Item 1. BUSINESS
Independent Film Development Corporation is a business development company, primarily focused on the development of opportunities to invest in eligible portfolio companies, providing early stage capital, strategic guidance and operational support. IFDC emphasizes investing in the securities of development stage and start up companies, with an emphasis on the entertainment industry. In November 2007, we acquired 68% of the equity securities of Imperia Entertainment, Inc., a film production company. That acquisition was rescinded on August 26, 2008. We own 100% of the equity securities of the newly formed Signature Entertainment, LLC, a start up film sales and distribution company that currently has no assets and no operations. Our plan of operations is to acquire the securities of portfolio companies with an emphasis on those engaged in independent film sales, distribution and production, with a goal toward our portfolio companies cooperating to become significant competitors to mini-major film studios, such as Lionsgate.
Signature Entertainment, LLC, is a newly formed film distribution and sales company, with no operations, whose plan of operations is to specialize in the marketing and sales of independent films. Signature’s management has a marketing and sales staff with over 23 years collective experience in identifying, producing, marketing and selling filmed entertainment. The majority of Signature’s business operates in a small, low risk, and profitable segment of the entertainment industry that connects the independent filmmakers and distribution outlets.
We are in the process of acquiring 60% of the common share capital of Basketball Tournament Enterprises, Inc., a start-up company whose plan of operations is to deliver sports related live and televised entertainment, in exchange for 100,000 shares of IFDC common stock. The Company has agreed, in the agreement to purchase Basketball Tournament Enterprise securities, to fund $2.5 million of its operating capital. This funding is contemplated to be possibly made by subsequent Company debt financing, but the form of financing has not yet been determined. We have signed a letter of intent with Hollywood Intermediate, Inc., to acquire 66 million shares of Hollywood Intermediate in exchange for 100,000 shares of IFDC common stock. Hollywood Intermediate is in the business of providing post production services. The closing of agreements to acquire securities in both companies subject to completion of due diligence and legal review.
FORWARD LOOKING STATEMENTS
This report contains forward-looking statements. The Company’s expectation of results and other forward-looking statements contained in this report statement involve a number of risks and uncertainties. Among the factors that could cause actual results to differ materially from those expected are the following: business conditions and general economic conditions, competitive factors, such as pricing and marketing efforts, and the pace and success of product research and development. These and other factors may cause expectations to differ.
Independent Film Development Corporation was incorporated in Nevada on September 14, 2007. The Company's fiscal year ends on September 30. Effective April 24, 2008 we commenced operating as a Business Development Company ("BDC") under Section 54(a) of the Investment Company Act of 1940 ("1940 Act").
Overview
On April 24, 2008, we elected, by the filing of a Form N-54A, to be regulated as a business development company ("BDC") under the Investment Company Act of 1940 ("1940 Act").
We intend to invest in companies with high profit margins, and solid management teams in place. We will seek to leverage the combined talents of an experienced management team to invest in primarily film sales, distribution and production companies, to increase the value of our portfolio securities, and enhance shareholder value. We will emphasize portfolio companies in the film distribution and production industries, but are not limited to investments in any particular type of portfolio company.
A business development company is defined and regulated by the Investment Act of 1940. A business development company must be organized in the United States for the purpose of investing in or lending primarily to private companies or companies not on any national exchange, and making managerial assistance available to them. A business development company may use capital provided by public shareholders and from other sources to invest in long-term, private investments in businesses. A business development company provides shareholders the ability to retain the liquidity of a publicly traded stock, while sharing in the possible benefits, if any, of investing primarily in privately owned companies.
As a business development company, we may not acquire any asset other than qualifying assets as defined under the 1940 Act, unless, at the time we make the acquisition, the value of our qualifying assets represents at least 90% of the value of our total assets.
The principal categories of qualifying assets relevant to our business are:
·
Securities purchased in transactions not involving any public offering, the issuer of which is an eligible
Portfolio Company under the 1940 Act;
·
Securities received in exchange for or distributed with respect to securities of an eligible portfolio
company or pursuant to the exercise of options, warrants or rights relating to such securities; and
·
Cash, cash items, government securities or high quality debt securities (within the meaning of the 1940
Act), maturing in one year or less from the time of investment.
·
An eligible portfolio company is generally a domestic company that is not an investment company
(other than a small business investment company wholly owned by a business development company);
and
·
Does not have a class of securities registered on an exchange or a class of securities with respect to
which a broker may extend margin credit; or
To include certain securities described above as qualifying assets for the purpose of the 90% test, a business development company must make available to the issuer of those securities significant managerial assistance such as providing significant guidance and counsel concerning the management, operations, or business objectives and policies of a portfolio company or making loans to a portfolio Company. We offer to provide managerial assistance to our portfolio companies, and may make loans to them.
As a business development company, we are entitled to issue senior securities in the form of stock or senior securities representing indebtedness, including debt securities and preferred stock, as long as each class of senior security has asset coverage of at least 200% immediately after each such issuance.
We may be prohibited under the 1940 Act from knowingly participating in certain transactions with our affiliates without the prior approval of our board of directors who are not interested persons and, in some cases, prior approval by the Securities and Exchange Commission.
As a business development company, our primary goal is to increase our net assets by investing in development stage or start-up companies that possess or will likely identify innovative distribution and production ideas. These businesses are thinly capitalized, unproven, small companies that lack management depth, are dependent on new, commercially unproven technologies and have little or no history of operations. It is our goal to assemble a diverse portfolio of companies, which will leverage the combined talents of an experienced management team to incubate these companies and seek to enhance shareholder value. As a result, we will focus on making equity and not debt investments, but may provide capital to our portfolio companies in the form of debt instruments.
We will likely be periodically examined by the SEC for compliance with the 1940 Act. As with other companies regulated by the 1940 Act, a business development company must adhere to certain substantive regulatory requirements. A majority of our directors must be persons who are not interested persons, as that term is defined in the 1940 Act. Additionally, we are required to provide and maintain a bond issued by a reputable fidelity insurance company to protect us against larceny and embezzlement. Furthermore, as a business development company, we are prohibited from protecting any director or officer against any liability to us or our shareholders arising from willful malfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person's office.
We must maintain a code of ethics that establishes procedures for personal investment and restricts certain transactions by our personnel. Our code of ethics generally does not permit investment by our employees in securities that may be purchased or held by us. As a business development company under the 1940 Act, we are entitled to provide loans to our employees in connection with the exercise of options. However, as a result of provisions of the Sarbanes-Oxley Act of 2002, we are prohibited from making new loans to, or materially modifying existing loans with, our executive officers in the future.
We may not change the nature of our business so as to cease to be, or withdraw our election as, a business development company unless authorized by vote of a "majority of the outstanding voting securities," as defined in the 1940 Act, of our shares. A majority of the outstanding voting securities of a company is defined under the 1940 Act as the lesser of: (i) 68% or more of such company's shares present at a meeting if more than 50% of the outstanding shares of such company are present and represented by proxy or (ii) more than 50% of the outstanding shares of such company. Since the Company made its business development company election, it has not made any substantial change in the nature of its business.
We intend to fund new investments using cash, through the issuance of our common stock, the reinvestment of previously accrued interest and dividends in debt or equity securities, or the current reinvestment of interest and dividend income through the receipt of a debt or equity security-payment-in-kind income. From time to time, the Company may also opt to reinvest accrued interest receivable in a new debt or equity.
Valuation Methodology
The Company will determine the value of each investment in our portfolio on a quarterly basis, and changes in value result in unrealized gains or losses being recognized. Fair value is defined in Section 2(a)(41) of the 1940 Act as (i) the market price for those securities for which a market quotation is readily available and (ii) for all other securities and assets, fair value is as determined in good faith by the board of directors. We have adopted a valuation policy consistent with the definition of fair value, and apply that policy for consistent evaluation of fair value of our investments.
Because of the inherent uncertainty of determining the fair value of investments that do not have a readily ascertainable market value, the fair value of our investments determined in good faith by the board of directors may differ significantly from the values that would have been used had a ready market existed for the investments, and the differences could be material. There is no single standard for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments we make.
The Company's investment in Portfolio Companies will be carried at cost (which approximates fair value) as this investment represents a continuation of the Company's former business prior to its election as a BDC, and is under common control at date of transfer. Unrealized gains and losses resulting from the change in valuation of investments are reflected in the Company’s Statement of Operations, as adjusted by estimated deferred tax liabilities.
