed CEO and Chairman of the Company. Per the terms of the agreement Mr. Hughes is to be compensated $
On March 25, 2024, the Company issued
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 $
On November 15, 2021, the Company entered into a consulting agreement with Erik Blum and J W Price LLC, in which Mr. Blum was appointed President of the Company. Per the terms of the agreement Mr. Blum is to be compensated $
| F-13 |
| Table of Contents |
On August 1, 2023, the Company issued
On March 25, 2024, the Company issued
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 $
On December 26, 2023, Xuqiang (Adam) Yang, was appointed as Chief Financial Officer (“CFO”) of the Company to replace Mr. Blum, who was serving as the Interim CFO. Per the terms of the consulting agreement to serve as the Company’s CFO Mr. Yang will be compensated $
The following is a summary of notes payable to related parties as of December 31, 2024:
Convertible note to Mr. Hughes for accrued compensation |
|
|
| |
as of December 31, 2024. 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 December 31, 2024. Non-interest bearing and convertible |
|
|
|
|
into shares of common stock at $0.00055 per share. |
|
|
| |
|
| $ |
| |
NOTE 8 — ACQUISITIONS
On April 21, 2023, the Company completed its acquisition of AI-enabled wealth management technology platform provider, Fyniti Global Equities EBT Inc. (“Fyniti”) for
The Company accounted for the transaction as a business combination under ASC 805 and as a result, allocated the fair value of the book value of identifiable assets acquired and liabilities assumed as of the acquisition date as outlined in the table below.
Purchase Price Allocation
Consideration |
|
|
| |
Consideration issued |
| $ |
| |
Identified assets, liabilities, and noncontrolling interest |
|
|
|
|
Intangible assets – developed technology |
|
|
| |
Cash overdraft |
|
| ( | ) |
Accounts payable |
|
| ( | ) |
Accrued expenses |
|
| ( | ) |
Total identified assets, liabilities, and noncontrolling interest |
|
|
| |
Excess purchase price allocated to goodwill |
| $ | - |
|
In connection with the Fyniti acquisition, the Company identified intangible assets of $
On June 21, 2024, the Company closed on the May 30, 2024 Acquisition Agreement (the “Acquisition Agreement”) with ChainTrade, LTD (“ChainTrade”), to purchase
| F-14 |
| Table of Contents |
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 $
As of December 31, 2024, the Company had not received any ChainTrade assets pursuant to the Acquisition Agreement. On January 12, 2025, Mr. Bryan Feinberg resigned from his position as Director of the Company. The Company has abandoned this acquisition due to non-performance of the seller, and is currently working to relieve itself of this obligation.
NOTE 9 — INCOME TAXES
Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company has evaluated Staff Accounting Bulletin No. 118 regarding the impact of the decreased tax rates of the Tax Cuts & Jobs Act. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The U.S. federal income tax rate of
Net deferred tax assets consist of the following components as of December 31:
|
| 2024 |
|
| 2023 |
| ||
Federal income tax benefit attributable to: |
|
|
|
|
|
| ||
Current operations |
| $ |
|
| $ |
| ||
Less: valuation allowance |
|
| ( | ) |
|
| ( | ) |
Net provision for Federal income taxes |
| $ |
|
| $ |
| ||
The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income from continuing operations for the period ended December 31, due to the following:
|
| 2024 |
|
| 2023 |
| ||
Deferred Tax Assets: |
|
|
|
|
|
| ||
NOL Carryover |
| $ |
|
| $ |
| ||
Less: valuation allowance |
|
| ( | ) |
|
| ( | ) |
Net deferred tax assets |
| $ |
|
| $ |
| ||
At December 31, 2024, the Company had net operating loss carry forwards of approximately $
Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for Federal Income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry forwards may be limited as to use in future years. With few exceptions, the Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years before 2020.
NOTE 10 – RESTATEMENT
The consolidated financial statements for the year ended December 31, 2023 are being restated to correct the accounting for certain balance sheet accounts.
| F-15 |
| Table of Contents |
Per ASC 250-10 Accounting Changes and Error Corrections, the balance sheet and statement of changes in stockholders’ deficit has been restated for the following:
|
| As Reported |
|
| Adjustment |
|
|
|
|
| As Restated |
| ||||
Receivable |
| $ |
|
| $ | ( | ) |
|
| (1 | ) |
| $ |
| ||
Total current assets |
| $ |
|
| $ | ( | ) |
|
| (1 | ) |
| $ |
| ||
Goodwill |
| $ |
|
| $ | ( | ) |
|
| (2 | ) |
| $ |
| ||
Intangible assets |
| $ |
|
| $ |
|
|
| (2 | ) |
| $ |
| |||
Total assets |
| $ |
|
| $ | ( | ) |
|
| (1 | ) |
| $ |
| ||
Accumulated deficit |
| $ | ( | ) |
| $ | ( | ) |
|
| (1 | ) |
| $ | ( | ) |
Total stockholders' deficit |
| $ | ( | ) |
| $ | ( | ) |
|
| (1 | ) |
| $ | ( | ) |
Total liabilities and stockholders' deficit |
| $ |
|
| $ | ( | ) |
|
| (1 | ) |
| $ |
| ||
(1) | Receivable was determined to be uncollectible. The Company wrote off this balance as of December 31, 2022. |
|
|
(2) | This balance was identified as intangible assets acquired pursuant to the Fyniti acquisition, and therefore reclassification was made from goodwill as previously reported. |
NOTE 11 — 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 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
On January 6, 2025, Xuqiang (Adam) Yang resigned from his position as Chief Financial Officer. His resignation was not due to any disagreement between Mr. Yang and the Company. His departure was not related to the operations, policies or practices of the Company or any issues regarding accounting policies or practices.
