Item 1. Description of Business
Modern City Entertainment Inc. (formerly Azul Studios International Inc.) (the “Company”) is a development stage Company incorporated on September 23, 1996 under the laws of the state of Texas. In July 1999 the Company changed its jurisdiction to the State of Washington through a merger agreement with Realty Technologies Inc. (RTI). That business was subsequently renamed to Equinta Corp and the business was sold. The Company then changed the name of the Company to eCourier Corps Inc. (ECC) and commenced the development a business model in the courier business which was subsequently abandoned. In December 2004, the Board of Directors of the Company were presented with a business plan and opportunity to acquire all right, title and interest to a business plan by the name of Azul Studios. In April 2004 the Board of Directors revised and approved the business plan, and commenced operations with limited success under the name “Azul Studios International Inc.”
On February 28, 2007, Modern City Entertainment Inc. (formerly Azul Studios International Inc.) entered into an agreement for the acquisition of Modern City Entertainment LLC, a Miami based development stage independent movie Company, which is in the business of acquiring, producing and distributing feature films internationally. The Company currently has the rights to six screenplays and is in the process of securing financing for the development of its first production. On February 28, 2007, a shareholder of the Company entered into an agreement with the unit holders of MCE, whereby that shareholder tendered 19,071,546 of the common shares held in the Company to be held in trust for the unit holders of MCE in exchange for the transfer of 99% of the issued and outstanding units of MCE to the Company. This transaction is expected to be accounted for as a reverse acquisition. The shares were issued December 12, 2007
The initial screenplay being developed is a movie called “Padre Pio The Signs of Heaven” which is a real life journey through the life, beliefs and miraculous events in the life of Padre Pio. It is management’s intention to produce this using the highest quality of effects to capture the compelling realism of his life and thereby capture the imagination of audiences worldwide.
Reports to Security Holders
The public may read and copy any materials filed by us with the SEC at the SEC's Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. The public may obtain information on the operation of the SEC's Public Reference Room by calling the SEC at 1-800-SEC-0330. We will be an electronic filer and the SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC which may be viewed at http://www.sec.gov/.
Item 2.
Item 2. Description of Property
The following table sets forth information relating to each of the Company's offices as of December 31, 2007. The total net book value of the Company's premises and equipment (furniture, fixtures and equipment) at December 31, 2007 was nil.
PRINCIPLE BUSINESS OFFICE
Modern City Entertainment Inc. (formerly Azul Studios International Inc.)
Sunrise Boulevard
Suite210
Ft. Lauderdale, Florida
Item 3.
Item 3. Legal Proceedings
The Company is not a party to any legal proceedings, and no such proceedings are known to be contemplated. No director, officer or affiliate of the Company, and no owner of record or beneficial owner of more than 5.0% of the securities of the Company, or any associate of any such director, officer or security holder is known to be a party adverse to the Company or has a material interest adverse to the Company in reference to pending litigation.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
None
PART II
Item 5.
Item 5. Market for Common Equity and Related Stockholder Matters
No public trading market exists for the Company's securities. No assurance can be given that an active trading market will develop in the foreseeable future. No dividends have been paid to date and the Company's Board of Directors does not anticipate paying dividends in the foreseeable future.
As of December 31, 2007, the Company had 34,753,439 shares of common stock outstanding, par value $0.0001, held by approximately 490 shareholders of record.
During the fiscal year ended December 31, 2007, and to date the Company issued unregistered-securities as follows:
On February 28, 2007, the Company issued 100,000 shares at a price of $0.25 per share to Modern City Entertainment LLC.
On July 21, 2007, the Company issued 2,073,600 shares at a price of $0.25 per share to accredited investors within the US pursuant to a Regulation 506 exemption from Registration.
On August 20, 2007, the Company issued 256,200 shares at a price of $1.00 per share to accredited investors within the US pursuant to a Regulation 506 exemption from Registration,
On February 28, 2007, a shareholder of the Company entered into an agreement with the unit holders of MCE, whereby that shareholder tendered 19,071,546 of the common shares held in the Company to be held in trust for the unit holders of MCE in exchange for the transfer of 99% of the issued and outstanding units of MCE to the Company. This transaction is expected to be accounted for as a reverse acquisition. The shares were issued December 12, 2007
Item 6.
