The accompanying notes are an integral part
of these financial statements.
The accompanying notes are an integral
part of these financial statements.
Notes to Financial Statements
June 30, 2013
(Unaudited)
NOTE 1: HISTORY OF OPERATIONS
Business Activity
Independent Film Development Corporation was
incorporated in the State of Nevada on September 14, 2007. Effective April 24, 2008 we commenced operating as a Business Development
Company ("BDC") under Section 54(a) of the Investment Company Act of 1940 ("1940 Act"). On September
30, 2009, our board of directors elected to cease operating as a BDC.
Independent Film Development Corporation (“IFLM”)
is a diversified publicly held entertainment company, whose common stock trades on the over-the-counter bulletin board under the
trading symbol, “IFLM.” We have developed a business plan of operations of developing genre themed studio style resorts,
film sales and distribution, film development, and an Internet social networking and resourcing website, for independent film and
television development, production, and distribution.
The Company is in the development stage as
defined under Statement on Financial Accounting Standards Accounting Standards Codification FASB ASC 915-205 "Development-Stage
Entities.”
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
Preparation of Financial Statements
The accompanying unaudited financial statements
have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and
regulations of the United States Securities and Exchange Commission for interim financial information. While these statements
reflect all normal recurring adjustments which are, in the opinion of management, necessary for fair presentation of the results
of the interim period, they do not include all of the information and footnotes required by generally accepted accounting principles
for complete financial statements. For further information, refer to the financial statements and footnotes thereto, which are
included in the Company’s Annual Report on form 10-K, as amended, previously filed with the Commission.
The unaudited interim financial statements
should be read in conjunction with the Company’s annual report on Form 10-K, which contains the audited financial statements
and notes thereto, together with the Management’s Discussion and Analysis, for the fiscal year ended September 30, 2012. The
interim results for the nine months ended June 30, 2013 are not necessarily indicative of the results for the full fiscal year.
Management further acknowledges that it is
solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control
and preventing and detecting fraud. The Company's system of internal accounting control is designed to assure, among other items,
that 1) recorded transactions are valid; 2) valid transactions are recorded; and 3) transactions are recorded in the proper period
in a timely manner to produce financial statements which present fairly the financial condition, results of operations and cash
flows of the Company for the respective periods being presented.
Cash and Cash Equivalents
For purposes of the statement of cash flows,
the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
There were no cash equivalents as of June 30, 2013 and September 30, 2012.
Stock Based Compensation
We account for equity instruments issued in
exchange for the receipt of goods or services from non-employees. Costs are measured at the fair market value of the consideration
received or the fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments
issued for consideration other than employee services is determined on the earlier of the date on which there first exists
a firm commitment for performance by the provider of goods or services or on the date performance is complete. The Company
recognizes the fair value of the equity instruments issued that result in an asset or expense being recorded by the company, in
the same period(s) and in the same manner, as if the Company has paid cash for the goods or services.
Use of Estimates
The presentation of financial statements in
conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Fair Value of Financial Instruments
The carrying amount of cash, notes
receivable, accounts payable, accrued liabilities and notes payable, as applicable, approximates fair value due to the short-term
nature of these items. The fair value of the related party notes payable cannot be determined because of the Company's affiliation
with the parties with whom the agreements exist. The use of different assumptions or methodologies may have a material effect on
the estimates of fair values.
ASC Topic 820, “Fair Value Measurements
and Disclosures,” requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, “Financial
Instruments,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement
that enhances disclosure requirements for fair value measures. The carrying amounts reported in the balance sheets for receivables
and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the
short period of time between the origination of such instruments and their expected realization and their current market rate of
interest. The three levels of valuation hierarchy are defined as follows:
·
Level
1: Observable inputs such as quoted prices in active markets;
·
Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly;
·
Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its
own assumptions.
The Company analyzes all financial instruments
with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity,” and ASC 815.
The following table
presents assets and liabilities that are measured and recognized at fair value as of June 30, 2013 and September 30, 2012 on a
recurring basis.
The change in fair value is a result of the embedded derivative feature in the convertible debentures.
June 30, 2013
Description
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total Gains and (Losses)
|
Derivative
|
|
|
-
|
|
|
-
|
|
|
(614,506)
|
|
|
(162,620)
|
Total
|
|
$
|
-
|
|
$
|
-
|
|
$
|
(614,506)
|
|
$
|
(162,620)
|
September 30, 2012
Description
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total Gains and (Losses)
|
Derivative
|
|
|
-
|
|
|
-
|
|
|
(468,884)
|
|
|
(264,027)
|
Total
|
|
$
|
-
|
|
$
|
-
|
|
$
|
(468,884)
|
|
$
|
(264,027)
|
Long Lived Assets
Long lived assets are carried at cost and amortized
over their estimated useful lives, generally on a straight-line basis. The Company reviews identifiable amortizable assets to be
held and used for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not
be recoverable. Determination of recoverability is based on the lowest level of identifiable estimated undiscounted cash flows
resulting from use of the asset and its eventual disposition. Measurement of any impairment loss is based on the excess of the
carrying value of the asset over its fair value.
