______________________________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 2014
OR
( ) TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 000-30800
THE MOVIE STUDIO, INC.
_______________________________________________________
(Exact name of registrant as specified in
its charter)
Delaware
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65-0494581
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer Identification No.)
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2040 Sherman Street, Hollywood, Florida
33020
_______________________________________________________________________________________________
(Address of Principal Executive Offices)
(954) 332-6600
______________________________________________________________________________________________
(Issuer’s telephone number)
N/A
______________________________________________________________________________________________
(Issuer’s facsimile number)
______________________________________________________________________________________________
(Former name, address and fiscal year, if changed since
last report)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common
Stock, $0.001 par value
Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act. Yes No X
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Act. Yes No X
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding twelve months (or for such
shorter periods that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes No [X]
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web Site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of
Regulation S-T during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes____ No [X]
1
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,”
“accelerated filer,” and “smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer_______ Accelerated
filer ____________
Non-accelerated filer ________ Smaller
reporting company [X]
Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):
Yes No [X]
State the aggregate market value of the
voting and non-voting common equity held by non-affiliates computed by
reference to the price at which the common equity was last sold, or the average
bid and asked price of such common equity, as of the last business day of the
registrant’s most recently completed second fiscal quarter.
Aggregate market value of the voting
common stock held by non-affiliates of the registrant as of February 4, 2015,
was $731,600.
Number of shares of our common stock
outstanding as of February 4, 2015 is 236,000,000
Documents incorporated by reference: None
THE MOVIE STUDIO, INC. F/K/A DESTINATION
TELEVISION, INC.
TABLE OF CONTENTS
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Page
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PART I
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ITEM 1
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DESCRIPTION OF
BUSINESS
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4
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ITEM 1A
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RISK
FACTORS
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9
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ITEM 1B
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UNRESOLVED
STAFF COMMENTS
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12
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ITEM 2
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PROPERTIES
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12
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ITEM 3
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LEGAL
PROCEEDINGS
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12
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ITEM 4
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(REMOVED AND
RESERVED)
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13
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PART II
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ITEM 5
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MARKET FOR
COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
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13
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PURCHASES OF
EQUITY SECURITIES
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ITEM 6
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SELECTED
FINANCIAL DATA
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13
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ITEM 7
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MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
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13
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OPERATIONS
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ITEM 7A
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QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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17
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ITEM 8
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CONSOLIDATED
FINANCIAL STATEMENTS
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18
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ITEM 9
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CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
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19
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FINANCIAL
DISCLOSURE
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ITEM 9A
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CONTROLS AND
PROCEDURES
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19
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ITEM 9B
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OTHER
INFORMATION
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19
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PART III
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ITEM 10
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DIRECTORS AND
EXECUTIVE OFFICERS OF THE REGISTRANT
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20
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ITEM 11
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EXECUTIVE
COMPENSATION
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20
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ITEM 12
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
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21
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RELATED
STOCKHOLDER MATTERS
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ITEM 13
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
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21
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ITEM 14
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PRINCIPAL
ACCOUNTING FEES AND SERVICES
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22
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PART IV
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ITEM 15
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EXHIBITS
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22
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PART I
ITEM 1.
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DESCRIPTION OF BUSINESS
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GENERAL
The Movie Studio,
Inc. F/K/A Destination Television, Inc. (“the Company" or “DSTV” or the
"Registrant”) is a publicly traded 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 is a broadcast
media company that used its custom content and entertainment-based programming
along with its proprietary technology to influence the purchasing decisions of
millions of active consumers in targeted “away-from-home” leisure destinations.
The Company’s original core
broadcast business was Bar TV, Gym TV, and Hotel TV, which were designed and implemented
to focus on leisure destinations with entertaining and informative audio and
video content, increasing the duration and frequency of consumer visits and
duration of stay, generating incremental revenue and promoting the sale of
specific products. The Company enabled advertisers and leisure/retailers to
effectively and efficiently reach active consumers at the point of sale (POS)
where most purchase decisions are made. In addition to influencing consumer
behavior, the Company’s programming was proven to be successful in generating
brand awareness and could create additional sales lift. The Company’s business
motto was “Leisure Destinations driving traffic to Retail Locations.”
Over the years, the Company
surveyed the media landscape, combining the best aspects of each medium into
the DSTV’s business model, simultaneously applying it to a very unique physical
space. In 2008, the US advertising industry consolidated, including digital
signage space, because the industry did not provide a quantifiable measurement
platform for its advertisers; at that time, The Company began to reorganize its
business model. In 2009, The Company took the first steps in transitioning its
core business operations into a new media platform, which included
incorporating elements of its original media business model into its new
business, The Movie Studio. In 2010, the Company took the next step, when it
physically began transitioning its core business to the new platform. The Movie
Studio platform consists of three verticals that operate synergistically with
each other. Strategic Partner, is the first of the three verticals. In this
vertical, the Company enters into agreements with substantial asset partners,
wherein these partners can promote their brand, product, or service through the
Movie Studio, which can offer them, through the its vertical integration model,
a variety of opportunities, as a result of their association with the movie
business. Each partner agreement is crafted in the best interest of the
client’s needs or objectives.
Locations Pay Us is the
second vertical, wherein we get paid for filming a scene of our movie at the
location of a client. The excitement generated from motion picture production
at given location can drive traffic to the client’s point of sale (POS); as a
result, the Company and the client both benefit from this arrangement . In
addition, the Company utilizes its win-a-part-in-a-movie contest at the
location; it also provides digital plates to the client’s location, which can
utilize the key art shot of the location as base artwork for web, print or
television at no additional cost in perpetuity. Clients have reported that
their locations have seen double digit increases in their margins on the night
of the filming event. Product Placement is the third vertical. The motion
picture product placement industry is a two billion dollar industry; companies
utilize this platform to create worldwide brand awareness for their brand,
product or service, with the average movie impact of fifteen (15) years (in
five year distribution cycles). In addition, these companies provides us
products that we utilize at movie events for PPG (on premise promotional
giveaways); they also gain additional branding exposure in direct interaction
with the brands exact demographic.
The value proposition for
investors is in the bi-product of manufacturing of a major motion picture asset(s),
which reduces capital expenses (CAP X) by utilizing these vertical in the
manufacturing of the intellectual property (movie) asset. The completed movie
then employs a significant expense to revenue ratio, by utilizing these metrics.
The motion picture asset is ultimately licensed to seventy (70) countries
around the world (foreign market) and domestically in the traditional media
outlet channels, movie theaters, television, DVD, pay cable, Video on Demand
(VOD) mobile etc. In addition the motion picture integrates a soundtrack, which
creates an additional revenue stream for investors. The Company has proven the
business model on all three verticals prior to opening up The Movie Studio, a
7200 Sq. Ft. state of the art production studio in downtown Ft. Lauderdale,
4
complete
with 24X36 green screen, infinity wall, edit suites, complete motion picture
manufacturing lighting and equipment, cameras make-up station, talent division,
and in-house marketing. The Movie Studio has manufactured its first feature
film production for Ventures Capital Partners, LLC. Is titled Exposure
starring Corey Feldman and is currently in pre-production of the sequel Double
Exposure. In addition, The Movie Studio can generate additional revenue
streams from studio rentals and music video production. The Company
is currently fully
operational and implementing its business model to scale the Companies
operations in 2013 and beyond. The Company changed its name of operations from
Destination Television, Inc. to The Movie Studio, Inc. In November, 2012 and has
applied for a new stock symbol, requesting: (MOVI).
INDUSTRY BACKGROUND
Film Studio:
The Movie Studio, Inc. is an entertainment or motion picture company
that has its own privately owned studio facility that is used to make films,
which is handled by the production company. The majority of companies in the
entertainment industry have never owned their own studios, but have rented
space from other companies. There are also independently owned studio
facilities, which have never produced a motion picture of their own because
they are not entertainment companies or motion picture companies – they are
companies who sell only studio space.
Beginnings:
In
1893, Thomas
Edison built the first movie studio in the United States when
he constructed the Black Maria, a tarpaper-covered structure near his
laboratories in West Orange, New Jersey, and asked
circus, vaudeville, and dramatic actors to perform for the camera. He
distributed these movies at
vaudeville theaters, penny arcades, wax museums, and fairgrounds. The
pioneering film studio was founded in New Rochelle, New York in 1909 by American theatrical
impresario Edwin
Thanhouser. The company produced and released 1,086 films between
1910 and 1917, successfully distributing them around the world. The first film serial ever, Million Dollar Mystery, was released by the Thanhouser Company
in 1914. In the early 1900s, companies started moving to Los Angeles, California.
Although electric
lights were by then widely available, none were yet powerful
enough to adequately expose film; the best source of illumination for motion
picture production was natural sunlight. Some movies were shot on the roofs of
buildings in Downtown Los Angeles. Early movie producers also relocated
to Southern
California to escape Edison's motion picture patents company,
which controlled almost all the patents relevant to movie
production at the time.
