Lux Digital Pictures, Inc. was incorporated
on May 6, 2008 under the laws of the State of Wyoming. Lux Digital Pictures, Inc. is referred to herein as the "Company".
The Company operates in the entertainment industry; specifically, in connection with the development, production, marketing and
distribution of digital films.
Basis of Presentation
The accompanying interim financial statements
have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of
the Securities and Exchange Commission (SEC), and should be read in conjunction with the audited financial statements
and notes thereto contained in the Companys Form 10-K filed with the SEC as of and for the period ended August 31, 2011. In
the opinion of management, all adjustments necessary in order for the financial statements to be not misleading have been reflected
herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for
the full year.
Use of Estimates
The preparation of financial statements
in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions
that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statement and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from the estimates.
For purposes of reporting cash flows,
the Company considers all short-term investments with an original maturity of three months or less to be cash equivalents.
Property and Equipment
The capital assets are being depreciated
over their estimated useful lives using the straight-line method of depreciation for book purposes.
Revenue consists substantially of fees
earned from movies and videos that we have interests in. We recognize revenue from a sale or licensing arrangement of a film when
all of the following conditions are met: persuasive evidence of a sale or licensing arrangement with a customer exists;
the film is complete and, in accordance with the terms of the arrangement, has been delivered or is available for immediate and
unconditional delivery; the license period of the arrangement has begun and the customer can begin its exploitation, exhibition,
or sale; the arrangement fee is fixed or determinable; and collection of the arrangement fee is reasonably assured.
The Company reports the costs of future
economic benefits that it expects will result from some or all advertising as assets when the costs are incurred and amortizes
the costs to expense in the current and subsequent periods, as the advertising takes place. If it determined that advertising
that has been paid for will not be used, then expense is recorded at the time of that determination. See Note 4.
Fair Value of Financial Instruments
The Companys financial instruments
consist of cash and cash equivalents, accounts receivable, prepaid consulting, prepaid advertising, deferred tax assets, accounts
payable, accrued taxes, accrued interest, note payable and convertible note payable. The carrying amount of these financial instruments
approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise
disclosed in these financial statements.
Unamortized Film Costs
Unamortized film costs consist of investments
in films which include the costs of completed films which have been produced by the Company. The costs include all direct production
and financing costs and production overhead. Costs of acquiring and producing films are amortized using the individual-film-forecast
method, whereby these costs are amortized and participation and residual costs are accrued in the proportion that current years
revenue bears to managements estimate of ultimate revenue at the beginning of the current year expected to be recognized
from the exploitation, exhibition or sale of the films.
Ultimate revenue includes estimates
over a period not to exceed ten years following the date of initial release. Unamortized film costs are stated at the
lower of amortized cost or estimated fair value on an individual film basis. The valuation of investment in films is reviewed
on a title-by-title basis, when an event or changes in circumstances indicates that the fair value of a film is less than its
unamortized cost. The fair value of the film is determined using managements future revenue and cost estimates. Additional
amortization is recorded in the amount by which the unamortized costs exceed the estimated fair value of the film. Estimates of
future revenue involve measurement uncertainty and it is therefore possible that reductions in the carrying value of investment
in films may be required as a consequence of changes in managements future revenue estimates. See Note 3.
The Company uses the asset and liability
method of accounting of income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable
to temporary differences between the financial statements carrying amounts of assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or settled. We evaluate deferred tax assets to determine
whether it is more likely than not that they will be realized. To the extent we believe that realization is not likely,
we establish a valuation allowance. See Note 9.
The Company established standards for
reporting and display of comprehensive income, its components and accumulated balances. When applicable, the Company would disclose
this information on its Statement of Stockholders Equity. Comprehensive income comprises equity except those resulting from
investments by owners and distributions to owners. The Company has not had any transactions that are required to be reported in
other comprehensive income.
Basic and Diluted Income (Loss) Per
Basic earnings (loss) per common share
is computed by dividing net income or (loss) available to common stockholders by the weighted average number of common shares outstanding.
Diluted earnings per common share is computed similar to basic earnings per common share except that the denominator is increased
to include the number of additional common shares that would have been outstanding if the potential common shares had been issued
and if the additional common shares were dilutive. At February 29, 2012 the Company had no stock equivalents that were anti-dilutive
and excluded in the earnings per share computation.
Recent Accounting Pronouncements
The Company does not expect the adoption
of recently issued accounting pronouncements to have a significant impact on the results of its operations, financial position
or cash flow.