Unlike banks, the Company is not permitted to provide a general reserve for anticipated loan losses. Instead, the Company is required to specifically value each individual investment on a quarterly basis. The Company will record unrealized depreciation on investments when it believes that an investment has become impaired. Conversely, the Company will record unrealized appreciation if it believes that the underlying portfolio company has appreciated in value and, therefore, our equity security has also appreciated in value.
As a business development company, the Company will invest in liquid and illiquid securities, including debt and equity securities primarily of private companies. Our investments will generally be subject to restrictions on resale and may have no established trading market. Because of the type of investments that the Company makes and will make, and the nature of its business, its valuation process requires an analysis of various factors. Our fair value methodology includes the examination of, among other things, the underlying investment performance, financial condition, and market changing events that impact valuation.
Investment Objectives and Policies
The investment objectives of the company are established by the board of directors, and can be changed in the discretion of the board of directors, without the vote of the holders of the majority of the voting securities. Our valuation policy may also be modified by our board of directors without the vote of holders of the majority of our voting securities, but our code of ethics cannot be changed without such majority voting security approval.
We focus on the development of opportunities to invest in eligible portfolio companies providing early stage capital, strategic guidance and operational support. Our principal objective is long-term capital appreciation. We may invest in debt securities of these companies, or may acquire an equity interest in the form of common or preferred stock, warrants or options to acquire stock or the right to convert the debt securities into stock. We may invest alone, or as part of a larger investment group. Consistent with our status as a BDC and the purposes of the regulatory framework for BDC’s under the 1940 Act, we will offer to provide managerial assistance, potentially in the form of a consulting agreement or in the form of a board of director’s seat, to the developing companies in which we invest.
In addition, we may acquire either a minority or controlling interest in mature companies that require management aid or capital in a roll-up strategy. It is anticipated that any acquisitions will be primarily in exchange for our common stock, or a combination of cash and stock. The principal objective of acquisitions pursuant to a roll-up strategy would be to consolidate an industry and either sell the acquired entities as a larger unit, or take the unit public through an initial public offering, spin-off to our shareholders, or reverse merger into a publicly traded corporation.
The securities the company may invest in may include common stock, bonds, convertible debentures, and/or LLC memberships. Some of them may have no current public market and may be considered to be illiquid. Over 50% of our investments will probably be in common stock of our portfolio companies. We intend to focus on the entertainment industry, because our management has experience in the industry and recognizes investment opportunities, and our management believes that, in this economy, there are ample entertainment investments that can be capitalized on by the company which can be more lucrative and subject to more long term appreciation with respect to the cost of the investment, than other growing industry investments. The company does not intend to only invest in securities in companies for the purpose of exercising control or management. With regard to the 30% of our assets that are not required to be invested in portfolio companies, we intend to maintain less than 5% of these assets in the form of office furniture and equipment and real estate and improvements thereon, and the remainder will be held in cash, government securities, or high quality debt securities maturing in one year or less from the time of investment. There are no other significant investment policies not described in this offering circular.
Investment in Portfolio Companies
In November 2007, we acquired 68% of the equity securities of Imperia Entertainment, Inc., a film production company. That acquisition was rescinded on August 26, 2008. The rescission and settlement agreement has been approved by the board of directors as fair and in the best interests of the company, and Imperia Entertainment, Jeff Ritchie, George Ivakhnik, Jeff Volpe and Gregory Allen Webb have released any and all claims they may have against the company as a result of the rescission.
In January 2008, we acquired 100% of the membership interests of Signature Entertainment, a newly created company which we organized into a limited liability company under the laws of the state of Nevada. Signature Entertainment has a plan of operations to engage in film distribution and sales. In March 2008 we acquired 50% of the limited liability company membership interests in Mainline Films, LLC, a limited liability company with three films in development and no operations. The acquisition of Signature and Mainline was arranged by our Chief Executive Officer and Director, Jeff Ritchie. On August 6, 2008, we mutually rescinded the acquisition of Mainline Films, LLC. The rescission was approved by the board of directors as fair and reasonable and in the best interests of the company, and Jeff Ritchie has released any and all claims he may have against the Company as a result of the rescission.
Employees
As of September 30, 2008, we employed a total of 5 people, three of whom are mangement and two clerical personel. We may require additional employees in the future. There is intense competition for capable, experienced personnel and there is no assurance the Company will be able to obtain new qualified employees when required.
The Company believes its relations with its employees are good.
Patents
The Company holds no patents for its products.
Government Regulation
Aside from the provisions of the Investment Company Act of 1940 and its regulations promulgated by the Securities and Exchange Commission, summarized in our plan of operations, government approval is not necessary for the Company’s business and government regulations have a negligible effect on its business.
Competition
We compete with other companies which have greater financial resources and experience than us. Our competitors include other, larger entities, which have substantially greater financial and other resources than us.
Item 1A.
Item 1A. RISK FACTORS
We are subject to various risks which may materially harm our business, financial condition and results of operations. You should carefully consider the risks and uncertainties described below and the other information in this filing before deciding to purchase our common stock. If any of these risks or uncertainties actually occur, our business, financial condition or operating results could be materially harmed. In that case, the trading price of our common stock could decline and you could lose all or part of your investment.
RISKS RELATED TO OUR BUSINESS
The Company is a development stage company with no operating history, and there is a risk we will not be able to sustain our operations, which means that investors may lose their entire investment.
We have no operating history and are still a development stage company. Since we have no history of operations, there is no way to predict if we will be able to sustain our operations. Our portfolio company, Signature Entertainment, LLC has no operating history. If we are unable to sustain our operations, investors may lose their entire investment.
Our Primary Assets at the Present Time Consist of Securities in one Start Up Portfolio Company; one with Limited Assets and one with No Assets.
Our only assets at this time are the limited liability company membership interests in Signature Entertainment, LLC, a start up company with no assets other than its plan of operations, which has no hard asset value. Financial statements of portfolio companies are not presented herein, and if we were not to diversify our investments, investors risk would be limited to the risk of investing in Signature Entertainment with no market value.
We Will Need to Raise Capital to Finance Investments
Such financing has historically come from a combination of borrowings and from the sale of common stock to third parties. We will need to raise additional capital to fund our anticipated operating expenses and future investments. Among other things, external financing will be required to cover our expenses. We cannot guarantee that financing whether from external sources or related parties will be available if needed or on favorable terms. The sale of our common stock to raise capital may cause dilution to our existing shareholders. Our inability to obtain adequate financing will result in the need to curtail business operations. Any of these events would be materially harmful to our business and may result in a lower stock price.
There is a Substantial Doubt About Our Ability to Continue as a Going Concern, which means that We May Not Be Able to Continue Operations Unless We Obtain Additional Funding
The report of our independent accountants on our December 31, 2007 financial statements included an explanatory paragraph indicating that there is substantial doubt about our ability to continue as a going concern due to recurring losses and working capital shortages. Our ability to continue as a going concern will be determined by our ability to obtain additional funding. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Our Common Stock Has No Market and May Never Develop a Market.
Prior to this offering, there has been no market for our common stock and there can be no assurance that an active trading market for our common stock will develop. As a result, this could adversely affect our shareholders' ability to sell our common stock in short time periods, or possibly at all. After closing, management intends to apply to American Stock Exchange (AMEX) if qualified, or to another exchange or quotation medium it may qualify for, such as the over-the-counter bulletin board, but there can be no assurance that we will qualify for such listing or quotation or that such listing or quotation will be accepted. We are not currently listed on AMEX or quoted on any quotation medium.
If Our Stock Does Develop a Market, It May Be Affected By Limited Trading Volume and May Fluctuate Significantly
Our common stock has experienced, and is likely to experience in the future, significant price and volume fluctuations which could adversely affect the market price of our common stock without regard to our operating performance. In addition, we believe that factors such as quarterly fluctuations in our financial results and changes in the overall economy or the condition of the financial markets could cause the price of our common stock to fluctuate substantially. Substantial fluctuations in our stock price could significantly reduce the price of our stock.
We Could Fail to Retain or Attract Key Personnel
Our future success depends, in significant part, on the continued services of Kenneth Eade. We cannot guarantee that we would be able to find an appropriate replacement for key personnel. Any loss or interruption of our key personnel's services could adversely affect our ability to develop our business plan. We do not presently maintain key-man life insurance policies on Mr. Eade.
Nevada Law and Our Charter May Inhibit a Takeover of Our Company That Stockholders May Consider Favorable
Provisions of Nevada law, such as its business combination statute, may have the effect of delaying, deferring or preventing a change in control of our company. As a result, these provisions could limit the price some investors might be willing to pay in the future for shares of our common stock.
