American Picture House Corp

American Picture House Corporation

Notes to Financial Statements

For the Years Ending December 31, 2023 and 2022

NOTE 1 –Organization And Description Of Business

American Picture House Corporation. (“the Company,” “we” “us”) was incorporated in the State of Nevada on September 21, 2005, originally under the corporate name of Servinational, Inc. The Company subsequently changed its name to Shikisai International, Inc. in November 2005 and then to Life Design Station, Intl., Inc. in August 2007. The Company changed its state of domicile from Nevada to Wyoming on October 13, 2020. On December 4, 2020, the Company changed its name to American Picture House Corporation.

The Company’s year-end is December 31.

NOTE 2 –Summary Of Significant Aaccounting Policies

Basis of Presentation

The accompanying financial statements have been prepared in accordance with the Financial Accounting Standards Board (“FASB”) “FASB Accounting Standard Codification™” (the “Codification”) which is the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with accepted accounting principles (“GAAP”) in the United States.

Principles of Consolidation

The condensed consolidated financial statements of the Company include the accounts of American Picture House Corporation and its wholly owned subsidiaries, Devil’s Half-Acre, LLC and Ask Christine Productions, LLC.

Going Concern

The accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business for the twelve months following the date of these financial statements. As of December 31, 2023, the Company had working capital of $164,496 and an accumulated deficit of $5,021,696.

Because the Company does not expect that the existing operational cash flow will be sufficient to fund presently anticipated operations, this raises substantial doubt about the Company’s ability to continue as a going concern. Therefore, the Company will need to raise additional funds and is currently exploring alternative sources of financing. Recently the Company has been funded by related party shareholders and officers. Historically, the Company raised capital through private placements, to finance working capital needs and may attempt to raise capital through the sale of common stock or other securities and obtaining some short-term loans. The Company will be required to continue to do so until its operations become profitable. Also, the Company has, in the past, paid for consulting services with its common stock to maximize working capital, and intends to continue this practice where feasible.

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant estimates relate to income taxes and contingencies. The Company bases its estimates on historical experience, known or expected trends, and various other assumptions that are believed to be reasonable given the quality of information available as of the date of these financial statements. The results of these assumptions provide the basis for making estimates about the carrying amount of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates.

Cash and cash equivalents

Cash equivalents are short-term highly liquid investments which include short term bank deposits (up to three months from date of deposit), that are not restricted as to withdrawals or use that are readily convertible to cash with maturities of three months or less as of the date acquired. The Company’s policy is to maintain its cash balances with financial institutions with high credit ratings and in accounts insured by the Federal Deposit Insurance Corporation (the “FDIC”) and/or by the Securities Investor Protection Corporation (the “SIPC”). The Company may periodically have cash balances in financial institutions in excess of the FDIC and SIPC insurance limits of $250,000 and $500,000, respectively. The Company has not experienced any losses to date resulting from this policy.

Accounts receivable

Accounts receivable primarily consist of trade receivables due from customers for consulting services and from fees derived from licensing of IP to content providers worldwide. As of December 31, 2023,100% of accounts receivable were due from theBUFFALOED CAMA (seeAssigned Rights to feature film, BUFFALOED below).As of December 31, 2022, approximately 10%,17%, and 72% of accounts receivable were due from three customers, including $35,000 from one related party (see Ribo Media in Note 10 – Related Party Transactions) and $249,000 from theBUFFALOED CAMA. In 2023, the Company wrote off $193,932 of receivables as bad debt based on a review of the customer’s ability to pay, the customer’s Managing Director resigning, and the customer ceasing operations. There wasno bad debt expense andno additional allowance for doubtful accounts for the years ended December 31, 2023 and 2022.

Allowance for doubtful accounts

The allowance for doubtful accounts is determined with respect to amounts the Company has determined to be doubtful of collection. In determining the allowance for doubtful accounts, the Company considers, among other things, its past experience with customers, the length of time that the balance is past due, the customer’s current ability to pay and available information about the credit risk on such customers. During the years ended December 31, 2023 and 2022, the Company recordedno additions to its allowance for doubtful accounts.

Prepaid expenses

At December 31, 2023, prepaid expenses consisted of prepaid insurance, prepaid licenses, and prepaid services. Prepaid expenses are amounts paid to secure the use of assets or the receipt of services at a future date or continuously over one or more future periods. When the prepaid expenses are eventually consumed, they are charged to expense. The Company had $29,185 and $32,862 in prepaid expenses December 31, 2023 and 2022, respectively.

Produced and Licensed Content Costs

Capitalized production costs, whether produced or acquired/ licensed rights, include development costs, direct costs and production overhead. These amounts and licensed content are included in “Produced and Licensed Content Costs” on the balance sheet as follows:

Production costs for content that is predominantly expected to be monetized individually will be amortized based upon the ratio of the current period’s revenues to the estimated remaining total revenues*(Ultimate Revenues)*. For film productions, Ultimate Revenues include revenues from all sources that will be earned within ten years from the date of the initial release for theatrical films. The costs of produced and licensed film and TV content are subject to regular recoverability assessments. For content that is predominantly monetized individually, the unamortized costs are compared to the estimated fair value. The fair value is determined based on a discounted cash flow analysis of the cash flows directly attributable to the title. To the extent the unamortized costs exceed the fair value, an impairment charge is recorded for the excess.

