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WRIT > SEC Filings for WRIT > Form 10-Q on 19-Feb-2014All Recent SEC Filings

Show all filings for WRIT MEDIA GROUP, INC.

Form 10-Q for WRIT MEDIA GROUP, INC.


19-Feb-2014

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Special Note Regarding Forward Looking Statements

In addition to historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We use words such as "believe," "expect," "anticipate," "project," "target," "plan," "optimistic," "intend," "aim," "will" or similar expressions which are intended to identify forward-looking statements. Such statements include, among others, those concerning market and industry segment growth and demand and acceptance of new and existing products; any projections of sales, earnings, revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; as well as all assumptions, expectations, predictions, intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those identified in Item 1A "Risk Factors" in our annual report on Form 10-K for fiscal year ended March 31, 2013, as well as assumptions, which, if they were to ever materialize or prove incorrect, could cause the results of the Company to differ materially from those expressed or implied by such forward-looking statements. Forward looking statements made by penny stock issuers are excluded from the safe harbors in Section 27A of the Securities Act of 1933 and in Section 21E of the Securities Exchange Act of 1934.

Readers are urged to carefully review and consider the various disclosures made by us in this report and our other filings with the Security and Exchange Commission ("SEC"). These reports attempt to advise interested parties of the risks and factors that may affect our business, financial condition and results of operations and prospects. The forward-looking statements made in this report speak only as of the date hereof and we disclaim any obligation, except as required by law, to provide updates, revisions or amendments to any forward-looking statements to reflect changes in our expectations or future events.

Overview

Writers' Group Film Corp. ("we", "us", "our", "WRIT", or the "Company") was incorporated in Delaware on March 9, 2007 to produce films, television programs and similar entertainment programs for various media formats.

Front Row Networks ("FRN") was incorporated on July 27, 2010 in the State of Nevada. The Company is a content creation company which intends to produce, acquire and distribute live concerts in 3D for initial worldwide digital broadcast into digitally-enabled movie theaters. This new concept is intended to present live concerts in 3D, at lower ticket prices, to a massive fan base worldwide in a cost-effective manner. Following the initial 3D theatrical run, the distribution rights to the concerts will be licensed, in both 2D and 3D format, to DVD and Blu-Ray retailers, Free TV broadcasters, cable and emerging 3D cable channels, and mobile streaming providers. Front Row Networks will also sell merchandising, such as clothing, household goods, and other products, tailored to each Artist and to each Sponsor, in movie theaters where the live concert is exhibited

In February 2011, FRN completed a reverse acquisition transaction through a share exchange with WRIT, whereby WRIT acquired 100% of the issued and outstanding capital stock of FRN in exchange for 100,000 shares of the Common Stock of WRIT. As a result of the reverse acquisition, FRN became WRIT's wholly-owned subsidiary and the former FRN's shareholders became controlling stockholders of WRIT. The share exchange transaction with WRIT was treated as a reverse acquisition, with FRN as the accounting acquirer and WRIT as the acquired party.


Consequently, the assets and liabilities and the historical operations that will be reflected in the consolidated financial statements for periods prior to the Share Exchange Agreement will be those of FRN and will be recorded at the historical cost basis. After the completion of the Share Exchange Agreement, the Company's consolidated financial statements will include the assets and liabilities of both FRN and WRIT, the historical operations of FRN and the operations of WRIT from the closing date of the Share Exchange Agreement.

On July 7, 2011, we modified our February 2011 Share Exchange Agreement and agreed to assume $100,000 in new debt which is shown as a reduction of our Paid-In Capital.

While the core business of Front Row Networks remains the production, acquisition and distribution of 2D and 3D theatrical event programming, the Company seeks to secure and distribute non-concert alternative theatrical programming, such as animated family content, music-related documentaries, and other gaming content that can be distributed via mobile and internet platforms. It is the Company's strategic goal to acquire the broadest range of rights for exclusive programming, we may finance all or part of the production of our entertainment programs, acquire rights to completed projects, acquire content catalogues, or acquire companies which own or control content catalogues. We believe that we are positioned to benefit from the market growth and increased demand for alternative theatrical content and mobile content, and we intend to continue expansion of our exclusive library content throughout the coming year.

