NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
APRIL 30, 2011
Note 1 – Description of Business
The Movie Studio, Inc. (the "Company") was
incorporated in the State of Delaware 1961 under the name Magic Fingers, Inc. The company is a vertically integrated motion picture
production company that develops, manufactures and distributes independent motion picture content for worldwide consumption on
a multitude of devices.
The Company has operated under various names since incorporation,
most recently Destination Television, Inc. from February 2007 to November 2012, when the name was changed to The Movie Studio,
Inc.
From October 31, 2001, the Company’s focus was
on the developing a private television network, in high traffic locations such as bars and nightclubs. During this development
period, the Company received incidental revenue from the sale of advertising and the production of commercials. In 2010, the Company
began implementation of its current business model, using the technology previously developed for the private television network.
Note 2 – Summary of significant Accounting Policies
Basis of Presentation
The accompanying unaudited consolidated quarterly financial statements have been
prepared on a basis consistent with generally accepted accounting principles in the United States (“GAAP”) for interim
financial information and pursuant to the rules of the Securities and Exchange Commission (“SEC”). In the opinion of
management, the accompanying unaudited financial statements reflect all adjustments, consisting of only normal and recurring adjustments,
necessary for a fair presentation of the results of operations, financial position and cash flows for the periods presented. The
results of operations for the periods are not necessarily indicative of the results expected for the full year or any future period.
These statements should be read in conjunction with the Entity’s Annual Report on Form 10-K for the year ended October 31,
2010 as filed with the SEC on January 12, 2013 (the “2010 Annual Report”).
The consolidated financial statements include the accounts
of The Movie Studio, Inc. (Formerly Destination Television, Inc.), a Delaware corporation, and its wholly owned subsidiary Destination
Television, Inc., a Florida corporation. All significant inter-company account balances and transactions between the Company and
its subsidiary have been eliminated in consolidation.
Long-Lived
Assets
In accordance with Financial Accounting Standard Board (“FASB”)
Accounting Standards Codification (“ASC”) Topic 360 “Property, Plant, and Equipment,” the Company records
impairment losses on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows
estimated to be generated by those assets are less than the assets’ carrying amounts. There were no impairment charges during
the quarter ended April 30, 2011 and the year ended October 31, 2010.
8
THE MOVIE STUDIO, INC.
(FORMERLY DESTINATION
TELEVISION, INC.)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
APRIL 30, 2011
Note 2 – Summary of significant Accounting Policies (continued)
Fair Value of Financial Instruments
The fair values of the Company’s assets and
liabilities that qualify as financial instruments under FASB ASC Topic 825, “Financial Instruments,” approximate their
carrying amounts presented in the accompanying consolidated statements of financial condition at
April 30, 2011 and October
31, 2010.
Revenue recognition
In accordance with the FASB ASC Topic 605, “Revenue Recognition,”
the Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed
or determinable, and collectability is reasonably assured.
Income Taxes
The Company accounts for income taxes in accordance with FASB ASC
Topic 740 “Income Taxes,” which requires accounting for deferred income taxes under the asset and liability method.
Deferred income tax asset and liabilities are computed for differences between the financial statement and tax bases of assets
and liabilities that will result in taxable or deductible amounts in the future based on the enacted tax laws and rates applicable
to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary,
to reduce the deferred income tax assets to the amount expected to be realized.
In accordance with GAAP, the Company is required to determine whether
a tax position of the Company is more likely than not to be sustained upon examination by the applicable taxing authority, including
resolution of any related appeals or litigation processes, based on the technical merits of the position. The Company files an
income tax return in the U.S. federal jurisdiction, and may file income tax returns in various U.S. state and local jurisdictions.
Generally the Company is no longer subject to income tax examinations by major taxing authorities for years before 2005. The tax
benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized
upon ultimate settlement. De-recognition of a tax benefit previously recognized could result in the Company recording a tax liability
that would reduce net assets. This policy also provides guidance on thresholds, measurement, de-recognition, classification, interest
and penalties, accounting in interim periods, disclosure, and transition that is intended to provide better financial statement
comparability among different entities. It must be applied to all existing tax positions upon initial adoption and the cumulative
effect, if any, is to be reported as an adjustment to stockholder’s equity as of January 1, 2009. Based on its analysis,
the Company has determined that the adoption of this policy did not have a material impact on the Company’s financial statements
upon adoption. However, management’s conclusions regarding this policy may be subject to review and adjustment at a later
date based on factors including, but not limited to, on-going analyses of and changes to tax laws, regulations and interpretations
thereof.