The
first movie studio in the Hollywood area
was Nestor
Studios, opened in 1911 by Al Christie for David Horsley. In the
same year, another 15 independents settled
in Hollywood. Other production companies eventually settled in the Los Angeles
area in places such as Culver City, Burbank,
and what would soon become known as Studio City in the San
Fernando Valley.
An independent film is a professional film production resulting in a feature film that is produced mostly or completely
outside of the major film
studio system. In addition to being produced
and distributed by independent entertainment companies, independent films are
also produced and/or distributed by subsidiaries of major film studios. Independent films
are sometimes distinguishable by their content and style and the way in which
the filmmakers' personal artistic vision is realized. Usually, but not always,
independent films are made with considerably lower film budgets than major studio films. Generally, the marketing of
independent films is characterized by limited release,
but can also have major marketing campaigns and a wide release. Independent films
are often screened at local, national, or international film festivals before distribution (theatrical
and/or retail release). An independent film production can rival a mainstream film production if it has the necessary funding and distribution.
PRINCIPAL PRODUCTS AND THEIR MARKETS
The Movie Studio, Inc. (OTC:
SYMBOL: DSTV Requested: MOVI)
Due to the proliferation of
new mobile media platforms in society, The Movie Studio intends to enter into
the personalized content & media space utilized by consumers via laptops, tablets,
smartphone’s and new out-of home devices as they are developed.
5
The
Movie Studio intends to manufacture independent content that fits the
marketplace void including indie movies with relevant movie stars and indie
soundtracks with substantial fan bases that we can reach their demographic
on-line and sell digital downloads direct to consumers with a minimum barrier
to entry and minimum capital expenditures compared to traditional marketing
forms of content delivery. In addition to traditional marketing platforms that
we intend to sell and leverage as well, The Movie Studio intends to sell its
content and where it’s available on all devices, mobile, I-Pad etc. for the
personal user with the personal playlist of unique and indie content relevant
to their interests applicable for the individual and their consumption.
The Movie Studio
is implementing its new proven vertically integrated revenue model:
(a) Strategic
Partners in Motion Pictures.
(b) Locations Pay
US a fee for placement in the movie, which can monetize our platform at their
point of sale (POS).
(c) Product Placement: we
receive a fee for product placement in a movie, product branding, and on premise
promotional giveaways (PPG). In addition the Product Placement client receives
digital plates and the same benefits as Location Pay US a fee client receive
(see (b) above).
(d) At the American Film
Market in November 2011, the Company established significant motion picture
arrangement for worldwide distribution, to provide investors an exit strategy
for (1) their movie partnership investment units and (2) shareholdings in the
Company. In May 1, 2012, we have entered into an exclusive worldwide distribution
agreement with Cinema Arts Entertainment, with minimum guarantees (MG’s) that sales
will total $520,000 for the first 10 markets.
(e) The completed movie then
employs a significant expense to revenue proposition by utilizing these metrics
and licenses the motion picture asset to seventy (70) countries around the
world (foreign market) as well as domestically in traditional media outlet
channels, movie theaters, television, DVD, pay cable, video on demand (VOD)
mobile etc. In addition the motion picture integrates a soundtrack that creates
an additional revenue stream for investors.
In addition, the
Company provides locations digital plates and green screen application for use
in movies, commercials, for the location, web-applications and print that can
significantly monetize the location, while 360 degree media branding at the location
can be an applicator for the location in a variety of ways:
Promotional Media
Promotional media
is a broad marketing term that describes methods used to promote goods and or
services. Promotional media can be broken into several categories or channels,
including:
Print Media--is
all the media we use in hard copy format such as
* Business
cards
* Brochures
* Posters
* Promotional
Literature
* Banners
Digital Media--this
includes the internet
* Video
Promotion
* Websites
* Social
Media
* Digital
Signage
* Digital
Tags
* Smartphone
Apps
* Radio
/ TV
6
Promotional Gifts--often used to stay top-of-mind with customers
* Pens
* Caps
* T-shirts
* Mugs
* Bags
* Banners
DISTRIBUTION METHODS
Film
distribution Methods: A
distributor is a company or
individual responsible for the marketing of a film. The distributor may set the release date of a film and the method by which a film is to be exhibited
or made available for viewing: for example, directly to the public either
theatrically or for home viewing (DVD, video-on-demand (VOD), download, television programs through broadcast syndication etc.). A distributor may do this directly,
if the distributor owns the theaters or film distribution networks, or through theatrical exhibitors
and other sub-distributors. A limited distributor may deal only with particular
products, such as DVDs or Blu-ray, or may act in a particular country or
market.
Theatrical
distribution:
If a
distributor is working with a theatrical exhibitor, the distributor secures a
written contract stipulating the amount of the gross ticket sales to be paid to the distributor
by the exhibitor (usually a percentage of the gross) after first deducting a
floor, which is called a house allowance (also known as the
nut), collects the amount due, audits the exhibitor's ticket sales, as
necessary, to ensure the gross reported by the exhibitor is
accurate, secures the distributor's share of these proceeds, and transmits the
remainder to the production company (or to any other intermediary,
such as a film release agent).
The
distributor must also ensure that enough film prints are struck to service all contracted
exhibitors on the contract-based opening day, ensure their physical delivery to the
theater by the opening day, monitor exhibitors to make sure the film is in fact
shown in the particular theatre with the minimum number of seats and show
times, and ensure the prints' return to the distributor's office or other
storage resource also on the contract-based return date. In practical terms,
this includes the physical production of film prints and their shipping around the world (a process that is
beginning to be replaced by digital distribution) as well as the creation of posters, newspaper and magazine advertisements, television commercials, trailers, and other types of ads.
The distributor is also responsible for
ensuring a full line of advertising material is available on each film which it
believes will help the exhibitor attract the largest possible audience, create
such advertising, if it is not provided by the
production company, and arrange for the physical delivery of the advertising
items selected by the exhibitor at intervals prior to the opening day.
If the distributor is
handling an imported or foreign film, it may also be responsible for securing
dubbing or subtitling for the film, and securing censorship or other legal or
organizational approval for the exhibition of the film in the country/territory
in which it does business, prior to approaching the exhibitors for booking. Depending
on which studio is distributing the film, the studio will either have offices
around the world, by themselves or partnered with another studio, to distribute
films in other countries. If a studio decides to partner with a native
distributor, upon release, both names will appear. The foreign distributor may
license the film for a certain amount of time, but the studio will retain the
copyright of the film.
Early distribution windows:
Although there
are numerous distribution techniques today, previous to the multi-channel
transition, studios and networks did not experiment with different distribution
processes. Studios believed that the new distribution methods would cause their
old methods of revenue to be destroyed. Within time, the development of new
distribution did prove to be beneficial. The studios revenue was gained from
myriad distribution windows. These windows created many opportunities in the
industry and allowed networks to make a profit and eliminate failure. These new
distribution methods benefited audiences that were normally too small to reach
and expanded the content of television. With the new age of technology,
networks accepted the fact that it was a consumer demand industry and accepted
the new models of distribution.
7
Non-theatrical
distribution:
This term,
used mainly in the British film industry, describes the distribution of feature films for
screening to a gathered audience, but not in theatres at which individual
tickets are sold to members of the public. The defining distinctions between a
theatrical and a non-theatrical screening are that the latter has to be to a closed
audience in some way, e.g. pupils of a school, members of a social club or
passengers on an airliner, and that there can be no individual admission
charge. Most non-theatrical screening contracts also specify that the screening
must not be advertised, except within the group that is eligible to attend
(e.g. in a membership organisation's newsletter or an in-flight magazine).
The largest
market for non-theatrical distribution is probably the airlines, followed by film societies. Non-theatrical distribution is generally
handled by companies that specialise in this market, of which Filmbank [1] is Britain's largest, representing the
major Hollywood studios. Home video media is sold with a licence that permits
viewing in the home only (hence the copyright notice that appears at the start of many VHS tapes and DVDs, which states that the content must not be
shown in oil rigs, prisons or schools). Until these technologies were
widespread, most non-theatrical screenings were on16mm film prints supplied by the distributor. Today, the
most common business model is for a distributor to sell the exhibitor
a licence that permits the legal projection of a copy of the film, which the
exhibitor buys separately on a home video format. These licences can either be
for individual, one-off screenings, or cover an unlimited number of screenings
of titles represented by that distributor for a specified time period. The
latter are often purchased by pubs and students' unions, to enable them to show occasional feature films on a
TV in their bars.
Home video distribution:
Some
distributors only handle home video distribution or some sub-set of home video
distribution such as DVD and/or Blu-ray distribution and now the fastest
growing area id Video on Demand (VOD). The remaining home video rights may be
licensed by the producer to other distributors or the distributor may
sub-license them to other distributors.
If
a distributor is going to distribute a movie on a physical format such as DVD,
they must arrange for the creation of the artwork for the case and the face of
the DVD and arrange with a DVD replicator to create a glass master to press
quantities of the DVD.
