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WRIT > SEC Filings for WRIT > Form 10-K on 15-Jul-2014All Recent SEC Filings

Show all filings for WRIT MEDIA GROUP, INC.

Form 10-K for WRIT MEDIA GROUP, INC.


15-Jul-2014

Annual Report


ITEM 7. 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, 2014, 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

WRIT Media Group, Inc. ("we", "us", "our", "WRIT", or the "Company") was incorporated as Writers' Group Film Corp. 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, license, and distribute music-related content in 3D and ultra-high definition (4K) for initial worldwide digital broadcast into digitally-enabled movie theaters. Through the distribution of music-related "alternative content," the Company intends to present live concerts, music documentaries, and other music-related content at affordable prices, to a massive fan base worldwide in a cost-effective manner. Following an initial theatrical run, or as an initial distribution window, the content will be licensed, in both 2D, 4K and 3D formats, to DVD and Blu-Ray retailers, Free TV broadcasters, cable and emerging 3D cable channels, and mobile streaming providers. In some cases, Front Row Networks will also sell merchandising and other products, bolstered by both in-theater and in-App advertising, tailored around each Artist and/or event, to maximize potential merchandising and sponsorship revenues.

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 were reflected in the consolidated financial statements for periods prior to the Share Exchange Agreement were 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 included 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 licensing, production, acquisition and distribution of music-related content and programming, the core business is dependent upon negotiating and financing projects with schedules that are solely determined by third parties, such as Artists and rights owners. In order to secure less cyclical entertainment product, the Company sought to license or purchase entertainment content that could be easily secured and distributed through the multiple distribution arrangements already established by the Company and via the rapidly growing marketplace represented by consumers of mobile, internet, and TV set-top devices. To reach this goal during the fiscal year, the Company set out to acquire exclusive branded content and entertainment programming, and achieved this goal through the acquisition of Amiga Games Inc.

On August 19, 2013, the Company completed an acquisition transaction through a share exchange with Amiga Games Inc., whereby WRIT acquired 100% of the issued and outstanding capital stock, assets, and trademarks 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.

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. WRIT also established a new company, 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.

During the fiscal year, Amiga Games Inc. and Retro Infinity Inc. entered several marketing and distribution agreements, including those with Microsoft Corporation and Roku Inc. Both agreements include minimum guarantees, defined as advances against future sales. Additionally, the Retro Infinity Inc. licensed dozens of classic games for distribution via the Windows 8, Roku player, iOS (Apple), and Android platforms. Although it was the Company's strategic goal to distribute a broad range of video game titles on the Windows 8 and iOS platforms during the 4th quarter of 2014, lack of operating capital caused the Company to temporarily halt software development funding, which delayed the Company's overall gaming product release schedule. This temporary reduction in operating capital was due to mainly to regulatory delays encountered in structuring WRIT's equity-line financing, and the Company's difficulty in raising alternative investment capital, due to its sub-penny share price at the time.


On January 22, 2014, the Company changed the name of the corporation to WRIT Media Group, Inc., and authorized a 1 for 1,000 reverse split of the Company's issued and outstanding shares of Common Stock. The name change was authorized to encompass the Company's broadened activities, including additional business plans and models, and the acquisition and formation of new subsidiaries. The equity restructuring was authorized to achieve the following: (a) price per share -- the rollback will increase the price per share to above $0.01, sub-penny markets are getting harder to trade and next to impossible to finance;
(b) funding -- with a sub penny share price the Company was unable to fund because of dilution, post rollback the share price should be well above $0.01 and allow management to close on numerous funding opportunities that have been presented; (c) larger potential audience -- with a higher share price the Company will have access to investors who do not trade sub penny stocks such as institutions and Europeans; (d) listing in Europe -- the Company will now be able to list its common shares for trading on a European Stock Exchange, as co-listings in Europe are not accepted with a sub penny share price; and (e) acquisitions -- the Company will be able to use common shares to acquire larger assets and other industry related companies.

On January 16, 2014 WRIT's Equity Line Financing ("ELF") agreement with Dutchess Opportunity Fund II, and its corresponding S1 registration statement, was declared effective by the SEC. The ELF agreement, executed in September 2013, allows but does not require WRIT to sell up to US$10,000,000 of common stock to Dutchess at a 5% discount to market price, during the 36 month term. Compared to the Company's convertible debt financing, ELFs provide a lower discount to market that minimize dilution while increasing operating capital. This additional financing source allowed the company to reduce debt and reduce the balance of the more expensive convertible notes that were outstanding during the last quarter of the fiscal year.

