Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K/A
(Amendment No. 1)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended August 31, 2012
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File Number: 001-34039
RED GIANT ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
Nevada 98-0471928
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
614 E. Hwy 50, Suite 235, Clermont, FL 34711
(Address, including zip code, of principal executive offices)
866-926-6427
(Registrants' telephone number, including area code)
Securities Registered Under Section 12(b) of the Exchange Act: None
Name of exchange on which registered: N/A
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.0001 par value per share
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 Exchange 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 12 months 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 such shorter period that the registrant was required to
submit and post such files). Yes [ ] No [X]
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. Yes [ ] No [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.
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]
The aggregate market value of the common stock held by non-affiliates of the
registrant as of February 29, 2012, the last business day of the registrant's
most recently completed second fiscal quarter, was $49,284, based on the a
private sale of the registrant's Common Stock on or about that date at a price
of $0.0022 per share. For purposes of determining this number, all officers and
directors and holders of more than 5% of the total outstanding shares of the
registrant are considered to be affiliates of the registrant. This number is
provided only for the purpose of this report on Form 10-K and does not represent
an admission by either the registrant or any such person as to the status of
such person.
The number of outstanding shares of the registrant's Common Stock on December
31, 2012 was 434,922,000.
EXPLANATORY NOTE
The sole purpose of this Amendment No. 1 to Red Giant Entertainment, Inc.'s
Annual Report on Form 10-K (the "Form 10-K") for the fiscal year ended August
31, 2012, as filed with the Securities and Exchange Commission on January 3,
2013, is to furnish Exhibit 101 to the Form 10-K in accordance with Rule 405 of
Regulation S-T. Exhibit 101 provides the financial statements and related notes
form the Form 10-K formatted in (eXtensible Business Reporting Language). In
addition, the Form 10-K contained a misnumbering of the notes to Financial
Statements. The Financial Statements and Notes thereto, as revised, are included
herein. No other changes have been made to the Form 10-K. This Amendment No. 1
does not reflect events that may have occurred subsequent to the original filing
date, and does not modify or update in any way the disclosures made in the
original Form 10-K.
ITEM 15. EXHIBITS
Exhibit No. Description
----------- -----------
31.1* Certification by Principal Executive Officer pursuant to Rule
13a-14(a)/ 15d-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
31.2* Certification by Principal Financial and Accounting Officer
pursuant to Rule 13a-14(a)/ 15d-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
32.1* Certification by Principal Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
32.2* Certification by Principal Financial and Principal Accounting
Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
101** The following materials from the Company's Annual Report on Form
10-K for the fiscal year ended August 31, 2012 formatted in
Extensible Business Reporting Language (XBRL): (i) the Condensed
Consolidated Balance Sheets, (ii) the Condensed Consolidated
Statements of Operations, (iii) the Condensed Consolidated
Statements of Cash Flows and (iv) related notes.
----------
* Filed as an exhibit to the original Form 10-K for the fiscal year ended
August 31, 2012, filed with the SEC on January 3, 2013.
** Attached hereto.
2
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: January 22, 2013 By: /s/ Benny Powell
---------------------------------------
Benny Powell
Chief Executive Officer
3
[LETTERHEAD OF MARTINELLIMICK PLLC]
To the Board of Directors and Stockholders
Red Giant Entertainment, Inc.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have audited the accompanying balance sheets of Red Giant Entertainment, Inc.
as of August 31, 2012 and December 31, 2011, and the related statements of
operations, stockholders' equity, and cash flows for each of the periods then
ending. Red Giant Entertainment, Inc.'s management is responsible for these
financial statements. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our 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, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Red Giant Entertainment, Inc.
as of August 31, 2012 and December 31, 2011, and the results of its operations
and its cash flows for each of the periods then ending in conformity with
accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company's accumulated deficit and net loss raise
substantial doubt about its ability to continue as a going concern. Management's
plans regarding the resolution of this issue are also discussed in Note 3. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ MartinelliMick PLLC
-------------------------------------
Spokane, Washington
January 2, 2013
F-1
RED GIANT ENTERTAINMENT INC.