Our Officers and Directors Have the Ability to Exercise Significant Influence Over Matters Submitted for Stockholder Approval and Their Interests May Differ From Other Stockholders
Our executive officers and directors, whether acting alone or together, may have significant influence in determining the outcome of any corporate transaction or other matter submitted to our stockholders for approval, including mergers, acquisitions, consolidations and the sale of all or substantially all of our assets, and also the power to prevent or cause a change in control. The interests of these executive officers and directors may differ from the interests of the other stockholders.
The Penny Stock Rules will cover our stock, which may make it difficult for a broker to sell investors= shares. This may make our stock less marketable, and liquid, and result in a lower market price.
Our common stock is a penny stock, which means that SEC rules require broker dealers who make transactions in the stock to comply with additional suitability assessments and disclosures than they would in stock that were not penny stocks, as follows:
Prior to the transaction, to approve the person's account for transactions in penny stocks by obtaining information from the person regarding his or her financial situation, investment experience and objectives, to reasonably determine based on that information that transactions in penny stocks are suitable for the person, and that the person has sufficient knowledge and experience in financial matters that the person or his or her independent advisor reasonably may be expected to be capable of evaluating the risks of transactions in penny stocks. In addition, the broker or dealer must deliver to the person a written statement setting forth the basis for the determination and advising in highlighted format that it is unlawful for the broker or dealer to effect a transaction in a penny stock unless the broker or dealer has received, prior to the transaction, a written agreement from the person. Further, the broker or dealer must receive a manually signed and dated written agreement from the person in order to effectuate any transactions is a penny stock.
Prior to the transaction, the broker or dealer must disclose to the customer the inside bid quotation for the penny stock and, if there is no inside bid quotation or inside offer quotation, he or she must disclose the offer price for the security transacted for a customer on a principal basis unless exempt from doing so under the rules.
Prior to the transaction, the broker or dealer must disclose the aggregate amount of compensation received or to be received by the broker or dealer in connection with the transaction, and the aggregate amount of cash compensation received or to be received by any associated person of the broker dealer, other than a person whose function in solely clerical or ministerial.
The broker or dealer who has effected sales of penny stock to a customer, unless exempted by the rules, is required to send to the customer a written statement containing the identity and number of shares or units of each such security and the estimated market value of the security. Imposing these reporting and disclosure requirements on a broker or dealer make it unlawful for the broker or dealer to effect transactions in penny stocks on behalf of customers. Brokers or dealers may be discouraged from dealing in penny stocks, due to the additional time, responsibility involved, and, as a result, this may have a deleterious effect on the market for IFDC 's stock.
RISKS RELATED TO OUR OPERATION AS A BUSINESS DEVELOPMENT COMPANY
We May Change Our Investment Policies Without Further Shareholder Approval.
Although we are limited by the Investment Company Act of 1940 with respect to the percentage of our assets that must be invested in qualified portfolio companies, we are not limited with respect to the minimum standard that any investment must satisfy, nor the industries in which those investments must operate. We may make investments without shareholder approval and such investments may deviate significantly from our historic operations. Any change in our investment policy or selection of investments could adversely affect our stock price, liquidity, and the ability of our shareholders to sell their stock.
Our Investments May Not Generate Sufficient Income to Cover Our Investments and Expenses.
We intend to make investments into qualified companies that will provide the greatest overall return on our investment. However, certain of those investments may fail, in which case we will not receive any return on our investment. In addition, our investments may not generate income, either in the immediate future, or at all. As a result, we may have to sell additional stock, or borrow money, to cover our operating expenses. The effect of such actions could cause our stock price to decline or, if we are not successful in raising additional capital, we could cease to continue as a going concern.
Our officers and directors have no prior experience in operating a business development company, and this lack of experience may result in additional costs to the company and the losses of certain opportunities.
Since none of our officers and directors have any experience in operating a business development company, they may need to hire additional advisors to educate them, resulting in additional costs to the company, and they may fail to recognize certain profitable opportunities and situations that more experienced management would readily recognize.
We may become subject to regulation under the Investment Company Act and be unable to comply with the Act.
As a business development company, we are currently subject to sections 55 through 65 of the Investment Company Act of 1940. In the event that we engage in investment activities which result in us holding passive interests in which we do not provide management assistance, we may be required to register under the Investment Company Act of 1940 and incur significant registration and compliance costs, or face adverse consequences for violation of the Act.
Item 2.
Item 2. PROPERTIES
We sublease our executive offices in Beverly Hills, California from our Secretary/Director Kenneth Eade, who has agreed to cover certain operating expenses for our first year of operations. We consider our existing facilities to be adequate for our current needs.
Item 3.
Item 3. LEGAL PROCEEDINGS
We are not a party to any material pending legal proceedings and, to the best of our knowledge, no such action by or against the Company has been threatened.
Item 4.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of the fiscal year covered by this report to a vote of security holders through the solicitation of proxies or otherwise.
PART II
Item 5.
Item 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
The following securities were sold by the registrant during the past two fiscal years, that were not registered under the Securities Act:
On September 24, 2007, 5,000,000 shares of common stock were issued to officer and director Kenneth Eade, pursuant to Section 4(2) of the Securities Act of 1933.
On November 29, 2007, 1,000,000 shares of common stock were issued to officer and director Kenneth Eade, in exchange for preferred stock of Imperia Entertainment, Inc., pursuant to Section 4(2) of the Securities Act of 1933.
On November 29, 2007, 1,000,000 shares of common stock were issued to officer and director George Ivakhnik, in exchange for preferred stock of Imperia Entertainment, Inc., pursuant to Section 4(2) of the Securities Act of 1933.
On August 26, 2008, the entire transaction by which shares of Imperia Entertainment, Inc. were acquired was mutually rescinded and the transaction was accounted for as follows:
On September 24, 2007, 125 shares of common stock were issued to Kenneth Eade, pursuant to Section 4(2) of the Securities Act of 1933.
On December 30, 2007, 1,245 shares of common stock were issued to Kenneth Eade, pursuant to Section 4(2) of the Securities Act of 1933, in exchange for $4,980 cash.
On March 31, 2008, 2,691 shares of common stock were issued to Kenneth Eade, pursuant to Section 4(2) of the Securities Act of 1933, in exchange for $10,764 in cash.
On June 30, 2008, 9,439 shares of common stock were issued to Kenneth Eade, pursuant to Section 4(2) of the Securities Act of 1933, in exchange for $1,800 in cash and $35,396 in forgiveness of debt.
On August 22, 2008, 525 shares of common stock were issued to non-affiliate investors, pursuant to Section 4(2) of the Securities Act of 1933, and other applicable exemptions.
On August 28, 2008, 1,250 shares of common stock were issued to non-affiliate investors, pursuant to Section 4(2) of the Securities Act of 1933, and other applicable exemptions.
On September 12, 2008, 125 shares of common stock were issued to non-affiliate investors, pursuant to Section 4(2) of the Securities Act of 1933, and other applicable exemptions.
On September 27, 2008, 717 shares of common stock were issued to non-affiliate investors, pursuant to Section 4(2) of the Securities Act of 1933, and other applicable exemptions.
On September 24, 2008, 2,500 shares of common stock were issued to non-affiliate investors, pursuant to Section 4(2) of the Securities Act of 1933, and other applicable exemptions.
No underwriters were used in any of the above-referenced sales.
The company’s common stock has no market and, although the issuer intends to attempt to obtain a quotation for its common stock on a quotation system such as the over-the-counter bulletin board, there can be no assurance that such a quotation will ever be established.
Item 6.
Item 6. SELECTED FINANCIAL DATA
The registrant is a smaller reporting company, pursuant to Rule 229.10(f)(1), and is not required to report this information. The financial statements of the issuer are attached.
Item 7.
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The company has focused since its inception on forming its corporate structure, developing its business plan and raising capital. The company is a development stage company with a plan of operations as set forth below.
PLAN OF OPERATIONS
The Company has filed a Form N-54A with the SEC, to be regulated as a business development company ("BDC") under the Investment Company Act of 1940 ("1940 Act"). A business development company is defined and regulated by the 1940 Act. A business development company must be organized in the United States for the purpose of investing in or lending primarily to private companies and making managerial assistance available to them. A business development company may use capital provided by public shareholders and from other sources to invest in long-term, private investments in businesses. A business development company provides shareholders the ability to retain the liquidity of a publicly traded stock, while sharing in the possible benefits, if any, of investing primarily in privately owned companies.