Item 6. Management’s Discussion and Analysis or Plan of Operation
The following is a discussion and analysis of the Company's financial position and results of operation and should be read in conjunction with the information set forth under Item 1 - Description of Business and the consolidated financial statement and notes thereto appearing elsewhere in this report. Certain statements contained in this Annual Report on Form 10-K, including without limitation, statements containing the words "believes," "anticipates," "estimates," "expects," and words of similar import, constitute "forward looking statements." You should not place undue reliance on these forward looking statements. Our actual results could differ materially from those anticipated in these forward looking statements for many reasons, including the risks faced by us described in the Annual Report and in other documents we file with the Securities and Exchange Commission.
GENERAL
The Company is a development stage enterprise and is in the process of building upon the developing business of it’s newly acquired subsidiary Modern City Entertainment LLC. The Company is currently seeking equity financing in order to commence production of the Company’s initial screen play called Padre Pio, Signs of Heaven. To date, no operating revenues have been generated. The Company's operations to date have consumed substantial amounts of cash. The Company's negative cash flow from operations is expected to continue and to accelerate in the foreseeable future as the Company develops it’s initial production.
On February 28, 2007, a shareholder of the Company entered into an agreement with the unit holders of MCE, whereby that shareholder tendered 19,071,546 of the common shares held in the Company to be held in trust for the unit holders of MCE in exchange for the transfer of 99% of the issued and outstanding units of MCE to the Company. This transaction is expected to be accounted for as a reverse acquisition. The shares were issued December 12, 2007
During the year ended December 31, 2007 and to date, the primary source of capital has been loans from existing shareholders, and equity sales. Upon the acquisition of Modern City Entertainment LLC, on February 28, 2007, the Company’s consolidated cash balance was increased to $757,906 comprised of the cash balance in the Company’s subsidiary Company. Since that time, the Company has made equity sales of $518,400 at $0.25 per share and an additional $256,000 sold at $1.00 per share. It is management’s intention to secure additional equity financings by way of further private placements of the Company’s common stock.
The Company's continued existence as a going concern is ultimately dependent upon its ability to secure funding on an ongoing basis. The Company will be seeking investment capital for the development of its initial screenplay, and the marketing of that screenplay once complete. There can be no assurance that such additional funding will be available on acceptable terms, if at all.
YEAR ENDED DECEMBER 31, 2007 COMPARED TO DECEMBER 31, 2006
The Company incurred a loss from operations of $154,731 compared to a loss of $30,857 in the previous fiscal year. The current year loss reflects a expenditure as the Company has increased spending in order to focuse upon the development of another area of activity, which has been successfully consummated with the acquisition of Modern City Entertainment LLC. The extraordinary gain arising from the disposition of Azul Studios Property SL was the disposition of a dormant subsidiary of the Company in Spain, and the Company has disposed of a net liability within the Company arising from ongoing sustaining costs.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2007 the Company had a working capital balance of $612,130. This is as a result of the acquisition of Modern City Entertainment LLC, and subsequent equity financings the Company’s consolidated working capital has become a surplus in the amount of approximately $ 734,706.
During the year ended December 31, 2007 and to date, the primary source of capital has been loans from existing shareholders, and equity sales. Upon the acquisition of Modern City Entertainment LLC, on February 28, 2007, the Company’s consolidated cash balance was increased to $757,906 comprised of the cash balance in the Company’s subsidiary Company. Since that time, the Company has made equity sales of $518,400 at $0.25 per share and an additional $256,000 sold at $1.00 per share. It is management’s intention to secure additional equity financings by way of further private placements of the Company’s common stock.
The Company is in the process of taking its securities up to trade on the OTCBB which management believe will facilitate the future financing of the Company, from new and existing shareholders.
Item 7.
Item 7. Financial Statements
MODERN CITY ENTERTAINMENT, INC.
(formerly Azul Studios International Inc.)
REPORT AND CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007 and 2006
Kramer Weisman and Associates, LLP
Certified Public Accountants
Orange Drive, Suite 814
Davie, Florida 33330
Independent Auditor’s Report
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Modern City Entertainment, Inc.
Sunrise, Florida
We have audited the accompanying consolidated balance sheet of Modern City Entertainment, Inc. as of December 31, 2007 and the related consolidated statements of operations, changes in shareholders' deficit and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit 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 purposes 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 amount and disclosures in the consolidated 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 provide a reasonable basis for our opinion.