On January 9, 2025, the Company received $
On January 12, 2025, Bryan Feinberg resigned from his position as Director of the Company. Mr. Feinberg’s resignation is not the result of a disagreement with SMC, and he continues to work with us as a consultant.
On January 17, 2025, Eric Sherb was appointed as the Company’s Chief Financial Officer.
On November 26, 2024, Jayakumar Gopalan resigned as the Company’s Chief Technical Officer and Director. He remains President of our wholly-owned subsidiary, Fyniti Global Equities EBT. His resignation was not due to any disagreement with the Company.
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 right, title and interest in Chaintrade to FYNX in exchange for a mutual release of claims. Upon the execution of the Assignment Agreement, FYNX acquired majority voting control of Chaintrade and became Chaintrade’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. As of the filing date of this report, the parties are finalizing terms of settlement, but no outcome has been determined in the above case.
On March 25, 2025, in connection with the Chaintrade transaction, Paul Couture was terminated from his position as Chief Technology Officer of the Company.
Through the issuance date, the Company has issued
| F-16 |
| Table of Contents |
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
In connection with the preparation of this annual report, an evaluation was carried out by the Company’s management, with the participation of the principal executive officer and the principal financial officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act (“Exchange Act”) as of December 31, 2024. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Commission’s rules and forms, and that such information is accumulated and communicated to management, including the principal executive officer and the principal financial officer, to allow timely decisions regarding required disclosures.
Based on that evaluation, the Company’s management concluded, as of the end of the period covered by this report, that the Company’s disclosure controls and procedures were not effective in recording, processing, summarizing, and reporting information required to be disclosed, within the time periods specified in the Commission’s rules and forms, and that such information was not accumulated and communicated to management, including the principal executive officer and the principal financial officer, to allow timely decisions regarding required disclosures.
Management’s Report on Internal Control over Financial Reporting
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process, under the supervision of the principal executive officer and the principal financial officer, designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with United States generally accepted accounting principles (GAAP). Internal control over financial reporting includes those policies and procedures that:
| ● | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the Company’s assets; |
| ● | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the board of directors; and |
| ● | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
The Company’s management conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013) as set forth in its Internal Control - Integrated Framework. This assessment identified material weaknesses in internal control over financial reporting. A material weakness is a control deficiency, or a combination of deficiencies in internal control over financial reporting that creates a reasonable possibility that a material misstatement in annual or interim financial statements will not be prevented or detected on a timely basis. Since the assessment of the effectiveness of our internal control over financial reporting did identify a material weakness, management considers its internal control over financial reporting to be ineffective.
| 26 |
| Table of Contents |
Management has concluded that our internal control over financial reporting had the following material deficiencies:
| ● | We were unable to maintain segregation of duties within our business operations due to our reliance on a single individual fulfilling the role of sole officer and director. |
|
| |
| ● | Lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our Board of Directors, resulting in ineffective oversight in the establishment and monitoring of required internal control and procedures. |
These control deficiencies to our 2024 annual financial statements could have resulted in a material misstatement that might have been prevented or detected by a segregation of duties. Accordingly, we have determined that this control deficiency constitutes a material weakness.
To the extent reasonably possible, given our limited resources, our goal is, upon consummation of a merger with a private operating company, to separate the responsibilities of principal executive officer and principal financial officer, intending to rely on two or more individuals. We will also seek to expand our current board of directors to include additional individuals willing to perform directorial functions. Since the recited remedial actions will require that we hire or engage additional personnel, this material weakness may not be overcome in the near term due to our limited financial resources. Until such remedial actions can be realized, we will continue to rely on the advice of outside professionals and consultants.
This annual report does not include an attestation report of our registered public accounting firm regarding our internal controls over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to Section 404(c) of the Sarbanes-Oxley Act that permit us to provide only management’s report in this annual report.
Changes in Internal Controls over Financial Reporting
During the year ended December 31, 2024, there has been no change in internal control over financial reporting that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.
Item 9B. Other Information
None
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
Item 10. Directors and Executive Officers, Corporate Governance.
The following table contains information with respect to our directors and executive officers. To the best of our knowledge, none of our directors or executive officers have an arrangement or understanding with any other person pursuant to which he or she was selected as a director or officer. There are no family relationships between any of our directors or executive officers. Directors serve one-year terms. Our executive officers are appointed by and serve at the pleasure of the Board of Directors.
