NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2010
Note 1. Description of Business
The Movie Studio, Inc. (the "Company") was incorporated in the State of Delaware
1961 under the name Magic Fingers, Inc. The company is a vertically integrated
motion picture production company that develops, manufactures and distributes
independent motion picture content for worldwide consumption on a multitude of
devices.
The Company has operated under various names since incorporation, most recently
Destination Television, Inc. from February 2007 to November 2012, when the name
was changed to The Movie Studio, Inc.
From October 31, 2001, the Company's focus was on the developing a private
television network, in high traffic locations such as bars and nightclubs.
During this development period, the Company received incidental revenue from the
sale of advertising and the production of commercials. In 2010, the Company
began implementation of its current business model, using the technology
previously developed for the private television network.
Note 2. Summary of significant Accounting Policies
Basis of Presentation
The accompanying unaudited consolidated quarterly financial statements have been
prepared on a basis consistent with generally accepted accounting principles in
the United States ("GAAP") for interim financial information and pursuant to the
rules of the Securities and Exchange Commission ("SEC"). In the opinion of
management, the accompanying unaudited financial statements reflect all
adjustments, consisting of only normal and recurring adjustments, necessary for
a fair presentation of the results of operations, financial position and cash
flows for the periods presented. The results of operations for the periods are
not necessarily indicative of the results expected for the full year or any
future period. These statements should be read in conjunction with the Entity's
Annual Report on Form 10-K for the year ended October 31, 2009 as filed with the
SEC on December 31, 2012 (the "2009 Annual Report")
The consolidated financial statements include the accounts of The Movie Studio,
Inc. (Formerly Destination Television, Inc.), a Delaware corporation, and its
wholly owned subsidiary Destination Television, Inc., a Florida corporation. All
significant inter-company account balances and transactions between the Company
and its subsidiary have been eliminated in consolidation.
Long-Lived Assets
In accordance with Financial Accounting Standard Board ("FASB") Accounting
Standards Codification ("ASC") Topic 360 "Property, Plant, and Equipment,"
the Company records impairment losses on long-lived assets used in operations
when indicators of impairment are present and the undiscounted cash flows
estimated to be generated by those assets are less than the assets' carrying
amounts. There were no impairment charges during the periods ended April 30,
2010 and October 31, 2009.
8
THE MOVIE STUDIO, INC.
(FORMERLY DESTINATION TELEVISION, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2010
Note 2. Summary of significant Accounting Policies (continued)
Fair Value of Financial Instruments
The fair values of the Company's assets and liabilities that qualify as
financial instruments under FASB ASC Topic 825, "Financial Instruments,"
approximate their carrying amounts presented in the accompanying consolidated
statements of financial condition at April 30, 2010 and October 31, 2009.
Revenue recognition
In accordance with the FASB ASC Topic 605, "Revenue Recognition," the Company
recognizes revenue when persuasive evidence of an arrangement exists, delivery
has occurred, the sales price is fixed or determinable, and collectability is
reasonably assured.
Income Taxes
The Company accounts for income taxes in accordance with FASB ASC Topic 740
"Income Taxes," which requires accounting for deferred income taxes under the
asset and liability method. Deferred income tax asset and liabilities are
computed for differences between the financial statement and tax bases of
assets and liabilities that will result in taxable or deductible amounts in
the future based on the enacted tax laws and rates applicable to the periods
in which the differences are expected to affect taxable income. Valuation
allowances are established, when necessary, to reduce the deferred income tax
assets to the amount expected to be realized.
In accordance with GAAP, the Company is required to determine whether a tax
position of the Company is more likely than not to be sustained upon
examination by the applicable taxing authority, including resolution of any
related appeals or litigation processes, based on the technical merits of the
position. The Company files an income tax return in the U.S. federal
jurisdiction, and may file income tax returns in various U.S. state and local
jurisdictions. Generally the Company is no longer subject to income tax
examinations by major taxing authorities for years before 2005. The tax benefit
to be recognized is measured as the largest amount of benefit that is greater
than fifty percent likely of being realized upon ultimate settlement.
De-recognition of a tax benefit previously recognized could result in the
Company recording a tax liability that would reduce net assets. This policy
also provides guidance on thresholds, measurement, de-recognition,
classification, interest and penalties, accounting in interim periods,
disclosure, and transition that is intended to provide better financial
statement comparability among different entities. It must be applied to all
existing tax positions upon initial adoption and the cumulative effect, if any,
is to be reported as an adjustment to stockholders 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, ongoing analyses of and changes to tax laws, regulations and
interpretations thereof.
