SEC Filing Document

Company: Ambitious Entertainment, Inc.
Ticker: 
CIK: 1900851
Filing Type: DRS
Document Type: DRS
Date Filed: 2025-07-17
Accession Number: 0001493152-25-011282
Exchange: 
SIC Code: 7812
SIC Description: Services-Motion Picture & Video Tape Production
URL: https://www.sec.gov/Archives/edgar/data/1900851/000149315225011282/filename1.htm

Chunk 19 of 56
Word Count: 1470
Character Count: 10093

Document Content:

the Company’s financial instruments including cash and cash equivalents, prepaid expenses, accounts payable and accrued liabilities approximate fair value due to the short-term maturities of these instruments. Stock-Based Compensation The Company accounts for share-based payment awards exchanged for services at the estimated grant date fair value of the award. Content Assets The Company sources intellectual property (“IP”) to create and develop new films for sale to third parties. Content assets related to original productions include the unamortized costs of both completed and in-process video content produced by the Company. Capitalized costs include all direct production and financing costs, capitalized interest when applicable, and production overhead. Content assets are monetized individually and therefore are reviewed at the individual level when an event or change in circumstance indicates a change in the expected usefulness of the content or the fair value may be less than the unamortized cost. Impairment of Long-lived Assets

The
Company reviews its long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset might
not be recoverable. An impairment loss would be recognized when projected undiscounted future cash flows are less than its carrying amount.
The expected cash flows are based on assumptions regarding the Company’s future business outlook. Actual results could differ from
these assumptions. The Company did not record any impairment losses during the years ended December 31, 2024, and 2023.

Revenue
Recognition

The
Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration
which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that are
within the scope of Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers (Topic 606), the Company
performs the following five steps:

1.	Identify
the contract(s) with a customer;

2.	Identify
the performance obligations in the contract;

3.	Determine
the transaction price;

4.	Allocate
the transaction price to the performance obligations in the contract; and

5.	Recognize
revenue when (or as) the entity satisfies a performance obligation.

The
Company applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to
in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within
the scope of Topic 606, the Company assesses the goods or services promised within each contract and determines those that are performance
obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the
transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Disaggregation
of Revenue

For
the years ended December 31, 2024, and December 31, 2023, 100% of the Company’s revenue was derived from production services. Revenue
related to production service agreements is recognized on a percentage-of-completion basis, as described below. The Company did not generate
revenue from feature films or other licensing activities during these periods.

For
the three months ended March 31, 2025, and 2024, 100% of the Company’s revenue was derived from production services. Revenue related
to production service agreements is recognized on a percentage-of-completion basis, as described below. The Company did not generate
revenue from feature films or other licensing activities during these periods.

Production
Services Revenue

For
production service agreements, revenue is recognized over time on a percentage-of-completion basis as the Company satisfies its performance
obligations. The percentage of completion is determined based on actual costs incurred relative to total estimated costs, and related
costs are expensed as incurred in proportion to the percentage of completion.

Contract
Balances

The
Company’s contract balances include the following:

●	Deferred
Revenue: Represents payments received in advance of the performance obligations being
satisfied.

●	Content
Assets: Capitalized costs related to feature film programming rights, which are deferred
and recognized as revenue when the rights are transferred to the customer.

March 31. December 31.

Deferred Revenue 2025 2024

Beginning Balance $	0 $	0

Additions $	0 $	0

Revenue Recognized $	0 $	0

Ending Balance $	0 $	0

Deferred Revenue 2024 2023

Beginning Balance $	0 $	0

Additions $	0 $	0

Revenue Recognized $	0 $	0

Ending Balance $	0 $	0

Performance
Obligations

The
Company satisfies its performance obligations for production services over time, accounting for 100% of the Company’s total revenue
for the three months ended March 31, 2025, and 2024. The satisfaction of performance obligations is measured using the percentage-of-completion
method, as described above. For the years presented, there were no material unsatisfied performance obligations as of the balance sheet
date.

The
Company satisfies its performance obligations for production services over time, accounting for 100% of the Company’s total revenue
for the years ended December 31, 2024, and December 31, 2023. The satisfaction of performance obligations is measured using the percentage-of-completion
method, as described above. For the years presented, there were no material unsatisfied performance obligations as of the balance sheet
date.

Cost
of Revenue

Costs
incurred to produce feature films are capitalized when incurred and expensed when the movie rights are transferred. The costs incurred
to acquire feature film programming rights, including advances, are capitalized.

Income
Taxes

Income
taxes are accounted for using an asset and liability approach for financial accounting and reporting for income taxes and recognition
and measurement of deferred assets are based upon the likelihood of realization of tax benefits in future years. Under this method, deferred
taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Valuation allowances are established when management determines that
it is more likely than not that some portion or all of the net deferred tax asset, on a jurisdiction-by-jurisdiction basis, will not
be realized. The financial effect of changes in tax laws or rates is accounted for in the period of enactment.

From
time to time, the Company engages in transactions in which the tax consequences may be subject to uncertainty. Significant judgment is
required in assessing and estimating the tax consequences of these transactions. In determining the Company’s tax provision for
financial reporting purposes, the Company establishes a reserve for uncertain tax positions unless such positions are determined to be
more likely than not of being sustained upon examination, based on their technical merits. The Company’s policy is to recognize
interest and/or penalties related to income tax matters in income tax expense.

The
Company has recognized a full valuation allowance of $4,848,574 against its deferred tax assets as of December 31, 2024, and $4,374,363
as of December 31, 2023. This valuation allowance reflects management’s assessment that it is more likely than not that the deferred
tax assets, including net operating loss carryforwards of approximately $6.6 million, will not be realized. The primary basis for this
conclusion is the Company’s cumulative losses in recent periods, which represent significant negative evidence under applicable
accounting guidance.

Deferred
tax assets and liabilities arise from temporary differences between the carrying values of assets and liabilities for financial reporting
purposes and their respective tax bases. Despite the availability of significant net operating loss carryforwards that do not expire
until 2038, the lack of sufficient taxable income in the foreseeable future to offset these carryforwards necessitated the valuation
allowance.

Management
continuously evaluates both positive and negative evidence in assessing the realizability of deferred tax assets. Positive evidence includes
the potential for future profitability and the expected utilization of net operating losses, while negative evidence includes recent
operating performance and industry-specific challenges. At this time, the weight of the negative evidence, particularly the cumulative
losses incurred in recent years, supports the decision to maintain a full valuation allowance.

The
Company will reassess the valuation allowance on a quarterly basis and adjust it if sufficient positive evidence becomes available to
support the realizability of deferred tax assets.

Segment
Reporting

Under
ASC 280, “Segment Reporting,” the Company applies the management approach model to define its operating segments. This model
evaluates the manner in which the Company’s chief operating decision maker (“CODM”) organizes the business for decision-making
purposes, assessing performance, and allocating resources. Segments are identified based on factors such as products and services, geography,
legal structure, or management organization.

The
Company has determined that its operations constitute a single reportable segment. While the Company produced films in both the United
States and Canada during 2023 and 2024, management concluded that geographic differences do not result in materially dissimilar economic
characteristics. Specifically:

1.	Similar
Economic Characteristics: The production activities in the United States and Canada generate
comparable profit margins, face similar cost structures (e.g., production expenses and tax
incentives), and serve the same class of customers, primarily major studios and streaming
platforms.