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EX-31 - EXHIBIT 31 - MOON RIVER STUDIOS, INC. | medient10q3q13ex31.htm |
EX-32 - EXHIBIT 32 - MOON RIVER STUDIOS, INC. | medient10q3q13ex32.htm |
EXCEL - IDEA: XBRL DOCUMENT - MOON RIVER STUDIOS, INC. | Financial_Report.xls |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d) Securities Exchange Act of 1934 for Quarterly Period Ended September 30, 2013
-OR-
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities And Exchange Act of 1934 for the transaction period from _________ to________
Commission File Number: 000-53835
Medient Studios, Inc.
(Exact name of registrant as specified in its charter)
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Nevada |
| 41-2251802 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification Number) |
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1635 Old River Road, Bloomingdale, GA |
| 31302 |
(Address of principal executive offices) |
| (Zip Code) |
(818) 634 4801
(Registrant's telephone number, including area code)
Indicate by check mark whether the issuer (1) 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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ]
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 (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [x] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerate filer, or a small reporting company as defined by Rule 12b-2 of the Exchange Act):
1
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Large accelerated filer [ ] |
| Non-accelerated filer [ ] |
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 number of outstanding shares of the registrant's common stock as of
November 19, 2013: Common Stock 41,298,817
2
MEDIENT STUDIOS, INC.
FORM 10-Q
For the quarterly period ended September 30, 2013
INDEX
PART 1 FINANCIAL INFORMATION
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Item 1. Financial Statements (Unaudited) |
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. Quantitative and Qualitative Disclosure About Market Risk |
| 18 |
Item 4. Controls and Procedures |
| 18 |
PART II OTHER INFORMATION
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Item 1. Legal Proceedings |
| 19 |
Item 1A. Risk Factors |
| 19 |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
| 19 |
Item 3. Defaults upon Senior Securities |
| 19 |
Item 4. Mine Safety Disclosures |
| 19 |
Item 5. Other Information |
| 19 |
Item 6. Exhibits |
| 19 |
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SIGNATURES |
| 20 |
3
In addition to historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. From time to time, we may also provide oral or written forward-looking statements in other materials we release to the public. Such forward-looking statements are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. The forward-looking statements are not historical facts but rather are based on current expectations, estimates and projections about our business and industry, and our beliefs and assumptions, and include, but are not limited to, statements under the headings Management's Discussion and Analysis of Financial Condition and Results of Operations and Outlook . Words such as anticipate, believe, estimate, expects, intend, plan, will and variations of these words and similar expressions identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, many of which are beyond our control, are difficult to predict and could cause actual results to differ materially (both favorable and unfavorably) from those expressed or forecasted in the forward-looking statements. These risks and uncertainties include, but are not limited to, those described in Risk Factors and elsewhere in this report, and those described from time to time in our past and future reports filed with the Securities and Exchange Commission, including in our Annual Report on Form 10-K for the year ended December 31, 2012. Forward-looking statements that were believed to be true at the time made may ultimately prove to be incorrect or false. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
4
MEDIENT STUDIOS, INC.
Balance Sheets
As of September 30, 2013 and December 31, 2012
(Unaudited)
| September 30, 2013 | December 31, 2012 |
| (Unaudited) | (Audited) |
Assets |
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Current assets |
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Cash in bank | $ 140,556 | $ - |
Deposits | 2,200 | - |
Total Cash and Cash Equivalents | 142,756 | - |
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Accounts receivable | 2,025,000 | 500 |
Accounts receivable - related party | 3,220,392 | 3,267,825 |
Total current assets | 5,388,148 | 3,268,325 |
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Film Assets: |
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Yellow, net of accumulated amortization of $0 | 15,033,354 | 14,653,173 |
Storage 24, Net of Accum. Amortization of $3,728,120 | 1,771,880 | 2,841,353 |
Films in development | 167,517 | 34,000 |
Total film assets | 16,972,751 | 17,528,526 |
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Fixed Assets: |
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Land | 22,100,000 | - |
Site Development | 314,533 | - |
Capitalized Preacquisition Costs | - | 72,872 |
Equipment | 2,084 | - |
Furniture & Fittings | 17,398 | - |
Motor Vehicles | 19,000 | 19,000 |
Less: Accumulated depreciation | (3,855) | (31) |
Total Fixed Assets | 22,449,160 | 91,841 |
Total Assets | $ 44,810,059 | $ 20,888,692 |
Continued on next page.
