Pre-Effective Amendment to Registration of Securities by a Small-Business Issuer — Form SB-2 Filing Table of Contents
Document/ExhibitDescriptionPagesSize 1: SB-2/A Platinum Studios Form SB-2/A HTML 1.25M
2: EX-5.1 Opinion re: Legality HTML 9K
3: EX-23.1 Consent of Experts or Counsel HTML 6K
From
time
to time after this Registration Statement becomes effective.
If
any
securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, other
than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: o _ X
_______
If
this
Form is filed to register additional securities for an offering pursuant to
Rule
462(b) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. o ________
(COVER
CONTINUES ON FOLLOWING PAGE)
1
If
this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. o
________
If
this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. o
________
If
delivery of the prospectus is expected to be made pursuant to Rule 434, please
check the following box. o ________
2
TITLE
OF EACH CLASS OF SECURITIES TO BE
REGISTERED
AMOUNT
TO BE
REGISTERED
(1)
PROPOSED
MAXIMUM
OFFERING
PRICE
PER
SHARE (2)
PROPOSED
MAXIMUM
AGGREGATE
OFFERING
PRICE
AMOUNT
OF
REGISTRATION
FEE
Common
stock, $.0001 par value
$
66,255,825
$
$
0.10
$
$6,625,583
$
$203.41
Total
$
$6,625,583
$
$203.41
*
(1)
Includes 100% of the shares of our common stock, par value $.0001 per
share, issued to the selling stockholders prior to the date of this
prospectus, under certain Subscription Agreements dated October 12, 2006, which
may be offered pursuant to this registration statement.
(2)
Estimated solely for the purpose of calculating the registration fee required
by
Section 6(B) of the Securities Act of 1933, as amended, and computed pursuant
to
Rule 457 under the Securities Act.
THE
INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PRELIMINARY
PROSPECTUS SUBJECT TO COMPLETION, DATED DECEMBER 14,2007
PLATINUM
STUDIOS, INC.
66,255,825
SHARES OF
COMMON
STOCK
This
prospectus relates to the resale by the selling stockholders of up to 66,255,825
shares of our common stock presently outstanding. The selling stockholders
may
be deemed underwriters of the shares of common stock, which they are offering.
We will pay the expenses of registering these shares.
We
are
not selling any shares of common stock in this offering and therefore will
not
receive any proceeds from this offering. We have paid the expenses of preparing
this prospectus and the related registration expenses.
Our
common stock is not traded on any national securities exchange and is not
quoted
on any over-the-counter market. We intend to begin discussions with various
market makers in order to arrange for an application to be made with respect
to
our common stock, to be approved for quotation on the Over-The-Counter Bulletin
Board upon the effectiveness of this prospectus. If our shares
become quoted on the Over-The-Counter Bulletin Board, sales will be made
at
prevailing market prices or privately negotiated prices.
The
selling stockholders are offering these shares of common stock. The selling
stockholders may sell all or a portion of these shares from time to time
in
market transactions through any market on which our common stock is then
traded,
in negotiated transactions or otherwise, and at prices and on terms that
will be
determined by the then prevailing market price or at negotiated prices directly
or through a broker or brokers, who may act as agent or as principal or by
a
combination of such methods of sale. The selling stockholders will receive
all
proceeds from the sale of the common stock. For additional information on
the
methods of sale, you should refer to the section entitled "Plan of
Distribution."
INVESTING
IN THESE SECURITIES INVOLVES SIGNIFICANT RISKS. SEE "RISK
FACTORS"
BEGINNING
ON PAGE 9.
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of these securities or determined if this Prospectus
is
truthful or complete. Any representation to the contrary is a criminal
offense.
The
date
of this prospectus is ________, 2007.
The
information in this Prospectus is not complete and may be changed. This
Prospectus is included in the Registration Statement that was filed by Platinum
Studios, Inc. with the Securities and Exchange Commission. The selling
stockholders may not sell these securities until the registration statement
becomes effective. This Prospectus is not an offer to sell these securities
and
is not soliciting an offer to buy these securities in any state where the sale
is not permitted.
This
prospectus and any prospectus supplement contain forward-looking statements.
We
have based these forward-looking statements on our current expectations and
projections about future events.
In
some
cases, you can identify forward-looking statements by words such as "may,""should,""expect,""plan,""could,""anticipate,""intend,""believe,""estimate,""predict,""potential,""goal," or "continue" or similar
terminology. These statements are only predictions and involve known and unknown
risks, uncertainties and other factors, including the risks outlined under
"Risk
Factors," that may cause our or our industry's actual results, levels of
activity, performance or achievements to be materially different from any future
results, levels of activity, performance or achievements expressed or implied
by
such forward-looking statements.
Unless
we
are required to do so under U.S. federal securities laws or other applicable
laws, we do not intend to update or revise any forward-looking
statements.
6
PROSPECTUS
SUMMARY
The
following summary highlights selected information contained in this prospectus.
This summary does not contain all the information you should consider before
investing in the securities. Before making an investment decision, you should
read the entire prospectus carefully, including the "risk factors" section,
the
financial statements and the notes to the financial statements. As used
throughout this prospectus, the terms “Platinum Studios”, the “Company”, “we”,
“us” and “our” refer to Platinum Studios, Inc.
PLATINUM
STUDIOS, INC.
OUR
BUSINESS
We
are an
entertainment company that works with independent comic book creators and small
publishers to form an independent library of over 3,800 comic book characters
which we adapt and produce for all forms of media. Our library
contains characters in a full range of genre and styles. With deals
in place with film studios and media players, our management believes we are
positioned to become a leader in the creation of new content across all
media.
We
are
focused on adding titles and expanding our library with the primary goal of
creating new franchise properties and characters. In addition to
in-house development and further acquisitions, we are developing content with
professionals outside the realm of comic books. We have teamed up
with screenwriters, producers, directors, movie stars, and novelists to develop
entertainment content and potential new franchise properties. We
believe our core brand offers a broader range of storylines and genres than
the
traditional superhero-centric genre. Management believes this
approach is maintained with Hollywood in mind, as the storylines offer the
film
industry fresh, high-concept brandable content as a complimentary alternative
to
traditional super hero storylines.
Over
the
next several years, we are working to become the leading independent comic
book
commercialization producer for the entertainment industry across all platforms
including film, television, direct-to-home, publishing, and digital media,
creating merchandising vehicles through all retail product lines. Our
management believes this will allow us to maximize the potential and value
of
our owned content creator relationships and acquisitions, story development
and
character/franchise brand-building capabilities while keeping required capital
investment relatively low.
Platinum
Studios derives revenues from a number of sources in each of the following
areas: Print Publishing, Digital Publishing, Filmed Entertainment,
and Merchandise/Licensing.
In
the
audit report dated July 13, 2007, our auditors noted the financial statements
of
the Company were prepared assuming the Company will continue as a going
concern. Due to the recurring losses from operations and insufficient
assets available to fund activities, they expressed a “going concern” opinion
reflective of their substantial doubt about the ability of the Company to
continue as a going concern.
We
were
founded as a California limited liability company on November 20,1996. On September 15, 2006, we filed Articles of Incorporation with
Statement of Conversion to convert to a California stock
corporation. The Plan of conversion provided for the issuance of an
aggregate of 135,000,000 shares to the former members of the limited liability
company. Our principal offices are located at 11400 W. Olympic Blvd. Suite
1400,
Los Angeles, CA90064 and our phone number is (310) 807-8100.
-
up to 49,047,250 shares of common stock issued
prior to the date of this prospectus to certain of the selling
stockholders pursuant to certain Subscription Agreements in October
2006
for an aggregate purchase price of $4,904,725, less offering costs of
$222,518
- 17,208,575
shares of common stock issued prior to the date of this prospectus
to a
selling stockholder pursuant to an agreement dated July 1, 2007
in
consideration for relief of long-term debt of $1,625,000 plus interest
of
$95,857.
This
number represents 32.92% of our current outstanding stock.
Common
stock to be outstanding after the offering
Up
to 201,255,825 shares
Use
of proceeds
We
will not receive any proceeds from the sale
of
the common stock.
The
above
information regarding common stock to be outstanding after the offering is
based
on 201,255,825 shares of common stock outstanding as of December 13, 2007,
which includes the shares being offered by the selling stockholders in this
prospectus and 17,208,575 shares issued pursuant to a cancellation of
indebtedness agreement dated July 1, 2007.
There
is
currently no public market for our securities. The $0.10 per share offering
price of the common stock being sold under this prospectus has been arbitrarily
set. This price does not bear any relationship to our assets, book value,
earnings or net worth and it is not an indication of actual value.
On
July1, 2007, we entered into a Cancellation of Indebtedness Agreement with our
CEO
Scott Mitchell Rosenberg, pursuant to which we agreed to issue 17,208,575
shares
in exchange for canceling $1,625,000 in long-term debt plus $95,857 in accrued
interest for said debt. Mr. Rosenberg directed the shares to be
issued in the name of Charlotte Rosenberg, his mother, from whom he personally
borrowed the funds, which he then loaned to the Company’s predecessor in
interest, Platinum Studios LLC.
We
claim
an exemption from the registration requirements of the Act for the private
placement of these securities pursuant to Section 4(2) of the Act and/or
Regulation D promulgated thereunder since, among other things, the transaction
did not involve a public offering, the investors were accredited investors
and/or qualified institutional buyers, the investors had access to information
about us and their investment, the investors took the securities for investment
and not resale, and we took appropriate measures to restrict the transfer of
the
securities.
The
following information for the years ended December 31, 2006 and 2005 have
been
derived from our audited financial statements, which appear elsewhere in
this
prospectus. The following information as at September 30, 2007 and for the
six
months ended June 30, 2007 has been derived from our unaudited financial
statements, which appear elsewhere in this prospectus.
This
investment has a high degree of risk. Before you invest you should carefully
consider the risks and uncertainties described below and the other information
in this prospectus. If any of the following risks actually occur, our business,
operating results and financial condition could be harmed and the value of
our
stock could go down. This means you could lose all or a part of your
investment.
RISKS
RELATED TO OUR BUSINESS AND INDUSTRY
WE
HAVE A LIMITED OPERATING HISTORY UPON WHICH YOU CAN BASE AN INVESTMENT
DECISION.
Our
company was formed on November 20, 1996 and has only recently begun to fully
exploit our library of characters. The first ten years of our
existence were spent acquiring and building our library. There can be
no assurance at this time that we will operate profitably or that we will have
adequate working capital to meet our obligations as they become
due. Management believes that our success will depend in large part
on the continued shift from print to digital media as well as the ability to
monetize that shift. We intend to invest heavily in developing and
marketing our library of characters, primarily for the web and traditional
media
outlets, i.e. film and television, with print as a secondary
medium. However, there can be no assurance that such investments will
yield the anticipated returns.
9
COMPETITION
FROM PROVIDERS OF SIMILAR PRODUCTS AND SERVICES COULD MATERIALLY ADVERSELY
AFFECT OUR REVENUES AND FINANCIAL CONDITION
The
industry in which we compete is a rapidly evolving, highly competitive and
fragmented market, which is based on consumer preferences and requires
substantial human and capital resources. We expect competition to intensify
in
the future. There can be no assurance that we will be able to compete
effectively. We believe that the main competitive factors in
the entertainment, media and communications industries include
effective marketing and sales, brand recognition, product quality, product
placement and availability, niche marketing and segmentation and value
propositions. They also include benefits of one's company, product and
services, features and functionality, and cost. Many of our competitors are
established, profitable and have strong attributes in many, most or all of
these areas. They may be able to leverage their existing relationships
to offer alternative products or services at more attractive pricing or
with better customer support. Other companies may also enter our markets
with better products or services, greater financial and human resources and/or
greater brand recognition. Competitors may continue to improve or expand current
products and introduce new products. We may be perceived as relatively too
small
or untested to be awarded business relative to the competition. To be
competitive, we will have to invest significant resources in
business development, advertising and marketing. We may also have to
rely on strategic partnerships for critical branding and relationship leverage,
which partnerships may or may not be available or sufficient. We cannot assure
you that we will have sufficient resources to make these investments or that
we
will be able to make the advances necessary to be competitive. Increased
competition may result in price reductions, reduced gross margin and loss
of market share. Failure to compete successfully against current or future
competitors could have a material adverse effect on the Company’s business,
operating results and financial condition.
THE
SPECULATIVE NATURE OF THE ENTERTAINMENT, MEDIA AND COMMUNICATIONS INDUSTRY
MAY
RESULT IN OUR INABILITY TO PRODUCE PRODUCTS OR SERVICES THAT RECEIVE SUFFICIENT
MARKET ACCEPTANCE FOR US TO BE SUCCESSFUL.
Certain
segments of the entertainment, media and communications industry are highly
speculative and historically have involved a substantial degree of risk. For
example, if a property is optioned by a studio, the option may not get
exercised, or if exercised, a film may still not be made, or even if a film
is
made, the success of a particular film, video game, program or recreational
attraction depends upon unpredictable and changing factors, including the
success of promotional efforts, the availability of alternative forms of
entertainment and leisure time activities, general economic conditions, public
acceptance and other tangible and intangible factors, many of which are beyond
our control. If we are unable to produce products or services that receive
sufficient market acceptance we may not generate sufficient revenues to maintain
our operations and our business will be unsuccessful.
CHANGES
IN TECHNOLOGY MAY REDUCE THE DEMAND FOR THE PRODUCTS OR SERVICES WE MAY OFFER
FOLLOWING A BUSINESS COMBINATION.
The
entertainment, media and communications industries are substantially affected
by
rapid and significant changes in technology. These changes may reduce the demand
for certain existing services and technologies used in these industries or
render them obsolete. We cannot assure you that the technologies used by or
relied upon or produced by a target business with which we effect a business
combination will not be subject to such occurrence. While we may attempt to
adapt and apply the services provided by the target business to newer
technologies, we cannot assure you that we will have sufficient resources to
fund these changes or that these changes will ultimately prove successful.
If we
are unable to respond to quickly to changes in technology our business will
fail.
WE
MAY NOT BE ABLE TO SUCCESSFULLY IMPLEMENT OUR BUSINESS MODEL, WHICH IS SUBJECT
TO INHERENT UNCERTAINTIES .
Our
business model is predicated on our ability to control all of the rights
surrounding our IP in order to properly monetize and exploit each property
in
the most appropriate medium. We cannot assure that there will be a
large enough audience for our IP or the media projects or merchandise based
on
them, or that prospective customers will agree to pay the prices that we propose
to charge. In the event our customers resist paying the prices we set
for our products, our business, financial condition, and results of operations
will be materially and adversely affected.
MANY
OF OUR COMPETITORS ARE LARGER AND HAVE GREATER FINANCIAL AND OTHER RESOURCES
THAN WE DO AND THOSE ADVANTAGES COULD MAKE IT DIFFICULT FOR US TO COMPETE WITH
THEM.
The
global media industry is competitive. There are a substantial number
of traditional and established print publishers, film studios, production
companies and internet media companies with which we compete directly and
indirectly, many of which have significantly greater financial resources, higher
revenues, and greater economies of scale than us. While we believe
that we are unique in our utilization of web-based comics as our primary
publishing option, new technologies may be developed in the future which will
compete with our publishing plan, and such technology may already be in
development. We will attempt to distinguish ourselves from our
competitors, but there can be no assurance that we will be able to penetrate
the
market. We believe that our intellectual property is attractive to an
online audience in light of the recent worldwide trend to move publishing from
print to electronic media. Nevertheless, there is no assurance that
we will compete successfully with existing or future competitors in the film
industry. If we are not successful in competing with these traditional and
established businesses we will be unable to generate any
revenues.
10
WE
MAY BE UNABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY FROM INFRINGEMENT
BY THIRD PARTIES.
Our
business plan is significantly dependent upon exploiting our intellectual
property. There can be no assurance that we will be able to control all of
the
rights for all of our property or that some of the rights may not revert to
their original owners after the expiration of their respective option periods.
We may not have the resources necessary to assert infringement claims against
third parties who may infringe upon our intellectual property rights. Litigation
can be costly and time consuming and divert the attention and resources of
management and key personnel. We cannot assure you that we can adequately
protect our intellectual property or successfully prosecute potential
infringement of our intellectual property rights. Also, we cannot assure you
that others will not assert rights in, or ownership of, trademarks and other
proprietary rights of ours or that we will be able to successfully resolve
these
types of conflicts to our satisfaction. Our failure to protect our intellectual
property rights may result in a loss of revenue and could materially adversely
affect our operations and financial condition.
OUR
FILMS MIGHT BE LESS SUCCESSFUL ECONOMICALLY THAN WE
ANTICIPATE.
We
cannot
predict the economic success of any of our films because the revenue derived
from the distribution of a film depends primarily upon its acceptance by the
public, which cannot be accurately predicted. The economic success of a film
also depends upon the public’s acceptance of competing films, critical reviews,
the availability of alternative forms of entertainment and leisure time
activities, piracy and unauthorized recording, transmission and distribution
of
films, general economic conditions, weather conditions and other tangible and
intangible factors, none of which can be predicted with certainty. We expect
to
release a limited number of films per year as part of our film slate. The
commercial failure of just one of those films could have a material adverse
effect on our results of operations in both the year of release and in the
future.
OUR
FILMS MIGHT BE MORE EXPENSIVE TO MAKE THAN WE ANTICIPATE.
We
expect
that future financing which we may obtain will provide the capital required
to
produce our film slate. Expenses associated with producing the films could
increase beyond projected costs because of a range of factors such as an
escalation in compensation rates of talent and crews working on the films or
in
the number of personnel required to work on films, or because of creative
problems or difficulties with technology, special effects and equipment. In
addition, unexpected circumstances sometimes cause film production to exceed
budget.
WE
MIGHT BE DISADVANTAGED BY CHANGES OR DISRUPTIONS IN THE WAY FILMS ARE
DISTRIBUTED.
The
manner in which consumers access film content has undergone rapid and dramatic
changes. Some ancillary means of distribution, such as the DVD market, have
gained importance, while others have faded. We cannot provide any assurance
that
new distribution channels will be as profitable for the film industry as today’s
channels or that we will successfully exploit any new channels. We can also
not
provide any assurance that current distribution channels, such as the DVD
market, will maintain their profitability. In addition, films and related
products are distributed internationally and are subject to risks inherent
in
international trade including war and acts of terrorism, instability of foreign
governments or economies, fluctuating foreign exchange rates and changes in
laws
and policies affecting the trade of movies and related products.
WE
MIGHT LOSE POTENTIAL SALES BECAUSE OF PIRACY OF FILMS AND RELATED
PRODUCTS.
With
technological advances, the piracy of films and related products has increased.
Unauthorized and pirated copies of our films will reduce the revenue generated
by those films and related products.
OUR
SUCCESS IS DEPENDENT UPON AUDIENCE ACCEPTANCE OF OUR ENTERTAINMENT
CONTENT WHICH IS DIFFICULT TO PREDICT
The
production and distribution of comic books, online publishing, television
programs, motion pictures and other entertainment content are inherently risky
businesses because the revenues we derive and our ability to distribute and
license rights to our content depend primarily upon its acceptance by the
public, which is difficult to predict. Audience tastes change frequently
and it is a challenge to anticipate what content will be successful at a certain
point in time. In addition, the commercial success of our content
also depends upon the quality and acceptance of competing programs, motion
pictures and other content available or released into the marketplace at or
near the same time. Other factors, including the availability of alternative
forms of entertainment and leisure time activities, general economic
conditions, piracy, digital and on-demand distribution and growing competition
for consumer discretionary spending may also affect the audience for our
content. Furthermore, the theatrical success of a feature film may impact
not only the theatrical revenues we receive but also those from other
distribution channels, such as DVD sales, pay television and sales of licensed
consumer products. A poor theatrical performance may also impact our negotiating
strength with distributors and retailers, resulting in less desirable product
promotion. Consequently, reduced public acceptance of our entertainment
content has the ability to affect all of our revenue streams and would have
an adverse effect on our results of operations.
11
WE
MUST RESPOND TO AND CAPITALIZE ON RAPID CHANGES IN CONSUMER BEHAVIOR RESULTING
FROM NEW TECHNOLOGIES AND DISTRIBUTION PLATFORMS IN ORDER TO REMAIN COMPETITIVE
AND EXPLOIT NEW OPPORTUNITIES
Technology
in the online and mobile arenas is changing rapidly. We must adapt to advances
in technologies, distribution outlets and content transfer and storage (legally
or illegally) to ensure that our content remains desirable and widely
available to our audiences while protecting our intellectual property interests.
The ability to anticipate and take advantage of new and future sources of
revenue from these technological developments will affect our ability to
continue to increase our revenue and expand our business. We may not have the
right, and may not be able to secure the right, to distribute some of our
licensed content across these, or any other, new platforms and must adapt
accordingly. Similarly, we also must adapt to changing consumer behavior
driven by technological advances such as video-on-demand and a desire for
more short form and user-generated and interactive content. These technological
advances may impact traditional distribution methods, such as reducing the
demand for DVD product and the desire to see motion pictures in theaters. If
we
cannot ensure that our content is responsive to the lifestyles of our target
audiences and capitalize on technological advances, our revenues will decline
which may cause us to curtail operations.
A
DECLINE IN ADVERTISING EXPENDITURES COULD CAUSE OUR REVENUES AND OPERATING
RESULTS TO DECLINE SIGNIFICANTLY IN ANY GIVEN PERIOD OR IN SPECIFIC
MARKETS
We
anticipate deriving revenues from the sale of advertising in print and on our
digital media outlets. A decline in advertising expenditures generally or
in specific markets could significantly adversely affect our revenues and
operating results in any given period. Declines can be caused by the
economic prospects of advertisers or the economy in general could alter
current or prospective advertisers’ spending priorities. Disasters, acts of
terrorism, political uncertainty or hostilities could lead to a reduction
in advertising expenditures as a result of economic uncertainty. Our
advertising revenues may also be adversely affected by changes in audience
traffic, which advertisers rely upon in making decisions to purchase
advertising. A decrease in our advertising revenues will adversely
impact our results of operations.