Today, some movie producers are using a process
called DVD-on-demand. In DVD-on-demand, a company will burn a DVD-R (a process
called duplication) when a copy of the DVD is ordered, and then ship in to the
customer.
A
distributor may also maintain contact with wholesalers, who sell and ship DVDs to retail outlets
as well as online stores, and arrange for them to carry the DVD. The
distributor may also place ads in magazines and online and send copies of the
DVD to reviewers.
The
newest area Video on Demand (VOD) is expected to grow as a result of new media devices, mobile
phones, PDA’s, tablets and I-Pads as additional ways individuals consume
content.
The New Hollywood/Foreign
Distribution:
In the past, big
studios have not always used analysis, analytics, metrics or measurement; but
that is not true any longer. Companies such as Relativity Media use a new Hollywood
approach that is vastly more technical than preparing an analysis of how many
people actually attend the theater as a result of buying a ticket. Their
approach now accounts for thousands of variables, from the stars of a movie to
its release date to the type of media used in production, and compares each of
those variables to nearly every film ever made with at least one of the same
attributes. It takes four people just to operate the program that governs their
approach.
New Hollywood
companies employ a movie-rejection system, not a movie-picking system, while
the data-intensive approach operates on a new paradigm of new media marketing
and buzzworthy elements intertwined into the infrastructure of the movie. Big
studios are swinging for the fences, and they lose money on 85 percent of the
movies they make; they don’t have a hedge against those losses, so they need
the one or two franchise movies each year to make up for the money losers. New
Hollywood studios have hedges; they make movies that people will love, but also
on a financially based system. They don’t take huge risks.
8
The New Hollywood studios can make money without a blockbuster on
its slate, if it controls upfront costs and has unique arrangements with film
distributors on the back-end. Unlike most major studios, who own their own
distribution companies, New Hollywood studios seek relationships with over 117
distributors around the globe, each of which could come under contract to buy
any movie the studio makes at a preset percentage of the film’s budget. In
return, the distributors are guaranteed a piece of the back-end revenue for
each movie. For New Hollywood studios, the structure is a safety net for films
that underperform, a safety net the major studios don’t have.
STATUS OF ANY PUBLICLY ANNOUNCED NEW PRODUCTS
The
Movie Studio has manufactured its first feature film production for Ventures
Capital Partners, LLC, a film titled Exposure, starring Corey Feldman.
The studio is currently in pre-production of the sequel Double Exposure.
In addition, The Movie Studio can generate additional revenue streams from
studio rentals and music video production. The Company is currently fully
operational and implementing its business model for operations in 2013 and
beyond.
SOURCES AND AVAILABILITY OF PRODUCTS
The
Movie Studio has manufactured its first feature film production for Ventures
Capital Partners, LLC, a film titled Exposure, starring Corey Feldman.
The studio is currently in pre-production of the sequel Double Exposure.
In addition, The Movie Studio can generate additional revenue streams from
studio rentals and music video production. The Company is currently fully
operational and implementing its business model for operations in 2013 and
beyond.
DEPENDENCE ON ONE OR A FEW MAJOR CUSTOMERS
The Company is not dependent on one or a few major customers.
PATENTS AND TRADEMARKS
Destination Television®
currently owns the registered trademark for the name and brand for Destination
Television, Inc. with the United States Patent and Trademark office (USPTO).
The Movie Studio ™ is a trademark of The Movie Studio, however, is not a
registered trademark.
The Movie Studio is a 7200 Sq.
Ft. state of the art production studio in downtown Ft. Lauderdale, complete
with green screen, infinity wall, edit suites, complete motion picture
manufacturing lighting and equipment, cameras, make-up station, talent division
and in-house marketing.
ENVIRONMENTAL LAWS
Our operations are not subject to environmental laws and
regulations.
EMPLOYEES
The Company currently is
currently completing its quasi-reorganization and currently employs one (1)
full time employee, the president and utilizes the services of numerous work
for hire and other individuals.
ITEM 1A. RISK FACTORS
Lack
of Profitable Operating History
The
Company does not have a history of profitable operation. There is no assurance
that the Company will ever be profitable. The Company’s ability to achieve
profitability will depend upon a number of factors, including, but not limited
to, whether the Company:
• has
funds available for working capital, project development and sales and
marketing efforts;
• has
funds for the continuous upgrading of its production operations and facilities;
• achieves
the projected sales revenues;
• controls
the Company’s operating expenses;
• continues
to attract new business; and
•
withstands competition in the Company’s marketplace.
9
Competition
The
Company’s competitors are rapidly changing and may be well capitalized and
financially stronger than Destination Television. Our competitors could
reproduce the company’s business model without significant barriers to entry.
The
Company’s activities may require additional financing, which may not be
obtainable.
The Company had limited cash
deposits. Based on the Company’s expectations as to future performance, the
Company considers these resources and existing and anticipated credit facilities,
to be inadequate to meet the Company’s anticipated cash and working capital needs
at least through January 31, 2015. The Company, however, expects to be able to
raise capital to fund the Company’s operations, current and future acquisitions
and investment in new program development. The Company may also need to raise
additional capital to fund expansion of the Company’s business by way of one or
more strategic acquisitions. Unless the Company’s results improve
significantly, it is doubtful that the Company will be able to obtain
additional capital for any purpose if and when the Company needs it.
The
Company depends heavily on the Company’s senior management who may be difficult
to replace.
The Company believes that the
Company’s future success depends to a significant degree on the skills,
experience and efforts of its chairman, CEO, and other key executives. Any of
these executives would be difficult to replace. While all of them have
incentives to remain with the Company, they are not bound by employment
contracts, and there is no assurance that either of them will not elect to
terminate their services to us at any time.
Increasing
the Company’s business depends on the Company’s ability to increase demand for
the Company’s products and services.
While the Company believes
that there is a market for its planned increase in the Company’s products and
services, there is no guarantee that the Company will be successful in its
choice of product or technology or that consumer demand will increase as the
Company anticipates.
The
Company may be exposed to significant costs of defense and damages in
litigation stemming from current unresolved legal proceedings undertaken in the
future by and against the Company.
The Company could be subject
of legal proceedings against the Company that could give rise to significant
exposure in costs and damages.
The
Company’s ability to operate and compete effectively requires that the Company
hires and retain skilled marketing and technical personnel, who have been in
short supply from time to time and may be unavailable to us when the Company
needs them.
The Company’s business
requires us to be able to continuously attract, train, motivate and retain
highly skilled employees, particularly marketing and other senior management
personnel. The Company’s failure to attract and retain the highly trained
personnel who are integral to the Company’s sales, development and distribution
processes may limit the rate at which the Company can generate sales. The
Company’s inability to attract and retain the individuals the Company needs
could adversely impact the Company’s business and its ability to achieve
profitability.
The
Company may suffer from a business interruption and continuity of its ongoing
operations might be affected.
The Company’s ability to
implement its business plans may be adversely affected by any business
interruption that will affect the continuity of its operations. While the
Company may take reasonable steps to protect itself, there could be interruptions
from computer viruses, server attacks, network or production failures and other
potential interruptions that would be beyond the Company’s reasonable control.
There can be no assurance that the Company’s efforts will prevent all such
interruptions. Any of the foregoing events may result in an interruption of
services and a breach of the Company’s obligations to its clients and customers
or otherwise have a material adverse effect on the business of the Company.
10
Macro-economic
factors may impede business, access to finance or may increase the cost of
finance or other operational costs of the Company.
Changes in the United States
and global financial and equity markets, including market disruptions, interest
rate fluctuations, or inflation changes, may make it more difficult for the
Company to obtain financing for its operations or investments or increase the
cost of obtaining financing. In the event that the Company is delayed in
attaining its projections, borrowing costs can be affected by short and
long-term debt ratings assigned by independent ratings agencies which are
based, in significant part, on the Company’s performance as measured by credit
metrics such as interest coverage and leverage ratios. Decrease in these ratios
or debt ratings would increase the Company’s cost of borrowings and make it
more difficult to obtain financing.
There
is a limitation on the officers and directors liability.
The articles of the Company
limit the personal liability of directors and officers for breach of fiduciary
duty and the Company provides an indemnity for expenses and liabilities to any
person who is threatened or made a party to any legal action by reason of the
fact that the person is or was a director or officer of the Company unless the
action of proven to that the person was liable to be negligent or misconduct in
the performance of their duty to the Company.
The loss of our key
officers or directors may raise substantial doubt as to the continued viability
of the Company.
The Company’s operations depend
on the efforts of key officers and directors and the loss of their services may
irreparably harm the Company in such a manner that it may not be able to
overcome any such loss in management.
Investors
may lose their entire investment if the Company fails to implement its business
plan.
The Company expects to face
substantial risks, uncertainties, expenses, and difficulties because it is a
development stage company. The Company was formed in 1961. The Company has no
demonstrable operations record of substance upon which you can evaluate the
Company’s business and prospects. The Company prospects must be considered in
light of the risks, uncertainties, expenses and difficulties frequently
encountered by companies in their early stages of development. The Company
cannot guarantee that it will be successful in accomplishing its objectives.