Investment in Films: Investment in films includes the unamortized costs of films, a portion of which are monetized individually (i.e., through domestic theatrical, home entertainment, television, international or other ancillary-market distribution), and a portion of which are monetized as part of a film group.

*Recording Cost.*Costs of acquiring and producing films and of acquired libraries are capitalized when incurred. For films produced by the Company, capitalized costs include all direct production and financing costs and production overhead. For acquired films, capitalized costs consist of minimum guaranteed payments to acquire the distribution rights.

*Amortization.*Costs of acquiring and producing films and of acquired libraries that are monetized individually are amortized using the individual-film-forecast method, whereby these costs are amortized and participations and residuals costs are accrued in the proportion that current year’s revenue bears to management’s estimate of ultimate revenue at the beginning of the current year expected to be recognized from the exploitation, exhibition or sale of the films or television programs.

*Ultimate Revenue.*Ultimate revenue includes estimates over a period not to exceed ten years following the date of initial release of the motion picture. For an episodic television series, the period over which ultimate revenues are estimated cannot exceed ten years following the date of delivery of the first episode, or, if still in production, five years from the date of delivery of the most recent episode, if later. For titles included in acquired libraries, ultimate revenue includes estimates over a period not to exceed twenty years following the date of acquisition.

*Development.*Films and television programs in development include costs of acquiring film rights to books, stage plays or original screenplays and costs to adapt such projects. Such costs are capitalized and, upon commencement of production, are transferred to production costs. Projects in development are written off at the earlier of the date they are determined not to be recoverable or when abandoned, or three years from the date of the initial investment unless the fair value of the project exceeds its carrying cost.

Licensed Program Rights: *General.*Licensed program rights include content licensed from third parties that is monetized as part of a film group for distribution on media networks distribution platforms. Licensed content is comprised of films or series that have been previously produced by third parties and the Company retains specified airing rights over a contractual term. Program licenses typically have fixed terms and require payments during the term of the license.

*Recording Cost.*The cost of licensed content is capitalized when the cost is known or reasonably determinable, the license period for programs has commenced, the program materials have been accepted by the Company in accordance with the license agreements, and the programs are available for the first showing. Licensed programming rights may include rights to more than one exploitation window under the Company’s output and library agreements. For films with multiple windows, the license fee is allocated between the windows based upon the proportionate estimated fair value of each window which generally results in the majority of the cost allocated to the first window on newer releases. Certain license agreements and productions may include additional ancillary rights in addition to the pay television rights. The cost of the Media Networks’ third-party licensed content and produced content is allocated between the pay television market distributed by the Media Networks’ segment and the ancillary revenue markets (e.g., home video, digital platforms, international television, etc.) distributed by the Television Production segment based on the estimated relative fair values of these markets. Our estimates of fair value for the pay television and ancillary markets and windows of exploitation involve uncertainty and management judgment.

*Amortization.*The cost of program rights for films and television programs (including original series) exhibited by the Media Networks segment are generally amortized on an accelerated or straight-line basis based on the anticipated number of exhibitions or expected and historical viewership patterns or the license period on a title-by-title or episode-by-episode basis. The number of exhibitions is estimated based on the number of exhibitions allowed in the agreement (if specified) and the expected usage of the content. Participations and residuals are expensed in line with the amortization of production costs. As of December 31, 2023 and 2022, the Company has not yet completed development of any film projects and, therefore, had not begun amortizing these costs. When amortization commences, it will be included in cost of revenues.

Changes in management’s estimate of the anticipated exhibitions and viewership patterns of films and original series on our networks could result in the earlier recognition of our programming costs than anticipated. Conversely, scheduled exhibitions and expected viewership patterns may not capture the appropriate usage of the program rights in current periods which would lead to the write-off of additional program rights in future periods and may have a significant impact on our future results of operations and our financial position.

Impairment Assessment for Investment in Films and Licensed Program Rights

*General.*A film group or individual film is evaluated for impairment when an event or change in circumstances indicates that the fair value of an individual film or film group is less than its unamortized cost. A film group represents the unit of account for impairment testing for a film or license agreement for program material when the film or license agreement is expected to be predominantly monetized with other films and/or license agreements instead of being predominantly monetized on its own. A film group is defined as the lowest level at which identifiable cash flows are largely independent of the cash flows of other films and/or license agreements.

*Content Monetized Individually.*For content that is predominantly monetized individually (primarily investment in film and television programs related to the Motion Picture and Television Production segments), whenever events or changes in circumstances indicate that the fair value of the individual film may be less than its unamortized costs, the unamortized costs of the individual film are compared to the estimated fair value of the individual film. The fair value is determined based on a discounted cash flow analysis of the cash flows directly attributable to the title. To the extent the unamortized costs exceed the fair value, an impairment charge is recorded for the excess.

*Content Monetized as a Group.*For content that is predominantly monetized as a group (primarily licensed program rights in the Media Networks segment and internally produced programming, as discussed above), whenever events or changes in circumstances indicate that the fair value of the film group may be less than its unamortized costs, the aggregate unamortized costs of the group are compared to the present value of the discounted cash flows of the group using the lowest level for which identifiable cash flows are independent of other produced and licensed content. The Company’s film groups are generally identified by territory (i.e., country) or groups of international territories, wherein content assets are shared across the various territories and therefore, the group of territories is the film group. If the unamortized costs of the film group exceed the present value of discounted cash flows, an impairment charge is recorded for the excess and allocated to individual titles based on the relative carrying value of each title in the group.

