ITEM 1.
DESCRIPTION OF BUSINESS
GENERAL
The Movie Studio, Inc. F/K/A Destination Television, Inc. (“the Company" or “DSTV” or the "Registrant”) is a publicly traded vertically integrated motion picture production company that develops, manufactures and distributes independent motion picture content for worldwide consumption on a multitude of devices.
The Company is a broadcast media company that used its custom content and entertainment-based programming along with its proprietary technology to influence the purchasing decisions of millions of active consumers in targeted “away-from-home” leisure destinations.
The Company’s original core broadcast business was Bar TV, Gym TV, and Hotel TV, which were designed and implemented to focus on leisure destinations with entertaining and informative audio and video content, increasing the duration and frequency of consumer visits and duration of stay, generating incremental revenue and promoting the sale of specific products. The Company enabled advertisers and leisure/retailers to effectively and efficiently reach active consumers at the point of sale (POS) where most purchase decisions are made. In addition to influencing consumer behavior, the Company’s programming was proven to be successful in generating brand awareness and could create additional sales lift. The Company’s business motto was “Leisure Destinations driving traffic to Retail Locations.”
Over the years, the Company surveyed the media landscape, combining the best aspects of each medium into the DSTV’s business model, simultaneously applying it to a very unique physical space. In 2008, the US advertising industry consolidated, including digital signage space, because the industry did not provide a quantifiable measurement platform for its advertisers; at that time, The Company began to reorganize its business model. In 2009, The Company took the first steps in transitioning its core business operations into a new media platform, which included incorporating elements of its original media business model into its new business, The Movie Studio. In 2010, the Company took the next step, when it physically began transitioning its core business to the new platform. The Movie Studio platform consists of three verticals that operate synergistically with each other. Strategic Partner, is the first of the three verticals. In this vertical, the Company enters into agreements with substantial asset partners, wherein these partners can promote their brand, product, or service through the Movie Studio, which can offer them, through the its vertical integration model, a variety of opportunities, as a result of their association with the movie business. Each partner agreement is crafted in the best interest of the client’s needs or objectives.
Locations Pay Us is the second vertical, wherein we get paid for filming a scene of our movie at the location of a client. The excitement generated from motion picture production at given location can drive traffic to the client’s point of sale (POS); as a result, the Company and the client both benefit from this arrangement . In addition, the Company utilizes its win-a-part-in-a-movie contest at the location; it also provides digital plates to the client’s location, which can utilize the key art shot of the location as base artwork for web, print or television at no additional cost in perpetuity. Clients have reported that their locations have seen double digit increases in their margins on the night of the filming event. Product Placement is the third vertical. The motion picture product placement industry is a two billion dollar industry; companies utilize this platform to create worldwide brand awareness for their brand, product or service, with the average movie impact of fifteen (15) years (in five year distribution cycles). In addition, these companies provides us products that we utilize at movie events for PPG (on premise promotional giveaways); they also gain additional branding exposure in direct interaction with the brands exact demographic.
The value proposition for investors is in the bi-product of manufacturing of a major motion picture asset(s), which reduces capital expenses (CAP X) by utilizing these vertical in the manufacturing of the intellectual property (movie) asset. The completed movie then employs a significant expense to revenue ratio, by utilizing these metrics. The motion picture asset is ultimately licensed to seventy (70) countries around the world (foreign market) and domestically in the traditional media outlet channels, movie theaters, television, DVD, pay cable, Video on Demand (VOD) mobile etc. In addition the motion picture integrates a soundtrack, which creates an additional revenue stream for investors. The Company has proven the business model on all three verticals prior to opening up The Movie Studio, a 7200 Sq. Ft. state of the art production studio in downtown Ft. Lauderdale,
complete with 24X36 green screen, infinity wall, edit suites, complete motion picture manufacturing lighting and equipment, cameras make-up station, talent division, and in-house marketing. The Movie Studio has manufactured its first feature film production for Ventures Capital Partners, LLC. Is titled Exposure starring Corey Feldman and is currently in pre-production of the sequel Double Exposure. In addition, The Movie Studio can generate additional revenue streams from studio rentals and music video production. The Company
is currently fully operational and implementing its business model to scale the Companies operations in 2013 and beyond. The Company changed its name of operations from Destination Television, Inc. to The Movie Studio, Inc. In November, 2012 and has applied for a new stock symbol, requesting: (MOVI).
INDUSTRY BACKGROUND
Film Studio:
The Movie Studio, Inc. is an entertainment or motion picture company that has its own privately owned studio facility that is used to make films, which is handled by the production company. The majority of companies in the entertainment industry have never owned their own studios, but have rented space from other companies. There are also independently owned studio facilities, which have never produced a motion picture of their own because they are not entertainment companies or motion picture companies - they are companies who sell only studio space.
Beginnings:
In 1893, Thomas Edison built the first movie studio in the United States when he constructed the Black Maria, a tarpaper-covered structure near his laboratories in West Orange, New Jersey, and asked circus, vaudeville, and dramatic actors to perform for the camera. He distributed these movies at vaudeville theaters, penny arcades, wax museums, and fairgrounds. The pioneering film studio was founded in New Rochelle, New York in 1909 by American theatrical impresario Edwin Thanhouser. The company produced and released 1,086 films between 1910 and 1917, successfully distributing them around the world. The first film serial ever, Million Dollar Mystery, was released by the Thanhouser Company in 1914. In the early 1900s, companies started moving to Los Angeles, California. Although electric lights were by then widely available, none were yet powerful enough to adequately expose film; the best source of illumination for motion picture production was natural sunlight. Some movies were shot on the roofs of buildings in Downtown Los Angeles. Early movie producers also relocated to Southern California to escape Edison's motion picture patents company, which controlled almost all the patents relevant to movie production at the time.
The first movie studio in the Hollywood area was Nestor Studios, opened in 1911 by Al Christie for David Horsley. In the same year, another 15 independents settled in Hollywood. Other production companies eventually settled in the Los Angeles area in places such as Culver City, Burbank, and what would soon become known as Studio City in the San Fernando Valley.
An independent film is a professional film production resulting in a feature film that is produced mostly or completely outside of the major film studio system. In addition to being produced and distributed by independent entertainment companies, independent films are also produced and/or distributed by subsidiaries of major film studios. Independent films are sometimes distinguishable by their content and style and the way in which the filmmakers' personal artistic vision is realized. Usually, but not always, independent films are made with considerably lower film budgets than major studio films. Generally, the marketing of independent films is characterized by limited release, but can also have major marketing campaigns and a wide release. Independent films are often screened at local, national, or international film festivals before distribution (theatrical and/or retail release). An independent film production can rival a mainstream film production if it has the necessary funding and distribution.
PRINCIPAL PRODUCTS AND THEIR MARKETS
The Movie Studio, Inc. (OTC: SYMBOL: DSTV Requested: MOVI)
Due to the proliferation of new mobile media platforms in society, The Movie Studio intends to enter into the personalized content & media space utilized by consumers via laptops, tablets, smartphone’s and new out-of home devices as they are developed.