Comprehensive Income
The Company complies with FASB ASC Topic 220, "Comprehensive Income," which
establishes rules for the reporting and display of comprehensive income (loss)
and its components. FASB ASC Topic 220 requires the Company's change in foreign
currency translation adjustments to be included in other comprehensive loss, and
is reflected as a separate component of stockholders' equity.
9
THE MOVIE STUDIO, INC.
(FORMERLY DESTINATION TELEVISION, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2010
Note 2. Summary of significant Accounting Policies (continued)
Stock-Based Compensation
The Company complies with FASB ASC Topic 718 "Stock Compensation"
which establishes standards for the accounting for transactions in which
an entity exchanges its equity instruments for goods or services.
It also addresses transactions in which an entity incurs liabilities in
exchange for goods or services that are based on the fair value of the
entity's equity instruments or that may be settled by the issuance of
those equity instruments. FASB ASC Topic 718 focuses primarily on
accounting for transactions in which an entity obtains employee services
in share-based payment transactions. FASB ASC Topic 718 requires an
entity to measure the cost of employee services received in exchange for
an award of equity instruments based on the grant-date fair value of the
award (with limited exceptions). That cost will be recognized over the
period during which an employee is required to provide service in exchange
for the award (usually the vesting period). No compensation costs are
recognized for equity instruments for which employees do not render the
requisite service. The grant-date fair value of employee share options
and similar instruments will be estimated using option-pricing models
adjusted for the unique characteristics of those instruments (unless
observable market prices for the same or similar instruments are available).
If an equity award is modified after the grant date, incremental compensation
cost will be recognized in an amount equal to the excess of the fair value of
the modified award over the fair value of the original award immediately
before the modification. No employee stock options or stock awards vested
during 2009 or 2008 under FASB ASC 718.
Nonemployee awards
The fair value of equity instruments issued to a nonemployee is measured by
using the stock price and other measurement assumptions as of the date of
either: (i) a commitment for performance by the nonemployee has been reached;
or (ii) the counterparty's performance is complete. Expenses related to
nonemployee awards are generally recognized in the same period as the Company
incurs the related liability for goods and services received. The Company
recorded stock compensation of approximately $-0- and $120,500 during the six
months ended April 30, 2010 and 2009, respectively, related to consulting
services.
Recently Adopted Accounting Pronouncements
In December 2010, FASB issued ASC ASU 2010-28, "When to Perform Step 2 of the
Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying
Amounts (Topic 350) - Intangibles - Goodwill and Other." ASU 2010-28 amends
the criteria for performing Step 2 of the goodwill impairment test for
reporting units with zero or negative carrying amounts and requires performing
Step 2, if qualitative factors indicate that it is more likely than not that
goodwill impairment exists. The amendments to this update are effective for us
in the first quarter of 2011. Any impairment to be recorded upon adoption will
be recognized as an adjustment to our beginning retained earnings. The Company
adopted the pronouncement on January 1, 2011 resulting in no impact to the
Company's financial statements.
10
THE MOVIE STUDIO, INC.
(FORMERLY DESTINATION TELEVISION, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2010
Note 2. Summary of significant Accounting Policies (continued)
Recently Adopted Accounting Pronouncements (continued)
In April 2010, the FASB issued ASU No. 2010-13, "Compensation - Stock
Compensation (Topic 718): Effect of Denominating the Exercise Price of a Share-
Based Payment Award in the Currency of the Market in Which the Underlying Equity
Security Trades," which addresses the classification of a share-based payment
award with an exercise price denominated in the currency of a market in which
the underlying equity security trades. Topic 718 is amended to clarify that a
share-based payment award with an exercise price denominated in the currency of
a market in which a substantial portion of the entity's equity securities trades
shall not be considered to contain a market, performance or service condition.
Therefore, such an award is not to be classified as a liability if it otherwise
qualifies as equity classification. The amendments in this update should be
applied by recording a cumulative-effect adjustment to the opening balance of
retained earnings. The cumulative-effect adjustment should be calculated for all
awards outstanding as of the beginning of the fiscal year in which the
amendments are initially applied, as if the amendments had been applied
consistently since the inception of the award. ASU No. 2010-13 is effective for
interim and annual periods beginning on or after December 15, 2010 and is not
expected to have amaterial impact on the Company's consolidated financial
position or results of operations. The Company adopted the pronouncement on
January 1, 2011 resulting in no impact to the Company's financial statements.
