SAPX Seven Arts Entertainment Inc (PK)

LOS ANGELES, Oct. 17, 2013 /PRNewswire/ -- Seven Arts Entertainment Inc. (OTCQB: SAPXD) ("Seven Arts" or the "Company") announced today its results of operations of the fiscal year ended June 30, 2013.  The Company reported a net loss of $22,062,539 on total revenue of $1,522,808 for the fiscal year ended June 30, 2013, compared to a restated net loss of $11,167,018 on revenues of $4,058,006 for the fiscal year ended June 30, 2012. 

In the fiscal year ended June 30, 2013, the Company has taken substantial write-downs of its film assets of $2,054,171, to net film costs of $8,368,686 as of June 30, 2013 and music assets of $4,718,205 to net music assets of $705,000 as of June 30, 2013 to reflect a reduction in expected future revenues. Additionally, the Company has written off $2,837,545 in costs related to films in development.

The write-down in music assets does not reflect an actual cash loss, as the music assets were acquired with consideration consisting of our Series B preferred stock.  Under generally accepted accounting principles, the music assets, when acquired, were valued at the fair value of the Series B preferred stock, which was calculated based on the trading price of the Company's common stock in February, 2012.  The Company determined that it was appropriate to write down the original value of the music assets based on current estimates of the future sales of our unreleased recordings, which were less than the valuation established in February 2012.  The Series B preferred stock that has, in fact, been converted to date, was converted at less than 10% of the original valuation of the Company's Series B preferred stock.    

The substantial increases in general and administrative costs reflect the write-off of several items of pre-paid expenses that management determined may not be recoverable from planned transactions as well as increased legal costs in connection with increased convertible debentures. A substantial portion of the G&A expenses in 2013 is related to bad debt expense, which includes a $1,180,000 reserve recognized for the fee income receivables due from Seven Arts Pictures Louisiana LLC ("SAPLA"), to reflect delays in their receipt of State tax credits, and $1,868,547 determined to no longer be collectible from Seven Arts Pictures, Inc., a related party, as a result of its current parent company, Seven Arts Pictures PLC, being in liquidation. Net interest expense increased from $2,752,682 to $4,227,472 as of June 30, 2013, reflecting increased interest expense on debt balances, as well as penalties and fees incurred in refinancing the convertible loans. 

The Company has restated its financial statements for the fiscal year ended June 30, 2012 to reflect comments by the Securities and Exchange Commission in connection with a pending Registration Statement on Form S-1 for our warrants.  The principal restatement was for the revenue earned for services provided in connection with the rehabilitation of the facility at 807 Esplanade Avenue in New Orleans that the Company leases for its post-production division.  The Company will be paid through the proceeds from expected tax credit revenues earned by SAPLA, a related party, and the owner of the building. The revenue and related receivable from the related party was restated to reflect only the amount which would have been earned by a third party.  In 2013, we have increased our reserve to cover amounts of the proceeds related to  the Louisiana film infrastructure and historic rehabilitation credits, which are currently the subject of pending litigation, to 100% although management believes the proceeds of those credits will be received by the Company.

Chief Executive Officer Kate Hoffman stated, "Among other items in these financial statements, we wrote down our film and music assets to a conservative and more realizable value, and wrote off a significant amount of prepayments.  We believe these changes will allow the Company to start afresh in this fiscal year.  We are continuing to shrink our indebtedness with a variety of our creditors and expect that we will make material progress in reducing our deficit in stockholder equity by the end of our current fiscal year.

Film revenue increased slightly to $841,956 from $823,006, mainly due to the US release of Nine Miles Down. We continue to develop Winter Queen and Neuromancer and expect casting announcements on both films in the near future.  Distribution revenue on these films is expected for later fiscal years.             

Our production and post-production facility at 807 Esplanade Avenue in New Orleans is now in operation and we expect announcements shortly of new film and television shows which will be using this facility.             

We appreciate the support of all our shareholders despite a difficult trading market in our shares."

About Seven Arts Entertainment Inc.:

Seven Arts Entertainment Inc. is the successor to Seven Arts Pictures Plc, which was founded in 2002 as an independent motion picture production and distribution company engaged in the development, acquisition, financing, production and licensing of theatrical motion pictures for exhibition in domestic (i.e., the United States and Canada) and foreign theatrical markets, and for subsequent worldwide release in other forms of media, including home video and pay and free television.

Cautionary Information Regarding Forward-Looking Statements.

Forward-looking statements contained in this press release are made under the Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995.  Any such statements are subject to risks and uncertainties that could cause actual results to differ materially from the anticipated.  The information contained in this release is as of October 17, 2013.  Seven Arts assumes no obligation to update forward-looking statements contained in this release as the result of new information or future events or developments.

Contact:
Seven Arts Entertainment Inc.
Peter Hoffman
323-372-3080
phoffman@7artspictures.com

SOURCE Seven Arts Entertainment Inc.