Income Taxes
Accounting Standards Codification Topic No.
740 “Income Taxes” (ASC 740) requires the asset and liability method of accounting be used for income taxes. Under
the asset and liability method, 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 to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. 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.
In June 2006, the FASB interpreted its
standard for accounting for uncertainty in income taxes, an interpretation of accounting for income taxes. This interpretation
clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance the
minimum recognition threshold and measurement attributable to a tax position taken on a tax return is required to be met before
being recognized in the financial statements. The FASB’s interpretation had no material impact on the Company’s financial
statements for the period ended June 30, 2013.
Derivative Liabilities
The Company records the fair value of its derivative
financial instruments in accordance with ASC815,
Derivatives and Hedging
. The fair value of the derivatives was calculated
using a multi-nominal lattice model performed by an independent qualified business valuator. The fair value of the derivative liability
is revalued on each balance sheet date with corresponding gains and losses recorded in the consolidated statement of operations.
Derivative financial instruments should be
recorded as liabilities in the balance sheet and measured at fair value. For purposes of the Company’s financial statements
fair value was used as the basis for formulating an analysis which has been defined by the Financial Accounting Standards Board
(“FASB”) as “the amount for which an asset (or liability) could be exchanged in a current transaction between
knowledgeable, unrelated willing parties when neither party is acting under compulsion”. The FASB has provided guidance that
its definition of fair value is consistent with the definition of fair market value in IRS Rev. Rule 59-60. In determining the
fair value of the derivatives it was assumed that the Company’s business would be conducted as a going concern. These derivative
liabilities will need to be marked-to-market each quarter with the change in fair value recorded in the income statement.
The Company has notes payable in which the
holder has the right to convert all or a portion of the principal into shares of common stock at a conversion price equal to fifty
percent (50%) of the average of the closing bid price of common stock during the five trading days immediately preceding the conversion
date, or fifty percent (50%) of the closing bid price of the common stock on the date of issuance as quoted by Bloomberg, LP. Pursuant
to the terms of this debenture, the holder shall not be entitled to convert a number of shares that would exceed 4.99% of the outstanding
shares of the Company’s common stock. Because the terms of the debentures do not specifically state that there is a
minimum amount on which the price of the conversion can go and/or there is no maximum amount of shares that can be converted into,
a derivative liability is triggered and must accounted for as such (see Note 5).
Revenue Recognition
The Company recognizes revenue when persuasive
evidence of an arrangement exists, services have been rendered, the sales price is fixed or determinable, and collection is reasonably
assured. The Company currently generates revenue from fees earned from services provided in the capacity of producer and/or sales
agent. The company’s primary focus will be to act as a sales agent for independent film producers by providing the sales
and marketing services for films.
Earnings (Loss) Per Share
Basic earnings (loss) per share are computed
by dividing the net income (loss) by the weighted-average number of shares of common stock and common stock equivalents (primarily
outstanding options and warrants). Common stock equivalents represent the dilutive effect of the assumed exercise of the outstanding
stock options and warrants, using the treasury stock method. The calculation of fully diluted earnings (loss) per share assumes
the dilutive effect of the exercise of outstanding options and warrants at either the beginning of the respective period presented
or the date of issuance, whichever is later. At June 30, 2013 and September 30, 2012, the Company had no outstanding options or
warrants.
NOTE 3: RECENT ACCOUNTING PRONOUNCEMENTS
Accounting
Standards Update 2013-11 Income Taxes (Topic 740) Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward,
a Similar Tax Loss, or a Tax Credit Carryforward Exists. An unrecognized tax benefit, or a portion of an unrecognized tax benefit,
should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward,
a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar
tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction
to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable
jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose,
the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred
tax assets. The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred
tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date.
This Update applies to all entities that have unrecognized tax benefits
when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date. The amendments
in this Update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013.
In October 2012, the Financial Accounting Standards
Board (FASB) issued Accounting Standards Update (ASU) 2012-04, ''Technical Corrections and Improvements" in Accounting Standards
Update No. 2012-04. The amendments in this update cover a wide range of Topics in the Accounting Standards Codification. These
amendments include technical corrections and improvements to the Accounting Standards Codification and conforming amendments related
to fair value measurements. The amendments in this update will be effective for fiscal periods beginning after December 15, 2012.
The adoption of ASU 2012-04 is not expected to have a material impact on our financial position or results of operations.
In August 2012, the FASB issued ASU 2012-03,
"Technical Amendments and Corrections to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin
(SAB) No. 114, Technical Amendments Pursuant to SEC Release No. 33-9250, and Corrections Related to FASB Accounting Standards Update
2010-22 (SEC Update)" in Accounting Standards Update No. 2012-03. This update amends various SEC paragraphs pursuant to the
issuance of SAB No. 114. The adoption of ASU 2012-03 is not expected to have a material impact on our financial position or results
of operations.