As a business development company, the Company may not acquire any asset other than “qualifying assets", unless, at the time we make the acquisition, the value of our qualifying assets represents at least 70% of the value of our total assets.
The principal categories of qualifying assets relevant to our business are:
· Securities purchased in transactions not involving any public offering, the Company of which is an eligible
portfolio company;
· Securities received in exchange for or distributed with respect to securities described in the bullet above or
pursuant to the exercise of options, warrants or rights relating to such securities; and
· Cash, cash items, government securities or high quality debt securities (within the meaning of the 1940 Act),
maturing in one year or less from the time of investment.
· An eligible portfolio company is generally a domestic company that is not an investment company (other
than a small business investment company wholly owned by a business development company); and
· Does not have a class of securities registered on an exchange or a class of securities with respect to which a
broker may extend margin credit; or
· Is actively controlled by the business development company and has an affiliate of a business development
company on its board of directors.
To include certain securities described above as qualifying assets for the purpose of the 70% test, a business development company must make available to the Company of those securities significant managerial assistance such as providing significant guidance and counsel concerning the management, operations, or business objectives and policies of a portfolio company or making loans to a portfolio company. The Company offers to provide managerial assistance to each of its portfolio companies.
As a business development company, the Company is entitled to issue senior securities in the form of stock or senior securities representing indebtedness, including debt securities and preferred stock, as long as each class of senior security has asset coverage of at least 200% immediately after each such issuance. See "Risk Factors."
The Company may be prohibited under the 1940 Act from knowingly participating in certain transactions with our affiliates without the prior approval of our board of directors who are not interested persons and, in some cases, prior approval by the Securities and Exchange Commission ("SEC").
As a business development company, the Company's primary goal is to increase its net assets by investing in private development stage or start-up companies that possess or will likely identify emerging and established technologies and markets for those technologies. These private businesses are thinly capitalized, unproven, small companies that lack management depth, are dependent on new, commercially unproven technologies and have no history of operations. It is the goal of the Company to assemble a diverse portfolio of companies, which will leverage the combined talents of an experienced management team to incubate these companies and seek to enhance shareholder value. As a result, the Company will focus on making equity and not debt investments.
The Company will likely be periodically examined by the SEC for compliance with the 1940 Act. As with other companies regulated by the 1940 Act, a business development company must adhere to certain substantive regulatory requirements. A majority of our directors must be persons who are not interested persons, as that term is defined in the 1940 Act. Additionally, we are required to provide and maintain a bond issued by a reputable fidelity insurance company to protect us against larceny and embezzlement. Furthermore, as a business development company, the Company is prohibited from protecting any director or officer against any liability to the Company or our shareholders arising from willful malfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person's office.
The Company must maintain a code of ethics that establishes procedures for personal investment and restricts certain transactions by our personnel. The Company's code of ethics generally does not permit investment by our employees in securities that may be purchased or held by us. As a business development company under the 1940 Act, we are entitled to provide loans to our employees in connection with the exercise of options. However, as a result of provisions of the Sarbanes-Oxley Act of 2002, the Company is prohibited from making new loans to, or materially modifying existing loans with, its executive officers in the future.
The Company may not change the nature of its business so as to cease to be, or withdraw our election as, a business development company unless authorized by vote of a "majority of the outstanding voting securities," as defined in the 1940 Act, of our shares. A majority of the outstanding voting securities of a company is defined under the 1940 Act as the lesser of: (i) 67% or more of such company's shares present at a meeting if more than 50% of the outstanding shares of such company are present and represented by proxy or (ii) more than 50% of the outstanding shares of such company. Since the Company made its business development company election, it has not made any substantial change in the nature of its business.
The Company intends to fund new investments using cash, through the issuance of its common stock, the reinvestment of previously accrued interest and dividends in debt or equity securities, or the current reinvestment of interest and dividend income through the receipt of a debt or equity security (payment-in-kind income). From time to time, the Company may also opt to reinvest accrued interest receivable in a new debt or equity.
Critical Accounting Estimates and Policies
The discussion and analysis of our financial condition and plan of operations is based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates including, among others, those affecting revenue, the allowance for doubtful accounts, the salability of inventory and the useful lives of tangible and intangible assets. The discussion below is intended as a brief discussion of some of the judgments and uncertainties that can impact the application of these policies and the specific dollar amounts reported on our financial statements. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form our basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions, or if management made different judgments or utilized different estimates. Many of our estimates or judgments are based on anticipated future events or performance, and as such are forward-looking in nature, and are subject to many risks and uncertainties, including those discussed below and elsewhere in this annual report. We do not undertake any obligation to update or revise this discussion to reflect any future events or circumstances.
We have identified below some of our accounting policies that we consider critical to our business operations and the understanding of our results of operations. This is not a complete list of all of our accounting policies, and there may be other accounting policies that are significant to us. For a detailed discussion on the application of these and our other accounting policies, see note 1 to the financial statements for the period ended June 30, 2008, included in this Form 10Q.
Basis of Presentation
The Company has elected to become a Business Development Company (“BDC”). Under the rules governing a BDC, the Company does not consolidate the results of its portfolio companies but assigns a fair market value as determined by the board of directors to these operations. The results of the portfolio companies are not included in the statements of the Company and are carried only as an investment on the balance sheet of the Company.
Cash Equivalents
Cash equivalents include all highly liquid debt instruments with original maturities of three months or less which are not securing any corporate obligations.
Stock Based Compensation.
The Company has filed an election to become a Business Development Company which is not allowed to issue stock as compensation.
Estimates.
The presentation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Fair Value of Financial Instruments.
The carrying amounts for the Company’s cash, accounts payable, accrued liabilities and current portion of long term debt approximate fair value due to the short-term maturity of these instruments.
Concentration of Credit Risk
The Company places its cash with high quality financial institutions and at times may exceed the FDIC $100,000 insurance limit. The Company will extend credit based on an evaluation of the customer’s financial condition, generally without collateral. Exposure to losses on receivables is principally dependent on each customer’s financial condition. The Company will monitor its exposure for credit losses and maintains allowances for anticipated losses, if required.
Advertising Costs
Advertising costs are expensed as incurred. There were no advertising expenses for the period September 14, 2007 (inception) through June 30, 2008.
Income Taxes
The Company accounts for income taxes under SFAS 109, "Accounting for Income Taxes." Under the asset and liability method of SFAS 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements 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. Under SFAS 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.
Basic and Diluted Income/(Loss) Per Share:
In accordance with SFAS No. 128, "Earnings Per Share," the basic income/(loss) per common share is computed by dividing net income/(loss) available to common stockholders by the weighted average number of common shares outstanding. Diluted income per common share is computed similar to basic income per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. As of June 30, 2008, the Company does not have any equity or debt instruments outstanding that can be converted into common stock.
Segment Reporting
Based on the Company's integration and management strategies, the Company operates in a single business segment. For the period September 14, 2007 (inception) through June 30, 2008, the Company had no revenue.
Revenue Recognition
Revenue is recognized in accordance with SEC Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements”. The Company recognizes revenue when the significant risks and rewards of ownership have been transferred to the customer pursuant to applicable laws and regulations, including factors such as when there has been evidence of a sales arrangement, the performance has occurred, or service have been rendered, the price to the buyer is fixed or determinable, and collectability is reasonably assured.
Valuation of Investments.
The Company will determine the value of each investment in our portfolio on a quarterly basis, and changes in value result in unrealized gains or losses being recognized. Fair value is defined in Section 2(a)(41) of the 1940 Act as (i) the market price for those securities for which a market quotation is readily available and (ii) for all other securities and assets, fair value is as determined in good faith by the board of directors. We have adopted a valuation policy consistent with the definition of fair value, and apply that policy for consistent evaluation of faire value of our investments. Because of the inherent uncertainty of determining the fair value of investments that do not have a readily ascertainable market value, the fair value of our investments determined in good faith by the board of directors may differ significantly from the values that would have been used had a ready market existed for the investments, and the differences could be material. There is no single standard for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments we make.
The Company's investment in Portfolio Companies will be carried at cost (which approximates fair value) as this investment represents a continuation of the Company's former business prior to its election as a BDC, and is under common control at date of transfer. Unrealized gains and losses resulting from the change in valuation of investments are reflected in the Company’s Statement of Operations, as adjusted by estimated deferred tax liabilities.
Unlike banks, the Company is not permitted to provide a general reserve for anticipated loan losses. Instead, the Company is required to specifically value each individual investment on a quarterly basis. The Company will record unrealized depreciation on investments when it believes that an investment has become impaired. Conversely, the Company will record unrealized appreciation if it believes that the underlying portfolio company has appreciated in value and, therefore, our equity security has also appreciated in value.