The Movie Studio intends to manufacture independent content that fits the marketplace void including indie movies with relevant movie stars and indie soundtracks with substantial fan bases that we can reach their demographic on-line and sell digital downloads direct to consumers with a minimum barrier to entry and minimum capital expenditures compared to traditional marketing forms of content delivery. In addition to traditional marketing platforms that we intend to sell and leverage as well, The Movie Studio intends to sell its content and where it’s available on all devices, mobile, I-Pad etc. for the personal user with the personal playlist of unique and indie content relevant to their interests applicable for the individual and their consumption.
The Movie Studio is implementing its new proven vertically integrated revenue model:
(a) Strategic Partners in Motion Pictures.
(b) Locations Pay US a fee for placement in the movie, which can monetize our platform at their point of sale (POS).
(c) Product Placement: we receive a fee for product placement in a movie, product branding, and on premise promotional giveaways (PPG). In addition the Product Placement client receives digital plates and the same benefits as Location Pay US a fee client receive (see (b) above).
(d) At the American Film Market in November 2011, the Company established significant motion picture arrangement for worldwide distribution, to provide investors an exit strategy for (1) their movie partnership investment units and (2) shareholdings in the Company. In May 1, 2012, we have entered into an exclusive worldwide distribution agreement with Cinema Arts Entertainment, with minimum guarantees (MG’s) that sales will total $520,000 for the first 10 markets.
(e) The completed movie then employs a significant expense to revenue proposition by utilizing these metrics and licenses the motion picture asset to seventy (70) countries around the world (foreign market) as well as domestically in traditional media outlet channels, movie theaters, television, DVD, pay cable, video on demand (VOD) mobile etc. In addition the motion picture integrates a soundtrack that creates an additional revenue stream for investors.
In addition, the Company provides locations digital plates and green screen application for use in movies, commercials, for the location, web-applications and print that can significantly monetize the location, while 360 degree media branding at the location can be an applicator for the location in a variety of ways:
Promotional Media
Promotional media is a broad marketing term that describes methods used to promote goods and or services. Promotional media can be broken into several categories or channels, including:
Print Media--is all the media we use in hard copy format such as
* Business cards
* Brochures
* Posters
* Promotional Literature
* Banners
Digital Media--this includes the internet
* Video Promotion
* Websites
* Social Media
* Digital Signage
* Digital Tags
* Smartphone Apps
* Radio / TV
Promotional Gifts--often used to stay top-of-mind with customers
* Pens
* Caps
* T-shirts
* Mugs
* Bags
* Banners
DISTRIBUTION METHODS
Film distribution Methods: A distributor is a company or individual responsible for the marketing of a film. The distributor may set the release date of a film and the method by which a film is to be exhibited or made available for viewing: for example, directly to the public either theatrically or for home viewing (DVD, video-on-demand (VOD), download, television programs through broadcast syndication etc.). A distributor may do this directly, if the distributor owns the theaters or film distribution networks, or through theatrical exhibitors and other sub-distributors. A limited distributor may deal only with particular products, such as DVDs or Blu-ray, or may act in a particular country or market.
Theatrical distribution: If a distributor is working with a theatrical exhibitor, the distributor secures a written contract stipulating the amount of the gross ticket sales to be paid to the distributor by the exhibitor (usually a percentage of the gross) after first deducting a floor, which is called a house allowance (also known as the nut), collects the amount due, audits the exhibitor's ticket sales, as necessary, to ensure the gross reported by the exhibitor is accurate, secures the distributor's share of these proceeds, and transmits the remainder to the production company (or to any other intermediary, such as a film release agent).
The distributor must also ensure that enough film prints are struck to service all contracted exhibitors on the contract-based opening day, ensure their physical delivery to the theater by the opening day, monitor exhibitors to make sure the film is in fact shown in the particular theatre with the minimum number of seats and show times, and ensure the prints' return to the distributor's office or other storage resource also on the contract-based return date. In practical terms, this includes the physical production of film prints and their shipping around the world (a process that is beginning to be replaced bydigital distribution) as well as the creation of posters, newspaper and magazine advertisements, television commercials, trailers, and other types of ads.
The distributor is also responsible for ensuring a full line of advertising material is available on each film which it believes will help the exhibitor attract the largest possible audience, create such advertising, if it is not provided by the production company, and arrange for the physical delivery of the advertising items selected by the exhibitor at intervals prior to the opening day.
If the distributor is handling an imported or foreign film, it may also be responsible for securing dubbing or subtitling for the film, and securing censorship or other legal or organizational approval for the exhibition of the film in the country/territory in which it does business, prior to approaching the exhibitors for booking. Depending on which studio is distributing the film, the studio will either have offices around the world, by themselves or partnered with another studio, to distribute films in other countries. If a studio decides to partner with a native distributor, upon release, both names will appear. The foreign distributor may license the film for a certain amount of time, but the studio will retain the copyright of the film.
Early distribution windows:
Although there are numerous distribution techniques today, previous to the multi-channel transition, studios and networks did not experiment with different distribution processes. Studios believed that the new distribution methods would cause their old methods of revenue to be destroyed. Within time, the development of new distribution did prove to be beneficial. The studios revenue was gained from myriad distribution windows. These windows created many opportunities in the industry and allowed networks to make a profit and eliminate failure. These new distribution methods benefited audiences that were normally too small to reach and expanded the content of television. With the new age of technology, networks accepted the fact that it was a consumer demand industry and accepted the new models of distribution.
Non-theatrical distribution:
This term, used mainly in the British film industry, describes the distribution of feature films for screening to a gathered audience, but not in theatres at which individual tickets are sold to members of the public. The defining distinctions between a theatrical and a non-theatrical screening are that the latter has to be to a closed audience in some way, e.g. pupils of a school, members of a social club or passengers on an airliner, and that there can be no individual admission charge. Most non-theatrical screening contracts also specify that the screening must not be advertised, except within the group that is eligible to attend (e.g. in a membership organisation's newsletter or an in-flight magazine).
The largest market for non-theatrical distribution is probably the airlines, followed by film societies. Non-theatrical distribution is generally handled by companies that specialise in this market, of which Filmbank [1] is Britain's largest, representing the major Hollywood studios. Home video media is sold with a licence that permits viewing in the home only (hence the copyright notice that appears at the start of many VHS tapes and DVDs, which states that the content must not be shown in oil rigs, prisons or schools). Until these technologies were widespread, most non-theatrical screenings were on16mm film prints supplied by the distributor. Today, the most common business model is for a distributor to sell the exhibitor a licence that permits the legal projection of a copy of the film, which the exhibitor buys separately on a home video format. These licences can either be for individual, one-off screenings, or cover an unlimited number of screenings of titles represented by that distributor for a specified time period. The latter are often purchased by pubs and students' unions, to enable them to show occasional feature films on a TV in their bars.
Home video distribution: Some distributors only handle home video distribution or some sub-set of home video distribution such as DVD and/or Blu-ray distribution and now the fastest growing area id Video on Demand (VOD). The remaining home video rights may be licensed by the producer to other distributors or the distributor may sub-license them to other distributors.
If a distributor is going to distribute a movie on a physical format such as DVD, they must arrange for the creation of the artwork for the case and the face of the DVD and arrange with a DVD replicator to create a glass master to press quantities of the DVD.
Today, some movie producers are using a process called DVD-on-demand. In DVD-on-demand, a company will burn a DVD-R (a process called duplication) when a copy of the DVD is ordered, and then ship in to the customer.