(formerly known as Castmor Resources Ltd.)
Balance Sheets
August 31, December 31,
2012 2011
-------- --------
ASSETS
Current Assets
Cash in Banks $ 269 $ 97
Inventory 10,928 16,301
Prepaid Expenses 20,000 --
-------- --------
Total Current Assets 31,197 16,398
Computer Equipment - net of depreciation 3,277 --
Intellectual Property - net of amortization 19,500 23,400
-------- --------
TOTAL ASSETS $ 53,974 $ 39,798
======== ========
LIABILITIES & STOCKHOLDERS' EQUITY
Accounts Payable & Accrued Expenses $ 19,776 $ --
-------- --------
Commitments & Contingencies -- --
-------- --------
STOCKHOLDERS' EQUITY
Preferred stock,$0.0001 par value; 100,000,000 shares authorized;
no shares issued -- --
Common Stock, $0.0001 par value; 900,000,000 shares authorized;
434,922,000 & 240,000,000 shares issued and outstanding, respectively 43,492 24,000
Additional paid in capital -- 6,676
Discount on Common Stock (1,947) --
Accumulated earning (deficit) (7,347) 9,122
-------- --------
Total Stockholders' Equity 34,188 39,798
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 53,974 $ 39,798
======== ========
The accompanying notes are an integral part of these financial statements.
F-2
RED GIANT ENTERTAINMENT INC.
(formerly known as Castmor Resources, Ltd.)
Statements of Operations
8 months ended 12 months ended
August 31, December 31,
2012 2011
------------ ------------
Sales $ 97,486 $ 53,286
Cost of Sales 69,651 27,563
------------ ------------
Gross Profit 27,835 25,723
Expenses
Advertising & marketing 962 3,902
Depreciation & amortization 3,956 5,850
General & administrative 3,362 5,269
Travel & entertainment 2,014 1,580
Payroll & related expenses 7,302 --
Meeting & conventions 5,213 --
Professional fees 21,495 --
------------ ------------
Total Expense 44,304 16,601
------------ ------------
Net Income (loss) before taxes (16,469) 9,122
Income taxes -- --
------------ ------------
Net Income (loss) $ (16,469) $ 9,122
============ ============
Net income per share, basic and diluted $ (0.00) $ 0.00
============ ============
Weighted average number of common shares outstanding,
basic & diluted 208,730,500 240,000,000
============ ============
The accompanying notes are an integral part of these financial statements.
F-3
RED GIANT ENTERTAINMENT INC
(formerly known as Castmor Resources, Ltd.)
Statement of Stockholders' Equity
Additional Discount Accumulated Total
Preferred Stock Common Stock Paid in on Common Earning Shareholder
Sh Amt Sh Amt Capital Stock (Deficit) Equity
------- -------- ----------- --------- --------- -------- -------- --------
Beg. bal, January 1, 2011 -- $ -- 240,000,000 $ 24,000 $ 6,676 $ -- $ -- $ 30,676
Net Income 9,122 9,122
------- -------- ----------- --------- --------- -------- -------- --------
Balance December 31, 2011 -- -- 240,000,000 24,000 6,676 -- 9,122 39,798
Contributed capital -- -- -- -- 10,869 -- -- 10,869
Recapitalization from
reverse merger -- -- 194,922,000 19,492 (17,545) (1,947) -- --
Net Loss (16,469) (16,469)
------- -------- ----------- --------- --------- -------- -------- --------
Balance August 31, 2012 -- $ -- 434,922,000 $ 43,492 $ -- $ (1,947) $ (7,347) $ 34,198
======= ======== =========== ========= ========= ======== ======== ========
The accompanying notes are an integral part of these financial statements.
F-4
RED GIANT ENTERTAINMENT
(formerly known as Castmor Resources, Ltd.)