As a business development company, the Company will invest in liquid and illiquid securities, including debt and equity securities primarily of private companies. Our investments will generally be subject to restrictions on resale and may have no established trading market. Because of the type of investments that the Company makes and will make, and the nature of its business, its valuation process requires an analysis of various factors. Our fair value methodology includes the examination of, among other things, the underlying investment performance, financial condition, and market changing events that impact valuation.
Fair Value Investments Measurement
Effective January 1, 2008, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”), for investments measured at fair value on a recurring basis. SFAS 157 accomplishes the following key objectives:
·
Defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date;
·
Establishes a three-level hierarchy (“Valuation Hierarchy”) for fair value measurements;
·
Requires consideration of the Company’s creditworthiness when valuing liabilities; and
·
Expands disclosures about instruments measured at fair value.
The Valuation Hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. A financial instrument’s categorization within the Valuation Hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels of the Valuation Hierarchy and the distribution of the Company’s financial assets within it are as follows:
·
Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
·
Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
·
Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value measurement.
As of June 30, 2008, the Company’s investments consisted 94% of marketable over-the-counter securities classified as Level 2 assets and 6% in limited liability company interests valued by its board of directors classified as Level 3 assets.
Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation
Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the cost basis of the investment without regard to unrealized appreciation or depreciation previously recognized, and include investments charged off during the year, net of recoveries. Net change in unrealized appreciation or depreciation primarily reflects the change in portfolio investment values during the reporting period, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized.
The Company has historically experienced operating losses and negative cash flow. The Company expects that these operating losses and negative cash flows may continue through additional periods. In addition, the Portfolio Company has no record of revenue- producing operations and there is no operating history upon which to base an assumption that it will be able to achieve its business plans.
During the next twelve months, the Company plans to satisfy its cash requirements by equity financing. The Company has no current material commitments. The Company intends to undertake sales of its common stock in order to raise future development and operating capital. There can be no assurance that the Company will be successful in raising the capital it requires through the sale of its common stock. The Company does not anticipate any product research and development in the next twelve months.
The Company has no off balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operatings, liquidity, capital expenditures or capital resources that is material to investors.
Item 7A.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company’s business activities contain elements of risk. The Company considers a principal type of market risk to be a valuation risk. All assets are valued at fair value as determined in good faith by or under the direction of the Board of Directors (which is based, in part, on quoted market prices). Market prices of common equity securities in general, are subject to fluctuations which could cause the amount to be realized upon sale to differ significantly from the current reported value. The fluctuations may result from perceived changes in the underlying economic characteristics of the Company’s portfolio companies, the relative prices of alternative investments, general market conditions and supply and demand imbalances for a particular security.
Neither the Company’s investments nor an investment in the Company is intended to constitute a balanced investment program. The Company will be subject to exposure in the public-market pricing and the risks inherent therein.
Item 8.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements of the company are attached as Exhibits to Item 15 and are hereby incorporated by reference.
Item 9.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Since inception, there have been no changes of or disagreements with our independent accountants.
Item 9A.
Item 9A. CONTROLS AND PROCEDURES
As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company carried out an evaluation under the supervision and with the participation of the Company’s management, including the Chief Executive Officer/Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures as of September 30, 2008. In designing and evaluating the Company’s disclosure controls and procedures, the Company recognizes that there are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their desired control objectives. Additionally, in evaluating and implementing possible controls and procedures, the Company’s management was required to apply its reasonable judgment. Furthermore, management considered certain matters deemed by the Company’s independent auditors to constitute a material weakness in the Company’s internal control over financial reporting described below. Based upon the required evaluation, the Chief Executive Officer and Chief Financial Officer concluded that as of September 30, 2008, the Company has determined that its system of controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.
Item 9A(T) CONTROLS AND PROCEDURES
Management is responsible for establishing and maintaining adequate internal control over financial reporting of the company.
In order to satisfy its responsibilities, management has instituted a procedure, whereby financial statements are prepared by the Chief Financial Officer, reviewed by the Chief Executive Officer, distributed to the board of directors for review and comment, and given to its outside accountant (former Chief Financial Officer) to review, along with the company’s books and records for the periods covered in the financial statements. The financial statements are then presented to the company’s independent accountant for an independent review prior to the filing and disclosure of any financial information.
As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company carried out an evaluation under the supervision and with the participation of the Company’s management, including the Chief Executive Officer/Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures as of September 30, 2008. In designing and evaluating the Company’s disclosure controls and procedures, the Company recognizes that there are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their desired control objectives. Additionally, in evaluating and implementing possible controls and procedures, the Company’s management was required to apply its reasonable judgment. Furthermore, management considered certain matters deemed by the Company’s independent auditors to constitute a material weakness in the Company’s internal control over financial reporting described below. Based upon the required evaluation, the Chief Executive Officer and Chief Financial Officer concluded that as of September 30, 2008, the Company has determined that its system of controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.
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 Securities and Exchange Commission that permit the company to provide only management’s report in this annual report.
Management had determined during the last fiscal year, that there were material weaknesses in its internal control over financial reporting procedures, and developed the current procedure to amelieorate the internal procedures.
Item 9B.
Item 9B. OTHER INFORMATION
During the first quarter of fiscal year 2009, the company and Not By Sight Entertainment, Inc. have mutually rescinded the amended share purchase agreement dated September 10, 2008, whereby the company was to acquire common stock of Not By Sight.
PART III
Item 10.
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Affiliate Officers and Directors
Jeff Ritchie. Jeff Ritchie is the current Chief Executive Officer and director of the company, since 2008. Ritchie began his film career in post-production by using advancements in computer technology to create a cost-effective computer graphics company with such clients as Disney and CBS. Having a lifelong passion for filmmaking, Ritchie sold his company and started working in film production. Ritchie worked for various studios, completing over 15 films, during that time Ritchie quickly rose up the ranks of feature film producer, and has produced over a dozen feature films, written three produced scripts and produced numerous commercials all in the last eight years. Ritchie has experience in managing private production companies, working for such production companies such as Crystal Sky Communications (Ghost Rider, Baby Genuises), Roger Corman’s New Horizon (The Haunting of Hell House), and has become a mainstay in the film industry and has developed solid relationships with studios and mini majors along with working relationships with production companies, sales distribution companies and with management and talent agencies. Ritchie’s film credits include 'SOULKEEPER' a film made on a very modest budget, which premiered on the sci-fi channel in 2001 and scored in the top non-theatrical sales week after week at video stores.
He produced and wrote 'COOKERS' a hardcore, gritty drug/horror story that has made the rounds at many film festivals including Milan Film Festival where it won Best Film, Best Cinematography, Best Editing and Best Music. It also won best film and best script at Screamfest and has garnered awards at many other film festivals around the world. Cookers also enjoyed a small but successful theatrical release. Ritchie wrote and produced 'AMERICAN CRIME', a psychological thriller which stars Rachel Leigh Cook, Kip Pardue, Annabella Sciorra and Carey Elwes. He followed it with the release of the heartwarming romantic Comedy 'MR. FIXIT' starring David Boreanz. Both films had overseas theatrical releases and garnered high sales domestically.
Kenneth G. Eade. Mr. Eade is the current Secretary, Chief Compliance Officer, and Director of the Company, since inception. He current serves as the Chief Financial Officer of the Company, since December 2008. He has served as the Chairman of Imperia Entertainment, Inc., from July 2005 through December 2007, and served as its CEO from March 2007 through December 2007. From February 2007 through September 2007, he served as the President of Muller Media, Inc. From October 5, 2003 through June 2005, he served as President of Muller Media, Inc. From 1998 to the present time, he has been engaged in the practice of corporate and securities law, doing public and private offerings, SEC filings, blue sky state filings, mergers and acquisitions, and helping small to medium sized development stage companies to obtain quotations of their securities on recognized quotation mediums. From 1987 through 1998, he was engaged in the practice of general law, emphasizing corporate and securities law. He is a member of the California Bar, and the federal District Court for the Central District of California. He holds a Juris Doctor in Law from Southwestern University School of Law, and a B.A. in Liberal Studies from California State University, Northridge. Mr. Eade stipulated to discipline including a 60 day suspension from practice by the California Bar in 1992 in connection with a personal injury case he successfully tried in the 80’s, because of his failure to pay a chiropractor more than the jury awarded in medical expenses. This led to him stipulating to discipline with no actual suspension in 1995 for the unauthorized practice of law because he had not been able to find attorneys to substitute for him in certain contingency cases, and continued to help the litigants in pro per with certain legal papers. In 2001 he stipulated to discipline with no actual suspension for the late return of a flat fee charged for a bankruptcy matter after the bankruptcy petition had been drawn but the client decided not to file, because the flat fee included a filing fee that was not sequestered in a trust account.