Comprehensive Income
The Company complies with FASB ASC Topic 220, “Comprehensive
Income,” which establishes rules for the reporting and display of comprehensive income (loss) and its components. FASB ASC
Topic 220 requires the Company’s change in foreign currency translation adjustments to be included in other comprehensive
loss, and is reflected as a separate component of stockholders’ equity.
9
THE MOVIE STUDIO, INC.
(FORMERLY DESTINATION
TELEVISION, INC.)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
APRIL 30, 2011
Note 2 – Summary of significant Accounting Policies (continued)
Stock-Based Compensation
The Company complies with FASB ASC Topic 718 “Compensation
– Stock Compensation,” which establishes standards for the accounting for transactions in which an entity exchanges
its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange
for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance
of those equity instruments. FASB ASC Topic 718 focuses primarily on accounting for transactions in which an entity obtains employee
services in share-based payment transactions. FASB ASC Topic 718 requires an entity to measure the cost of employee services received
in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That
cost will be recognized over the period during which an employee is required to provide service in exchange for the award (usually
the vesting period). No compensation costs are recognized for equity instruments for which
employees do not render the requisite service. The grant-date fair
value of employee share options and similar instruments will be estimated using option-pricing models adjusted for the unique characteristics
of those instruments (unless observable market prices for the same or similar instruments are available). If an equity award is
modified after the grant date, incremental compensation cost will be recognized in an amount equal to the excess of the fair value
of the modified award over the fair value of the original award immediately before the modification. No employee stock options
or stock awards vested during 2009 or 2008 under FASB ASC 718.
Nonemployee awards
The fair value of equity instruments issued to a nonemployee is
measured by using the stock price and other measurement assumptions as of the date of either: (i) a commitment for performance
by the nonemployee has been reached; or (ii) the counterparty’s performance is complete. Expenses related to nonemployee
awards are generally recognized in the same period as the Company incurs the related liability for goods and services received.
The Company recorded stock compensation of approximately $-0- and $-0- during the six months ended April 30, 2011 and 2010, respectively,
related to consulting services.
Recently Adopted Accounting Pronouncements
The Company evaluates the pronouncements of various authoritative
accounting organizations, primarily the Financial Accounting Standards Board (FASB), the SEC, and the Emerging Issues Task Force
(EITF), to determine the impact of new pronouncements on GAAP and the impact on the Company. The following are recent accounting
pronouncements that have been adopted during
2012
, or will be adopted in future periods.
Fair Value Measurements
: In May 2011, the FASB amended the
ASC to develop common requirements for measuring fair value and for disclosing information about fair value measurements in accordance
with GAAP and International Financial Reporting Standards. The amendment is effective for the first interim or annual period beginning
on or after December 15, 2011. The adoption of this amendment on January 1, 2012 did not have a material impact on the Company's
results of operations and financial condition.
10
THE MOVIE STUDIO, INC.
(FORMERLY DESTINATION
TELEVISION, INC.)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
APRIL 30, 2011
Note 2 – Summary of significant Accounting Policies (continued)
Recently Adopted Accounting Pronouncements (continued)
Comprehensive Income
: In June 2011, the FASB amended the
ASC to increase the prominence of the items reported in other comprehensive income. Specifically, the amendment to the ASC eliminates
the option to present the components of other comprehensive income as part of the statements of shareholders’ equity. The
amendment must be applied retrospectively and is effective for fiscal years and the interim periods within those years, beginning
after December 15, 2011.
In February 2013, the FASB amended the ASC to require entities to
provide information about amounts reclassified out of other comprehensive income by component. The Company is required to present,
either on the face of the financial statements or in the notes, the amounts reclassified from other comprehensive income to the
respective line items in the statements of operations. This amendment is effective for interim and annual periods beginning after
December 15, 2012
The Company has adopted all accounting pronouncements issued through
May 9, 2013, none of which had a material impact on the Company’s financial statements.
Loss Per Common Share
The Company complies with the accounting and disclosure requirements
of FASB ASC 260, “Earnings Per Share.” Basic loss per common share is computed by dividing net loss available to common
stockholders by the weighted average number of common shares outstanding during the period. Diluted loss per common share incorporates
the dilutive effect of common stock equivalents on an average basis during the period.