In our opinion, the 2007 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Modern City Entertainment, Inc. as of December 31, 2007, and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
/s/ Kramer, Weisman and Associates, LLP
Certified Public Accountants
Davie, Florida
August 15, 2008
MODERN CITY ENTERTAINMENT, INC.
(formerly Azul Studios International Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 2007 and 2006
MODERN CITY ENTERTAINMENT, INC.
(formerly Azul Studios International Inc.)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIENCY)
for the period September 23, 1996 (Date of Inception) to December 31, 2007
(Stated in US Dollars)
Par value and additional paid-in capital have been radjusted for changes in value due to the merger (Note 1).
MODERN CITY ENTERTAINMENT, INC.
(formerly Azul Studios International Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007 and 2006
Note 1 Nature and Continuance of Operations
Modern City Entertainment, Inc. (formerly Azul Studios International Inc.) (the “Company”) was incorporated on September 23, 1996 under the laws of the State of Texas as Alvin Consulting Inc. On July 15, 1999, the stockholders of the Company approved a merger with a newly incorporated company in the State of Washington and the surviving company, Realty Technologies Inc., operates under the laws of the State of Washington. On August 12, 1999 stockholders of the Company approved an amendment to the articles of the Company changing its name to Equinta Corp. On April 10, 2000, the stockholders of the Company approved a change to the articles of the Company changing its name to Courier Corps Inc. On May 16, 2000, the stockholders the Company approved a change in the name of the Company to eCourierCorps Inc. On March 12, 2004, the Company changed its name to Azul Studios International Inc. and adopted a business plan to develop a group of boutique hotels catering to the professional photographers and film artists. In July 2004 the Company incorporated Azul Studios Properties S.L., in Barcelona, Spain, a wholly-owned subsidiary. The Company also incorporated a wholly-owned corporation, Azul Media Inc., in the State of Washington on March 8, 2005. The Company intended to develop a group of professional photographic studios in select locales around the world. On June 29, 2006, the Company sold all of the issued and outstanding shares of its wholly-owned subsidiary, Azul Studios Property, S.L.. On February 28, 2007, the Company agreed to acquire Modern City Entertainment LLC (“MCE”), a Miami based development stage independent movie company, which is in the business of acquiring, producing and distributing feature films internationally (Note 8). Currently the Company has no revenue.
On April 27, 2007, the Company changed its name to Modern City Entertainment, Inc.
The Company is currently a development stage company as defined under Statement of Financial Accounting Standards (“FAS”) No. 7. As required for development stage enterprises, the statements of operations and cash flows include a total of all expenditures from the Date of Commencement of the Development Stage (April 1, 2000) to December 31, 2007. Prior to April 1, 2000, the Company developed and sold the rights to a web based internet application in the real estate industry.
Note 1 Nature and Continuance of Operations - (cont’d)
These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next fiscal year. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. At December 31, 2007, the Company had not yet achieved profitable operations, has accumulated losses of $1,473,214 since its inception, has a working capital deficiency of $109,176 and expects to incur further losses in the development of its business, all of which casts substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management considers that the Company will be able to obtain additional funds by equity financing and/or related party advances, however there is no assurance of additional funding being available.
Note 2 Summary of Significant Accounting Policies
The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America. Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates which have been made using careful judgement. Actual results may vary from these estimates.
The financial statements have, in management’s opinion, been properly prepared within the framework of the significant accounting policies summarized below:
Principles of Consolidation
The consolidated financial statements included the accounts of the Company and its wholly-owned subsidiary, Azul Media Inc. All significant inter-company transactions and balances have been eliminated on consolidation.
Development Stage Company
The Company complies with FAS No. 7 for its characterization of the Company as development stage.
Note 2 Summary of Significant Accounting Policies - (cont’d)
Impairment of Long-lived Assets
The Company reports the impairment of long-lived assets and certain identifiable intangibles in accordance with FAS No. 144, “Accounting for the Impairment of Long-lived Assets”. Certain long-lived assets held by the Company are reviewed for impairment whenever assets or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Accordingly, an impairment loss is recognized in the year it is determined.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes pursuant to FAS, No. 109 “Accounting for Income Taxes”. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. When necessary, a valuation allowance is recorded to reduce tax assets to an amount for which realization is more likely than not. The effect of changes in tax rates is recognized in the period in which the rate change occurs.