WE
COULD BE ADVERSELY AFFECTED BY STRIKES AND OTHER UNION
ACTIVITY
We
and
our suppliers engage the services of writers, directors, actors and other
talent, trade employees and others who are subject to collective bargaining
agreements. If we or our suppliers are unable to renew expiring
collective bargaining agreements, certain of which are expiring in the next
year or two, it is possible that the affected unions could take action in
the form of strikes or work stoppages. Such actions, higher costs in connection
with these agreements or a significant labor dispute could adversely affect
our business by causing delays in the production, the release date or by
reducing the profit margins of our programming or feature films.
IF
WE ARE UNABLE TO OBTAIN ADDITIONAL FUNDING, OUR BUSINESS OPERATIONS WILL BE
HARMED AND IF WE DO OBTAIN ADDITIONAL FINANCING, OUR THEN EXISTING SHAREHOLDERS
MAY SUFFER SUBSTANTIAL DILUTION.
There
is
no assurance that we will not incur debt in the future, that we will have
sufficient funds to repay any indebtedness or that we will not default on our
debt obligations, jeopardizing our business viability. Furthermore,
we may not be able to borrow or raise additional capital in the future to meet
our needs or to otherwise provide the capital necessary to conduct our business.
There can be no assurance that financing will be available in amounts or on
terms acceptable to us, if at all. The inability to obtain additional capital
will restrict our ability to grow and may reduce our ability to continue to
conduct business operations. If we are unable to obtain additional financing,
we
will likely be required to curtail our marketing and development plans and
possibly cease our operations. Any additional equity financing may involve
substantial dilution to our then existing shareholders.
IF
WE DO NOT MAINTAIN THE CONTINUED SERVICE OF OUR EXECUTIVE OFFICERS, OUR BUSINESS
OPERATIONS MAY BE AFFECTED.
Our
success is substantially dependent on the performance of our executive officers
and key employees. Given our early stage of development, we are
dependent on our ability to retain and motivate high quality
personnel. Although we believe we will be able to engage qualified
personnel for such purposes, an inability to do so could materially adversely
affect our ability to market, sell, and enhance our products. The
loss of one or more of our key employees or our inability to hire and retain
other qualified employees, including but not limited to development staff,
business development staff, digital publishing staff and corporate office
support staff, could have a material adverse effect on our
business.
12
WE
MAY INCUR UNINSURED LOSSES IN THE OPERATION OF OUR
BUSINESS.
There
is
no assurance that we will not incur uninsured liabilities and losses as a result
of the conduct of our business. We plan to maintain comprehensive
liability and property insurance at customary levels. We will also
evaluate the availability and cost of business interruption
insurance. However, should uninsured losses occur we may be unable to
cover these losses from our existing work capital which may cause us to incur
significant losses.
WE
MAY INCUR LIABILITIES THAT WE MIGHT BE UNABLE TO REPAY IN THE
FUTURE
We
may
incur liabilities with affiliated or unaffiliated lenders. These
liabilities would represent fixed costs which would be required to be paid
regardless of the level of our business or profitability. Our current
liabilities as of September 30, 2007 were as follows: accounts
payable $618,997, accrued expenses $149,973, short-term notes payable to
shareholder $834,850, short-term notes payable $150,000, related party payable
$193,079, and capital lease obligations of $73,364 for total current liabilities
of $2,020,263. There
is
no assurance that we will be able to pay all of our
liabilities. Furthermore, we are always subject to the risk of
litigation from customers, suppliers, employees, and others because of the
nature of our business, including but not limited to consumer
lawsuits. Litigation can cause us to incur substantial expenses and,
if cases are lost, judgments, and awards can add to our costs. An increase
in
our costs may cause us to increase the prices at which we charge our customers
which may lead to our customers to seek alternatives to our products. In
such
event, our revenues will decrease and we may be forced to curtail our
operations.
WE
MAY INCUR UNANTICIPATED COST OVERRUNS WHICH MAY SIGNIFICANTLY AFFECT OUR
OPERATIONS.
We
may
incur substantial cost overruns in the development and enhancement of our
electronic comics, printed comics, and merchandise. Management is not
obligated to contribute capital to us. Unanticipated costs may force
us to obtain additional capital or financing from other sources if we are unable
to obtain the additional funds necessary to implement our business plan. There
is no assurance that we will be able to obtain sufficient capital to implement
our business plan successfully. If a greater investment is required
in the business because of cost overruns, the probability of earning a profit
or
a return of the Shareholders’ investment will be diminished.
OUR
PRINCIPAL STOCKHOLDERS, OFFICERS AND DIRECTORS WILL OWN A CONTROLLING INTEREST
IN OUR VOTING STOCK AND INVESTORS WILL NOT HAVE ANY VOICE IN OUR
MANAGEMENT.
Our
principal stockholders, officers and directors, in the aggregate, beneficially
own approximately 67.08% of our outstanding common
stock. Our Chairman, Scott Rosenberg and
President and Chief Operating Officer, Brian Altounian own approximately
128,250,000 and 6,750,000 shares of our outstanding common stock, respectively.
As a result, our principal stockholders, officers and directors, acting
together, have the ability to control substantially all matters submitted to
our
stockholders for approval, including:
adoption
of measures that could delay or prevent a change in control or impede
a
merger, takeover or other business combination involving
us.
As
a
result of their ownership and positions, our principal stockholders, directors
and executive officers collectively are able to influence all matters requiring
stockholder approval, including the election of directors and approval of
significant corporate transactions. In addition, sales of significant amounts
of
shares held by our principal stockholders, directors and executive officers,
or
the prospect of these sales, could adversely affect the market price of our
common stock. Their stock ownership may discourage a potential acquirer from
making a tender offer or otherwise attempting to obtain control of us, which
in
turn could reduce our stock price or prevent our stockholders from realizing
a
premium over our stock price.
WE
MAY NEED TO RAISE ADDITIONAL CAPITAL, WHICH MAY NOT BE AVAILABLE ON ACCEPTABLE
TERMS OR AT ALL.
While
we
were successful in raising $4,904,725, less offering costs of
$222,518 in the recent completed financing we may be required to
raise additional funds, particularly if we are unable to generate positive
cash
flow as a result of our operations. We estimate that our
capital requirements in the next six months will be approximately $2,400,000.
There can be no assurance that financing will be available in amounts or
on
terms acceptable to us, if at all. The inability to obtain additional
capital may reduce our ability to continue to conduct business
operations. If we are unable to obtain additional financing, we will
likely be required to curtail our research and development plans. Any
additional equity financing may involve substantial dilution to our then
existing shareholders.
13
BECAUSE
OF OUR DEPENDENCE ON A LIMITED NUMBER OF TRADITIONAL MEDIA OUTLETS, ANY
SIGNIFICANT REDUCTION IN DEALS WITH MAJOR FILM STUDIOS AND TELEVISION/CABLE
NETWORKS MAY IMPAIR OUR ABILITY TO OPERATE PROFITABLY.
Our
business to date has been dependent upon a small number of licensing
transactions with major studios and television/cable networks. For the first
six
months of 2007 and the year ended December 31, 2006, a very small number of
transactions accounted for a disproportionately large percentage of our revenue.
As of June 30, 2007, two transactions, one to each of two customers accounted
for 87% of our revenues. An acquisition sale and a rights option
agreement provided 60% and 27% of the year to date revenues,
respectively. For the year ended December 31, 2006, three
transactions (two rights options and an acquisition deal) accounted for 100%
of
our revenue. The loss of or significant reduction in transactions to any of
these traditional media outlets could impair our ability to operate profitably
and that we may not be able to replace any decline in revenue.
RISKS
RELATING TO OUR COMMON STOCK
IF
YOU PURCHASE SHARES IN THIS OFFERING, YOU WILL EXPERIENCE IMMEDIATE AND
SUBSTANTIAL DILUTION.
The
$0.10
per share offering price of the common stock being sold under this prospectus
has been arbitrarily set. The price does not bear any relationship to our
assets, book value, earnings or net worth and it is not an indication of actual
value. Accordingly, if you purchase shares in this offering, you will experience
immediate and substantial dilution. You may also suffer additional dilution
in
the future from the sale of additional shares of common stock or other
securities.
THERE
IS NO MARKET FOR OUR COMMON STOCK, WHICH MAY MAKE IT MORE DIFFICULT FOR YOU
TO
DISPOSE OF YOUR COMMON STOCK.
There
is
no established public trading market for our securities. Hence, there is no
central place, such as a stock exchange or electronic trading system, to resell
your common stock. If you want to resell your shares, you will have to locate
a
buyer and negotiate your own sale. It is our plan to utilize a market maker
who
will apply to have our common stock quoted on the Over-the-Counter Bulletin
Board in the United States. Our shares are not and have not been listed or
quoted on any exchange or quotation system. There can be no assurance that
a
market maker will agree to file the necessary documents with the National
Association of Securities Dealers, which operates the Over-the-Counter Bulletin
Board, nor can there be any assurance that such an application for quotation
will be approved or that a regular trading market will develop or that if
developed, will be sustained. In the absence of a trading market, an investor
will be unable to liquidate his investment except by private sale.
SHOULD
OUR STOCK BECOME LISTED ON THE OTC BULLETIN BOARD, IF WE FAIL TO REMAIN CURRENT
ON OUR REPORTING REQUIREMENTS, WE COULD BE REMOVED FROM THE OTC BULLETIN BOARD
WHICH WOULD LIMIT THE ABILITY OF BROKER-DEALERS TO SELL OUR SECURITIES AND
THE
ABILITY OF STOCKHOLDERS TO SELL THEIR SECURITIES IN THE SECONDARY
MARKET.
Companies
trading on the Over-The-Counter Bulletin Board, such as we are seeking to
become, must be reporting issuers under Section 12 of the Securities Exchange
Act of 1934, as amended, and must be current in their reports under Section
13,
in order to maintain price quotation privileges on the OTC Bulletin Board.
If we
fail to remain current on our reporting requirements, we could be removed from
the OTC Bulletin Board. As a result, the market liquidity for our securities
could be severely adversely affected by limiting the ability of broker-dealers
to sell our securities and the ability of stockholders to sell their securities
in the secondary market. In addition, we may be unable to get re-listed on
the
OTC Bulletin Board, which may have an adverse material effect on our
Company.
ONCE
PUBLICLY TRADING, THE APPLICATION OF THE "PENNY STOCK" RULES COULD ADVERSELY
AFFECT THE MARKET PRICE OF OUR COMMON SHARES AND INCREASE YOUR TRANSACTION
COSTS
TO SELL THOSE SHARES.
The
Securities and Exchange Commission has adopted Rule 15g-9 which establishes
the
definition of a "penny stock," for the purposes relevant to us, as any equity
security that has a market price of less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain exceptions.
For
any transaction involving a penny stock, unless exempt, the rules
require:
·
that
a broker or dealer approve a person's account for transactions in
penny
stocks; and
·
the
broker or dealer receive from the investor a written agreement to
the
transaction, setting forth the identity and quantity of the penny
stock to
be purchased.
In
order
to approve a person's account for transactions in penny stocks, the broker
or
dealer must:
14
·
obtain
financial information and investment experience objectives of the
person;
and
·
make
a reasonable determination that the transactions in penny stocks
are
suitable for that person and the person has sufficient knowledge
and
experience in financial matters to be capable of evaluating the risks
of
transactions in penny stocks.
sets
forth the basis on which the broker or dealer made the suitability
determination; and
·
that
the broker or dealer received a signed, written agreement from the
investor prior to the transaction.
Generally,
brokers may be less willing to execute transactions in securities subject to
the
"penny stock" rules. This may make it more difficult for investors to dispose
of
our common stock and cause a decline in the market value of our
stock.
Disclosure
also has to be made about the risks of investing in penny stocks in both public
offerings and in secondary trading and about the commissions payable to both
the
broker-dealer and the registered representative, current quotations for the
securities and the rights and remedies available to an investor in cases of
fraud in penny stock transactions. Finally, monthly statements have to be sent
disclosing recent price information for the penny stock held in the account
and
information on the limited market in penny stocks.
WE
DO NOT EXPECT TO PAY DIVIDENDS IN THE FUTURE; ANY RETURN ON INVESTMENT MAY
BE
LIMITED TO THE VALUE OF OUR COMMON STOCK.
We
do not
currently anticipate paying cash dividends in the foreseeable future. The
payment of dividends on our Common Stock will depend on earnings, financial
condition and other business and economic factors affecting it at such time
as
the board of directors may consider relevant. Our current intention is to apply
net earnings, if any, in the foreseeable future to increasing our capital base
and development and marketing efforts. There can be no assurance that the
Company will ever have sufficient earnings to declare and pay dividends to
the
holders of our Common Stock, and in any event, a decision to declare and pay
dividends is at the sole discretion of the our Board of Directors. If we do
not
pay dividends, our Common Stock may be less valuable because a return on your
investment will only occur if its stock price appreciates.
Market
for Common Stock and related Stockholders Matters
Our
common stock is not traded on any national securities exchange and is not quoted
on any over-the-counter market. If our shares become quoted on the
Over-The-Counter Bulletin Board, sales will be made at prevailing market prices
or privately negotiated prices.
HOLDERS
As
of
December 13, 2007, our common stock was held by 311 stockholders of record
and
we had 201,255,825 shares of common stock issued and outstanding, which includes
the shares being offered by the selling stockholders in this
prospectus.
Transfer
Agent
The
transfer agent of our securities is Computershare Limited, whose address is
1745
Arden Avenue, Glendale, CA91204. The phone number of the transfer
agent is (800) 962-4284.
15
Dividends
We
have
not declared any dividends to date. We have no present intention of paying
any
cash dividends on our common stock in the foreseeable future, as we intend
to
use earnings, if any, to generate growth. The payment by us of dividends, if
any, in the future, rests within the discretion of our Board of Directors and
will depend, among other things, upon our earnings, our capital requirements
and
our financial condition, as well as other relevant factors. There are no
restrictions in our articles of incorporation or bylaws that restrict us from
declaring dividends.
Securities
Authorized for Issuance Under Equity Compensation Plans
EQUITY
COMPENSATION PLAN INFORMATION
The
following table shows information with respect to each equity compensation
plan
under which our common stock is authorized for issuance as from inception
(November 20, 1996) through September 30, 2007.
Plan
category
Number
of securities
to
be issued upon
exercise
of
outstanding
options,
warrants
and rights
Weighted
average
exercise
price of
outstanding
options,
warrants
and rights
Number
of securities
remaining
available for future issuance under equity compensation plans (excluding
securities reflected in column (a)
(a)
(b)
(c)
Equity
compensation plans approved by security holders
30,000,000
-0-
30,000,000
Equity
compensation plans not approved by security
holders
0-
-0-
-0-
Total
30,000,000
-0-
30,000,000
Description
of the Platinum Studios, Inc. 2007 Incentive Plan
The
Platinum Studios, Inc. 2007 Incentive Plan (the “Plan”) has initially reserved
30,000,000 shares of common Stock for issuance. Under the Plan, options may
be
granted which are intended to qualify as Incentive Stock Options ("ISOs") under
Section 422 of the Internal Revenue Code of 1986 (the "Code") or which are
not
("Non-ISOs") intended to qualify as Incentive Stock Options thereunder. In
addition, direct grants of stock or restricted stock may be
awarded.
Purpose
. The primary purpose of the Plan is to attract and retain the best available
personnel in order to promote the success of our business and to facilitate
the
ownership of our stock by employees and others who provide services to
us.
Administration
. The Plan is administered by the compensation committee of our Board of
Directors, for any period in which the Company is subject to the reporting
requirements of the Exchange Act shall consist of not less than two members
of
the Board each of whom shall qualify as non-employee directors.
Eligibility
. Under the Plan, options may be granted to employees, directors
or consultants of the Company, as provided in the Plan.
Terms
of Options . The term of each option granted under the Plan shall be for
such period as may be determined by the Committee but not to exceed ten
years. Each option grants shall be contained in a stock option
agreement between the optionee and Platinum Studios and such terms shall be
determined by the Board of Directors consistent with the provisions of the
Plan,
including the following:
(a)
Purchase Price. The purchase price of the common stock subject to each stock
option shall be determined by the Committee at the time the Option is granted
but shall not be less than 100% fair market value on the date of grant. If
any
Employee to whom an option that is an incentive stock option is granted owns
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any parent corporation, within the
meaning of Section 424(e) of the Internal Revenue Code of 1986 (the “Code”), or
any subsidiary corporation of the Company, within the meaning of Section 424(f)
of the Code, then the exercise price per share shall not be less than one
hundred ten percent (110%) of the fair market value per share on the date of
grant and the option term shall not exceed five (5) years measured from the
date
of grant.
(b)
Vesting. The dates on which each option (or portion thereof) shall be
exercisable and the conditions precedent to such exercise, if any, shall be
fixed by the Committee, in its discretion, at the time such option is granted.
All options or grants which include a vesting schedule will vest in their
entirety upon a change of control transaction as described in the
Plan;
(c)
Expiration. The expiration of each option shall be fixed by the Committee,
in
its discretion.
16
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
Some
of
the information in this prospectus contains forward-looking statements that
involve substantial risks and uncertainties. You can identify these statements
by forward-looking words such as "may,""expect,""anticipate,""believe,""estimate" and "continue," or similar words. You should read statements that
contain these words carefully because they:
·
discuss
our future expectations;
·
contain
projections of our future results of operations or of our financial
condition; and
·
state
other "forward-looking"
information.
We
believe it is important to communicate our expectations. However, there may
be
events in the future that we are not able to accurately predict or over which
we
have no control. Our actual results and the timing of certain events could
differ materially from those anticipated in these forward-looking statements
as
a result of certain factors, including those set forth under "Risk Factors,""Business" and elsewhere in this prospectus. See "Risk Factors."
GENERAL
We
are a
comics-based entertainment company. We own the rights to a library of
over 3,800 of comic book characters, which we adapt and produce for film,
television and all other media. Our library contains characters in a full range
of genre and styles. With deals in place with film studios and media
players, our management believes we are positioned to become a leader in the
creation of new content across all media.
We
are
focused on adding titles and expanding our library with the primary goal of
creating new franchise properties and characters. In addition to
in-house development and further acquisitions, we are developing content with
professionals outside the realm of comic books. We have teamed up
with screenwriters, producers, directors, movie stars, and novelists to develop
entertainment content and potential new franchise properties. We
believe our core brand offers a broader range of storylines and genres than
the
traditional superhero-centric genre. Management believes this
approach is maintained with Hollywood in mind, as the storylines offer the
film
industry fresh, high-concept brandable content as a complimentary alternative
to
traditional super hero storylines.
Over
the
next several years, we are working to become the leading independent comic
book
commercialization producer for the entertainment industry across all platforms
including film, television, direct-to-home, publishing, and digital media,
creating merchandising vehicles through all retail product lines. Our
management believes this will allow us to maximize the potential and value
of
our owned content creator relationships and acquisitions, story development
and
character/franchise brand-building capabilities while keeping required capital
investment relatively low.
We
derive
revenues from a number of sources in each of the following
areas: Print Publishing, Digital Publishing, Filmed Entertainment,
and Merchandise/Licensing.
Set
forth
below is a discussion of the financial condition and results of operations
of
Platinum Studios, Inc. (the “Company”, “we”, “us,” and “our”) for the twelve
months ended December 31, 2006 and 2005, and the nine months ended
September 30, 2007 and September 30, 2006. The
following discussion should be read in conjunction with the information set
forth in the consolidated financial statements and the related notes thereto
appearing elsewhere in this report.
Total
Revenue increased by $1,742,217 from $32,200 for the nine months ended September30, 2006 to $1, 774,917 for the nine months ended September 30,2007. This increase is primarily due to a $1,000,000 acquisition fee
for the sale of a comic book property realized in March of 2007 and $450,000
from a multi-property, first-look agreement which expired in May of 2007,
thus
allowing the Company to recognize previously deferred revenue. The
Company may realize future revenue related to commercialization of the acquired
property, however, there are no guarantees of such revenue. The
first-look agreement will not provide any future revenue and there are no
other
material contracts with these customers.
The
Company recognized revenue on both the option/acquisition and first-look
agreements in accordance with guidance provided in Securities and Exchange
Commission Staff Accounting Bulletin No. 104 “Revenue
Recognition”. Under the SAB 104 guidelines, revenue is recognized
when the earnings process is complete. This is considered to have
occurred when persuasive evidence of an agreement between the customer and
the
Company exists, when the properties are made available to the licensee and
the
Company has satisfied its obligations under the agreement, when the fee is
fixed
or determinable and when collection is reasonably assured.
17
Typically,
clients purchase an option on a property for a period of time (i.e. 1 year,
for
example) and at the end of the option period the client either purchases the
property or the property reverts back to Platinum. Also, the option
fee may or may not be applicable to the final purchase price of the rights
to
the property. If the option is not applicable to the purchase
price, the Company will utilize subscription accounting for the option revenue
over the option period. If the option fee is applicable to the
final purchase price, the Company will defer the revenue until the earlier
of
the option period expiring or the property is purchased.
The
$1,000,000 option agreement was for the acquisition of all right, title and
interest in and to a graphic novel written and owned by Platinum. The
option was exercised via a formal letter from the client to the Company and
the
full purchase price received by the Company prior to the expiration of the
option to purchase. There was a contractual agreement between the
parties, the property was made available to the optionee, the Company had
completed its obligations, the fee was fixed, determinable and
paid. There was no obligation by the optionee to further
commercialize the property. The option fee was applicable to the
purchase price so the initial $300,000 option payment was held as deferred
revenue until the option was exercised (at which time Platinum received the
remaining $700,000).