As of the date of this
prospectus, the Company has had only limited startup operations and has
generated very small revenues. Considering these facts, independent auditors
have expressed substantial doubt about the Company’s ability to continue as a
going concern in the independent auditors’ report to the financial statements
included in the registration statement, of which this prospectus is a part. In
addition, the Company’s lack of operating capital could negatively affect the
value of its common shares and could result in the loss of your entire
investment.
Because of our new
business model, we have not proven our ability to generate profit, and any
investment in The Company is risky.
We have very little
meaningful operating history so it will be difficult for you to evaluate an
investment in our stock. We have not sold any of our products to date. Our
auditors have expressed substantial doubt about our ability to continue as a
going concern. We cannot assure that we will ever be profitable. Since we
have not proven the essential elements of profitable operations, you will be
furnishing venture capital to us and will bear the risk of complete loss of
your investment in the event we are not successful.
We may be unsuccessful in
monitoring new trends.
Our net revenue might
decrease with time. Consequently, our future success depends on our ability to
identify and monitor trends and the development of new markets. To establish
market acceptance of a new technologies, we will dedicate significant resources
to research and development, production and sales and marketing. We will incur
significant costs in developing, commissioning and selling new products, which
often significantly precedes meaningful revenues from its sale. Consequently,
new business can require significant time and investment to achieve
profitability. Prospective investors should note, however, that there can be no
assurance that our efforts to introduce new products or other services will be
successful or profitable.
11
We
may face distribution and product risks.
Our future financial results
depend in large part on our ability to develop relationships with our
customers. Any disruption in our relationships with our future customers could
adversely affect our financial performance.
We may face claims of
infringement on intellectual property rights.
Other parties may assert
claims of ownership or infringement or assert a right to payment with respect
to the exploitation of certain intellectual properties against us. In many
cases, the rights owned or being acquired by us are limited in scope, do not
extend to exploitation in all present or future uses or in perpetuity. We
cannot assure you that we will prevail in any of these claims. In addition, our
ability to demonstrate, maintain or enforce these rights may be difficult. The
inability to demonstrate or difficulty in demonstrating our ownership or
license rights in these technologies may adversely affect our ability to
generate revenue from or use of these intellectual property rights.
If
our operating costs exceed our estimates, it may impact our ability to continue
operations.
We believe we have accurately
estimated our needs for the next twelve months. It is possible that we may need
to purchase additional equipment, hire additional personnel, and further
develop new business ventures, or that our operating costs will be higher than
estimated. If this happens, it may impact our ability to generate revenue and
we would need to seek additional funding. We intend to establish our initial
client base via existing relationships that our directors and officers have
established in past business relationships. Should these relationships not
generate the anticipated volume of business, any unanticipated costs would
diminish our working capital.
Competitors
with more resources may force us out of business.
Competition in our sectors of
business come from a variety of factors, including quality, timely
commissioning of new projects, product positioning, pricing and brand name
recognition. The principal competitors for our business may do this better
than we can. Each of these competitors has substantially greater financial
resources than we do. New technologies may also present substantial
competition. We may be unsuccessful in competing with these competitors, which
may materially harm our business.
The Company may not be
able to attain profitability without additional funding, which may be unavailable.
The Company has limited
capital resources. Unless the Company begins to generate sufficient revenues to
finance operations as a going concern, the Company may experience liquidity and
solvency problems. Such liquidity and solvency problems may force the Company
to cease operations if additional financing is not available.
ITEM 1B. UNRESOLVED
STAFF COMMENTS
None.
The Company leased 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 $54,000 for each of the
years ended October 31, 2013 and October 31, 2012.
As of November 1st 2014, the Movie Studio, Inc. moved
its production facility without executing a lease agreement or rent agreement
to a new 17,000 square foot studio in Hollywood Florida with administrative office
space, food court, and 5,000 square foot sound, green screen stage, stage 2
edit suites and two audio suites and voice over booth. It’s new business
address is 2040 Sherman Street Hollywood, Florida 33020.
ITEM 3.
|
LEGAL PROCEEDINGS
|
None
12
ITEM 4.
|
REMOVED AND RESERVED
|
PART II
ITEM 5.
|
MARKET FOR REGISTRANT’S COMMON EQUITY,
RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|
On November 12, 2014, there were 439 common
stock shareholders of record.
DIVIDENDS
We do not intend to retain future earnings
to support our growth. Any payment of cash dividends in the future
will be dependent upon: the amount of funds legally available; therefore, our
earnings; financial condition, capital requirements, and other factors which
our board of directors deems relevant.
ITEM 6. SELECTED CONSOLIDATED
FINANCIAL DATA
Not applicable
ITEM 7.
|
MANGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
The following Management’s Discussion and Analysis
(‘M&D&A”) is intended to help the reader understand the results of
operations and financial condition of The Movie Studio, Inc. F/K/A Destination
Television, Inc.. MD&A is provided as a supplement to, and should be read
in conjunction with, our financial statements and the accompanying Notes to
Financial Statements.
Forward Looking Statements
The
Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for certain forward-looking statements. Certain information
included in this Annual Report on Form 10-K, and other materials filed or to be
filed by us with the Securities and Exchange Commission (as well as information
included in oral statements or other written statements made or to be made by
us or our management) contain or will contain, forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended, and Section 27A of the Securities Act of 1933, as amended. The words
"believe," "expect," "anticipate," "estimate,"
project" and similar expressions identify forward-looking statements,
which speak only as of the date the statement was made. We undertake no
obligation to publicly update or revise any forward-looking statements. Such
forward-looking statements are based upon management's current plans or
expectations and are subject to a number of uncertainties and risks that could
significantly affect current plans, anticipated actions and our future
financial conditions and results. As a consequence, actual results may differ
materially from those expressed in any forward-looking statements made by or on
behalf of us as a result of various factors. Any forward-looking statements are
made pursuant to the Private Securities Litigation Reform Act of 1995 and, as
such, speak only as of the date made.
13
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.
Results of Operations for the
years ended October 31, 2014 and 2013
The following tables sets forth a summary
of financial highlights for the years ended October 31:
|
|
Year Ended
|
|
|
|
|
|
|
October 31,
|
|
|
|
%
|
|
|
2014
|
|
2013
|
|
Change
|
|
Change
|
Statement of
operations data:
|
|
2014
|
|
2013
|
|
Changes
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$ 31,679
|
|
$ 295,824
|
|
$ (264,145)
|
|
-
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
337,862
|
|
444,608
|
|
(106,746)
|
|
-24%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
(306,183)
|
|
(148,784)
|
|
(157,399)
|
|
(14%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per
share
|
|
$ (0.001)
|
|
$ (0.001)
|
|
|
|
|
For the years ended October 31, 2014 and 2013, we reported a net
loss of $306,183 and $148,784, respectively, an increase in net loss of $157,399.
The increase in net loss is primarily attributable to a decrease in revenue of
$264,145, partially offset by a decrease in total expenses of $106,746.
For the years ended October 31, 2014 and 2013, we reported
revenues of $31,679 and $295,824, respectively.
Total expenses for the years ended October 31, 2014 and 2013 were
$335,951 and $444,608, respectively, a decrease of $106,746, or 24%. This decrease
is primarily attributable of a decrease of $106,746 in selling and general
administrative expenses.
Interest expense decreased $39,644 for the year ended October 31,
2014 to $0 from the $39,644 reported for the prior fiscal year. This decrease results
from an overall elimination of debt obligations during the year ended October
31, 2014.
14
Liquidity
and Capital Resources
For the year
ended October 31, 2014, we used $279,159 for operating activities, as compared
to $404,944 used for operations for the year ended October 31, 2013.
Historically, we
have financed our business primarily from the receipt of cash from financing
activities. During the year ended October 31, 2014, we received proceeds of $198,667
from the issuance of common stock and $0 from any related party loans made to
the Company.
At October 31,
2014, we reported total liabilities of $2,273,833, all of which is current and due
within one year. The liability total consists of loans payable to an entity
owned by a shareholder and officer of the Company, of $1,371,463. This entity
assumed the debt due to Dr. Terry for an equity interest in the entity owned by
the shareholder and officer. The Company was also indebted to its president
and CEO in the amount of $902,370; $831,888 of this amount represented unpaid wages
and the balance of $70,482 represents funds he advanced to the Company for
working capital purposes.
At October 31, 2013,
we reported total liabilities of $2,587,676, all of which was current and due
within one year. The liability total consists of loans payable to an entity
owned by a shareholder and officer of the Company, of $1,371,463. This entity
assumed the debt due to Dr. Terry for an equity interest in the entity owned by
the shareholder and officer. The Company was also indebted to its president
and CEO in the amount of $803,698 representing unpaid wages and funds he
advanced to the Company for working capital purposes.