*Valuation Assumptions.*The discounted cash flow analysis includes cash flows estimates of ultimate revenue and costs as well as a discount rate (a Level 3 fair value measurement). The discount rate utilized in the discounted cash flow analysis is based on the weighted average cost of capital of the Company plus a risk premium representing the risk associated with producing a particular film or television program or film group. The fair value of any film costs associated with a film or television program that management plans to abandon is zero. Estimates of future revenue involve measurement uncertainty and it is therefore possible that reductions in the carrying value of investment in films and television programs may be required as a consequence of changes in management’s future revenue estimates.

Assigned rights to the feature film, BUFFALOED. On November 10, 2022, the Company obtained certain limited rights to the feature filmBUFFALOED. On December 1, 2022, the Cash Asset Management Agreement (“CAMA”) was signed by all parties. The assigned rights granted the Company a secured position of a one million three hundred eighty-thousand-dollar ($1,380,000.00 USD) receivable against the film’s revenues as per the film’s Cash Asset Management Agreement (“CAMA”) and a 35% share of the profits generated thereafter. In December 2022, subsequent to and contingent on the CAMA being signed, the Company received notice that it would receive $249,924 under the CAMA. As of December 31, 2023 and 2022, the Company had recognized $249,924 of revenue under this arrangement representing the amount whose collection was deemed probable. The assets acquired include:

●Title and all copyrights to*“THIEF” (including five titles) (U.S. Copyright #: V9968D472 (2019)),*BC will transfer such copyrights to APHP and APHP will file the necessary documents with the U.S. Library of Congress to effectuate such transfer; and

●Title and copyright to*“SPREAD THE WORD” (U.S. Copyright #: V9968D474 (2019))*BC will transfer such copyrights to APHP and APHP will file the necessary documents with the U.S. Library of Congress to effectuate such transfer.

The terms of the above agreement to purchase the BC assets include:

As consideration for the BC Assets being acquired by APH hereunder, APH shall pay to Bold Crayon the below purchase price (the “Purchase Price”):

During 2019, Magnolia Pictures acquired the distribution rights toBUFFALOED and released the movie on February 14, 2020. In evaluating the fair value of the rights acquired and consideration incurred, management evaluated the likelihood of future receivables to be derived from the November 10, 2022 acquisition of rights underBUFFALOED, the Company recorded the assumed liability of $130,000. At the time the agreement was signed, no value was assigned to the receivable as the amount was not known or able to be estimated and the timing of any future payments, if any, were not know. Subsequently, in late December, 2023 the Company was notified by Fintage House (the collection account manager of the CAMA), that the Company would receive an initial payment of $249,924. Due to uncertainties of any future revenue, if any, no value was assigned to any potential future revenues.

IMM Technology License and Related Advances and Loans – The Company is the holder of a perpetual Master License to technologies being developed by Vastech Holdings LTD*(U.K. Company Number: 08312665)* (“Vastech”) specifically referred to as “Inverse Magnetic Motor”, an electric motor technology intended for the automotive industry (the “IMM Technology”). The license covers the North American territories (individually and collectively, the “IMM Target Markets”) and is for select target markets including electric vehicles, electric 2/3-wheelers, and medium duty/heavy duty electric vehicles. The license entitles the Company to issue sub- licenses to its licensees and/or key partners. The Master License grants certain rights to the Company including but not limited to the Company having the right to develop its own patents and/or products based on the IMM technology independently and/or with others and to integrate such technologies into motors for sale in the IMM Target Markets. The Company may also passalong these rights which may be wholly and/or partially assigned to licensees and/or key partners if such is deemed appropriate by the Company. In conjunction with the grant of this license to the Company by Vastech, the Company in its sole discretion, which may be withheld at any time, shall initially pay up to one million six hundred thousand pounds (£1,600,000) to Vastech in advances against future licensing royalties (“the IMM Advances’’). The IMM Advances will be treated as loans with a maximum term not to exceed one year and will carry an annual interest rate of six percent (6%) (the “Loans”) which shall be made by the Company to Vastech until such time as Vastech validates its technology sufficiently to the Company, its licensees, and key partners. Acceptance of validation of the technology will be at the sole discretion of the Company which may be withheld for any reason and/or for no reason. If in the event Vastech does not validate its technology, or the Company does not accept such Validation within one year of making such IMM Advances, such will be considered IMM Loans and will become fully due and payable immediately. Vastech agrees to immediately repay the Company for all such IMM Advances and/or IMM Loans upon demand from the Company to Vastech that such repayments must be made. Once the Company accepts validation, the IMM Loans shall convert to IMM Advances; but, not before such acceptance of Validation has been delivered by the Company to Vastech in writing.

In December 2021, management of the Company re-evaluated the $266,387 IMM Loans Receivable and, in managements’ opinion, determined that this receivable should be fully reserved by an allowance for uncollectible accounts. Further, the Company has substantial doubt that VASTECH and/or its successors and affiliates will successfully commercialize the licensed technology. The license is carried on the Company’s balance sheets at December 31, 2023 and 2022 at $0.