Basic and Diluted Loss Per Share
The Company reports basic loss per share in accordance with the FAS No. 128, “Earnings Per Share”. Basic loss per share is computed using the weighted average number of shares outstanding during the period. Diluted loss per share includes the potentially dilutive effect of outstanding debt and stock options which are convertible into common shares. Diluted loss per share has not been provided as it would be anti-dilutive.
Equipment and Amortization
Equipment is recorded at cost. Amortization is provided using the declining balance method at the following rates:
Equipment additions during the year are amortized at one-half rates.
Note 2 Summary of Significant Accounting Policies - (cont’d)
Financial Instruments
The carrying value of the Company’s financial instruments, consisting of cash and accounts payable and accrued liabilities approximate their fair value due to the short term maturity of such instruments. Due to related parties and loans payable to stockholders also approximate fair value. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.
Convertible Debt
The Company accounts for convertible debt as required by APB Opinion No. 14 “Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants”.
Stock-based Compensation
The Company has a stock-based compensation plan, which is described in Note 5. Under this plan, all stock based payments to non-employees are accounted for using a fair value based method of accounting. No compensation expense is recognized when the stock options are granted to employees or directors. Consideration received from employees, directors or consultants on exercise of stock options is credited to share capital. If stock is repurchased from employees, directors or consultants, the excess of the consideration paid over the carrying amount of the stock is charged to deficit. On the granting of stock options to employees or directors the Company has elected to provide pro forma disclosure on their fair value.
Foreign Currency Translation
The Company’s previously wholly-owned subsidiary, Azul Studios Property S.L. (disposed of on June 29, 2006), translates amounts from its functional currency, Euro, to the reporting currency, United States dollars, in accordance with FAS No. 52, “Foreign Currency Translation”. At each balance sheet date, recorded balances that are denominated in a currency other than US dollars are adjusted to reflect the current exchange rate which may give rise to a foreign currency translation adjustment accounted for as a separate component of stockholder’s deficiency and included in comprehensive loss.
Monetary assets and liabilities are translated into the functional currency at the exchange rate in effect at the end of the period. Non-monetary assets and liabilities are translated at the exchange rate prevailing when the assets were acquired or the liabilities assumed. Revenues and expenses are translated at the rate approximating the rate of exchange on the transaction date. All exchange gains and losses are included in the determination of net loss for the year.
Note 2 Summary of Significant Accounting Policies - (cont’d)
New Accounting Standards
In December 31, 2004, the FASB issued FAS 123R “Share-based Payment,” a revision to FAS 123. FAS 123R replaces existing requirements under FAS 123 and APB 25, and requires public companies to recognize the cost of employee services received in exchange for equity instruments, based on the grant-date fair value of those instruments, with limited exceptions. FAS 123R also affects the pattern in which compensation cost is recognized, the accounting for employee share purchase plans and the accounting for income tax effects of share-based payment transactions. For small business filers, FAS 123R will be effective for interim or annual periods beginning after December 15, 2005. The Company adopted FAS 123R on April 1, 2006. Accordingly, the adoption of FAS 123R’s fair value method may have a significant impact on our statement of operation, although it will have no impact on our overall financial position. The impact of adoption of FAS 123R cannot be predicted at this time because it will depend on levels of share-based payments granted in the future.
Note 3 Equipment
Note 4 Capital Stock
Effective December 30, 2005, the Company reverse split its issued common stock on the basis of one new share for two old shares and the Articles of Incorporation of the Company was amended to reduce the authorized shares of common stock of the Company from 100,000,000 to 50,000,000. The number of shares referred to in these financial statements has been restated wherever applicable to give retroactive effect to the reverse stock split.
The retroactive restatement of the issued common shares is required by the Securities and Exchange Commission’s Staff Accounting Bulletin, Topic 4c.
Stock Option Plan and Stock-based Compensation
In June 2003, the Board of Directors approved a stock option plan for the Company which provides for allocation of options to purchase up to 375,000 common shares of the Company. The Board of Directors also approved the issuance of options to a director to acquire up to 125,000 common shares of the Company at $0.50 per share. The options have a term of ten years expiring in June 2013. The option plan is subject to approval by the stockholders of the Company.