In January 2010, the FASB issued Accounting Standards Update 2010-06,"Fair
Value Measurements and Disclosures (Topic 820) - Improving Disclosures about
Fair Value Measurements" (ASU 2010-06), to require new disclosures related
to transfers into and out of Levels 1 and 2 of the fair value hierarchy and
additional disclosure requirements related to Level 3 measurements. The
guidance also clarifies existing fair value measurement disclosures about
the level of disaggregation and about inputs and valuation techniques used
to measure fair value. The additional disclosure requirements are effective
for the first reporting period beginning after December 15, 2009, except for
the additional disclosure requirements related to Level 3 measurements, which
are effective for fiscal years beginning after December 15, 2010. The Company
adopted the pronouncement on January 1, 2011 resulting in no impact to the
Company's financial statement.
The Company has adopted all accounting pronouncements issued since December 31,
2007 through January 30, 2013, none of which had a material impact on the
Company's financial statements.
Loss Per Common Share
The Company complies with the accounting and disclosure requirements of FASB
ASC 260,"Earnings Per Share." Basic loss per common share is computed by
dividing netloss 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.
11
THE MOVIE STUDIO, INC.
(FORMERLY DESTINATION TELEVISION, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2010
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
$8.7 million as of April 30, 2010, 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 shareholderhas 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.
Note 4. Acquired Amortizable Intangible Assets
As of October 31, 2006, the Company invested $3,280 in establishing trademarks
associated with its Bar TV concept. The Company amortizes the costs of these
intangibles over their estimated useful lives unless such lives are deemed
indefinite. Amortizable intangible assets are also tested for impairment based
on undiscounted cash flows and, if impaired, written down to fair value based
on either discounted cash flows or appraised values. Intangible assets with
indefinite lives are tested for impairment, at least annually, and written down
to fair value as required. Expected annual amortization expense related to
amortizable intangible assets is,as follows:
As of October 31,
2010 $ 300
2011 300
2012 300
2012 300
Thereafter 280
Total expected annual ---------
amortization expense $ 1,480
=========
|
12
THE MOVIE STUDIO, INC.
(FORMERLY DESTINATION TELEVISION, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2010
Note 5. Income Taxes
The Company has approximately $11.1 million in net operating loss carryovers
available to reduce future income taxes. These carryovers expire at various
dates through the year 2029. The Company has adopted SFAS 109 which provides
for the recognition of a deferred tax asset based upon the value the loss
carryforwards 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
is, as follows:
April 30, October 31,
2010 2009
------------ ------------
Deferred tax asset:
Net operating loss carry-forward $4,250,407 $4,177,000
Other Temporary differences -
Deferred tax asset 1,800 10,500
------------ ------------
Less: Valuation allowance (4,252,207) (4,187,500)
Net deferred tax asset $ - $ -
============= =============
|
April 30 October 31
2012 2009
------------ ------------
Statutory federal income tax expense (34)% (34)%
State and local income tax
(net of federal benefits) ( 5) ( 5)
Other temporary differences
Valuation allowance 39 39
------------ ------------
-% -%
============ ============
|
Note 6. Commitments
Facilities
The Company leases from a stockholder, Dr. H. K. Terry, pursuant to an oral
agreement on a month-to-month basis, an 8,500 square foot building in Fort
Lauderdale, Florida, which serves as its administrative offices and computer
operations center. The rent is $4,500 per month and the Company is responsible
for utilities. Rent expense was $27,000 and $27,000 for each of the three months
ended April 30, 2010 and 2009, respectively.
13
THE MOVIE STUDIO, INC.
(FORMERLY DESTINATION TELEVISION, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2010
Note 6. Commitments (continued)
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 salary in the
event of a change of control or termination "without cause," or if the employee
terminates for "good reason." As of April 30, 2010, Mr. Venters was owed
$334,427 for accrued unpaid salary. As of October 31, 2009, Mr. Venters was owed
$248,557 for accrued unpaid salary.
Note 7. Payroll Taxes Payable
The Company has been delinquent in its payment of payroll taxes. As of July 31,
2009,the total of payroll taxes payable, including estimated interest and
penalties, was $261,710. In August, October and November 2007, the Internal
Revenue Service filed tax liens against the Company in the total amount of
$198,351. In August 2007, the Company made a lump-sum payment of $48,000 and
in November 2007, an additional lump sum payment of $18,600. These payments
were made in connection with the Company's submission of an Offer in Compromise
to settle its payroll tax obligations. The Offer in Compromise was rejected and
the Company appealed the initial determination which also was rejected in June
2009. The Company plans to submit a revised Offer in Compromise. There is no
assurance that an acceptable settlement will be reached. Payroll tax
obligations for the calendar years 2007, 2008 and 2009 have been paid
as required.
