UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2009
a Delaware corporation
1752 East Avenue J #266
Lancaster, CA 93535
213-694-1888
Commission file number: 333-156832
I.R.S. Employer I.D. #: 56-2646829
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 day. x Yes o No
We are not required to submit electronically nor post on our website any Interactive Date Files pursuant to Rule 405 of Regulation S-T.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
| Large accelerated filer o | | Accelerated filer o |
Non-accelerated filer o (Do not check if a smaller reporting company) | | Smaller reporting company x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). o Yes x No
The number of shares outstanding of our Common Stock is 64,519,822 as of August 18, 2009. There are no other classes of stock.
TABLE OF CONTENTS
| | |
| Unaudited Financial Statements | 3 |
| Management’s Discussion and Analysis of Financial Condition and Results of Operations | 7 |
| Controls and Procedures | 10 |
| Legal Proceedings | 11 |
| Exhibits | 11 |
| Signatures | 11 |
Unaudited Financial Statements.
WRITERS' GROUP FILM CORP
[A Development Stage Company]CONSOLIDATED BALANCE SHEETS(Unaudited)
| | | | June 30, 2009 | | | March 31, 2009 | |
| ASSETS | | | | | | | |
| | | | | | | | |
| Current Assets | | | | | | |
| | Cash | $ | 4,334 | | | $ | 1,136 | |
| | | | | | | | | | |
| Total Current Assets | | | 4,334 | | | | 1,136 | |
| | | | | | | | | | |
| Total Assets | | $ | 4,334 | | | $ | 1,136 | |
| | | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS' DEFICIT | | | | | | | | |
| | | | | | | | | | |
| Current Liabilities | | | | | | | | |
| | Accounts Payable | | $ | 5,257 | | | $ | 4,887 | |
| | | | | | | | | | |
| Total Liabilities | | | 5,257 | | | | 4,887 | |
| | | | | | | | | | |
| Stockholders' Deficit | | | | | | | | |
| | | | | | | | | | |
| | Common stock, $0.001 par, 175,000,000 | | | | | |
| | shares authorized, 64,519,822 shares | | | | | | | | |
| | issued and outstanding, respectively | | | 64,520 | | | | 64,520 | |
| | Additional paid-in capital | | | 92,928 | | | | 81,028 | |
| | Deficit accumulated during the development stage | | | (158,371 | ) | | | (149,299 | ) |
| | | | | | | | | | |
| Total Stockholders' Deficit | | | (923 | ) | | | (3,751 | ) |
| | | | | | | | | | |
| Total Liabilities and Stockholders' Deficit | | $ | 4,334 | | | $ | 1,136 | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | |
See Notes to unaudited financial statements
| |
| [A Development Stage Company] | |
| CONSOLIDATED STATEMENTS OF EXPENSES | |
| (Unaudited) | |
| | | | | | | | | | |
| | | Three Months Ended | | | March 9, 2007 (inception) through | |
| | | June 30, 2009 | | | June 30, 2008 | | | June 30, 2009 | |
| | | | | | | | | | |
| Revenues | | $ | - | | | $ | - | | | $ | 9,425 | |
| | | | | | | | | | | | | |
| General and administrative | | | 9,072 | | | | 7,255 | | | | 167,736 | |
| Interest expense | | | | | | | 0 | | | | 60 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Net loss | | $ | (9,072 | ) | | $ | (7,255 | ) | | $ | (158,371 | ) |
| | | | | | | | | | | | | |
| Basic and diluted | | | | | | | | | | | | |
| Net loss per share | | $ | - | | | $ | - | | | | n/a | |
| | | | | | | | | | | | | |
| Weighted average common | | | | | | | | | | | | |
| shares outstanding | | | 64,519,822 | | | | 62,682,822 | | | | n/a | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
See Notes to unaudited financial statements | |
| WRITERS' GROUP FILM CORP. | |
| [a development stage company] | |
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |
| (Unaudited) | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | Three Months Ended June 30, | | | March 9, 2007 (inception) through | |
| | | 2009 | | | 2008 | | | June 30, 2009 | |