In July 2012, the FASB issued
ASU 2012-02, "Intangibles -Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment"
in Accounting Standards Update No. 2012-02. This update amends ASU 2011-08, Intangibles -Goodwill and Other (Topic 350): Testing
Indefinite-Lived Intangible Assets for Impairment and permits an entity first to assess qualitative factors to determine whether
it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary
to perform the quantitative impairment test in accordance with Subtopic 350-30, Intangibles -Goodwill and Other -General Intangibles
Other than Goodwill. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning
after September 15, 2012. Early adoption is permitted, including for annual and interim impairment tests performed as of a date
before July 27, 2012, if a public entity's financial statements for the most recent annual or interim period have not yet been
issued or, for nonpublic entities, have not yet been made available for issuance. The adoption of ASU 2012-02 is not expected to
have a material impact on our financial position or results of operations.
The Company has implemented all new accounting
pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless
otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued
that might have a material impact on its financial position or results of operations.
NOTE 4: WEBSITE PROPERTIES
As of September 30, 2012 the Company has terminated
its business relationship with iBacking Corp. the developer of the Indiebacker.com website and will therefore no longer use the
website. As such the Company considers the asset fully impaired and has written its cost and related accumulated amortization down
to $0, resulting in a loss on impairment of $490,959 as of September 30, 2012. The Company maintains the liability associated with
the cost of developing the website (Note 5) but is seeking to rescind the debenture and cancel the debt (Note 8).
As of September 30, 2012 the Company has
terminated its business relationship with Junior Capital, Inc. the developer of the HollywoodIndy.com website and will
therefore no longer use the website. As such the Company considers the asset fully impaired and has written its cost and
related accumulated amortization down to $0, resulting in a loss on impairment of $327,562 as of September 30, 2012. The
Company maintains the liability associated with the cost of developing the website (Note 5) but is seeking to rescind the
debenture (Note 8).
NOTE 5: CONVERTIBLE DEBENTURE
On July 1, 2011, the Company entered into an
exchange agreement with Junior Capital Inc. (“Junior”), pursuant to which Junior exchanged a $350,000 promissory note
for a $350,000 convertible debenture (the “Junior Debenture”). The Junior Debenture accrues interest of 10% and matures
on July 1, 2012. Junior has the right to convert all or a portion of the principal into shares of common stock at a conversion
price equal to fifty percent (50%) of the average of the closing bid price of common stock during the five trading days immediately
preceding the conversion date, or fifty percent (50%) of the closing bid price of the common stock on the date of issuance, or
$0.05 per share of common stock on the date of conversion as quoted by Bloomberg, LP. Pursuant to the terms of this debenture,
the holder shall not be entitled to convert a number of shares that would exceed 4.99% of the outstanding shares of the Company’s
common stock. Based on the initial valuation the Company has recorded a debt discount of $50,514, all of which has been amortized
to interest expense. As of June 30, 2013, $143,500 of the $350,000 debenture was converted into 4,100,000 shares of common stock.
As a result of the conversions the remaining $4,359 of debt discount amortization was accelerated and expensed, and the derivative
liability decreased by $149,671. In addition, as a consequence of the triggering of the default provisions of the debenture, as
a result of nonpayment as of the due date and failure to convert a portion of the debenture upon request, the interest on the debenture
has been instated at a rate of 18%, effective as of the date of issuance, and a per day penalty of $500 has been accrued from the
date of default of $153,000.
On October 25, 2011 the Company issued a convertible
debenture/note payable to Junior Capital, Inc. for $20,000, $15,000 of this amount was advanced to the Company prior to signing
the debenture and prior to the year ended September 30, 2011. The remaining $5,000 was received in October 2011. The Debenture
accrues interest of 10% beginning on October 25, 2011 and matures on October 25, 2012. Junior has the right to convert all or a
portion of the principal into shares of common stock at a conversion price equal to fifty percent (50%) of the average of the closing
bid price of common stock during the five trading days immediately preceding the conversion date, or fifty percent (50%) of the
closing bid price of the common stock on the date of issuance as quoted by Bloomberg, LP. Pursuant to the terms of this debenture,
the holder shall not be entitled to convert a number of shares that would exceed 4.99% of the outstanding shares of the Company’s
common stock. Based on the initial valuation the Company has recorded a debt discount of $20,000, all of which has been amortized
to interest expense. As of June 30, 2013, $20,000 of the principal face value of the Junior Debenture remains outstanding. In addition,
as a consequence of the triggering of the default provision of the debenture the interest on the debenture has been instated at
a rate of 18% effective as of the date of issuance.