The
Company has been delinquent in its payment of payroll taxes for the
periods of December 2005; March, June and September of 2006 in the amount of
$412,500. During February of 2013, the Internal Revenue Service deemed the
unpaid balance as “Uncollectible” allowing the Company to write-off the
obligations, however, the President of the Company was issued a Levy on his Wages,
Salary, and Other Income personally in the amount of $93,457 owed to and for
the Trust Fund Management Penalty. Any payroll tax obligations for the
calendar years since 2007, 2008, 2009, 2010, 2011, 2012 and 2013 that have been
incurred have been paid as required. There were no payroll taxes incurred for any
of the three quarters then ended October 31st, of 2014.
Capital
Expenditures
Our requirements
for capital expenditures should not exceed $10,000 for year ended October 31,
2014.
Inflation
We believe that inflation has not had a
material effect on our operations during 2014 and 2013.
Off-balance Sheet Arrangements
We did not have any off-balance sheet
arrangements during 2014 and 2013.
Recently Issued Accounting Standards
In February 2013, the accounting
guidance was amended for obligations resulting from joint and several liability
arrangements for which the total amount of the obligation is fixed at the
reporting date. The amendments provide guidance on the recognition,
measurement, and disclosure of obligations resulting from joint and several
liability arrangements, including debt arrangements, other contractual
obligations, and settled litigation and judicial rulings, for which the total
amount of the obligation is fixed at the reporting date. The amendment was
effective for the Company beginning January 1, 2014 and was applied
retrospectively. The adoption of this guidance did not have a material effect
on the Company’s results of operations, cash flows or financial condition.
In July 2013, the
Financial Accounting Standards Board (“FASB”) issued Accounting Standards
Update (“ASU”) No. 2013-11, Presentation of an Unrecognized Tax Benefit
When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit
Carryforward Exists, which states that entities should present the
unrecognized tax benefit as a reduction of the deferred tax asset for a net
operating loss (“NOL”) or similar tax loss or tax credit carryforward rather
than as a liability when the uncertain tax position would reduce the NOL or
other carryforward under the tax law. The Company will be required to adopt
this new standard on a
15
prospective
basis in the first interim reporting period of fiscal 2015, though early
adoption is permitted as is a retrospective application. We do not anticipate
that the adoption of this standard will have a material effect on the Company’s
results of operations, financial position or cash flows.
In May 2014, the Financial
Accounting Standards Board ("FASB") issued Accounting Standards
Update No. 2014-09, Revenue from Contracts with Customers ("ASU
2014-09"). It outlines a single comprehensive model for entities to use in
accounting for revenue arising from contracts with customers and supersedes
most current revenue recognition guidance, including industry-specific
guidance. The core principle of the revenue model is that revenue is recognized
when a customer obtains control of a good or service. A customer obtains
control when it has the ability to direct the use of and obtain the benefits from
the good or service. ASU 2014-09 is effective for annual periods beginning
after December 15, 2016, including interim periods within that annual period.
The Company is in the process of assessing the impact of the adoption of ASU
2014-09 to its consolidated financial statements.
In June 2014, accounting
guidance was updated for stock-based awards when the terms of an award provide
that a performance target that affects vesting could be achieved after the
requisite service period. The current accounting standard for stock-based
compensation as it applies to awards with performance conditions should be
applied. This guidance is effective for the Company as of January 1, 2016.
The Company is currently evaluating this guidance, but does not anticipate it
will have a material impact on its financial statements.
In June 2014, the FASB
issued ASU 2014-12, Accounting for Share-Based Payments When the Terms of an
Award Provide That a Performance Target Could Be Achieved after the Requisite
Service Period. This guidance requires that a performance target that
affects vesting and that could be achieved after the requisite service period
be treated as a performance condition of the award. A reporting entity should
apply existing guidance in Accounting Standards Codification Topic 718, Compensation-Stock
Compensation, as it relates to such awards. The guidance is effective for
fiscal years beginning after December 15, 2015, and may be applied
prospectively or retrospectively. Early adoption is permitted. The Company is
currently evaluating the impact that the adoption of this guidance will have on
the Company’s consolidated statements and related disclosures.
In August 2014, the FASB
issued ASU 2014-15, Presentation of Financial Statements – Going Concern
(Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to
Continue as a Going Concern. The guidance requires an entity to evaluate
whether there are conditions or events, in the aggregate, that raise
substantial doubt about the entity’s ability to continue as a going concern
within one year after the date that the financial statements are issued (or
within one year after the financial statements are available to be issued when
applicable) and to provide related footnote disclosures in certain circumstances.
The guidance is effective for the annual period ending after December 15, 2016,
and for annual and interim periods thereafter. Early application is permitted.
We do not believe the adoption of this guidance will have a significant impact
the Company’s consolidated statements and related disclosures.
The Company has reviewed all other recently issued, but not yet
adopted, accounting standards in order to determine their effects, if any, on
its results of operation, financial position or cash flows. Based on
that review, the Company believes that none of these pronouncements will have a
significant effect on its consolidated financial statements.
.
Critical Accounting Policies and Estimates
We prepared our consolidated financial statements in conformity
with accounting principles generally accepted in the United States of America.
In preparing these consolidated financial statements, we are required to make
judgments, assumptions and estimates, which we believe are reasonable and
prudent based on the available facts and circumstances. These judgments,
assumptions and estimates affect certain of our revenues and expenses and their
related balance sheets. On an on-going basis, we re-evaluate our selection of
assumptions and the method of calculating our estimates. Actual results,
however, may materially differ from our calculated estimates and this
difference would be reported in our current operations. Our critical accounting
policies include income taxes and stock-based compensation for services.
16
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.
Stock-Based Compensation for Services
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 2013 or 2012 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 years ended October 31, 2013 and 2012,
respectively, related to consulting services.
ITEM 7A. QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
17
ITEM 8.
|
FINANCIAL STATEMENTS
|
Our financial statements, together with
the report of auditors, are as follows
|
|
CONSOLIDATED
BALANCE SHEET AS OF OCTOBER 31, 2014 and 2013
|
F-2
|
|
|
CONSOLIDATED
STATEMENTS OF OPERATIONS FOR THE YEARS ENDED OCTOBER 31,
|
F-3
|
2014 AND 2013
|
|
|
|
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY FOR THE
|
F-4
|
YEARS ENDED
OCTOBER 31, 2014 AND 2013
|
|
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED OCTOBER 31,
|
F-5
|
2014 AND 2013
|
|
|
|
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
|
F-6 - F-12
|
|
|
|
|
|
|
18
TERRY L. JOHNSON, CPA
406 Greyford Lane
Casselberry, Florida 32707
Phone 407-721-4753
Fax/Voice Message 866-813-3428
E-mail cpatlj@yahoo.com
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board
of Directors
The Movie Studio, Inc.,
I
have audited the accompanying balance sheets of The Movie Studio, Inc. as of
October 31, 2014 and 2013 and the statements of operations, stockholders’
equity, and cash flows for the years ended October 31, 2014 and 2013. These
financial statements are the responsibility of the Company’s management. My
responsibility is to express an opinion on these financial statements based on
my audit.
Management’s Responsibility for Financial
Statements
Management is responsible for the
preparation and fair presentation of these consolidated financial statements in
accordance with accounting principles generally accepted in the United State of
America; this includes the design, implementation and maintenance of internal
control relevant to the preparation and fair presentation of financial
statements that are free from material misstatement, whether due to fraud or
error.
Auditor’s Responsibility
My responsibility is to express an opinion
on these consolidated financial statements based on my audits. I conducted my
audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that I plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. The Company is not
required to have, nor was I engaged to perform, an audit of its internal
control over financial reporting. My audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, I express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall consolidated financial statement
presentation. I believe that my audits provide a reasonable basis
for my opinion.
Opinion
In
my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of The Movie Studio, Inc. as of
October 31, 2014 and 2013 and the results of its operations and its cash flows
for the years ended October 31, 2014 and 2013 in conformity with accounting
principles generally accepted in the United States.
Emphasis of Matter
The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern. As discussed in Note 3 to the financial
statements, the Company has a minimum cash balance available for payment of
ongoing operating expenses, has experienced losses from operations since
inception, and it does not have a source of revenue sufficient to cover its
operating costs. These factors raise substantial doubt about the Company’s
ability to continue as a going concern. Management’s plans in this regard are
described in Note 3. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ Terry L. Johnson,
CPA
Casselberry,
Florida
March 20, 2015
THE MOVIE STUDIO, INC.
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(FORMERLY DESTINATION TELEVISION, INC.)