Statements of Cash Flow
8 months ended 12 months ended
August 31, December 31,
2012 2011
-------- --------
OPERATING ACTIVITIES
Net Income $(16,469) $ 9,122
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation & amortization 3,956 5,850
Inventory 5,373 (16,301)
Prepaid expenses (20,000) --
Accounts payable & accrued expenses 19,776 --
-------- --------
Net Cash Used by Operating Activities (7,364) (1,329)
-------- --------
INVESTING ACTIVITIES
Computer equipment purchased (3,333) --
-------- --------
Net Cash Used by Investing Activities (3,333) --
-------- --------
FINANCING ACTIVITIES
Capital contributed 10,869 1,426
-------- --------
Net Cash Provided by Financing Activities 10,869 1,426
-------- --------
Net Cash Increase for Period 172 97
Cash at Beginning of Period 97 --
-------- --------
Cash at End of Period $ 269 $ 97
======== ========
Supplemental cash flow information:
Interest paid $ -- $ --
======== ========
Income taxes paid $ -- $ --
======== ========
Non-cash Investing and Financing Activities
Shareholder contribution of intellectual property $ -- $ 29,250
======== ========
The accompanying notes are an integral part of these financial statements.
F-5
RED GIANT ENTERTAINMENT, INC.
(formerly known as Castmor Resources, Inc.)
Notes to the Financial Statements
August 31, 2012
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Red Giant Entertainment LLC, (hereinafter "the Company") was formed in the State
of Florida, U.S.A., on January 1, 2011. The Company's fiscal year end is
December 31. On May 9, 2012, the Company incorporated and changed its name to
Red Giant Entertainment, Inc. ("RGE") All income and expenses in these financial
statements have been recharacterized for reporting purposes to be all inclusive
for the corporate entity. The Company was originally a publishing company, but
has expanded its operations to include mass media and graphic novel artwork
development.
On June 11, 2012, Castmor Resources Ltd., a Nevada corporation entered into a
Share Exchange Agreement (the "Share Exchange Agreement") with Red Giant
Entertainment Inc., and Benny Powell, who had owned 100% of the issued and
outstanding shares in RGE. Pursuant to the terms and conditions of the Share
Exchange Agreement, RGE exchanged 100% of the outstanding shares in RGE for
forty million (40,000,000; 240,000,000 post split) newly-issued restricted
shares of the Company's common stock. Due to the recapitalization and reverse
merger with Castmor Resources Ltd, 32,487,000 shares (194,922,000 post split)
were issued in the entity. The Company subsequently approved a 6 to 1 forward
stock split of all shares of record in June, 2012.
The exchange resulted in RGE becoming a wholly-owned subsidiary of the Company.
As a result of the Share Exchange Agreement, the Company will now conduct all
current operations through Red Giant Entertainment, and our principal business
became the business of RGE. All share information has been restated for both the
reverse merger and the forward stock split for all periods presented.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the Company have been prepared in accordance with
the generally accepted accounting principles in the United States of America.
Because a precise determination of many assets and liabilities is dependent upon
future events, the preparation of financial statements for a period necessarily
involves the use of estimates that have been made using careful judgment. The
financial statements have, in management's opinion been properly prepared within
reasonable limits of materiality and within the framework of the significant
accounting policies summarized below:
ACCOUNTING METHOD
The Company's financial statements are prepared using the accrual basis of
accounting in accordance with accounting principles generally accepted in the
United States of America and have been consistently applied in the preparation
of the financial statements.
ADVERTISING
Advertising costs are expensed as incurred. The Company expensed advertising
costs of $962 and $109 for the periods ending August 31, 2012 and December 31,
2011, respectively.