A distributor may also maintain contact with wholesalers, who sell and ship DVDs to retail outlets as well as online stores, and arrange for them to carry the DVD. The distributor may also place ads in magazines and online and send copies of the DVD to reviewers.
The newest area Video on Demand (VOD) is expected to grow as a result of new media devices, mobile phones, PDA’s, tablets and I-Pads as additional ways individuals consume content.
The New Hollywood/Foreign Distribution:
In the past, big studios have not always used analysis, analytics, metrics or measurement; but that is not true any longer. Companies such as Relativity Media use a new Hollywood approach that is vastly more technical than preparing an analysis of how many people actually attend the theater as a result of buying a ticket. Their approach now accounts for thousands of variables, from the stars of a movie to its release date to the type of media used in production, and compares each of those variables to nearly every film ever made with at least one of the same attributes. It takes four people just to operate the program that governs their approach.
New Hollywood companies employ a movie-rejection system, not a movie-picking system, while the data-intensive approach operates on a new paradigm of new media marketing and buzzworthy elements intertwined into the infrastructure of the movie. Big studios are swinging for the fences, and they lose money on 85 percent of the movies they make; they don’t have a hedge against those losses, so they need the one or two franchise movies each year to make up for the money losers. New Hollywood studios have hedges; they make movies that people will love, but also on a financially based system. They don’t take huge risks.
The New Hollywood studios can make money without a blockbuster on its slate, if it controls upfront costs and has unique arrangements with film distributors on the back-end. Unlike most major studios, who own their own distribution companies, New Hollywood studios seek relationships with over 117 distributors around the globe, each of which could come under contract to buy any movie the studio makes at a preset percentage of the film’s budget. In return, the distributors are guaranteed a piece of the back-end revenue for each movie. For New Hollywood studios, the structure is a safety net for films that underperform, a safety net the major studios don’t have.
STATUS OF ANY PUBLICLY ANNOUNCED NEW PRODUCTS
The Movie Studio has manufactured its first feature film production for Ventures Capital Partners, LLC, a film titled Exposure, starring Corey Feldman. The studio is currently in pre-production of the sequel Double Exposure. In addition, The Movie Studio can generate additional revenue streams from studio rentals and music video production. The Company is currently fully operational and implementing its business model for operations in 2013 and beyond.
SOURCES AND AVAILABILITY OF PRODUCTS
The Movie Studio has manufactured its first feature film production for Ventures Capital Partners, LLC, a film titled Exposure, starring Corey Feldman. The studio is currently in pre-production of the sequel Double Exposure. In addition, The Movie Studio can generate additional revenue streams from studio rentals and music video production. The Company is currently fully operational and implementing its business model for operations in 2013 and beyond.
DEPENDENCE ON ONE OR A FEW MAJOR CUSTOMERS
The Company is not dependent on one or a few major customers.
PATENTS AND TRADEMARKS
Destination Television® currently owns the registered trademark for the name and brand for Destination Television, Inc. with the United States Patent and Trademark office (USPTO). The Movie Studio ™ is a trademark of The Movie Studio, however, is not a registered trademark.
The Movie Studio is a 7200 Sq. Ft. state of the art production studio in downtown Ft. Lauderdale, complete with green screen, infinity wall, edit suites, complete motion picture manufacturing lighting and equipment, cameras, make-up station, talent division and in-house marketing.
ENVIRONMENTAL LAWS
Our operations are not subject to environmental laws and regulations.
EMPLOYEES
The Company currently is currently completing its quasi-reorganization and currently employs one (1) full time employee, the president and utilizes the services of numerous work for hire and other individuals.
ITEM 1A.
ITEM 1A. RISK FACTORS
Lack of Profitable Operating History
The Company does not have a history of profitable operation. There is no assurance that the Company will ever be profitable. The Company’s ability to achieve profitability will depend upon a number of factors, including, but not limited to, whether the Company:
• has funds available for working capital, project development and sales and marketing efforts;
• has funds for the continuous upgrading of its production operations and facilities;
• achieves the projected sales revenues;
• controls the Company’s operating expenses;
• continues to attract new business; and
• withstands competition in the Company’s marketplace.
Competition
The Company’s competitors are rapidly changing and may be well capitalized and financially stronger than Destination Television. Our competitors could reproduce the company’s business model without significant barriers to entry.
The Company’s activities may require additional financing, which may not be obtainable.
The Company had limited cash deposits. Based on the Company’s expectations as to future performance, the Company considers these resources and existing and anticipated credit facilities, to be inadequate to meet the Company’s anticipated cash and working capital needs at least through December 31, 2013. The Company, however, expects to be able to raise capital to fund the Company’s operations, current and future acquisitions and investment in new program development. The Company may also need to raise additional capital to fund expansion of the Company’s business by way of one or more strategic acquisitions. Unless the Company’s results improve significantly, it is doubtful that the Company will be able to obtain additional capital for any purpose if and when the Company needs it.
The Company depends heavily on the Company’s senior management who may be difficult to replace.
The Company believes that the Company’s future success depends to a significant degree on the skills, experience and efforts of its chairman, CEO, and other key executives. Any of these executives would be difficult to replace. While all of them have incentives to remain with the Company, they are not bound by employment contracts, and there is no assurance that either of them will not elect to terminate their services to us at any time.
Increasing the Company’s business depends on the Company’s ability to increase demand for the Company’s products and services.
While the Company believes that there is a market for its planned increase in the Company’s products and services, there is no guarantee that the Company will be successful in its choice of product or technology or that consumer demand will increase as the Company anticipates.
The Company may be exposed to significant costs of defense and damages in litigation stemming from current unresolved legal proceedings undertaken in the future by and against the Company.
The Company could be subject of legal proceedings against the Company that could give rise to significant exposure in costs and damages.
The Company’s ability to operate and compete effectively requires that the Company hires and retain skilled marketing and technical personnel, who have been in short supply from time to time and may be unavailable to us when the Company needs them.
The Company’s business requires us to be able to continuously attract, train, motivate and retain highly skilled employees, particularly marketing and other senior management personnel. The Company’s failure to attract and retain the highly trained personnel who are integral to the Company’s sales, development and distribution processes may limit the rate at which the Company can generate sales. The Company’s inability to attract and retain the individuals the Company needs could adversely impact the Company’s business and its ability to achieve profitability.
The Company may suffer from a business interruption and continuity of its ongoing operations might be affected.
The Company’s ability to implement its business plans may be adversely affected by any business interruption that will affect the continuity of its operations. While the Company may take reasonable steps to protect itself, there could be interruptions from computer viruses, server attacks, network or production failures and other potential interruptions that would be beyond the Company’s reasonable control. There can be no assurance that the Company’s efforts will prevent all such interruptions. Any of the foregoing events may result in an interruption of services and a breach of the Company’s obligations to its clients and customers or otherwise have a material adverse effect on the business of the Company.
Macro-economic factors may impede business, access to finance or may increase the cost of finance or other operational costs of the Company.