Name |
| Current Age |
| Position |
Erik Blum |
| 59 |
| President, and Chief Executive Officer (Principal Executive Officer) (Appointed President on November 15, 2021, and later Director on May 16, 2023). |
Ronald E. Hughes |
| 62 |
| VP Communications as of May 13, 2020. Chief Operating Officer and Chairman of the Board of Directors (Served as Chairman and Director, Chief Executive Officer and Chief Financial Officer from October 1, 2021, until being appointed as Chief Operating Officer on November 15, 2021). |
Eric Sherb |
| 38 |
| Chief Financial Officer, appointed on January 17, 2025. |
Jayakumar Gopalan |
| 46 |
| Former Chief Technical Officer and Director (Appointed on May 16, 2023 and Resigned on November 26, 2024). Current President of the Company’s subsidiary, Fyniti Global Equities EBT. |
Xuqiang (Adam) Yang |
| 41 |
| Former Chief Financial Officer (Appointed on December 23, 2023. and resigned on January 6, 2025). |
Paul Couture |
|
|
| Former Chief Technology Officer (Appointed June 25, 2024, and terminated on March 25, 2025). |
Bryan Feinberg |
|
|
| Former Director (Appointed June 25, 2024 and resigned on January 12, 2025). |
| 27 |
| Table of Contents |
Erik Blum, President, Chief Executive Officer, and Director
With over 30 years of experience in debt, corporate finance and company management, Mr. Blum’s career started at Lehman Brothers and Drexel Burnham California underwriting junk bonds in the late 1980’s. While at Drexel, Mr. Blum worked with Steve Nassau and Michael Milken on the 7UP and NWA LBO’s. After Drexel, Mr. Blum moved to Shearson and later found a home at Tucker Anthony /John Hancock, structuring debt, raising equity, and participating in corporate finance. Mr. Blum then joined D. Blech & Company as an officer and principal in 1993 and was instrumental in bringing more than 50 Bio Tech companies to market including Gilead, Human Genome Sciences, Texas Biotech, VISX Laser, Guilford, and many others. In 2001 Mr. Blum moved to Florida and began structuring CMO’S specializing in the inverse floater side of Fannie Mae and Freddie Mac. In 2005 Mr. Blum successfully created a reverse convertible bond desk based on volatility for Stern Agee. Mr. Blum left Wall Street in 2010 to branch off privately.
Over the last 6 years Mr. Blum has been involved in the private equity markets. In 2016 he was a managing member of a conceptual company based on telemedicine named, Beyond Pharma LLC. The company was based on the premise of 24 hour a day, 7 day a week access to doctors and medical consultations, exclusively via phone. As this was pre Covid when Covid hit, telemedicine opened wide up. Beyond Pharma LLC was subsequently sold and Mr. Blum moved on.
In November of 2020 Mr. Blum founded JW Price, LLC, a corporate consulting firm, which focused on providing business development services to microcap and other small public companies. During his time at JW Price Mr. Blum helped multiple companies become successful public traded entities. He has held positions as CEO, CFO, and director of multiple companies and has been instrumental in enabling their turnarounds. With over 30 years’ experience in Debt Structures, Corporate Finance, Compliance and Management, Mr. Blum has a unique perspective on the equity markets. As of January 2022, Mr. Blum serves as Director, President and Chief Executive Officer of SMC Entertainment Inc.
Ronald E. Hughes, Chief Operating Officer, Director and Chairman of the Board
Mr. Hughes has over 30 years of experience of business development and navigation through investment markets. In 1996, Ron joined Global Securities as a Canadian Licensed Investment Advisor providing investment analysis, equity trading and capital structure strategy with corporate finance. In late 2001, he began his executive roles, first as Director, President and CEO of TransAmerican Energy Inc., acquiring and financing oil & gas producing assets along with exploration operations in both Canada and the United States, while trading on TSX Venture Exchange.
In May of 2020, Mr. Hughes was appointed VP of Communications for SMC Entertainment Inc., further into February of 2021, he subsequently became Chief Operations Officer before being promoted to President in June of 2021. In October of 2021, Mr. Hughes became Chairman of the Board, as well as sole Director and CEO of SMC Entertainment Inc. Relinquishing the roles of President and Chief Executive Officer in January of 2022, he currently remains the Chief Operations Officer of SMC Entertainment Inc.
As of September of 2022, Mr. Hughes serves on additional boards of publicly traded companies in the United States, Sanwire Corporation listed on the OTC Pink as its Director & CEO and in Canada, American Biofuels Inc. (formerly TransAmerican Energy now on the TSX NEX Exchange) as Director and former President. Ron has been a partner with privately held North Arm Capital Services, providing Investor Relations and Business Development services to domestic and international clients for more than three decades. Ron studied Resource Economics at the University of Alberta, then International Marketing and Management at the University of Hawaii (1987). Mr. Hughes’ skill sets lend themselves to Management, Marketing, Finance, Administration and Communications.