The
$450,000 first-look agreement, was an option to have the right of first refusal
over (5) properties (Youngblood, Barry Ween, Quiver, Nathan Never and The Fog
or
other substitute titles) meaning Platinum could still market these properties
to
other buyers but if another buyer expressed an interest to option one of the
named properties, this client had the right to exercise its option to purchase
the property. Again, the option payment was applicable to the final
purchase price so the payment received upon execution of the option agreement
was recorded as deferred income as it was not determinable as to which, if
any
properties would be purchased or produced.
Platinum
is currently negotiating with other customers for similar and material
contracts, but does not currently have any additional executed contracts similar
in nature to the two material transactions recognized in the first six months
of
2007.
EXPENSES
OPERATIONS–
Operating expenses increased by $1,373,178 from $2,087,694 for the nine months
ended September 30, 2006 to $3,460,872 for the nine months ended September30,2007, an increase of 66%. This reflects the increased operating
expenses initiated in the second half of 2006 as the Company shifted from
a
predominantly contractor-based workforce to hiring internal staff and increased
its public relations and advertising efforts to expedite the establishment
of
additional sales distribution channels. Legal expenses were lower in
2007 due to the hiring of an internal corporate counsel and reducing external
legal fees. On July 10, 2006, the Company entered into a lease for
new office facilities in Los Angeles, CA to accommodate, its plans for
future growth and miscellaneous expenses primarily consist of website costs
and
supplies.
A
detailed schedule of significant expense types within “Operations” is as
follows:
2007
2006
Jan
- Sep
%
Jan
- Sep
%
$
Change
Salaries/Benefits
1,443,076
41%
220,774
11%
1,222,302
Contractors
479,134
14%
918,894
44%
(439,760)
Travel
& Entertainment
216,272
6%
123,106
6%
93,166
Marketing
Activities
347,459
10%
66,710
3%
280,749
Accounting
& Tax
166,110
5%
54,124
3%
111,986
Legal
100,806
3%
254,202
12%
(153,396)
Facilities
686,321
20%
358,629
17%
327,692
Miscellaneous
21,694
1%
91,255
4%
(69,561)
Total
operating expense
3,460,872
100%
2,087,694
100%
1,373,178
RESEARCH
AND DEVELOPMENT– Research and Development expenses consist primarily of
salaries and related personnel costs and independent, work-for-hire fees
associated with product development. Research and Development
expenses increased from $518,999 for the nine months ended September 30,2006 to
$692,677 for the nine months ended September 30, 2007, an increase of $173,678
(33%). This increase was primarily due to the development activities
associated with the delivery of new comic book titles and books on multiple
platforms implemented in the second quarter of 2006.
18
DEPRECIATION
AND AMORTIZATION EXPENSE– Depreciation and Amortization expenses increased
by $92,934 for the nine month period, from $30,329 for the nine months ended
September 30, 2006 to $123,263 for the nine months ended September 30,2007. This 306% increase consisted of $68,478 in amortization expense
related to other assets which were $7,609 in 2006 and $24,456 in increased
depreciation expense due to additional investments in computer equipment,
software and furniture and fixtures.
INTEREST
EXPENSE– Interest expense increased by $124,617 (44%) from $285,889 for the
nine months ended September 30, 2006 to $410,506 for the nine months ended
September 30, 2007. This increase is as a result of a note payable to
shareholder that was converted to common stock. Most of this increase
came from warrants issued as an incentive to convert the debt to common
stock. The fair value of the warrants were booked as interest expense
totaling $195,507.
NET
LOSS BEFORE INCOME TAXES– As a result of the factors described above, we
reported a net loss before income taxes of $2,890,711 for the nine months
ended
September 30, 2006 compared to a loss of $3,147,523 for the nine months ended
September 30, 2007, an increase of $256,812.
Total
Revenue increased by $18,000 year over year, from $162,500 for the year ended
December 31, 2005 to $180,500 for the year ended December 31, 2006, an increase
of 11%. For the year ended December 31, 2006, three transactions (two
rights options and an acquisition deal) to three different customers, accounted
for 100% of the revenue. The acquisition sale contributed 82% of the
total revenue and one of the rights options provided an additional 14% of
total
revenue. The Company does not currently have any additional executed
contracts for similar transactions with these or other clients. The Company
may
realize future revenue related to future commercialization from the acquisition
transaction, however there are no guarantees of such
revenue. Additionally, one of the properties that was under a rights
option in 2006, which has since expired, is currently under negotiation with
another interested party in 2007. The Company entered into an agreement with
Dimension Studios on November 2, 2004 for which $125,000 was received for
the
perpetual license to utilize the title “The Darkness” and a option fee of
$150,000 which expired on November 2, 2006. The Company entered into a one-year
option agreement with Relativity Media, LLC on June 12, 2005 for the property
Witchblade from Top Cow. The agreement did not provide for a fee for
the option and no fee was paid. There is no standard fee structure to which
our
business is subject to. Fee arrangements may vary from studio to studio and
project to project and may depend on numerous factors beyond our control.
In
some instances we may pay a fee for an option, in others we may
not.
EXPENSES
OPERATIONS–
Operating expenses increased by $1,560,406 (97%), from $1,607,672 for the
year
ended December 31, 2005 to $3,168,078 for the year ended December 31,2006. The Company increased staffing primarily in the second
half of 2006 to address the ramp-up in contractor expense (138% year over
year)
as Platinum launched its Mobile, Digital and Print Publishing efforts initially
utilizing contractor resources in order to expedite
operations. Marketing and travel expenses increased $184,912 in real
dollars over 2005 related to the investment in establishing additional sales
distribution channels and marketing activities such as the Comic Book Challenge
but remained fairly unchanged as a percentage of total operating
expense. Legal expense increased by $224,747 or 526% related to
financing activities during 2006 while facility costs increased by $167,445
(115%) as the Company moved into new offices in LA during the summer of
2006. A detailed schedule of significant expense types within
“Operations” is as follows:
2006
2005
Jan
- Dec
%
Jan
- Dec
%
$
Change
Salaries/Benefits
640,186
20
%
458,780
29
%
181,406
Contractors
1,018,742
32
%
423,593
26
%
595,149
Travel
& Entertainment
180,025
6
%
86,954
5
%
93,071
Marketing
Activities
206,978
7
%
115,137
7
%
91,841
Accounting
& Tax
166,559
5
%
173,969
11
%
(7,410
)
Legal
266,974
8
%
42,227
3
%
224,747
Facilities
310,574
10
%
143,129
9
%
167,445
Miscellaneous
378,040
12
%
163,883
10
%
214,157
Total
operating expense
3,168,078
100
%
1,607,672
100
%
1,560,406
RESEARCH
AND DEVELOPMENT– Research and Development expenses consist primarily of
salaries and related personnel costs and independent, work-for-hire fees
associated with product development. Research and Development
expenses were $243,833 and $764,282 for the years ended December 31, 2005 and
December 31, 2006, respectively. This 213% increase in year over year
costs was due to the increased commitment in development activities associated
with the delivery of new comic book titles and books on multiple
platforms.
DEPRECIATION
AND AMORTIZATION EXPENSE– Depreciation and Amortization expenses increased
$66,050 year over year, from $7,436 for the year ended December 31, 2005 to
$73,486 for the year ended December 31, 2006. This 888% increase
consisted of $30,435 in amortization expense related to other assets which
were
$0 in 2005 and $35,615 in increased depreciation expense due to additional
investments in computer equipment, software and furniture and
fixtures.
GAIN/(LOSS)
ON DISPOSTION OF ASSETS– In the year ended December 31, 2006, the Company
took in a one-time charge of $33,260 as a result of a physical inventory taken
as part of the move to its new facilities.
20
INTEREST
EXPENSE– Interest expenses remained essentially flat year over year with
$390,288 for the year ended December 31, 2005 versus $391,745 for the year
ended
December 31, 2006. This interest expense is primarily due to
servicing the interest on debt obligations used to fund the company
operations.
OTHER
EXPENSE– The Company had a one-time expense of $25,000 during the year ended
December 31, 2006 to write-off a deposit related to a potential acquisition
target which the Company elected to not consummate.
NET
LOSS BEFORE INCOME TAXES– As a result of the factors described above, we
reported a net loss before income taxes of $2,080,915 for the year ended
December 31, 2005 compared to a loss of $4,272,780 for the year ended December31, 2006.
LIQUIDITY
AND CAPITAL RESOURCES
As
of
September 30, 2007, we had a cash balance of $7,070 and negative working
capital
of $1,741,695. Effective July 1, 2007, the Company and Scott
Rosenberg executed an agreement by which $1,625,000 in debt (principal of
$258,153 Short-term and $1,366,847 Long-term), plus accrued interest of $95,857
were paid off through the issuance of common stock and warrants. In
addition, management believes it will not have to pay the $745,850 principal
in
Short-term debt also due to Mr. Rosenberg, during 2007 unless the Company
can
generate sufficient revenues from normal operations and will be allowed to
pay
interest only on this loan for the remainder of 2007. These two
actions would eliminate the $1,004,003 debt obligation identified as a cash
requirement during 2007 and materially improve the working capital position
of
the Company. Management does believe there will be an increase in
overall expenses to expand the Company’s operations during 2007 and although
revenues are expected to increase, it is anticipated that additional cash
resources will be required during the next twelve months. We are
currently projecting operational cash requirements of $2,400,000 over the
next
six months, including planned cash requirements for IP content development
of
$200,000, $400,000 for promotion and marketing, $200,000 for accounting and
legal expenses related to our public reporting obligations, $200,000 for
outside
legal expenses related to independent film financing, and $1,400,000 for
working
capital. Although we are currently evaluating potential avenues of
financing, we have no definitive plans at this time for additional funding
and
may undertake additional debt or equity financings to meet these or future
long-term needs to better enable us to grow and meet our operating and capital
requirements. However, we cannot guarantee that any additional equity
or debt financing will be available in sufficient amounts or on acceptable
terms
when needed. If such financing is not available in sufficient amounts
or on acceptable terms, our results of operations and financial condition
may be
adversely affected. In addition, equity financing may result in
dilution to existing stockholders and may involve securities that have rights,
preferences or privileges that are senior to or common stock, and any debt
financing obtained must be repaid regardless of whether or not we generate
profits or cash flows from our business activities.
Net
cash
used in operating activities was $3,306,437 for the nine months ended September30, 2007 as compared to $1,999,504 for the nine months ended September 30,2006,
an increased cash requirement of $1,306,933 or 40%. The increase
in net cash used in operating activities is primarily the result of our
increased staffing, investment in research and development, increased expenses
related to our financing and registration process, and enhanced marketing
activities to expand our sales channels.
Below
is
a description of significant financings we completed during the fiscal year
ended December 31, 2006.
OCTOBER
2006 FINANCING
In
October 2006, we entered into Subscription Agreements with various accredited
investors (the “October 2006 Private Placement”) pursuant to which the investors
subscribed to purchase a total of 49,047,250 shares of our common stock,
resulting in proceeds to the company of $4,904,725, less offering costs of
$222,518. The offering closed on April 30, 2007. In
connection with the offering, we agreed to use our reasonable best efforts
to
file a registration statement with the Securities and Exchange Commission
registering the resale of the shares of common stock sold in the private
placement within 180 days following the closing of the
offering.
We
agreed
to use our reasonable best efforts to file a registration statement with the
Securities and Exchange Commission registering the resale of the shares of
common stock sold in the private placement on or prior to 180 days following
the
closing of the offering.
Midtown
Partners, registered broker-dealer, acted as placement agent for a portion
of
the common stock sold in the offering. In connection with the closing
we paid the placement agents a cash fee of an aggregate $32,102. In
addition, the Company issued to the placement agent 458,600 warrants to purchase
shares of our common stock with an exercise price of $0.10 per share exercisable
for a period of five years. The shares underlying the warrants are not included
in this prospectus.
We
claim
an exemption from the registration requirements of the Act for the private
placement of these securities pursuant to Section 4(2) of the Act and/or
Regulation D promulgated thereunder since, among other things, the transaction
did not involve a public offering, the investors were accredited investors
and/or qualified institutional buyers, the investors had access to information
about us and their investment, the investors took the securities for investment
and not resale, and we took appropriate measures to restrict the transfer of
the
securities.
21
GOING
CONCERN
The
accompanying consolidated financial statements have been prepared assuming
that
we will continue as a going concern, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of
business. Since Platinum Studios, Inc.’s inception, we have incurred
losses, had an accumulated deficit, and have experienced negative cash flows
from operations. We expect this trend to continue. The
expansion and development of our business will likely require additional
capital. This condition raises substantial doubt about our ability to
continue as a going concern. We expect cash flows from operating
activities to improve, primarily as a result of an increase in revenues,
although there can be no assurance thereof. The accompanying
consolidated financial statements do not include any adjustments that might
be
necessary should we be unable to continue as a going concern. If we
fail to generate positive cash flows or obtain additional financing when
required, we may have to modify, delay or abandon some or all of our business
and expansion plans.
OFF-BALANCE
SHEET ARRANGEMENTS
We
do not
have any off-balance sheet arrangements that are reasonably likely to have
a
current or future effect on our financial condition, revenues, results of
operations, liquidity, or capital expenditures.
CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
The
policies discussed below are considered by our management to be critical to
an
understanding of our financial statements because their application places
the
most significant demands on our management’s judgment, with financial reporting
results relying on estimation about the effect of matters that are inherently
uncertain. Specific risks for these critical accounting policies are
described below. For these policies, our management cautions that
future events rarely develop as forecast, and that best estimates may routinely
require adjustment.
The
SEC
has issued cautionary advice to elicit more precise disclosure about accounting
policies management believes are most critical in portraying our financial
results and in requiring management’s most difficult subjective or complex
judgments.
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
judgments and estimates. On an on-going basis, we evaluate our estimates, the
most significant of which include establishing allowances for doubtful accounts
and determining the recoverability of our long-lived assets. The
basis for our estimates are historical experience and various assumptions that
are believed to be reasonable under the circumstances, given the available
information at the time of the estimate, the results of which form the basis
for
making judgments about the carrying values of assets and liabilities that are
not readily available from other sources. Actual results may differ
from the amounts estimated and recorded in our financial
statements.
We
believe the following critical accounting policies affect our more significant
judgments and estimates used in the preparation of our consolidated financial
statements.
Reclassification: Certain
prior year amounts have been reclassified in order to conform to the current
year’s presentation. In 2006, the Company transitioned into a new
accounting system that allows for a more detailed analysis of project expenses
and revenues. Financials from earlier years have been reclassified to
account for this transition.
Revenue
Recognition: The Company derives its licensing revenue primarily from
options to purchase rights, the purchase of rights to properties and first
look
deals. For options that contain non-refundable minimum payment
obligations that are not applied to the purchase price, revenue is recognized
ratably over the option period, prior to the collection of all amounts
ultimately due, provided all the criteria for revenue recognition under SAB
104
have been met. Option fees that are applicable to the purchase price
are deferred and recognized as revenue at the later of the expiration of the
option period or in accordance with the terms of the purchase
agreement. Revenue received under first look deals is recognized
ratably over the first look period, which varies by contract provided all the
criteria for revenue recognition under SAB 104 have been met. First
look deals that have contingent components are deferred and recognized at the
later of the expiration of the first look period or in accordance with the
terms
of the first look contract.
For
licenses requiring material continuing involvement or performance based
obligations, by the Company, the revenue is recognized as and when such
obligations are fulfilled. The Company records as deferred revenue
any licensing fees collected in advance of obligations being fulfilled or if
a
licensee is not sufficiently creditworthy, the Company will record deferred
revenue until payments are received. License agreements typically
include reversion rights which allow the Company to repurchase property rights
which have not been used by the studio (the buyer) in production within a
specified period of time as defined in the purchase agreement. The
cost to repurchase the rights is generally based on the costs incurred by the
studio to further develop the characters and story lines. Reversion rights
have
no impact on the revenue recognition nor timing of the revenue recorded, not
is
any portion of the revenue deferred.
Character
development costs: Character development costs consist primarily of
costs to acquire properties from the creator, development of the property using
internal or independent writers and artists, and the registration of a property
for a trademark or copyright. These costs are capitalized in the year
incurred if the Company has executed a contract or is negotiating a revenue
generating opportunity for the property. If the property derives a
revenue stream that is estimable, the capitalized costs associated with the
property are expensed as revenue is recognized. If the Company
determines there is no determinable market for a property, it is deemed impaired
and is written off.
22
Recent
accounting pronouncements: In July 2006, the FASB issued
Interpretation No. 48, “Accounting for Uncertainly in Income Taxes” (“FIN
48”). FIN 48 applies to all tax positions related to income taxes
subject to SFAS 109, “Accounting for Income Taxes”. Under FIN 48 a
company would recognize the benefit from a tax position only if it is
more-likely-than-not that the position would be sustained upon audit based
solely on the technical merits of the tax position. FIN 48 clarifies
how a company would measure the income tax benefits from the tax positions
that
are recognized, provides guidance as to the timing of the de-recognition of
previously recognized tax benefits and describes the methods for classifying
and
disclosing the liabilities within the financial statements for any unrecognized
tax benefits. FIN 48 also addresses when a company should record
interest and penalties related to tax positions and how the interest and
penalties may be classified within the income statement and presented in the
balance sheet. FIN 48 is effective for fiscal years beginning after
December 15, 2006. For Platinum, FIN 48 will be effective for the
first quarter of fiscal 2007.
In
May
2005, the FASB issued SFAS No. 154, Accounting Changes and Error
Corrections , which replaces APB No. 20, Accounting Changes and
SFAS No. 3, Reporting Accounting Changes in Interim Financial
Statements . SFAS No. 154 requires that a voluntary change in accounting
principle be applied retrospectively with all
prior period financial statements presented as if the new accounting principle
had always been used. SFAS No. 154 also requires that a change in method of
depreciating or amortizing long-lived non-financial assets be accounted for
prospectively, in the period of change and in future periods, if applicable,
as
a change in estimate, and requires the correction of errors in previously issued
financial statements be termed a “restatement”. SFAS No. 154 is effective for
accounting changes and correction errors made in fiscal years beginning after
December 15, 2005. The implementation of SFAS 154 is not expected to
have a material impact on the Company’s financial statements.
In
December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary
Assets, which amends APB Opinion 29 (APB 29), Accounting for
Nonmonetary Transactions . The guidance in APB 29 is based on the principle
that exchanges of nonmonetary assets should be measured based on the fair value
of the assets exchanged and included certain exceptions to that principle.
SFAS
No.153 amends APB29 to eliminate the exception for nonmonetary exchanges of
similar productive assets and replaces it with a general exception for exchanges
of nonmonetary assets that do not have commercial substance. This Statement
will
be effective for the Company for nonmonetary asset exchanges occurring on or
after January 1, 2006.
BUSINESS
INTRODUCTION
Our
Company was formed and operated as a California limited liability company from
its inception on November 20, 1996 through September 14, 2006. On
September 15, 2006, we filed with the State of California to convert Platinum
Studios, LLC into Platinum Studios, Inc., a California corporation.
Our
corporate website address is www.platinumstudios.com. Our website and the
information contained on our website are not incorporated into this prospectus
or the registration statement of which it forms a part. Further, our references
to the URLs for this and any and all other company-owned websites (including
www.platinumstudiosmobile.com,www.drunkduck.com,www.platinumstudioscomics.com
, www.PlatinumStudiosComics.com, store.platinumstudios.com,
www.pt78mobile.com,) are intended to be inactive textual references
only.
We
are a
comics-based entertainment company. We own the rights to a library of
over 3,800 of comic book characters, which we adapt and produce for film,
television and all other media. Our continually expanding library consists
of
characters that have appeared in comics in 25 languages and in more than 50
countries. Our library of comics-based characters spans across multiple genres
and multiple target audiences. Not only have we developed many of our characters
in-house, but we have also aggregated content from several third-party comics
publishers, acquiring the rights to use these characters via all media except
print publishing. We believe that the size of our library gives us a
competitive edge over other comics-based libraries, as we will be able to go
to
market quicker with new opportunities to exploit our characters, such as
electronic comics.
We
seek
to be a leader in producing entertainment content for all platforms including
film, television, direct-to-home, publishing, and digital media based on comic
book characters providing new merchandising vehicles across all retail product
lines. By combining our character commercialization strategy with our
extensive storytelling, packaging, and corporate management abilities, we seek
to build a strategically diversified and profitable character-based
entertainment business.
We
believe our library has broader audience appeal than other comic character
companies whose libraries comprise primarily of the traditional superhero
characters. Our library includes characters that span all story genres,
including science fiction, fantasy, horror, mystery, romance, comedy, crime,
action/adventure, and family. While our library includes superhero
characters, management believes this broad spectrum allows us to be protected
by
any unforeseen downturn in audience reaction to any single genre.
23
In
addition to a broad universe of more than 1,000 characters developed in-house,
we also acquired the rights to the characters and storylines of Italian-based,
SBE Publishing’s Horror/Sci-Fi Universe and French-based, Hexagon Comics, as
well as U.S.-based Top Cow and Barry Wean. We believe that this library gives
us
an established international audience for our media exploitation plans. In
addition to the international exploitation of these properties, there are
significant other benefits to our relationships with SBE and Hexagon Comics,
including providing us with the advantage of owning all content created, without
the burden of overhead to run extensive publishing entities, thus providing
us
with a constant source of new material. As our publishing partners expand their
library, our character and story lists expand as well. Our management
believes that our strategy provides numerous synergies, including:
·
Development
of individual character franchises by leveraging feature films, television
programming, Internet/wireless, licensees, promotional partners,
and
advertisers.