In March 2004, the Board of Directors approved the issuance of options to a director of the Company to acquire up to 125,000 shares of common stock at $0.50 per share. The options vest over a period of two years evenly every 3 months from the date of issuance and once vested may be exercised at any time up to ten years expiring in March, 2014. At March 31, 2006, these options were all exercisable.
The Company does not record compensation expense on the granting of stock options to employees. In accordance with FAS No. 123R “Share-Based Payment”, disclosure of pro forma net loss and net loss per share is required and is calculated by determining the fair value of the options using fair value option pricing models. The Company has determined the fair value of vested employee stock options using the fair value method.
Note 4 Capital Stock - (cont’d)
Stock Option Plan and Stock-based Compensation - (cont’d)
The fair value for these stock options was estimated at the date of grant using the following weighted average assumptions:
a)
Pursuant to an Agreement of Purchase and Sale dated June 29, 2006, the Company sold all the issued and outstanding shares of its wholly-owned subsidiary, ASP, S.L. for $216.
b)
On February 28, 2007, a shareholder of the Company entered into an agreement with the unit holders of MCE, whereby that shareholder tendered 19,071,546 of the common shares held in the Company to be held in trust for the unit holders of MCE in exchange for the transfer of 99% of the issued and outstanding units of MCE to the Company. This transaction is expected to be accounted for as a reverse acquisition.
c)
Pursuant to a sale and purchase of shares agreement dated February 28, 2007, the Company issued 100,000 shares of its common stock at $0.25 per share for total proceeds of $25,000.
d)
On June 12, 2007, the Company approved the adoption of a 2007 employee and director stock option plan for the issuance of up to 2,100,000 options to acquire common stock of the Company at a price of $0.25 per share. The Company further approved the issuance of 1,000,000 options out of the 2,100,000 to acquire stock, to certain officers and directors of the Company at the price of $0.25 per share.
e)
On August 10, 2007 the Company completed upon an additional private placement of 2,008,000 shares at a price of $0.25 per share with aggregate proceeds of $502,000 pursuant to a regulation 506 exemption from registration.
On August 11, 2007 the Company completed upon additional private placement of shares at a price of $1.00 per share with aggregate proceeds of $37,000 pursuant to a regulation 506 exemption from registration
Share Purchase Warrants
At December 31, 2007, 312,715 share purchase warrants are outstanding. Each warrant entitles the holder to purchase an additional common share of the Company at $0.50 per share until September 30, 2007.
Note 5 - Income Taxes
The following table summarizes the significant components of the Company’s future tax assets:
Note 5 Income Taxes - (cont’d)
The amount taken into income as future tax assets must reflect that portion of the income tax loss carry-forwards that is more likely-than-not to be realized from future operations. The Company has chosen to provide an allowance of 100% against all available income tax loss carry-forwards, regardless of their time of expiry.
As at December 31, 2007, the Company has accumulated non-capital losses totaling approximately $1,451,903, which are available to reduce taxable income in future taxation years. These losses expire beginning in 2017. The potential benefit of these losses, if any, has not been recorded in the financial statements.
Note 6 - Completion of Acquisition of Assets
As disclosed in the Company’s 8-K dated May 3, 2007, on April 28, 2007, the Registrant entered into an agreement for the acquisition of 99% of the issued and outstanding units of Modern City Entertainment LLC, an independent motion picture company. Effective December 12, 2007 the agreement was finalized and consideration of shares were issued as per the agreement as described below.
The units acquired by Modern City Entertainment Inc. were acquired from each of the following individuals;
Mr. William Erurth, (President and Director of the Registrant subsequent to the acquisition)
Mr. Scott Rosenfelt
Mr. Ron Stone
Mr. Christian Ramirez
Mr. David Hold
Mr. Mark Geohhegan
Mr. Joe Greco (Director of the registrant, subsequent to the acquisition transaction)
Mr. & Mrs. Marc & Robin Kesselman
Mr. Frank Pierce (Director of the registrant subsequent to the acquisition transaction)
Mr. William Lindsay
Mr. Joe Sollecito (Director of the registrant subsequent to the acquisition transaction)
The consideration paid for the acquisition was 19,071,546 common shares of the registrant issued to each of the Class “A” unit holders and Class “B” unit holders on a pro-rata basis, calculated with each Class “B” unit equal to 10 Class “A” by an existing shareholder of the Registrant.