Changes in the United States and global financial and equity markets, including market disruptions, interest rate fluctuations, or inflation changes, may make it more difficult for the Company to obtain financing for its operations or investments or increase the cost of obtaining financing. In the event that the Company is delayed in attaining its projections, borrowing costs can be affected by short and long-term debt ratings assigned by independent ratings agencies which are based, in significant part, on the Company’s performance as measured by credit metrics such as interest coverage and leverage ratios. Decrease in these ratios or debt ratings would increase the Company’s cost of borrowings and make it more difficult to obtain financing.
There is a limitation on the officers and directors liability.
The articles of the Company limit the personal liability of directors and officers for breach of fiduciary duty and the Company provides an indemnity for expenses and liabilities to any person who is threatened or made a party to any legal action by reason of the fact that the person is or was a director or officer of the Company unless the action of proven to that the person was liable to be negligent or misconduct in the performance of their duty to the Company.
The loss of our key officers or directors may raise substantial doubt as to the continued viability of the Company.
The Company’s operations depend on the efforts of key officers and directors and the loss of their services may irreparably harm the Company in such a manner that it may not be able to overcome any such loss in management.
Investors may lose their entire investment if the Company fails to implement its business plan.
The Company expects to face substantial risks, uncertainties, expenses, and difficulties because it is a development stage company. The Company was formed in 1961. The Company has no demonstrable operations record of substance upon which you can evaluate the Company’s business and prospects. The Company prospects must be considered in light of the risks, uncertainties, expenses and difficulties frequently encountered by companies in their early stages of development. The Company cannot guarantee that it will be successful in accomplishing its objectives.
As of the date of this prospectus, the Company has had only limited startup operations and has generated very small revenues. Considering these facts, independent auditors have expressed substantial doubt about the Company’s ability to continue as a going concern in the independent auditors’ report to the financial statements included in the registration statement, of which this prospectus is a part. In addition, the Company’s lack of operating capital could negatively affect the value of its common shares and could result in the loss of your entire investment.
Because of our new business model, we have not proven our ability to generate profit, and any investment in The Company is risky.
We have very little meaningful operating history so it will be difficult for you to evaluate an investment in our stock. We have not sold any of our products to date. Our auditors have expressed substantial doubt about our ability to continue as a going concern. We cannot assure that we will ever be profitable. Since we have not proven the essential elements of profitable operations, you will be furnishing venture capital to us and will bear the risk of complete loss of your investment in the event we are not successful.
We may be unsuccessful in monitoring new trends.
Our net revenue might decrease with time. Consequently, our future success depends on our ability to identify and monitor trends and the development of new markets. To establish market acceptance of a new technologies, we will dedicate significant resources to research and development, production and sales and marketing. We will incur significant costs in developing, commissioning and selling new products, which often significantly precedes meaningful revenues from its sale. Consequently, new business can require significant time and investment to achieve profitability. Prospective investors should note, however, that there can be no assurance that our efforts to introduce new products or other services will be successful or profitable.
We may face distribution and product risks.
Our future financial results depend in large part on our ability to develop relationships with our customers. Any disruption in our relationships with our future customers could adversely affect our financial performance.
We may face claims of infringement on intellectual property rights.
Other parties may assert claims of ownership or infringement or assert a right to payment with respect to the exploitation of certain intellectual properties against us. In many cases, the rights owned or being acquired by us are limited in scope, do not extend to exploitation in all present or future uses or in perpetuity. We cannot assure you that we will prevail in any of these claims. In addition, our ability to demonstrate, maintain or enforce these rights may be difficult. The inability to demonstrate or difficulty in demonstrating our ownership or license rights in these technologies may adversely affect our ability to generate revenue from or use of these intellectual property rights.
If our operating costs exceed our estimates, it may impact our ability to continue operations.
We believe we have accurately estimated our needs for the next twelve months. It is possible that we may need to purchase additional equipment, hire additional personnel, and further develop new business ventures, or that our operating costs will be higher than estimated. If this happens, it may impact our ability to generate revenue and we would need to seek additional funding. We intend to establish our initial client base via existing relationships that our directors and officers have established in past business relationships. Should these relationships not generate the anticipated volume of business, any unanticipated costs would diminish our working capital.
Competitors with more resources may force us out of business.
Competition in our sectors of business come from a variety of factors, including quality, timely commissioning of new projects, product positioning, pricing and brand name recognition. The principal competitors for our business may do this better than we can. Each of these competitors has substantially greater financial resources than we do. New technologies may also present substantial competition. We may be unsuccessful in competing with these competitors, which may materially harm our business.
The Company may not be able to attain profitability without additional funding, which may be unavailable.
The Company has limited capital resources. Unless the Company begins to generate sufficient revenues to finance operations as a going concern, the Company may experience liquidity and solvency problems. Such liquidity and solvency problems may force the Company to cease operations if additional financing is not available.
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2.
ITEM 2.
PROPERTIES
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 $54,000 for each of the years ended October 31, 2012 and October 31, 2011.
ITEM 3.
ITEM 3.
LEGAL PROCEEDINGS
The Company, Inc. is in possession of third party equipment as a result of a previous company (Studione 1) that left the premises and claimed ownership of the property. We were contacted by a third party and shareholder of Peter Langone affiliated Company Global Branding who stated they were the owers of the equipment and if we turned over the equipment to Peter Langone et al., they would litigate. Peter Langone commenced litigation on the equipment and, the third party provided discovery to the Judge, who ordered the Company to preserve the
equipment pending the outcome of litigation or settlement discussions between the parties or additional court order(s). The Company, Inc. has preserved all the equipment as stated by the judge and has never made any claim as to ownership of the property and further expects to be dismissed of the lawsuit without prejudice once the true ownership of the equipment can be identified by the courts.
ITEM 4.
ITEM 4.
REMOVED AND RESERVED
PART II
ITEM 5.
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
On December 26, 2012, there were 559 shareholders of record of our common stock.
DIVIDENDS
We do not intend to retain future earnings to support our growth. Any payment of cash dividends in the future will be dependent upon: the amount of funds legally available; therefore, our earnings; financial condition, capital requirements, and other factors which our board of directors deems relevant.
ITEM 6.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
Not applicable
ITEM 7.
ITEM 7.
MANGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management’s Discussion and Analysis (‘M&D&A”) is intended to help the reader understand the results of operations and financial condition of The Movie Studio, Inc. F/K/A Destination Television, Inc.. MD&A is provided as a supplement to, and should be read in conjunction with, our financial statements and the accompanying Notes to Financial Statements.
Forward Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for certain forward-looking statements. Certain information included in this Annual Report on Form 10-K, and other materials filed or to be filed by us with the Securities and Exchange Commission (as well as information included in oral statements or other written statements made or to be made by us or our management) contain or will contain, forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. The words "believe," "expect," "anticipate," "estimate," project" and similar expressions identify forward-looking statements, which speak only as of the date the statement was made. We undertake no obligation to publicly update or revise any forward-looking statements. Such forward-looking statements are based upon management's current plans or expectations and are subject to a number of uncertainties and risks that could significantly affect current plans, anticipated actions and our future financial conditions and results. As a consequence, actual results may differ materially from those expressed in any forward-looking statements made by or on behalf of us as a result of various factors. Any forward-looking statements are made pursuant to the Private Securities Litigation Reform Act of 1995 and, as such, speak only as of the date made.