Eric Sherb, Chief Financial Officer
On January 17, 2025, Mr. Eric Sherb, CPA, of EMS Consulting Services, was appointed as the Company’s Chief Financial Officer. Mr. Sherb is a CPA with 19 years of experience in accounting advisory, auditing and mergers and acquisitions. He began his career at PricewaterhouseCoopers, where he worked as a senior associate from July 2008 to January 2013. Mr. Sherb has several years’ experience in mid-size audit and consulting firms with clients in a variety of industries. Following his time at PricewaterhouseCoopers, Mr. Sherb served as Audit Manager at RBSM LLP, and Senior Manager at CFGI. Since October 2018, Eric has been a founder and owner of EMS Consulting Services, LLC. He has extensive experience in financial reporting for pre-revenue startups to large public entities, including bookkeeping, consolidation, financial statement preparation and analysis, management and investor reporting, financial modeling and audit and IPO readiness. Mr. Sherb has provided technical advisory on complex transactions, including debt/equity financings, business combinations, revenue recognition, lease arrangements, etc. Mr. Sherb has helped clients establish and improve financial operations, including system implementation, compensation structures and the creation of accounting policies and processes. Mr. Sherb graduated with a Bachelor of Business Administration from Emory University in Accounting and Finance. As SMCE is a fully reporting company, Mr. Sherb is well qualified to help the management transition into our next phase of development.
Jayakumar Gopalan, Former Chief Technical Officer and Director
Mr. Gopalan served as our Chief Technical Officer and Director from May 16, 2023 to November 26, 2024. He remains President of continues to lead our wholly-owned subsidiary, Fyniti Global Equities EBT as its President. He entrepreneurial executive experience nearing 25 years, Mr. Gopalan has a diverse resume, including Electronic Trading, Brokerage Trade Processing, Settlement Administration, Wealth Management along with Technology Expertise, Artificial Intelligence, Big Data and Analytics. From April 2012 to 2015, Mr. Gopalan was the Principal Architect of back-office management systems as VP Bank of New York Mellon. He then became VP of Technology at Netomi (formerly MSG.AI) from July 2015 to September of 2019, creating and scaling the engineering team to build Artificial Intelligence Technology. In March of 2020, he became VP of Sett & Lucas Fund in Dallas Texas, where he oversaw the Trading Systems, Research and Compliance until June of 2021. Beginning in October of 2019 and concurrently to date, Mr. Goplalan co-founded Fyniti Global Equities EBT, an Artificial Intelligence Technology Platform, as well as S&L Capital Markets, Broker Dealer (pending approval) in the positions of General Securities Principal and Managing Member, he holds Series 7, Series 24 and Series 63 licenses. He has extensive work experience in various business verticals including middle/back-office trading systems, prime brokerages, banking, payment systems etc. Mr. Gopalan has lead talented teams with the principal of lead by example, built engineering teams to specialize in cutting-edge technologies and deliver products to exceed expectations.
Mr. Gopalan holds a Bachelor of Engineering (Electrical and Electronics) to compliment his proven abilities and understanding of Securities Brokerage Technology.
| 28 |
| Table of Contents |
Xuqiang (Adam) Yang, Former Chief Financial Officer
Adam Yang, Chief Financial Oficer. On December 26, 2023, Xuqiang (Adam) Yang, was appointed as Chief Financial Officer of the Company to replace Erik Blum, the Company’s Chief Executive Officer, who was also serving as SMCE’s Interim CFO. Adam Yang served as the Company’s Chief Financial Officer from December 26, 2023 Until his resignation on On January 6, 2025, Xuqiang (Adam) Yang resigned from his position as Chief Financial Officer. His resignation was not due to any disagreement between Mr. Yang and the Company. His departure was not related to the operations, policies or practices of the Company or any issues regarding accounting policies or practices.
Xuqiang (Adam) Yang, age 41 is a Certified Public Accountant (CPA) and has been involved in the accounting and finance space for over 10 years. He brings a wealth of firsthand accounting experience from his tenure with companies like ADT, Office Depot, Envision Physicians Services, and much more. Throughout his career, Mr. Yang has demonstrated an ability to adapt to the ever fast changing world of finance and accounting. Prior to his role as CFO with SMC Entertainment, Inc, he was a controller with a startup solar company where he designed the accounting system from the ground up. Mr. Yang was also an auditor of startup public traded companies and has served as a senior assurance officer for these engagements. As SMCE is a fully reporting company, Mr. Yang is well qualified to help the management transition into our next phase of development.
Bryan Feinberg, Former Director
Mr. Feinberg was appointed the Company’s Director on June 25, 2024 in connection with the closing of the Acquisition Agreement for the purchase of the assets of Chaintrade, Ltd., on June 21, 2024. Mr. Feinberg serves as Chief Executive Officer of Plato Technologies, Inc., a party to the Acquisition Agreement. His resignation was not due to any disagreement with the Company and he continues to work with the Company as a consultant.
Paul Couture, Former Chief Technology Officer
Mr. Couture was appointed the Company’s Chief Technology Officer on June 25, 2024, in connection with the closing of the Acquisition Agreement for the purchase of the assets of Chaintrade, Ltd. on June 21, 2024. Prior to the Acquisition, Mr. Couture served as Chief Executive Officer of Chaintrade, and serves as Chief Executive Officer of Red Matter Capital, which were both parties to the Acquisition Agreement. Mr. Couture was terminated as the Company’s CTO on March 25, 2025.
Family Relationships.
There are no family relationships between any of our directors or executive officers.
Involvement in Certain Legal Proceedings.
There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our Company or any of our subsidiaries, threatened against or affecting our Company, our common stock, any of our subsidiaries or of our Company’s or our Company’s subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
None.