Intangible assets

The Company’s intangible assets include in-service and under-development websites and licensed internal use software. During the year ended December 31, 2023 the Company developed an external website that was placed in service during the third quarter of 2023. Additionally, during the fourth quarter of 2023 the Company began developing additional aspects of its website that are expected to go live in the first quarter of 2024. During the fourth quarter of 2023, the Company licensed rights to new internal use software that is expected to be placed in service during the first quarter of 2024.

The Company accounts for website development costs in accordance with Accounting Standards Codification 350-50 “Website Development Costs” (ASC 350-50). All costs incurred in the planning stage are expensed as incurred, costs incurred in the website application and infrastructure development stage are accounted for in accordance with ASC 350-50 which requires the capitalization of certain costs that meet specific criteria, and costs incurred in the day-to-day operation of the website are expensed as incurred. The Company capitalizes external website development costs (“website costs”), which primarily include third-party costs related to developing applications, as well as costs incurred to develop or acquire and customize code for web applications, costs to develop HTML web pages or develop templates and costs to create initial graphics for the website that included the design or layout of each page.

Through December 31, 2023, the capitalized costs of the Company’s websites placed into service were subject to straight-line amortization over athree-year period.

Deferred Revenue

Deferred revenue represents the amount billed to clients that has not yet been earned, pursuant to agreements entered into in current and prior periods. As of December 31, 2023 and 2022, total net deferred revenue was $0 and $35,000, respectively.

Revenues and Costs from Services and Products – Historically, Company’s revenue comes from contracts with customers for consulting services and from the licensing and distribution of film and other entertainment rights. The consulting services typically relate to development of business strategy and monetization of intellectual property 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. Historically, the term of these consulting agreements has been approximately three to six months in duration. The Company’s revenue is measured based on considerations specified in the contract with each customer. Accounting Standards Codification (“ASC”) 606 allows for adoption of an “as invoiced” practical expedient that allows companies to recognize revenue in the amount to which the entity has a right to invoice when they have a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entity’s performance completed to date. The Company has elected to adopt this practical expedient with regards to its consulting services revenue. All 2023 revenues were derived from a single customer. Approximately 13%,33%, and 54% of 2022 revenues were derived from three customers.

Revenues from Films and Licensed Rights, are calculated based on expected ultimate revenues estimated over a period not to exceed ten years following the date of initial release of the motion picture. For an episodic television series, the period over which ultimate revenues are estimated cannot exceed ten years following the date of delivery of the first episode, or, if still in production, five years from the date of delivery of the most recent episode, if later. For titles included in acquired libraries, ultimate revenue includes estimates over a period not to exceed twenty years following the date of acquisition.

The cost of services includes only those costs directly related to the services being rendered. For the 2022 period, a majority of the consulting services were performed by the Company’s CEO, Mr. MacGregor, who as described in Note 3 was providing the Company with financing and, as a result, did not receive any separate current or deferred compensation for these services. Due to Mr. MacGregor’s limited annual compensation of $5,000 per month in the first half of 2023 and $0 in 2022, any allocation of time to these services would have been immaterial. 2022 included $131,722 of cost of goods, $130,000 was to Bold Crayon related to CAMA assignment noted above. CAMA agreement income totaled $0 and $249,924 for the years ended December 31, 2023 and 2022, respectively.

*Fair Value Measurements **–***The Company measures and discloses fair value in accordance with the ASC Topic 820, Fair Value Measurements and Disclosures which defines fair value, establishes a framework and gives guidance regarding the methods used for measuring fair value, and expands disclosures about fair value measurements. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions there exists a three-tier fair-value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1 - unadjusted quoted prices are available in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date.

Level 2 - pricing inputs are other than quoted prices in active markets that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data.

Level 3 - pricing inputs are unobservable for the non-financial asset or liability and only used when there is little, if any, market activity for the non-financial asset or liability at the measurement date. The inputs into the determination of fair value require significant management judgment or estimation. Level 3 inputs are considered as the lowest priority within the fair value hierarchy. The valuation of the right to obtain control over affiliated company, right to acquire shares of other companies, contingent consideration to be paid upon achieving of performance milestone, certain convertible bridge loans (following the maturity date and thereafter) and certain freestanding stock warrants and bifurcated convertible feature of convertible bridge loans issued to the units’ owners, fall under this category.

This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value.

The fair value of cash and cash equivalents is based on its demand value, which is equal to its carrying value. Additionally, the carrying value of all other short-term monetary assets and liabilities are estimated to be equal to their fair value due to the short-term nature of these instruments.

Valuation of Long-Lived Assets –The Company evaluates whether events or circumstances have occurred which indicate that the carrying amounts of long-lived assets*(principally produced and licensed content costs)*may be impaired or not recoverable. The significant factors that are considered that could trigger an impairment review include: changes in business strategy, market conditions, or the manner of use of an asset; underperformance relative to historical or expected future operating results; and negative industry or economic trends. In evaluating an asset for possible impairment, management estimates that asset’s future undiscounted cash flows and appraised values to measure whether the asset is recoverable. The Company measures the impairment based on the projected discounted cash flows of the asset over its remaining life.