Note 3 – Going Concern
The accompany financial statements have been prepared on the basis
of accounting principles applicable to a going concern, which assume that Destination Television, Inc. will continue in operation
for a least one year and realize its assets and discharge its liabilities in the normal course of operations.
Several conditions cast doubt about the Company’s ability
to continue as a going concern. The Company has an accumulated deficit of approximately $9 million as of April 30, 2011, has no
cash available for payment of operating expenses, no source of revenue, and requires additional financing in order to finance its
business activities on ongoing basis. The Company’s future capital requirements will depend on numerous factors, including
but not limited to continued progress in the pursuit of business opportunities. The Company is actively pursuing alternative financing
and has discussions with various third parties, although no firm commitments have been obtained. In the interim, the principal
shareholder has committed to meeting any operating expenses incurred by the Company. The Company believes that actions it is presently
taking to revise its operating and financial requirements provide it with the opportunity to continue as a going concern.
11
THE MOVIE STUDIO, INC.
(FORMERLY DESTINATION
TELEVISION, INC.)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
APRIL 30, 2011
Note 3 – Going Concern (continued)
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. While we believe
that the actions already taken or planned, will mitigate the adverse conditions and events which raise doubt about the validity
of going concern assumption used in preparing these financial statements, there can be no assurance that these actions will be
successful. If the Company were unable to continue as a going concern, then substantial adjustments would be necessary to the carrying
values of the reported liabilities.
Note 4 - Acquired Amortizable Intangible Assets
As of October 31, 2006, the Company invested $3,280
in establishing trademarks associated with its Bar TV concept. The Company amortizes the costs of these intangibles over their
estimated useful lives unless such lives are deemed indefinite. Amortizable intangible assets are also tested for impairment based
on undiscounted cash flows and, if impaired, written down to fair value based on either discounted cash flows or appraised values.
Intangible assets with indefinite lives are tested for impairment, at least annually, and written down to fair value as required.
Expected annual amortization expense related to
amortizable intangible assets is as follows:
As of October 31,
|
|
2011
|
$ 300
|
2012
|
300
|
2012
|
300
|
Thereafter
|
280
|
Total expected annual amortization expense
|
$ 1,180
|
Note 5 - Income Taxes
The Company has approximately $9 million in net operating
loss carryovers available to reduce future income taxes. These carryovers expire at various dates through the year 2031. The Company
has adopted FASB ASC Topic 740 which provides for the recognition of a deferred tax asset based upon the value the loss carry-forwards
will have to reduce future income taxes and management's estimate of the probability of the realization of these tax benefits.
The Company's management determined that it was more likely than not that the Company's net operating loss carry-forwards would
not be utilized; therefore, a valuation allowance against the related deferred tax asset has been established.
12
THE MOVIE STUDIO, INC.
(FORMERLY DESTINATION
TELEVISION, INC.)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
APRIL 30, 2011
Note 5 - Income Taxes (continued)
A summary of the deferred tax asset presented on the
accompanying balance sheets is as follows:
|
|
April 30,
|
|
October 31,
|
|
|
2011
|
|
2010
|
Deferred tax asset:
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$
|
3,420,000
|
|
|
$
|
3,382,000
|
|
Other Temporary differences
|
|
|
—
|
|
|
|
0
|
|
Deferred tax asset
|
|
|
3,420,000
|
|
|
|
3,382,000
|
|
Less: Valuation allowance
|
|
|
(3,420,000
|
)
|
|
|
(3,382,000
|
)
|
Net deferred tax asset
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30,
|
|
|
|
October 31,
|
|
|
|
|
2011
|
|
|
|
2010
|
|
Statutory federal income tax expense
|
|
|
(34
|
)%
|
|
|
(34
|
)%
|
State and local income tax
|
|
|
(4
|
)
|
|
|
(4
|
)
|
(net of federal benefits)
|
|
|
|
|
|
|
|
|
Other temporary differences
|
|
|
—
|
|
|
|
—
|
|
Valuation allowance
|
|
|
38
|
|
|
|
38
|
|
|
|
|
—
|
%
|
|
|
—
|
%
|
Note 6 - Commitments
Facilities
The Company leases from a stockholder, Dr. H. K. Terry,
pursuant to an oral agreement on a month-to-month basis, an 8,500 square foot building in Fort Lauderdale, Florida, which serves
as its administrative offices and computer operations center. The rent is $4,500 per month and the Company is responsible for utilities.