On February 4, 2014 the Company completed its administrative and legal work with the Depository Trust & Clearing Corporation ("DTCC") and the DTCC's long-standing "Administrative Chill" on clearing WRIT stock certificates was removed. DTCC resumed accepting deposits of the Company's common stock for book entry transfer services. As a result, shareholders with online brokerage accounts at firms such as Scottrade, ETRADE, TD Ameritrade and other full service brokerage firms are allowed to deposit new shares of WRIT's common stock in the electronic system that controls clearance and settlement. The reinstatement of the DTC depository services is an instrumental and enormous accomplishment for WRIT, which greatly reduced the costs and expenses associated with private equity investments in the Company.

After restructuring WRIT's balance sheet and resuming software development activities, we believe WRIT is well positioned to benefit from the market growth and increased demand for entertainment content that can be enjoyed on mobile phones, tablets and other devices. Barring any additional funding delays, we estimate that the majority of WRIT's video gaming product will be available for release in the 4th quarter of 2014. We intend to continue to look for opportunities to expand WRIT's business and increase its catalogue of both music and video game content, though acquisitions and licensing arrangements. Throughout the year, the Company also intends to continue to explore business relationships with entities that have the resources to offer financing, distribution and marketing of WRIT's product.

Financial Performance Highlights

The following summarizes certain key financial information for the fiscal year ended March 31, 2014 and for the fiscal year ended March 31, 2013:

Revenues: Our revenues were $11,000 and $8,855 for the fiscal years ended March 31, 2014 and 2013.

Net income (loss): Net income (loss) was $1,044,284 and $(392,769) for the fiscal years ended March 31, 2014 and 2013.


Results of Operations

The following table sets forth key components of our results of operations for the fiscal years ended March 31, 2014 and 2013.

                                    For the Year       For the Year
                                       Ended              Ended
                                     03/31/2014         03/31/2013
Total Revenue                      $       11,000     $        8,855
Operating Expenses:
Wages and benefits                        210,578            248,069
Audit and accounting                       34,989             55,122
Legal fee                                   2,915             16,839
Other general and administrative          249,768            122,116
Loss from operations                    (487,250)          (433,291)
Loss on extinguishment of debt                  -                  -
Other income                              (3,000)                  -
Gain on derivative liability            1,715,954            193,155
Interest expense                        (187,420)          (152,633)
Net income (loss)                  $    1,044,284     $    (392,769)

Fiscal Year Ended March 31, 2014 Compared to Fiscal Year Ended March 31, 2013

Revenues. Revenues increased 24% to $11,000 for the fiscal year ended March 31, 2014 from $8,855 for the fiscal year ended March 31, 2013, due to an increase in content delivered to customers, comprised solely of video gaming product compared to the decrease in available produced and acquired content available for distribution for the prior year.

Revenues in the amount of $11,000 for the fiscal year ended March 31, 2014 were comprised of $11,000 for the delivery of gaming titles to the Microsoft Corporation.


Wages and benefits. Wages and benefits expenses decreased 15.1% to $210,578 for the fiscal year ended March 31, 2014 from $248,069 for the fiscal year ended March 31, 2013. The decrease is mainly due to a decrease in personnel costs during the year. The wages and benefits expenses for the fiscal year ended March 31, 2014 and 2013 include employee stock compensation in the amount of $165,104 and $192,368, respectively.

Audit and accounting. Audit and accounting expenses was $34,989 for the fiscal year ended March 31, 2014. The decrease in the audit and accounting expense is mainly related to the change in accounting personnel.

Legal fees. Legal Fees decreased 82.7% to $2,915 for the fiscal year ended March 31, 2014 from $16,839 for the fiscal year ended March 31, 2013. The legal fees were related to the usual and customary transaction for the Company.

Other general and administrative expenses. Other general and administrative expenses increased to $249,768 for the fiscal year ended March 31, 2014 from $122,116 for the fiscal year ended March 31, 2013. Those expenses consist primarily of company's increase in business development, consulting fees and other expenses incurred in connection with general operations and the acquired operations of Amiga Games Inc.

Loss from operations. Our loss from operations was $487,250 for the fiscal year ended March 31, 2014 and $433,291 for the fiscal year ended March 31, 2013.

Gain or loss from derivative liability. We recorded a gain from derivative liability of $1,715,954 for the fiscal year ended March 31, 2014 and $193,155 for the fiscal year ended March 31, 2013, which is discussed in more detail in Note 4 "Convertible Debt", Note 5 "Convertible Debt - Related Party" and Note 6 "Derivative Liabilities" to our consolidated financial statements.