Non-interested directors
Patrick Peach. Patrick Peach has been an independent director of the company since April 21, 2008. Mr. Peach started his entertainment career as a literary agent, and produced his first film at the age of 23. As an independent producer, his credits include, Prey of the Chameleon, A Showtime world premiere in 1992, The Chinatown Connection, Big Bad John, Bitter Harvest, and the Glass Shield. Through his own production company, Peach produced When the Bough Breaks (1993), Mother (1994) and Galaxis. From 1994 through 1995, Peach served as Supervising Producer for Film Finances, Inc. on the completion of eight visual effects intensive features by Full Moon Entertainment, including Josh Kirby: Time Warrior, Pre Hysteria II, and The Wee Folk I & II. In 1995, he produced Maximum Surge, an interactive game and movie for Digital Pictures. In 1996 he produced Sticks and Stones for Hallmark Entertainment, co-produced, DNA, an HBO World Premiere, and was Supervising Producer on Bombshell, a Sci-Fi Channel World Premiere.
He also produced Suicide Kings (1998) for Artisan Entertainment. Since 1998, Peach has produced P.U.N.K.S., a Disney Original Picture, and worked on several films for Miramax, Lions Gate, and Dimension Films. In 2000, he co-produced Highlander: Endgame, and worked for Miramax on Equilibrium and Imposter. In 2001, as a result of his work on Project Greenlight, Peach produced Stolen Summer, released by Miramax in 2002. Since then, he has co-produced the Theme Park Attraction, StarTrek Voyager: Borg Encounter, Outin Riley (2004), Icon (2004), Canes, and has worked on Cookers (2005), the Guardian (2006), and Nanking. Peach also produces commercials for clients Renault, Volkswagen, Nickelodeon and Comedy Central. He has studied entertainment law, film production; screenwriting, distribution, marketing and finance at UCLQ, USC, AFI and Writer’s Boot Camp.
Sanford M. Passman. Sanford M. Passman has been an independent director of the company since April 21, 2008. Mr. Passman has served as a member of the California Bar since 1977. A well known litigator in Los Angeles, Passman’s practice concentrates heavily on entertainment law and securities litigation. Passman served as a partner of Miracle Entertainment, Inc., a personal management for recording artists. He founded Outpost Management, representing directors, writers and actors, produced The Big Knife, on stage, a theatrical motion picture, burning Down the House, an award winning musical documentary, Standing in the Shadows of Motown, and is a partner in Rimshot Management, a personal management firm representing musical artists. He is also a founding partner of Tripartite LLC, an entity with various Internet business interests.
Robert Searcy. Robert Searcy has been an independent director of the company since August 8, 2008. Mr. Searcy is the current principal of Terra Firma Services since 1995, a company which specializes in land use planning and project management and development. At the helm of Terra Firma, Mr. Searcy has managed telecommunications sites for AT&T Wireless, L.A. Cellular and Bechtel, and for Sprint and Lucent Technologies. From 2004 through 2007, he was employed as a Land use and Entitlement manager for MWH Development Corporation. From 1995 through 1996 he was employed as the Principal Planner for the City of Calabasas, managing the day to day operations of the Planning and Environmental Services Departments and served as the City Council and Planning Commission Coordinator/Liaison . From 1990 through 1995, he served as Senior Planner for the City of Diamond Bar. He holds a Masters Degree in Urban Planning (1989) from Kansas University and a B.A. in Political Science (1985) from Washburn University. He has served on the board of directors of the Century City Chamber of Commerce, and the San Gabriel Fair Housing Council.
Item 11.
Item 11. EXECUTIVE COMPENSATION
The following table provides information as to cash compensation of all officers of the Company, for each of the Company’s last two fiscal years.
SUMMARY COMPENSATION TABLE
The company has entered into employment contracts with each of our executive officers, providing for the payment of $120,000 each in annual salaries, commencing the first quarter of fiscal year 2009. There are no outstanding equity awards or options to officers issued or outstanding.
The following table provides information concerning the compensation of the directors of the Company for the past fiscal year:
DIRECTOR COMPENSATION
There are no outstanding equity awards or options to directors issued or outstanding.
Corporate Governance
The Board of Directors is committed to maintaining strong corporate governance principles and practices. The Board periodically reviews evolving legal, regulatory, and best practice developments to determine those that will best serve the interests of our shareholders.
Meetings and Attendance
Our Board of Directors is required by our by laws to hold regularly scheduled annual meetings. In addition to the annual meetings, it has the authority to call regularly scheduled meetings and special meetings by resolution. Our Board met 1 time during the past fiscal year.
All incumbent directors attended 100% or more of the Board meetings during the last fiscal year.
Nominations of Directors
There are no material changes to the procedures by which security holders may recommend nominees to the registrant’s board of directors.
Audit Committee
The Company has standing audit committee, established in accordance with section 3(a)(58)(A) of the Securities Exchange Act of 1934, consisting of independent director Patrick Peach and independent director Robert Searcy. No member of the audit committee may accept directly or indirectly any consulting, advisory, or other compensatory fee from the company or any subsidiary, not including fixed amounts of compensation under a retirement plan for prior service, and may not be an “interested person” as defined in section 2(a)(19) of the Investment Company Act of 1940.
Item 12.
Item 12. SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS.
The following table sets forth information furnished to us with respect to the beneficial ownership of our common stock by (i) each executive officer, director and nominee, and by all directors and executive officers as a group, and (ii) each beneficial owner of more than five percent of our outstanding common stock, in each case as of September 30, 2008. Unless otherwise indicated, each of the persons listed has sole voting and dispositive power with respect to the shares shown as beneficially owned.
The issuer is not aware of any person who owns of record, or is known to own beneficially, five percent or more of the outstanding securities of any class of the issuer, other than as set forth above. The issuer is not aware of any person who controls the issuer as specified in section 2(a)(1) of the Investment Company Act of 1940. The Company does not have an investment advisor. Our independent directors hold no shares.
Item 13.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
On September 24, 2007, 5,000,000 shares of common stock were issued to officer and director Kenneth Eade, pursuant to Section 4(2) of the Securities Act of 1933.
On November 29, 2007, 1,000,000 shares of common stock were issued to officer and director Kenneth Eade, in exchange for preferred stock of Imperia Entertainment, Inc., pursuant to Section 4(2) of the Securities Act of 1933.
On November 29, 2007, 1,000,000 shares of common stock were issued to officer and director George Ivakhnik, in exchange for preferred stock of Imperia Entertainment, Inc., pursuant to Section 4(2) of the Securities Act of 1933.
In November 2007, we acquired 68% of the equity securities of Imperia Entertainment, Inc., a film production company. That acquisition was rescinded on August 26, 2008. The rescission and settlement agreement has been approved by the board of directors as fair and in the best interests of the company, and Imperia Entertainment, Jeff Ritchie, George Ivakhnik, Jeff Volpe and Gregory Allen Webb have released any and all claims they may have against the company as a result of the rescission.
On September 24, 2007, 125 shares of common stock were issued to Kenneth Eade, pursuant to Section 4(2) of the Securities Act of 1933.
On December 30, 2007, 1,245 shares of common stock were issued to Kenneth Eade, pursuant to Section 4(2) of the Securities Act of 1933, in exchange for $4,980 cash.
On March 31, 2008, 2,691 shares of common stock were issued to Kenneth Eade, pursuant to Section 4(2) of the Securities Act of 1933, in exchange for $10,764 in cash.
On June 30, 2008, 9,439 shares of common stock were issued to Kenneth Eade, pursuant to Section 4(2) of the Securities Act of 1933, in exchange for $1,800 in cash and $35,396 in forgiveness of debt.
