Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

Our Management's Discussion and Analysis should be read in conjunction with our unaudited consolidated financial statements and related notes thereto included elsewhere in this quarterly report.

Forward-Looking Statements

The information in this report contains forward-looking statements. All statements other than statements of historical fact made in this report are forward-looking. In particular, the statements herein regarding industry prospects and future results of operations or financial position are forward-looking statements. These forward-looking statements can be identified by the use of words such as "believes," "estimates," "could," "possibly," "probably," anticipates," "projects," "expects," "may," "will," or "should" or other variations or similar words. No assurances can be given that the future results anticipated by the forward-looking statements will be achieved. Forward-looking statements reflect management's current expectations and are inherently uncertain. If underlying assumptions prove inaccurate or unknown risks or uncertainties materialize, our actual results may differ significantly from management's expectations. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q or, in the case of documents referred to or incorporated by reference, the date of those documents.

The following discussion and analysis should be read in conjunction with our unaudited financial statements, included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management.

Company Overview and Description of Business

On April 21, 2023, the Company completed its acquisition of AI-enabled wealth management technology platform provider, Fyniti Global Equities EBT Inc. ("Fyniti") for 2,500,000 shares of Series B $10.00 Preferred Stock.

Fyniti, (www.fyniti.com, www.fynitiiq.com) is a Fintech platform developer founded by veteran Wall Street technologists and investment bankers who worked for Goldman Sachs, JP Morgan Chase, Bank of America (Merrill Lynch) and Citigroup. Fyniti has a clear focus on developing disruptive technologies in the Wealth Management and capital markets domains. Fyniti owns the IQ Engine and EBT Technology.

Fintech developer and provider of technology that combines Artificial Intelligence/Machine Learning (AI/ML) driven Quantitative investing (IQ Engine) with AI-enabled wealth management Electronic Block Trading ("EBT") technology.

On August 14, 2023, the Company filed a Certificate of Change with the Nevada Secretary of State to increase the authorized shares of the Company's common stock to 3,000,000,000.

On January 7, 2025, the Company completed closing on the acquisition agreement dated November 2, 2024 (the "Acquisition Agreement") with Bateau Asset Management Pty, Ltd., an Australia company and the Bateau Shareholders ("Bateau"), and the Shareholders of Bateau to purchase 100% of the outstanding ordinary shares of Bateau (the "Bateau Equity").

Bateau is a boutique investment manager founded in 2016 based in Australia with offices in Singapore. Bateau follows an absolute-return investment philosophy and a multi-manager approach to investing.

The Company is in the process of consolidating all of its current and legacy technologies (Fyniti) under one technology platform which will be referred to as FYNN AI. This consolidation will help SMC to effectively manage and streamline product offering, removal of product/feature redundancies and reduce development. With this consolidation, SMC will be more agile in deploying future features faster to meet the ever-expanding AI marketspace.

Results of Operations

Management's discussion and analysis of financial condition and results of operations ("MD&A") includes a discussion of the consolidated results from operations of SMC Entertainment, Inc. and its subsidiaries.

Three Months Ended September 30, 2025 Compared to the Three Months Ended September 30, 2024

Revenue

For the three months ended September 30, 2025 and 2024, we recognized $25,404 and $0 revenue, respectively. In the current period our revenue came via management fees from the newly acquired Bateau Asset Management Pty, Ltd.

General and Administrative Expenses

General and Administrative expenses ("G&A") for the three months ended September 30, 2025 were $58,335 as compared to $62,446 for the comparable prior period, a decrease of $4,111 or 6.58%. In the current period we had G&A expense for Bateau of $53,219. This added G&A expense was offset by a decrease in legal fees and consulting expense during the period.

Compensation Expense - Related Party

Compensation Expense - Related Party for the three months ended September 30, 2025, was $110,000 as compared to $116,000 for the comparable prior period, a decrease of $6,000 or 5.2%.

Bad Debt Expense

For the three months ended September 30, 2025 and 2024, the Company recorded no bad debt expense, compared to $300,000 in the prior period.

Development Expense

During the three months ended September 30, 2025, we have new development expense of $10,000 for payments made to Plato Technologies compared to $68,800 for the comparable prior period.

Other Income (Expense)

Total other expense for the three months ended September 30, 2025, was $446,225 compared to total other income of $5,939,012 for the comparable prior period. In the current period we had interest expense of $435,329, of which $392,811 was for the amortization of debt discount, a gain of $16,425 related to the change in the fair value of derivatives, a loss on the issuance of convertible debt of $31,401 and a loss of $134,162 on conversion of debt. In the prior period we had interest expense of $118,892, a gain of $5,907,520 related to the change in the fair value of derivatives and a gain of $150,384 for debt extinguishment.