5
MEDIENT STUDIOS, INC.
Balance Sheets
As of September 30, 2013 and December 31, 2012
(Unaudited)
Continued from previous page
| September 30, 2013 | December 31, 2012 |
| (Unaudited) | (Audited) |
Liabilities and Stockholders' Equity |
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Current liabilities |
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Accounts Payable | $ 163,141 | $ 171,910 |
Accounts Payable - Related Party | 683,635 | 486,905 |
Notes Payable | 2,180,000 | 6,040,000 |
Interest on Notes Payable | 321,866 | 190,321 |
Settlement Payable | - | 385,000 |
Credit Line | 600,000 | - |
Interest Payable on Credit Line | 9,000 | - |
Restricted Notes | 742,500 | - |
Interest Payable Restricted Notes | 9,183 | - |
Aged Debt | 1,016,709 | - |
Interest Payable on Aged Debt | 8,278 | - |
Stock to be Issued | 30,000 | 30,000 |
Accrued Expenses | 266,145 | 35,000 |
Taxes Payable | - | - |
Payroll Taxes Payable | 2,211 | - |
Total Current Liabilities | 6,032,668 | 7,339,136 |
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Long Term Liabilities |
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Capital Lease | 3,635,538 | - |
Deferred Revenue | 18,464,462 | - |
Total Liabilities | 28,132,668 | 7,339,136 |
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Stockholders' Equity |
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Preferred stock, 50,000,000 shares authorized, 10,000,000 issued and outstanding | 10,000,000 | 10,000,000 |
Common stock, $0.001 par value, 500,000,000 shares authorized and 38,022,329 and 28,458,100 shares issued and outstanding, respectively | 38,,022 | 28,458 |
Common Stock Converted | 283,291 | 0 |
Additional paid-in capital | 6,754,247 | 3,763,811 |
Accumulated deficit in development stage | 0 | (259,318) |
Retained earnings | (398,169) | 16,605 |
Total stockholders' equity | 16,677,391 | 13,549,556 |
Total liabilities and stockholders' equity | $ 44,810,059 | $ 20,888,692 |
The accompanying notes are an integral part of these financial statements.
6
MEDIENT STUDIOS, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012
(Unaudited)
| Three Months Ended September 30, 2013 | Three Months Ended September 30, 2012 | Nine Months Ended September 30, 2013 | Nine Months Ended September 30, 2012 |
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Revenue | $(38,381) | $ - | $1,911,619 | $ 150 |
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Cost of Sales: |
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Commission & Fees | 6,181 | - | 6,181 | - |
Amortization of film asset | 6,204 | - | 1,069,473 | - |
Gross margin | (50,766) | - | 835,965 | 150 |
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Operating expenses: |
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General and administrative expenses | 438,092 | 95 | 595,747 | 272 |
Licenses | 0 | 1,000 | 2,638 | 4,000 |
Depreciation | 1,924 | 0 | 3,824 | 0 |
Stock for Services | 0 | 107,400 | 0 | 107,400 |
Professional fees | 193,839 | 11,275 | 241,589 | 22,688 |
Total expenses | 633,855 | 119,770 | 843,798 | 134,360 |
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Exchange Gain | (65,383) | 0 | (65,383) | 0 |
Interest expense | 101,121 | 8 | 213,006 | 25 |
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Tax expense (benefit) | (125,216) | - | - | - |
Net income (loss) | $(595,143) | $(119,778) | $(155,456) | $(134,235) |
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Per share information: |
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Net profit/(loss) per common share - basic and fully diluted | $ (0.02) | $ (0.09) | $ (0.00) | $ (0.10) |
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Weighted average number of common stock outstanding | 39,752,684 | 1,404,000 | 33,240165 | 1,404,000 |
The accompanying notes are an integral part of these financial statements.