On August 19, 2013, Writers' Group Film Corp. completed an acquisition transaction through a share exchange with Amiga Games Inc., whereby Writers' Group Film Corp. acquired 100% of the issued and outstanding capital stock of Amiga Games Inc. in exchange for 500,000 shares of the Common Stock of WRIT. As a result of the acquisition, Amiga Games Inc. became WRIT's wholly-owned subsidiary. After the completion of the Share Exchange Agreement, the Company's consolidated financial statements will include the assets and liabilities of both WRIT and Amiga Games Inc., the historical operations of WRIT and the operations of Amiga games Inc. from the closing date of the Share Exchange Agreement.

Amiga Games Inc. licenses classic pre-Windows computer game libraries and adapts and republishes the most popular titles for smartphones, modern game consoles, PCs, tablets, and other television streaming devices. The Company established Retro Infinity Inc., to publish and brand games that were not originally released for Amiga brand computers. The two companies tap into the growing "retro gaming" marketplace, building on the "Amiga", "Atari", and "MS-DOS" brands, delivering retro-gaming titles adapted for modern devices as well as merchandise featuring brands and characters from the games.

Results of Operations

Three Months Ended December 31, 2013 and 2012

Revenues. No revenues were recognized for the three months ended December 31, 2013 which was a decrease of $2,745 from the three months ended December 31, 2012.

Wages and benefits. Wages and benefits expenses decreased $91,050 and 100% for the three months ended December 31, 2013 as compared to the same period in 2012. The decrease is mainly due to the reduction in revenues.

Audit and accounting. Audit and accounting expenses increased $6,000 and 40% for the three months ended December 31, 2013 as compared to the same period in 2012. The increase in the audit and accounting expense is mainly related to cost management of the expenses and regulatory filings.

Other general and administrative expenses. Other general and administrative expenses increased $30,032 and 75% for the three months ended December 31, 2103 and as compared to the same period in 2012. Those expenses consist primarily of company's business development, consulting fees and other expenses incurred in connection with general operations. The increase is mainly related regulatory filings and to the consulting fees related to the fund raising projects and other projects.


Loss from operations. Our loss from operations was $100,874 for the three months ended December 31, 2013 and $143,664 for the same period in 2012.

Gain or loss from derivative liability. We recorded a gain of $131,937 from derivative liability for the three months ended December 31, 2013 and a gain of $6,726 from derivative liability for the same period in 2012.

Interest expense. We incurred $38,094 in interest expense for the three months ended December 31, 2013 and $53,408 for the same period in 2012. The decrease in interest expense is mainly related to the amortization of debt discount.

Net income or loss. As a result of the foregoing factors, we generated a net loss of $7,031 for the three months ended December 31, 2013, and we generated a net loss of $190,346 for the same period in 2012.

Nine Months Ended December 31, 2013 and 2012

Wages and benefits. Wages and benefits expenses decrease $267,523 and 84.37% for the nine months ended December 31, 2013 as compared to the same period in 2012. The decrease is mainly related to the reduction in revenues during the current fiscal year.

Audit and accounting. Audit and accounting expenses increased $5,657 and 12.41% for the nine months ended December 31, 2013 as compared to the same period in 2012. The increase is in the audit and accounting expense is mainly related to cost management of the expenses. .

Legal fee. Legal fees increase $11,974 and 74.42% for the nine months ended December 31, 2013 as compared to the same period in 2012. The increase in legal fees is mainly related to increase in new entities and management of regulatory filings.

Other general and administrative expenses. Other general and administrative expenses increased $156,595 and 241.61% for the nine months ended December 31, 2013 as compared to the same period in 2012. Those expenses consist primarily of company's business development, consulting fees and other expenses incurred in connection with general operations and expansion of business.