On October 28, 2011, the Company entered into
an exchange agreement with Editor Newswire Inc. (“Editor”), pursuant to which Editor exchanged a $20,000 promissory
note for a $20,000 convertible debenture (the “Editor Debenture”). The Editor Debenture accrues interest of 10% and
matures on October 28, 2012. Editor has the right to convert all or a portion of the principal into shares of common stock at a
conversion price equal to fifty percent (50%) of the average of the closing bid price of common stock during the five trading days
immediately preceding the conversion date, or fifty percent (50%) of the closing bid price of the common stock on the date of issuance
as quoted by Bloomberg, LP. Pursuant to the terms of this debenture, the holder shall not be entitled to convert a number of shares
that would exceed 4.99% of the outstanding shares of the Company’s common stock. Based on the initial valuation the Company
has recorded a debt discount of $20,000, all of which has been amortized to interest expense. As of June 30, 2013 $20,000 of the
principal face value of the Debenture remains outstanding. In addition, as a consequence of the triggering of the default provision
of the debenture the interest on the debenture has been instated at a rate of 18% effective as of the date of issuance.
On November 18, 2011, the Company entered into
an exchange agreement with Editor Newswire Inc. (“Editor”), pursuant to which Editor exchanged a $25,000 promissory
note dated November 18, 2011 for a $25,000 convertible debenture (the “Editor Debenture”). The Editor Debenture accrues
interest of 10% and matures on November 18, 2012. Editor has the right to convert all or a portion of the principal into shares
of common stock at a conversion price equal to fifty percent (50%) of the average of the closing bid price of common stock during
the five trading days immediately preceding the conversion date, or fifty percent (50%) of the closing bid price of the Common
Stock on the date of issuance as quoted by Bloomberg, LP. Pursuant to the terms of this debenture, the holder shall not be entitled
to convert a number of shares that would exceed 4.99% of the outstanding shares of the Company’s common stock. . Based on
the initial valuation the Company has recorded a debt discount of $25,000, all of which has been amortized to interest expense.
As of June 30, 2013 $25,000 of the principal face value of the Debenture remains outstanding. In addition, as a consequence of
the triggering of the default provision of the debenture the interest on the debenture has been instated at a rate of 18% effective
as of the date of issuance.
On January 11, 2012, the Company entered into
a $33,000 convertible debenture with Junior Capital Inc. (“Junior”). The Junior Debenture accrues interest of 10% and
matures on January 11, 2013. Junior has the right to convert all or a portion of the principal into shares of common stock at a
conversion price equal to fifty percent (50%) of the average of the closing bid price of common stock during the five trading days
immediately preceding the conversion date, or fifty percent (50%) of the closing bid price of the Common Stock on the date of issuance
as quoted by Bloomberg, LP. Pursuant to the terms of this debenture, the holder shall not be entitled to convert a number of shares
that would exceed 4.99% of the outstanding shares of the Company’s common stock. Based on the initial valuation the Company
has recorded a debt discount of $33,000, $8,425 of which was amortized to interest expense before conversion. As a result of the
conversions, $24,575 of debt discount amortization was accelerated and expensed and the derivative liability decreased by $37,159.
As of September 30, 2012 the entire $33,000 debenture was converted into 1,015,384 shares of common stock.
On March 15, 2012, the Company entered into
a $40,000 convertible debenture with Junior Capital Inc. (“Junior”). The Junior Debenture accrues interest of 12% and
matures on March 15, 2013. Junior has the right to convert all or a portion of the principal into shares of common stock at a conversion
price equal to fifty percent (50%) of the average of the closing bid price of common stock during the five trading days immediately
preceding the conversion date, or fifty percent (50%) of the closing bid price of the Common Stock on the date of issuance as quoted
by Bloomberg, LP. Pursuant to the terms of this debenture, the holder shall not be entitled to convert a number of shares that
would exceed 4.99% of the outstanding shares of the Company’s common stock. Based on the initial valuation the Company has
recorded a debt discount of $40,000, all of which has been amortized to interest expense. As of June 30, 2013 $40,000 of the principal
face value of the Debenture remains outstanding. In addition, as a consequence of the triggering of the default provision of the
debenture the interest on the debenture has been instated at a rate of 18% effective as of the date of issuance.
On April 9, 2012, the Company entered into a $100,000 convertible debenture with Neil Linder. The debenture
accrues interest of 12% and matures on April 9, 2013. Mr. Linder has the right to convert all or a portion of the principal into
shares of common stock at a conversion price equal to the lesser of fifty percent (50%) of the average of the closing bid price
of common stock during the five trading days immediately preceding the conversion date, or fifty percent (50%) of the closing bid
price of the Common Stock on the date of issuance as quoted by Bloomberg, LP. Pursuant to the terms of this debenture, the holder
shall not be entitled to convert a number of shares that would exceed 4.99% of the outstanding shares of the Company’s common
stock. Based on the initial valuation the Company has recorded a debt discount of $49,532, all of which has been amortized to interest
expense. As of June 30, 2013, $13,950 of the $100,000 debenture was converted into 2,052,795 shares of common stock. As of June
30, 2013 $86,050 of the principal face value of the Debenture remains outstanding. In addition, as a consequence of the triggering
of the default provision of the debenture the interest on the debenture has been instated at a rate of 18% effective as of the
date of issuance, a $1,000 per business day penalty is being imposed for failure to execute a conversion in a timely manner, resulting
in a $20,000 accrual as of June 30, 2013 and an additional accrual of $112,509 was accounted for as a result of a provision requiring
additional funds due in the event that a “default payment” is made by the Company.