7
MEDIENT STUDIOS, INC.
Statements of Cash Flows
For the Nine Months Ended September 30, 2013 and 2012
(Unaudited)
| Nine Months Ended September 30, 2013 | Nine Months Ended September 30, 2012 |
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Cash flows from operating activities |
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Net profit (loss) | $ (155,456) | $ (134,235) |
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Adjustments to reconcile net profit to net cash provided by (used in) operating activities: |
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Depreciation | 3,824 | 0 |
Amortization of Film Assets | 1,069,473 | 0 |
Increase in Assets and Liabilities |
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(Increase) in Accounts Receivable | (1,977,067) | 0 |
Capitalization of additions to Film Costs | (380,181) | 0 |
(Increase) in Film Rights | (133,517) | 0 |
(Decrease) in Accounts Payable | (8,769) | (48,312) |
Increase in Accounts Payable to Related Parties | 196,730 | 0 |
Increase in Interest on Notes Payable | 131,545 | 0 |
Increase in Interest on Credit Line | 9,000 | 0 |
Increase in Interest on Aged Debt | 8,278 | 0 |
Increase in Interest on Restricted Notes | 9,183 | 0 |
Increase in Payroll Taxes | 2,211 | 0 |
Increase in Accrued Expenses | 231,145 | 0 |
(Decrease) in Settlement | (385,000) | 0 |
(Increase) in Fixed Assets | (19,482) | 0 |
Increase (Decrease) in Line of Credit | 0 | (1,000) |
Common Stock to be Issued for Services | 0 | 107,400 |
Taxes payable | 0 | 0 |
Net cash used in operating activities | (1,398,083) | (76,147) |
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Cash flows from investing activities |
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Land and Capitalized Site and Preacquisition Costs | (22,341,661) | 0 |
Net cash provided by investing activities | (22,341,661) | 0 |
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(Continued on next page)
8
MEDIENT STUDIOS, INC.
Statements of Cash Flows
For the Nine Months Ended September 30, 2013 and 2012
(Unaudited)
(Continued from previous page)
Cash flows from financing activities |
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Issuance of common stock | 292,855 | 0 |
Additional paid-in capital | 2,990,436 | 0 |
Capital Lease | 3,635,538 | 0 |
(Decrease) in Notes Payable | (3,860,000) | 0 |
Increase in Credit Line | 600,000 | 0 |
Increase in Aged Debt | 1,016,709 | 0 |
Increase in Restricted Notes | 742,500 | 0 |
Deferred Revenue | 18,464,462 | 0 |
Assumption of liabilities by former shareholders | 0 | 75,333 |
Net cash provided by financing activities | 23,882,500 | 75,333 |
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Net increase (decrease) in cash and cash equivalents | 142,756 | (814) |
Cash and cash equivalents, beginning of fiscal year | 0 | 814 |
Cash and cash equivalents, end of period | $ 142,756 | $ 0 |
The Accompanying Notes are an Integral Part of these Financial Statements.
9
Notes to the Financial Statements
September 30, 2013
(Unaudited)
NOTE 1 - BUSINESS AND BASIS OF PRESENTATION
Business
Medient Studios, Inc. (Medient, the Company, the Registrant, We, Our) was incorporated on September 10, 2007 in the state of Nevada. The Company operates on a calendar year-end.
Medient, headquartered in Effingham County, Georgia, is a global film production and distribution company with a strong presence in the key markets of North America, Europe and India. Medient's management team has approximately 150 years of experience in the motion picture industry and is responsible for producing or financing in excess of 250 movies. To date, some 14 movies, in multiple languages and continents, two music acts and several hundred live performance shows have been produced under the Medient banner.