Item 8.
Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
The Company has had no disagreements with Accountants on accounting and financial disclosure matters or otherwise.
ITEM 8A. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
-----------------------------------------------------
The Company's Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of the Company's controls and procedures (as defined in the Securities Act of 1934 Rule 13a 14(c) and 15d 14 (c)) within 90 days of the filing of this annual report on Form 10-K (the "Evaluation Date"), have concluded that as of the Evaluation Date, the Company's disclosure controls and procedures were adequate and effective to ensure that material information relating to it would be made known to it by others, particularly during the period in which this yearly report on Form 10-K was being made.
(b) Changes in Internal Controls
-------------------------------
There were no significant changes in the Company's internal controls or in other factors that could significantly affect the Company's disclosure controls and procedures subsequent to the Evaluation Date, nor any significant deficiencies or material weaknesses in such disclosure controls and procedures requiring corrective actions.
ITEM 8A(T). MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the company in accordance with and as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the (i) effectiveness and efficiency of operations, (ii) reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and (iii) compliance with applicable laws and regulations. Our internal controls framework is based on the criteria set forth in the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, 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.
Management’s assessment of the effectiveness of the small business issuer’s internal control over financial reporting is as of the year ended December 31, 2007. We believe that internal control over financial reporting is effective. We have not identified any, current material weaknesses considering the nature and extent of our current operations and any risks or errors in financial reporting under current operations.
This annual report does not include an attestation report of the company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management’s report in this annual report.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING.
There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended December 31, 2007, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART III
Item 9.
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance With Section 16(a) of the Exchange Act
The following table sets forth the names and ages of, and all positions and offices held by, each of the Company’s directors and its executive officers. Also set forth are the dates the Company’s directors were initially elected to the Board of Directors , a summary of each identified person’s business experience during the last five years and any directorship(s) held in other companies with securities registered under Section 12 or subject to the requirements of Section 15(d) of the Securities Exchange Act of 1934, as amended.
Directors and Executive Officers
Mr. James Vandeberg is an attorney operating primarily in Seattle Washington focused on Corporate Securities law. Formerly Mr. Vandeberg was with Ogden Murphy Wallace, a law firm in Seattle, Washington. Mr. Vandeberg specializes in corporate finance with an emphasis on securities matters and acquisitions. Mr. Vandeberg graduated from New York University School of Law in 1969, where he was a Root-Tilden Scholar. He is a member and former director of the American Society of Corporate Secretaries. He was previously general counsel and secretary of two NYSE companies in the retail and food services sectors.
Mr. Michael Lorenz has more than a decade of experience at executive levels with some of the largest hotel organizations in the world and has achieved a track record for setting aggressive sales and marketing goals, meeting and exceeding those objectives. Mr. Lorenz is currently a VP of sales for IMI Living, a South Carolina based business. Previously, he was employed by The Ritz-Carlton Hotels overseeing the sales and marketing for existing properties in the Caribbean and Mexico, and was intimately involved with strategizing and orchestrating the launch of new product in that area.
Mr. Bill Erfurth comes to filmmaking from a non-traditional background. From November, 1981 to the present, Mr. Erfurth has been affiliated with the Miami-Dade Police Department in Miami, Florida. Mr. Erfurth was promoted to Lieutenant in 1997 and assigned as Commander of The Tactical Narcotics Team (TNT). This unit became the most productive unit in the Miami-Dade Police Department’s history, and recognized nationally as one of the top units in the country. As leader of TNT, Mr. Erfurth was responsible for the supervision of 130 officers, and a multi-million dollar budget. Currently, Mr. Erfurth is assigned as the Commander of a Multi-Agency Violent Crime Task Force, (S.T.I.N.G.) Street Tactics Intervention Group. In 1995 Mr. Erfurth hosted a new radio show. The show, Copnet - the Police Radio Network became a nationally syndicated radio program, airing in 100 markets, and the first syndicated show of its kind to be hosted by active police officers. “Copnet” aired for nine years, winning three Achievements in Radio Awards. In 2001, while still working on the radio show, Mr. Erfurth, was approached by the Discovery Channel and the BBC to do an eight-part mini-series about the TNT police unit entitled The Real Miami Vice. On location filming with TNT lasted for four months. Upon completion of filming, Mr. Erfurth traveled to London to work with the editors on the final cut. The show still airs currently on both networks.In 2002, Mr. Erfurth became a Consultant and Technical Advisor for Bad Boys II. His Tactical Narcotics Team was featured in the movie. Mr. Erfurth served as Technical Advisor to Producer Jerry Bruckheimer, and Director Michael Bay. To this day, Mr. Erfurth maintains an active and regular association with Bruckheimer Films, Disney Studios, Sony Pictures, Warner Brothers, and Michael Bay Films, providing Consultant, Technical Advisor, and Research & Development services for major studio productions.