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Consolidated Balance Sheets
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October 31,
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2014
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2013
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Assets
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Current assets
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Cash
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$ 1,360
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$ 8,012
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Total current assets
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1,360
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8,012
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Property and equipment, net
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-
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1,911
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Acquired amortizable
intangible assets
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-
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280
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Total assets
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$ 1,360
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$ 10,203
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Liabilities and
stockholders' deficiency
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Current liabilities
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Payroll taxes payable
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-
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412,515
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Loans payable - related
party
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$ 902,370
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803,698
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Loan from VCP
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1,371,463
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1,371,463
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Total current
liabilities
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2,273,833
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2,587,676
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Total liabilities
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2,273,833
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2,587,676
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Stockholders' deficiency
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Preferred stock, Series B
convertible ($.0001 par value)
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5,750,000 authorized,
issued and outstaning at October 31, 2014
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and October 31, 2013,
respectively
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575
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575
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Common stock,( $.0001 par
value); 750,000,000 shares
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authorized, 236,000,000 and
170,545,068 shares issued and
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outstanding at October 31,
2014 and October 31, 2013, respectively
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23,600
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17,055
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Additional paid in capital
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7,063,369
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6,871,247
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Accumulated deficit
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(9,360,017)
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(9,466,350)
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Total stockholders'
deficiency
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(2,272,473)
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(2,577,473)
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Total liabilities and
stockholders' deficiency
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$ 1,360
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$ 10,203
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The accompanying footnotes are an
integral part of these financial statements.
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F-2
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THE MOVIE STUDIO, INC.
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(FORMERLY DESTINATION TELEVISION, INC.)
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Consolidated Statements of Operations
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Year Ended October 31,
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2014
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2013
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Revenue
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$ 31,679
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$ 295,824
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Expenses:
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Selling, general and
administrative expenses
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337,861
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404,944
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Interest expense
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-
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39,664
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Total expenses
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337,861
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444,608
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Net loss before income
taxes
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(306,182)
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(148,784)
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Income taxes
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-
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Net loss
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$ (306,182)
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$ (148,784)
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Basic and diluted loss
per share
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(0.002)
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(0.001)
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Weighted average number of
common
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shares outstanding, basic
and fully diluted
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203,272,534
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133,232,022
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The accompanying footnotes are an integral part of
these financial statements.
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F-3
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(FORMERLY DESTINATION TELEVISION, INC.)
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Consolidated Statements of Changes in Stockholders
Deficiency
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Additional
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Total
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Common Stock
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Preferred Stock
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Paid-In
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Accumlated
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Stockholders'
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Shares
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Amount
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Shares
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Amount
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Capital
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Deficit
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Deficiency
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Balance, October
31, 2011
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102,355,260
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$ 10,236
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5,750,000
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$ 575
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$ 6,822,066
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$ (9,145,247)
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$
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$ (2,312,370)
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Net Loss
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-
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Balance, October
31, 2012
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102,355,260
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10,236
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5,750,000
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575
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6,822,066
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(9,145,247)
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(2,312,370)
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Common Stock
issued for cash
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68,189,808
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6,819
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49,181
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56,000
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Net Loss
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-
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Balance, October
31, 2013
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170,545,068
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17,055
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5,750,000
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575
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6,871,247
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(9,145,247)
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(2,256,370)
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Common Stock
issued for cash
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65,454,932
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6,545
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192,122
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198,667
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Write-off
Payroll Tax Payable
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412,515
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412,515
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Net Loss
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(306,182)
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(306,182)
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Balance, October
31, 2014
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236,000,000
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23,600
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5,750,000
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575
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7,063,369
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(9,038,914)
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(1,951,370)
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THE MOVIE STUDIO, INC.
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(FORMERLY DESTINATION TELEVISION, INC.)
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Consolidated Statements of Cash Flows
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Year Ended
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October 31,
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2014
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2013
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Cash flows from
operating activities:
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Net loss
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$ (306,182)
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$ (148,784)
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Adjustment to reconcile net
loss to net
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net cash used by operating
activities:
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Depreciation and
amortization
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2,191
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2,408
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Changes in operating assets
and liabilities:
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Increase in amount due to
GSV
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98,673
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Decrease in payables and
accrued expenses
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35,331
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Increase in payroll taxes
payable
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39,664
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Net cash used in
operating activities
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(205,318)
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(71,381)
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Cash flows from
investing activities
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-
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Cash flows from
financing activities
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-
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Proceeds from issuance of
common stock
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198,667
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56,000
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Proceeds from related party
loan to the company
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23,374
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Net cash provided by
investing activities
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198,667
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79,374
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Net incresase(decrease)
in cash
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(6,651)
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7,993
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Cash, beginning of period
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8,012
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19
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Cash, end of period
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$ 1,361
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$ 8,012
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The accompanying footnotes are an integral part of
these financial statements.
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F-5
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THE
MOVIE STUDIO, INC.
(FORMERLY
DESTINATION TELEVISION, INC.)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
OCTOBER
31, 2014
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 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 years
ended October 31, 2014 and 2013.
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 October 31, 2014 and 2013.
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.
F-6
THE
MOVIE STUDIO, INC.
(FORMERLY
DESTINATION TELEVISION, INC.)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
OCTOBER
31, 2014
Note
2 – Summary of significant Accounting Policies (continued)
Income Taxes (continued)
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.
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 2014 or 2013 under FASB ASC 718.
F-7
THE
MOVIE STUDIO, INC.
(FORMERLY
DESTINATION TELEVISION, INC.)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
OCTOBER
31, 2014
Note 2 – Summary of significant
Accounting Policies (continued)
Stock-Based
Compensation (continued)
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 expense of
approximately $1,200 issuing 12,000,000 shares at par value $0.0001; and $-0- during
the years ended October 31, 2014 and October 31, 2014 for consulting services,
respectively.
Recently
Adopted Accounting Pronouncements
In
February 2013, the accounting guidance was amended for obligations resulting from
joint and several liability arrangements for which the total amount of the
obligation is fixed at the reporting date. The amendments provide guidance on
the recognition, measurement, and disclosure of obligations resulting from
joint and several liability arrangements, including debt arrangements, other
contractual obligations, and settled litigation and judicial rulings, for which
the total amount of the obligation is fixed at the reporting date. The
amendment was effective for the Company beginning January 1, 2014 and was
applied retrospectively. The adoption of this guidance did not have a material
effect on the Company’s results of operations, cash flows or financial
condition.
In
July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting
Standards Update (“ASU”) No. 2013-11, Presentation of an Unrecognized
Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a
Tax Credit Carryforward Exists, which states that entities should present
the unrecognized tax benefit as a reduction of the deferred tax asset for a net
operating loss (“NOL”) or similar tax loss or tax credit carryforward rather
than as a liability when the uncertain tax position would reduce the NOL or
other carryforward under the tax law. The Company will be required to adopt
this new standard on a
prospective
basis in the first interim reporting period of fiscal 2015, though early
adoption is permitted as is a retrospective application. We do not anticipate
that the adoption of this standard will have a material effect on the Company’s
results of operations, financial position or cash flows.
In May 2014, the Financial Accounting Standards
Board ("FASB") issued Accounting Standards Update No. 2014-09,
Revenue from Contracts with Customers ("ASU 2014-09"). It outlines a
single comprehensive model for entities to use in accounting for revenue
arising from contracts with customers and supersedes most current revenue
recognition guidance, including industry-specific guidance. The core principle
of the revenue model is that revenue is recognized when a customer obtains
control of a good or service. A customer obtains control when it has the
ability to direct the use of and obtain the benefits from the good or service.
ASU 2014-09 is effective for annual periods beginning after December 15, 2016,
including interim periods within that annual period. The Company is in the
process of assessing the impact of the adoption of ASU 2014-09 to its
consolidated financial statements.
In
June 2014, accounting guidance was updated for stock-based awards when the
terms of an award provide that a performance target that affects vesting could
be achieved after the requisite service period. The current accounting standard
for stock-based compensation as it applies to awards with performance
conditions should be applied. This guidance is effective for the Company as of
January 1, 2016. The Company is currently evaluating this guidance, but
does not anticipate it will have a material impact on its financial statements.
In June 2014, the FASB
issued ASU 2014-12, Accounting for Share-Based Payments When the Terms of an
Award Provide That a Performance Target Could Be Achieved after the Requisite
Service Period. This guidance requires that a performance target that
affects vesting and that could be achieved after the requisite service period
be treated as a performance condition of the award. A reporting entity should
apply existing guidance in Accounting Standards
Codification Topic 718, Compensation-Stock Compensation, as it relates
to such awards. The guidance is effective for fiscal years beginning after
December 15, 2015, and may be applied prospectively
THE
MOVIE STUDIO, INC.
(FORMERLY
DESTINATION TELEVISION, INC.)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
OCTOBER 31, 2014
Note
2 – Summary of significant Accounting Policies (continued)
Recently Adopted
Accounting Pronouncements (continued)
or retrospectively. Early
adoption is permitted. The Company is currently evaluating the impact that the
adoption of this guidance will have on the Company’s consolidated statements
and related disclosures.
In August 2014, the FASB
issued ASU 2014-15, Presentation of Financial Statements – Going Concern
(Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue
as a Going Concern. The guidance requires an entity to evaluate whether
there are conditions or events, in the aggregate, that raise substantial doubt
about the entity’s ability to continue as a going concern within one year after
the date that the financial statements are issued (or within one year after the
financial statements are available to be issued when applicable) and to provide
related footnote disclosures in certain circumstances. The guidance is
effective for the annual period ending after December 15, 2016, and for annual
and interim periods thereafter. Early application is permitted. We do not
believe the adoption of this guidance will have a significant impact the
Company’s consolidated statements and related disclosures.