Plan of Operation
The Movie Studio, Inc. F/K/A Destination Television, Inc. (the "Company" or the "Registrant") was incorporated in the State of Delaware in 1961 under the name Magic Fingers, Inc. By amendment of its certificate of incorporation, the Company's name was changed in 1999 to Magicinc.com and in April 2002 to Magic Media Networks, Inc. and in February 2007 to Destination Television, Inc. In November of 2012, the Company filed an amendment to change its name to The Movie Studio, Inc. Through the period ended October 31, 1999, the Company devoted substantially all its efforts to reorganizing its financial affairs and settling its debt obligations. During the fiscal years ended October 31, 2000 and October 31, 2001, the Company was engaged primarily in the planning and development of an interactive network to provide entertainment via the Internet. Subsequent to October 31, 2001, the Company redirected its business focus to the development of a private television network, in high traffic locations such as bars and nightclubs. During the development process, the Company received incidental revenue from the sale of advertising and the production of commercials.
Results of Operations for the years ended October 31, 2012 and 2011
The following tables sets forth a summary of financial highlights for the years ended October 31:
For the years ended October 31, 2012 and 2011, we reported a net loss of $172,319 and $192,371, respectively, a decrease in net loss of $20,052. The decrease in net loss is primarily attributable to a $20,052 decrease in expenses.
For the year ended October 31, 2012 and 2011, the Company had no revenues.
Total expenses for the years ended October 31, 2012 and 2011 were $172,319 and $192,371, respectively, a decrease of $20,052, or 10%. This decrease is attributable to a decrease of approximately $13,500 in selling and general and administrative expenses and a decrease of $6,552 in interest expense.
For the year ended October 31, 2012, interest expense decreased $6,552 to $36,464 (15%) from the $43,016 reported for the year ended October 31, 2011. This decrease results from the decrease in short-term borrowings during the year ended October 31, 2012.
Liquidity and Capital Resources
For the year ended October 31, 2012, we used $133,000 for operating activities, as compared to $133,000 used for operations for the year ended October 31, 2011.
Historically, we have financed our business primarily from the receipt of cash from financing activities. During the year ended October 31, 2012, we received proceeds of $133,000 from loans made to the Company by related party shareholders.
At October 31, 2012, we reported total liabilities of $2,489,307, all of which is current and due within one year. The liability total consists of loans payable to an entity owned by a shareholder and officer of the Company, of $1,353,420. This entity assumed the debt due to Dr. Terry for an equity interest in the entity owned by the shareholder and officer. The Company is also indebted to its president and CEO in the amount of $727,705; $680,597 of this amount represents accrued wages and the balance of $47,108 represents funds he advanced to the Company for working capital purposes.
At October 31, 2011, we reported total liabilities of $2,319,843, all of which was current and due within one year. The liability total consists of loans payable to an entity owned by a shareholder and officer of the Company, of $1,353,420. This entity assumed the debt due to Dr. Terry for an equity interest in the entity owned by the shareholder and officer. The Company is also indebted to its president and CEO in the amount of $594,705; $547,597 of this amount represents accrued wages and the balance of $47,108 represents funds he advanced to the Company for working capital purposes.
We also owe the Internal Revenue Service approximately $375,000 for unpaid payroll taxes. The Company did submit an Offer in Compromise to substantially reduce the liability; however, the Internal Revenue Service rejected our initial Offer in Compromise. We have appealed the Internal Revenue Service’s rejection, and we continue to negotiate with the Internal Revenue Service to resolve all outstanding issues related to the unpaid payroll taxes. All payroll tax obligations incurred during the fiscal years ended October 31, 2012 and 2011 have been paid.
Capital Expenditures
Our requirements for capital expenditures should not exceed $10,000 for year ended October 31, 2013.
Inflation
We believe that inflation has not had a material effect on our operations during 2012 and 2011.
Off-balance Sheet Arrangements
We did not have any off-balance sheet arrangements during 2012 and 2011.
Recently Issued Accounting Standards
In May 2011, the Financial Accounting Standards Board (FASB) issued authoritative guidance regarding Fair Value Measurement: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, which resulted in common requirements for measuring fair value and for disclosing information about fair value measurement under both U.S. GAAP and International Financial Reporting Standards (IFRS), including a consistent definition of the term "fair value." The amendments were effective beginning in the first quarter of 2012, and did not have a material effect on our consolidated financial statements.
In June 2011, the FASB issued Accounting Standards Update 2011-05, Presentation of Comprehensive Income. This update amended the provisions of FASB ASC 220-10 by eliminating the option of reporting other comprehensive income in the statement of changes in stockholders’ equity. Companies will have the option of presenting net income and other comprehensive income in a single, continuous statement of comprehensive income or presenting two separate but consecutive statements of net income and comprehensive income. The new presentation requirements are effective for interim and annual periods beginning after December 15, 2011. The adoption of this standard is not anticipated to have a material impact on our financial statements.
In September 2011, the FASB issued Accounting Standards Update 2011-08, Testing Goodwill for Impairment. This update amended the provisions of FASB ASC 350-20-35 by allowing an entity the option to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether it should calculate the fair value of a reporting unit. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or interim period have not yet been issued. The adoption of this standard is not anticipated to have a material impact on our financial statements.
ASC 480, In March of 2012, the FASB issued Accounting Standards Update, Distinguishing Liabilities from Equity; primarily originated from FAS 150 and related interpretations. This subtopic establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. The guidance applies to freestanding financial instruments, thus reinforcing the importance of this determination.
The Company has reviewed all other recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on its results of operation, financial position or cash flows. Based on that review, the Company believes that none of these pronouncements will have a significant effect on its consolidated financial statements.
.
Critical Accounting Policies and Estimates
We prepared our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. In preparing these consolidated financial statements, we are required to make judgments, assumptions and estimates, which we believe are reasonable and prudent based on the available facts and circumstances. These judgments, assumptions and estimates affect certain of our revenues and expenses and their related balance sheets. On an on-going basis, we re-evaluate our selection of assumptions and the method of calculating our estimates. Actual results, however, may materially differ from our calculated estimates and this difference would be reported in our current operations. Our critical accounting policies include income taxes and stock-based compensation for services.
Income Taxes
The Company accounts for income taxes in accordance with FASB ASC Topic 740 Income Taxes” which requires accounting for deferred income taxes under the asset and liability method. Deferred income tax asset and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on the enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce the deferred income tax assets to the amount expected to be realized.
In accordance with GAAP, the Company is required to determine whether a tax position of the Company is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The Company files an income tax return in the U.S. federal jurisdiction, and may file income tax returns in various U.S. state and local jurisdictions. Generally the Company is no longer subject to income tax examinations by major taxing authorities for years before 2005. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. De-recognition of a tax benefit previously recognized could result in the Company recording a tax liability that would reduce net assets. This policy also provides guidance on thresholds, measurement, de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition that is intended to provide better financial statement comparability among different entities. It must be applied to all existing tax positions upon initial adoption and the cumulative effect, if any, is to be reported as an adjustment to stockholder’s equity as of January 1, 2009. Based on its analysis, the Company has determined that the adoption of this policy did not have a material impact on the Company’s financial statements upon adoption. However, management’s conclusions regarding this policy may be subject to review and adjustment at a later date based on factors including, but not limited to, on-going analyses of and changes to tax laws, regulations and interpretations thereof.
