SEC Filing Document

Company: Ambitious Entertainment, Inc.
Ticker: 
CIK: 1900851
Filing Type: DRS/A
Document Type: DRS/A
Date Filed: 2025-10-08
Accession Number: 0001493152-25-017387
Exchange: 
SIC Code: 7812
SIC Description: Services-Motion Picture & Video Tape Production
URL: https://www.sec.gov/Archives/edgar/data/1900851/000149315225017387/filename1.htm

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842). As a result, ASC Topic 326, Financial Instruments – Credit Losses is effective for public companies for annual reporting periods, and interim periods within those years beginning after December 15, 2020. For all other entities, it is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. As the Company is an “emerging growth company” and elects to apply for the new and revised accounting standards at the effective date for a private company, the Company adopted ASU No. 2016-13. on January 1, 2023, and the adoption did not have a material impact on the Company’s unaudited condensed consolidated financial statements. NOTE 3 - ACCOUNTS RECEIVABLE of June 30, 2025, and December 31, 2024, accounts receivable totaled $0 and $290,597, respectively. The amount as of December 31, 2024, represents funds due to the Company under the terms of the film production service agreements.

NOTE
4 - PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid
expenses and other current assets are assets and payments previously made, that benefit future periods. The balance as of June 30,
2025, and December 31, 2024, respectively includes prepaid operating expenses and production related deposits.

Prepaid
and other current assets comprised of the following:

June 30, December 31,

Prepaid expenses $	800 $	7,083

Deposits - 109,659

NOTE
5 - INVESTMENTS

of June 30, 2025, the Company had no remaining balance related to investments,
following the impairment recognized during the three months ended June 30, 2025, due to the expiration of participation rights in
May 2025.

of December 31, 2024, the Company’s sole investment in third-party film projects consisted of a participation right in the development
of The Chuck Berry Story. This investment reflects
financial contributions made under a shopping agreement originally executed on November 14, 2022, and amended on July 24, 2024, to
extend the term through May 14, 2025. Under the agreement, the Producer may solicit funding partners and development opportunities
for the project. If a funding partner is not secured by the contractual maturity date, all rights under the agreement revert to the
Licensor.

The
Company accounts for this investment at cost, representing the cash payments made, unless there is evidence of impairment.
The carrying value of the investment was $128,650 as of December 31, 2024.

The
Company does not hold any equity ownership in the underlying project rights. Instead, the investment entitles the Company to participate
in revenue generated if the project proceeds successfully to production and distribution.

Revenue
Participation

These
investments provide the Company with participation rights in revenue streams generated from the exploitation of the films, including
theatrical releases, streaming, and other distribution channels. The timing and amount of returns from these investments depend on the
performance of the respective film projects and market conditions.

Impairment
Testing

The
Company evaluates its film investments for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable.
Impairment testing is conducted using a discounted cash flow (DCF) model, which incorporates significant assumptions about future revenue
streams, market demand, and other economic factors. If the recoverable amount, calculated as the present value of expected future cash
flows, is less than the carrying value, an impairment loss is recognized in the period of determination.

The
Company recognized an impairment loss of $128,650, and $0 during the six months ended June 30, 2025, and
2024, respectively. related to the Company’s investments in third-party films.

Fair
Value Hierarchy Classification

Although
the investments are carried at cost, the Company estimates their fair value for impairment testing purposes using unobservable inputs,
including projections of future cash flows and discount rates reflective of project-specific risks. As such, these investments fall within
Level 3 of the fair value hierarchy under Accounting Standards Codification (ASC) 820.

Credit
Risk

The
Company’s investments in third-party film projects are subject to credit risk, as returns depend on the financial and operational
performance of external producers and distributors. The Company actively monitors the creditworthiness of its partners and evaluates
the recoverability of its investments based on current and anticipated market conditions. Management believes that any credit risks associated
with these investments are appropriately reflected in their carrying amounts.

NOTE
6 - ACCRUED EXPENSES

Accrued
expenses were as follows:

June 30, December 31,

Legal and other services $	337,128 $	137,128

Accrued interest 633,681 519,290

NOTE
7 - PRODUCTION FINANCING

The
Company did not have any film related obligations as of June 30, 2025.