The company has three independent directors; Patrick Peach, Sanford M. Passman and Robert Searcy, whose independence were determined by the board of directors according to the independence tests found in Section 2(a)(19) of the Investment Company Act of 1940, which provides that the director must not be:
i.
any affiliated person of such company,
ii.
any member of the immediate family of any natural person who is an affiliated person of such company,
iii.
any interested person of any investment adviser of or principal underwriter for such company,
iv.
any person or partner or employee of any person who at any time since the beginning of the last two completed fiscal years of such company has acted as legal counsel for such company,
v.
any person or any affiliated person of a person (other than a registered investment company) that, at any time during the 6-month period preceding the date of the determination of whether that person or affiliated person is an interested person, has executed any portfolio transactions for, engaged in any principal transactions with, or distributed shares for--
I.
the investment company;
II.
any other investment company having the same investment adviser as such investment company or holding itself out to investors as a related company for purposes of investment or investor services; or
III.
any account over which the investment company's investment adviser has brokerage placement discretion,
vi.
any person or any affiliated person of a person (other than a registered investment company) that, at any time during the 6-month period preceding the date of the determination of whether that person or affiliated person is an interested person, has loaned money or other property to--
I.
the investment company;
II.
any other investment company having the same investment adviser as such investment company or holding itself out to investors as a related company for purposes of investment or investor services; or
III.
any account for which the investment company's investment adviser has borrowing authority,
vii.
any natural person whom the Commission by order shall have determined to be an interested person by reason of having had, at any time since the beginning of the last two completed fiscal years of such company, a material business or professional relationship with such company or with the principal executive officer of such company or with any other investment company having the same investment adviser or principal underwriter or with the principal executive officer of such other investment company:
Provided, That no person shall be deemed to be an interested person of an investment company solely by reason of his being a member of its board of directors or advisory board or an owner of its securities, or his membership in the immediate family of any person who is a member of its board of directors or advisory board of an owner of its securities.
The board also considers the guidelines of section 303A.02 of the New York Stock Exchange Listed Company Manual, which requires that 1) the board of directors affirmatively determine that the director has no material relationship with the company (either directly or as a partner, shareholder, or officer of an organization that has a relationship with the company;) 2) the independent director must not be an employee of the company, or have an immediate family member who is or has been an executive officer of the company, and cannot have received, during any 12 month period within the last three years, more than $120,000 in direct compensation from the company, other than director and committee fees and pension or other forms of deferred compensation for prior service, provided such compensation is not contingent in any way on continued services; 3) The director must not be a current partner or employee of a firm that is the company’s internal or external auditor, have an immediate family member who is a current employee of such a firm , or have an immediate family member who is a current employee of such firm and personally worked on the company’s audit, or an immediate family member was within the last three years a partner of such a firm and personally worked on the company’s audit within that time; 4) the director or an immediate family member is not and has not been, during the past three years, employed as an executive officer of another company where any of the company’s officers at the same time serves or served on the other company’s compensation committee; and 5) the director must not be a current employee of, or have an immediate family member who is a current executive officer of a company that has made payments to, or received payments from the registrant for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million or 2% of the other company’s consolidated gross revenues.
Item 14.
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
We have not changed our independent accountants since inception. Our independent accountant’s reports on the financial statements for the Registrant for the last two years of financial statements reported has not contained an adverse opinion or a disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope, or accounting principles, except for the fact that the accountant included an opinion that, due to the Registrant’s significant losses from operations and dependence on financing to continue its operations, there is doubt about the Registrant’s ability to continue as a going concern.
During the two most recent fiscal years, there have been no disagreements with the former accountant on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of the accountant, would have caused it to make reference to the subject matter of the disagreements in connection with the reports.
The Company’s Audit Committee consists of interested director Kenneth Eade and independent director Patrick Peach. The Audit Committee verified the following with respect to our independent accountants:
The accountant is and has been in good standing within the jurisdiction of its practice.
The accountant is a member in good standing of the Public Accountancy Oversight Board (PAOB).
The accountant is capable of exercising objective and impartial judgment on all issues encompassed
within its potential engagement, and that no member of the firm had any interest or relationship with any
officer, director or principal shareholder.
Audit Fees
The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit or review of the registrant’s financial statements is approximately the sum of $5,500 which all related to the review and audit of Company financial statements.
Tax Fees
No fees were paid to the former accountant for professional services rendered by the principal accountant for tax compliance, tax advice and tax planning.
All Other Fees
No other fees were paid to the former accountant for any other services.
Item 15.
Item 15. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES.
The following financial statements are filed as part of this annual report:
Report of Independent Registered Certified Public Accountant
Financial Statements
Balance Sheet
Statement of Operations
Statement of Stockholders’ Equity
Statement of Cash Flows
Notes to Financial Statements
The following exhibits are filed as part of this annual report:
None
Report of Independent Registered Public Accounting Firm
To The Board of Directors and Stockholder of
Independent Film Development Corporation
We have audited the accompanying balance sheet of Independent Film Development Corporation (a Development Stage Company) as of September 30, 2008 and 2007, and the related statements of operations, statements of changes in net assets (liabilities) stockholders’ equity and cash flows for the year ending September 30, 2008, the period from September 14, 2007 (inception) to September 30, 2007 and for the period from September 14, 2007 (inception) to September 30, 2008. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audit 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 the Company’s internal control over its 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 purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Independent Film Development Corporation as of September 30, 2008 and 2007, and the results of its operations and cash flows for the year ended September 30, 2008 the period from September 14, 2007 (inception) to September 30, 2007 and for the period from September 14, 2007 (inception) to September 30, 2008, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 2 to the financial statements the Company has not generated any significant revenue during the period September 14, 2007 (inception) through September 30, 2008 and has funded its operations primarily through the issuance of equity. This matter raises substantial doubt about the Company’s ability to continue as a going concern unless it is able to generate sufficient cash flows through the issuance of additional debt or equity financing to meet its obligations and sustain its operations. Management’s plans regarding those matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/Gruber & Company, LLC
Lake Saint Louis, Missouri
February 27, 2009
Independent Film Development Corporation
(a Development Stage Company)
Schedule of Investments at September 30, 2008
Signature Entertainment was in formation at the time of acquisition in January 2008. The acquisition agreement was modified in March 2008, whereby the company agreed to contribute its LLC organizational costs of $2,026 and to undertake debt financing to fund Signature’s first three years operating costs.
See accompanying notes to financial statements
Independent Film Development Corporation
Development Stage Company)
Notes to Financial Statements
September 30, 2008
NOTE 1: HISTORY OF OPERATIONS
Business Activity.
Independent Film Development Corporation was incorporated on September 14, 2007 in the State of Nevada. The Company intends to file an election n to operate as a Business Development Company (“BDC”) under Section 54(a) of the Investment Company Act of 1940 (“1940 Act”).
The Company is currently a development stage company under the provisions of Statement of Financial Accounting Standards ("SFAS") No. 7.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Going Concern
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company has not generated any significant revenue during the period September 14, 2007 (inception) thorough September 30, 2008 and has funded its operations primarily through the issuance of equity. This matter raises substantial doubt about the Company's ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Accordingly, the Company’s ability to accomplish its business strategy and to ultimately achieve profitable operations is dependent upon its ability to obtain additional debt or equity financing. Management plans to take the following steps that it believes will be sufficient to provide the Company with the ability to continue in existence:
Management intends to raise financing through private equity financing or other means and interests that it deems necessary. The Company, as described above, is in the business of investing in operations of other companies. There can be no assurance that the Company will be successful in its endeavor.
Basis of Presentation
The Company has elected to become a Business Development Company (“BDC”). Under the rules governing a BDC, the Company does not consolidate the results of its portfolio companies but assigns a fair market value as determined by the board of directors to these operations. The results of the portfolio companies are not included in the statements of the Company and are carried only as an investment on the balance sheet of the Company.
Cash Equivalents
Cash equivalents include all highly liquid debt instruments with original maturities of three months or less which are not securing any corporate obligations.
Stock Based Compensation.
The Company has filed an election to become a Business Development Company which is not allowed to issue stock as compensation.
Estimates.
The presentation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Fair Value of Financial Instruments.
The carrying amounts for the Company’s cash, accounts payable, accrued liabilities and current portion of long term debt approximate fair value due to the short-term maturity of these instruments.
Concentration of Credit Risk
The Company places its cash with high quality financial institutions and at times may exceed the FDIC $100,000 insurance limit. The Company will extend credit based on an evaluation of the customer’s financial condition, generally without collateral. Exposure to losses on receivables is principally dependent on each customer’s financial condition. The Company will monitor its exposure for credit losses and maintains allowances for anticipated losses, if required.
Advertising Costs
Advertising costs are expensed as incurred. There were no advertising expenses for the period September 14, 2007 (inception) through September 30, 2008.
Income Taxes
The Company accounts for income taxes under SFAS 109, "Accounting for Income Taxes." Under the asset and liability method of SFAS 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements 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. Under SFAS 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.