Rent expense was $13,500 and $13,500 for each of the three months ended April 30, 2011 and 2010, respectively.
Employment Agreements
Gordon Scott Venters is employed as the Company's President
and Chief Executive Officer, pursuant to an employment agreement, effective November 1, 2004. The agreement was for an initial
period of three years, with automatic renewals of one year. The employment agreement, which extended a previous agreement, provides
for an annual salary of $161,662; annual increases of a minimum of 5%; and participation in incentive or bonus plans at the discretion
of the Board of Directors. The agreement additionally provides for certain confidentiality and non-competition provisions and a
minimum payment of 18 months’ salary in the event of a change of control or termination without cause, or if the employee
terminates for good reason. As of April 30, 2011, Mr. Venters was owed $481,097 for accrued unpaid salary. As of October 31, 2010,
Mr. Venters was owed $414,597 for accrued unpaid salary.
13
THE MOVIE STUDIO, INC.
(FORMERLY DESTINATION
TELEVISION, INC.)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
APRIL 30, 2011
Note 7 - Payroll Taxes Payable
The Company has been delinquent in its payment of payroll taxes. As of July
31, 2009, the total of payroll taxes payable, including estimated interest and penalties, was $261,710. In August, October and
November 2007, the Internal Revenue Service filed tax liens against the Company in the total amount of $198,351. In August 2007, the
Company made a lump-sum payment of $48,000 and in November 2007, an additional lump sum payment of $18,600. These payments were
made in connection with the Company's submission of an Offer in Compromise to settle its payroll tax obligations. The Offer in
Compromise was rejected and the Company appealed the initial determination which also was rejected in June 2009. The Company plans
to submit a revised Offer in Compromise. There is no assurance that an acceptable settlement will be reached. Payroll tax obligations
for the calendar years 2007, 2008, 2009 and 2010 have been paid as required.
Note 8 - Notes Payable
At March 31, 2011, the Company owed Dr. K. Terry, a
related party shareholder, a total of $1,353,420, which represented $436,500 for accrued rent, $705,000 for convertible notes,
and $211,920 for accrued interest against the convertible notes. On April 1, 2011, the total due Dr. Terry of $1,353,420 was purchased
by Ventures Capital Partners, LLC, another related party, which provided Dr.Terry an equity interest in Ventures Capital Partners,
LLC.
Note 9 - Stockholders' Deficiency
Common Stock
Stock Issued for Cash
During three months ended April 30, 2010, the Company
issued 5,500,000 shares of common stock for $27,500.
During fiscal year 2009, the Company issued to accredited
investors a total of 5,950,000 shares of common stock for $103,100, of which 2,950,000 shares were issued at $0.018 per share,
1,000,000 shares were issued at $0.015 and 2,000,000 shares were issued at $0.01 per share.
None of the above shares have been registered under
the Securities Act of 1933, as amended, and therefore, may not be transferred in the absence of an exemption from registration
under such laws and will be considered "restricted securities" as that term is defined in Rule 144 adopted under the
Securities Act, and may be sold only in compliance with the resale provisions set forth therein.
Stock Issued for Services
During period ended April 30, 2010, the Company did
not issue any shares of common stock.
In fiscal year 2009, the Company issued a total of 15,246,500
shares of common stock as payment for services of which 2,500,000 shares were pursuant to a consulting agreement described below;
200,000 and 150,000 to two separate consultants and 50,000 shares for fees to a director.
14
THE MOVIE STUDIO, INC.
(FORMERLY DESTINATION
TELEVISION, INC.)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
APRIL 30, 2011
Note 9 - Stockholders' Deficiency (continued)
Stock Issued for Services (continued)
On February 20, 2008, the Company entered into a 12-month
business consulting agreement with a consultant and, in connection with that agreement, issued, as compensation, 2,500,000 shares
of common stock, which were registered pursuant to Form S-8 under the Securities Act of 1933, as amended and stock options. The
shares were valued at $30,000, or $0.012 per share, which was representative of the approximate market value at the date of issuance.
On May 30, 2008, the Company was notified by the consultant that effective June 29, 2008, he was terminating the agreement. The
Company has demanded return of the 2,500,000 shares it issued as a consulting fee. The options, which expired on June 29, 2008,
are described below in
Note 10 - Common Stock Options.