Loss from operations. Our loss from operations was $350,273 for the nine months ended December 31, 2013 and $434,715 for the same period in 2012.

Gain or loss from derivative liability. We recorded a gain from derivative liability of $1,590,246 for the nine months ended December 31, 2013, which is discussed in more detail in Note 5 "Convertible Debt", Note 6 "Convertible Debt
- Related Party" and Note 7 "Derivative Liabilities" to our consolidated financial statements. There was a gain from derivative liability of $365,846 for the nine months ended December 31, 2012.

Interest expense. We incurred $157,034 interest expense for the nine months ended December 31, 2013 and $109,489 for the same period in 2012. The increase in interest expense is mainly related to the amortization of debt discount.

Net income or loss. As a result of the foregoing factors, we generated a of net gain of $1,082,939 for the nine months ended December 31, 2013, and we generated a net loss of $178,358 for the same period in 2012. The increase in the net gain is mainly related to the gain from derivative liability.

Liquidity and Capital Resources

As reflected in the accompanying consolidated financial statements, the Company has Retained Earnings of $458,678 at December 31, 2013 that includes a loss of $7,031 for the three months ended December 31, 2013. The Company also had a working capital deficiency of $576,551 as of December 31, 2013. These factors raise substantial doubt about the ability of the Company to continue as a going concern. Although management is currently attempting to implement its business plan, and is seeking additional sources of equity or debt financing, there is no assurance these activities will be successful.


As of December 31, 2013 and March 31, 2013, we have $226 and $1,143 cash and cash equivalents, respectively. To date, we have financed our operations primarily through cash flows from borrowings from third and related parties.

Operating activities

Net Cash used in operating activities of $120,397 for the nine months ended December 31, 2013 reflected our net gain of $1,082,939 , adjusted for $150,502 amortization of debt discount and a $1,590,246 gain on derivative liability, and $87,624 from stock based services, amortization of $15,817 and accounts receivable use of $300. Additional sources of cash include increase in accrued liability of $44,657 and increase in accounts payable of $90,749. Uses of cash included an increase in prepaid expenses of $2,040.

Net cash used in operating activities was $100,092 for the nine months ended December 31, 2012. The net cash used in operating activities is primarily due to the net loss, gain on derivative liability and partially offset by shares issued for services, amortization of debt discount, decrease in accounts payable, increase in accrued liabilities and the increase in accounts receivable during the nine months ended December 31, 2012.

Investing activities

During the nine months ended December 31, 2013, the net cash used in investing activities is primarily due to computer software development costs and hardware purchases of $41,664. During the nine months ended December 31, 2011, the net cash provided by investing activities is from loan repayment by related party for an amount of $2,034.

Financing activities

Net cash provided by financing activities of $161,144 for the nine months ended December 31, 2013 includes funds of borrowing on notes of $113,500 and $86,000 respectively and $55,000 in proceeds from shares issued for cash and $0 respectively, payment of $5,000 and $3,500 for deferred financing costs respectively and proceeds from related party advances of $2,356.

Loan Commitments

Borrowings from Third Parties

On October 10, 2013, the Company borrowed $6,000 from John L. Shaw. The maturity date of this note is April 10, 2014 and this loan bears an interest rate of 0% per annum from the issuance date. During the three months ended December 31, 2013, the Company paid off $4,500 of the balance, bringing the note balance to $1,500.

On October 22, 2013, the Company borrowed $14,000 from SFH Capital LLC. The maturity date of this note is October 22, 2014 and this loan bears an interest rate of 12% per annum from the issuance date.

On October 29, 2013, the Company borrowed $4,000 from SFH Capital LLC. The maturity date of this note is October 29, 2014 and this loan bears an interest rate of 8% per annum from the issuance date.

On November 5, 2013 SFH Capital LLC purchased a note payable, including interest, in the amount of $3,952 from Powerguard International Inc. The note bears interest of 8% per annum, has a maturity date of September 11, 2010 and is convertible into common shares at a price of $0.1.