ASSET RETIREMENT OBLIGATIONS
The Company has adopted ASC 410, ASSET RETIREMENT AND ENVIRONMENTAL OBLIGATIONS,
which requires that the fair value of a liability for an asset retirement
obligation be recognized in the period in which it is incurred. ASC 410 requires
the Company to record a liability for the present value of the estimated site
restoration costs with corresponding increase to the carrying amount of the
related long-lived assets. The liability will be accreted and the asset will be
depreciated over the life of the related assets. Adjustments for changes
resulting from the passage of time and changes to either the timing or amount of
the original present value estimate underlying the obligation will be made. As
at August 31, 2012 and December 31, 2011, the Company does not have any asset
retirement obligations.
F-6
RED GIANT ENTERTAINMENT, INC.
(formerly known as Castmor Resources, Inc.)
Notes to the Financial Statements
August 31, 2012
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all highly
liquid investments and short-term debt instruments with original maturities of
three months or less to be cash equivalents. As at August 31, 2012 and December
31, 2011, there were $269 and $97 of cash equivalents, respectively.
COST OF GOODS SOLD
Cost of goods sold includes the cost of creating services or artwork,
advertising and books.
EARNINGS (LOSS) PER SHARE
The Company follows financial accounting standards, which provides for
calculation of "basic" and "diluted" earnings per share. Basic earnings per
share includes no dilution and is computed by dividing net income available to
common shareholders by the weighted average common shares outstanding for the
period. Diluted earnings per share reflect the potential dilution of securities
that could share in the earnings of an entity similar to fully diluted earnings
per share. There were no common stock equivalents outstanding at August 31, 2012
and December 31, 2011.
FAIR VALUE MEASUREMENTS
Topic 820 in the Accounting Standards Codification (ASC 820) defines fair value,
establishes a framework for measuring fair value in generally accepted
accounting principles and expands disclosures about fair value measurements. ASC
820 applies whenever other standards require (or permit) assets or liabilities
to be measured at fair value but does not expand the use of fair value in any
new circumstances. In this standard, the FASB clarifies the principle that fair
value should be based on the assumptions market participants would use when
pricing the asset or liability. In support of this principle, ASC 820
establishes a fair value hierarchy that prioritizes the information used to
develop those assumptions. The fair value hierarchy is as follows:
* Level 1 inputs -- Unadjusted quoted process in active markets for
identical assets or liabilities that the entity has the ability to
access at the measurement date.
* Level 2 inputs -- Inputs other than quoted prices included in Level 1
that are observable for the asset or liability, either directly or
indirectly. These might include quoted prices for similar assets and
liabilities in active markets, and inputs other than quoted prices
that are observable for the asset or liability, such as interest rates
and yield curves that are observable at commonly quoted intervals.
* Level 3 inputs -- Unobservable inputs for determining the fair values
of assets or liabilities that reflect an entity's own assumptions
about the assumptions that market participants would use in pricing
the assets or liabilities.
The Company currently does not have any assets that are measured at fair value
on a recurring or non-recurring basis, consequently, the Company did not have
any fair value adjustments for assets and liabilities measured at fair value at
August 31, 2012 and December 31, 2011, nor gains or losses reported in the
statement of operations that are attributable to the change in unrealized gains
or losses relating to those assets and liabilities still held at the reporting
date for the periods ended August 31, 2012 and December 31, 2011.
INCOME TAXES
The Company was a limited liability company until May 9, 2012. As an LLC, no
income tax provision was made at the Company level and all taxable income and
deductions were passed directly to the equity owner. The Company will be
evaluating the tax ramifications of the change in entity status and the
organizational changes to determine future tax issues. Currently the Company
expects to recognize losses in 2012. The Company further expects the losses to
be reserved against for deferred tax purposes.
F-7
RED GIANT ENTERTAINMENT, INC.
(formerly known as Castmor Resources, Inc.)
Notes to the Financial Statements
August 31, 2012
The Company has adopted ASC 740, INCOME TAXES, which requires the Company to
recognize deferred tax liabilities and assets for the expected future tax
consequences of events that have been recognized in the Company's financial
statements or tax returns using the liability method. Under this method,
deferred tax liabilities and assets are determined based on the temporary
differences between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect in the years in which the
differences are expected to reverse.
