American Picture House Corp 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management’s discussion and analysis of financial condition and results of operations The following discussion and analysis of our results of operations and financial condition should be read in conjunction with our financial statements and the notes to those financial statements that are included elsewhere in this Form 10-K. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations, and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. See “Cautionary Note Regarding Forward-Looking Statements” at the beginning of this Form 10-K. General American Picture House Corporation plans to be a premiere entertainment company with a focus on feature films, limited series, and content-enhancing technologies. APHP is managed by astute financiers and supported by seasoned creatives. The Company plans to partner with top filmmakers, showrunners, content developers, and strategic technology partners to develop, package, finance, and produce high-quality feature films and shows with broad-market appeal. The Company’s management and advisors have relationships with major studios, Streamers, leading talent agencies, and proven foreign sales companies, which will empower the Company to offer A-list creatives (and convincing up-and-comers) the opportunity to partner with a financier/producer that values passion and imagination and understands profitability. The Company plans to specialize in mid-budgeted productions where more than 100% of the budget can be collateralized by a film’s or show’s intellectual property (‘IP”), unsold licensing sales projections, pre-sold licensing contracts, incentive agreements, tax rebates, and grants. The Company’s management and advisors will use these assets to limit risk and guarantee greater profitability. The Company will strive to become synonymous with creative ability, financial sophistication, and leading-edge technology. The Company has optioned IP with the intent to co-finance and co-produce feature films and limited series shows. The Company intends to embrace the ever-evolving technologies that service the industry including innovative artificial intelligence (“AI”) tools and models. 18 Our ability to generate any revenue sufficient to achieve profitability will depend on the successful development, production, and distribution of motion pictures. We reported net losses of $2.3 million and $1.4 million for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, we had an accumulated deficit of approximately $7.3 million. We expect to continue to incur significant expenses and increasing operating losses until we begin receiving revenue from the distribution of our film properties. We expect that our expenses and capital expenditures will increase substantially in connection with our ongoing activities including, but not limited to the following: ● Development and production of current and future film properties; ● Potential acquisition of additional intellectual property rights and/or acquisition of intellectual property and production companies in the entertainment industry; ● Add development and production personnel to support our film production activities; and ● Add operational, legal, compliance, financial, investor relations, and management information systems personnel to support our development and production and operations as a new public company. Over the next twelve months management plans to use borrowings and the sale of Common Stock to mitigate the effects of cash flow deficits; however, no assurance can be given that debt or equity financing, if and when required, will be available on commercially reasonable terms. Components of Our Results of Operations Revenue The Company’s revenue comes from contracts with customers for consulting services and from the licensing and distribution of film and other entertainment rights. The Company accounts for a contract with a customer when there is an enforceable contract between the Company and the customer, the rights of the party are identified, the contract has economic substance, and collectability of the contract is considered probable. Cost of Revenues Cost of revenues includes only those costs directly related to the services being rendered. A majority of the consulting services were performed by management and members of the Board of Directors with no separate compensation due or payable to these individuals. Operating Expenses General and Administrative Expenses General and administrative expenses consist primarily of salaries and personnel-related costs, including stock-based compensation, for our executives and other administrative functions. General and administrative expenses include legal fees, accounting, auditing, consulting, and tax services; insurance costs; investor relations and transfer agent fees; travel expenses; and facility costs. We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research activities and development of our projects. We also anticipate that we will incur increased accounting, audit, legal, regulatory, compliance, director and officer insurance, and investor and public relations expenses associated with operating as a public company. 19 Other Income (Expense) Interest Income . Interest income consists of interest earned on our cash balances. Interest Expense . Interest expenses consist of interest on the Company’s Economic Injury Disaster Loan (“EIDL ”); credit cards, and related party debt. Income Taxes Since our inception, we have not recorded any income tax benefits for the net losses we have incurred or for the research and development tax credits earned in each year and interim period, as we believe, based upon the weight of available evidence, that it is more likely than not that all of our net operating loss carry forwards and tax credit carryforwards will not be realized. Results of Operations Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 The following table summarizes our results of operations for the years ended December 31, 2024 and 2023: Years Ended December 31, 2024 2023 Change $ Revenues $ 52,677 $ 201,059 $ (148,382 ) Cost of revenues - 36,701 (36,701 ) 52,677 164,358 (111,681 ) Operating Expenses: General and administrative 2,252,130 1,511,532 740,598 Research and development 703 11,416 (10,713 ) Sales and marketing 25,947 6,119 Total Operating Expenses 2,278,780 1,529,067 729,885 