The Companys first horror film, Storage 24, was filmed and produced in the United Kingdom. Storage 24 has been licensed globally, and was world premiered in London by Universal Pictures Visual Programming Limited. The Company's second major film rights acquisition, Yellow, was written and directed by Nick Cassavetes, the director of The Notebook and My Sisters Keeper. Yellow was filmed in the United States, and the film world premiered in September 2012 at the Toronto International Film Festival. (TIFF). Since the TIFF screening, the movie has participated in a number of domestic and international film festivals, most recently winning Best Film at the Catalina Film Festival. The Company has received several offers for distribution and is currently reviewing dates for the films domestic and international releases.
Medient has procured and has initiated construction of the largest film studio in North America (Studioplex). On August 21, 2013, the Company entered into a lease agreement (Lease) with the Effingham County Industrial Development Authority (the IDA), an instrumentality of the State of Georgia. Under this Lease, the Company leased approximately 1,550 acres of land located within Effingham County, Georgia. The Lease is effective from August 21, 2013 through July 1, 2033. No interest is payable and no payments are due for the first two years, with the total rent of $10 Million being paid in 18 equal annual installments, commencing February 28, 2016. The Company is obligated to pay additional rent if it does not achieve the specified goals of $90 Million in investment and 1,000 jobs on or before the end of year five. At the end of the Lease, the Company has the option to purchase the property for $100. Furthermore, the State of Georgia and the IDA are providing additional cash grants, rebates, and tax incentives for the Studioplex
In connection with the Lease, the Company and the IDA entered into the Bond Loan Purchase Agreement, pursuant to which the IDA agreed to issue up to $300 Million in Taxable Industrial Development Revenue Bonds. The bond will be issued as a single bond draw-down instrument, which will mature on July 1, 2033 and bear interest at a rate of 6.00% per annum, payable on July 1 of each year. The proceeds of the bonds will be used by the IDA to acquire the Studioplex, subsequently leased to the Company.
Basis of Presentation
The Company prepares its financial statements on the accrual basis of accounting. All intercompany balances and transactions are eliminated. Management believes that all adjustments necessary for a fair presentation of the results of the three and nine months ended September 30, 2013 and 2012 respectively have been made.
Investments in subsidiaries, that the Company may acquire, where it has a controlling interest, will be reported using the equity method. For those businesses that the Company acquires and does not have a controlling interest, they will be accounted through the Noncontrolling Interest method.
Unaudited Interim Financial Statements
The accompanying unaudited consolidated financial statements of the Company 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). These financial statements are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring accruals) necessary to present fairly the balance sheet, statement of operations, statement of stockholders equity and statement of cash flows for the periods presented in accordance with accounting principles generally accepted in the United States. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to SEC rules and regulations. The results of operations for the three and nine months ended September 30, 2013, are not necessarily indicative of the results of operations for the full year or any other interim period. The information included in this Form 10-Q should be read in conjunction with the audited financial statements and notes thereto included in the Companys Annual Report on Form 10-K for the year ended December 31, 2012.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Significant Accounting Policies
The Companys management selects accounting principles generally accepted in the United States of America and adopts methods for their application. The application of accounting principles requires the estimating, matching and timing of revenue and expense. It is also necessary for management to determine, measure and allocate resources and obligations within the financial process according to those principles. The accounting policies used conform to generally accepted accounting principles which have been consistently applied in the preparation of these financial statements.
The financial statements and notes are representations of the Companys management that is responsible for their integrity and objectivity. Management further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud. The Company's system of internal accounting control is designed to assure, among other items, that 1) recorded transactions are valid; 2) valid transactions are recorded; and 3) transactions are recorded in the proper period in a timely manner to produce financial statements which present fairly the financial condition, results of operations and cash flows of the Company for the respective periods being presented.
Use of Estimates
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America 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 during the reporting periods. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less and money market instruments to be cash equivalents. Deposits made are also considered cash equivalents.
Revenue Recognition
The Company recognizes revenue from the sale of products in accordance with ASC 605-15 Revenue Recognition , (formerly Staff Accounting Bulletin No. 104, "Revenue Recognition in Financial Statements" ("SAB 104"). Revenue will be recognized only when all of the following criteria have been met.