LONG-LIVED ASSETS IMPAIRMENT
Long-lived assets of the Company are reviewed for impairment whenever events or
circumstances indicate that the carrying amount of assets may not be
recoverable, pursuant to guidance established in ASC 360, PROPERTY, PLANT AND
EQUIPMENT. Management considers assets to be impaired if the carrying value
exceeds the future projected cash flows from related operations (undiscounted
and without interest charges). If impairment is deemed to exist, the assets will
be written down to fair value. Fair value is generally determined using a
discounted cash flow analysis.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at historical cost and capitalized.
Depreciation is calculated on a straight-line basis over the estimated useful
life of the asset. The Company currently has equipment being depreciated for
estimated lives of three to five years. Depreciation for the periods ended
August 31, 2012 and December 31, 2011 was $56 and zero, respectively.
RECENT ACCOUNTING PRONOUNCEMENTS
In July 2012, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") No. 2012-02, "INTANGIBLES--GOODWILL AND
OTHER (TOPIC 350): TESTING INDEFINITE-LIVED INTANGIBLE ASSETS FOR IMPAIRMENT"
(the "Update"). The Update simplifies the guidance for testing the decline in
the realizable value (impairment) of indefinite-lived intangible assets other
than goodwill. Examples of intangible assets subject to the guidance include
indefinite-lived trademarks, licenses and distribution rights. The new standard
is effective for fiscal years beginning after September 15, 2012. As of August
31, 2012, none of the Company's intangible assets are amortized as
indefinite-lived intangible assets. Therefore, the adoption of this amendment is
not expected to have a material impact on the Company's financial position or
results of operations.
In September 2011, the FASB issued ASU No. 2011-08, "Intangibles--Goodwill and
Other (Topic 350): TESTING GOODWILL FOR IMPAIRMENT." This amendment permits, but
does not require, an entity to first assess qualitative factors to determine
whether it is more likely than not that the fair value of a reporting unit is
less than its carrying amount as a basis for determining whether it is necessary
to perform the two-step goodwill impairment test. The amendment is required to
be adopted by the Company beginning October 1, 2012, although early adoption is
permitted. The Company will consider assessing qualitative factors to determine
whether it is more likely than not that the fair value of a reporting unit is
less than its carrying amount as a basis for determining whether it is necessary
to perform the two-step goodwill impairment test in future periods. The adoption
of this amendment is not expected to have a material impact on the Company's
financial position or results of operations.
In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic
820): AMENDMENTS TO ACHIEVE COMMON FAIR VALUE MEASUREMENTS AND DISCLOSURE
REQUIREMENTS IN U.S. GAAP AND INTERNATIONAL FINANCIAL REPORTING STANDARDS
(IFRS). Among other things, the guidance expands the disclosure requirements
around fair value measurements categorized in Level 3 of the fair value
hierarchy and requires disclosure of the level in the fair value hierarchy of
items that are not measured at fair value in the statement of financial position
but whose fair value must be disclosed. It also clarifies and expands upon
existing requirements for measurement of the fair value of financial assets and
liabilities as well as instruments classified in shareholders' equity. The
F-8
guidance is effective for interim and annual periods beginning after December
15, 2011. We are currently evaluating the impact this update will have on our
financial statements.
REVENUE RECOGNITION
Revenue for the Company is recognized from three primary sources: Advertising
Revenue, Publishing Sales and Creative Services. Revenue was processed through
our Paypal Account and Project Wonderful accounts where applicable.
Advertising Revenue comes from the following sources and is stated at net after
commissions:
* Keenspot: Revenue is earned on a net 90 basis and is based upon
traffic to Red Giant property Web sites. It is calculated on a Cost
Per Thousand (CPM) of verified impressions and varies based upon bids
by advertisers and other customary factors. In exchange for
advertising, hosting, IT, and sales management, Keenspot takes 50%
commission of ad revenue for their services.
* Project Wonderful: Revenue is paid immediately and based upon bids by
advertisers for a set amount of time at the prevailing highest winning
rate. Project Wonderful takes a 25% commission of ad revenue for their
services.