| CASH FLOWS FROM OPERATING | | | | | | | | | |
| ACTIVITIES | | | | | | | | | |
| Net loss | | $ | (9,072 | ) | | $ | (7,255 | ) | | $ | (158,371 | ) |
| Adjustments to reconcile | | | | | | | | | | | | |
| net loss to cash used | | | | | | | | | | | | |
| in operating activities: | | | | | | | | | | | | |
| Stock issued for services | | | - | | | | - | | | | 84,498 | |
| Bad debt expense | | | | | | | | | | | - | |
Changes in: Accounts receivable | | | | | | | 424 | | | | | |
| Accounts payable | | | 370 | | | | 3,720 | | | | 5,257 | |
| NET CASH USED IN OPERATING ACTIVITIES | | | (8,702 | ) | | | (3,111 | ) | | | (68,616 | ) |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| CASH FLOWS FROM FINANCING | | | | | | | | | | | | |
| ACTIVITIES | | | | | | | | | | | | |
| Proceeds from subscriptions receivable | | | - | | | | - | | | | 13,500 | |
| Capital contributions | | | 11,900 | | | | 3,000 | | | | 21,200 | |
| Stock issued for cash | | | - | | | | - | | | | 38,250 | |
| NET CASH PROVIDED BY FINANCING ACTIVITIES | | | 11,900 | | | | 3,000 | | | | 72,950 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| NET CHANGE IN CASH | | | 3,198 | | | | (111 | ) | | | 4,334 | |
| | | | | | | | | | | | | |
| Cash balance, beginning | | | 1,136 | | | | 576 | | | | - | |
| Cash balance, ending | | $ | 4,334 | | | $ | 465 | | | $ | 4,334 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| CASH PAID FOR: | | | | | | | | | | | | |
| Interest | | | - | | | | - | | | | - | |
| Income taxes | | | - | | | | - | | | | - | |
WRITERS’ GROUP FILM CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited interim financial statements of Writers’ Group Film Corp., have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in Writers’ Group's annual report filed with the SEC on Form 10-K on July 10, 2009. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for fiscal 2009 as reported in the Form 10-K have been omitted.
Recent Accounting Pronouncement
Effective this quarter, the Company implemented SFAS No. 165, Subsequent Events (“SFAS 165”). This standard establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. The adoption of SFAS 165 did not impact the Company’s financial position or results of operations. The Company evaluated all events or transactions that occurred after June 30, 2009 up through August 18, 2009, the date the Company issued these financial statements. During this period, the Company had a subsequent event that is disclosed in Note 4.
NOTE 2. GOING CONCERN
Writers’ Group has generated nominal revenues since inception and is unlikely to generate earnings in the immediate or foreseeable future. The continuation of Writers’ Group as a going concern is dependent upon the continued financial support from its shareholders, the ability of Writers’ Group to obtain necessary equity financing to continue operations, and the attainment of profitable operations. As of June 30, 2009, Writers’ Group has accumulated losses. These factors raise substantial doubt regarding Writers’ Group's ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should Writers’ Group be unable to continue as a going concern.
NOTE 3. EQUITY
During the three months ended June 30, 2009, the President and Chairman of Writers’ Group gave the company $11,900. These funds were used for operating expenses. The amount is reflected as contributed capital.
NOTE 4. SUBSEQUENT EVENT
On August 3, 2009, the company borrowed $10,000 in the form of a convertible note with our President, Tal L. Kapelner. The value of the note is $10,000, with an annual interest rate of 8%, and a maturity date of August 3, 2010. The note is convertible into 10,000,000 shares of common stock.
Management's Discussion and Analysis of Financial Condition and Results of Operations.