In February 2008, the Company also issued 200,000 shares
for consulting services, which were valued at $3,580, or approximately $0.018 per share, and in September 2008, the Company issued
150,000 shares for consulting services, valued at $765, or $0.0051 per share. In October 2008, a director of the Company (Mr. Nugent)
was granted, as a director's fee, 50,000 shares, which were valued at $105, or $.0021 per shares. The shares, which were
issued for services, and valued at the approximate market price at the date of issuance have not been registered under the Securities
Act of 1933, as amended, and therefore, may not be transferred in the absence of an exemption from registration under such laws
and will be considered "restricted securities" as that term is defined in Rule 144 adopted under the Securities Act,
and may be sold only in compliance with the resale provisions set forth therein.
Preferred Stock
Series B Preferred Stock
The Series B Preferred Stock is identical in all aspects
to the Common Stock, including the right to receive dividends, except that each share of Series B Preferred Stock has voting rights
equivalent to four times the number of shares of Common Stock into which it could be converted. As of April 30, 2010 there were
5,750,000 shares of Series B Preferred Stock outstanding and on October 31, 2009 there were 5,750,000 shares outstanding. Each
share of Series B Preferred Stock is convertible into one share of common stock.
Note 10- Common Stock Options
No options or warrants were outstanding at April 30,
2011 and October 31, 2010.
Note 11 – Litigation
As of April 30, 2011, the Company was not a party to
any existing or threatened litigation.
15
THE MOVIE STUDIO, INC.
(FORMERLY DESTINATION
TELEVISION, INC.)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
APRIL 30, 2011
Note 12 - Related Party Transactions
G0ordon Scott Venters
Effective November 2007, Gordon Scott Venters, entered
into a three-year employment agreement with the Company, which is described above in
Note
5-
Commitments-Employment Agreements.
In November 2007, Mr. Venters, acquired from the Company
2,000,000 shares of its Series B Preferred Stock as payment of $56,000 of accrued unpaid salary. The shares were valued at $56,000,
or $0.028 per share, which represented the approximate value, at the date of issuance, of the common stock into which the Series
B Preferred Stock may be converted. Also, in September and October 2008, Mr. Venters, acquired a total 15,000,000 shares of common
stock from the Company at an average price of approximately $0.0051 as payment for accrued but unpaid salary of $76,000. The shares
of Series B Preferred Stock and the common shares have not been registered under the Securities Act of 1933, as amended, and therefore,
may not be transferred in the absence of an exemption from registration under such laws and will be considered "restricted
securities" as that term is defined in Rule 144 adopted under the Securities Act, and may be sold only in compliance with
the resale provisions set forth therein.
In August 2006 and February 2007, Mr. Venters made non-interest
bearing unsecured loans to the Company in the amounts of $25,000 and $5,000, respectively. In April 2007, the Company repaid the
$5,000 loan ; in addition to the repayment of the $5,000 loan, the Company also issued 500,000 of its $0.0001 par value common
stock in exchange for the $25,000 loan and accrued wages. These shares were valued at $0.052 per share. Additionally, in August
2007, he acquired 1,000,000 shares of common stock, which were valued at $0.04 per share, in exchange for $40,000 of accrued unpaid
salary. As of April 30, 2011, $481,097 was due to Mr. Venters for accrued unpaid salary. October 31, 2010, $414,597 was due to
Mr. Venters for accrued unpaid salary.
Note 13– Restatement
This Amendment to the Company’s Form 10-Q, which was filed
on April 23, 2013, restates the consolidated balance sheets at April 30, 2011, consolidated statement of operations for the three
and six month periods ended April 30, 2011, and the consolidated statement of cash flows for the six month period ended April 30,
2011, to correct errors associated with the inclusion of incorrect financial results in the aforementioned consolidated financial
statements. The effect of the correction of these errors was to increase net loss by $1,559 for the three months ended April 30,
2011 and decrease net loss by $23,016 for the six months ended April 30, 2011.
The following table presents the effect of restatement on the consolidated
balance sheets, consolidated statements of operations, and consolidated statements of cash flows:
16
THE MOVIE STUDIO, INC.