The Company has reviewed all other recently issued, but not yet
adopted, accounting standards in order to determine their effects, if any, on
its results of operation, financial position or cash flows. Based on
that review, the Company believes that none of these pronouncements will have a
significant effect on its consolidated 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 $9,360,017 as of October 31, 2014, 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.
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.
F-9
THE MOVIE STUDIO, INC.
(FORMERLY
DESTINATION TELEVISION, INC.)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
OCTOBER 31, 2014
Note 4 - Acquired Amortizable
Intangible Assets
As of October 31, 2006, the Company invested $3,280 in
establishing trademarks associated with its concept of placing TV’s in bars,
hotels and gyms. 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, 2014
|
$ 280
|
Note 5 - Income Taxes
The Company has approximately $9,360,017 million in net operating loss carryovers
available to reduce future income taxes. These carryovers expire at various
dates through the year 2033. The Company has adopted FASB
ASC Topic 740, “Income Taxes,” 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.
A summary of the deferred tax asset presented on the accompanying
balance sheets represents the
amount of preserved carryover losses due to changes in the US Tax Code from the
five year carryover rule for accumulated Net Operating Losses to twenty years
IRC§1179, is as
follows:
|
|
|
October 31,
|
|
|
|
2014
|
|
2013
|
Deferred tax
asset:
|
|
|
|
|
|
|
Net operating
loss carryforwards
|
|
$ 3,997,182
|
|
|
$ 3,692,000
|
Deferred tax
asset
|
|
|
3,997,182
|
|
|
3,692,000
|
|
|
|
|
|
|
|
|
Less: Valuation
allowance
|
|
(3,997,182)
|
|
|
(3,692,000)
|
Net deferred
tax asset
|
|
|
$ -
|
|
|
$ -
|
|
|
|
|
|
|
|
|
|
|
|
October 31,
|
|
|
|
2014
|
|
2013
|
Statutory
federal income tax expense
|
(34)
|
%
|
|
(34)
|
%
|
State and local
income tax
|
(5)
|
|
|
(5)
|
|
(net of
federal benefits)
|
|
|
|
|
|
Other temporary
differences
|
-
|
|
|
-
|
|
Valuation
allowance
|
|
39
|
|
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
%
|
|
-
|
%
|
The Company has taken a full valuation allowance against the
deferred asset attributable to the NOL carryovers of approximately $3,998,182
and $3,692,000 at October 31, 2014 and 2013, respectively, due to the
uncertainty of realizing the future tax benefits.
F-10
THE MOVIE STUDIO, INC.
(FORMERLY
DESTINATION TELEVISION, INC.)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
OCTOBER 31, 2014
Note 6 – Commitments
Facilities
The Company leased 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 $54,000 for each of the years ended
October 31, 2014 and October 31, 2013.
As of November 1st 2014, the
Movie Studio, Inc. moved its production facility without executing a lease
agreement or rent agreement to a new 17,000 square foot studio in Hollywood
Florida with administrative office space, food court, and 5,000 square foot
sound, green screen stage, stage 2 edit suites and two audio suites and voice
over booth. Its new business address is 2040 Sherman Street Hollywood, Florida
33020.
Employment Agreements
Gordon Scott Venters is employed as the Company's
president and chief executive officer pursuant to an employment agreement,
effective November 1, 2007. The three-year 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 in the event of a change of
control or termination without cause, or if the employee terminates for good
reason. As of October 31, 2014
and 2013, the Company owed Mr. Venters
$902,370 (unpaid wages of $831,888; advances of $70,482) and $803,698 (unpaid
wages of $733,216; advances of $70,482), respectively, for unpaid wages and advances he made to the Company.
He has agreed to convert the $733,216 due him for unpaid wages, under terms of
his employment agreement, and the $70,482 due him for advances he has made to
the Company in exchange for the issuance to him of 25million shares of the
Company’s common shares, which will have one to one voting rights. This
conversion transaction will be completed within the next twelve months.
Note 7 - Payroll Taxes Payable
The Company has been
delinquent in its payment of payroll taxes for the periods of December 2005;
March, June and September of 2006 in the amount of $412,500. During February
of 2013, the Internal Revenue Service deemed the unpaid balance as
“Uncollectible” and the President of the Company was issued a Levy on Wages,
Salary, and Other Income personally in the amount of $93,457 owed to and for
the Trust Fund Management Penalty. Payroll tax obligations for the calendar
years since 2007, 2008, 2009, 2010, 2011, 2012 and 2013 that have been incurred
have paid as required. There were no payroll taxes incurred for the three quarters
then ended October 31, 2014.
Note 8 - Notes Payable
At March 31, 2011, the Company owed Dr. K. Terry, a related party
shareholder, a total of $1,371,463, which represented $436,500 for accrued
rent, $705,000 for convertible notes, and $229,963 for accrued interest against the
convertible notes. On April 1, 2011, the total due Dr. Terry of $1,371,463
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
June of 2014, the Company amended its articles of incorporation and
reauthorized an additional 550,000,000 shares of common stock at par value of
$0.0001. As of July 31, 2014, the Company has a total of 750,000,000 shares
authorized and as of October 31, 2014 and 2013 had 236,000,000 and 170,545,068 shares
issued and outstanding. During year ended October 31, 2014, the Company issued
to accredited investors a total of 57,634,932 shares of common stock for $0.0008
per share for a total of $197,467. None of the above shares have been
registered
F-11
THE MOVIE STUDIO, INC.
(FORMERLY
DESTINATION TELEVISION, INC.)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
OCTOBER
31, 2014
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.
Note 9 - Stockholders' Deficiency (continued)
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 October 31, 2014 and 2013, there were 5,750,000 shares of Series B preferred stock 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 October 31, 2014 and October 31, 2013.
Note 11 – Litigation
As of October 31, 2014, the Company was not a party to any
existing or threatened litigation.
Note 12 - Related Party Transactions
Gordon Scott Venters
Effective November 2007, Gordon Scott Venters, entered into an employment agreement with the Company,
which is described above in Note 6--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 and Mr. Venters
acquired from the Company 500,000 shares of its common stock, which were valued
at $26,000, or $0.052 per share, in exchange for the $25,000 loan and the
balance of $1,000 was applied to accrued unpaid salary. 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 October 31, 2013 and 2012, the Company owed Mr. Venters $803,698 (unpaid wages of
$733,216; advances of $70,482) and $680,590 (unpaid wages of $680,597; advances
of $47,108), respectively, for unpaid wages and
advances he made to the Company. He has agreed to convert the $733,216 due him
for unpaid wages, under terms of his employment agreement, and the $70,482 due
him for advances he has made to the Company in exchange for the issuance to him
of 25 million shares of the Company’s common shares, which will have one to one
voting rights. This conversion transaction will be completed within the next
twelve months.
F-12
Note 13 – Subsequent Events
On
January 5, 2015 the Company issued a Private Placement Memorandum for The Movie
Studio, Inc.’s 175,000,000 shares offered at $.003 per share totaling $525,000
with a minimum investment of $25,000 for 8,333,333 shares. The Company is
conducting a 506(b) exempted offering to sell 175,000,000 shares having a par
value of $.0001 per share at the discounted price of $.003 per share, offered
on a “best efforts” basis to accredited investors only. The funds will be used
to acquire the Company’s first film library.
On
January 7, 2015 the Company signed a Letter of Intent with Seven Arts
Entertainment Inc. (now known as Wireless Connection Inc.) a Pink Sheet Company
having symbol: SAPX, a diversified company with motion picture production
assets and wireless communications to acquire a movie library of twelve
titles. Under the terms of the LOI, The Movie Studio Inc. agrees to acquire
the film library for cash and stock from a lender Seven Arts Entertainment Inc.
assigned them to.
F-13
ITEM 9. CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON
ACCOUNTING
AND FINANCIAL DISCLOSURE
Our accountant is Terry
Johnson, C.P.A., P.A. We do not presently intend to change accountants. At no
time have there been any disagreements with such accountant regarding any
matter of accounting principles or practices, financial statement disclosure,
or auditing scope or procedure.
ITEM 9A. CONTROLS
AND PROCEDURES
Changes in Internal
Control Over Financial Reporting
Our management is responsible
for establishing and maintaining adequate internal control over financial
reporting. Internal control over financial reporting is defined in Rule
13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as
a process designed by, or under the supervision of, the company’s principal
executive and principal financial officers and effected by the company’s 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 accounting principles
generally accepted in the United States of America and includes those policies
and procedures that:
- Pertain to the
maintenance of records that in reasonable detail accurately and fairly
reflect the
transactions and dispositions of the assets of the company;
-
Provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial
statements in accordance with accounting principles generally accepted in the
United States of America and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors
of the company; 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. 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. All internal control systems, no matter how well
designed, have inherent limitations. Therefore, even those systems determined
to be effective can provide only reasonable assurance with respect to financial
statement preparation and presentation. Because of the inherent limitations of
internal control, there is a risk that material misstatements may not be
prevented or detected on a timely basis by internal control over financial
reporting. However, these inherent limitations are known features of the
financial reporting process. Therefore, it is possible to design into the
process safeguards to reduce, though not eliminate, this risk.
