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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payments previously made, that benefit future periods. The balance as of December 31, 2024, and 2023, respectively includes prepaid operating expenses and production related deposits. Prepaid and other current assets comprised of the following: December 31, December 31, Prepaid expenses $ 7,083 $ 5,000 Deposits 109,659 352,301 NOTE 5 - INVESTMENTS The Company invests in various film projects produced by other entities. These investments represent financial contributions to third-party film projects in exchange for participation rights in revenue generated by the completed films. The investments are classified as current assets on the balance sheet and are stated at cost, unless there is evidence of impairment. of December 31, 2024, the Company had investments in film projects produced by other entities totaling $128,650, compared to $292,720 as of December 31, 2023. The increase reflects the Company’s strategic decision to expand its portfolio of external film investments during the year. 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.

During
the year ended December 31, 2024, an impairment loss of $85,837 was recognized 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:

December 31, December 31,

Legal and other service $	137,128 $	200,696

Accrued interest 519,290 586,748

NOTE
7 - PRODUCTION FINANCING

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

Film
related obligations were as follows as of December 31, 2023:

December 31,

Production financing Maturity Default Interest Collateral 2023

Note issued on September 30, 2022 The loan shall be due on the later to occur of: (a) ten (10) Business Days after the date on which the Distributor has received a completed W-9 and vendor application form from Producer and (b) either (i) Distributor has delivered or is deemed to have delivered an Acceptance Notice of Mandatory Delivery or (ii) Mandatory Delivery has otherwise been deemed effected. 12% per annum Tax credit and File copy right $	750,000

Note issued on September 15, 2022 The Loan Amount shall be immediately due and payable on the date which is the earlier of (i) December 31, 2023, or (ii) receipt of the final payment of Tax Credit Proceeds. 19.5% per annum Tax credit and all copy rights and contract rights 1,089,023

Note issued on October 10, 2022 The Loan Amount shall be due the earlier of (i) the date the funds are received by DMH Productions, LLC and (ii) April 15, 2023. 19.5% per annum Tax credits 303,482

Note issued on December 21, 2023 February 29, 2024 Fixed amount UBCP Bond 168,395

Note issued on December 31, 2023 December 31, 2025 5% per annum N/A 76,074

Note issued on August 25, 2023 December 31, 2024 Fixed amount Tax credits 374,470

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 2024, 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 $1.31M as of December 31, 2024, and 2023, 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 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
derivative liability was valued using a Black-Scholes model with the following key assumptions as of December 31, 2023:

●	Expected
IPO offering price: $4.00.

●	Expected
volatility: 64%.

●	Risk-free
interest rate: 4.79%.

●	Expected
term of conversion feature: 2.17 – 2.93 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 2024, 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, 2022 $	1,264,379

Issuance in 2023 628,850

Less: discount (212,219	)

Balance as of December 31, 2023 $	1,681,010

Convertible notes payable

Balance as of December 31, 2023 $	1,893,229

Issuance in 2024 137,500

Less: discount (8,958	)

Balance as of December 31, 2024 $	2,021,771

During
the years ended December 31, 2024, and 2023, the Company recorded interest expense of $137,240 and $116,406 along with amortization of
debt discount of $215,761 and $496,894, respectively. As of December 31, 2024, and 2023, the Company recorded accrued interest of $402,506
and $265,166, respectively.