Mr. Frank Pierce Mr. Pierce enlisted in the United States Coast Guard in 1955 and was honorably discharged in 1959. After his military service Mr. Pierce was employed by the Miami Springs Police Department from 1959 to 1965. Later in 1965 Mr. Pierce joined the Miami-Dade Police Department and served there until June 30th, 2001. Officially retired from Police duty now for the last five years, Mr. Pierce has become a successful Real Estate Investor and Venture Capitalist.
Mr. Joseph Greco Writer/Director Joseph Greco’s feature film debut, Canvas, stars Academy Award winner Marcia Gay Harden, Emmy Award winner Joe Pantoliano. The film premiered at the Hamptons International Film Festival and has been heralded by critics and audiences alike. Canvas has since won the Audience Award, Best Dramatic Performance Award for Joe Pantoliano, and a Best Director Award for Mr. Greco at the Ft. Lauderdale International Film Festival. The project is slated for release in 2007.
Mr. Greco was born in Hollywood, Florida and graduated Florida State University’s School of Motion Picture, Television and Recording Arts. While at FSU, Mr. Greco attended into the Film School’s London Film Study Program.
After graduating from film school, Joseph Greco worked under the auspices of film director James Cameron at Lightstorm Entertainment during the making of Titanic. Greco worked at THX, Lucasfilm on such projects as Star Wars Episodes I & II, and went on to supervise the color timing and printing of The Legend of Bagger Vance, The Contender and The Academy Award winning film Shrek in Rome, Italy. Greco has produced, directed & edited several corporate projects for The Walt Disney Company.
Mr. Greco is a member of the Directors Guild of America.
Mr. Joe Sollecito enlisted in the United States Coast Guard Reserves in 1980 and served as a Hospital Corpsman/EMT until 1987. In 1987, Mr. Sollecito joined the Miami-Dade Fire Department. Mr. Sollecito founded United Sleep Diagnostics, Inc in January of 2000, a South Florida company specializing in the diagnosis and treatment of Sleep Disorders. Under his direction, United Sleep Diagnostics has grown from a small company performing ambulatory sleep testing, to currently one of the largest independent sleep testing companies in South Florida, with multiple freestanding and hospital-based facilities. Mr. Sollecito currently lives in South Florida where he divides his time as a Lieutenant for Miami Dade Fire Rescue, CEO of United Sleep Diagnostics, Real Estate Investor, and Board Executive for Modern City Entertainment LLC.
The directors named above will serve until the next annual meeting of the Company's stockholders. Thereafter, directors will be elected for one-year terms at the annual stockholders' meeting. Officers will hold their positions at the pleasure of the board of directors, absent any employment agreement, of which none currently exists or is contemplated. There is no arrangement or understanding between the directors and officers of the Company and any other person pursuant to which any director or officer was or is to be selected as a director or officer. The officers will serve at will.
The directors and officers of the Company will devote such time to the Company's affairs on an "as needed" basis. As a result, the actual amount of time which they will devote to the Company's affairs is unknown and is likely to vary substantially from month to month.
Board of Directors Committees and Other Information
All Directors hold office until the next annual meeting of stockholders and until their successors have been duly elected and qualified. Officers are appointed by and serve at the discretion of the Board of Directors.