On May 29, 2012, the Company entered into a
$500,000 convertible debenture with iBacking Corp. The iBacking Debenture accrues interest of 12% and matures on May 29, 2013.
iBacking has the right to convert all or a portion of the principal into shares of common stock at a conversion price equal to
the lesser of fifty percent (50%) of the lowest closing bid price of common stock during the ten trading days immediately preceding
the conversion date, or fifty percent (50%) of the closing bid price of the Common Stock on the date of issuance as quoted by Bloomberg,
LP. Pursuant to the terms of this debenture, the holder shall not be entitled to convert a number of shares that would exceed 4.99%
of the outstanding shares of the Company’s common stock. Based on the initial valuation the Company has recorded a debt discount
of $84,651, all of which has been amortized to interest expense. As of June 30, 2013 $500,000 of the principal face value of the
Debenture remains outstanding. In addition, as a consequence of the triggering of the default provision of the debenture the interest
on the debenture has been instated at a rate of 18% effective as of the date of issuance.
On June 5, 2012, the Company entered into an
$18,000 convertible debenture with Junior Capital Inc. (“Junior”). The Junior Debenture accrues interest of 12% and
matures on June 5, 2013. Junior has the right to convert all or a portion of the principal into shares of common stock at a conversion
price equal to fifty percent (50%) of the average of the closing bid price of common stock during the five trading days immediately
preceding the conversion date, or fifty percent (50%) of the closing bid price of the Common Stock on the date of issuance as quoted
by Bloomberg, LP. Pursuant to the terms of this debenture, the holder shall not be entitled to convert a number of shares that
would exceed 4.99% of the outstanding shares of the Company’s common stock. Based on the initial valuation the Company has
recorded a debt discount of $18,000 all of which has been amortized to interest expense. As of June 30, 2013 $18,000 of the principal
face value of the Debenture remains outstanding. In addition, as a consequence of the triggering of the default provision of the
debenture the interest on the debenture has been instated at a rate of 18% effective as of the date of issuance,
The following inputs and assumptions were used
to value the secured convertible notes at June 30, 2013 and September 30, 2012:
-
The convertible promissory notes have a conversion price
of the lesser of 50% of the average of the lowest closing bid stock prices (lowest closing bid price for the 5/29/12 note) over
the last 5-10 days or 50% of the closing bid price at issuance (or $0.05 for the 7/1/11 note) and contains no dilutive reset feature.
-
The stock price would fluctuate with an annual volatility.
The projected volatility curve was based on historical volatilities of the 18 comparable companies in the entertainment industry.
-
The Holder would redeem based on availability of alternative
financing, increasing 1.0% monthly to a maximum of 10%.
-
The Holder will automatically convert the note at maturity
if the registration was effective and the company was not in default. The following conversions were completed during the fiscal
year.
-
On March 7, 2012, the Company authorized the issuance
of 450,000 common shares in conversion of $22,500 of the Junior Capital debenture dated July 1, 2011. The shares were issued at
$0.05 pursuant to the conversion terms of the debenture.
-
On March 28, 2012, the Company authorized the issuance of 450,000 common shares
in conversion of $22,500 of the Junior Capital debenture dated July 1, 2011. The shares were issued at $0.05 pursuant to the conversion
terms of the debenture.
-
On April 20, 2012, the Company authorized the issuance
of 450,000 common shares in conversion of $22,500 of the Junior Capital debenture dated July 1, 2011. The shares were issued at
$0.05 pursuant to the conversion terms of the debenture.
-
On June 13, 2012, the Company authorized the issuance
of 250,000 common shares in conversion of $12,500 of the Junior Capital debenture dated July 1, 2011. The shares were issued at
$0.05 pursuant to the conversion terms of the debenture.
-
On June 28, 2012, the Company authorized the issuance
of 400,000 common shares in conversion of $20,000 of the Junior Capital debenture dated July 1, 2011. The shares were issued at
$0.05 pursuant to the conversion terms of the debenture.
-
On July 24, 2012, the Company authorized the issuance
of 1,000,000 common shares in conversion of $32,500 of the Junior Capital debenture dated July 1, 2011. The shares were issued
at $0.0325 pursuant to the conversion terms of the debenture.
-
On July 27, 2012, the Company authorized the issuance
of 1,015,384 common shares in conversion of $33,000 of the Junior Capital debenture dated January 11, 2012. The shares were issued
at $0.0325 pursuant to the conversion terms of the debenture.
-
On August 21, 2012, the Company authorized the issuance
of 1,100,000 common shares in conversion of $11,000 of the Junior Capital debenture dated July 1, 2011. The shares were issued
at $0.01 pursuant to the conversion terms of the debenture.