Stock-Based Compensation – The Company follows U.S. GAAP, which requires all stock-based compensation to employees, including the grant of employee stock options, to be recognized in the statement of operations based on its fair value. Awards outstanding are accounted for using the accounting principles originally applied to the award. The expense associated with share-based compensation is recognized on a straight-line basis over the service period of each award. Refer to Note 8 for additional information related to this stock-based compensation plan.

Income taxes

The Company accounts for income taxes under FASB ASC 740, “Accounting for Income Taxes”. Under FASB ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under FASB ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. FASB ASC 740-10-05, “Accounting for Uncertainty in Income Taxes” prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.

The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. The Company assesses the validity of its conclusions regarding uncertain tax positions quarterly to determine if facts or circumstances have arisen that might cause it to change its judgment regarding the likelihood of a tax position’s sustainability under audit.

Net Loss per Share

Basic (loss) income per share is computed by dividing net (loss) income available to Common Stockholders by the weighted average number of common shares outstanding during the period. Diluted (loss) income per share reflects the potential dilution, using the treasury stock method that could occur if securities or other contracts to issue Common Stock were exercised or converted into Common Stock or resulted in the issuance of Common Stock that then shared in the (loss) income of the Company. In computing diluted (loss) income per share, the treasury stock method assumes that outstanding instruments are exercised/converted, and the proceeds are used to purchase Common Stock at the average market price during the period. Instruments may have a dilutive effect under the treasury stock method only when the average market price of the Common Stock during the period exceeds the exercise price/conversion rate of the instruments.

The following common share equivalents are excluded from the calculation of weighted average common shares outstanding because their inclusion would have been anti-dilutive:

Segment Information

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker (“CODM”), or decision-making group, in deciding how to allocate resources and in assessing performance. For the period of these financial statements, the CEO of the Company was the CODM. The Company views its operations and manages its business as one operating and reporting segment.

New accounting standards

The Company’s management has evaluated all the recently issued, but not yet effective, accounting standards and guidance that have been issued or proposed by the FASB or other standards-setting bodies through the filing date of these financial statements and does not believe the future adoption of any such pronouncements will have a material effect on the Company’s financial position and results of operations.

Note 3 –Liquidity and Going Concern

The Company’s financial statements are prepared using account principles generally accepted in the United States (“U.S. GAAP”) applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. As of December 31, 2023, the Company has an accumulated deficit of approximately $5.0 million and incurred a net loss of $1.4 million in 2023. These factors, among others, raise doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from an inability of the Company to continue as a going concern.

The Company has a limited operating history, which makes it difficult to evaluate current business and future prospects. During 2023, the Company reported $169,111 of service revenues, down from $461,174 in 2023 andno revenues in 2021 and 2020. Management expects the Company to incur further losses in the foreseeable future due to costs associated with content acquisition and production, the cost of on-going litigation, and costs associated with being a public company. There can be no assurance that our operations will ever generate sufficient revenues to fund continuing operations, or that we will ever generate positive cash flow from our operations, or that we will attain or thereafter sustain profitability in any future period. To mitigate this situation, the Company has a loan agreement with the Company’s CEO/President to fund its month-to-month cash flow needs. During 2023, the Company borrowed $178,500 from and repaid $178,500 to Mr. MacGregor pursuant to a master loan agreement that is due and payable in 2024. The master note agreement accrues interest at a rate of 4.4% due and payable in a lump sum upon maturity of the obligation. This note is not convertible.

NOTE 4. Intangible Assets

The identifiable intangible assets consist of the following assets:

There wereno impairment charges associated with the Company’s identifiable intangible assets during the years ended December 31, 2023 and 2022.

Amortization expense recorded in the accompanying consolidated statements of operations was $1,000 for the year ended December 31, 2023. The Company did not own any intangible assets during the year-ended December 31, 2022.

Note 5 –Income Taxes

The components of our deferred tax assets are as follows:

The benefit of income taxes for the years ended December 31, 2023 and 2022 consist of the following:

At December 31, 2023, the Company has federal and state net operating loss carryforwards of approximately $65,000 of losses that begin toexpire in 2037. Beginning in 2018, net operating losses generated for federal purposes will no longer expire. As of December 31, 2023, the amount of federal net operating loss carryforwards that do not expire is approximately $449,000. Realization of the deferred tax assets is dependent on the Company’s ability to generate sufficient taxable income.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that one portion or all of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical losses and the uncertainty of future taxable income over the periods which the Company will realize the benefits of its net deferred tax assets, management believes it is more likely than not that the Company will not fully realize the benefits on the balance of its net deferred tax assets and, accordingly, the Company has established full valuation allowance on its net deferred tax assets.

Note 6 –Notes Payable

Note Payable – Related Party

On March 31, 2022, the Company agreed to exchange $299,401 in debt obligations to Michael MacGregor, the Company’s CEO & President and Board member, and relief from two of the Company’s legal services providers in exchange for equity in the form of 3,000,000 common shares valued at $0.10 per share for an equivalent aggregate value of $300,000. The transaction enabled the Company to retire $231,901 of debt due and owing to Mr. MacGregor and $67,500 of accrued legal fees. Additionally, during 2022, the Company borrowed from and subsequently repaid an additional $68,760 to Mr. MacGregor.