Stock-Based Compensation for Services
The Company complies with FASB ASC Topic 718 Compensation - Stock Compensation, which establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. FASB ASC Topic 718 focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. FASB ASC Topic 718 requires an entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award (usually the vesting period). No compensation costs are recognized for equity instruments for which employees do not render the requisite service. The grant-date fair value of employee share options and similar instruments will be estimated using option-pricing models adjusted for the unique characteristics of those instruments (unless observable market prices for the same or similar instruments are available). If an equity award is modified after the grant date, incremental compensation cost will be recognized in an amount equal to the excess of the fair value of the modified award over the fair value of the original award immediately before the modification. No employee stock options or stock awards vested during 2012 or 2011 under FASB ASC 718.
Nonemployee awards
The fair value of equity instruments issued to a nonemployee is measured by using the stock price and other measurement assumptions as of the date of either: (i) a commitment for performance by the nonemployee has been reached; or (ii) the counterparty’s performance is complete. Expenses related to nonemployee awards are generally recognized in the same period as the Company incurs the related liability for goods and services received. The Company recorded stock compensation of approximately $-0- and $-0- during the years ended October 31, 2012 and 2011, respectively, related to consulting services.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
ITEM 8.
ITEM 8.
FINANCIAL STATEMENTS
Our financial statements, together with the report of auditors, are as follows
Patrick Rodgers, CPA, PA
309 E. Citrus Street
Altamonte Springs, FL 32701
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors
The Movie Studio, Inc. (FKA Destination Television).
We have audited the accompanying balance sheets of The Movie Studio, Inc. (FKA Destination Television) as of October 31, 2012 and 2011 and the statements of operations, stockholders’ equity, and cash flows for the years ended October 31, 2012 and 2011. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on my audit.
We conducted our audits in accordance with 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes 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 provides a reasonable basis for my opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Movie Studio, Inc. (FKA Destination Television) as of October 31, 2012 and 2011 and the results of its operations and its cash flows for the years ended October 31, 2012 and 2011 in conformity with accounting principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has a minimum cash balance available for payment of ongoing operating expenses, has accumulated deficits of $9.3 million, and it does not have a source of revenue sufficient to cover its operating costs. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in this regard are described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Patrick Rodgers, CPA, PA
Altamonte Springs, Florida
August 15, 2013
THE MOVIE STUDIO, INC.
(FORMERLY DESTINATION TELEVISION, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2012
Note 1 - Description of Business
The Movie Studio, Inc. (the "Company") was incorporated in the State of Delaware 1961 under the name Magic Fingers, Inc. The company is a vertically integrated motion picture production company that develops, manufactures and distributes independent motion picture content for worldwide consumption on a multitude of devices.
The Company has operated under various names since incorporation, most recently Destination Television, Inc. from February 2007 to November 2012, when the name was changed to The Movie Studio, Inc.
From October 31, 2001, the Company’s focus was on the developing a private television network, in high traffic locations such as bars and nightclubs. During this development period, the Company received incidental revenue from the sale of advertising and the production of commercials. In 2010, the Company began implementation of its current business model, using the technology previously developed for the private television network.
Note 2 - Summary of significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of The Movie Studio, Inc. (Formerly Destination Television, Inc.), a Delaware corporation, and its wholly owned subsidiary Destination Television, Inc., a Florida corporation. All significant inter-company account balances and transactions between the Company and its subsidiary have been eliminated in consolidation.
Long-Lived Assets
In accordance with Financial Accounting Standard Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 360 Property, Plant, and Equipment, the Company records impairment losses on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. There were no impairment charges during the years ended October 31, 2012 and 2011.
Fair Value of Financial Instruments
The fair values of the Company’s assets and liabilities that qualify as financial instruments under FASB ASC Topic 825, Financial Instruments, approximate their carrying amounts presented in the accompanying consolidated statements of financial condition at October 31, 2012 and 2011.
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.
THE MOVIE STUDIO, INC.
(FORMERLY DESTINATION TELEVISION, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2012
Note 2 - Summary of significant Accounting Policies (continued)
Income Taxes (continued)
In accordance with GAAP, the Company is required to determine whether a tax position of the Company is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The Company files an income tax return in the U.S. federal jurisdiction, and may file income tax returns in various U.S. state and local jurisdictions. Generally the Company is no longer subject to income tax examinations by major taxing authorities for years before 2005. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. De-recognition of a tax benefit previously recognized could result in the Company recording a tax liability that would reduce net assets. This policy also provides guidance on thresholds, measurement, de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition that is intended to provide better financial statement comparability among different entities. It must be applied to all existing tax positions upon initial adoption and the cumulative effect, if any, is to be reported as an adjustment to stockholder’s equity as of January 1, 2009. Based on its analysis, the Company has determined that the adoption of this policy did not have a material impact on the Company’s financial statements upon adoption. However, management’s conclusions regarding this policy may be subject to review and adjustment at a later date based on factors including, but not limited to, on-going analyses of and changes to tax laws, regulations and interpretations thereof.
Comprehensive Income
The Company complies with FASB ASC Topic 220, Comprehensive Income, which establishes rules for the reporting and display of comprehensive income (loss) and its components. FASB ASC Topic 220 requires the Company’s change in foreign currency translation adjustments to be included in other comprehensive loss, and is reflected as a separate component of stockholders’ equity.
Stock-Based Compensation
The Company complies with FASB ASC Topic 718 Compensation - Stock Compensation, which establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. FASB ASC Topic 718 focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. FASB ASC Topic 718 requires an entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award (usually the vesting period). No compensation costs are recognized for equity instruments for which employees do not render the requisite service. The grant-date fair value of employee share options and similar instruments will be estimated using option-pricing models adjusted for the unique characteristics of those instruments (unless observable market prices for the same or similar instruments are available). If an equity award is modified after the grant date, incremental compensation cost will be recognized in an amount equal to the excess of the fair value of the modified award over the fair value of the original award immediately before the modification. No employee stock options or stock awards vested during 2012 or 2011 under FASB ASC 718.
THE MOVIE STUDIO, INC.
(FORMERLY DESTINATION TELEVISION, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2012
Note 2 - Summary of significant Accounting Policies (continued)
Stock-Based Compensation (continued)
Nonemployee awards
The fair value of equity instruments issued to a nonemployee is measured by using the stock price and other measurement assumptions as of the date of either: (i) a commitment for performance by the nonemployee has been reached; or (ii) the counterparty’s performance is complete. Expenses related to nonemployee awards are generally recognized in the same period as the Company incurs the related liability for goods and services received. The Company recorded stock compensation expense of approximately $-0- and $-0- during the years ended October 31, 2012 and 2011, respectively, related to consulting services.
Recently Adopted Accounting Pronouncements
In May 2011, the Financial Accounting Standards Board (FASB) issued authoritative guidance regarding Fair Value Measurement: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, which resulted in common requirements for measuring fair value and for disclosing information about fair value measurement under both U.S. GAAP and International Financial Reporting Standards (IFRS), including a consistent definition of the term "fair value." The amendments were effective beginning in the first quarter of 2012, and did not have a material effect on our consolidated financial statements.