Code of Ethics
We currently do not have a code of ethics that applies to our officers, employees and directors, including our Chief Executive Officer and Chief Financial Officer; however, we intend to adopt one in the near future.
Conflicts of Interest
Since we do not have an audit or compensation committee comprised of independent directors, the functions that would have been performed by such committees are performed by our directors. The Board of Directors has not established an audit committee and does not have an audit committee financial expert, nor has the Board established a nominating committee. The Board is of the opinion that such committees are not necessary since the Company is an early-stage company, and to date, such directors have been performing the functions of such committees. Thus, there is a potential conflict of interest in that our Directors and Officers have the authority to determine issues concerning management compensation, nominations, and audit issues that may affect management decisions.
Item 11. Executive Compensation.
Summary Compensation Table
The following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named executive officers paid by us during the years ended December 31, 2024 and 2023.
| 29 |
| Table of Contents |
EXECUTIVE OFFICER COMPENSATION TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Non-Equity |
|
| Non-Qualified |
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Incentive |
|
| Deferred |
|
| All |
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
| Stock |
|
| Option |
|
| Plan |
|
| Compensation |
|
| Other |
|
|
|
| |||||||||
|
|
| Salary |
|
| Bonus |
|
| Awards |
|
| Awards |
|
| Compensation |
|
| Earnings |
|
| Compensation |
|
| Total |
| |||||||||
Name and Principal Position |
| Year |
| ($)(5) |
|
| ($) |
|
| ($) |
|
| ($) |
|
| ($) |
|
| ($) |
|
| ($) |
|
| ($) |
| ||||||||
Erik Blum |
| 2024 |
|
| 195,500 |
|
|
| - |
|
|
| 125,700 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 321,200 |
|
CEO(1) |
| 2023 |
|
| 320,000 |
|
|
| - |
|
|
| 97,300 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 417,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald E. |
| 2024 |
|
| 35,000 |
|
|
| - |
|
|
| 25,600 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 60,600 |
|
Hughes(2) |
| 2023 |
|
| 240,000 |
|
|
| - |
|
|
| 6,200 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 246,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Xuqiang (Adam) Yang(3) |
| 2024 |
|
| 29,000 |
|
|
| - |
|
|
| 55,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 84,000 |
|
Former CFO |
| 2023 |
|
| 14,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 14,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric Sherb |
| 2024 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
CFO(4) |
| 2023 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul Couture |
| 2024 |
|
| 15,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 15,000 |
|
Former CTO(6) |
| 2023 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
(1) | Erik Blum was appointed as President, Chief Executive Officer, and Chief Financial Officer of the Company on November 15, 2021, and later Director on May 16, 2023. |
(2) | Ronald E. Hughes served as the Company’s former Chief Executive Officer from February 3, 2021 and Director from October 12, 2021 until November 15, 2021, at which time he became the Company’s Chief Operating Officer upon the appointment of Erik Blum as President, CEO and CFO. |
|
|
(3) | Xuqiang (Adam) Yang was appointed Chief Financial Officer of the Company on December 26, 2023, and resigned on January 6, 2025. |
|
|
(4) | Eric Sherb was appointed Chief Financial Officer of the Company on January 17, 2025. |
(5) | Amounts not paid have been accrued. |
|
|
(6) | Paul Couture was appointed Chief Technology Officer of the Company on June 25, 2024, and was terminated on March 25, 2025. |
Outstanding Equity Awards at the End of the Fiscal Year
We do not have any equity compensation plans and therefore no equity awards are outstanding as of December 31, 2024.
None of the members of the Board of Directors of the Company were compensated for services in such a capacity.
Bonuses and Deferred Compensation
We do not have any bonus, deferred compensation or retirement plan. All decisions regarding compensation are determined by our Board of Directors.
Options and Stock Appreciation Rights
As of December 31, 2024, no options have been issued.
Payment of Post-Termination Compensation
We do not have change-in-control agreements with our director or executive officer, and we are not obligated to pay severance or other enhanced benefits to our executive officer upon termination of his employment.
Employment Agreements
We currently have five (5) employees and seven (7) full time contractors. Our officers and directors each devote approximately 35 hours per week to the management of the Company.
On June 21, 2024, the Company entered into an Employment Agreement with Paul Couture to serve as the Chief Technology Officer, in connection with the Acquisition Agreement for the purchase of the assets of Chaintrade, Ltd. Per the terms of the Technology Consulting Agreement Mr. Feinberg was to be compensated $7,500 per month for his services as CTO, which he did not perform as required. Mr. Couture was terminated as CTO on March 25, 2025.
Consulting Agreements
On October 1, 2021, the Company entered into a consulting agreement with Ronald Hughes and North Arm Capital LLC, in which Mr. Hughes was appointed CEO and Chairman of the Company. Per the terms of the agreement Mr. Hughes is to be compensated $17,500 per month through October 1, 2022. In addition to his consulting fee Mr. Hughes will be granted 500,000 shares of common stock per month.