During 2023, the Company borrowed $178,500 from and repaid $178,500 to Mr. MacGregor pursuant to a master loan agreement dated March 1, 2023. The master note agreement accrues interest at a rate of 4.4% due and payable in a lump sum upon maturity of the obligation. This note is not convertible.

On March 1, 2023, the Company entered into a new Master Loan Agreement between Mr. MacGregor and the Company. During 2023, the Company borrowed $178,500 from and repaid the same amount to Mr. MacGregor.

Economic Injury Disaster Loan

In March 2021, the Company executed anEconomic Injury Disaster Loan (“EIDL”) secured loan with the U.S. Small Business Administration under the EIDL program in the amount of $149,900. The loan is secured by all tangible and intangible assets of the Company and payable over 30 years at an interest rate of 3.75% per annum. Interest only installment payments commenced in September 2023.

Note 7 –Equity

Common Stock

The Company has 1,000,000,000 common shares authorized. As of March 13, 2024, the Company has 109,865,991 shares issued and outstanding. As of March 13, 2024, the total number of shareholders of record was 330.

The Common Stock has a one share one voting right with no other rights. There are no provisions in the Company’s Articles of Incorporation, Articles of Amendment, or By-laws that would delay or prevent a change of control. The Board may from time to time declare, and the Company may pay, dividends on its shares in cash, property, or its own shares, except when the Corporation is insolvent, when the payment thereof would render the Company insolvent, subject to any preferential dividend rights of outstanding shares of preferred shares or when the declaration or payment thereof would be contrary to any other state law restrictions.

Preferred Stock

The Preferred Stock consists of 1,000,000 preferred shares authorized, of which 100,000 preferred shares have been designated as Series A Convertible Preferred Stock (“Series A preferred shares” herein). At present,3,829 Series A preferred shares are issued and outstanding. The Series A preferred shares have the following rights: (i.) a first position lien against all of the Company’s assets including but not limited to the Company’s IP (“Intellectual Property”), (ii.) is convertible at a ratio of 1 to 100,000 so that each one share of Series A preferred stock may be exchanged for 100,000 Common Stock shares, (iii.) and that each share of Series A preferred stock shall carry superior voting rights to the Company’s Common Stock and that each share of Series A preferred stock shall be counted as 1,000,000 votes in any Company vote and (iv.) and any other benefits as deemed necessary and appropriate at the time of such issuance. The Preferred shares do not have any specific redemption rights or sinking fund provisions.

The “Liquidation Preference” with respect to a share of Series A preferred stock means an amount equal to the ratio of (i.) the total amount of the Company’s assets and funds available for distribution to the Series A preferred shares to (ii.) the number of shares of Series A preferred stock outstanding. The Series A preferred stock has a liquidation preference equal to $12.02 per preferred share.

Dividend Provisions

Subject to preferential dividend rights, if any, of the holders of Preferred Stock, dividends on the Common Stock may be declared by the Board of Directors and paid out of any funds legally available therefor at such times and in such amounts as the Board of Directors shall determine.

Note 8–Equity Based Compensation

The American Picture House Corporation 2023 Directors, Employees and Advisors Stock Incentive and Compensation Plan (the “Plan”) was established in January 2023 to create an additional incentive to promote the financial success and progress of the Company. The Plan shall be administered by the Board of Directors and may grant options to purchase shares of the authorized but unissued Common Stock of the Company. The options may be either incentive stock options or nonqualified stock options.

The options granted under the Plan expire on the date determined by the Board of Directors and may not extend more than 10 years.

Under the Plan, unless the board specifies otherwise, stock options must be granted at an exercise price not less than the fair value of the Company’s Common Stock on the grant date. The aggregate fair value of incentive stock options held by any optionee shall not exceed $100,000.

The Board of Directors shall determine the terms and conditions of the options. The vesting requirements of all awards under the Plan may be time or event based and vary by individual grant. The incentive stock options and nonqualified stock options generally become exercisable over a two-year period. Vested and unexercised options may be available to be exercised no later than three months after termination of employment (or such longer period as determined by the Board of Directors).

On January 11, 2024, the Company’s Board of Directors authorized the issuance of 250,000 options to each of its nine board members,1,673,250 options to advisors,662,983 options to Mr. Macgregor, and 497,238 options to Mr. Blanchard for an aggregate of 5,083,471 options with the rights to purchase common shares of the Company at an exercise price of $0.0125 per share. No stock option expense will be reported until such time as the stock option grant and related agreements are fully executed. Also see Note 11 – Subsequent Events.

Note 9 –Contingencies and Uncertainties

Risks and Uncertainties – The Company’s operations are subject to significant risks and uncertainties including financial, operational, and regulatory risks, including the potential risk of business failure. The Company does not have employment contracts with its key employees, including the controlling shareholders who are officers of the Company.

Legal and other matters – In the normal course of business, the Company may become a party to litigation matters involving claims against the Company.

Pending Legal Proceeding:

Randall S. Sprung v. Bannor Michael MacGregor, Jeffery Katz, and Life Design Station International, Inc. – Supreme Court of New York, County of Kings, Index No.: 504677/2019

This action instituted by Randall Sprung against the Defendants on March 4, 2019, to recover monies he alleges are owed by Defendants (Counter-Plaintiffs) pursuant to written agreements to purchase shares and to provide consulting services between the parties. Defendants Bannor Michael MacGregor and Life Design Station International, Inc. (“LDSI”) (Counter-Plaintiffs) have filed counterclaims to recover damages they have incurred as a direct result of Sprung’s failure to properly perform his obligations and duties under the written agreement between the parties.