In June 2011, the FASB issued Accounting Standards Update 2011-05, Presentation of Comprehensive Income. This update amended the provisions of FASB ASC 220-10 by eliminating the option of reporting other comprehensive income in the statement of changes in stockholders’ equity. Companies will have the option of presenting net income and other comprehensive income in a single, continuous statement of comprehensive income or presenting two separate but consecutive statements of net income and comprehensive income. The new presentation requirements are effective for interim and annual periods beginning after December 15, 2011. The adoption of this standard is not anticipated to have a material impact on our financial statements.
In September 2011, the FASB issued Accounting Standards Update 2011-08, Testing Goodwill for Impairment. This update amended the provisions of FASB ASC 350-20-35 by allowing an entity the option to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether it should calculate the fair value of a reporting unit. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or interim period have not yet been issued. The adoption of this standard is not anticipated to have a material impact on our financial statements.
The Company has reviewed all other recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on its results of operation, financial position or cash flows. Based on that review, the Company believes that none of these pronouncements will have a significant effect on its consolidated financial statements.
ASC 480, In March of 2012, the FASB issued Accounting Standards Update, Distinguishing Liabilities from Equity; primarily originated from FAS 150 and related interpretations. This subtopic establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. The guidance applies to freestanding financial instruments, thus reinforcing the importance of this determination.
Loss Per Common Share
The Company complies with the accounting and disclosure requirements of FASB ASC 260, Earnings Per Share. Basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted loss per common share incorporates the dilutive effect of common stock equivalents on an average basis during the period.
THE MOVIE STUDIO, INC.
(FORMERLY DESTINATION TELEVISION, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2012
Note 3 - Going Concern
The accompany financial statements have been prepared on the basis of accounting principles applicable to a going concern, which assume that Destination Television, Inc. will continue in operation for a least one year and realize its assets and discharge its liabilities in the normal course of operations.
Several conditions cast doubt about the Company’s ability to continue as a going concern. The Company has an accumulated deficit of approximately $9.3 million as of October 31, 2012, has no cash available for payment of operating expenses, no source of revenue, and requires additional financing in order to finance its business activities on ongoing basis. The Company’s future capital requirements will depend on numerous factors, including but not limited to continued progress in the pursuit of business opportunities. The Company is actively pursuing alternative financing and has discussions with various third parties, although no firm commitments have been obtained. In the interim, the principal shareholder has committed to meeting any operating expenses incurred by the Company. The Company believes that actions it is presently taking to revise its operating and financial requirements provide it with the opportunity to continue as a going concern.
The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. While we believe that the actions already taken or planned, will mitigate the adverse conditions and events which raise doubt about the validity of going concern assumption used in preparing these financial statements, there can be no assurance that these actions will be successful. If the Company were unable to continue as a going concern, then substantial adjustments would be necessary to the carrying values of the reported liabilities.
Note 4 - Acquired Amortizable Intangible Assets
As of October 31, 2006, the Company invested $3,280 in establishing trademarks associated with its concept of placing TV’s in bars, hotels and gyms. The Company amortizes the costs of these intangibles over their estimated useful lives unless such lives are deemed indefinite. Amortizable intangible assets are also tested for impairment based on undiscounted cash flows and, if impaired, written down to fair value based on either discounted cash flows or appraised values. Intangible assets with indefinite lives are tested for impairment, at least annually, and written down to fair value as required.
Expected annual amortization expense related to amortizable intangible assets is as follows:
THE MOVIE STUDIO, INC.
(FORMERLY DESTINATION TELEVISION, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2012
Note 5 - Income Taxes
The Company has approximately $9.3 million in net operating loss carryovers available to reduce future income taxes. These carryovers expire at various dates through the year 2032. The Company has adopted FASB ASC Topic 740, “Income Taxes,” which provides for the recognition of a deferred tax asset based upon the value the loss carry-forwards will have to reduce future income taxes and management's estimate of the probability of the realization of these tax benefits. The Company's management determined that it was more likely than not that the Company's net operating loss carry-forwards would not be utilized; therefore, a valuation allowance against the related deferred tax asset has been established.
A summary of the deferred tax asset presented on the accompanying balance sheets is as follows:
The Company has taken a full valuation allowance against the deferred asset attributable to the NOL carry-forwards of approximately $4,800,000 and $4,600,000 at October 31, 2012 and 2011, respectively, due to the uncertainty of realizing the future tax benefits.
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 $54,000 for each of the years ended October 31, 2012 and October 31, 2011.
THE MOVIE STUDIO, INC.
(FORMERLY DESTINATION TELEVISION, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2012
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 October 31, 2012, Mr. Venters was owed $680,597 for accrued unpaid salary. As of October 31, 2011, Mr. Venters was owed $547,597 for accrued unpaid salary.
Note 7 - Payroll Taxes Payable
As of October 31, 2012 and 2011, the Company owed the Internal Revenue Service approximately $336,386 and $299,923, respectively, for unpaid payroll taxes, interest, and penalties, for unpaid payroll taxes for periods ended prior to the year ended October 31, 2007. 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, 2009, 2010, 2011 and 2012 have been paid as required.
Note 8 - Notes Payable
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.Terry an equity interest in Ventures Capital Partners, LLC.
Note 9 - Stockholders' Deficiency
Common Stock
Preferred Stock
Series B Preferred Stock
The Series B preferred stock is identical in all aspects to the common stock, including the right to receive dividends, except that each share of Series B Preferred Stock has voting rights equivalent to four times the number of shares of Common Stock into which it could be converted. As of October 31, 2012, there were 5,750,000 shares of Series B preferred stock outstanding; on October 31, 2007, there were 3,750,000 shares outstanding. Each share of Series B preferred stock is convertible into one share of common stock.
THE MOVIE STUDIO, INC.
(FORMERLY DESTINATION TELEVISION, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2012
Note 10- Common Stock Options
No options or warrants were outstanding at October 31, 2012 and October 31, 2011.
Note 11 - Litigation
As of October 31, 2012, the Company was not a party to any existing or threatened litigation.
Note 12 - Related Party Transactions
Gordon Scott Venters
Effective November 2007, Gordon Scott Venters, entered into an employment agreement with the Company, which is described above in Note 6--Commitments-Employment Agreements.
In November 2007, Mr. Venters, acquired from the Company 2,000,000 shares of its Series B preferred stock as payment of $56,000 of accrued unpaid salary. The shares were valued at $56,000, or $0.028 per share, which represented the approximate value, at the date of issuance, of the common stock into which the Series B preferred Stock may be converted. Also, in September and October 2008, Mr. Venters, acquired a total 15,000,000 shares of common stock from the Company at an average price of approximately $0.0051 as payment for accrued but unpaid salary of $76,000. The shares of Series B preferred stock and the common shares have not been registered under the Securities Act of 1933, as amended, and therefore, may not be transferred in the absence of an exemption from registration under such laws and will be considered "restricted securities" as that term is defined in Rule 144 adopted under the Securities Act, and may be sold only in compliance with the resale provisions set forth therein.