Interest expense. We incurred $187,420 in interest expense for the fiscal year ended March 31, 2014, and $152,633 in interest expense for the fiscal year ended March 31, 2013. The increase in interest expense is mainly due to additional borrowings, extinguished debt, and debt discount amortization.


Liquidity and Capital Resources

As reflected in the accompanying consolidated financial statements, the Company has retained earnings of $420,023 that includes net income of $1,044,284 at March 31, 2014 and had accumulated deficits of $624,261 at March 31, 2013 that includes losses of $392,769 for the fiscal year ended March 31, 2013 and losses of $216,784 for the fiscal year ended March 31, 2012. The Company also had a working capital deficiency of $181,109 as of March 31, 2014 and $214,499 as of March 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 March 31, 2014 and March 31, 2013, we have $25,810 and $1,143 respectively in cash and cash equivalents. The following table provides detailed information about our net cash flow for all financial statement periods presented in this report. To date, we have financed our operations primarily through cash flows from operations, sale of restricted stock through private placements, and borrowings from third and related parties.

                                                                For the Year       For the Year
                                                                   Ended              Ended
                                                                 3/31/2014          03/31/2013
Net cash used in operating activities                          $    (175,463)     $    (164,736)
Net cash used in investing activities                                (89,125)                  -
Net cash provided by financing activities                             289,255            150,280
Net increase (decrease) in cash and cash equivalents                   24,667           (14,456)
Cash and cash equivalents at beginning of the period                    1,143             15,599
Cash and cash equivalents at end of the period                 $       25,810     $        1,143

Operating activities

Cash used in operating activities of $175,463 for the fiscal year ending March 31, 2014 which reflected our net income of $1,044,284, adjusted for non-cash expenses, consisting primarily of $1,715,954 of gain on derivative liability, $258,418 of stock based compensation to employees, consultants and other services, $173,376 of amortization of debt discount, $7,312 of amortization of deferred financing costs and gain on settlement of $28,468. Additional major sources of cash include increases in accounts payable of $23,885, increase in accrued expenses of $8,629, and an increase in deferred revenue of $55,395. Uses of cash included a decrease in accounts receivables of $300, a decrease in prepaid expenses and other assets of $2,040.

Cash used in operating activities of $164,736 for fiscal year ended March 31, 2013 reflected our net loss of $392,769, adjusted for non-cash expenses, consisting primarily of $193,155 of gain on derivative liability, $254,340 of stock based compensation to employee, consultant and other services, $138,758 of amortization of debt discount, $2,500 of amortization of deferred financing costs, and $5,449 imputed interest on related party loan. Additional major sources of cash include decreases in related party accounts receivable of $46,800. Uses of cash included a decrease in accounts payable and accrued liabilities of $25,102.


Investing activities

The net cash provided by or used in investing activities is for the fiscal year ended March 31, 2014 is primarily due to funds invested in software development costs of $87,461 and purchases of technology hardware of $1,664. During the fiscal year ended March 31, 2013 there were $0 net cash provided by our investing activities.

Financing activities

Net cash provided by financing activities of $289,255 and $150,280 for the fiscal years ended March 31, 2014 and March 31, 2013, respectively and included funds borrowed on short term notes payable of $61,500, borrowing on convertible debt of $80,077 and proceeds from shares issued for cash of $222,774 offset by payments to related parties of $2,896, payments of short term notes of $6,000, payments of convertible debt of $61,200 and payments of $5,000 for deferred financing costs. During the fiscal year ended March 31, 2013 there were $116,000 of funds borrowed from third party, $35,000 of shares issued for cash and $2,780 of advances from related party, offset by $3,500 paid for deferred financing costs.

Loan Commitments

Borrowings from Related Parties

The Company has no current or anticipated borrowings from related parties.

Borrowings from Third Parties

Asher Enterprises, Inc.

On November 2, 2012, the Company borrowed $16,000 from Asher Enterprises. The maturity date of this note is August 5, 2013. This loan bears an interest rate of 8% per annum from the issuance date before default. Interest on overdue principal after default accrues at an annual rate of 22%. After 180 days following the date of the note, Asher Enterprises has the right to convert all or a portion of the remaining outstanding principal amount of this note into shares of the Company's Common Stock. The conversion price will be 25% multiplied by the lowest trading price for the Common Stock during the one hundred twenty trading day period ending on the latest complete trading day prior to the conversion date. Along with the note payable, the Company issued warrants to purchase 49,231 shares of common stock. The warrants expire 5 years after issuance and have an exercise price of $0.0325. The exercise price can adjust downward if the Company issues common stock at a price per share lower than the current exercise price. This note has been converted in its entirety and has been surrendered to the Company. The warrants have been exercised in their entirety and no warrant shares remain un-exercised.