Overview. The recent market downturn has negatively impacted the entertainment industry, and this company in particular. Right now, we are pinning our hopes for revenue on the production and success of “Writers’ Assistants”, but the third-party financier who verbally agreed to put up the $150,000 incentive money we needed to attract a well-known actor has pulled his commitment in the last few months, citing the poor economic climate, leaving us to raise that money through other third-party financiers – who have not materialized yet – and/or future private placements or registered offerings. Further, even if we raised $150,000 and attracted a star actor, film financing companies are tightening their belts and are financing fewer films, even those that may be quite viable with a well-known actor attached, leaving us few options in financing the film.
We are looking more seriously now into the possibilities provided by web-based entertainment as a source of future growth, perhaps even as a revenue source. Historically, we have not been of the opinion that web-based entertainment provides much opportunity for anything but use as a marketing vehicle for our talents as filmmakers and as a way to positively brand the company as a whole. However, two web-based serials – “Quarterlife” and, very recently, “In the Motherhood” – have been picked up as programs for broadcast television, and several more – out of admittedly thousands – have managed to earn small profits, including “Paradise Cove”, “Easy to Assemble”, “Web Therapy” and “Tiki Bar”, mostly through sponsorships and merchandise sales. The benefits to producing a web-based serial is that it is significantly cheaper, requiring far less start-up capital, and would get the company at least in production on something, rather than just working on administration and raising capital.
The concept of a business model based at least in part on web-based programming presents many challenges for us, however. The first challenge would be raising money: web-based programming may be cheaper than producing feature films, but it still requires some capital – see the estimates under our “Web Strategy” subsection below – and so far, we have not been successful in raising sufficient capital for production of any kind. Another challenge would be securing sponsorships. Because of our relatively unknown status, it would take significant recognition by the public of any web-based program we produced first, before we could hope to successfully sign sponsorship deals with advertisers. Further, sponsors we approach may already be sponsoring a competing web content provider, or not approve of the content we produce. The inexperience of our management working with this medium is another factor in our consideration of this venture, particularly as it relates to strategies to generate web traffic to the content. Just posting such content on our website and a few video-sharing sites like YouTube is not likely to generate the millions of “views” we would likely need to have a successful business model. Therefore, more advanced strategies are necessary, including the use of more sophisticated web promotional tools such as Tube Mogul and Virtual Property – see our “Web Strategy” subsection below. Additional challenges, currently unknown to us, may also present themselves once we have conducted a more thorough study of web programming and its related business models over the next several months.
Financial Condition. In our most recent private stock offering, conducted from December, 2008 – January, 2009, pursuant to Rule 506. Shares of Common Stock were sold at $0.01 per share. $11,600 was in cash and $400 was for services rendered. Through the offering we sold 1,200,000 shares to 6 investors.
The amount of cash we currently have on hand, as of June 30, 2009, is $4,334, and the amount of working capital we have as of March 31 is ($923). The amount of cash we will need to operate our business over the next 12 months is estimated at $19,200. Therefore, the amount of cash we have on hand is insufficient to satisfy our cash requirements.
We received contributed capital from our President Tal Kapelner, in the amount of $9,300 during the fiscal year ended March 31, 2009 and an additional $11,900 during the three months ended June 30, 2009. Without an infusion of cash from additional revenues or future registered offerings or private placements, management will likely have to continue to contribute money to pay our expenses.
We also generated our first revenues in fiscal year 2009. In November, 2008, we signed a services contract with Car Search Consulting, Inc. of Los Angeles, California, wherein we were contracted to produce a 35-second commercial advertisement as well as a 5-10 minute internal employee training video. We were paid $8,425 up front for those services, which we completed in January 2009.
Also in November of 2008, we optioned the screenplay for Forever Man to Cruck Productions, Inc. a Florida-based production company, for $1,000.
Despite these early revenues, we do not anticipate these or future revenues to produce a profit for the foreseeable future; we have subsisted so far by capital contributions from our management and by selling shares through our three private offerings and our public offering, which raised for us a total of $51,750 in cash and $28,598 worth of services, including initial website design and consulting services.