Note 8. Notes Payable
Convertible Notes Payable - Dr. Terry
As of April 30, 2010, notes payable due Dr. Terry totaled $500,000, comprised
of convertible notes of $400,000 and $100,000 at 6% and 8%, respectively. Of the
$500,000 principal balance of convertible notes payable, $300,000 of the notes
are secured by all of the assets of the Company and $200,000 of the notes are
unsecured.
The convertible notes 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.
Loans Payable - Dr. Terry
On May 16, 2008, the Company borrowed $30,000 from Dr. Terry. The loan which is
unsecured is payable in one-year with 6% interest. Loans payable to Dr. Terry
totaled $205,000 as of April 30, 2010.
14
THE MOVIE STUDIO, INC.
(FORMERLY DESTINATION TELEVISION, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2010
Note 9. Stockholders' Deficiency
Common Stock
Stock Issued for Cash
During three months ended April 30, 2010, the Company issued 5,500,000 shares
of common stock for $27,500. During fiscal year 2009, the Company issued to
accredited investors a total of 5,950,000 shares of common stock for $103,100,
of which 2,950,000 shares were issued at $0.018 per share, 1,000,000 shares
were issued at $0.015 and 2,000,000 shares were issued at $0.01 per share.
None of the above shares have been registered under the Securities Act of 1933,
as amended, and therefore, may not be transferred in the absence of an exemption
from registration under such laws and will be considered "restricted securities"
as that term is defined in Rule 144 adopted under the Securities Act, and may
be sold only in compliance with the resale provisions set forth therein.
Stock Issued for Services
During period ended April 30, 2010, the Company did not issue any shares of
common stock.
In fiscal year 2009, the Company issued a total of 15,246,500 shares of common
stock as payment for services of which 2,500,000 shares were pursuant to a
consulting agreement described below; 200,000 and 150,000 to two separate
consultants and 50,000 shares for fees to a director.
On February 20, 2008, the Company entered into a 12-month business consulting
agreement with a consultant and, in connection with that agreement, issued, as
compensation, 2,500,000 shares of common stock, which were registered pursuant
to Form S-8 under the Securities Act of 1933, as amended and stock options.
The shares were valued at $30,000,or $0.012 per share, which was representative
of the approximate market value at the date of issuance. On May 30, 2008, the
Company was notified by the consultant that effective June 29, 2008, he was
terminating the agreement. The Company has demanded return of the 2,500,000
shares it issued as a consulting fee. The options, which expired on June 29,
2008, are described below in Note 10 - Common Stock Options.
In February 2008, the Company also issued 200,000 shares for consulting
services,which were valued at $3,580, or approximately $0.018 per share,
and in September 2008, the Company issued 150,000 shares for consulting
services, valued at $765,or $0.0051 per share. In October 2008, a director
of the Company (Mr. Nugent) was granted, as a director'sfee, 50,000 shares,
which were valued at $105, or $.0021 per shares. The shares, which were issued
for services, and valued at the approximate market price at the date of issuance
have not been registered under the Securities Act of 1933, as amended, and
therefore, may not be transferred in the absence of an exemption from
registration under such laws and will be considered "restricted securities"
as that term is defined in Rule 144 adopted under the Securities Act, and may
be sold only in compliance with the resale provisions set forth therein.
15
THE MOVIE STUDIO, INC.
(FORMERLY DESTINATION TELEVISION, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2010
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 April 30, 2010
there were 5,750,000 shares of Series B Preferred Stock outstanding and on
October 31, 2009 there were 5,750,000 shares outstanding. Each share of Series
B Preferred Stock is convertible into one share of common stock.
Note 10. Common Stock Options
On February 20, 2008, the Company granted options, pursuant to a consulting
agreement, to purchase 8,000,000 shares of common stock. The options had an
initial expiration date of February 20, 2009 and give the right to the grantee
to purchase shares of common stock at exercise prices of $0.05 to $0.10, or an
average of $0.075 per share. The number of shares of common stock to be received
by the grantee was limited so that he would not beneficially own more than 10%
of the then outstanding shares of common stock. At the date of grant, the
options were deemed to have a fair value of $36,020, pursuant to the Black-
Scholes valuation model which amount has been reflected as additional Consulting
Expense in the Consolidated Statements of Operations for the 2008 fiscal year.
The following table summarizes the key assumptions used in determining the fair
value of options granted during the year ended October 31, 2009.
The following table summarizes the option activity during the fiscal periods
ended April 30, 2010 and October 31, 2009.
Table of Key Assumptions
Interest Dividend Expected Expected
Rate Yield Volatility Life
--------- ---------- ----------- ----------
5.0% 0.0% 200.0% 12 mos.