-
On October 16, 2012, the Company
authorized
the issuance of
1,552,795
common shares in conversion of $10,000 of the Neil Linder debenture
dated April 9, 2012. The shares were issued at $0.00644 pursuant to the conversion terms of the debenture.
-
On June 19, 2013, the Company
authorized
the issuance of
500,000
common shares in conversion of $3,950 of the Neil Linder debenture dated
April 9, 2012. The shares were issued at $0.0079 pursuant to the conversion terms of the debenture.
A summary of the activity of the derivative liability is shown below:
Balance at September 30, 2011
|
|
|
|
|
$
|
116,504
|
Increase in derivative due to new issuances
|
|
|
275,183
|
Derivative loss due to new issuances
|
|
|
85,169
|
Decrease in derivative due to settlement of debt
|
|
|
(186,830)
|
Derivative loss due to mark to market adjustment
|
|
|
178,858
|
Balance at September 30, 2012
|
|
|
|
|
468,884
|
Increase in derivative due to new issuances
|
|
-
|
Derivative loss due to new issuances
|
|
-
|
Decrease in derivative due to settlement of debt
|
|
(16,998)
|
Derivative gain due to mark to market adjustment
|
|
162,620
|
Balance at June 30, 2013
|
|
|
|
$
|
614,506
|
NOTE 6: COMMON STOCK TRANSACTIONS
During the period from September 14, 2007 (inception)
through September 30, 2007 the Company issued 125 common shares for $500 cash.
During the year ended September 30, 2008 the
Company issued 18,492 common shares for $35,942 cash.
During the year ended September 30, 2009 the
Company issued 34,803 common shares for $25,000 cash and a subscription receivable in the amount of $85,000. During the year ended
September 30, 2010 the Company received $22,660 on its subscription receivable.
On September 30, 2009 the Company’s Board
of Directors authorized the issuance of 200,000 common shares to Directors Robert Searcy and Patrick Peach, as compensation for
two years’ services rendered, pursuant to Section 4(2) of the Securities Act of 1933. Due to the volatility of the market
and the limited trading of the Company’s stock, shares were valued at $0.10 by the Board of Directors.
On September 30, 2009 the Company’s Board
of Directors authorized the issuance of, 200,000 shares and 500,000 shares to Jeff Ritchie, the Company’s President and Director
for compensation for two years’ services rendered, and 10 million shares in exchange for business opportunities assigned
to the company, pursuant to Section 4(2) of the Securities Act of 1933. Due to the volatility of the market and the limited trading
of the Company’s stock, shares were valued at $0.10 by the Board of Directors.
On September 30, 2009 the Company’s Board
of Directors authorized the issuance of, 200,000 shares and 500,000 shares to Kenneth Eade, a former Officer and Director for compensation
for two years’ services rendered, 500,000 for two years’ legal services rendered, and 10,000,000 shares in exchange
for business opportunities assigned to the company, pursuant to Section 4(2) of the Securities Act of 1933. Due to the volatility
of the market and the limited trading of the Company’s stock, shares were valued at $0.10 by the Board of Directors.
During the three month period ended December
31, 2009 the Company issued 90,000 common stock shares for total consideration of $45,000.
During the three months ended June 30, 2010 the Company issued 406,571
common shares for total consideration of $119,595.
During the three months ended June 30, 2010,
the Company issued 4,000 common shares for services totaling $2,000. Due to the volatility of the market and the limited trading
of the Company’s stock, shares were valued at $0.10 by the Board of Directors.
During the three months ended September 30,
2010, the Company issued 130,000 common shares for total consideration of $32,500.
On March 31, 2011 the Company’s Board
of Directors authorized the issuance of 100,000 common shares for Director’s fees totaling $38,000, based on the value of
the common stock on the date of authorization. As of June 30, 2013 these shares had
not yet been issued and therefore have been
recorded as a stock payable.
On March 31, 2011 the Company’s Board
of Directors authorized the issuance of 750,000 shares each to Jeff Ritchie, the Company’s CEO and Kenneth Eade the Company’s
former CFO for compensation for services rendered in 2010, and an additional 200,000 shares to Kenneth Eade for legal services
rendered, for total consideration of $646,000, based on the value of the common stock on the date of authorization. As of June
30, 2013 these shares had not yet been issued and therefore have been recorded as a stock payable.
During the three month period ended March 31,
2011, the Company authorized the issuance of 250,000 common shares for services valued at $95,000, based on the value of the common
stock on the date of authorization. The payable was subsequently written off to forgiveness of stock payable.
On May 10, 2011 the Company issued 300,000
common shares for cash proceeds of $6,975 and a subscription receivable in the amount of $8,025. As of December 31, 2011 it was
determined that the remaining receivable would not be collected; as a result the company credited the stock subscription receivable
account and debited bad debt expense for $8,025.