Liquidity and Capital Resources. We have plans to issue shares under an equity line of credit in the next 12 months. However, no equity line agreement has been, nor may ever be, finalized and executed. Furthermore, any agreement with a financier to provide us with an equity line of credit may require that our shares be listed on the Over the Counter Bulletin Board stock quotation service, which our shares currently are not.
Plan for the next 12 months. In Fiscal Year 2010, which began April 1, 2009, we plan to produce our film “Writers’ Assistants” and finish developing a web strategy which may include producing a web-based serial (“webisodic programming”) and/or producing short vignettes and skits for use solely as a marketing and branding tool.
Writers’ Assistants
The major challenge in producing Writers’ Assistants is the financing, as our “Plan to Generate Future Revenues” subsection, located in our “Description of Business” section above, discusses.
Our timetable, then, in producing Writers’ Assistants is:
| · | May – September, 2009: Raise $150,000 through private and public stock offerings. |
| · | September – December, 2009: Identify, approach, negotiate and sign an agreement with a well-known actor to have him or her appear in the film. |
| · | December, 2009 – March, 2010: Identify studios, distributors, large production companies and other financiers who may finance the remainder of the film’s budget, submit applications and secure financing. |
| · | March – April, 2010: Complete development and pre-production on the film. |
Web Strategy
Our web strategy will focus on answering the following questions: Is it possible to make a profit from content produced specifically for, and distributed on, the web? If so, how significant a profit is possible, or has been historically achieved? Besides sponsorships from advertisers and merchandise sales, what are the other keys to profiting from web-based content? What type and genre of programming has had the most success, and how has the content been organized and distributed?
We hope to answer those questions through a) our own market research consisting of attendance at seminars and related symposia on the topic, study of web news journals such as “TubeFilter”, study of revenue-sharing and licensing deals currently being made, and interviews with consultants who have an expertise in web-based programming; as well as b) market research data we compile provided by web programming monetization sites such as TubeMogul, Visible Measures and Brightcove. “Rich analytics”, which refers to the breakdown and analysis of any given website’s popularity, is provided by these web programming monetization sites for no fee or a small fee.
Once we have answered those questions, we will develop a comprehensive web strategy that, depending on the answers we get from our questions, will either focus on developing the type of content that will seek to make a profit, but is generally more expensive and time-consuming to produce and distribute, or the type of content that is geared only towards our marketing and branding efforts, which would likely be cheaper and easier to produce and simpler to distribute.
In other words, if our web strategy calls for us to produce content for profit on the web, the type of content will necessarily be of a higher quality, both in terms of appeal and in the quality of the various production elements, such as camera, lighting, etc.
For example, we have already identified two possible candidates for development into webisodic programming. The first is to re-work our first short film, “Buckeye Marhaba” – a drama about an Arab couple living in the U.S. who attempt to balance assimilation with retention of their cultural identity through the following of the Ohio State Buckeye football team – which was slated for production but is now languishing with no immediate prospect for production, into a web-based serial of perhaps 10 “webisode” installments of approximately 3 minutes each.
The second is a new comedy concept we developed, entitled “Flagged”, about a group of assistants to professional athletes who form a flag football team. This could be organized as close to a television sitcom as possible, with each “webisode” made up of three “acts” of 7 minutes each, much the same way a typical television sitcom is broken up. We could produce a “season” of 8-13 webisodes, mirroring the number of episodes typically ordered per season for a basic cable television program.
While we have done no market research yet, anecdotally we understand that professionally-produced webisodes can cost about $1,000 per minute, which would make Buckeye Marhaba a $30,000 project and Flagged a $56,000 - $91,000 project. This cost estimate was provided verbally by a consensus of web programming producers at a Screen Actors Guild symposium on producing content for the web held in Los Angeles in February of 2009. This is significantly cheaper than financing a feature film, but would still present challenges in financing. Distribution would be through more complex and professional sites that are geared towards monetization of web content, such as TubeMogul, Virtual Property and Dogma Studios.