·
Development
and introduction of new characters, planted spin-offs and tie-ins
with
branded characters.
·
Reduced
marketing and promotions costs by cross marketing the characters
through
different distribution media.
·
Interactive
feedback from various affiliated and co-branded online
destinations.
We
believe that our strategy will offer the ability to communicate with audiences
from around the world providing market analysis from fan, industry and creative
perspectives that gauge the appeal of new Characters and stories.
Library
of Characters
Universe
of Characters
Origins
#
of Characters
SBE
Horror / Sci-Fi
Europe
1,000
+ (ongoing)
Awesome
Comics
North
America
500
+ (ongoing)
Top
Cow Comics
North
America
300
+ (ongoing)
Hexagon
Comics
Europe
600+
(ongoing)
Platinum
Studios Macroverse
Worldwide
1,000
+ (ongoing)
Platinum
Studios Acquisitions
Worldwide
400+
(ongoing)
SBE
Horror/Sci-Fi
This
library comprises of the following characters:
·
Characters:
1,103
Dylan
Dog
acquired from SBE: 319 characters
Legs
Weaver acquired from SBE: 271 characters
Nathan
Never acquired from SBE: 456 characters
Barry
Ween acquired directly from creator: 57
characters
Our
rights: We have all rights worldwide, not including print comic publishing
rights. We acquired all rights to all characters in the Barry Ween
property and there is no reversion of rights. On the SBE properties, we
have acquired all right, title and interest in and to all 3 properties (Dylan
Dog, Legs Weaver, Nathan Never), excluding only comic book print publication
rights. The Company originally had 10 years in which to produce a motion
picture or television program based on these properties to preclude a reversion
of rights. This 10-year period expired July 2, 2007. However, the
rights do not revert until Platinum receives notice of reversion, which we
have
not received as of this date. Even if such notice is received, the Company
effectively has 14 months from the date of such notice to commence principal
photography on a picture, whereupon reversion rights would be
terminated.
Awesome
Comics/RIP Media
·
Characters:
516
Our
rights : We have all rights worldwide, not including print comic publishing
rights. Currently, we have the exclusive right to enter into agreements related
to the licensing of motion picture rights and allied/ancillary rights until
the
date upon which Platinum Studios’ CEO, Scott Mitchell Rosenberg is no longer at
least one of the following: (a) an executive officer of the Company; (b) a
member of the Board of Directors of the Company, or (c) holds at least 30%
of
the outstanding capital stock of the Company.
Top
Cow
·
Characters:
546
Our
rights : We have all rights for film and television worldwide. Publishing
is excluded and certain non-film ancillary rights subject to preexisting deals
(certain properties only) are also excluded. Currently, we have the
exclusive right to enter into agreements related to the licensing of motion
picture rights and allied/ancillary rights through January 30, 2010. If we
pay
an additional $350,000 on or before June 30, 2010, these rights are extended
through January 30, 2011.
Hexagon
Library from Mosaic Multimedia
·
Characters:
703
24
Our
rights : We have all rights worldwide, not including print comic publishing
rights, contingent on verification of chain-of-title and European legal
documentation (on completion of paperwork, Platinum will have a long-term,
exclusive option, with provision to buy out all restrictions and third-party
approvals). Currently, we have the exclusive right to enter into agreements
related to the licensing of motion picture rights and allied/ancillary rights
through January 1, 2014. If we pay $196k on or before January 1, 2011, we
then have until January 1, 2016. If we pay $600,000 by January 1, 2016, we
then
have the right in perpetuity. The agreement requires the formation of an
LLC that is co-owned by Mosaic Multimedia and Platinum Studios with Platinum
acting as manager. Company will move forward on formation of the LLC when
it appears likely that exploitation will occur on one or more of the
properties.
Recent
Developments
Print
Publishing
After
launching our first graphic novel in December, 2006, we have published over
30
comic books and graphic novels for distribution through traditional domestic
channels. In July, 2007, we began developing an international channel
for worldwide print distribution. We entered a co-production deal
with KISS Catalog to produce a new line of comic material based on the 1970’s
legendary rock band, KISS, that includes a 50% ownership in all material derived
from this comics line for exploitation in other merchandise and licensing
opportunities.
Digital
Publishing
Since
the
3 rd quarter
of
2006, we have launched an online “e-commerce” store to sell merchandise, comic
books and other products (store.platinumstudios.com), an online comics site
to
highlight the printed comics and graphic novels (
www.platinumstudioscomics.com ), a mobile storefront for distribution of
digital content ( www.platinumstudiosmobile.com ), a web-comics site to
host the digital distribution of our printed comic material and as a resource
for independent comics creators to post new material ( www.drunkduck.com
) and we have developed multiple destination sites for individual comic
properties. This digital publishing group has also created digital images that
consumers can download to their mobile phones and personal computers for
wallpapers and screensavers.
Filmed
Entertainment
We
currently have film and television development deals with several major film
producers and in 2007, we successfully sold one property, Unique , to
Disney Studios, with the anticipation that it will go into production in
2008. Additionally, in June, 2007, we entered into negotiations on a
2-year option agreement with Dreamworks, Universal Studios, Paramount Pictures,
and Imagine Entertainment to acquire the film production rights to our property
Cowboys & Aliens , the #1-ordered graphic novel in the U.S. in 2006
(Entertainment Weekly, January, 2007) with the goal to produce a
feature film. This film’s production schedule has not been officially set yet
but it is anticipated to begin pre-production sometime within the next 24
months. In 2006, we entered into a co-production and distribution
deal with Arclight Films to produce a slate of 8 feature films based on a number
of our properties over the next 3 years. We are currently in contract
negotiations with various talent on our first film from that slate, Dylan
Dog: Dead of Night and we hope to begin production in 2008.
Merchandise/Licensing
In
addition to the KISS Comics line as mentioned above, we have created a line
of
apparel called Number Zero Limited that takes a unique approach to t-shirt
and
other clothing design, highlighting images from comics on the outside of the
shirt and additional story material printed on the inside. We are
negotiating with console and pc-based video game developers to create games
based on our material and we are exploring a number of toys and other
merchandise opportunities. We have extended our branding philosophy
to include our annual “Comic Book Challenge”, a competition that allows
independent creators to pitch original comic book ideas to a panel of live
judges. The winning contestant gets a publishing deal with revenue
sharing across all distribution outlets. In 2007, we signed a 3-year
corporate sponsorship deal with AT&T and secured other sponsorship
arrangements with 5 other corporations to underwrite the event and expose the
Company to a wide audience.
Industry
Overview
The
comic
book market is highly sought after by the entertainment industry for the purpose
of mining for new material. As proof of this appeal, two recent trade
articles have pinpointed the virtues of comics publishing as a credible source
of new material in Hollywood. Daily Variety and Hollywood Reporter
have each reported separately that the big moneymakers are fresh concepts and
comicbooks. “Among the better averages were pics based on comicbooks: There
were only 13 such films, and the $2.8 billion total means that each comicbook
hit averaged a $215 million gross. Which explains why Hollywood is so
hot to film comicbooks.” (“How to make box-office gold”, Marc Graser,
Daily Variety 7/6/07).
Additionally,
IDT Internet Mobile acquired comics publisher IDW in a recent transaction as
reported July 24, 2007. According to Daily Variety, the reasoning
behind this acquisition was to give IDT the ability to “take IDW’s
properties and sell them to traditional film and television outlets and it
will
develop them for new media platforms.” IDT was recently acquired by John
Malone’s Liberty Media in 2007, marking an expansion of a traditional telco into
the content development and media industry. (“IDT buys comics
publisher IDW”, Steven Zeitchik, Daily Variety , 7/24/07).
25
It
was
also reported in July, 2007 that UK-based sales, production and finance house
Intandem is embarking on a “ new corporate strategy by acquiring a 5% stake
in Los Angeles-based comic book publisher Radical Publishing and sister movie
company Blatant Pictures, providing the company with another source of quality
commercial product for studios and top distributors .” (“Intandem has
Radical idea for content”, Stuart Kemp, Hollywood Reporter ,
7/17/07). These industry announcements all support our contention
that comic-books and graphic novel publishing is a viable source for multiple
forms of media exploitation.
Print
Publishing
Every
project we publish is designed for eventual adaptation to other media, including
film and television. Our core business model focuses on the
exploitation of our characters in all media. We license our
characters and stories for domestic and/or international comics
publishing. In some cases, we produce our own publications under the
“Platinum Studios Comics” label, but we also have agreements with other
publishers and original copyright holders whereby our agreement provides for
these parties to continue publishing comic books, generating new characters
and
stories which are added to our ever-growing library of
material. Under these agreements, the publisher retains the
publishing rights and generates ongoing serial publications, maintaining large
staffs within their publishing and distribution organizations to achieve these
goals. We benefit tremendously from this relationship as all new
characters and story lines generated from new publications are added to our
library, without the burden of carrying an entire publishing and distribution
staff. One such example of this arrangement is the Bonelli Publishing
library from Italy, which has been producing comic books in printed form for
over 50 years. Popular characters from the Bonelli library include
Nathan Never, Legs Weaver and Dylan Dog. Pursuant to our
agreement with Bonelli Publishing characters which they develop are added to
our
library.
Print
Publishing Schedule
After
a
successful launch of our inaugural graphic novel, Cowboys & Aliens
, in December, 2006, we have established a steady schedule of 23 books with
an
additional 20 titles to be published before the end of 2007. These titles have
are all published under the Platinum Studios Comics banner and they are sold
directly to comic book stores through the industry’s sole distributor, Diamond
Distribution. The writers and artists of these titles are hired
on a work-for-hire basis.
Distribution
Model
We
currently have four distribution channels to sell our products: (1) direct
to
comic book stores, (2) online, (3) traditional book retail stores, and (4)
international distributors.
All
products offered directly to the thousands of comic book retailers throughout
the United States must be listed through Diamond Comic
Distributors. Diamond was established in 1982 to provide comic book
specialty retailers with wholesale, non-returnable comic books and related
merchandise. Diamond has a vast network of strategically-located Distribution
Centers throughout the world.
Currently,
we have a distribution agreement with Top Cow Productions to list our titles
in
Diamond’s wholesale catalog for retail comic book stores. By capitalizing on Top
Cow Production’s long-standing relationship with Diamond, we have been able to
procure better placement in this wholesale catalog. To date this has
been our primary distribution chain; however, as an adjunct to our Top Cow
Productions arrangement, we have also recently established a direct contractual
relationship with Diamond for the listing of our properties, giving us more
flexibility regarding the types and number of products we offer to this direct
market.
We
also
distribute our products to consumers and retailers via our Web store and comic
book site ( www.PlatinumStudiosComics.com ). The site allows the comic
book fan to get a closer look at the books, the creators and sample
artwork. We have also created a strategy of launching the published
book online, updating one page per day, giving the readers and fans a place
to
preview the book and communicate with the creators one-on-one via our webcomic
hosting site, DrunkDuck (www.drunkduck.com).
We
also
distribute our products through established distribution companies, such as
our
current arrangement with Ingram. Ingram has agreed to distribute our
KISS 4K books to book stores and libraries. Currently, they
distribute to Borders, Barnes & Noble, Hastings and
newsstands. Ingram Book Company is the leading wholesale distributor
of book product.
Finally,
we have recently established relationships with international publishing
entities to distribute translated versions of our completed series of comic
books to over 100 countries throughout the world. These publishers
generally pay advances against sales royalties without charging for translations
and/or printing, making this distribution option a significant way to offset
the
costs of the domestic distribution chain.
Digital
Publishing
We
have
established ourselves as a leader in comics-based entertainment, and continue
to
build our already substantial library of characters and
storylines. We are currently pursuing a strategy to leverage our
momentum in the entertainment space and commercialize our intellectual property
through the most viable media outlets and channels, including the online content
space.
26
Our
Digital Publishing Division’s mission is to leverage our library of intellectual
property across multiple online channels and distribution platforms, and create
an online community for fans of comic-based entertainment in all
media.
We
plan
to aggregate several online comic properties and develop an online comics
“portal,” where we can further interact with the comic-creator and -fan
communities via content, reference information, community tools and other
interactive features. By engaging the community through this
network/portal strategy, we believe we will increase our volume of property,
story and character submissions, promote our online and offline properties,
track key trends in the comic entertainment space and continue to brand the
company with the comic fan base. Revenues for this portal will be derived from
advertising and sponsorship and intelligently monetized through tie-ins,
merchandise and other long-tail strategies.
Online
Comics Community / Portal
In
2006,
we acquired Drunk Duck (www.drunkduck.com), an online web comic community
boasting over 3,000 strips and 10 million monthly page views. Since the
acquisition, we implemented several programming and feature upgrades to enhance
the functionality and user-friendly interface of Drunk Duck, including a new
section for print publishers to post their printed works online as
well. In less than one year, we have seen increased numbers across
the board for Drunk Duck, where as of June 30, 2007, the site hosts over 8,000
strips/stories and the monthly page views now exceed 30,000,000.
Our
ongoing strategy is to create a network of sites dedicated to the online comic
genre (which includes web based comic strips similar to the traditional
newspaper format, online comic books and graphic novels, and
streaming/electronic comics) anchored by Drunk Duck. The goal is to
aggregate the comic fan base across the internet, monetize the traffic through
subscriptions, advertising and sponsored content, embedded product placement,
licensed exploitation opportunities and casual gaming, as well as provide an
access point for the Company to launch and promote its properties and characters
in all forms of media – print, film, television, mobile/wireless and
gaming.
We
have
identified several additional key sites as potential acquisition targets
covering specific aspects of the community – original comic content, industry
news, historical comic reference material, fan sites – which will be combined to
create a grassroots network that speaks directly to the comic book
fan-base. By employing a technique known as a “hat”- a branded
identifying navigational tool commonly found across of the top of the page
(i.e.
Slate.com and Fox.com are part of the MSN.com network, and MSN.com’s
navigational “hat” appears across the top left of each), we believe we can
combine several of these sites to form a comic content network. The
focal point of this network will be Drunk Duck which will feature our streaming
electronic comics, supported by daily content updates and comic strips, industry
news provided by Broken Frontier, interviews, games, podcasts, fan involvement
(blogs; forums; wikis; profiles of fans and comic creators), contests,
etc.
Our
network of online comic sites will speak directly to the fan community and
strive to offer fans a sense of ownership in the properties, with editors for
much of the content selected from the fan base itself. We intend to take this
one step further, where the best fan writers would be welcomed onto the official
staff, creating an “it can happen to you” feeling among the loyal followers,
thereby deepening their attachment to a series.
Of
significant value to us is the ability to monetize the traffic generated across
the entire network through several avenues, including subscriptions, advertising
and sponsored content, embedded product placement, and licensed exploitation
opportunities. Each of these revenue streams can be active on every
site within the network, as they work to drive traffic to one another, further
maximizing the revenue potential of every visitor. As the characters
and stories themselves begin to establish a broader audience, additional revenue
streams such as licensed products, merchandising and additional media outlets
become viable options.
Casual
Games
Due
to a
renewed interest in retro arcade games like pac-man, asteroids and centipede,
as
well as new titles inspired by retro games, card and board games, puzzle games
and the like, a new gaming sector, often collectively referred to as “casual
games,” has evolved. The category is loosely defined as games with simple rules,
that are easy to learn and can be played in very small increments of time –
perfect for a 5-10 minute break at work. The most prevalent casual game genres
today are puzzles, word games, and casual-action games, followed by tile/card
and board games.
Our
Drunk
Duck portal includes a casual gaming section, with a variety of games featuring
characters and story lines from our library. We are in discussions
with leading game developers to “re-skin” an assortment of casual games with our
properties (i.e. changing the cosmetic nature of the game characters without
changing the underlying software of the program), and we are evaluating several
ways to monetize this product. In the past few years, the dominant business
model for targeting the casual games audience was offering free online games
that were monetized by advertising and sponsorships. A number of business models
have now emerged, including fee-based downloadable games, premium online
subscription services, skill-based gaming tournaments, in-game advertising
and
free game play supported by video advertising and sponsorships.
27
Digital
Studio Model
We
are in
the process of creating a “digital studio,” which management believes will be
positioned to exploit our intellectual property across the web and expand our
audience for comic-based entertainment. Content developed through the digital
studio will be tailored to current and burgeoning web distribution platforms,
including electronic comics, streaming video/video-on-demand, and instant
messaging, and distributed through partnerships with online portals such as
AOL, MSN, Google, and Yahoo!, all of which are aggressively pursuing content
plays via in-house development, acquisitions and joint ventures. In
addition, we will exploit the rapidly growing world of wireless/mobile
content.
Following
the lead of our broadcast entertainment studio model, our Digital Publishing
team will develop several series of “tentpole” electronic comics based on
characters from our intellectual property library, which combine the best
elements of animation and comics. These electronic comics will be roughly 3-5
minutes in length, merging the unique visual animated template of comics with
top-flight directing, writing, editing and voicing, all created to fit with
the
viewing habits of online users in the target demographic.
The
distribution platform for our electronic comics includes establishing
relationships with the online entertainment content portals and search
destinations such as AOL, MSN, Yahoo and Google. These portals will
utilize the content within their entertainment channels, and revenues will
be
derived through advertising and sponsorship, managed by each individual
portal. With the continuing evolution of web-based video content
delivery, broadband penetration to the home and the forecasted growth in online
ad spending, this will provide Platinum with a significant revenue stream.
Additionally, by providing content through any of these partners to their vast
audience, the Company believes it can generate significant exposure for many
of
its properties and characters.
Online
content/streaming content models have shifted in recent years, however ad
supported and subscription models are still recognized as the most lucrative
and
cost-effective. There has been an upswing in the downloadable content model
(i.e. – iTunes, Rhapsody, Google’s Online Video Store) in late 2005 and early
2006, and we will continue to explore these and other avenues for the
distribution of content created by its digital studio. One of the
strongest components of the digital studio as part of the Company’s overall
Digital Publishing Division initiative, is its ability to be self sustaining
–
expending capital and resources to produce the content, and generate revenue
by
licensing that content across the web through multiple destinations and
partners.
Drunk
Duck itself will provide us with not only an online destination for fans of
the
comic genre, but also a distribution platform for content developed in the
digital studio. Furthermore, this also provides a place where new stories and
concepts can be critiqued and fine-tuned by an audience who not only knows
the
genre, but also begins to feel a sense of involvement and ownership as they
contribute to the evolution of their favorite characters.
Mobile/Wireless
Distribution
In
June,
2006, we began pursuing a strategy to leverage our momentum in the entertainment
space and commercialize our intellectual property through the most viable media
outlets and channels, including the wireless and mobile content space. Our
Wireless/Mobile Content group mission is to leverage our library of intellectual
property across multiple mobile distribution platforms and further expand the
audience for our characters and stories. Through affiliations and
partnerships with mobile content developers, syndicators, and distributors,
we
intend to make available an array of downloadable content, including ring tones,
wallpapers, and games, featuring characters, icons and concepts from our library
of characters. We believe that utilizing the internet as a key access
point to reach the mobile customer will keep production and overhead costs
to a
minimum and develop a very robust revenue stream. In addition to the
potentially lucrative revenue stream from the sale of each phone and service
contract, we will gain an additional point of contact to reach a dedicated
fan
base for specific properties. The subscriber base can be offered exclusive
content, promotions, early access to other media properties, and other key
benefits to keep them engaged with our various content offering.
As
a
mobile content provider, we will focus primarily on the delivery of content
in
various forms, including downloadable images, ringtones, voicetones, wallpapers,
video, animation, games, and interactive applications (such as e-mail, web
browsing, SMS and instant messaging) to a range of wireless
devices. This will be achieved through partnerships with Mobile
Content Syndicators, who aggregate and package content from multiple providers
and distribute it through alliances with various channels or
portals.
Filmed
Entertainment: Feature Films
We
are
aggressively pursuing a multi-pronged approach to create feature
films:
·
Licensing
characters and stories to third-party producers and/or affiliated
major
studios for production
·
Secure
outside financing to produce our own slates of
films
28
Licensing
Deals
Some
examples of our current projects with major studios based on previously
unbranded characters include:
·
Unique
(Disney) - Based on a comic book series released in early 2007, Disney
acquired the film rights to this project and tentative production
schedule
is set for sometime in 2008.
·
Cowboys
& Aliens (Dreamworks/Paramount/Imagine/Universal) – In June,
Dreamworks agreed to option our property for development and production
for joint distribution through Paramount and Universal with Imagine
Entertainment as a producing
partner.
Production
Slate Financing
As
an
alternative to licensing properties to studios, independent financing
arrangements are becoming more prevalent in the entertainment
industry. While there are many ways to finance films, one of the
options is to create an Intellectual Property-Backed Securitization vehicle
to
facilitate the funding efforts. The structure is designed to (1)
isolate the Intellectual Property assets needed for the production and
exploitation of theatrically released films into a bankruptcy-remote vehicle,
thus protecting the financial integrity of the Company from potential adverse
performance of the picture slate, and (2) mitigate the performance risk across
a
number of films through structural credit enhancements.
The
vast
majority of issuance by dollar volume has occurred in the film industry because
film catalogs represent large, predictable assets with clearly defined
historical cash flows and relatively little variance. Similarly, future flows
transactions backed by film catalogs tend to show less volatility as the film
industry has followed the same pattern for many years where a few blockbusters
(perhaps 5% of the total releases) finance the rest of the releases. This “all
or nothing” type of economics, where the few hits pay for the many flops, works
well for slates because the catalogs behave like a portfolio of assets whose
diversification smoothes the volatility of revenues.
Intellectual
property backed securitization is a recent phenomenon and the total market
to
date remains relatively small. In 1997 there were $380 million in
known IP backed securitization transactions. In 2000 there were $1.13 billion.