(FORMERLY DESTINATION
TELEVISION, INC.)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
APRIL 30, 2011
Note 13– Restatement (continued)
|
Consolidated Balance Sheets
|
|
At April 30, 2011
|
|
|
|
|
|
|
|
Originally
|
|
Restatement
|
|
|
|
Reported
|
|
Adjsutment
|
|
Restatement
|
|
|
|
|
|
|
Total assets
|
$ 22,385
|
|
$ (13,485)
|
|
$ 8,900
|
|
|
|
|
|
|
Total liabilities
|
2,227,481
|
|
(27,601)
|
|
2,199,880
|
|
|
|
|
|
|
Total stockholders' deficiency
|
(2,204,096)
|
|
13,016
|
|
(2,191,080)
|
|
|
|
|
|
|
Total liabilities and stockholders' deficiency
|
$ 23,385
|
|
(14,485)
|
|
$ 8,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statement of Operations
|
|
Three Months Ended April 30, 2011
|
Sales
|
$ 4,896
|
|
$ (4,896)
|
|
$ -
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
Selling general and administrative expenses
|
34,704
|
|
(740)
|
|
33,964
|
Consulting
|
2,597
|
|
(2,597)
|
|
-
|
Interest expense
|
4,593
|
|
|
|
4,593
|
|
|
|
|
|
|
Total expenses
|
41,894
|
|
(3,337)
|
|
38,557
|
|
|
|
|
|
|
Net loss
|
$ (36,998)
|
|
$ (1,559)
|
|
$ (38,557)
|
17
THE MOVIE STUDIO, INC.
(FORMERLY DESTINATION
TELEVISION, INC.)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
APRIL 30, 2011
Note 13– Restatement (continued)
|
Consolidated Statement of Operations
|
|
Six Months Ended April 30, 2011
|
|
|
|
|
|
|
Sales
|
$ 4,896
|
|
$ (4,896)
|
|
$ -
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
Selling general and administrative expenses
|
95,668
|
|
(14,240)
|
|
81,428
|
Consulting
|
2,597
|
|
(2,597)
|
|
-
|
Interest expense
|
35,859
|
|
(11,075)
|
|
24,784
|
|
|
|
|
|
|
Total expenses
|
134,124
|
|
(27,912)
|
|
106,212
|
|
|
|
|
|
|
Net loss
|
$ 129,228
|
|
$ (23,016)
|
|
$ 106,212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statement of Cash Flows
|
|
Six Months Ended April 30, 2011
|
Cash flows from operating activities
|
|
|
|
|
|
Net loss
|
$ (129,228)
|
|
$ 23,016
|
|
$ (106,212)
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net
|
|
|
|
|
|
cash used by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
1,428
|
|
-
|
|
1,428
|
Accounts payable and accrued expenses
|
66,500
|
|
(66,500)
|
|
-
|
Accrued rent
|
27,000
|
|
(450,000)
|
|
(423,000)
|
Accrued interest
|
35,859
|
|
(241,227)
|
|
(205,368)
|
Payroll taxes payable
|
|
|
18,232
|
|
18,232
|
Movie-in progress
|
(4,054)
|
|
4,054
|
|
-
|
|
|
|
|
|
|
Net cash used in operating activities
|
(2,495)
|
|
(735,441)
|
|
(714,920)
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
Proceeds from issuance of common stock
|
10,000
|
|
(10,000)
|
|
-
|
Proceedes from relating party loan
|
-
|
|
714,920
|
|
714,920
|
Net cash provided by investing activities
|
10,000
|
|
704,920
|
|
714,920
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
7,505
|
|
(7,505)
|
|
-
|
Cash, beginning of period
|
1,890
|
|
(1,871)
|
|
19
|
Cash, end of period
|
$ 9,395
|
|
$ (9,376)
|
|
$ 19
|
18
THE MOVIE STUDIO, INC.
(FORMERLY DESTINATION
TELEVISION, INC.)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
APRIL 30, 2011
Note 14– Subsequent Events
In November 2012, the Company changed its name from
Destination Television, Inc. to the Movie Studio, Inc.