As of October 31, 2014
management assessed the effectiveness of our internal control over financial
reporting based on the criteria for effective internal control over financial reporting
established in Internal Control--Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission ("COSO") and
SEC guidance on conducting such assessments. Based on that evaluation, they
concluded that, during the period covered by this report, such internal
controls and procedures were not effective.
This annual report does not
include an attestation report of the Corporation's registered public accounting
firm regarding internal control over financial reporting. Management's report
was not subject to attestation by the Corporation's registered public
accounting firm pursuant to temporary rules of the SEC that permit the
Corporation to provide only the management's report in this annual report.
ITEM 9B. OTHER
INFORMATION
None.
19
PART III
ITEM 10.
|
DIRECTORS, EXECUTIVE OFFICERS, AND
CORPORATE GOVERNANCE
|
The directors and officers as of October
31, 2014, are set forth below. The directors hold office for their
respective term and until their successors are duly elected and qualified.
Vacancies in the existing Board are filled by a majority vote of the remaining
directors. The officers serve at the will of our Board of Directors.
Name
|
|
Age
|
|
First Year as Director
|
|
Position
|
Gordon Scott Venters
|
|
53
|
|
1993
|
|
CEO/Director
|
|
|
|
|
|
|
|
BUSINESS EXPERIENCE
Set forth below is the name of our
director and officer, all positions and offices held, the period during which
he has served as such, and the business experience during at least the last five
years:
Gordon Scott Venters, Chief Executive Officer and Chairman
of the Board
Gordon Scott Venters has been
president and chief executive officer and a director of The Movie Studio FKA
Destination, Television, Inc. for the last ten months and a director of
Destination Television since 1996. During that time he has executive produced,
produced, written and directed Exposure starring Corey Feldman ready for
worldwide released in the first quarter of 2013 the first of the four picture
franchise. He has also served as a member of our board of directors from March
1994 to May 1995. Prior to joining Destination Television, Inc., Mr. Venters
was engaged in the entertainment industry, including the financing, management
and production of films, videos and recordings. From May 1995 until December
1996, he served as president and director of Quantum Entertainment, Company in
Los Angeles. From 1990 to 1993, Mr. Venters served as president and chief executive
officer of Flash Entertainment, Inc., an independent feature film company and
predecessor of our company, during which time he was the executive producer of no
More Dirty Deals and five music videos. He had previously been the
executive producer of two full length feature films, Shakma & Shoot.
Mr. Venters, has also been a financial advisor and a registered stockbroker
with FD.D. Roberts Securities and Prudential Bache Securities, Inc.
CERTAIN LEGAL PROCEEDINGS
No director, nominee for director, or
executive officer has appeared as a party in any legal proceeding material to
an evaluation of his ability or integrity during the past five years.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
To date, we have not filed Form 5 for the year ended October 31,
2014.
ITEM 11.
|
EXECUTIVE COMPENSATION
|
Gordon Scott Venters is employed as the Company's president and chief
executive officer, pursuant to an employment agreement, effective November 1,
2007. The three-year 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 month salary in the
event of a change of control or termination without cause, or if the employee
terminates for good reason. As of October 31, 2014 and 2013, the Company owed Mr. Venters $902,370 (unpaid wages of $831,888; advances of $70,482)
and $803,698 (unpaid wages of $733,216; advances of $70,482), respectively, for
unpaid wages and advances he made to the
Company. He has agreed to convert the $733,216 due him for unpaid wages, under
terms of his employment agreement, and the $70,482 due him for advances he has
made to the Company in exchange for the issuance to him of 25million shares of
the Company’s common shares, which will have one to one voting rights. This
conversion transaction will be completed within the next twelve months.
No retirement, pension, profit sharing,
stock option or insurance programs or other similar programs have been adopted
by us for the benefit of our employees.
20
ITEM 12.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
The following table illustrates the common stock and preferred
stock ownership of Gordon Scott Venters as of February 21, 2013.
Title of Name,
Title and Address of Beneficial Amount of Beneficial %
of
Class Owner
of Shares Ownership
Shareholdings
Common Gordon Scott
Venters, CEO, and 3.5 million shares 3%
Director
Preferred Gordon Scott
Venters, CEO, and 5.75 million shares 100%
Director
The address for all officers and directors
is 530 North Federal Highway, Ft. Lauderdale, Florida 33301.
ITEM 13.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE
|
None
ITEM 14.
|
PRINCIPAL ACCOUNTANT FEES AND SERVICES
|
Audit Fees
For the Company's fiscal year ended October
31, 2014, we were billed and paid $4,000. The audit fees were for
professional services rendered for the audit of our financial statements,
respectively.
Tax Fees
For the Company's fiscal year ended October
31, 2014, we were billed and paid $0 for professional services
rendered for tax compliance, tax advice, and tax planning, as well as for legal
services.
All Other Fees
The Company incurred other fees related to
services rendered by our principal accountant for the fiscal year ended October
31, 2014 in the amount of $5,500 was billed and paid $1,500.
21
PART IV
ITEM 15.
|
EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
|
(a) The following documents are filed as part of this
report:
1.
|
Financial statements; see index to financial statements and
schedules in Item 8 herein.
|
2.
|
Financial statement schedules; see index to financial statements
and schedules in Item 8 herein.
|
The following exhibits are filed
with this Form 10-K and are identified by the numbers indicated; see index to
exhibits immediately following financial statements and schedules of this
report.
EXHIBIT INDEX
3.1
|
Articles of Incorporation (1)
|
31.1
|
Certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
32.1
|
Certification pursuant to Title 18 Section 1350
|
Reports on Form 8k:
22
SIGNATURES
Pursuant to the requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, there unto duly
authorized.
THE MOVIE STUDIO, INC. F/K/A DESTINATION TELEVISION, INC.
By: /s/ Gordon Scott Venters
_______________________________________________________________________________________________
Gordon Scott Venters
President, Chief Executive Officer,
and Director
Dated: February 6, 2015
Pursuant to the requirements of Section 12
of the Securities Exchange Act of 1934, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
By: /s/ Gordon Scott Venters
_______________________________________________________________________________________________
President, Chief Executive
Officer,
Director
Dated: March 6, 2015
23
302
CERTIFICATION OF CERTIFYING OFFICER
CERTIFICATION
OF CHIEF EXECUTIVE OFFICER
AND CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Gordon Scott Venters,
certify that:
1. I have reviewed this
Form 10-K of The Movie Studio, Inc. F/K/A Destination Television, Inc.;
2. Based on my knowledge,
this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3. Based on my knowledge,
the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition,
results of operations and cash flows of the small business issuer as of, and
for, the periods present in this report;
4. The small business
issuers other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13-a-15(f) and 15d-15(f)) for the small
business issuer and have:
(a) Designed such
disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material
information relating to the small business issuer, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Designed such
internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, 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 principals;
(c) Evaluated the
effectiveness of the small business issuer's disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) Disclosed in this
report any change in the small business issuer's internal control over
financing reporting that occurred during the small business issuer's most
recent fiscal quarter (the small business issuer's fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely
to materially affect, the small business issuer's internal control over
financial reporting; and
5. The small business
issuer's other certifying officer(s) and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the small
business issuer's auditors and the audit committee of the small business
issuer's board of directors (or persons performing the equivalent functions):
(a) All significant
deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonable likely to adversely
affect the small business issuer's ability to record, process, summarize and
report financial information; and
(b) Any fraud, whether
or not material, that involved management or other employees who have a
significant rile in the small business issuer's internal control over financial
reporting.
Dated: February 6, 2015
/s/ Gordon Scott Venters
--------------------------
Gordon Scott Venters
Chief
Executive Officer
Chief Financial Officer
24
906 CERTIFICATION OF
CERTIFYING OFFICER
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
AND CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
In connection with the
accompanying Yearly Report On Form 10-K of The Movie Studio, Inc. F/K/A
Destination Television, Inc. for the Year Ended October 31, 2013 I, Gordon Scott
Venters, chief executive officer and chief financial officer of The Movie
Studio, Inc. F/K/A Destination Television, Inc. hereby certify pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, to the best of my knowledge and belief, that:
1. Such Yearly Report
on Form 10-K for the year ended October 31, 2014 fully complies with the
requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and
2. The information
contained in such Yearly Report on Form 10-K for the year ended October 31, 2014
fairly presents, in all material respects, the financial condition and results
of operations of The Movie Studio, Inc. F/K/A Destination Television, Inc.
Dated: February 6, 2015
THE MOVIE STUDIO, INC. F/K/A
DESTINATION TELEVISION, INC.
By: /s/ Gordon Scott Venters
-
-------------------------------------
Gordon Scott Venters
Chief Executive Officer and
Chief Financial Officer
Movie Studio (PK) (USOTC:MVES)
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