1. Persuasive evidence of an arrangement exists
2. Ownership and all risks of loss have been transferred to buyer, which is generally upon delivery
3. The price is fixed and determinable, and
4. Collectability is reasonably assured.
Land Lease
The Company entered a capital Lease with the IDA under which the Company owns the economic interest in approximately 1550 acres of land in Effingham, GA subject to payments of the rental thereon.
The Company undertook an independent appraisal of the value of the land that totaled $22.1 Million that has been capitalized and not depreciated.
Long Term Liability- Capital Lease
Under the terms of the Lease the Company pays rentals of $10 Million over a 20 year period. The total rentals have been discounted to a net present value of $3,635,538, using an annual discount rate of 10.43%. This discount rate applied is the Companys weighted average of its cost of borrowing from third parties (excluding Accounts Payable and non-interest bearing Notes).
Site Development Costs
Costs incurred in securing the approximate 1550 acre property in Effingham, GA and those incurred in the commencement of preconstruction works have been capitalized as Site Development Costs and not depreciated. Previously incurred Preacquisition Costs have also been included within this category, as the economic interest in the property has been secured under the terms of the Lease.
Gain Contingency
The Company accounts for deferred revenue using the Gain Contingency Model. This is in accordance with ASC 450-20 Contingencies Gain Contingencies.
The Company calculates that there is deferred revenue of $18,464,462, being the difference between the independent appraisal of the value of the land leased from the IDA and the net present value of the 20 year capital Lease with the IDA. This represents the estimated value of the assistance provided by the IDA in granting the Lease of the land.
In calculating the net present value of the capital Lease, an annual discount rate of 10.43% was applied to future rental payments. The discount rate applied is the Companys weighted average of its cost of borrowing from third parties (excluding Accounts Payable and non interest bearing Notes).
Earnings per Share
Earnings per share (basic) is calculated by dividing the net income (loss) by the weighted average number of common shares outstanding for the period covered. The Company has ten million preferred shares outstanding, convertible into ten million shares of common stock. Earnings per share is calculated for the number of common shares issued and outstanding for the period. At the end of the period the Company had 38,022,329 common shares outstanding.
Comprehensive Income
ASC 220 establishes standards for reporting and display of comprehensive income and its components in a full set of general purpose financial statements. For the quarters ended September 30, 2013 and 2012, and the nine months ended September 30, 2013 and 2012 the Company had no items of other comprehensive income. Therefore, the net loss equals the comprehensive loss for the periods then ended.
Income Taxes
Provision for income taxes represents actual or estimated amounts payable on tax return filings each year. Deferred tax assets and liabilities are recorded for the estimated future tax effects of temporary differences between the tax basis of assets and liabilities and amounts reported in the accompanying balance sheets, and for operating loss and tax credit carry forwards. Any change in deferred tax assets and liabilities for the period measures the deferred tax provision or benefit for the period. Effects of changes in enacted tax laws on deferred tax assets and liabilities are reflected as an adjustment to the tax provision or benefit in the period of enactment.
Fair Value of Financial Instruments
In accordance with the reporting requirements of ASC 820, the Company calculates the fair value of its assets and liabilities which qualify as financial instruments under this statement and includes this additional information in the notes to the financial statements when the fair value is different than the carrying value of those financial instruments. At September 30, 2013, the Company did not have any financial instruments.
Recent Accounting Pronouncements
There were various accounting standards and interpretations issued during the three months ended September 30, 2013, none of which are expected to have a material impact on the Company's financial position, operations or cash flows.
NOTE 3 - CREDIT LINE
On August 26, 2013, the Company executed a $5 Million credit facility with TCA Global Credit Master Fund, LP. The facility is to finance development of motion pictures and also Print and Advertising costs for US domestic release of films.
As of September 30, 2013, the Company has a current credit line in the amount of $5 Million, of which $600,000 has been drawn down. The amount drawn down is secured in the Companys Accounts Receivables and Film Assets.