On the other hand, if our web-based strategy calls for us to produce simple video vignettes and sketches, solely for marketing and branding purposes and without attention on profiting from the content itself, we would look to produce those products more cheaply and distribute them more simply, such as through our own website, and video-sharing websites such as YouTube, Veoh and FunnyorDie.com.
Two examples of these sketches are “A&F”, in which an overweight man takes off his shirt and pretends to be one of the live male models at an Abercrombie and Fitch store, and “Stalk Another Day”, about a lazy celebrity stalker.
Our timetable for our web strategy is:
| · | April – September, 2009: Conduct market research on cost, and on answering the questions identified above. Develop comprehensive web strategy. |
| · | September – October, 2009: Develop ideas and scripts for either a) for-profit web content; or b) sketches and vignettes for marketing purposes only. |
| · | October – December, 2009: Raise financing through registered offerings or private placements. If we are financing for-profit web content, financing needs may be anywhere from $30,000 to almost $100,000, as noted above. Since inception, we have not successfully raised $100,000 in cash, and at this time have no special ideas to raise the necessary funds, other than approaching venture capitalists and other private equity firms who invest in entertainment projects. While subject to the results of our web strategies research, we do not intend at this time to offer any profit participation or other significant financial incentives to entice well-known actors or directors to participate in these productions, although we may nevertheless approach well-known actors, directors, or in the case of our proposed “Flagged” production, professional sports figures, to participate in our web-based projects without significant financial incentives. |
| · | December, 2009 – March, 2010: Produce either for-profit web content or the video sketches and vignettes for marketing purposes only. |
| · | March – April, 2010: Distribute the material that we produced. |
We have no purchases or sales of plant or significant equipment planned in the next 12 months.
We do not anticipate any significant changes in the number of employees. We currently have zero and anticipate having zero employees in the next 12 months.
Controls and Procedures.
Our principal executive and financial officers have evaluated the effectiveness of our disclosure controls and procedures as of the end of our first quarter (June 30, 2009) for fiscal year 2010, and have concluded that they are not effective to ensure that information required to be disclosed in the reports that we file pursuant to Section 15(d) of the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules under the Exchange Act. We based the material weakness noted below in our assessment of our internal control over financial reporting.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control over financial reporting as of June 30, 2009, the Company determined that we had a material weakness, as described below and therefore our internal controls over financial reporting were not effective.
We noted we have a material weakness regarding proper segregation of duties for the preparation of our financial statements. As of June 30, 2009, the majority of the preparation of financial statements was carried out by one person, who is an independent CPA to the Company. Additionally, the Company currently only has one officer/director having oversight on all transactions. We plan to remedy the material weakness once operations expand to include employees, and/or the production of self-generated and owned entertainment products.
There have been no changes in our internal control over financial reporting during the first quarter of our current fiscal year 2010 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Legal Proceedings.
We are not a party to any pending legal proceeding, nor are we aware of any proceeding contemplated by any governmental authority.
Exhibits.
Financial statements are included in the body of this report.
Exhibit Index:
| | | |
| * Certificate of Incorporation | | [incorporated by reference to Form 10-K filed on July 10, 2009] |
| * Certificate of Amendment of Certificate of Incorporation | | [incorporated by reference to Form S-1 filed on January 21, 2009] |
| * By-laws | | [incorporated by reference to Form 10-K filed on July 10, 2009] |
| * Instruments defining rights of security holders | | [see By-laws] |
| * Rule 15d-14(a) Certifications | | Exhibit (31)(i) |
| * Section 1350 Certification | | Exhibit (32) |
Signatures.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by tht undersigned, thereunto duly authorized.
WRITERS’ GROUP FILM CORP.
| | Company Name | |
| | | | |
| August 19, 2009 | By: | /s/  | |
| | | Tal L. Kapelner, President and Chairman | |
| | | | |
| | | | |
| | | |
| | | | |
| August 19, 2009 | By: | /s/ Ariella Kapelner | |
| | | Ariella Kapelner, Principal Financial Officer and Director | |
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