Publishing Revenue comes from the following sources:
* Kickstarter Campaigns: These are presales for books and revenue is
recognized only once the books arrive and are shipped to the buyers.
* Direct Sales: Through our online store, we sell directly to clients
and the transactions process through our Paypal account. All orders
are shipped immediately and revenue is recognized immediately.
Creative Services are artwork, writing, advertising, and other creative
endeavors we handle for outside clients. Revenue is recognized upon completion
of the services and payment has been tendered.
Shipping and Handling for purchases are paid directly by the consumer through
Paypal. The Company has not established an allowance for doubtful accounts, as
all transactions are handled through Paypal directly by the consumer.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses for the reporting period. The
Company reviews its estimates on an ongoing basis. The estimates were based on
historical experience and on various other assumptions that the Company believes
to be reasonable under the circumstances. Actual results could differ from these
estimates. The Company believes the judgments and estimates required in its
accounting policies to be critical in the preparation of the Company's financial
statements.
NOTE 3 - MANAGEMENT STATEMENT REGARDING GOING CONCERN
The Company is currently generating revenues from operations sufficient to meet
its operating expenses. However, as the Company completed the first year of
operation in 2011, management believes that given the current economic
environment and the continuing need to strengthen our cash position, there is
still doubt about the Company's ability to continue as a going concern.
Management is currently pursuing various funding options, including seeking debt
or equity financing, licensing opportunities, as well as a strategic or other
transaction, to obtain additional funding to continue the development of, and
successfully commercialize, its products. There can be no assurance that the
F-9
RED GIANT ENTERTAINMENT, INC.
(formerly known as Castmor Resources, Inc.)
Notes to the Financial Statements
August 31, 2012
Company will be successful in its efforts and this raises substantial doubt
about the Company's future. Should the Company be unable to obtain adequate
financing or generate sufficient revenue in the future, the Company's business,
results of operations, liquidity and financial condition would be materially and
adversely harmed, and the Company will be unable to continue as a going concern.
The Company believes that its ability to execute its business plan, and
therefore continue as a going concern, is dependent upon its ability to do the
following:
* obtain adequate sources of funding to fund long-term business
operations;
* enter into a licensing or other relationship that allows the Company
to commercialize its products;
* manage or control working capital requirements; and
* develop new and enhance existing relationships with product
distributors and other points of distribution for the Company's
products.
There can be no assurance that the Company will be successful in achieving its
short- or long-term plans as set forth above, or that such plans, if
consummated, will enable the Company to obtain profitable operations or continue
in the long-term as a going concern.
NOTE 4 - INVENTORY
As of August 31, 2012 and December 31, 2011, inventory consisted of physical
copies of published books, as well as artwork that's used for digitally
distributed works for advertising revenue and future publications. The inventory
is valued at the cost to produce.
NOTE 5 - INTELLECTUAL PROPERTY
The Company's intellectual property consists of graphic novel artwork and was
contributed by a shareholder to the Company and valued at $29,250, which was
determined based on the historical costs for artists and printing. The
intangible is being amortized over its life of five years. Amortization cost for
the year periods ended August 31, 2012 and December 31 2011 $3,900 and $5,850,
respectively. The Company expects to amortize the remaining $19,500 over the
remaining life of approximately four years at $5,850 per year.
NOTE 6 - PROVISION FOR INCOME TAXES
Income taxes are provided based upon the liability method. Under this approach,
deferred income taxes are recorded to reflect the tax consequences in future
years of differences between the tax basis of assets and liabilities and their
financial reporting amounts at each year-end. A valuation allowance is recorded
against deferred tax assets if management does not believe the Company has met
the "more likely than not" standard imposed by accounting standards to allow
recognition of such an asset.