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 $5,000 per month. In addition, the Company issued to Mr. Hughes a convertible promissory note for all accrued compensation as of December 31, 2023. The note for $517,000 is non-interest bearing and convertible into shares of common stock at $0.0006 per share. On June 15, 2024, Mr. Hughes converted $25,000 of accrued compensation into 12,500,000 shares of common stock.
On November 15, 2021, the Company entered into a consulting agreement with Erik Blum and J W Price LLC, in which Mr. Blum was appointed President of the Company. Per the terms of the agreement Mr. Blum is to be compensated $20,000 per month through November 15, 2022, increasing to $25,000 per month through November 15, 2023.
On October 17, 2023, Ayal Israel Levy entered into a Consulting Agreement with the Company to provide part-time interim accounting services in preparation for the Company hiring a full-time Chief Financial Officer. Under the terms of the Consulting Agreement, he was to be compensated $2,500 per month from November 1, 2023 to November 1, 2024. He completed his services for the Company and his Consulting Agreement was terminated by mutual agreement on December 26, 2023 when the Company appointed Xuqiang (Adam) Yang, as full time CFO.
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 $26,666 per month. In addition, the Company issued to Mr. Blum a convertible promissory note for all accrued compensation as of December 31, 2023. The note for $594,460 is non-interest bearing and convertible into shares of common stock at $0.00055 per share. During the year ended December 31, 2024, Mr. Blum converted $124,500 of accrued compensation into 81,990,740 shares of common stock.
On June 21, 2024, Bryan Feinberg was appointed to our Board of Directors, and the Company entered into a Technology Consulting Agreement with Zephyr Technology Ventures LLC, an entity owned by Mr. Feinberg, in connection with the Acquisition Agreement for the purchase of the assets of Chaintrade, Ltd. Per the terms of the Technology Consulting Agreement Mr. Feinberg was to be compensated $7,500 per month for his services. He resigned as Director in January 2025, and continues to work with the Company as a consultant.
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Director Agreements
The Company has not currently entered into any formal written agreements with members of its Board of Directors.
Board of Directors
Our directors hold office until the next annual meeting of shareholders and until their successors have been duly elected and qualified. Our officers are elected by and serve at the discretion of the Board of Directors.
The board of directors acts as the Audit Committee and the Board of Directors has no separate committees. The Company has no qualified financial expert at this time because it has not been able to hire a qualified candidate. The Company intends to continue to search for a qualified individual for hire.
None of our directors are considered “independent” under the language of Refer to Item 407(a) of Regulation S-K.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
(a) Security ownership of certain beneficial owners.
The following table sets forth, as of April XX, 2025 the number of shares of common stock owned of record and beneficially by our executive officers, directors and persons who hold 5% or more of the outstanding shares of common stock of the Company.
The amounts and percentages of our common stock beneficially owned are reported on the basis of SEC rules governing the determination of beneficial ownership of securities. Under the SEC rules, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to vote or to direct the voting of such security, or “investment power,” which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has the right to acquire beneficial ownership within 60 days through the exercise of any stock option, warrant or other right. Under these rules, more than one person may be deemed a beneficial owner of the same securities and a person may be deemed to be a beneficial owner of securities as to which such person has no economic interest. Unless otherwise indicated, each of the shareholders named in the table below, or his or her family members, has sole voting and investment power with respect to such shares of our common stock. Except as otherwise indicated, the address of each of the shareholders listed below is: c/o SMC Entertainment, Inc., 9170 Glades Road Suite 150, Boca Raton, FL 33434.
Applicable percentage ownership is based on 1,352,951,483 shares of Common Stock outstanding as of April XX, 2025. In computing the number of shares of Common Stock beneficially owned by a person and the percentage ownership of that person, we deemed to be outstanding all shares of Common Stock as held by that person or entity that are currently exercisable or that will become exercisable within 60 days of December 31, 2024.
