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

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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: December 31, December 31, Legal and other service $ 227,128 $ 137,128 Accrued interest 574,518 519,290 NOTE 7 - PRODUCTION FINANCING

The
Company did not have any film related obligations as of March 31, 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 bifurcated from the host debt and classified as a derivative liability. The derivative liability
was recorded at its fair value of $1.55M and $1.58M as of March 31, 2025, and December 31, 2024, respectively.

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 March 31, 2025:

●	Expected
IPO offering price: $4.00.

●	Expected
volatility: 47.12%.

●	Risk-free
interest rate: 4.23%.

●	Expected
term of conversion feature: .16 – 2.93 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 March 31, 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 55,000

Less: discount (12,187	)

Balance as of March 31, 2025 $	2,073,542

Related
to convertible notes payable, during the three months ended March 31, 2025, and the year ended December 31, 2024, the Company
recorded interest expense of $35,114 and $137,240 along with amortization of debt discount of $1,771 and $215,761, respectively. As of
March 31, 2025, and December 31, 2024, the Company recorded accrued interest of $437,621 and $2402,506, respectively.

During
the year ended December 31, 2024, the Company issued five convertible debt instruments with principal balances of $25,000. Each debt
instrument had the following terms (i) a one-year, 7% senior secured convertible promissory note in the aggregate amount of $25,000 per
Unit purchased (the “Convertible Notes”) subject to an original issue discount of 10% (the “OID”), (ii) a five-year
Series B warrant at an aggregate exercise price of $25,000 per Unit purchased, and (iii) a five-year Series C warrant at an aggregate
exercise price of $25,000 per Unit purchased. Each Unit was immediately separable upon issuance. The Company received gross proceeds
in the amount of $442,461 from the issuance of the convertible notes.

During
the three months ended March 31, 2025, the Company issued two convertible debt instruments with principal balances of $25,000 each. The
two debt instruments had the following terms (i) a one-year, 7% senior secured convertible promissory note in the aggregate amount of
$25,000 per Unit purchased (the “Convertible Notes”) subject to an original issue discount of 10% (the “OID”),
(ii) a five-year Series B warrant at an aggregate exercise price of $25,000 per Unit purchased, and (iii) a five-year Series C warrant
at an aggregate exercise price of $25,000 per Unit purchased. Each Unit was immediately separable upon issuance. As of March 31, 2025,
the Company recorded accounts receivable of $50,000 related to the issuance of the convertible notes. The receivable was subsequently
collected in April 2025.

NOTE
9 - WARRANT

Series
A Warrants

of March 31, 2025, and December 31, 2024, the Company has 4,000,000 Series A warrants outstanding.

The
Series A Warrants are five-year warrants that are immediately vested and exercisable at a nominal exercise price of $0.001 per share.
These warrants may also be exercised on a cashless basis.

Series
B Warrants (Units)

During
the three months ended March 31, 2024, and the year ended December 31, 2024, the Company issued 2 and 76 Series B Warrants, respectively.
The warrants are five-year warrants that are immediately vested and exercisable at an exercise price equal to 110% of the Conversion
Price of the Convertible Notes with an aggregate purchase price of $25,000 per Unit. These warrants can be exercised on a cashless basis.

of March 31, 2025, and December 31, 2024, the Company has 78 and 76 Series B warrants outstanding, respectively.

Series
C Warrants (Units)

During
the three months ended March 31, 2024, and the year ended December 31, 2024, the Company issued 2 and 76 Series C Warrants, respectively.
The warrants are five-year warrants that are immediately vested and exercisable at an exercise price equal to 110% of the Conversion
Price of the Convertible Notes with an aggregate purchase price of $25,000 per Unit. These warrants can be exercised on a cashless basis.

of March 31, 2025, and December 31, 2024, the Company has 78 and 76 Series C warrants outstanding, respectively.

The
Series A, B and C Warrants have been accounted for as a derivative liability, in accordance with ASC 815.

summary of activity of the warrants during the three months ended March 31, 2025, and the year ended December 31, 2024, are as follows:

Warrants
Outstanding Weighted Average

Number of Weighted Average Remaining life

Warrants Exercise
Price (years)

Outstanding, December 31, 2023 4,000,142 $	0.001 2.17

Granted 10 0.001 -

Expired / cancelled - - -

Exercised - - -

Outstanding, December 31, 2024 4,000,152 $	0.001 1.16