The total known transaction volume in those years was greater that $2
billion. The total asset value of patents worldwide is estimated to
be many trillion dollars. (Source: Bernhard H. Fischer, “New Patent Issue:
BioPharm Royalty Trust”, “From Ideas to Assets: Investing Wisely in
Intellectual Property”, Bruce Berman (editor), (New York, John Wiley & Sons,
Inc.) p. 484).
We
are
working with Havenwood Media LLC and Arclight Films to arrange a financing
slate
of eight low-budget (between $6 and $12 million) motion pictures intended for
theatrical release. Together with Arclight, we will put together a
combination of equity, tax incentives and other financing to fully fund the
production of these films.
Along
with our partners, Arclight and Havenwood, we have identified the following
eight (8) properties for our current slate (although various circumstances
may
require us to substitute alternative titles for those listed):
·
Witchblade
·
The
Darkness
·
Dead
of Night (from Dylan Dog )
·
The
Hunter
·
Ghosting
·
Hive
·
Mal
Chance
·
Blood
Nation
Our
first
project in this slate, Dead of Night , is in early stages of
pre-production as of August 27 as we are in final negotiations with key
talent. We anticipate production to begin the first quarter of
2008. The second film identified for potential 2007 production
schedule is Ghosting . In addition to this current
slate with Havenwood and Arclight, we are reviewing additional slate
opportunities such as direct-to-home video slate and genre-specific, low-budget
slates.
Filmed
Entertainment:
Television
In
television, we intend to (1) continue our strategy of licensing our characters
and stories to third-party producers for sale to broadcast and cable television
networks: and (2) secure third-party financing to produce our own specials
and
series .
Licensing
Deals
We
are
currently working with several well-known producing partners in order to help
bring other characters to the small screen as follows:
·
Film
44
Peter
Berg ( Friday Night Lights ) is directing and Raphael Alverez (
The Wire ) is writing the hour-long drama,
Down, for NBC Universal/Television Studio based on the Top
Cow
Productions property by Warren
Ellis.
·
Raimi-Donen
Sam
Raimi ( Spider Man 1, 2 & 3 ) is developing Rising
Stars , by J.M.S. ( Babylon 5 ) as a
mini-series.
·
Roundtable
Entertainment
Gina
Matthews ( 13 going on 30 ) and Phil Stark ( Dude, Where’s My
Car ) are working to develop Utopia , a
single-camera half-hour sitcom for 20 th
Century
Fox.
29
Merchandise/Licensing
We
recognize a targeted merchandising and licensing strategy can produce
significant revenues from characters who build their audience / fan base through
any form of media exploitation – feature film, television, home video/DVD,
print, online, wireless and gaming. We will seek to develop relationships with
category leaders to help secure more retail support, increase the distribution
of its products, and make us a key franchise for our licensees.
Licensees
recognize the potential that comic based properties afford them in diversifying
their retail mix with lines for multiple characters within one story, and,
in so
doing, expanding the potential consumer audience interested in their
merchandise. It is not uncommon for a major theatrical release in the comic
to
film genre to secure over 50 licensees for an array of products, from action
figures, games and trading cards, to party supplies, costumes, furniture, and
packaged foods.
The
opportunities within the merchandising and licensing arena for us are equally
as
wide ranging, including toys/games, collectibles, apparel, and numerous consumer
goods. We will pursue opportunities via the following
channels:
·
General
merchandising agreements with third parties in each major territory
where
films, television and new media will be released.
·
Collectible
merchandising: cultivating the worldwide collector market by allowing
licensees in other countries to break with the normal tradition of
shipping only within their territory. In these agreements, we will
allow
such licensees to ship product to special retailers who have partnership
arrangements with the Company. These items will carry a double royalty:
the original royalty from the licensee and the additional royalty
from the
retailer allowed to carry the material.
·
The
licensing of the Characters for customized advertising campaigns
and/or
media purchase campaigns.
·
Leveraging
individual partners and licensees’ efforts together globally and locally
to create critical mass, including promotions, contests, and third-party
advertising on radio, television and new media.
·
The
leveraging of our relationships with hundreds of comic book publishers
and
distributors worldwide for the distribution of the Characters in
print
form.
Collectibles
Merchandising Strategy
Our
collectible merchandising strategy will be an important area for income and
branding. The collectible markets worldwide will be developed through the
combination of an online and offline merchandising model. We will
establish merchandise-licensing arrangements that enable individual licensees’
ability to sell merchandise outside their territories through our distribution
partners. Where licensees traditionally cannot cross borders to sell products
available within their own licensed territories, we will establish a global
capability for individual territory merchandise licensees to make their product
available worldwide over our website (including co-branded and syndicated
versions of the website).
KISS
Comics Group Venture
Spinning
off from the successful marketing empire of the 70’s rock superstars, KISS,
KISS 4K is a multi-platform comic property that follows the adventures
of superheroes based off the KISS band personalities. KISS
4K is the first launch of the Kiss Comics Group, a 50/50 licensing venture
with KISS. Concepts developed in KISS 4K will be spun off
into separate titles, which will include appearances by the members of
KISS. The comic lends itself to unique merchandising
opportunities. KISS 4K merchandising will target higher-end
product, including clothing, collectibles, cell phone accessories and plug-ins
and electronics. Additionally, there are many opportunities for
sponsors to dress/equip the characters with specific products within the
comic.
Merchandise
LicensingIndustry
According
to License Magazine , character-based licensed products – which include
entertainment, television and movie characters - generated more than $39B at
retail in 2003. Licensed toy lines in the character category increased by
more than 5% in 2003 to just over $5.6B ( NPD Group/FunWorld
). Top action properties, including Spider-Man , Buffy
the Vampire Slayer , The X-Men , Hercules , and Star
Wars , have built lucrative licensing programs across all product
categories. In fact, franchises such as Teenage Mutant Ninja Turtles,
Star Wars Episode I , Toy Story , and even Barney have
garnered over $1 billion sales each in the U.S. alone. We are looking to
expand our merchandise lines in ways that benefit our franchises beyond current
licensing agreements.
30
Merchandise
licensing can include various products including sporting goods, apparel, home
furnishings, stationery, packaged goods, books, and more, but the largest
segment in this industry is toys. In the toy business, companies like
Mattel and Hasbro may develop their own core brands that include characters
and
storylines to drive and support their toy lines. Often they look to third
parties, including entertainment studios, video game companies, and book authors
& publishers to bring popular storylines and characters to their
products.
Through
co-ventures, direct manufacturing, and merchandise licensing, we hope to expand
our franchises into a tactile world that extends consumers
relationships with the characters and stories that they know and
love.
Our
offices are located at 11400 W. Olympic Blvd., Suite 1400, Los Angeles,
CA90064, and consist of approximately 12,400 square
feet. We entered into a five year lease for our offices which
requires payments of $31,857 per month or minimum annual payments of $127,429
in
2006, $387,383 in 2007, $402,878 in 2008, $418,993 in 2009, $435,753 in 2010
and
$298,147 in 2011. Our lease expires on August 31, 2011.
LEGAL
PROCEEDINGS
We
are
not currently a party to any legal proceedings. There has been no bankruptcy,
receivership or similar proceedings.
There
have been no material reclassifications, mergers, consolidations, or purchase
or
sale of a significant amount of assets not in the ordinary course of
business. As of the date of this prospectus, there are no material
proceedings to which any of our directors, executive officers, affiliates or
stockholders is a party adverse to us.
Employees
As
of the
date of this prospectus, we have twenty-two (22) full-time and eight (8)
part-time employees. We have not experienced any work stoppages and we consider
relations with our employees to be good.
MANAGEMENT
EXECUTIVE
OFFICERS, DIRECTORS AND KEY EMPLOYEES
The
following table sets forth information about our executive officers, key
employees and directors as of December ___, 2007.
Name
Age
Position
Scott
Mitchell Rosenberg
44
Chairman
& Chief Executive Officer
Brian
Kenneth Altounian
43
President,
Chief Operating Officer and Director
Jill
Zimmerman
44
Director
Helene
Pretsky
43
Corporate
Secretary and General Counsel
__________________
Scott
Rosenberg has been our Chairman and Chief Executive Officer since
September 15, 2006 and Mr. Rosenberg served as the Chairman and Chief Executive
Officer of Platinum Studios, LLC, our predecessor, since November
1996. Mr. Rosenberg established Platinum Studios, LLC in 1996
following a successful, high-profile career in the comic book industry. As
founder and head of Malibu Comics, Rosenberg produced the Men In Black
comic book, which he took to Sony to become a billion-dollar film franchise.
At
Malibu, Rosenberg developed an innovative grass-roots marketing approach,
reaching out directly to fans, retailers, and press to allow Malibu to be
distributed alongside top industry players at a fraction of what the major
companies spent—notably, in the pre-Internet age, without the opportunities and
advantages provided by the web. Malibu’s marketing savvy and ability to create
and develop new characters and new ideas led to a fierce bidding war to acquire
the company, and in 1994 Malibu was bought by Marvel Comics. Mr. Rosenberg
holds
an undergraduate degree from the University of Denver.
Brian
Altounian has been our Chief Operating Officer since June 2005 and was
appointed to serve as President and Director in September 2006. Mr. Altounian's
background includes business development, finance, operations and administration
and he has applied those skills to a variety of start-ups, Fortune 100
companies, and public and private organizations. Mr. Altounian has worked
extensively in the entertainment and high-tech industries, the bread and
butter
of Los Angeles' commercial culture.
He
currently sits on the Board of Directors of Cereplast, Inc. (CERP.OTC), a
manufacturer of proprietary bio-based, renewable plastics, where he has served
as the Audit Committee Chairman since May, 2005. From August, 2004
through June, 2006, he sat on the Board of Directors of Machine Talker
(MTKN.OTC), which has created a breakthrough technology in smart security
wireless networks. From May, 2003 through June, 2006, he sat as
Chairman of the Board of Directors of XsunX, Inc. (XSNX.OTC), a developer of
revolutionary thin film photovoltaic solar cell technology. His expertise is
in
the area of developing corporate infrastructure and assisting early-stage
companies to execute on their business plans and grow, often through the access
of capital through the public equity markets and from December, 2003 through
June, 2007, he has provided advisory support to a number of these early-stage
technology companies such as Warp9 (WNYN.OTC), Imaging3, Inc. (IMGG.OTC),
BioSolar, Inc (BSRC.OTC), Carbon Sciences, Inc. (CABN.OTC) and Origin Oil,
Inc.
(private). His first foray in the high-tech space came as Executive
Vice President of Main Course Technologies, a wireless applications developer
which he co-founded in January 2000 and ran until May, 2003.
31
Prior
to
his adventures in the high-tech arena, Mr. Altounian spent 12 years in the
entertainment industry with a successful consulting practice, advising
entertainment companies in the areas of finance, administration, operations
and
business development. His clients have included Disney Interactive, Two Oceans
Entertainment Group, The Santa Barbara Grand Opera Association, International
Documentary Association, In-Finn-Ity Productions and many others. He
also held senior management positions in-house at Lynch Entertainment, a
television production company where he held the position of Vice President,
Finance from January 1998 through December 1999; Time Warner
Interactive, a CD-ROM and interactive game company where he served as Vice
President, Finance from July, 1995 – May, 1996; National Geographic Television,
serving as Finance Director for this world-renown documentary film production
company, specifically for the National Geographic Specials for the NBC
Television Network from July, 1992 – June, 1996; and from 1987 through June,
1992, as Business Services Manager for WQED, the country’s first community-owned
Public Television stations where he oversaw the finances and operations for
numerous television documentary series.
Most
recently, he was Consulting Producer on Random 1, a reality television
series that debuted in November 2005 on the A&E Network and Executive
Producer on the documentary feature film Lost in Woonsocket
. Mr. Altounian also recently founded a non-profit media
organization, Lost & Found in America, Inc., where he currently sits as
Chairman of the Board for this company that creates media projects that support
local community-based non-profit groups serving underserved segments of the
US
population.
Mr.
Altounian holds an MBA from Pepperdine University and an undergraduate degree
from UCLA.
Jill
M. Zimmerman has been a director since September 16,2006. Since May 2005, Ms. Zimmerman has served as a Vice
President at the Alford Group, a consulting firm based in Evanston, Illinois.
Ms. Zimmerman previously served as a Crisis Program Supervisor and Director
of
Development at Alternatives, Inc. a not-for profit corporation from November
1994 through May 2005. Ms. Zimmerman holds a Bachelor of Arts from the
University of California at Santa Barbara and a Masters degree from the
University of Chicago.
Helene
Pretsky has been our general counsel since January, 2006 and our
corporate secretary and Executive Vice President since October 1 2006. Ms.
Pretsky, a securities/corporate attorney with expertise in intellectual
property, has focused her twenty-year legal career on representing start-up,
early-stage revenue companies in the high-tech, emerging technologies and
entertainment industries. Ms Pretsky was an associate at Brobeck, Phleger &
Harrison from 1987 to 1994, and associate at Kinsella, Boesch,
Fujikawa & Towle from 1994 to 2000 where Ms. Pretsky provided the full
range of corporate representation for private and public companies, including
public offerings, private placements, mergers and acquisitions and preferred
stock financings; complex patent, trade secret, copyright and trademark
licensing and protection agreements; cooperative research, development and
commercialization agreements; and domestic and international distribution and
sales arrangements. From 2000 to 2005, Ms. Pretsky served as General Counsel
and
VP of Business Affairs of Virtual Fonlink, Inc., a cutting edge mobile payment
services hardware and software solutions company, which she also
co-founded. Ms. Pretsky provided the full range of corporate and
securities work for such company, including preparation and negotiation of
private placements, technology development and license agreements and strategic
partnership contracts with Motorola, Nextel, Sprint, SAfeNet and TNS. She was
also instrumental in creating the company's overall business and intellectual
property strategies.
Ms.
Pretsky, a magna cum laude, Phi Beta Kappa graduate of the University of
California, Los Angeles, received her J.D. from the UCLA School of Law, where
she graduated in the top 15% of her class and was a member of its prestigious
Law Review.
SIGNIFICANT
EMPLOYEES
Norman
“Hank” Lambert
Executive
Vice President, Business Development and Operations
Hank
Lambert came to Platinum as VP of Business Development in November 2006 and
has
served as Executive Vice President, Business Development and Operations since
August 2007. From 1995 through 2006, as CEO of 3Notch, Inc., Mr. Lambert
consulted with C-level executives and start-up entrepreneurs developing new
strategic initiatives and business models for organizations such as Dot Hill
Systems, TeraGlobal Communications, Universal Home Video, New South Federal
Savings Bank, and Mother and Me. In addition to strategy development services,
3Notch, Inc provided implementation and execution strategies for their clients
and shared in the revenue growth they generated.
Mr.
Lambert has a BS degree in Business from the University of Alabama and his
MBA
from the University of Southern California.
32
Sean
O’Reilly
Vice
President, Publishing and Animation
Sean
O’Reilly joined Platinum Studios as VP, Publishing & Animation in August,
2007. In 2004, Sean created Arcana Studios, where he released five
original comic titles, all of which have now been translated and distributed
throughout the world. The company won the Shuster Award for
Outstanding Publisher, as voted by the retailers and readers throughout
Canada. Arcana Studio was nominated for a Harvey Award in its first
year, a feat unprecedented in the quarter century tenure of the
award.
Sean
earned his B.Sc. in Biology from Simon Fraser University in Vancouver, B.C.
Canada in 1997. Sean received a second degree in 1999 with his B.Ed.
from the University of British Columbia in Vancouver, B.C. and then completed
his M.Sc. in Leadership and Administration at the University of Oregon in 2002.
Sean is currently pursuing his Ph.D. in a Doctoral of Management Information
Services and Technology.
Richard
Marincic
Director
of Film/Television Development
Mr.
Marincic also worked in the literary management department of Management 360,
whose client roster includes Toby Maguire, Reese Witherspoon, director James
Mangold ( Walk the Line ), and director Frank Coraci ( Wedding
Singer ). Mr. Marincic worked at the company from the day it opened the
doors of its Beverly Hills offices until he started with Platinum Studios,
in
2004. He has worked in almost all aspects of the Film and TV business
over the last decade including a stint as Associate Producer Bravo in 2003,
Production Assistant for Spelling Entertainment in 2000 and various other
production positions since June, 1999.
Mr.
Marincic earned his Bachelors degrees in Television and Film Production as
well
as Theater from Southern Illinois University in 1999. He has also written and
directed several plays in his hometown of Chicago.
Dan
Forcey
Vice
President, Content Development
Mr.
Forcey has served as Platinum’s Vice President of Content Development since
January of 2007. Prior to that, he served as Platinum’s Communications
Manager from December of 2002, coordinating their public relations efforts
and
managing multiple websites for the company, including the corporate site
platinumstudios.com, the fan portal, jeremiahportal.com, and the Unique
Experience alternative reality game.
For
the
past 10 years, Mr. Forcey has worked extensively across the United States
and Canada as a stuntman, fight choreographer, and teacher of movement and
stage
combat and is a world-recognized expert in fencing and swordfighting. Mr. Forcey
's stunt work includes multiple television shows and feature films both in
the
U.S. and abroad, including Oscar-nominated movies like Master and Commander:
The Far Side of the World , Flags of Our Fathers, and Letters
from Iwo Jima .
From
1997
through 2002, Mr. Forcey has held faculty positions at York University, the
Centre for Indigenous Theatre, the University of Southern California, Cal State
University, Long Beach, Cal Poly Pomona, and the Cerritos Center for the
Performing Arts. During his various tenures, he has instructed students in
acting, movement for actors, stage combat and clowning.
On
1996,
Mr. Forcey graduated cum laude from the University of Southern California with
an undergraduate degree in theatre with a minor in
philosophy. Mr. Forcey graduated Magna cum laude from York
University while receiving his graduate degree in acting and movement, writing
his master's thesis on the use of the British quarterstaff.
Zachary
Pennington
Vice
President, Creative Design
Mr.
Pennington is a multiple award-winning designer, editor and art director who
has
spent the last 14 years designing projects for both the entertainment and
Internet industries and has worked on projects for almost every major studio
in
Hollywood. Prior to joining Platinum Studios in 2006 he was Senior Art Director
at The Cimarron Group from 2002-2006, an advertising agency serving the
entertainment industry. From 1998 to 2002 he worked as a freelance
art director and creative director for entertainment agencies and Internet
companies, including NeoPets, an on-line community games site, and CUShopper,
an
Inc 500 company.
Mr.
Pennington’s designs have earned him acclaim and numerous awards including a
Hollywood Reporter Key Art Award and three nominations, an Andy Award and two
nominations, and a feature in Print Magazine’s The Big Event. His work includes
the home video and DVD campaigns for To Kill a Mockingbird,Rocky
1-5, The Omen (the film collection), X-Men 1, 2 and 3, Minority Report, Casino,
Dune, The Bourne Supremacy, Dawn of the Dead (2004), Night of the Living Dead,
Million Dollar Baby, Platoon, The Terminator, Fantastic Four, The Devil Wears
Prada, The Sentinel, Look, Up in the Sky! The Amazing Story of Superman,
the best-selling Riddick Trilogy and the multi-award-wining campaign
for The Texas Chainsaw Massacre as well as the multi-award winning
campaign for Titanic. He also received much acclaim for his work
designing the DVD release of the original Star Wars
Trilogy.
33
Amongst
the many theatrical campaigns he has worked on are Disney’s Mulan, Hercules,
The Little Mermaid, as well as Species, Saw 3, Blue Streak and
Ripley Under Ground . Mr. Pennington is also well
respected in the entertainment and comic book industries for his work for the
Independent Spirit Awards and the Hero Initiative.
CONFLICT
OF INTEREST
Our
officers and directors devote 100% of their time to our business.
Our Chief Executive officer, Scott Mitchell Rosenberg
,
is permitted to enter into separate producer agreements for our productions
through his own loan-out corporation, Scott Mitchell Rosenberg Productions,
Inc., provided that all compensation that he receives through these agreements
are considered as compensation he receives as CEO of the Company and therefore
taken into account in setting his annual compensation. The Producer agreements
are standard in the industry for heads of media companies and in no way can
negatively impact, impede or affect the Company’s ability to make deals with
production companies for its properties. Mr. Rosenberg did not receive any
compensation under this arrangement for the years ended December 31, 2005
and
2006. A loan-out company is use in the entertainment industry and is used
for
actors, musicians, directors, producers, writers and other key individuals.
In a
typical loan-out company arrangement, the individual forms the corporation
which
he controls. The corporation hires the individual with the salary to be set
from
time to time to reflect the activity of the corporation. Instead of the
individual being hired directly, a deal is made with the loan-out company
which
in turn lends the services of its employee. In order to give the hiring company
comfort that the individual will be committed to doing the work the individual
may be asked to sign an inducement letter, which confirms that he or she
will
look only to the loan-out corporation for compensation.
TERM
OF OFFICE
Pursuant
to our bylaws, our directors are elected at our annual meeting of stockholders
and each director holds office until his successor is elected and qualified.
Officers are elected by our Board of Directors and hold office until an
officer's successor has been duly appointed and qualified unless an officer
sooner dies, resigns or is removed by the Board.
COMMITTEES
OF THE BOARD
We
currently do not have an audit committee, compensation committee, nominations
and governance committee of our board of directors.
FAMILY
RELATIONSHIPS
There
are
no family relationships among our executive officers and directors.
CODE
OF ETHICS
We
have adopted our Code of Ethics and
Business Conduct for Officers, Directors and Employees that applies to all
of
our executive officers and directors. Our Code of Business Conduct and Ethics
is
posted on our corporate website at www.platinumstudios.com,
under the corporate tab on the
Company’s home page. Upon request, we will provide to any person
without charge a copy of our Code of Ethics. Any such request should be made
to
the Company, 11400 W. Olympic Blvd. 14 th
Floor, Los Angeles, California, 90064,
and Attention: Brian Altounian.