During the month of November 2012, the Company became
involved in litigation regarding the ownership of equipment left in the building by a previous tenant. The building serves as the
corporate headquarters for the Company. The Company was ordered by the court to preserve the equipment until ownership can be established
by the court. The Company has made no claim of ownership of the equipment and expects to be dismissed from the litigation
19
Item 2. Management’s
Discussion and Analysis of Financial Conditions and
Results of Operations
THIS FILING CONTAINS FORWARD-LOOKING STATEMENTS. THE WORDS “ANTICIPATED,”
“BELIEVE,” “EXPECT,” “PLAN,” “INTEND,” “SEEK,” “ESTIMATE,”
“PROJECT,” “WILL,” “COULD,” “MAY,” AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY
FORWARD-LOOKING STATEMENTS. THESE STATEMENTS INCLUDE, AMONG OTHERS, INFORMATION REGARDING FUTURE OPERATIONS, FUTURE CAPITAL EXPENDITURES,
AND FUTURE NET CASH FLOW. SUCH STATEMENTS REFLECT THE COMPANY’S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND FINANCIAL
PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES, INCLUDING, WITHOUT LIMITATION, GENERAL ECONOMIC AND BUSINESS CONDITIONS, CHANGES
IN FOREIGN, POLITICAL, SOCIAL, AND ECONOMIC CONDITIONS, REGULATORY INITIATIVES AND COMPLIANCE WITH GOVERNMENTAL REGULATIONS, THE
ABILITY TO ACHIEVE FURTHER MARKET PENETRATION AND ADDITIONAL CUSTOMERS, AND VARIOUS OTHER MATTERS, MANY OF WHICH ARE BEYOND THE
COMPANY’S CONTROL. SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES OCCUR, OR SHOULD UNDERLYING ASSUMPTIONS PROVE TO BE
INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY AND ADVERSELY FROM THOSE ANTICIPATED, BELIEVED, ESTIMATED, OR OTHERWISE INDICATED.
CONSEQUENTLY, ALL OF THE FORWARD-LOOKING STATEMENTS MADE IN THIS FILING ARE QUALIFIED BY THESE CAUTIONARY STATEMENTS AND THERE
CAN BE NO ASSURANCE OF THE ACTUAL RESULTS OR DEVELOPMENTS.
The following discussion and analysis of our financial condition
and plan of operations should be read in conjunction with our financial statements and related notes appearing elsewhere herein.
This discussion and analysis contains forward-looking statements including information about possible or assumed results of our
financial conditions, operations, plans, objectives and performance that involve risk, uncertainties and assumptions. The actual
results may differ materially from those anticipated in such forward-looking statements. For example, when we indicate that we
expect to increase our product sales and potentially establish additional license relationships, these are forward-looking statements.
The words expect, anticipate, estimate or similar expressions are also used to indicate forward-looking statements.
Plan of Operation
The Movie Studio, Inc. F/K/A Destination Television,
Inc. (the "Company" or the "Registrant") was incorporated in the State of Delaware in 1961 under the name Magic
Fingers, Inc. By amendment of its certificate of incorporation, the Company's name was changed in 1999 to Magicinc.com and in April
2002 to Magic Media Networks, Inc. and in February 2007 to Destination Television, Inc. In November of 2012 the Company filed an
amendment to change its name to The Movie Studio, Inc. Through the period ended October 31, 1999, the Company devoted substantially
all its efforts to reorganizing its financial affairs and settling its debt obligations. During the fiscal years ended October
31, 2000 and October 31, 2001, the Company was engaged primarily in the planning and development of an interactive network to provide
entertainment via the Internet. Subsequent to October 31, 2001, the Company redirected its business focus to the development of
a private television network, in high traffic locations such as bars and nightclubs. During the development process, the Company
received incidental revenue from the sale of advertising and the production of commercials.
20
Results of Operation
Three months ended April 30, 2011 compared with three months
ended April 20, 2010.
Revenue
Revenue decreased from $9,765 to $-0- for the three months ended
April 30, 2011 compared to the same period in 2010. The $9,765 decrease in revenue is primarily attributable to the increase in
subscription revenue.
Expenses
For the three months period ended April 30, 2011 and 2010, the Company
reported $-0- and $4,450 for consulting expenses. The decrease is attributable to the discontinuation of the use of outside consultants.
Selling, general and administrative expenses decreased $48,722 from
$82,686 to $33,964 for the three months ended April 30, 2011, as compared to the same period in 2010. These decreases were primarily
due to the Company’s decreasing payroll costs.
Other
For the three months ended April 30, 2011 and 2010, the Company
reported interest expense of $4,593 and $20,191, respectively, a decrease of $15,598(77.3%).
Six months ended April 30, 2011 compared with six months ended
April 20, 2010.
Revenue
Revenue decreased from $18,750 to $-0- for the six months ended
April 30, 2011 compared to the same period in 2010. The $18,750 decrease in revenue is primarily attributable to the decrease in
subscription revenue.
Expenses
For the six months period ended April 30, 2011 and 2010, the Company
reported $-0- and $4,450, respectively, for consulting expenses. The decrease is attributable to the discontinued use of outside
consultants.