Weighted Average
------------------
Exercise Fair
Shares Price Value
------------ --------- --------
Balance October 31, 2008 - $ - $ -
Granted during 2009 8,000,000 .075 49,930
Exercise during 2009 - -
Lapsed during 2009 (8,000,000) - -
------------ --------- --------
Balance October 31, 2009 - - -
Granted during 2010 - - -
Exercised during 2010 - -
Lapsed during 2010 - - -
------------ --------- --------
Balance April 30, 2010 - $ - $ -
============ ========= ========
|
16
THE MOVIE STUDIO, INC.
(FORMERLY DESTINATION TELEVISION, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2010
Note 10. Common Stock Options (continued)
No options or warrants were outstanding at April 30, 2010 and October 31, 2009.
Note 11. Litigation
As of April 30, 2010, the Company was not a party to any existing or threatened
litigation.
Note 12. Related Party Transactions
Dr. Harold Terry
On December 21, 2007, the Company issued a one-year 8%, $100,000 secured
convertible note to Dr. Harold Terry, a major shareholder of the Company's
common stock for $100,000 cash. The note is convertible into common stock
at $0.05 pershare and is collateralized by all of the Company's assets,
both tangible and intangible, and is restricted as to transferability. The
proceeds of the note were used for working capital. As of October 31, 2008,
notes payable due Dr. Terry totaled $500,000, comprised of convertible notes
of $400,000 and $100,000 at 6% and 8%, respectively. Of these convertible
notes payable, $300,000 are secured by all of the assets of the Company and
$200,000 of the notes are unsecured. On May 16, 2008, the Company borrowed
$30,000 from Dr. Terry. The loan which is unsecured is payable in one-year
with 6% interest. In fiscal year 2007, Dr. Terry made $125,000 of unsecured
loans to the Company. As of October 31, 2008, the total of unsecured loans
payable to Dr. Terry totaled $205,000. The Company leases the building that
houses its offices from Dr. Terry on a month-to-month basis, at $4,500 per
month, which has been accrued by the Company but not paid. As of April 30,
2010 and October 31, 2009, the Company owed Dr. Terry for accrued interest
$183,218 and $162,093, respectively; and for accrued rent $396,000 and
$369,000,respectively. These amounts are included in the accompanying
consolidated balance sheets as accrued interest related party accounts and
accrued expenses payable, respectively.
Gordon Scott Venters
Effective November 2007, Gordon Scott Venters, entered into a three-year
employment agreement with the Company, which is described above in Note 5-
Commitments-Employment Agreements. In November 2007, Mr. Venters, acquired
from the Company 2,000,000 shares of its Series B Preferred Stock as payment
of $56,000 of accrued unpaid salary. The shares were valued at $56,000, or
$0.028 per share, which represented the approximate value, at the date of
issuance, of the common stock into which the Series B Preferred Stock may be
converted. Also, in September and October 2008, Mr. Venters, acquired a total
15,000,000 shares of common stock from the Company at an average price of
approximately $0.0051 as payment for accrued but unpaid salary of $76,000.
The shares of Series B Preferred Stock and the common shares have not been
registered under the Securities Act of 1933, as amended, and therefore, may
not be transferred in the absence of an exemption from registration under
such laws and will be considered "restricted securities" as that term is
defined in Rule 144 adopted under the Securities Act, and may be sold only
in compliance with the resale provisions set forth therein.
17
THE MOVIE STUDIO, INC.
(FORMERLY DESTINATION TELEVISION, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2010
Note 12. Related Party Transactions (continued)
Gordon Scott Venters (continued)
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 April 30, 2010, Mr. Venters was owed $334,247 for
accrued unpaid salary. October 31, 2009, Mr. Venters was owed $248,557.
Note 13. Supplemental Cash Flow Information
Selected non-cash investing and financing activities are summarized,
as follows:
Note 14. Subsequent Events
At March 31, 2011, the Company owed Dr. K. Terry, a related party
shareholder,a total of $1,353,420, which represented $436,500 for accrued
rent, $705,000 for convertible notes, and $211,920 for accrued interest
against the convertible notes. On April 1, 2011, the total due Dr. Terry
of $1,353,420 was purchased by Ventures Capital Partners, LLC, another
related party, which provided Dr.Terryan equity interest in Ventures
Capital Partners, LLC.
In November 2012, the Company changed its name from Destination Television,
Inc. to the Movie Studio, Inc.
During the month of November 2012, the Company became involved in litigation
regarding the ownership of equipment left in the building by a previous tenant.
The building serves as the corporate headquarters for the Company. The Company
was ordered by the court to preserve the equipment until ownership can be
established by the court. The Company has made no claim of ownership of the
equipment and expects to be dismissed from the litigation
18