EXECUTIVE
COMPENSATION
The
following table sets forth the compensation paid or accrued by us to our Chief
Executive Officer and President and Chief Operating Officer and each of our
other officers whose compensation exceeded $100,000 for each of the Company’s
last two completed fiscal years.
Name
and
Principal
Position
Year
Salary
($)
Bonus
($)
Stock
Awards ($)
Option
Awards ($)
Non-Equity
Incentive Plan Compensation ($)
Change
in Pension Value and Non-Qualified Deferred Compensation Earnings
($)
All
Other Compensation ($)
Total
($)
Scott Mitchell
Rosenberg,
CEO
2006
2005
$34,615
-
-
-
-
-
-
-
-
-
-
-
-
-
$34,615
-
Brian
K. Altounian, President/COO
2006
2005
$299,039
(1)
$63,961(2)
-
-
-
-
-
-
-
-
-
-
-
-
$299,039
$63,961
Helene
Pretsky, EVP Bus. Affairs
2006
2005
$161,187(3)
-
-
-
-
-
-
-
-
-
-
-
-
-
$161,187
-
34
(1)
$250,000 (of which 243,079 was deferred) of Mr. Altounian’s compensation
for 2006 was paid in his capacity as an independent contractor, $49,039 as
paid
in his capacity as an employee of the Company.
(2)
Mr.
Altounian’s compensation for 2005 was paid in his capacity as an independent
contractor.
(3)
$130,417 of Ms. Pretsky’s compensation in 2006 was paid in her capacity as an
independent contractor and $30,770 in her capacity as an employee of the
Company.
Outstanding
Equity Awards at Fiscal Year-End Table.
The
following table sets forth information with respect to grants of options to
purchase our common stock to the named executive officers at December 31,2006.
Option
Awards
Stock
Awards
Name
Number of
Securities
Underlying
Unexercised
Options
(#) Exercisable
Number of
Securities
Underlying
Unexercised
Options
(#) Unexercisable
Equity
Incentive
Plan
Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#)
Option
Exercise
Price
($)
Option
Expiration
Date
Number of Shares or Units of Stock That Have Not
Vested
(#)
Market Value of Shares or Units of Stock That Have Not
Vested
($)
Equity
Incentive
Plan
Awards: Number of
Unearned
Shares,
Units
or
Other
Rights
That
Have
Not
Vested
(#)
Equity Incentive
Plan
Awards:
Market
or Payout
Value
of
Unearned
Shares,
Units or
Other
Rights
That
Have
Not
Vested
($)
Scott
Mitchell Rosenberg
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
Brian
Altounian
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
Director
Compensation
The
following table sets forth with respect to the named directors, compensation
information inclusive of equity awards and payments made for the fiscal year
ended December 31, 2006.
Change
in Pension Value and Nonqualified Deferred Compensation Earnings
(f)
All
Other Compensation ($) (g)
Total
($) (h)
Scott
Mitchell Rosenberg
-0-
-0-
-0-
-0-
-0-
-0-
-0-
Brian
Altounian
-0-
-0-
-0-
-0-
-0-
-0-
-0-
Jill
Zimmerman
-0-
-0-
-0-
-0-
-0-
-0-
-0-
EMPLOYMENT
AGREEMENTS
We currently
have no employment agreements with our executive officers.
35
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth, as of December ___, 2007, the number of and percent
of our common stock beneficially owned by:
·
all
directors and nominees, naming
them,
·
our
executive officers,
·
our
directors and executive officers as a group, without naming them,
and
·
persons
or groups known by us to own beneficially 5% or more of our common
stock:
We
believe that all persons named in the table have sole voting and investment
power with respect to all shares of common stock beneficially owned by
them.
A
person
is deemed to be the beneficial owner of securities that can be acquired by
him
within 60 days from October 30, 2007upon the exercise of options, warrants
or
convertible securities. Each beneficial owner's percentage ownership is
determined by assuming that options, warrants or convertible securities that
are
held by him, but not those held by any other person, and which are exercisable
within 60 days of October 30, 2007 have been exercised and
converted.
Title
of Class
Name
of
Beneficial
Owner
Number
of Shares
Beneficially
Owned
Percent
of Total
Common
Stock
Scott
Rosenberg (1)
128,250,000
63.7%
Common
Stock
Brian
Altounian
6,750,000
3.3%
Common
Stock
Jill
Zimmerman
-0-
*
Common
Stock
Helene
Pretsky
-0-
*
Common
Stock
Charlotte
Rosenberg
17,208,575
8.6%
Common
Stock
All
Executive Officers and Directors as a Group (3 persons )
135,000,000
100.00%
*Less
than one percent.
(1)
Includes
135,000 shares of common stock beneficially owned by Pamela Rosenberg,
the
wife of Scott Rosenberg. Mr. Rosenberg disclaims beneficial ownership
of
these shares. Also includes 16,875,000 shared held by the Scott
Mitchell Rosenberg GRIT, of which Mr. Rosenberg is the
Trustee.
Certain
Relationships and Transactions
We
have
an exclusive option to enter licensing/acquisition of rights agreements for
individual characters, subject to existing third party rights, within the RIP
Awesome Library of RIP Media, Inc., a related entity in which Scott Rosenberg
is
a majority shareholder. The Company did not exercise this right during the
years
ended December 31, 2006 and 2005.
Our
Chief
Executive officer, Scott Mitchell Rosenberg , is permitted to enter into
separate producer agreements for our productions through his own loan-out
corporation, Scott Mitchell Rosenberg Productions, Inc., provided that all
compensation that he receives through these agreements are considered as
compensation he receives as CEO of the Company and therefore taken into account
in setting his annual compensation. The Producer agreements are standard
in the
industry for heads of media companies and in no way can negatively impact,
impede or affect the Company’s ability to make deals with production companies
for its properties. Mr. Rosenberg did not receive any compensation
under this arrangement for the years ended December 31, 2005 and
2006.
36
At
December 31, 2005, we owed RIP Media $20,000 in uncollateralized
loans. During 2006, we repaid in full the $20,000 uncollateralized
loans received during 2004. These loans accrued interest at 5% and 6% for the
years ended December 31, 2005 and 2006, respectively.
At
December 31, 2006, we owed $243,079 to Brian Altounian for consulting services
provided prior to his employment.
DESCRIPTION
OF SECURITIES
Our
authorized capital stock consists of 500,000,000 shares of Common Stock,
$0.001
par value per share, of which 201,255,825 shares were issued and outstanding
as
of December ___, 2007.
The
holders of Common Stock are entitled to one vote for each share held of record
on all matters to be voted on by the stockholders. The holders of Common Stock
are entitled to receive dividends ratably, when, as and if declared by the
Board
of Directors, out of funds legally available therefore. In the event of a
liquidation, dissolution or winding-up of our business, the holders of Common
Stock are entitled to share equally and ratably in all assets remaining
available for distribution after payment of liabilities.
The
holders of shares of Common Stock, as such, have no conversion, preemptive,
or
other subscription rights and there are no redemption provisions applicable
to
the Common Stock. All of the outstanding shares of Common Stock are, and the
Common Stock offered hereby, when issued will be, validly issued, fully paid
and
non-assessable.
We
have
never paid any cash dividends on our Common Stock and do not anticipate paying
any cash dividends in the foreseeable future. We intend to retain future
earnings to fund ongoing operations and future capital requirements of our
business. Any future determination to pay cash dividends will be at the
discretion of the Board of Directors and will be dependent upon our financial
condition, results of operations, capital requirements and such other factors
as
the Board of Directors deems relevant.
COMMISSION'S
POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Our
By-laws, as amended, provide to the fullest extent permitted by California
law,
our directors or officers shall not be personally liable to us or our
shareholders for damages for breach of such director's or officer's fiduciary
duty. The effect of this provision of our By-laws, as amended, is to eliminate
our right and our shareholders (through shareholders' derivative suits on behalf
of our company) to recover damages against a director or officer for breach
of
the fiduciary duty of care as a director or officer (including breaches
resulting from negligent or grossly negligent behavior), except under certain
situations defined by statute. We believe that the indemnification provisions
in
our By-laws, as amended, are necessary to attract and retain qualified persons
as directors and officers.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933
(the
“Act” or “Securities Act”) may be permitted to directors, officers or persons
controlling us pursuant to the foregoing provisions, or otherwise, we have
been
advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In May, 2007, the Company entered into
indemnification agreements with each of the Officers and Directors of the
Corporation individually.
PLAN
OF DISTRIBUTION
The
selling stockholders and any of their respective pledgees, donees, assignees
and
other successors-in-interest may, from time to time, sell any or all of their
shares of common stock on any stock exchange, market or trading facility on
which the shares are traded or in private transactions. These sales may be
at
fixed or negotiated prices. The selling stockholders may use any one or more
of
the following methods when selling shares:
·
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits the purchaser;
·
block
trades in which the broker-dealer will attempt to sell the shares
as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
·
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its
account;
·
an
exchange distribution in accordance with the rules of the applicable
exchange;
·
privately-negotiated
transactions;
·
broker-dealers
may agree with the selling stockholders to sell a specified number
of such
shares at a stipulated price per
share;
37
·
a
combination of any such methods of sale;
and
·
any
other method permitted pursuant to applicable
law.
The
selling stockholders may also sell shares under Rule 144 under the Securities
Act, if available, or Regulation S, rather than under this prospectus. The
selling stockholders shall have the sole and absolute discretion not to accept
any purchase offer or make any sale of shares if they deem the purchase price
to
be unsatisfactory at any particular time.
The
selling stockholders or their respective pledgees, donees, transferees or other
successors in interest, may also sell the shares directly to market makers
acting as principals and/or broker-dealers acting as agents for themselves
or
their customers. Such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the selling stockholders and/or
the
purchasers of shares for whom such broker-dealers may act as agents or to whom
they sell as principal or both, which compensation as to a particular
broker-dealer might be in excess of customary commissions. Market makers and
block purchasers purchasing the shares will do so for their own account and
at
their own risk. It is possible that a selling stockholder will attempt to sell
shares of common stock in block transactions to market makers or other
purchasers at a price per share which may be below the then market price. The
selling stockholders cannot assure that all or any of the shares offered in
this
prospectus will be sold by the selling stockholders. The selling stockholders
and any brokers, dealers or agents, upon effecting the sale of any of the shares
offered in this prospectus, may be deemed to be "underwriters" as that term
is
defined under the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, or the rules and regulations under such acts. In such
event, any commissions received by such broker-dealers or agents and any profit
on the resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
We
are
required to pay all fees and expenses incident to the registration of the
shares, including fees and disbursements of counsel to the selling stockholders,
but excluding brokerage commissions or underwriter discounts.
The
selling stockholders, alternatively, may sell all or any part of the shares
offered in this prospectus through an underwriter. No selling stockholder has
entered into any agreement with a prospective underwriter and there is no
assurance that any such agreement will be entered into.
The
selling stockholders may pledge their shares to their brokers under the margin
provisions of customer agreements. If a selling stockholders defaults on a
margin loan, the broker may, from time to time, offer and sell the pledged
shares. The selling stockholders and any other persons participating in the
sale
or distribution of the shares will be subject to applicable provisions of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
under
such act, including, without limitation, Regulation M. These provisions may
restrict certain activities of, and limit the timing of purchases and sales
of
any of the shares by, the selling stockholders or any other such person. In
the
event that the selling stockholders are deemed affiliated purchasers or
distribution participants within the meaning of Regulation M, then the selling
stockholders will not be permitted to engage in short sales of common stock.
Furthermore, under Regulation M, persons engaged in a distribution of securities
are prohibited from simultaneously engaging in market making and certain other
activities with respect to such securities for a specified period of time prior
to the commencement of such distributions, subject to specified exceptions
or
exemptions.
We
have
agreed to indemnify the selling stockholders, or their transferees or assignees,
against certain liabilities, including liabilities under the Securities Act
of
1933, as amended, or to contribute to payments the selling stockholders or
their
respective pledgees, donees, transferees or other successors in interest, may
be
required to make in respect of such liabilities.
If
the
selling stockholders notify us that they have a material arrangement with a
broker-dealer for the resale of the common stock, then we would be required
to
amend the registration statement of which this prospectus is a part, and file
a
prospectus supplement to describe the agreements between the selling
stockholders and the broker-dealer.
PENNY
STOCK
The
Securities and Exchange Commission has adopted Rule 15g-9 which establishes
the
definition of a "penny stock," for the purposes relevant to us, as any equity
security that has a market price of less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain exceptions.
For
any transaction involving a penny stock, unless exempt, the rules
require:
·
That
a broker or dealer approve a person's account for transactions in
penny
stocks; and
·
the
broker or dealer receive from the investor a written agreement to
the
transaction, setting forth the identity and quantity of the penny
stock to
be purchased.
In
order
to approve a person's account for transactions in penny stocks, the broker
or
dealer must
·
obtain
financial information and investment experience objectives of the
person;
and
38
·
make
a reasonable determination that the transactions in penny stocks
are
suitable for that person and the person has sufficient knowledge
and
experience in financial matters to be capable of evaluating the risks
of
transactions in penny stocks.
That
the broker or dealer received a signed, written agreement from the
investor prior to the transaction.
Disclosure
also has to be made about the risks of investing in penny stocks in both public
offerings and in secondary trading and about the commissions payable to both
the
broker-dealer and the registered representative, current quotations for the
securities and the rights and remedies available to an investor in cases of
fraud in penny stock transactions. Finally, monthly statements have to be sent
disclosing recent price information for the penny stock held in the account
and
information on the limited market in penny stocks.
SELLING
STOCKHOLDERS
The
table
below sets forth information concerning the resale of the shares of common
stock
by the selling stockholders , which we previously issued to the selling
stockholders . We will not receive any proceeds from the resale of the common
stock by the selling stockholders. Assuming all the shares registered below
are
sold by the selling stockholders, none of the selling stockholders will continue
to own any shares of our common stock.
The
following table also sets forth the name of each person who is offering the
resale of shares of common stock by this prospectus, the number of shares of
common stock beneficially owned by each person, the number of shares of common
stock that may be sold in this offering and the number of shares of common
stock
each person will own after the offering, assuming they sell all of the shares
offered.
(1)
All
of the selling stockholders purchased our shares pursuant to our October 2006
Private Placement Subscription Agreement, described below.
(2)
Assumes that all securities will be sold.
(3)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Niki
Anagnos, as trustee, may be deemed a control person of the shares owned by
such
entity, with final voting power and investment control over such
shares.
(4)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Eugene
Berk, as trustee, may be deemed a control person of the shares owned by such
entity, with final voting power and investment control over such
shares.
(5)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Michael
D.
Berk, as trustee, may be deemed a control person of the shares owned by such
entity, with final voting power and investment control over such
shares.
(6)
In
accordance with rule 13d-3 under the securities exchange act of 1934,
Christopher Bonbright, as trustee, may be deemed a control person of the shares
owned by such entity, with final voting power and investment control over such
shares.
(7)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Melissa
Bordy as managing member, may be deemed a control person of the
shares owned by such entity, with final voting power and investment control
over
such shares.
(8)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Lawrence
J. Brenner, as trustee, may be deemed a control person of the shares owned
by
such entity, with final voting power and investment control over such
shares.
(9)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Lynn
Brody, as trustee, may be deemed a control person of the shares owned by such
entity, with final voting power and investment control over such
shares.
(10)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Randolph
Capri, as trustee, may be deemed a control person of the shares owned by such
entity, with final voting power and investment control over such
shares.
(11)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Gary
Carlson, as trustee, may be deemed a control person of the shares owned by
such
entity, with final voting power and investment control over such
shares.
(12)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Bryan
G.
Crane, as trustee, may be deemed a control person of the shares owned by such
entity, with final voting power and investment control over such
shares.
(13)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Sheri
A.
Creger, as co-trustee, may be deemed a control person of the shares owned by
such entity, with final voting power and investment control over such
shares.
(14)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Paula
E.
Eylar, as trustee, may be deemed a control person of the shares owned by such
entity, with final voting power and investment control over such
shares.
(15)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Daniel
J.
Fiorito, as trustee, may be deemed a control person of the shares owned by
such
entity, with final voting power and investment control over such
shares.
(16)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Douglas
M.
Freedman, as co-trustee, may be deemed a control person of the shares owned
by
such entity, with final voting power and investment control over such
shares.
(17)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Carl
Frommer may be deemed a control person of the shares owned by such entity,
with
final voting power and investment control over such shares.
(18)
In
accordance with rule 13d-3 under the securities exchange act of 1934,
Russell Goldsmith may be deemed a control person of the shares owned
by such entity, with final voting power and investment control over such
shares
(19)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Carol
Haskin, as plan fiduciary, may be deemed a control person of the shares owned
by
such entity, with final voting power and investment control over such
shares
45
(20)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Joel
B.
Hecht, as trustee, may be deemed a control person of the shares owned by such
entity, with final voting power and investment control over such
shares.
(21)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Andrea
P.
Hein, as trustee, may be deemed a control person of the shares owned by such
entity, with final voting power and investment control over such
shares.
(22)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Harold
A.
Held, as trustee, may be deemed a control person of the shares owned by such
entity, with final voting power and investment control over such
shares.
(23)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Todd
Hosaka, as trustee, may be deemed a control person of the shares owned by such
entity, with final voting power and investment control over such
shares.
(24)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Ivan
Inerfeld may be deemed a control person of the shares owned by such entity,
with
final voting power and investment control over such shares.
(25)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Mort
Kessler, as trustee, may be deemed a control person of the shares owned by
such
entity, with final voting power and investment control over such
shares.
(26)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Morton
Kirshner may be deemed a control person of the shares owned by such entity,
with
final voting power and investment control over such shares.
(27)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Randy
Kirshner, as trustee, may be deemed a control person of the shares owned by
such
entity, with final voting power and investment control over such
shares.
(28)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Randy
Kirshner, as co-trustee, may be deemed a control person of the shares owned
by
such entity, with final voting power and investment control over such
shares.
(29)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Israel
L.
Kunin, as trustee, may be deemed a control person of the shares owned by such
entity, with final voting power and investment control over such
shares.
(30)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Lavender
Mehrali & Mehdi Mehrali, as co- trustees, may be deemed a control person of
the shares owned by such entity, with final voting power and investment control
over such shares.
(31)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Lon
Morton, as trustee, may be deemed a control person of the shares owned by such
entity, with final voting power and investment control over such
shares.
(32)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Jerome
D.
Muchin, as trustee, may be deemed a control person of the shares owned by such
entity, with final voting power and investment control over such
shares.
(33)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Michael
A.
Oliver, as trustee, may be deemed a control person of the shares owned by such
entity, with final voting power and investment control over such
shares.
(34)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Albert
Ovadia and Virginia Ovadia, as co-trustees, may be deemed a control person
of
the shares owned by such entity, with final voting power and investment control
over such shares.
(35)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Daniel
B.
Peters may be deemed a control person of the shares owned by such entity, with
final voting power and investment control over such shares.
(36)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Richard
Peters may be deemed a control person of the shares owned by such entity, with
final voting power and investment control over such shares.
(37)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Richard
Peters, as trustee, may be deemed a control person of the shares owned by such
entity, with final voting power and investment control over such
shares.
(38)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Rondine
Volpert and Regina Modica may be deemed a control person of the shares owned
by
such entity, with final voting power and investment control over such
shares.
(39)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Larry
Sandler, as trustee, may be deemed a control person of the shares owned by
such
entity, with final voting power and investment control over such
shares.
(40)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Mark
Scheiner, as trustee, may be deemed a control person of the shares owned by
such
entity, with final voting power and investment control over such
shares.
(41)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Neil
Sullivan, as President and sole shareholder, may be deemed a control person
of
the shares owned by such entity, with final voting power and investment control
over such shares.
46
(42)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Stanley
Swartz, as trustee, may be deemed a control person of the shares owned by such
entity, with final voting power and investment control over such
shares.
(43)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Charles
E.
Tronson, as trustee, may be deemed a control person of the shares owned by
such
entity, with final voting power and investment control over such
shares.
(44)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Warren
Weinzoff, as trustee, may be deemed a control person of the shares owned by
such
entity, with final voting power and investment control over such
shares.
(45)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Lisa
C.S.
Wong, as trustee, may be deemed a control person of the shares owned by such
entity, with final voting power and investment control over such
shares.
(46)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Russell
D.
Wong, as trustee, may be deemed a control person of the shares owned by such
entity, with final voting power and investment control over such
shares.
(47)
In
accordance with rule 13d-3 under the securities exchange act of 1934, Bruce
Isaacs & Robert A. Wyman, as co-trustees, may be deemed a control person of
the shares owned by such entity, with final voting power and investment control
over such shares.
47
TRANSACTIONS
WITH THE SELLING STOCKHOLDERS PURSUANT TO WHICH THEY ACQUIRED THEIR
SHARES
OCTOBER
2006 PRIVATE PLACEMENT
In
October 2006, we entered into Subscription Agreements with various accredited
investors (the “October 2006 Private Placement”) pursuant to which the investors
subscribed to purchase a total of 49,047,250 shares of our common stock,
resulting in proceeds to the company of $4,904,725, less offering costs of
$222,518 which stock we issued to the selling stockholders prior to the date
of
this prospectus. We granted registration rights to our investors in
our October 2006 Private Placement. The offering closed on April 30,2007. In connection with the offering, we agreed to use our
reasonable best efforts to file a registration statement with the Securities
and
Exchange Commission registering the resale of the shares of common stock
sold in
the private placement within 180 days following the closing of the
offering.