Net Loss

For the three months ended September 30, 2025, we had net loss of $605,355, mainly due to the interest expense and the change in fair value. For the three months ended September 30, 2024, we had net comprehensive income of $5,691,766, mainly due to the gain of $5,907,520 from change in fair value of derivatives.

Nine Months Ended September 30, 2025 Compared to the Nine Months Ended September 30, 2024

Revenue

For the nine months ended September 30, 2025 and 2024, we recognized $77,302 and $0 revenue, respectively. In the current period our revenue came via management fees from the newly acquired Bateau Asset Management Pty, Ltd.

General and Administrative Expenses

G&A for the nine months ended September 30, 2025 were $341,180 as compared to $191,612 for the comparable prior period, an increase of $149,568 or 78.1%. In the current period we had G&A expense for Bateau of $163,165. This added G&A expense was offset by a decrease in consulting and development expense during the period.

Compensation Expense - Related Party

Compensation Expense - Related Party for the nine months ended September 30, 2025, was $332,000 as compared to $349,800 for the comparable prior period, a decrease of $17,800 or 5.1%.

Bad Debt Expense

For the nine months ended September 30, 2025, the Company recorded no bad debt expense, compared to $300,000 in the prior period.

Development Expense

During the nine months ended September 30, 2025, we have new development expense of $45,000 for payments made to Plato Technologies compared to $98,800 for the comparable prior period, a decrease of $53,800 or 54.5%.

Other Income (Expense)

Total other income for the nine months ended September 30, 2025, was $6,975,691 compared to total other expense of $7,831,621 for the comparable prior period. In the current period we had gain of $8,446,602 on extinguishment of debt, partially offset by interest expense of $1,323,517, of which $1,121,139 was for the amortization of debt discount, a gain of $68,805 related to the change in the fair value of derivatives, a loss on the issuance of convertible debt of $31,401 and a loss of $184,798 on conversion of debt. In the prior period we had interest expense of $186,955, a gain of $175,350 related to the change in the fair value of derivatives, and a gain of $150,384 for debt extinguishment and a loss $7,970,400 transaction expense.

Net Loss

For the nine months ended September 30, 2025, we had net income of $6,328,614, mainly due to the gain on extinguishment of debt of $8,446,602. For the nine months ended September 30, 2024, we had net loss of $8,446,602, mainly due to transaction expense of $7,970,400.

Liquidity and Capital Resources

During the nine months ended September 30, 2025, we used $273,324 of cash in operations compared to $165,094 used in the prior period.

During the nine months ended September 30, 2025, we netted $11,925 of cash from investing activities compared to $0 received in the prior period resulting from cash acquired pursuant to the Bateau acquisition.

During the nine months ended September 30, 2025, we netted $271,513 of cash from financing activities compared to $159,577 received in the prior period.

As of September 30, 2025, we have convertible notes, including accrued interest, due of $1,846,225. We also have notes payable to related parties of $1,111,460.

The following is a summary of the convertible notes:

		September 30,				December 31,
		2025				2024
Total convertible notes, principal outstanding		$	2,654,089			$	688,892
Less: unamortized debt discount			(939,094	)			(5,333	)
Convertible notes - net of debt discount		$	1,714,995			$	683,559

Off-Balance Sheet Arrangements

As of September 30, 2025, the Company had no off-balance sheet arrangements.

Going Concern

Our auditors have expressed substantial doubt as to our ability to continue as a going concern. The accompanying unaudited consolidated financial statements have been prepared on a going concern basis. For the nine months ended September 30, 2025, the Company had net comprehensive income of $6,328,614; however, this was largely due to the extinguishment of debt. We had net cash used in operating activities of $329,902 and an accumulated deficit of $19,889,057. These matters raise substantial doubt about the Company's ability to continue as a going concern for a period of one year from the date of this filing. The Company's ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due, to fund possible future acquisitions, and to generate profitable operations in the future. Management plans to provide for the Company's capital requirements by continuing to issue additional equity and debt securities. The outcome of these matters cannot be predicted at this time and there are no assurances that, if achieved, the Company will have sufficient funds to execute its business plan or generate positive operating results. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Critical Accounting Policies

Refer to Note 2 for a condensed discussion of our critical accounting policies and to our Form 10-K, which includes our audited financial statements for the year ended December 31, 2024, for a full discussion of our critical accounting policies.