In February 2022, Plaintiff Sprung passed away. On May 25, 2023, the Court entered an Order substituting David Sprung, as Administrator of the Estate of Randall S. Sprung, for Randall S. Sprung as Defendant in the action.

On January 8, 2024, Defendants LDSI and MacGregor filed their Motion for Summary Judgment with the Court seeking an order dismissing the action. Defendants’ Motion is currently pending before the Court.

At this time, management is unable to make an estimate of the possible loss or range of loss, if any, although it estimates the risk of such loss to be low. Because management is unable to reasonably estimate the amount of any loss, if any, no loss accrual has been recorded.

NOTE 10 –Related Party Transactions

The Company has agreed to indemnify Mr. MacGregor for all legal and professional costs originating from the lawsuit*Randall S. Sprung v. Bannor Michael MacGregor, Jeffery Katz, and Life Design Station International, Inc. –*Supreme Court of New York, County of Kings, Index No.: 504677/2019.

Regarding the IMM Technology License more fully described in Note 2, Mr. MacGregor was a member of the Board of Directors of VASTECH from March 8, 2017 until July 7, 2021. Mr. MacGregor also owns approximately 2.5% of VASTECH. Mr. MacGregor owns approximately 4.9% of Intellitech Pty Ltd, the now current owner of the VASTECH IMM Technology.

During 2023 and 2022, the Company incurred approximately $200,000 and 120,000, respectively, of professional fees to a legal firm affiliated with a member of the Board of Directors. At December 31, 2023 and 2023, the Company had $0 and $65,000, respectively, in accounts payable and accrued expenses owed to the legal firm.

The Company has consulting services relationships with members of the Board whereby they were compensated a total of $185,000 and $149,000 in 2023 and 2022, respectively. As of December 31, 2023 and 2022, $20,000 and $105,000, respectively, were accrued and unpaid. The consulting services are provided as requested by management and may be terminated at any time with no penalty. On January 1, 2023, the $105,000 of the 2022 accrued consulting fees were exchanged for options to purchase 1,160,221 shares of Common Stock at $0.125 per share.

During 2022, the Company entered into consulting agreements with Ribo Music LLCaka Ribo Media (“Ribo Media”) whereby the Company assisted Ribo Media in developing an online media platform to deliver music and eventually movies directly to consumers via their smart devices. Revenues from the Ribo Media consulting services totaled $0 and $186,250, for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023 and 2022, accounts receivable from Ribo Media totaled $0 and $35,000, respectively. Michael Blanchard, a director and shareholder of the Company and Timothy Battles, a director and shareholder of the Company, are both Managing Members and controlling shareholders in Ribo Media.

On March 31, 2022, the Company agreed to exchange $299,401 in debt obligations to Michael MacGregor, the Company’s CEO & President and Board member, and relief from two of the Company’s legal services providers in exchange for equity in the form of 3,000,000 common shares valued at $0.10 per share for an equivalent aggregate value of $300,000. The transaction enabled the Company to retire $231,901 of debt due and owing to Mr. MacGregor and $67,500 of accrued legal fees.

In August 2022, the Company funded Devil’s Half-Acre Productions, LLC owned by John Luessenhop to produce the feature film Devil’s Half-Acre written and directed by Dashiell Luessenhop, a son of A. John Luessenhop, a director of the Company. During the years ended December 31, 2023 and 2022, the Company capitalized $40,199 and $106,355, respectively, of production costs associated with this film. In July 2023 APH obtained 100% ownership of Devil’s Half-Acre Productions, LLC and executed a new option agreement with the writer. In September 2023, APH paid a Five Thousand-Dollar (5,000) option fee to the writer. This option entitles APH to produce the film by July 2024, with the ability to extend the option for an additional two (2) years.

During 2022, the Company entered into definitive agreements to secure Bold Crayon Corporation (“Bold Crayon” or “BC”) as a development partner and purchased certain assets from Bold Crayon, including a portion of the rights to a feature film, and copyrights on six film titles. The Parties agree that APHP will designate BC as a “Content Partner”, wherein BC will develop content and present APHP with a first opportunity to co-finance and/or coproduce content developed by BC subject to a mutually agreed upon Content Partner Agreement and BC will accept such designation. The Company anticipates any rights and obligations between APH and BC to be effective upon the greenlighting of a specific film or show Mr. MacGregor, CEO/President and a director of the Company, Mr. MacGregor is also the CEO/President and a director of Bold Crayon and effectively controls Bold Crayon as a managing manager of the trustee of the trust that owns the majority ownership interest in Bold Crayon. Mr. Michael Blanchard was a past Director and Secretary/Treasurer of Bold Crayon and is a director of APHP. The transaction between the parties has been consummated and all IP and copyrights have been transferred. The assets acquired included:

● Title and all copyrights to*“THIEF” (including five titles) (U.S. Copyright #: V9968D472 (2019)),*BC will transfer such copyrights to APHP and APHP will file the necessary documents with the U.S. Library of Congress to effectuate such transfer; and

● Title and copyright to*“SPREAD THE WORD” (U.S. Copyright #: V9968D474 (2019))*BC will transfer such copyrights to APHP and APHP will file the necessary documents with the U.S. Library of Congress to effectuate such transfer.