On
July1, 2007, we entered into a Cancellation of Indebtedness Agreement with our
CEO
Scott Mitchell Rosenberg, pursuant to which we agreed to issue 17,208,575
shares
in exchange for canceling $1,625,000 in long-term debt plus $95,857 in accrued
interest for said debt. Mr. Rosenberg directed the shares to be
issued in the name of Charlotte Rosenberg, his mother, from whom he personally
borrowed the funds, which he then loaned to the Company’s predecessor in
interest, Platinum Studios LLC.
LEGAL
MATTERS
Sichenzia
Ross Friedman Ference LLP, New York, New York will issue an opinion with respect
to the validity of the shares of common stock being offered hereby.
EXPERTS
Our
financial statements appearing in this prospectus and registration statement
have been audited by HJ Associates & Consultants, LLP, independent
registered public accountants, as set forth on their report thereon appearing
elsewhere in this prospectus, and are included in reliance upon such report
given upon the authority of such firm as experts in accounting and
auditing.
AVAILABLE
INFORMATION
We
have
filed a registration statement on Form SB-2 under the Securities Act of 1933,
as
amended, relating to the shares of common stock being offered by this
prospectus, and reference is made to such registration statement. This
prospectus constitutes the prospectus of Platinum Studios, Inc., filed as part
of the registration statement, and it does not contain all information in the
registration statement, as certain portions have been omitted in accordance
with
the rules and regulations of the Securities and Exchange
Commission.
We
are
subject to the informational requirements of the Securities Exchange Act of
1934
which requires us to file reports, proxy statements and other information with
the Securities and Exchange Commission. Such reports, proxy statements and
other
information may be inspected at public reference facilities of the SEC at 100
F
Street N.E. Washington, D.C. 20549. Copies of such material can be obtained
from
the Public Reference Section of the SEC at 100 F Street N.E. Washington, D.C.
20549 at prescribed rates. Because we file documents electronically with the
SEC, you may also obtain this information by visiting the SEC's Internet website
at http://www.sec.gov .
Nature
of operations– The Company controls a library
consisting of more than 3,800 characters and is engaged principally
as a
comics-based entertainment company adapting characters and storylines
for
production in film, television, publishing and all other
media.
Platinum
Studios, LLC was formed and operated as a California limited liability
company from its inception on November 20, 1996 through September14,2006. On September 15, 2006, Platinum Studios, LLC filed with
the State of California to convert Platinum Studios, LLC into Platinum
Studios, Inc., (“the Company”, “Platinum”) a California
corporation.
This
change to the Company structure was made in preparation of a private
placement memorandum and common stock offering in October, 2006
(Note
12).
(
2 )
Basis
of financial statement
presentation
The
accompanying unaudited condensed financial statements of Platinum
Studios,
Inc. have been prepared in accordance with generally accepted accounting
principles for interim financial information. Accordingly, they
do not include all of the information and footnotes required by
generally
accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments
considered necessary for a fair statement of financial position,
results
of operations and cash flows for the periods presented have been
included.
The unaudited condensed Statements of Operations for the nine-month
period
ended September 30, 2007 and the unaudited condensed Statements
of Cash
Flows for the nine-month period ended September 30, 2007 are not
necessarily indicative of those for the full year ending December31,2007. The year-end condensed balance sheet data was derived
from audited financial statements, but does not include all disclosures
required by accounting principles generally accepted in the United
States
of America.
(
3 )
Going
concern
The
accompanying financial statements have been prepared on a going concern basis,
which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business. The Company has incurred
significant losses which have resulted in an accumulated deficit of $7,420,303
as of September 30, 2007. The Company plans to seek additional
financing in order to execute its business plan, but there is no assurance
the
Company will be able to obtain such financing on terms favorable to the Company
or at all. These items raise substantial doubt about the Company’s
ability to continue as a going concern. The accompanying financial
statements do not include any adjustments to reflect the possible future
effects
related to recovery and classification of assets, or the amounts and
classifications of liabilities that might result from the outcome of this
uncertainty.
(
4 )
Summary
of significant accounting
policies
Reclassifications
– Certain prior year amounts have been reclassified in order
to
conform to the current year’s
presentation.
Revenue
recognition -
Revenue from the licensing of characters and storylines (“the
properties”) owned by the Company are recognized in accordance with
guidance provided in Securities and Exchange Commission Staff Accounting
Bulletin No. 104 “Revenue Recognition” (an amendment of Staff Accounting
Bulletin No. 101 “Revenue Recognition”) (“SAB 104”). Under the
SAB 104 guidelines, revenue is recognized when the earnings process
is
complete. This is
considered
to
have occurred when persuasive evidence of an agreement between
the
customer and the
Summary
of significant accounting policies
(continued)
Company
exists, when the properties are made available to the licensee
and the
Company has satisfied its obligations under the agreement, when
the fee is
fixed or determinable and when collection is reasonably
assured.
The
Company derives its licensing revenue primarily from options to purchase
rights,
the purchase of rights to properties and first look deals. For
options that contain non-refundable minimum payment obligations that are
not
applied to the purchase price, revenue is recognized ratably over the option
period, prior to the collection of all amounts ultimately due, provided all
the
criteria for revenue recognition under SAB 104 have been met. Option
fees that are applicable to the purchase price are deferred and recognized
as
revenue at the later of the expiration of the option period or in accordance
with the terms of the purchase agreement. Revenue received under
first look deals is recognized ratably over the first look period, which
varies
by contract provided all the criteria for revenue recognition under SAB 104
have
been met. First look deals that have contingent components are
deferred and recognized at the later of the expiration of the first look
period
or in accordance with the terms of the first look contract.
For
licenses requiring material continuing involvement or performance based
obligations, by the Company, the revenue is recognized as and when such
obligations are fulfilled.
The
Company records as deferred revenue any licensing fees collected in advance
of
obligations being fulfilled or if a licensee is not sufficiently creditworthy,
the Company will record deferred revenue until payments are
received.
License
agreements typically include reversion rights which allow the Company to
repurchase property rights which have not been used by the studio (the buyer)
in
production within a specified period of time as defined in the purchase
agreement. The cost to repurchase the rights is generally based on
the costs incurred by the studio to further develop the characters and story
lines.
Use
of estimates - The preparation of financial statements in
conformity with accounting principles generally accepted in the
United
States requires management to make estimates and assumptions that
affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of financial statements,
and
the reported amounts of revenues and expenses during the reporting
periods. Actual results could differ from those
estimates.
Cash
and cash equivalents– The Company considers all highly liquid
investment securities with an original maturity date of three months
or
less to be cash equivalents.
Concentrations
of risk - Financial instruments that potentially subject the
Company to concentrations of credit risk consist primarily of uninsured
cash balances. The Company
maintains its cash balances with
what management believes to be a high
credit quality financial institution. At times, balances within
the company’s cash accounts may exceed the Federal Deposit Insurance
Corporation (FDIC) limit of
$100,000.
During
the nine months ended September 30, 2007 and 2006, the Company
had
customer revenues representing a concentration of the Company’s total
revenues. In 2007, two customers represented approximately 56%
and 25% of
total revenues. During 2006, two customers represented 78% and
17% of the Company’s total revenues for the nine months ended September30, 2006.
Depreciation
- Depreciation is computed on the straight-line method over the
following
estimated useful lives:
Summary
of significant accounting policies
(continued)
Fixed
assets
UsefulLives
Furniture
and fixtures
7
years
Computer
equipment
5
years
Office
equipment
5
years
Software
3
years
Leasehold
improvements
Shorter
of lease term or useful economic
life
Character
development costs - Character development costs consist primarily of
costs to acquire properties from the creator, development of the property
using
internal or independent writers and artists, and the registration of a property
for a trademark or copyright. These costs are capitalized in the year
incurred if the Company has executed a contract or is negotiating a revenue
generating opportunity for the property. If the property derives a
revenue stream that is estimable, the capitalized costs associated with the
property are expensed as revenue is recognized.
If
the
Company determines there is no determinable market for a property, it is
deemed
impaired and is written off.
Purchased
intangible assets and long-lived assets – Intangible assets are
capitalized at acquisition costs and intangible assets with definite lives
are
amortized on the straight-line basis. The Company periodically
reviews the carrying amounts of intangible assets and property in conformance
with the Statement of Financial Accounting Standards No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets (SFAS
144). Under SFAS 144, long-lived assets, such as property and
equipment, and purchased intangibles subject to amortization, are reviewed
for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets
to
be held and used is measured by a comparison of the carrying amount of an
asset
to the estimated undiscounted future cash flows expected to be generated
by the
asset. If the carrying amount of an asset exceeds its estimated future cash
flows, the impairment charge to be recognized is measured by the excess of
the
carrying amount over the fair value of the asset.
Advertising
costs - Advertising costs are expensed the later of when incurred
or when the advertisement is first run. For the nine months
ended September 30, 2007 and 2006, advertising expenses were $83,414
and
$3,671, respectively.
Research
and development - Research and development costs, primarily character
development costs and design not associated with an identifiable revenue
opportunity, are charged to operations as incurred. For the nine
months ended September 30, 2007 and 2006, research and development expenses
were
$692,677 and $518,999, respectively.
Income
taxes – From inception thru September 14, 2006the Company operated as
a limited liability company and elected to be taxed similar to a
partnership. Accordingly, each member was responsible for reporting
its respective share of the Company’s net
income or loss for Federal and
California income tax purposes and the Company did not pay Federal income
tax. From September 15, 2006 forward the Company has accounted for
income taxes using the liability method, whereby deferred tax assets and
liability account balances are determined based on differences between financial
reporting and tax basis of assets and liabilities and are measured using
the
enacted tax rates and laws that will be in effect when the differences are
expected to reverse. The Company was subject to an annual minimum tax
of $800 and a fee based on gross receipts in California from inception through
September 14, 2006.
Summary
of significant accounting policies
(continued)
Net
income/(loss) per share– In accordance with SFAS No. 128 “Earnings Per
Share”, basic income per share is computed by dividing net income (loss)
available to common stockholders by the weighted average number of shares
of
common stock outstanding during the periods, excluding shares subject to
repurchase or forfeiture. Diluted income per share increases the
shares outstanding for the assumption of the vesting of restricted stock
and the
exercise of dilutive stock options and warrants, using the treasure stock
method, unless the effect is anti-dilutive.
Recent
accounting pronouncements– In July 2006, the FASB issued Interpretation
No. 48, “Accounting for Uncertainly in Income Taxes” (“FIN 48”). FIN
48 applies to all tax positions related to income taxes subject to SFAS 109,
“Accounting for Income Taxes”. Under FIN 48 a company would recognize
the benefit from a tax position only if it is more-likely-than-not that the
position would be sustained upon audit based solely on the technical merits
of
the tax position. FIN 48 clarifies how a company would measure the
income tax benefits from the tax positions that are recognized, provides
guidance as to the timing of the de-recognition of previously recognized
tax
benefits and describes the methods for classifying and disclosing the
liabilities within the financial statements for any unrecognized tax
benefits. FIN 48 also addresses when a company should record interest
and penalties related to tax positions and how the interest and penalties
may be
classified within the income statement and presented in the balance
sheet. FIN 48 is effective for fiscal years beginning after December15, 2006. For Platinum, FIN 48 will be effective for the first
quarter of fiscal 2007.
In
May
2005, the FASB issued SFAS No. 154, Accounting Changes and Error
Corrections, which replaces APB No. 20, Accounting Changes and
SFAS No. 3, Reporting Accounting Changes in Interim Financial
Statements. SFAS No. 154 requires that a voluntary change in accounting
principle be applied retrospectively with all
prior period financial statements presented as if the new accounting principle
had always been used. SFAS No. 154 also requires that a change in method
of
depreciating or amortizing long-lived non-financial assets be accounted for
prospectively, in the period of change and in future periods, if applicable,
as
a change in estimate, and requires the correction of errors in previously
issued
financial statements be termed a “restatement”. SFAS No. 154 is effective for
accounting changes and correction errors made in fiscal years beginning after
December 15, 2005. The implementation of SFAS 154 is not expected to
have a material impact on the Company’s financial statements.
On
July1, 2007, we adopted Statement of Financial Accounting Standards No. 123 (revised
2004), “Share-Based Payment,” (“SFAS 123(R)”) which requires the measurement and
recognition of compensation expense for all share-based payments to employees
and directors including employee stock option s and stock purchases related
to
the Company’s employee stock option and award plans based on estimated fair
values. In March 2005, the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 107 (“SAB 107”) relating to SFAS
123(R). We have applied the provision of SAB 107 in our adoption of
SFAS 123(R).
We
have
selected the Black-Scholes method of valuation for share-based compensation
and
have adopted the modified prospective transition method under SFAS 123R,
which
requires that compensation cost be recorded, as earned, for all unvested
stock
options and warrants outstanding at the beginning of the first quarter of
adoption of SFAS 123R. The charge is being recognized in non cash
compensation, which is included in stock-based compensation expense, on a
straight-line basis over the remaining service period after the adoption
date
based on the options or warrants original estimate of fair value. As
permitted by SFAS 123(R), the Company elected the disclosure only requirements
of SFAS 123(R).
Summary
of significant accounting policies
(continued)
On
July1, 2007, principal and interest of $1,720,857 were converted into common
stock
of the Company. As an incentive to convert the outstanding debt
obligation, warrants were issued to the debt-holder, Charlotte
Rosenberg. Based on the Black-Scholes method of valuation, $195,507
of interest expense was recorded as the fair value of the warrants issued
as
part of this debt conversion.
Property
and equipment are recorded at cost. The cost of repairs and maintenance
are expensed when incurred, while expenditures refurbishments and
improvements that significantly add to the productive capacity
or extend
the useful life of an asset are capitalized. Upon asset
retirement or disposal, any resulting gain or loss is included
in the
results of operations.
For
the
nine months ended September 30, 2007 and year ended December 31, 2006, property
and equipment at cost includes assets acquired under capital leases of $40,325
and $203,833, respectively. Depreciation expense charged to
operations for the nine months ended September 30, 2007 and 2006 were $54,785
and $24,399 including $39,570 and $14,912, applicable to assets acquired
under
capital leases, respectively.
During
2006, the Company repaid in full the uncollateralized loans received from
Rosenberg IP during 2004. These loans accrued interest at 5% and 6%
for the years ended December 31, 2005 and 2006, respectively.
Loans
payable to shareholder - uncollateralized; payable in monthly
installments
of interest only at variable interest rates. At September 30,2007 and
December 31, 2006, the interest rates were 7.65% and 7.90%,
respectively.
Due upon demand.
$
745,850
$
745,925
Loans
payable to shareholder - uncollateralized; subject to annually
variable
interest rates. At September 30, 2007 the interest rate was
5.0%. The
loans are due upon demand.
89,000
-
Loans
payable to third parties - uncollateralized; Fixed interest
rate of 12%
per annum plus six points, payable in monthly installments
of principal,
interest and points. Loans of $100,000 and $50,000 mature on
December 10,2007 and March 21, 2007, respectively.
150,000
-
Loans
payable to shareholder - uncollateralized; payable in monthly
installments
of interest only at variable interest rates. At September 30,2007 and
December 31, 2006, the interest rates were 7.758% and 7.708%,
respectively. Monthly payments of principal and interest begin
on July 1,2009; final payment due June 1, 2034.
Loans
payable to
shareholders - uncollateralized; subject to annually variable
interest
rates. At September 30, 2007 and December 31, 2006, the interest
rates
were 5.0% and 5.0%, respectively. The loans are due June 30,2010.
1,100,524
665,000
Loans
payable to member - uncollateralized;
Effective January 1, 2006, interest became fixed at 3.8%. Monthly
payments
of principal and interest to begin on July 1, 2007; final payment
due June30, 2010. Converted to equity July 1, 2007.
-
1,625,000
Total
short-term and long-term debt
$
3,379,634
$
4,330,185
The
following summarizes future cash payment
obligations:
The
Company has entered into operating leases having expiration dates
through
2011 for real estate and various equipment needs, including office
facilities, computers, office equipment and a
vehicle.
On
July10, 2006, the Company entered into an operating agreement for the lease of
real
property located in Los Angeles, California. The agreement has a five
year term, commencing September 1, 2006 and ending August 31, 2011.
Rent
expense under non-cancelable operating leases were $295,012 and $86,650 for
the
nine months ended September 30, 2007 and 2006, respectively.
At
September 30, 2007, future minimum rental payments required under
non-cancelable operating leases that have initial or remaining
terms in
excess of one year are as follows:
The
company has various non-cancelable capital leases for computer
and office
equipment, at cost of $40,325 and $203,833 at September 30, 2007
and
December 31, 2006, respectively. The capital leases are secured
by the assets which cannot be freely sold until the maturity date
of the
lease. Accumulated amortization for equipment under capital
lease totaled $67,678 and $11,026 at September 30, 2007 and December31,2006, respectively.
Future
required payments at September 30, 2007 under these leases are
as
follows:
Years
Ending September 30,
Capital Leases
2008
$
23,034
2009
89,947
2010
57,334
2011
37,947
2012
24,705
Thereafter
-
Total
minimum obligations
$
232,967
Less
amounts representing interest
(35,532
)
Present
value of net minimum obligations
197,435
Less
current portion
(73,364
)
Long-term
portion
$
124,071
(
11 )
Commitments
During
2004, the Company entered into an agreement with Top Cow Productions, Inc.
to
acquire certain rights in and to certain comic books, related characters,
storylines and intellectual property (the properties). The current
agreement period expires on June 30, 2010. The Company has the right
to extend the agreement for an additional twelve month period for an additional
$350,000 and has pre-paid $75,000 toward this extended period. If the
Company enters into production on a particular property, additional fees
based
on a percentage of the adjusted gross revenue resulting from the production,
as
defined in the agreement, will be due to the owner. The agreement is
collateralized by a security interest in and to all rights licensed or granted
to the Company under this agreement including the right to receive
revenue. The current agreement period cost of $350,000 is included in
Other Assets on the balance sheet (Note 7) and is being amortized on a
straight-line basis beginning in 2006 when the rights became available for
exploitation.
The
Company has an exclusive option to enter licensing/acquisition
of rights
agreements for individual characters, subject to existing third
party
rights, within the RIP Awesome Library of RIP Media, Inc., a related
entity in which Scott Rosenberg is a majority shareholder. The
Company did
not exercise this right during the nine months ended September30, 2007 or
the year ended December 31, 2006. During 2006, the Company
repaid uncollateralized loans of $20,000 in full (Note
8).
Scott
Mitchell Rosenberg also provides production consulting services
to the
Company’s customers (production companies) through Scott Mitchell
Rosenberg Productions (another related entity) wholly-owned by
Scott
Mitchell Rosenberg. At the time the Company enters into a purchase
agreement with a production company, a separate contract may be
entered
into between the related entity and the production company. In
addition,
consulting services regarding development of characters and storylines
may
also be provided to the Company by this related entity. Revenue
would be paid directly to the related entity by the production
company.
(
13 )
Stockholders
equity
As
of May1, 2006, the Company issued a five percent (5.0%) ownership interest in Platinum
Studios, LLC to Brian Altounian in consideration of a capital contribution
in
the amount of $500,000.
On
September 14, 2006, Scott Mitchell Rosenberg converted $5,731,057 in outstanding
principal and interest as a capital contribution in Platinum Studios, LLC
in
fulfillment of commitments made to the Company prior to the issuance to Brian
Altounian.
Platinum
Studios LLC filed Articles of Incorporation with the Secretary of the State
of
California on September 15, 2006, by which Platinum Studios, LLC converted
from
a California limited liability company into Platinum Studios, Inc., a California
corporation. On September 15, 2006, 135,000,000 common shares were
issued for conversion of LLC interests as all members of the limited liability
company became shareholders of the corporation, maintaining their same
percentage ownership, with no additional contribution required by any of
the
members to the corporation.
A
Private
Placement Memorandum was issued on October 12, 2006, offering up to 50,000,000
shares of common stock, $0.0001 par value per share, for sale to Accredited
Investors (as defined in the memorandum), at a price of $0.10 per share on
a
“best efforts” basis, for a total offering price to investors of
$5,000,000. The proceeds of the offering are expected to be used for
property acquisitions, marketing and general and administrative
expenses. The offering was closed on April 30, 2007 with the Company
having sold 49,047,250 shares resulting in gross proceeds of $4,904,725 and
net
proceeds of $4,682,207, after related costs.
Midtown
Partners & Company, LLC, acted as a placement agent on behalf of Platinum
Studios, Inc. for the private placement of its common stock. As part
of the compensation for their services, Midtown Partners received a warrant
to
purchase 458,600 common stock shares of the Company at $0.10 per
share.
On
July1, 2007, the Board of Directors approved the cancellation/conversion of
$1,720,857 in debt due to Scott Mitchell Rosenberg consisting of $1,625,000
in
principal and $95,857 of accrued interest through conversion of the debt
into
17,208,575 shares of common stock of the Company valued at $0.10 per
share. In addition, Mr. Rosenberg received a warrant to purchase
2,437,500 additional shares of common stock for his agreement to accept this
offer from the Company rather than demanding repayment of the debt
amount.
Effective
July 12, 2007, the Company obtained board approval of an incentive plan under
which equity incentives would be granted to officers, employees, non-employee
directors and consultants of the Company. The board further resolved
for 30,000,000 shares of the Company’s common stock, $0.0001 par value, be
reserved for issuance in accordance with the requirements of this
plan. No grants were approved or issued under this plan as of
September 30, 2007
(
14 )
Stock
Compensation
Warrants
outstanding at September 30,2007 are summarized as follows:
A
“Literary Material Option/Purchase Agreement” executed on November 5, 2007, by
Platinum Studios, Inc. and Dreamworks Films, LLC. This agreement
concerns the motion picture project, to be based in whole or in part on the
work, presently entitled “COWBOYS AND ALIENS”. It is understood and
agreed the first motion picture, if produced, must be intended for initial
release to the general public as a theatrical motion picture.