In August 2006 and February 2007, Mr. Venters made non-interest bearing unsecured loans to the Company in the amounts of $25,000 and $5,000, respectively. In April 2007, the Company repaid the $5,000 loan and Mr. Venters acquired from the Company 500,000 shares of its common stock, which were valued at $26,000, or $0.052 per share, in exchange for the $25,000 loan and the balance of $1,000 was applied to accrued unpaid salary. Additionally, in August 2007, he acquired 1,000,000 shares of common stock, which were valued at $0.04 per share, in exchange for $40,000 of accrued unpaid salary. At October 31, 2012 and 2011, the Company owed Mr. Venters $680,597 and $547,597, respectively, for accrued unpaid salary.
Note 13 - Subsequent Events
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
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Our accountant is Patrick Rodgers CPA, P.A. We do not presently intend to change accountants. At no time have there been any disagreements with such accountant regarding any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES
Changes in Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:
- Pertain to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of the assets of the company;
- Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
- Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
As of October 31, 2012 management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control--Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective.
This annual report does not include an attestation report of the Corporation's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Corporation's registered public accounting firm pursuant to temporary rules of the SEC that permit the Corporation to provide only the management's report in this annual report.
ITEM 9B.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10.
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
The directors and officers as of October 31, 2012, are set forth below. The directors hold office for their respective term and until their successors are duly elected and qualified. Vacancies in the existing Board are filled by a majority vote of the remaining directors. The officers serve at the will of our Board of Directors.
BUSINESS EXPERIENCE
Set forth below is the name of our director and officer, all positions and offices held, the period during which he has served as such, and the business experience during at least the last five years:
Gordon Scott Venters, Chief Executive Officer and Chairman of the Board
Gordon Scott Venters has been president and chief executive officer and a director of The Movie Studio FKA Destination, Television, Inc. for the last ten months and a director of Destination Television since 1996. During that time he has executive produced, produced, written and directed Exposure starring Corey Feldman ready for worldwide release in the first quarter of 2013 the first of the four picture franchise. He has also served as a member of our board of directors from March 1994 to May 1995. Prior to joining Destination Television, Inc., Mr. Venters was engaged in the entertainment industry, including the financing, management and production of films, videos and recordings. From May 1995 until December 1996, he served as president and director of Quantum Entertainment, Company in Los Angeles. From 1990 to 1993, Mr. Venters served as president and chief executive officer of Flash Entertainment, Inc., an independent feature film company and predecessor of our company, during which time he was the executive producer of no More Dirty Deals and five music videos. He had previously been the executive producer of two full length feature films, Shakma & Shoot. Mr. Venters, has also been a financial advisor and a registered stockbroker with FD.D. Roberts Securities and Prudential Bache Securities, Inc.
CERTAIN LEGAL PROCEEDINGS
No director, nominee for director, or executive officer has appeared as a party in any legal proceeding material to an evaluation of his ability or integrity during the past five years.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
To date, we have not filed Form 5 for the year ended October 31, 2012.
ITEM 11.
ITEM 11.
EXECUTIVE COMPENSATION
Gordon Scott Venters is employed as the Company's president and chief executive officer, pursuant to an employment agreement, effective November 1, 2007. The three-year employment agreement, which extended a previous agreement, provides for an annual salary of $161,662; annual increases of a minimum of 5%; and participation in incentive or bonus plans at the discretion of the board of directors. The agreement additionally provides for certain confidentiality and non-competition provisions and a minimum payment of 18 month salary in the event of a change of control or termination without cause, or if the employee terminates for good reason. As of October 31, 2012, Mr. Venters was owed $680,597 for accrued unpaid salary. As of October 31, 2011, Mr. Venters was owed $547,597 for accrued unpaid salary.
No retirement, pension, profit sharing, stock option or insurance programs or other similar programs have been adopted by us for the benefit of our employees.
ITEM 12.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table illustrates the common stock and preferred stock ownership of Gordon Scott Venters as of February 21, 2013.
Title of Name, Title and Address of Beneficial Amount of Beneficial % of
Class Owner of Shares Ownership Shareholdings
Common Gordon Scott Venters, CEO, and 3.5 million shares 3%
Director
Preferred Gordon Scott Venters, CEO, and 5.75 million shares 100%
Director
The address for all officers and directors is 530 North Federal Highway, Ft. Lauderdale, Florida 33301.
ITEM 13.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
None
ITEM 14.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees
For the Company's fiscal year ended October 31, 2012, we were billed and paid $4,000. The audit fees were for professional services rendered for the audit of our financial statements, respectively.
Tax Fees
For the Company's fiscal year ended October 31, 2012, we were billed and paid $0 for professional services rendered for tax compliance, tax advice, and tax planning, as well as for legal services.
All Other Fees
The Company did not incur any other fees related to services rendered by our principal accountant for the fiscal year ended October 31, 2012.
PART IV
ITEM 15.
ITEM 15.
EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of this report:
1.
Financial statements; see index to financial statements and schedules in Item 8 herein.
2.
Financial statement schedules; see index to financial statements and schedules in Item 8 herein.
3.
Exhibits:
The following exhibits are filed with this Form 10-K and are identified by the numbers indicated; see index to exhibits immediately following financial statements and schedules of this report.
EXHIBIT INDEX
3.1
Articles of Incorporation (1)
3.2
By-laws (1)
31.1
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1
Certification pursuant to Title 18 Section 1350
Reports on Form 8k:
None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, there unto duly authorized.
THE MOVIE STUDIO, INC. F/K/A DESTINATION TELEVISION, INC.
By: /s/ Gordon Scott Venters
_______________________________________________________________________________________________
Gordon Scott Venters
President, Chief Executive Officer,
and Director
Dated: August 15, 2013
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: /s/ Gordon Scott Venters
_______________________________________________________________________________________________
President, Chief Executive Officer,
Director
Dated: August 15, 2013
CERTIFICATION OF CERTIFYING OFFICER
CERTIFICATION
OF CHIEF EXECUTIVE OFFICER
AND CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Gordon Scott Venters, certify that:
1. I have reviewed this Form 10-K of The Movie Studio, Inc. F/K/A Destination Television, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods present in this report;
4. The small business issuers other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13-a-15(f) and 15d-15(f)) for the small business issuer and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principals;
(c) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the small business issuer's internal control over financing reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and
5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonable likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involved management or other employees who have a significant rile in the small business issuer's internal control over financial reporting.
Dated: August 15, 2013
/s/ Gordon Scott Venters
--------------------------
Gordon Scott Venters
Chief Executive Officer
Chief Financial Officer
906 CERTIFICATION OF CERTIFYING OFFICER
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
AND CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
In connection with the accompanying Yearly Report On Form 10-K of The Movie Studio, Inc. F/K/A Destination Television, Inc. for the Year Ended October 31, 2011 I, Gordon Scott Venters, chief executive officer and chief financial officer of The Movie Studio, Inc. F/K/A Destination Television, Inc. hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief, that:
1. Such Yearly Report on Form 10-K for the year ended October 31, 2011 fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in such Yearly Report on Form 10-K for the year ended October 31, 2011 fairly presents, in all material respects, the financial condition and results of operations of The Movie Studio, Inc. F/K/A Destination Television, Inc.
Dated: August 15, 2013
THE MOVIE STUDIO, INC. F/K/A DESTINATION TELEVISION, INC.
By: /s/ Gordon Scott Venters
- -------------------------------------
Gordon Scott Venters
Chief Executive Officer and
Chief Financial Officer