|
| Common |
|
|
| |||
|
| Stock Owned |
|
| Percent of |
| ||
Name and Address of Beneficial Owner |
| Beneficially |
|
| Class* |
| ||
Named Executive Officers and Directors |
|
|
|
|
|
| ||
Erik Blum, President, Chief Executive Officer, Chief Financial Officer, and Director(1) |
|
| 301,490,740 |
|
|
| 22.3 | % |
Ronald E. Hughes, Chief Operating Officer, Director and Chairman of the Board |
|
| 227,000,000 |
|
|
| 16.8 | % |
Jayakumar Gopalan, Former Chief Technical Officer and Former Director(2) |
|
| 25,000,000 |
|
|
| 1.8 | % |
Xuqiang (Adam), Former Chief Financial Officer |
|
| 27,500,000 |
|
|
| 2.0 | % |
Paul Couture, Former Chief Technology Officer (3) |
|
| - |
|
|
| 0.0 | % |
Bryan Feinberg, Former Director (3) |
|
| - |
|
|
| 0.0 | % |
Eric Sherb, Chief Financial Officer |
|
| - |
|
|
| 0.0 | % |
All directors and officers as a group (5 persons) |
|
| 580,990,740 |
|
|
| 42.9 | % |
5% or greater shareholders |
|
|
|
|
|
|
|
|
Rich Bjorkland |
|
| 200,000,000 |
|
|
| 14.8 | % |
Total |
|
| 659,000,000 |
|
|
| 57.7 | % |
(1) | Includes 200,000,000 shares of common stock held in the name of JW Price, LLC, a limited liability company beneficially controlled by Erik Blum as its President. |
(2) | Includes 25,000,000 shares of common stock, presuming a full conversion of all 2,500,000 shares of Series B Preferred Stock owned by Fyniti Global Equities EBT Inc. (“Fyniti”). Per the amendment to the Certificate of Designation for Series B Preferred Stock filed on August 14, 2023, each 1 share of Series B Preferred Stock converts into 10 shares of common stock. |
|
|
(3) | In connection with the Acquisition Agreement of Chaintrade, Ltd, which closed on June 21, 2024, the Company issued a convertible promissory note in the principal amount of $8,000,000 to Chaintrade, Ltd. (the “Note”) Following the closing it was discovered that Chaintrade did not deliver all of its assets as required consideration for the receipt of the Note. 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 right, title and interest in Chaintrade to FYNX in exchange for a mutual release of claims. Upon the execution of the Assignment Agreement, FYNX acquired majority voting control of Chaintrade and became Chaintrade’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. As of the filing date of this report, the parties are finalizing terms of settlement, but no outcome has been determined in the above case. |
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Changes in Control
Other than as disclosed above, we are not aware of any arrangements that may result in “changes in control” as that term is defined by the provisions of Item 403(c) of Regulation S-K.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Other than as disclosed below, there have been no transactions involving the Company since the beginning of the last fiscal year, or any currently proposed transactions, in which the Company was or is to be a participant and the amount involved exceeds $120,000 or one percent of the average of the Company’s total assets at year-end for the last two completed fiscal years, and in which any related person had or will have a direct or indirect material interest.
On October 1, 2021, the Company entered into a consulting agreement with Ronald Hughes and North Arm Capital LLC, in which Mr. Hughes was appointed CEO and Chairman of the Company. Per the terms of the agreement Mr. Hughes is to be compensated $17,500 per month through October 1, 2022, increasing to $20,000 per month thereafter. In addition to his consulting fee Mr. Hughes will be granted 500,000 shares of common stock per month. During the year ended December 31, 2023, Mr. Hughes was granted 6,000,000 shares of common stock. The shares were valued on the date of grant for total non-cash compensation expense of $6,200. As of December 31, 2023, a total of 8,000,000 shares of common stock have not been issued by the transfer agent and are disclosed as common stock to be issued in the amount of $11,850. Per the terms of the agreement Mr. Hughes has the right to convert all or a portion of any accrued amount of compensation into shares of common stock at a 10% discount to the VWAP of the average of the last five trading days before conversion.
On March 25, 2024, the Company issued 9,500,000 shares of common stock to Ronald Hughes for services. 1,000,000 shares are shares earned in the current period. Those shares were valued at $0.0006, the closing price on the date of grant, for total non-cash compensation expense of $600. All other shares issued were earned in the prior period and had been disclosed as common stock to be issued.
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 $5,000 per month. In addition, the Company issued to Mr. Hughes a convertible promissory note for all accrued compensation as of December 31, 2023. The note for $517,000 is non-interest bearing and convertible into shares of common stock at $0.0006 per share. On June 15, 2024, Mr. Hughes converted $25,000 of accrued compensation into 12,500,000 shares of common stock. As of December 31, 2024 and 2023, there is $35,000 and $461,000 due to Mr. Hughes, respectively, for accrued consulting services.
On November 15, 2021, the Company entered into a consulting agreement with Erik Blum and J W Price LLC, in which Mr. Blum was appointed President of the Company. Per the terms of the agreement Mr. Blum is to be compensated $20,000 per month through November 15, 2022, increasing to $25,000 per month through November 15, 2023. During the year ended December 31, 2023, Mr. Blum was granted 6,000,000 shares of common stock. The shares were valued on the date of grant for total non-cash compensation expense of $7,300. As of December 31, 2023, a total of 8,000,000 shares of common stock have not been issued by the transfer agent and are disclosed as common stock to be issued in the amount of $10,150.
Per the terms of the agreement Mr. Blum has the right to convert all or a portion of any accrued amount of compensation into shares of common stock at a 10% discount to the VWAP of the average of the last five trading days before conversion.
On August 1, 2023, the Company issued 100,000,000 shares of common stock to JW Price LL for services. The shares were valued at $0.0009, the closing price of on the date of grant, for total non-cash compensation expense of $90,000.
On March 25, 2024, the Company issued 9,500,000 shares of common stock to JW Price LLC. 2,000,000 shares are for shares earned in the current period. Those shares were valued at $0.0006, the closing price on the date of grant, for total non-cash compensation expense of $1,200. All other shares issued were earned in the prior period and had been disclosed as common stock to be issued.
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 $26,666 per month. In addition, the Company issued to Mr. Blum a convertible promissory note for all accrued compensation as of December 31, 2023. The note for $594,460 is non-interest bearing and convertible into shares of common stock at $0.00055 per share. During the year ended December 31, 2024, Mr. Blum converted $124,500 of accrued compensation into 81,990,740 shares of common stock. As of December 31, 2024 and 2023, there is $177,710 and $594,460 due to Mr. Blum, respectively, for accrued consulting services.