The terms of the above agreement to purchase the BC assets included the following consideration:

On November 10, 2022, the Company approved the optioning ofMIDNIGHT’S DOOR written by Kirsten Elms from Mr. Luessenhop for $12,700 *(provided the Company produces MIDNIGHT’S DOOR as a feature film and further subject to producer agreements with Luessenhop and MacGregor).*Mr. Luessenhop is a director of the Company and owned 2.005% of the Company at the time of this transaction.

On November 10, 2022 the Company entered into an additional agreement regardingTHE DEVIL’S HALF-ACRE to extend additional financing in an undetermined amount to the film in exchange among other things for increased equity in the film. At the time,DEVIL’S HALF-ACRE was controlled by Mr. Luessenhop.

On November 10, 2022 the Company granted Mr. Luessenhop, a director of the Company, the right to purchase 2,000,000 common shares in the Company for $0.0125 per share for an aggregate purchase price $25,000 to be paid to the Company in the form of two components: (i.) relief of an outstanding account payable of $12,417 due to Mr. Luessenhop from the Company and (ii.) cash of $12,583.

During 2023, the Company borrowed $178,500 from and repaid $178,500 to Mr. MacGregor pursuant to a master loan agreement dated March 1, 2023. The master note agreement accrues interest at a rate of 4.4% due and payable in a lump sum upon maturity of the obligation. This note is not convertible.

In November 2023, the Company entered into a Consulting Agreement with A. John Luessenhop a director of the Company, pursuant to which Mr. Luessenhop serves as President of the Company. During 2023, Mr. Luessenhop was paid $80,000 under this agreement. The Consulting Agreement expired on December 31, 2023.

In November 2023, the Company entered into a Consulting Agreement with Michael Blanchard, a director of the Company, pursuant to which Mr. Blanchard agree to serve as an advisor to the Company to promote the quality of the Company’s products and services and to enhance and develop the Company’s relationships with the entertainment industry and technology developers. In return for these services, the Company paid Mr. Blanchard $40,625 for services rendered. The Consulting Agreement expired on December 31, 2023.

In November 2023, the Company entered into a Consulting Agreement with Philip Quartararo, a director of the Company, pursuant to which Mr. Quartararo acted as an advisor to the Company to promote the quality of the Company’s products and services and to enhance and develop the Company’s relationships with the entertainment industry and technology developers. In return for these services, the Company paid Mr. Quartararo $10,000.00 for services rendered. Mr. Quartararo died on November 22, 2034, terminating the consulting agreement.

NOTE 11 –SUBSEQUENT EVENTS

In accordance with FASB ASC 855-10,Subsequent Events, the Company has analyzed its operations subsequent to December 31, 2023, to the date these consolidated financial statements were issued. Except as noted below, management has determined that it does not have any material subsequent events to disclose in these consolidated financial statements.

Sales of Common Stock

During the period January 1, 2024 to present, the Company sold 75,000 shares of Common Stock at $0.20 per share to new investors resulting in total proceeds of $15,000.

Stock Option Grants

On January 11, 2024, the Company’s Board of Directors authorized the issuance of 250,000 options to each of its nine board members,1,673,250 options to advisors,662,983 options to Mr. Macgregor, and 497,238 options to Mr. Blanchard for an aggregate of 5,083,471 options with the rights to purchase common shares of the Company at an exercise price of $0.0125 per share.

Noah Morgan Private Family Trust Loan Agreement (“NMPFT”)

On February 6, 2024, the Company entered into a master loan agreement with the NMPFT. The master note agreement accrues interest at a rate of 4.68%. Also on February 6, 2024, the Company borrowed $200,000 pursuant to this loan agreement with this amount due and payable in a lump sum on February 6, 2025. This note is not convertible. The $200,000 was used to fund the senior mezzanine loan to Barron’s Cove Movie, LLC as described below. Later in February, NMPFT loaned an additional $50,000 to APHP.

Senior Mezzanine Loan Agreement with Barron’s Cove Movie, LLC

In February 2024, the Company loaned $200,000 to Barron’s Cove Movie, LLC pursuant to a Senior Mezzanine Loan Agreement. $20,000 of the loan proceeds will be used to pay executive producer fees, including $10,000 to Mr. MacGregor. The $200,00 loan, plus a premium of twenty percent (20%), is due and payable on that date which is the earlier of either (a) twelve (12) months from the date of the loan, or (b) from allocable proceeds received by Barron’s Cove Movie, LLC related to the movie, whichever occurs first.

On March 18, 2024, the Company received $54,951 from the Buffaloed CAMA (See Note 10) - $31,948 related to the receivable due the Company at December 31, 2023 plus $23,003 earned in the first quarter of 2024. Previously in 2022, the Company earned an additional $249,924 under the Buffaloed CAMA for cumulative proceeds of $304,875. Pursuant to the Asset Purchase Agreement by and among the Company and Bold Crayon Corporation and based on cumulative collections of $304,875, the Company issued 17 shares of preferred stock to Bold Crayon Corporation.