Net operating income (loss) (2,226,103 ) (1,364,709 ) (841,566 ) Other Income (Expenses): Interest income 1,974 4,618 (2,644 ) Interest expense (46,129 ) (6,227 ) (39,902 ) Net Other Income (Expenses) (44,155 ) (1,609 ) (42,546 ) Income (loss) before income taxes (2,270,258 ) (1,366,318 ) (903,940 ) Income taxes - - - Net income (loss) $ (2,270,258 ) $ (1,366,318 ) $ (903,940 ) 20 Revenues During the years ended December 31, 2024 and 2023, the Company reported revenues of approximately $53,000 and $201,000, respectively. Approximately $53,000 and $32,000 of the 2024 and 2023, respectively, of revenue relates to revenues generated from the licensed film Buffaloed . The remainder of the 2023 revenues comes from contracts with customers for consulting services and from the licensing and distribution of film and other entertainment rights. Cost of Revenues Cost of revenues for the years ended December 31, 2024 and 2023, were approximately $0 and $37,000 respectively. The 2023 expense consist of those costs directly related to the services being rendered. A majority of the consulting services were performed by management and members of the Board of Directors. General and Administrative Expenses General and administrative expenses for the year ended December 31, 2024, were approximately $2.3 million compared to approximately $1.5 million for the year ended December 31, 2023, an increase of approximately $741,000. The increase was primarily attributable to the Company recording approximately $1,258,000 of stock option expense offset by a $322,000 reduction in legal and professional fees. Additionally, the 2023 period included approximately $194,000 of bad debt expense. We expect to see further increases as we grow our operations in future periods. Other Income (Expense) Interest Income. Interest income for the years ended December 31, 2024 and 2023 was approximately $2,000 and $5,000, respectively, and consisted of interest earned on invested cash balances. Interest Expense. Interest expense for the years ended December 31, 2024 and 2023 was approximately $46,000 and $6,000, respectively. The 2024 expense included $24,000 of interest on working capital loans, $22,000 of related party interest, and $10,000 of EIDL interest. The 2023 interest was primarily related to our Economic Injury Disaster Loan (“EIDL ”) and working capital loans. Liquidity and Capital Resources As indicated in the accompanying financial statements, we had an accumulated deficit of approximately $7.3 million, incurred a net loss of approximately $2.2 million and cash outflow from operations of approximately $805,000 as of and for the year ended December 31, 2024. Further, we expect to continue to incur significant costs in the pursuit of our business plans. We cannot assure you that our plans to raise capital or to complete our film development and production activities and commercially release our products will be successful. These factors, among others, raise substantial doubt about our ability to continue as a going concern. Since our inception, we have incurred significant operating losses. We expect to incur significant expenses and operating losses for the foreseeable future as we advance the preclinical and, if successful, the clinical development of our programs. To date, we have funded our operations with proceeds from sales of Common Stock and borrowings under convertible promissory notes. As of December 31, 2024, we had negative cash and cash equivalents of $21. Operating Activities During the year ended December 31, 2024, operating activities used approximately $805,000 of cash, primarily resulting from our net loss of approximately $2.3 million, partially offset by non-cash charges of approximately $1.4 million. During the year ended December 31, 2023, operating activities used approximately $1.1 million of cash, primarily resulting from our net loss of approximately $1.4 million, partially offset by non-cash charges of approximately $353,000. 21 Investing Activities During the year ended December 31, 2024, net cash used by financing activities was approximately $22,000 comprised of investment in intangible assets. During the year ended December 31, 2023, net cash used by financing activities was approximately $73,000 comprised of investment in intangible assets. Financing Activities During the year ended December 31, 2024, net cash provided by financing activities was approximately $623,000, derived primarily from related party borrowings of $358,000, $357,000 of net borrowings on a commercial line of credit, and $169,000 from the sale of common stock. During the year ended December 31, 2023, net cash provided by financing activities was approximately $1.467 million, derived primarily from stock sales. Additionally, during 2024 the Company borrowed and repaid $178,500 from Mr. MacGregor under a working capital borrowings arrangement. Funding Requirements We expect our expenses to increase substantially in connection with our ongoing film development and production activities. In addition, transition from the OTC markets to an SEC registrant will increase our reporting and compliance cost. Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of equity offerings and debt financings. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of such stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures, or declaring dividends. Critical Accounting Policies and Significant Judgments and Estimates Our financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of our financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events, and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in Note 2 to our financial statements, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements. Use of Estimates The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of expenses during the reporting periods. Actual results could differ from those estimates. As applicable to these financial statements, the most significant estimates and assumptions include (i.) determining the need for an allowance for doubtful accounts (ii.) impairment of long-lived assets; (iii.) deferred income taxes and (iv.) measurement of the fair value of equity awards. Off-Balance Sheet Arrangements During the periods presented, we did not have and we do not currently have any significant off-balance sheet arrangements, as defined in the rules and regulations of the SEC.