On December 26, 2023, Xuqiang (Adam) Yang, was appointed as Chief Financial Officer (“CFO”) of the Company to replace Mr. Blum, who was serving as the Interim CFO. Per the terms of the consulting agreement to serve as the Company’s CFO Mr. Yang will be compensated $7,000 per month, beginning November 1, 2023. On June 15, 2024, Mr. Yang converted $55,000 of accrued compensation into 27,500,000 shares of common stock. As of December 31, 2024 and 2023, there is $42,000 and $14,000 due to Mr. Yang, respectively, who resigned as CFO in January 2025.
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| Table of Contents |
The common stock of the Company is currently quoted on the OTC Markets, a quotation system which currently does not have director independence requirements. On an annual basis, each director and executive officer will be obligated to disclose any transactions with the Company in which a director or executive officer, or any member of his or her immediate family, have a direct or indirect material interest in accordance with Item 404(a) of Regulation S-K. Following completion of these disclosures, the Board will make an annual determination as to the inclusion of each such transaction under “Item 7. Certain Relationships and Related Transactions, and Director Independence.” At this time, the Company does not have any independent directors using the current standards for “independence” that satisfy the criteria for the NASDAQ.
Item 14. Principal Accountant Fees and Services.
On June 24, 2024, the Board of Directors received notice from Olayinka Oyebola & Co (“Olayinka”), the independent registered public accounting firm of SMC Entertainment, Inc. (the “Company”), that they were resigning as the Company’s registered accounting firm effective immediately, following the appointment by the Company of RBSM, LLP (“RBSM”), effective June 24, 2024, as its new registered accounting firm.
RBSM is the Company’s current independent registered public accounting firm.
(1) Audit Fees
The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for our audit of annual financial statements and review of financial statements included in our quarterly reports or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years were:
2024 |
| $ | 82,000 |
|
2023 |
| $ | 21,000 |
|
(2) Audit-Related Fees
The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountants that are reasonably related to the performance of the audit or review of our financial statements and are not reported in the preceding paragraph:
2024 |
| $ | - |
|
2023 |
| $ | - |
|
(3) Tax Fees
The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning were:
2024 |
| $ | - |
|
2023 |
| $ | - |
|
(4) All Other Fees
The aggregate fees billed in each of the last two fiscal years for the products and services provided by the principal accountant, other than the services reported in paragraphs (1), (2), and (3) were:
2024 |
| $ | - |
|
2023 |
| $ | - |
|
The percentage of hours expended on the principal accountant’s engagement to audit our financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full time, permanent employees was 0%.
Audit Committee’s Pre-Approval Process
The Board of Directors acts as the audit committee of the Company, and accordingly, all services are approved by all the members of the Board of Directors.
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| Table of Contents |
Item 15. Financial Statements and Exhibits.
Exhibit |
|
|
| Incorporated by Reference | |
Number |
| Exhibit Description |
| Form | |
3.1 |
| Articles of Incorporation, as amended |
|
| |
|
|
| |||
3.3 |
| August 14, 2023 Certificate of Change Increasing Authorized Common Stock and Certificates of Designation for Series A and B Preferred Stock |
|
| |
3.4 |
| Amendment of Series B Designation NV |
|
| |
3.5 |
| Amended and Restated Certificate of Designation Series B Preferred Stock |
|
| |
10.1 |
| October 1, 2021 Consulting Agreement with Ronald Hughes and North Arm Capital LLC** |
|
| |
10.2 |
| November 15, 2021 Consulting Agreement with Erik Blum and J W Price LLC** |
|
| |
10.3 |
| December 12, 2022 Rescission and Release Agreement with Genesis Financial, Inc |
|
| |
March 31, 2023 Stock Purchase Agreement with Fyniti Global Equities EBT Inc.* |
|
| |||
April 21, 2023 Intellectual Property Assignment Agreement with Fyniti Global Equities EBT Inc.* |
|
| |||
September 15, 2020 Consulting Agreement of Rachel Boulds, CPA* |
|
| |||
May 15, 2023 Consulting Agreement of Jayakumar Gopalan, CTO* |
|
| |||
October 17, 2023 Consulting Agreement of Ayal Israel Levy*** |
|
| |||
10.9 |
| June 25, 2024 Employment Agreement of Paul Couture, CTO |
|
|
|
10.10 |
| June 25, 2024 Consulting Agreement with Bryan Feinberg |
|
|
|
Rule 13a14(a)/15d-14(a) Certification of Chief Executive Officer | |||||
Rule 13a14(a)/15d-14(a) Certification of Chief Financial 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) |
* | Indicates previously filed with our Form 10 on June 8, 2023, and incorporated by reference herein. |
** | Indicates a management contract or compensatory plan or arrangement. |
*** | Indicates previously filed with our Form 10 on October 31, 2023, and incorporated by reference herein. |
_______________________
+ | In accordance with SEC Release 33-8238, Exhibit 32.1 is being furnished and not filed. |
Item 16. Form 10–K Summary.
As permitted, the registrant has elected not to supply a summary of information required by Form 10-K.
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| 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: April 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) |
|
| 35 |