Selling, general and administrative expenses decreased $67,600 from
$149,028 to $81,428 for the six months ended April 30, 2011, as compared to the same period in 2010. These decreases were primarily
due to the Company’s decreasing payroll costs.
Other
For the six months ended April 30, 2011 and 2010, the Company reported
interest expense of $24,784 and $39,357, respectively, a decrease of $14,573(37.0%).
Liquidity and Capital Resources
As of April 30, 2011 the Company had
assets of $8,900 as against total liabilities of $2,199,980.
The Company has an accumulated deficit of approximately $9,000,000
as of April 30, 2011, has no cash available for payment of operating expenses, no source of revenue, and requires additional financing
in order to finance its business activities on ongoing basis. The Company’s future capital requirements will depend on numerous
factors, including but not limited to continued progress in the pursuit of business
21
opportunities. The Company is actively pursuing alternative financing
and has discussions with various third parties, although no firm commitments have been obtained. In the interim, the principal
shareholder has committed to meeting any operating expenses incurred by the Company. The Company believes that actions it is presently
taking to revise its operating and financial requirements provide it with the opportunity to continue as a going concern.
Item 3
.
Quantitative
and Qualitative Disclosures About Market Risk
Not applicable.
Item 4. Controls and Procedures
|
(a)
|
Evaluation of disclosure controls and procedures.
|
Our management is responsible for establishing and maintaining adequate
internal control over financial reporting for the Company. Internal control over financial reporting is defined in Rule 13a-15(f)
or 15d-15(f) promulgated under the Securities Exchange Act of 1934 (Exchange Act) as a process designed by or under the supervision
of, our principal executive and principal financial officers and effected by our Board of Directors, management and other personnel,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
Pertain to the maintenance of records that is in reasonable
detail accurately and fairly reflect the transactions and dispositions of our assets
Provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the Company are being made only in accordance with authorizations of our management and directors:
and
Provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject
to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies
or procedures may deteriorate.
Management assessed the effectiveness of the Company’s Internal
Control over financial reporting as of April 30, 2010. In making this assessment, management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission in this Internal Control-Integrated Framework.
Base on our assessment, we believe that, as of April 30, 2011 our
internal control over financial reporting was not effective.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act) that are designed to ensure that information required to be disclosed in the reports
we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the
SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive
officer and chief financial officer, as appropriate to allow
22
timely decisions regarding disclosure. In designing and
evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was
required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Our management, with the participation of our chief executive officer
and chief financial officer, has evaluated the effectiveness of our disclosure controls and procedures as of April 30, 2011. Based
on their evaluation, our chief executive officer and chief financial officer have concluded that, as of April 30, 2011, our disclosure
controls and procedures were not effective.
(b) Changes in internal
controls
.
There have not been any changes in the Company’s internal
control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter
ended January 31, 2010 that have materially affected, or are reasonably likely to materially affect, the Company’s internal
control over financial reporting.
PART
II - OTHER INFORMATION
Item 1. Legal Proceedings
During the month of November 2012, the Company became involved in
litigation regarding the ownership of equipment left in the building by a previous tenant. The building serves as the corporate
headquarters for the Company. The Company was ordered by the court to preserve the equipment until ownership can be established
by the court. The Company has made no claim of ownership of the equipment and expects to be dismissed from the litigation.
Item 2. Unregistered Sales
of Equity Securities and Use of Proceeds
During the six month period ended April 30,
2011, there was no modification of any instruments defining the rights of holders of the Company’s common stock and no limitation
or qualification of the rights evidenced by the Company’s common stock as a result of the issuance of any other class of
securities or the modification thereof.
Item 3. Defaults upon Senior
Securities
There have been no defaults in any material
payments during the covered period.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
The Company does not have any other material
information to report with respect to the three month period ended April 30, 2011.
Item 6. Exhibits and Reports
on Form 8-K
(a)
Exhibits
33.1
Certification pursuant to Section 302 of Sarbanes Oxley Act of 2002
23
33.2
Certification pursuant to Section 906 of Sarbanes Oxley Act of 2002
No
reports on Form 8-K were filed during the quarter ended April 30, 2011.
24
SIGNATURES
In accordance with the requirements
of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
THE MOVIE STUDIO, INC.
Date: June 17, 2013
/s/ Gordon Scott Venters
Gordon Scott Venters
President, Secretary and Director
25
EXHIBIT 33.1