The
film related obligations were as follows as of December 31, 2024:

December 31,

Production financing Maturity Default Interest Collateral 2024

Note issued on May 22, 2024 The Credit Facility shall be repayable on demand. Without limiting the generality of the foregoing, the Credit Facility shall be repaid to Lender not later than sixteen (16) months from the Closing Date (the “Maturity Date”). Canadian Prime Rate plus 1.50% per annum From Borrower, a first ranking General Security Agreement on all of Borrower’s personal property, movable property, present and future, tangible and intangible, corporeal and incorporeal, including, without limitation, the income receivable from the worldwide sale, licensing commercialization or other exploitation of the Project in all distribution territories and media worldwide to be registered by Lender’s counsel in all applicable jurisdictions $	775,761

NOTE
8 – DEBT

Convertible
Debt and Embedded Derivative Liabilities

The
Company adopted Accounting Standards Update (ASU) 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives
and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40), on January 1, 2022, using the modified retrospective
method. This adoption was aimed at simplifying the accounting for convertible instruments and contracts in an entity’s own equity.

ASU
2020-06 introduced key changes to accounting guidance for convertible debt instruments, including the following:

1.	Elimination
of Beneficial Conversion Features (BCF):

Under
ASU 2020-06, the need to separately recognize a beneficial conversion feature (BCF) has been removed. In the case of the Company’s
convertible debt issued in 2021 through March 31, 2025, the conversion price is tied to 50% of the Initial Public Offering (IPO) offering
price, which inherently introduces variability. Due to this variability, the conversion feature does not trigger the requirements for
a BCF under the new standard.

2.	Bifurcation
of Embedded Derivatives:

The
Company evaluated whether the conversion feature met the criteria for bifurcation as an embedded derivative under ASC 815-40 (Derivatives
and Hedging). The analysis determined that:

○	Indexation
Criterion: The conversion price is variable and tied to 50% of the IPO offering price. This variability fails the “fixed-for-fixed”
requirement, which would allow the feature to be considered indexed to the Company’s equity.

○	Settlement
Criterion: While settlement in equity is possible, the variability in conversion terms introduces exposure to equity market risk
and does not qualify as “clearly and closely related” to the debt host.

○	Derivative
Criterion: The conversion feature exposes the holder to equity market risk, resembling the characteristics of a derivative. Therefore,
bifurcation is required under ASC 815.

a result, the conversion feature was separated from the host debt and accounted for as a derivative liability. The derivative
liability was $6.9 million and $8.5 million as of June 30, 2025 and December 31, 2024, respectively. These amounts included
$1.59 million and $1.56 million, respectively, representing the fair value of the conversion feature.

3.	Single-Instrument
Accounting (No Separation):

While
ASU 2020-06 encourages a single-instrument approach, the embedded conversion feature did not qualify for this treatment because it failed
to meet the criteria for being indexed to the Company’s equity and “clearly and closely related” to the debt host.

Valuation
of Derivative Liability:

The
derivative liability was valued using a Black-Scholes model with the following key assumptions as of June 30, 2025:

●	Expected
IPO offering price: $4.00.

●	Expected
volatility: 50.00%.

●	Risk-free
interest rate: 4.41%.

●	Expected
term of conversion feature: .67 – 3.43 years.

The
derivative liability was valued using a Black-Scholes model with the following key assumptions as of December 31, 2024:

●	Expected
IPO offering price: $4.00.

●	Expected
volatility: 84%.

●	Risk-free
interest rate: 4.16%.

●	Expected
term of conversion feature: 1.16 – 3.93 years.

The
Company continues to monitor changes in assumptions and market conditions that may impact the valuation of the derivative liability.

Key
Accounting Impact:

The
adoption of ASU 2020-06 did not have a material impact on the Company’s financial statements at the time of implementation. However,
for convertible instruments issued in the period of 2021 through June 30, 2025, the variability in the conversion price tied to
IPO terms necessitated the bifurcation and recognition of the embedded conversion feature as a derivative liability under ASC 815-40.

Convertible
notes payable

Convertible notes payable

Balance as of December 31, 2024 $	2,030,729

Issuance in 2025 110,000

Less: discount (13,749	)

Balance as of June 30, 2025 $	2,126,980