On May 9, 2011 the Company issued 6,000 common
shares for a lock up agreement in which the stockholder agreed not to transfer any of his shares for an agreed upon time. The Company
recorded an expense of $2,280 based on the value of the common stock on the date of issuance.
On May 10, 2011 the Company issued 6,000 common
shares to a stockholder for shares authorized in a prior period. The Company recorded an expense of $2,280 based on the value of
the common stock on the date of issuance.
On June 24, 2011, the Company authorized the
issuance of 550,000 common shares for services valued at $209,000, based on the value of the common stock on the date of authorization.
During the year ended September 30, 2011, the
Company issued 275,000 common shares for total consideration of $24,975.
On February 7, 2012, the Company authorized
the issuance of 50,000 common shares to Rachel Boulds, the Company’s CFO, for compensation of services. The shares were issued
at $0.51 based on the value of the common stock on the date of authorization for total compensation expense of $25,500.
On March 7, 2012, the Company authorized the
issuance of 450,000 common shares in conversion of $22,500 of the Junior Capital debenture dated July 1, 2011. The shares were
issued at $0.05 pursuant to the conversion terms of the debenture.
On March 28, 2012, the Company authorized the
issuance of 450,000 common shares in conversion of $22,500 of the Junior Capital debenture dated July 1, 2011. The shares were
issued at $0.05 pursuant to the conversion terms of the debenture.
On April 20, 2012, the Company authorized the
issuance of 450,000 common shares in conversion of $22,500 of the Junior Capital debenture dated July 1, 2011. The shares were
issued at $0.05 pursuant to the conversion terms of the debenture
On June 13, 2012, the Company authorized the
issuance of 250,000 common shares in conversion of $12,500 of the Junior Capital debenture dated July 1, 2011. The shares were
issued at $0.05 pursuant to the conversion terms of the debenture
On June 28, 2012, the Company authorized the
issuance of 400,000 common shares in conversion of $20,000 of the Junior Capital debenture dated July 1, 2011. The shares were
issued at $0.05 pursuant to the conversion terms of the debenture
On July 24, 2012, the Company authorized the
issuance of 1,000,000 common shares in conversion of $32,500 of the Junior Capital debenture dated July 1, 2011. The shares were
issued at $0.0325 pursuant to the conversion terms of the debenture.
On July 27, 2012, the Company authorized the
issuance of 1,015,384 common shares in conversion of $33,000 of the Junior Capital debenture dated January 11, 2012. The shares
were issued at $0.0325 pursuant to the conversion terms of the debenture.
On August 21, 2012, the Company authorized
the issuance of 1,100,000 common shares in conversion of $11,000 of the Junior Capital debenture dated July 1, 2011. The shares
were issued at $0.01 pursuant to the conversion terms of the debenture.
On September 1, 2012, the Company authorized
the issuance of 25,000 common shares to Rachel Boulds, the Company’s CFO, for compensation of services. The shares were issued
at $0.0085 based on the value of the common stock on the date of authorization for total compensation expense of $213. The shares
were issued in October 2012.
During September 2012, the Company authorized
the issuance of 8,166,500 common shares for various services. Shares were issued at $0.0075 - $0.095 for total expense of $66,459.
The shares were issued in October 2012.
During September 2012, the Company authorized
the issuance of 115,000 common shares for related party debt of $440. The shares were issued at $0.0085 based on the value of the
common stock on the date of authorization, resulting in a loss on the conversion of debt of $577. The shares were issued in October
2012.
On October 16, 2012, the Company issued 1,552,795
common shares in conversion of $10,000 of the Neil Linder debenture dated April 9, 2012. The shares
were issued at $0.00644 pursuant to the conversion terms of the debenture.
On October 16, 2012, the Company issued 38,000
common shares in conversion of $380 advanced to the Company by a related party. The shares were issued
at $0.01 based on the value of the common stock on the date of authorization.
During the quarter ended December 31, 2012,
the Company issued 8,191,500 common shares for services and 115,000 common shares for debt. All issuances were previously recorded
as a stock payable.
On February 4, 2013, the Company authorized
the issuance of 75,000 common shares to Rachel Boulds, the Company’s CFO, for compensation of services. The shares were issued
at $0.0369 based on the value of the common stock on the date of authorization for total compensation expense of $2,767.
On June 19, 2013, the Company authorized the
issuance of 200,000 common shares to Rachel Boulds, the Company’s CFO, for compensation of services. The shares were issued
at $0.013 based on the value of the common stock on the date of authorization for total compensation expense of $2,767.
On June 19, 2013, the Company issued 505,000
common shares for services valued at $6,565.
On June 19, 2013, the Company issued 500,000
common shares for accrued compensation. The shares were values at $0.013 for a total of $6,500.
On June 19, 2013, the Company
authorized
the issuance of
500,000
common shares in conversion of $3,950 of the Neil Linder debenture dated
April 9, 2012. The shares were issued at $0.0079 pursuant to the conversion terms of the debenture.