Basic and Diluted Income/(Loss) Per Share:
In accordance with SFAS No. 128, "Earnings Per Share," the basic income/(loss) per common share is computed by dividing net income/(loss) available to common stockholders by the weighted average number of common shares outstanding. Diluted income per common share is computed similar to basic income per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. As of September 30, 2008, the Company does not have any equity or debt instruments outstanding that can be converted into common stock.
Segment Reporting
Based on the Company's integration and management strategies, the Company operates in a single business segment. For the period September 14, 2007 (inception) through September 30, 2008, the Company had no revenue.
Revenue Recognition
Revenue is recognized in accordance with SEC Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements”. The Company recognizes revenue when the significant risks and rewards of ownership have been transferred to the customer pursuant to applicable laws and regulations, including factors such as when there has been evidence of a sales arrangement, the performance has occurred, or service have been rendered, the price to the buyer is fixed or determinable, and collectability is reasonably assured.
Valuation of Investments.
The Company will determine the value of each investment in our portfolio on a quarterly basis, and changes in value result in unrealized gains or losses being recognized. Fair value is defined in Section 2(a)(41) of the 1940 Act as (i) the market price for those securities for which a market quotation is readily available and (ii) for all other securities and assets, fair value is as determined in good faith by the board of directors. We have adopted a valuation policy consistent with the definition of fair value, and apply that policy for consistent evaluation of faire value of our investments. Because of the inherent uncertainty of determining the fair value of investments that do not have a readily ascertainable market value, the fair value of our investments determined in good faith by the board of directors may differ significantly from the values that would have been used had a ready market existed for the investments, and the differences could be material. There is no single standard for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments we make.
The Company's investment in Portfolio Companies will be carried at cost (which approximates fair value) as this investment represents a continuation of the Company's former business prior to its election as a BDC, and is under common control at date of transfer. Unrealized gains and losses resulting from the change in valuation of investments are reflected in the Company’s Statement of Operations, as adjusted by estimated deferred tax liabilities.
Unlike banks, the Company is not permitted to provide a general reserve for anticipated loan losses. Instead, the Company is required to specifically value each individual investment on a quarterly basis. The Company will record unrealized depreciation on investments when it believes that an investment has become impaired. Conversely, the Company will record unrealized appreciation if it believes that the underlying portfolio company has appreciated in value and, therefore, our equity security has also appreciated in value.
As a business development company, the Company will invest in liquid and illiquid securities, including debt and equity securities primarily of private companies. Our investments will generally be subject to restrictions on resale and may have no established trading market. Because of the type of investments that the Company makes and will make, and the nature of its business, its valuation process requires an analysis of various factors. Our fair value methodology includes the examination of, among other things, the underlying investment performance, financial condition, and market changing events that impact valuation.
Fair Value Investments Measurement
Effective January 1, 2008, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”), for investments measured at fair value on a recurring basis. SFAS 157 accomplishes the following key objectives:
·
Defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date;
·
Establishes a three-level hierarchy (“Valuation Hierarchy”) for fair value measurements;
·
Requires consideration of the Company’s creditworthiness when valuing liabilities; and
·
Expands disclosures about instruments measured at fair value.
The Valuation Hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. A financial instrument’s categorization within the Valuation Hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels of the Valuation Hierarchy and the distribution of the Company’s financial assets within it are as follows:
·
Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
·
Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
·
Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value measurement.
As of September 30, 2008, the Company’s investments consisted 94% of marketable over-the-counter securities classified as Level 2 assets and 6% in limited liability company interests valued by its board of directors classified as Level 3 assets.
Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation
Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the cost basis of the investment without regard to unrealized appreciation or depreciation previously recognized, and include investments charged off during the year, net of recoveries. Net change in unrealized appreciation or depreciation primarily reflects the change in portfolio investment values during the reporting period, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized.
NOTE 4: RECENT ACCOUNTING PRONOUNCEMENTS
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS 157"). SFAS 157 defines fair value and establishes a framework for measuring fair value. It also expands the disclosures about the use of fair value to measure assets and liabilities. SFAS 157 was effective for the Company on January 1, 2008. The adoption of SFAS No. 157 had a material impact on the Company's financial statements, as the financial statements of the Company were audited prior to the effective date.
In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Liabilities, including an amendment of FASB Statement No. 115" ("SFAS No. 159"). SFAS No. 159 permits entities to choose, at specified election dates, to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. Unrealized gains and losses shall be reported on items for which the fair value option has been elected in earnings at each subsequent reporting date. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of SFAS No. 157 "Fair Value Measurements" ("SFAS No. 157"). The Company is currently assessing the impact that SFAS No. 159 will have on its financial statements.
In June 2007, the FASB issued FASB Staff Position No. EITF 07-3, “Accounting for Nonrefundable Advance Payments for Goods or Services Received for use in Future Research and Development Activities” (“FSP EITF 07-3”), which addresses whether nonrefundable advance payments for goods or services that used or rendered for research and development activities should be expensed when the advance payment is made or when the research and development activity has been performed. Management is currently evaluating the effect of this pronouncement on financial statements.
In December 2007, the FASB issued SFAS No. 141 (Revised 2007), “Business Combinations.” SFAS No. 141 (Revised 2007) changes how a reporting enterprise accounts for the acquisition of a business. SFAS No. 141 (Revised 2007) requires an acquiring entity to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value, with Ltd. exceptions, and applies to a wider range of transactions or events. SFAS No. 141 (Revised 2007) is effective for fiscal years beginning on or after December 15, 2008 and early adoption and retrospective application is prohibited.
In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements”, which is an amendment of Accounting Research Bulletin (“ARB”) No. 51. This statement clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. This statement changes the way the consolidated income statement is presented, thus requiring consolidated net income to be reported at amounts that include the amounts attributable to both parent and the noncontrolling interest. This statement is effective for the fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Based on current conditions, the Company does not expect the adoption of SFAS 160 to have a significant impact on its results of operations or financial position.
In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities an amendment of FASB Statement No. 133.” This Statement changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. Based on current conditions, the Company does not expect the adoption of SFAS 161 to have a significant impact on its results of operations or financial position.
In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles.” This Statement identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy). This Statement will not have an impact on the Company’s financial statements.
In May 2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee Insurance Contracts, an interpretation of FASB Statement No. 60.” The scope of this Statement is limited to financial guarantee insurance (and reinsurance) contracts, as described in this Statement, issued by enterprises included within the scope of Statement 60. Accordingly, this Statement does not apply to financial guarantee contracts issued by enterprises excluded from the scope of Statement 60 or to some insurance contracts that seem similar to financial guarantee insurance contracts issued by insurance enterprises (such as mortgage guaranty insurance or credit insurance on trade receivables). This Statement also does not apply to financial guarantee insurance contracts that are derivative instruments included within the scope of FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities.” This Statement will not have an impact on the Company’s financial statements.
NOTE 5: RELATED PARTY TRANSACTIONS
On December 30, 2007, 1,245 shares of common stock were issued to Kenneth Eade, pursuant to Section 4(2) of the Securities Act of 1933, in exchange for $4,980 cash.
On March 31, 2008, 2,691 shares of common stock were issued to Kenneth Eade, pursuant to Section 4(2) of the Securities Act of 1933, in exchange for $10,764 in cash.
On June 30, 2008, 9,439 shares of common stock were issued to Kenneth Eade, pursuant to Section 4(2) of the Securities Act of 1933, in exchange for $1,800 in cash and $35,396 in forgiveness of debt.
NOTE 6:
PORTFOLIO COMPANY ACQUISITIONS
In November 2007, we acquired 68% of the equity securities of Imperia Entertainment, Inc., a film production company. That acquisition was rescinded on August 26, 2008. The rescission and settlement agreement has been approved by the board of directors as fair and in the best interests of the company, and Imperia Entertainment, Jeff Ritchie, George Ivakhnik, Jeff Volpe and Gregory Allen Webb have released any and all claims they may have against the company as a result of the rescission.
On January 1, 2008, the Company acquired 100% of Signature Entertainment, LLC, a limited liability company to be formed for the purposes of film distribution, and issued a “Confidential Private Placement Memorandum,” offering up to 25 units, each consisting of a 1% equity interest in Signature Entertainment, LLC, and 12,500 shares of company common stock, in order to fund the first three years operations of the new distribution company. This private placement was abandoned. The membership interests of have been valued at their fair market value.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized.
Independent Film Development Corp.
Registrant
Date: March 31, 2009
By /s/ Jeff Ritchie
______________
Jeff Ritchie
CEO and Director