NOTE 4 - STOCKHOLDERS' EQUITY
The authorized capital stock of the Company is 500,000,000 shares with a $0.001 par value. At September 30, 2013, the Company had 38,022,329 shares of its common stock issued and outstanding. The Company has 50,000,000 preferred shares authorized. At September 30, 2013, the Company had 10,000,000 preferred shares issued and outstanding.
During the three months ended September 30, 2013, the Company issued 4,165,778 shares of its common stock.
NOTE 5 - INCOME TAXES
The Company has adopted ASC 740-10 that requires the use of the liability method in the computation of income tax expense and the current and deferred income taxes payable (deferred tax liability) or benefit (deferred tax asset). Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
The cumulative tax effect at the expected tax rate of 34% of significant items comprising the Companys net deferred tax amounts as of September 30, 2013 and 2012 are as follows:
| September 30, 2013 | September 30, 2012 |
Prior Year | $82,522 | $ 25,017 |
Tax (Expense)/benefit | 52,855 | 26,847 |
Total | 135,377 | 51,864 |
Less: Valuation Allowance | (135,377) | 0 |
Net Deferred Tax Asset | $ 0 | $ 51,864 |
At September 30, 2013 and 2012, the Company had net operating loss carry forwards of approximately was $398,169 in 2013 and $134,235 in 2012, respectively, for federal income tax purposes. These carry forwards, if not utilized to offset taxable income, will begin to expire in 2028.
NOTE 6 - SUBSEQUENT EVENTS
The Company has evaluated it activities subsequent to the three months ended September 30, 2013 and that there are no significant subsequent events requiring reporting.
10
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Plan of Operations
Medient Studios, Inc. was incorporated on September 10, 2007 in the state of Nevada. The registrant's fiscal year end is December 31st.
The registrant has initiated the building and construction of a movie studio, entertainment facility and campus on the approximately 1,550 acre property being leased by the registrant from the IDA On August 21, 2013, we executed various agreements with the IDA, pursuant to which the registrant leased the property from the IDA for a period of 20 years. In addition, the IDA granted the registrant an option to purchase the property.
Facilities will include the movie and electronic games studios, housing, cinema and electronic games experiences with large areas providing both recreational and retailing services to the general public. Once complete, the studio will be the largest movie production facility in the world outside of Asia.
The Medient management team has relocated to Savannah, GA.
We intend to obtain debt and/or equity financing to meet our ongoing operating expenses and to acquire completed theatrical release quality films as well as produce our own films. There is and can be no assurance that these events can be successfully completed. In particular there is no assurance that any such film assets will be acquired or that any stockholder will realize any return on its shares after such a transaction. Any acquisitions completed by the registrant can be expected to have a significant dilutive effect on the percentage of shares held by our current stockholders.
Results of Operations
For the three months ended September 30, 2013, we lost revenues of $38,381. We paid commission and fees of $6,181 for reselling Storage 24 and paid the amortization of film assets of $6,204. As a result, we had a gross margin of $(50,766). We paid general and administrative expenses of $438,092, depreciation expenses of $1,924, and professional fees of $193,839. We received $65,383 on the exchange gain, and paid interest expenses of $101,121. We had a tax benefit of $125,216. As a result, we had a net loss of $595,143 for the three months ended September 30, 2013.
Comparatively, for the three months ended September 30, 2012, we did not earn any revenues. We paid general and administrative expenses of $95 and license expenses of $1,000. We paid $107,400 in stock for services and paid professional fees of $11,275. We had an interest expense of $8. As a result, we had a net loss of $119,778 for the three months ended September 30, 2012.
The $475,365 difference in net loss for the three months ended September 30, 2013 and 2012 was primarily the result of increased general and administrative expenses and professional fees incurred initiating the building and construction of the Effingham movie Studioplex. The reduction in revenue was due to a sale of Storage 24 to China was reversed as a result of difficulties in having the movie rated.