At August 31, 2012, the Company had net deferred tax assets calculated at an
expected rate of 34%, noted in the table below, of approximately $2,400. As
management of the Company cannot determine that it is more likely than not that
the Company will realize the benefit of the net deferred tax asset, a valuation
allowance equal to the net deferred tax asset was recorded at August 31, 2012.
The significant components of the net deferred tax asset calculated with the
estimated effective income tax rate at August 31, 2012 and December 31, 2011
were as follows:
F-10
RED GIANT ENTERTAINMENT, INC.
(formerly known as Castmor Resources, Inc.)
Notes to the Financial Statements
August 31, 2012
2012
--------
Deferred tax assets
Net operating loss carry forward $ 7,300
--------
Net deferred income tax asset 2,400
Deferred tax asset valuation allowance (2,400)
--------
Net deferred tax asset $ --
========
At August 31, 2012, the Company had net income tax operating loss carry forwards
of approximately $7,300, which expire in the years 2022 through 2032. The change
in the allowance account from December 31, 2011 August 31, 2012 to was $2,400.
For the tax year ended December 31, 2011, the predecessor entity to Red Giant
Entertainment, Inc. was a limited liability company, and as such, all tax
benefits and obligations passed through the entity to its members. No provisions
have been made at December 31, 2011, nor does management believe that any tax
modifications would have a material effect on the financials.
Although Management believes that its estimates are reasonable, no assurance can
be given that the final tax outcome of these matters will not be different than
that which is reflected in our tax provisions. Ultimately, the actual tax
benefits to be realized will be based upon future taxable earnings levels, which
are very difficult to predict.
ACCOUNTING FOR INCOME TAX UNCERTAINTIES AND RELATED MATTERS
The Company may be assessed penalties and interest related to the underpayment
of income taxes. Such assessments would be treated as a provision of income tax
expense on the financial statements. For the years ended August 31, 2012 and
December 31, 2011, no income tax expense has been realized as a result of
operations and no income tax penalties and interest have been accrued related to
uncertain tax positions. The Company has not filed a tax return for the new
entity. These filings will be subject to a three year statute of limitations. No
adjustments have been made to reduce the estimated income tax benefit at fiscal
year end. Any valuations relating to these income tax provisions will comply
with U.S. generally accepted accounting principles.
NOTE 7 - CAPITAL STOCK
The Company has 100,000,000 shares of preferred stock authorized and none have
been issued.
The Company has 900,000,000 shares of common stock authorized, of which
434,922,000 shares are issued and outstanding. All shares of common stock are
non-assessable and non-cumulative, with no preemptive rights.
During the eight months ended, August 31, 2012, $10,869 of contributed capital
was added to additional paid in capital.
In June, 2012, Castmor Resources Ltd., entered into Share Exchange Agreement
(the "Share Exchange Agreement") with Red Giant Entertainment Inc., ("RGE"), and
Benny Powell, who had owned 100% of the issued and outstanding shares in RGE.
Pursuant to the terms and conditions of the Share Exchange Agreement, RGE
F-11
RED GIANT ENTERTAINMENT, INC.
(formerly known as Castmor Resources, Inc.)
Notes to the Financial Statements
August 31, 2012
exchanged 100% of the outstanding shares in RGE for forty million (240,000,000
post split) newly-issued restricted shares of the Company's common stock. Due to
the recapitalization and reverse merger of Castmor Resources Ltd, an additional
32,487,000 (194,922,000 post split) shares were issued. The Company approved a 6
to 1 stock split of all shares issued in June of 2012. All share information has
been restated for both the reverse merger and the forward stock split for all
periods presented.
NOTE 8 - RELATED PARTIES
Benny Powell was an officer and director of both parties to the merger. See Note
1. Mr. Powell continues as the Company's sole officer and director post merger.
Mr. Powell also provides rent and other services to the Company through his
other ventures.
NOTE 9 - SUBSEQUENT EVENTS
Management has evaluated subsequent events through December 27, 2012. There was
no event of which management was aware that occurred after the balance sheet
date that would require any adjustment to, or disclosure in, the accompanying
consolidated financial statements.
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