The Board of Directors currently has no committees. As and when required by law, it will establish Audit Committee and a Compensation Committee. The Audit Committee will oversee the actions taken by our independent auditors and review our internal financial and accounting controls and policies. The Compensation Committee will be responsible for determining salaries, incentives and other forms of compensation for our officers, employees and consultants and will administer our incentive compensation and benefit plans, subject to full board approval. The Audit Committee Charter and the Compensation Committee Charter as
attached hereto as Exhibit to this filing. The functions of the Audit Committee and the Compensation Committee are currently performed by the Board of Directors.
Director Compensation
Our directors do not receive cash for their services. The Company does not provide additional compensation for committee participation or special assignments of the Board of Directors, but may enter into separate consulting agreements with individual directors at times.
Item 10.
Item 10. Executive Compensation
With the exception of Mr. Erfurth, who has an employment contract providing a monthly compensation of $3,000USD per month paid by the Company’s subsidiary Modern City Entertainment LLC. Executive officers of the Company currently do not receive any remuneration in their capacity as Company executive officers. The following table sets forth information concerning the compensation for services to the Company from businesses of which the Director or Executive officer exercised significant influence, for the years ended December 31, 2007, 2006, and 2005.
Summary Compensation Table
(1)
Represents fees charged by Bay Management Ltd., a company controlled by Mr. Mark Geoghegan, for its consulting and investor relations services for the three fiscal years ended December 31, 2007, 2006 and 2005. In addition, during 2007 Bay Management Ltd. paid $11,623 (2006 - $15,805) for accounting and administrative services and office expenses for the Company and those were also charged to the Company. As of December 31, 2007, all of the fees were accrued but unpaid.
(2)
Represents an adjustment to fees charged by Mr. James Vandeberg for his legal services in the fiscal year ended December 31, 2007 related to prior period fees.
Stock Options
The following table sets forth certain information with respect to stock options granted to the named officers and outstanding at December 31, 2007
Code of Ethics
We have adopted a code of ethics that applies to all of our executive officers, directors and employees. Code of ethics codifies the business and ethical principles that govern all aspects of our business. This document will be made available in print, free of charge, to any shareholder requesting a copy in writing from the Company. A copy of our code of ethics is filed herein.
Item 11.
Item 11. Security Ownership of Certain Beneficial Owners and Management and related Stockholder Matters
The following table sets forth, as of the date of this Form , the number of shares of Common Stock owned of record and beneficially by executive officers, directors and persons who hold 5.0% or more of the outstanding common Stock of the Company. Also included are the shares held by all executive officers and directors as a group.
Item 12.
Item 12. Certain Relationships and Related Transactions
During the years ended December 31, 2007 and 2006, no officer, director, or affiliate of the Company has or proposes to have any direct or indirect material interest in any asset proposed to be acquired by the Company through security holdings, contracts, options, or otherwise.
The Company has adopted a policy under which any consulting or finder's fee that may be paid to a third party or affiliate for consulting services to assist management in evaluating a prospective business opportunity would be paid in stock or in cash. Any such issuance of stock would be made on an ad hoc basis. Accordingly, the Company is unable to predict whether or in what amount such a stock issuance might be made.
Item 13.
Item 13. Exhibits
31.1
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.
31.2
Certification of Chief Executive Officer Pusuant to Section 906 of the Sarbanes-Oxley Act.
Item 14.
Item 14. Principal Accountant Fees and Services
Audit and audit-Related Fees
For the year ended December 31, 2007, the Company's principal accountant billed $10,800 in fees for the audit of the Company’s annual financial statements and review of financial statements included in the Company’s Form 10-QSB, plus accruals of $7,500.
For the year ended December 31, 2006, the Company's principal accountant billed $17,190 in fees for the audit of the Company’s annual financial statements.
Tax Fees
The Company's principal accountant did not bill any tax fees during the years ended December 31, 2007 and 2006.
All Other Fees
The Company's principal accountant did not bill any other fees during the years ended December 31, 2007 and 2006.
Audit Committee's Pre-Approval Policies and Procedures
The audit committee of the Company evaluate and approve in advance the engagement before the principal accountant renders audit or non-audit services. The audit committee of the Company have determined that the services provided by the Company's principal accountant, as referred to in the above paragraphs, are compatible with maintaining the principal accountant's independence.
Percentage of Hours Expended
All hours expended on the principal accountant's engagement to audit the Company's financial statements for the most recent fiscal year were attributable to work performed by persons that are the principal accountant's full-time, permanent employees.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.