On January 30, 2013, the Company borrowed $32,500 from Asher Enterprises. The maturity date of this note is November 1, 2013. This loan bears an interest rate of 8% per annum from the issuance date before default. Interest on overdue principal after default accrues at an annual rate of 22%. After 180 days following the date of the note, Asher Enterprises has the right to convert all or a portion of the remaining outstanding principal amount of this note into shares of the Company's Common Stock. The conversion price will be 50% multiplied by the average of the lowest two trading prices for the Common Stock during the twenty trading day period ending on the latest complete trading day prior to the conversion date. This note has been converted in its entirety and has been surrendered to the Company.


On April 10, 2013, the Company borrowed $28,000 from Asher Enterprises. The maturity date of this note is January 15, 2014. This loan bears an interest rate of 8% per annum from the issuance date before default. Interest on overdue principal after default accrues at an annual rate of 22%. After 180 days following the date of the note, Asher Enterprises has the right to convert all or a portion of the remaining outstanding principal amount of this note into shares of the Company's Common Stock. The conversion price will be 50% multiplied by the average of the lowest two trading prices for the Common Stock during the twenty trading day period ending on the latest complete trading day prior to the conversion date. An amount equal to $5,800 of the principal balance of the note was converted on October 21, 2014. On January 31, 2014, the principal balance of the note plus interest was paid in its entirety and the note has been surrendered to the Company.

On May 13, 2013, the Company borrowed $27,500 from Asher Enterprises. The maturity date of this note is February 17, 2014. This loan bears an interest rate of 8% per annum from the issuance date before default. Interest on overdue principal after default accrues at an annual rate of 22%. After 180 days following the date of the note, Asher Enterprises has the right to convert all or a portion of the remaining outstanding principal amount of this note into shares of the Company's Common Stock. The conversion price will be 50% multiplied by the average of the lowest two trading prices for the Common Stock during the forty trading day period ending on the latest complete trading day prior to the conversion date. On February 17, 2014, the principal balance of the note plus interest was paid in its entirety and the note has been surrendered to the Company.

Mrs. Nancy Louise Jones

On June 12, 2013, the Company borrowed $12,000 from Mrs. Nancy Louise Jones. Out of the $12,000 debt proceeds $2,000 was paid to Mrs. Nancy Louise Jones for legal and administrative fees. The maturity date of this note is August 31, 2013, which was amended by the parties to April 1, 2014. This loan bears an interest rate of 12% per annum. The Company evaluated the application of ASC 470-50 and ASC 470-60 and concluded the extension of maturity date does not constitute a troubled debt restructuring or debt extinguishment. On March 17, 2014, Nancy Louise Jones assigned her $12,000 note to Magna Group LLC (see Note
4). The maturity date of this amended note is March 17, 2015. This loan bears an interest rate of 12% per annum. The note is convertible into common stock at a price of 55% multiplied by the lowest volume weighted average price for the Common Stock during the five trading day period ending on the latest complete trading day prior to the conversion date. Additionally, in no event shall the conversion price be less than $0.00004. The Company evaluated the application of ASC 470-50 and ASC 470-60 and concluded the addition of a conversion feature constituted a debt extinguishment rather than a troubled debt restructuring. See more discussion about the new debt in Note 4. An amount equal to $2,577 of the principal balance of the note was converted on March 24, 2014.

Magna Group LLC

As noted above, on March 17, 2014, Nancy Louise Jones assigned her $12,000 note to Magna Group LLC. The maturity date of this amended note is March 17, 2015. This loan bears an interest rate of 12% per annum. The note is convertible into common stock at a price of 55% multiplied by the lowest volume weighted average price for the Common Stock during the five trading day period ending on the latest complete trading day prior to the conversion date. Additionally, in no event shall the conversion price be less than $0.00004. The Company evaluated the application of ASC 470-50 and ASC 470-60 and concluded the addition of a conversion feature constituted a debt extinguishment rather than a troubled debt restructuring. See more discussion about the new debt in Note 4. An amount equal to $2,577 of the principal balance of the note was converted on March 24, 2014, leaving a principal balance of $10,500.


On March 17, 2014, a convertible note was issued with Magna Group, LLC in the amount of $13,077. The notes bears interest of 12% per annum, and is due on March 31, 2015 and is convertible into common shares at a price of 55% multiplied by the lowest volume weighted average price for the Common Stock during the five trading day period ending on the latest complete trading day prior to the conversion date. Additionally, in no event shall the conversion price be less than $0.00004.

SCHU Mortgage & Capital, Inc.

On February 18, 2014, the Company borrowed $15,000 from SCHU Mortgage & Capital, . . .

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