On December 11, 2013, the Company borrowed $12,500 from SFH Capital LLC. The maturity date of this note is December 11, 2014 and this loan bears an interest rate of 8% per annum from the issuance date.


Obligations under Material Contracts

On September 9, 2013 Writers' Group Film Corp., a Delaware corporation (the "Company"), entered into an Investment Agreement (the "Investment Agreement") with Dutchess Opportunity Fund, II, LP, a Delaware limited partnership (the "Investor"). Pursuant to the Investment Agreement, and subject to certain restrictions and conditions, the Company may issue and sell to the Investor, and the Investor shall purchase from the Company, up to that number of shares of the Company's common stock having an aggregate purchase price of ten million dollars ($10,000,000), over a period of 36 months from the first trading day following the effectiveness of the registration statement registering the resale of shares purchased by the Investor pursuant to the Investment Agreement.

On December 5, 2013, pursuant to Rule 477 under the Securities Act, the Company withdrew the Registration Statement, requesting such withdrawal because it intended to file an amended Registration Statement in response to the comments received in correspondence from SEC staff dated November 18, 2013. On December 16, the Company re-filed the revised Registration Statement. On January 10, 2014 the Company filed an Amended Registration Statement based on comments received in correspondence from the SEC, and on January 16, 2014, the SEC made the Registration effective.

Except with respect to the loan obligations disclosed above, we have no obligations to pay cash or deliver cash to any other party.

Inflation

Inflation and changing prices have not had a material effect on our business and we do not expect that inflation or changing prices will materially affect our business in the foreseeable future. However, our management will closely monitor price changes in our industry and continually maintain effective cost controls in operations.

Off Balance Sheet Arrangements

We do not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity or capital expenditures or capital resources that is material to an investor in our securities.

Seasonality

Our operating results and operating cash flows historically have not been subject to seasonal variations. This pattern may change, however, as a result of new market opportunities or new product introduction.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operation. Critical accounting policies are those that are most important to the portrayal of our financial conditions and results of operations and require management's difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management's current judgments. We believe the following critical accounting policies involve the most significant estimates and judgments used in the preparation of our financial statements:

Accounts Receivable: Accounts receivable are recorded at the net invoice value and are not interest bearing. We consider receivables past due based on the contractual payment terms. We perform ongoing credit evaluations of our customers, and generally we do not require collateral on our accounts receivable. We estimate the need for allowances for potential credit losses based on historical collection activity and the facts and circumstances relevant to specific customers and we record a provision for uncollectible accounts when collection is uncertain. To date, we have not experienced significant credit related losses.

Revenue Recognition: We recognize revenues when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable and collectability is reasonably assured.


Recent Accounting Pronouncements

We do not expect the adoption of recently issued accounting pronouncements to have a significant impact on our results of operations, financial position or cash flow.

CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report, we conducted an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer ("CEO") and Chief Financial Officer
("CFO") of our disclosure controls and procedures (as defined in Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934). Based on this evaluation, the CEO and CFO concluded that, because of the material weaknesses in our internal control over financial reporting described below, our disclosure controls and procedures were not effective as of December 31, 2013 See our discussion at "Item 9A Controls and Procedures" on Form 10-K for the year ended March 31, 2013.

Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process certain safeguards to reduce, though not eliminate, this risk. Management is responsible for establishing and maintaining adequate internal control over our financial reporting.

Changes in Internal Controls

There have been no changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

LEGAL PROCEEDINGS

There is no litigation pending or threatened by or against the Company.

Exhibits.

Consolidated Financial statements are included in the body of this report.

Exhibit Index:

* Rule 15d-14(a) Certifications Exhibit (31)(i) and (ii)

* Section 1350 Certification Exhibit (32)

101.INS **   XBRL Instance Document

101.SCH **   XBRL Taxonomy Extension Schema Document

101.CAL **   XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF **   XBRL Taxonomy Extension Definition Linkbase Document

101.LAB **   XBRL Taxonomy Extension Label Linkbase Document

101.PRE **   XBRL Taxonomy Extension Presentation Linkbase Document

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.


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