On June 19, 2013, the Company issued 6,000,000
common shares in conversion of $60,000 debt. The shares were valued at $0.013 for a total value of $78,000. The Company has recorded
a loss on conversion of debt of $18,000.
On June 19, 2013,
the Company authorized the issuance of 7,000,000 common shares to George Ivakhnik, the Company’s
Interim CEO, for compensation of services. The shares were issued at $0.013 based on the value of the common stock on the date
of authorization for total compensation expense of $91,000.
NOTE 7: RELATED PARTY TRANSACTION
During September 2012, the Company authorized
the issuance of 115,000 common shares for related party debt of $440. The shares were valued at $0.085, the stock price on the
date of authorization. As a result of the transaction the Company recorded a loss on settlement of debt of $538.
During the year ended September 30, 2012, the
Company authorized the issuance of 75,000 common shares to Rachel Boulds, the Company’s CFO for compensation of services.
The shares were issued based on the value of the common stock on the date of authorization for total compensation expense of $25,713.
On or about February 4, 2013, the Company authorized
the issuance of 75,000 common shares to Rachel Boulds, the Company’s CFO, for compensation of services. The shares were issued
at $0.0369 based on the value of the common stock on the date of authorization for total compensation expense of $2,767.
On June 19, 2013,
the Company authorized the issuance of 200,000 common shares to Rachel Boulds, the Company’s
CFO, for compensation of services. The shares were issued at $0.013 based on the value of the common stock on the date of authorization
for total compensation expense of $2,600.
On June 19, 2013,
the Company authorized the issuance of 7,000,000 common shares to George Ivakhnik, the Company’s
Interim CEO, for compensation of services. The shares were issued at $0.013 based on the value of the common stock on the date
of authorization for total compensation expense of $91,000.
As of June 30, 2013, the Company owed its COO
$9,233. The money was advanced to the company to cover certain operating expenses. Amount is due on demand and accrues interest
at 8% per year.
As of June 30, 2013, the Company owed its Interim
CEO $7,334. The money was advanced to the company to cover certain operating expenses. Amount is due on demand and accrues interest
at 8% per year.
During the period ended June 30, 2013. A former
officer of the Company assigned $60,000 of his accrued salary to an unrelated third party.
NOTE 8: LEGAL PROCEEDINGS
On or about September
1, 2011, the company and its Chief Operating Officer and counsel filed a complaint in federal court, Central District of California,
Case No. CV-11-07233 DMG (MRWx), to recover 6,500,000 shares of common stock transferred to Consultants Marc Cifelli and Arriva
Capital, LLC on the grounds of fraud and failure of consideration. The plaintiffs in the case received a judgment in their favor
on July 30, 2012, to return 6,000,000 shares and a money judgment for the value of 500,000 shares, which is in the process of being
executed. The shares have not yet been returned.
On or about August
31, 2012, the company served notices of rescission on Junior Capital, rescinding that certain $350,000 convertible debenture dated
July 1, 2011, in exchange for promissory note in the amount of $350,000, that certain $20,000 convertible debenture dated October
25, 2011, that certain $40,000 convertible debenture dated March 15, 2012 and that certain $18,000 convertible debenture dated
June 5, 2012, on the grounds of fraud and failure of consideration.
On or about August
31, 2012, the Company has served notices of rescission on Ibacking Corp. that certain $500,000 convertible debenture dated May
29, 2012, on the grounds of fraud and failure of consideration.
On February 13, 2013,
the Company filed an action in federal court, Central District of California, Case No.SAV13-259-DOC, on against Junior Capital,
Inc., Ibacking Corp; and Albert Aimers for securities fraud, rescission, declaratory relief, interference with contract and prospective
economic advantage. On July 22, 2013, the Clerk of the Court entered the default of Junior Capital, Inc. and Ibacking Corp., and
the Company intends to seek a default judgment.
NOTE 9: GOING CONCERN
The accompanying financial statements have
been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation
of the Company as a going concern. The Company has generated minimal revenue during the period September 14, 2007 (inception)
through June 30, 2013, has an accumulated deficit of $6,836,125 and has funded its operations primarily through the issuance
of debt and equity. This matter raises substantial doubt about the Company's ability to continue as a going concern.
These financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities
that might be necessary should the Company be unable to continue as a going concern. Accordingly, the Company’s ability to
accomplish its business strategy and to ultimately achieve profitable operations is dependent upon its ability to obtain additional
debt or equity financing. Management plans to take the following steps that it believes will be sufficient to provide the Company
with the ability to continue in existence.
Management intends to raise financing through
private equity financing or other means and interests that it deems necessary. The Company, as described above, is in the business
of investing in operations of other companies. There can be no assurance that the Company will be successful in its endeavor.
NOTE 10: SUBSEQUENT EVENTS
The Company has performed an evaluation of
subsequent events in accordance with ASC Topic 855. The Company is not aware of any subsequent events which would require
recognition or disclosure in the financial statements.