NOTE 6 - NOTES PAYABLE AND RELATED PARTY LOANS |
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Sep. 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| NOTE 6 - NOTES PAYABLE AND RELATED PARTY LOANS | NOTE 6 – NOTES PAYABLE AND RELATED PARTY LOANS
The Company enters into loan agreements with both related and non-related parties in order to fund their ongoing film production activities. To that extent, the Company had the following outstanding debt as of September 30, 2024 and June 30, 2024:
As of September 30, 2024, certain notes totaling $4,140,000, were in technical default as a result of non-payment. However, per the terms of the notes, the default interest rate of 25% cannot be triggered unless a default notice is received from the lender(s). Notes totaling $2,450,000 were paid-down during October 2024. Subsequently, a default notice was received for $1,500,000 in notes during November of 2024 at which time the interest rate on the notes increased from 15% to 25%. These notes totaling $1,500,000 of the notes were paid off during the three months ended March 31, 2025. The remaining $190,000 were still in default as of the time of this filing and bore an interest rate of 25%.
During the three months ended September 30, 2024, the Company entered into certain note agreements totaling $61,064. These notes bear interest at a rate of 10%, and mature at dates through March 28, 2025.
Additionally, during the three months ended September 30, 2024, the Company entered into certain note agreements totaling $880,000. These notes bear interest at rates of 15% to 20%, and mature dependent upon factors related to future film sales or the closing of a senior debt facility.
In addition to the stated interest rates on the loans, certain loans include a net profit participation feature whereby the lender may receive an additional return based on the performance of the film underwritten by the loan. Certain of these loans are collateralized by interests in film rights the Company owns. Additionally, certain of these notes are guaranteed by an individual who is a related party. To that extent, none of the participation features were triggered as of September 30, 2024. In addition, certain tax credit assignment loans totaling $750,000 were entered into during fiscal year 2024 whereby the lenders agreed to be paid (on a dollar per dollar basis) from the proceeds of a refundable tax credit related to the production of the Nutcracker film. While the tax credit was not received as of September 30, 2024, the Company expects to receive the credit in the near future and has therefore classified the tax assignment loans as current. In order to receive this tax credit, the Company must have an audit performed on the required financial information, which is currently in-process.
The Company had approximately $7.9 million in related party debt to its former parent company as of June 30, 2024. However, in accordance with the merger agreement all of the debt was forgiven as of the merger consummation date. The debt forgiveness was recognized as an increase to additional paid in capital. Upon settlement of the transaction an additional $0.2 million of liabilities were forgiven, resulting in total liability forgiveness of $8.1 million.
Maturities on debt are as follows:
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