For the nine months ended September 30, 2013, we earned revenues of $1,911,619. We paid commissions and fees of $6,181 and paid $1,069,473 for the amortization of film assets. As a result, we had a gross margin of $835,965. We paid general and administrative expenses of $595,747 and license expenses of $2,638. We paid depreciation expenses of $3,824 and professional fees of $241,589. We had an exchange gain of $65,383 and paid interest expenses of $213,006. As a result, we had a net loss of $155,456 for the nine months ended September 30, 2013.
Comparatively, for the nine months ended September 30, 2012, we earned revenues of $150. We paid general and administrative expenses of $272 and license expenses of $4,000. We paid $107,400 for stock for services, and paid professional fees of $22,688. We had interest expenses of $25. As a result, we had a net loss of $134,235 for the nine months ended September 30, 2012.
The $21,221 increase in net loss for the nine months ended September 30, 2013 compared to September 30, 2012 was caused primarily from by the increase in general and administrative expenses. Our general and administrative expenses increased due to the additional management hired now that the land in Effingham County has been secured. We earned $1,911,619 in revenues for the sale of Storage 24, but this was offset by the $1,069,473 amortization of the film asset.
Capital Resources and Sources of Liquidity
For the nine months ended September 30, 2013, we spent $22,341,661, $241,661 of which was on capitalized site and preacquisition costs, and we capitalized $22,100,000 in regards to the economic interest in land. As a result, we had net cash used in investing activities of $22,341,661 for the nine months ended September 30, 2013.
For the nine months ended September 30, 2012, we did not pursue any investing activities.
For the nine months ended September 30, 2013, we received $292,855 from the issuance of common stock and $2,990,436 from additional paid-in capital. We accounted for the net present value of the capital lease of $3,635,538, and $18,464,462 of deferred revenue. We had a decrease in notes payable of $3,860,000. We had an increase in our credit line of $600,000, an increase in aged debt of $1,016,709, and an increase in restricted notes of $742,500. As a result, we had net cash used in financing activities of $23,882,500 for the nine months ended September 30, 2013.
For the nine months ended September 30, 2012, we received $75,333 from the assumption of liabilities by former shareholders. As a result, we had net cash used in financing activities of $75,333 for the nine months ended September 30, 2012.
As part of the proposed $40 Million cost of the initial phase of construction of the Studioplex, we have $226,000 of commitments for capital expenditures within the next year. These include the costs of architectural design, attorneys, civil engineering, geotechnical survey, DRI development, rezoning, wetland master plan, traffic study, water distribution master plan, sanitary sewer master plan, stormwater master plan, and utility master plan.
Off-Balance Sheet Arrangements
The registrant had no material off-balance sheet arrangements as of September 30, 2013.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable for smaller reporting companies.
ITEM 4. CONTROLS AND PROCEDURES
During the period ended September 30, 2013, there were no changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our chief executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of September 30, 2013. Based on this evaluation, our chief executive officer and principal financial officers have concluded such controls and procedures to be effective as of September 30, 2013 to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act is recorded, processed, summarized and reported, within the time periods specified in the Commissions rules and forms and to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuers management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 1A. Risk Factors
Not applicable for smaller reporting companies
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the three months ended September 30, 2013, the Company issued 4,165,778 common shares as result of the exercising of convertible notes outstanding.
Item 3. Defaults Upon Senior Securities.
None
Item 4. Mine Safety Disclosures
Not Applicable
Item 5. Other Information
None
Item 6. Exhibits
Exhibit 31* - Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32* - Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS** XBRL Instance Document
101.SCH** XBRL Taxonomy Extension Schema Document
101.CAL** XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF**. XBRL Taxonomy Extension Definition Linkbase Document
101.LAB** XBRL Taxonomy Extension Label Linkbase Document
101.PRE** XBRL Taxonomy Extension Presentation Linkbase Document
* Filed herewith
**XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
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SIGNATURES
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.
Dated: November 19, 2013
Medient Studios, Inc.
By: /s/Manu Kumaran
Manu Kumaran
Principal Executive Officer
Principal Financial Officer
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