The
Company executed four (8) promissory notes (“the Notes”) for a total of $515,000
between October 5, 2007 and December 11, 2007. The Notes
are short-term in nature, maturing between April 5,2008 and
June11, 2008, with an interest rates between 12% and 18%.
A
joint
venture agreement dated October 5, 2007, was executed between Platinum Studios,
Inc. and Comflix Studios, Inc. in relation to the parties desire to co-develop
a
platform player for streaming of videos via the internet. Each of the
parties, Platinum and Comflix, shall own a 50% interest in the joint
venture.
Effective
October 10, 2007, Platinum Studios, Inc. adopted by unanimous written consent
of
its directors the Code of Ethics for directors and officers of the
Corporation.
Effective
October 22, 2007, a letter agreement setting forth the basic terms and
conditions between Rainmaker Entertainment Inc., M3 Productions, Ltd and
Platinum Studios, Inc., was agreed to and
accepted
regarding a “Horror in 3D” 4-picture animated film slate. The films
shall be based on comic book properties owned or controlled by Platinum Studios,
Inc.
F-15
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Board of Directors
PLATINUM
STUDIOS, INC.
Los
Angeles, CA
We
have
audited the balance sheet of Platinum Studios, Inc. as of December 31, 2006
and
the related statements of operations, stockholders' equity deficit, and cash
flows for the year ended December 31, 2006. We have audited the balance sheet
of
Platinum Studios, LLC as of December 31, 2005 and the related statements of
operations, members’ equity deficit, and cash flows for the year ended December31, 2005. 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 audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In
our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Platinum Studios, Inc. as of
December 31, 2006, and the results of its operations and its cash flows for
the
year ended December 31, 2006 and the financial position of Platinum Studios,
LLC
as of December 31, 2005, and the result of its operations and its cash flows
for
the year ended December 31, 2005 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 discussed in Note 2 to the
financial statements, the Company has suffered recurring losses from operations
and has insufficient assets available to fund activity, which raises substantial
doubt about its ability to continue as a going concern. Management's
plans regarding those matters also are described in Note 2. The
financial statements do not include any adjustments that might result from
the
outcome of this uncertainty.
Nature
of operations– The Company controls a library
consisting of more than 3,800 characters and is engaged principally
as a
comics-based entertainment company adapting characters and storylines
for
production in film, television, publishing and all other
media.
Platinum
Studios, LLC was formed and operated as a California limited liability
company from its inception on November 20, 1996 through September14,2006. On September 15, 2006, Platinum Studios, LLC filed with
the State of California to convert Platinum Studios, LLC into Platinum
Studios, Inc., (“the Company”, “Platinum”) a California
corporation.
This
change to the Company structure was made in preparation of a private
placement memorandum and common stock offering in October, 2006
(Note
12).
(
2 )
Going
Concern
The
accompanying financial statements have been prepared on a going concern basis,
which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business. The Company has incurred
significant losses which have resulted in an accumulated deficit of $4,272,780
as of December 31, 2006. The Company plans to seek additional
financing in order to execute its business plan, but there is no assurance
the
Company will be able to obtain such financing on terms favorable to the Company
or at all. These items raise substantial doubt about the Company’s
ability to continue as a going concern. The accompanying financial
statements do not include any adjustments to reflect the possible future effects
related to recovery and classification of assets, or the amounts and
classifications of liabilities that might result from the outcome of this
uncertainty.
(
3 )
Summary
of significant accounting
policies
Reclassifications–
Certain prior year amounts have been reclassified in order to conform
to
the current year’s presentation.
Revenue
recognition -
Revenue from the licensing of characters and storylines (“the
properties”) owned by the Company are recognized in accordance with
guidance provided in Securities and Exchange Commission Staff Accounting
Bulletin No. 104 “Revenue Recognition” (an amendment of Staff Accounting
Bulletin No. 101 “Revenue Recognition”) (“SAB 104”). Under the
SAB 104 guidelines, revenue is recognized when the earnings process
is
complete. This is considered to have occurred when persuasive
evidence of an agreement between the customer and the Company exists,
when
the properties are made available to the licensee and the Company
has
satisfied its obligations under the agreement, when the fee is
fixed or
determinable and when collection is reasonably
assured.
The
Company derives its licensing revenue primarily from options to purchase rights,
the purchase of rights to properties and first look deals. For
options that contain non-refundable minimum payment obligations that are not
applied to the purchase price, revenue is recognized ratably over the option
period, prior to the collection of all amounts ultimately due, provided all
the
criteria for revenue recognition under SAB 104 have been met. Option
fees that are applicable to the purchase price are deferred and recognized
as
revenue at the later of the expiration of the option period or in accordance
with the terms of the purchase agreement. Revenue received under
first look deals is recognized ratably over the first look period, which varies
by contract provided all the criteria for revenue recognition under SAB 104
have
been met. First look deals that have contingent components are
deferred and recognized at the later of the expiration of the first look period
or in accordance with the terms of the first look contract.
Summary
of significant accounting policies
(continued)
For
licenses requiring material continuing involvement or performance based
obligations, by the Company, the revenue is recognized as and when such
obligations are fulfilled.
The
Company records as deferred revenue any licensing fees collected in advance
of
obligations being fulfilled or if a licensee is not sufficiently creditworthy,
the Company will record deferred revenue until payments are
received.
License
agreements typically include reversion rights which allow the Company to
repurchase property rights which have not been used by the studio (the buyer)
in
production within a specified period of time as defined in the purchase
agreement. The cost to repurchase the rights is generally based on
the costs incurred by the studio to further develop the characters and story
lines. The reversion rights have no impact on revenue recognition nor timing
of
the revenue recorded, nor is any portion of the revenue deferred. The
purpose of the reversion rights is to allow the Company the contractual right
to
reclaim the property at some distant point.
Use
of estimates - The preparation of financial statements in
conformity with accounting principles generally accepted in the
United
States requires management to make estimates and assumptions that
affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of financial statements,
and
the reported amounts of revenues and expenses during the reporting
periods. Actual results could differ from those
estimates.
Cash
and cash equivalents– The Company considers all highly liquid
investment securities with an original maturity date of three months
or
less to be cash equivalents.
Concentrations
of risk - Financial instruments that potentially subject the
Company to concentrations of credit risk consist primarily of uninsured
cash balances. The Company
maintains its cash balances with
what management believes to be a high
credit quality financial institution. At times, balances within
the company’s cash accounts may exceed the Federal Deposit Insurance
Corporation (FDIC) limit of $100,000.
During
the years ended December 31, 2006 and 2005, the Company had customer
revenues representing a concentration of the Company’s total revenues. In
2006, two customers represented approximately 82% and 14% of total
revenues and during 2005, three customers represented approximately
64%,
19% and 17% of the Company’s total revenues.
Depreciation
- Depreciation is computed on the straight-line method over the
following
estimated useful lives:
Character
development costs - Character development costs consist primarily of
costs to acquire properties from the creator, development of the property using
internal or independent writers and artists, and the registration of a property
for a trademark or copyright. These costs are capitalized in the year
incurred if the Company has executed a contract or is negotiating a revenue
generating opportunity for the property. If the property derives a
revenue stream that is estimable, the capitalized costs associated with the
property are expensed as revenue is recognized.
Summary
of significant accounting policies
(continued)
If
the
Company determines there is no determinable market for a property, it is deemed
impaired and is written off.
Purchased
intangible assets and long-lived assets– Intangible assets are
capitalized at acquisition costs and intangible assets with definite lives
are
amortized on the straight-line basis. The Company periodically reviews the
carrying amounts of intangible assets and property in conformance with the
Statement of Financial Accounting Standards No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets (SFAS 144). Under SFAS
144, long-lived assets, such as property and equipment, and purchased
intangibles subject to amortization, are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used is measured
by
a comparison of the carrying amount of an asset to the estimated undiscounted
future cash flows expected to be generated by the asset. If the carrying amount
of an asset exceeds its estimated future cash flows, the impairment charge
to be
recognized is measured by the excess of the carrying amount over the fair value
of the asset.
Advertising
costs - Advertising costs are expensed the later of when incurred or
when the advertisement is first run. For the years ended December 31, 2006
and 2005, advertising expenses were $14,017 and $8,042,
respectively.
Research
and development - Research and development costs, primarily character
development costs and design not associated with an identifiable revenue
opportunity, are charged to operations as incurred. For the years ended
December 31, 2006 and 2005, research and development expenses were $764,282
and
$243,833, respectively.
Income
taxes– From inception thru September 14, 2006the Company operated as a
limited liability company and elected to be taxed similar to a
partnership. Accordingly, each member was responsible for reporting
its respective share of the Company’s net
income or loss for Federal and California income
tax purposes and the Company did not pay Federal income tax. From
September 15, 2006 forward the Company has accounted for income taxes using
the
liability method, whereby deferred tax assets and liability account balances
are
determined based on differences between financial reporting and tax basis of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse. The
Company was subject to an annual minimum tax of $800 and a fee based on gross
receipts in California from inception through September 14, 2006.
Net
income/(loss) per share– In accordance with SFAS No. 128 “Earnings Per
Share”, basic income per share is computed by dividing net income (loss)
available to common stockholders by the weighted average number of shares of
common stock outstanding during the periods, excluding shares subject to
repurchase or forfeiture. Diluted income per share increases the shares
outstanding for the assumption of the vesting of restricted stock and the
exercise of dilutive stock options and warrants, using the treasure stock
method, unless the effect is anti-dilutive. For the years ended December31, 2006 and 2005, there were no restricted shares, stock options or warrants
outstanding.
Recent
accounting pronouncements– In July 2006, the FASB issued Interpretation
No. 48, “Accounting for Uncertainly in Income Taxes” (“FIN 48”). FIN 48
applies to all tax positions related to income taxes subject to SFAS 109,
“Accounting for Income Taxes”. Under FIN 48 a company would recognize the
benefit from a tax position only if it is more-likely-than-not that the position
would be sustained upon audit based solely on the technical merits of the tax
position. FIN 48 clarifies how a company would measure the income tax
benefits from the tax positions that are recognized, provides guidance as to
the
timing of the de-recognition of previously recognized tax benefits and describes
the methods for classifying and disclosing the liabilities within the financial
statements for any unrecognized tax benefits. FIN 48 also addresses
when a company should record interest and penalties related to tax positions
and
how the interest and penalties may be classified within the income statement
and
presented in the balance sheet. FIN 48 is effective for fiscal years
beginning after December 15, 2006. For Platinum, FIN 48 will be
effective for the first quarter of fiscal 2007.
In
May
2005, the FASB issued SFAS No. 154, Accounting Changes and Error
Corrections , which replaces APB No. 20, Accounting Changes and
SFAS No. 3, Reporting Accounting Changes in Interim Financial
Statements . SFAS No. 154 requires that a voluntary change in accounting
principle be applied retrospectively with all
prior period financial statements presented as if the new accounting principle
had always been used. SFAS No. 154 also requires that a change in method of
depreciating or amortizing long-lived non-financial assets be accounted for
prospectively, in the period of change and in future periods, if applicable,
as
a change in estimate, and requires the correction of errors in previously issued
financial statements be termed a “restatement”. SFAS No. 154 is effective for
accounting changes and correction errors made in fiscal years beginning after
December 15, 2005. The implementation of SFAS 154 is not expected to
have a material impact on the Company’s financial statements.
Summary
of significant accounting policies
(continued)
In
December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary
Assets, which amends APB Opinion 29 (APB 29), Accounting for
Nonmonetary Transactions . The guidance in APB 29 is based on the principle
that exchanges of nonmonetary assets should be measured based on the fair value
of the assets exchanged and included certain exceptions to that principle.
SFAS
No.153 amends APB29 to eliminate the exception for nonmonetary exchanges of
similar productive assets and replaces it with a general exception for exchanges
of nonmonetary assets that do not have commercial substance. This Statement
will
be effective for the Company for nonmonetary asset exchanges occurring on or
after January 1, 2006.
(
4 )
Property
and equipment
Property
and equipment are recorded at cost. The cost of repairs and maintenance
are expensed when incurred, while expenditures refurbishments and
improvements that significantly add to the productive capacity or
extend
the useful life of an asset are capitalized. Upon asset
retirement or disposal, any resulting gain or loss is included in
the
results of operations.
For
the
years ended December 31, 2006 and 2005, property and equipment at cost includes
assets acquired under capital leases of $203,833 and $21,922,
respectively. Depreciation expense charged to operations for
the years ended December 31, 2006 and 2005 were $43,051 and $7,436 including
$26,429 and $1,679, applicable to assets acquired under capital leases,
respectively.
During
2006, the Company repaid in full the uncollateralized loans of $20,000 received
from RIP Media during 2004. These loans accrued interest at 5%
and 6% for the years ended December 31, 2005 and 2006,
respectively. At December 31, 2006 and 2005, the Company owed
$243,079 to Brian Altounian for consulting services provided prior to his
employment and $20,000 to RIP Media, respectively.
Loan
payable to shareholder - uncollateralized; payable in monthly
installments of interest only at variable interest rates. The note
is due
on demand at the shareholder's discretion. For the year ended December31,2006, the interest rate was 7.9%.
$
745,925
$
-
Loan
payable to shareholder - uncollateralized; payable in monthly installments
of interest only at variable interest rates. At December 31, 2006
and
2005, the interest rates were 7.708% and 6.151%, respectively. Monthly
payments of principal and interest begin on July 1, 2009; final payment
due June 1, 2034.
1,294,260
1,308,711
Loan
payable to shareholder - uncollateralized; principal advances accrue
at variable interest rates. At December 31, 2006 and 2005, the
interest rates were 5.0% and 6.0%, respectively . The loans are due
June30, 2010.
665,000
5,312,621
Loan
payable to shareholder - uncollateralized; principal includes accrud
interest. Effective January 1, 2006, interest became fixed at
3.8% for the remaining life of the loan. At December 31, 2005,
the interest rate was 6.0%. Monthly payments of principal and
interest begin on July 1, 2007; final payment due June 30,2010.
1,625,000
815,000
Total
short-term and long-term debt
$
4,330,185
$
7,436,332
The following summarizes future cash payment obligations:
The
Company has entered into operating leases having expiration dates
through
2011 for real estate and various equipment needs, including office
facilities, computers, office equipment and a
vehicle.
On
July10, 2006, the Company entered into an operating agreement for the lease of
real
property located in Los Angeles, California. The agreement has a five
year term, commencing September 1, 2006 and ending August 31, 2011.
Rent
expense under non-cancelable operating leases were $220,623 and $114,669 for
the
years ended December 31, 2006 and 2005, respectively.
At
December 31, 2006, future minimum rental payments required under
non-cancelable operating leases that have initial or remaining terms
in
excess of one year are as follows:
Years
Ending December 31,
Operating
Leases
2007
$
430,088
2008
421,416
2009
426,833
2010
442,815
2011
302,855
Thereafter
-
Total
minimum obligations
$
2,024,007
The
company has various non-cancelable capital leases for computer and
office
equipment, at cost of $203,833 and $21,922 at December 31, 2006 and
2005,
respectively. The capital leases are secured by the assets
which cannot be freely sold until the maturity date of the
lease. Accumulated amortization for equipment under capital
lease totaled $11,026 and $1,257 at December 31, 2006 and 2005,
respectively. Future required payments at December 31, 2006
under these leases are as follows:
During
2004, the Company entered into an agreement with Top Cow Productions, Inc.
to
acquire certain rights in and to certain comic books, related characters,
storylines and intellectual property (the properties). The current
agreement period expires on June 30, 2010. The Company has the right
to extend the agreement for an additional twelve month period for an additional
$350,000 and has pre-paid $75,000 toward this extended period. If the
Company enters into production on a particular property, additional fees based
on a percentage of the adjusted gross revenue resulting from the production,
as
defined in the agreement, will be due to the owner. The agreement is
collateralized by a security interest in and to all rights licensed or granted
to the Company under this agreement including the right to receive
revenue. The current agreement period cost of $350,000 is included in
Other Assets on the balance sheet (Note 6) and is being amortized on a
straight-line basis beginning in 2006 when the rights became available for
exploitation.
(
11 )
Related
party transactions
The
Company has an exclusive option to enter licensing/acquisition of
rights
agreements for individual characters, subject to existing third party
rights, within the RIP Awesome Library of RIP Media, Inc., a related
entity in which Scott Rosenberg is a majority shareholder. The Company
did
not exercise this right during the years ended December 31, 2006
and
2005. During 2006, the Company repaid uncollateralized loans of
$20,000 in full (Note 7).
Our
Chief Executive officer, Scott Mitchell Rosenberg , is permitted
to enter
into separate producer agreements for our productions through his
own
loanout corporation, Scott Mitchell Rosenberg Productions, Inc.,
provided
that all compensation that he receives through these agreements are
considered as compensation he receives as CEO of the Company and
therefore
taken into account in setting his annual compensation. The Producer
agreements are standard in the industry for heads of media companies
and
in no way can negatively impact, impede or affect the Company’s ability to
make deals with production companies for its
properties.
(
12 )
Stockholders
equity
As
of May1, 2006, the Company issued a five percent (5.0%) ownership interest in Platinum
Studios, LLC to Brian Altounian in consideration of a capital contribution
in
the amount of $500,000.
On
September 14, 2006, Scott Mitchell Rosenberg converted $5,731,057 in outstanding
principal and interest as a capital contribution in Platinum Studios, LLC in
fulfillment of commitments made to the Company prior to the issuance to Brian
Altounian.
Platinum
Studios LLC filed Articles of Incorporation with the Secretary of the State
of
California on September 15, 2006, by which Platinum Studios, LLC converted
from
a California limited liability company into Platinum Studios, Inc., a California
corporation. On September 15, 2006, 135,000,000 common shares were
issued for conversion of LLC interests as all members of the limited liability
company became shareholders of the corporation, maintaining their same
percentage ownership, with no additional contribution required by any of the
members to the corporation.
A
Private
Placement Memorandum was issued on October 12, 2006, offering up to 50,000,000
shares of common stock, $0.0001 par value per share, for sale to Accredited
Investors (as defined in the memorandum), at a price of $0.10 per share on
a
“best efforts” basis, for a total offering price to investors of
$5,000,000. The proceeds of the offering are expected to be used for
property acquisitions, marketing and general and administrative
expenses. As of December 31, 2006, the Company had sold 23,056,000
shares resulting in proceeds of $2,305,600.
As
discussed in Note 3 regarding income taxes, the Company operated
as a
limited liability company and was taxed as a partnership prior
to
September 15, 2006. Effective September 15, 2006, the Company
is being taxed as a corporation.
Deferred
taxes are provided on a liability method whereby deferred tax assets
are
recognized for deductible temporary differences and operating loss
and tax
credit carryforwards and deferred tax liabilities are recognized
for
taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities
and
their tax basis. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely
than not
that some portion or all of the deferred tax assets will not be
realized. Deferred tax assets and liabilities are adjusted for
the effects of changes in tax laws and rates on the date of
enactment.
Net
deferred tax assets and liabilities consist of the following
components:
The
income tax provision differs from the amount of income tax determined
by
applying the statutory U.S. federal income tax rate to the pre-tax
loss as
a result of the following:
The
difference between the deferred tax asset and valuation allowance
above is
$81,890, which is attributable to the Related Party Payable as
of
September 14, 2006.
At
December 31, 2006, the Company had net operating loss carryforwards
of
approximately $1,386,000 that may be offset against future taxable
income
from the year 2006 through 2026. No tax benefit has been
reported in the December 31, 2006 financial statements since the
potential
tax benefit is offset by a valuation allowance of the same
amount.
Due
to
the change in ownership provisions of the Tax reform Act of 1986, net operating
loss carryforwards for Federal income tax reporting purposes are subject to
annual limitations. Should a change in ownership occur, net operating
loss carryforwards may be limited as to use in future years.
(
14 )
Subsequent
events
On
January 18, 2007, the Company entered into a one-year content and license
distribution agreement with Menfond Electronic Art & Computer Design Co.,
LTD to make certain Platinum content available for download over mobile
telephony platforms and to mobile and handheld wireless devices and handsets
in
the People’s Republic of China.
On
February 22, 2007, the Company entered into a one-year, non-exclusive, worldwide
content and license distribution agreement with Mobinex, LLC to create licensed
Avatars from certain Platinum content. They would be available for
download to personal computers (excluding mobile and handheld wireless devices
and handsets).
On
March12, 2007, Walt Disney Pictures (“WDP”) exercised their option to acquire all
rights, title and interest in and to the unpublished graphic novel entitled
“UNIQUE”.
On
April30, 2007, the Company closed the private placement offering, having sold an
additional 25,991,250 shares of common stock to accredited
investors. In total, the placement sold 49,047,250 shares of common
stock and raised $4,904,725 in additional funds for acquisitions and
operations.
On
May29, 2007, a licensing, services and sponsorship agreement was executed between
Platinum and AT&T Operations, Inc. (“AT&T”) formalizing AT&T as the
“Presenting Sponsor” of the Comic Book Challenge for the years 2007, 2008 and
2009.
F-30
UP
TO
49,047,250 SHARES
OF
OUR
OF
COMMON
STOCK
Platinum
Studios, Inc.
PROSPECTUS
________,
2007
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
ITEM
24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our
By-laws, as amended, provide to the fullest extent permitted by California
law,
our directors or officers shall not be personally liable to us or our
shareholders for damages for breach of such director's or officer's fiduciary
duty. The effect of this provision of our By-laws, as amended, is to eliminate
our right and our shareholders (through shareholders' derivative suits on behalf
of our company) to recover damages against a director or officer for breach
of
the fiduciary duty of care as a director or officer (including breaches
resulting from negligent or grossly negligent behavior), except under certain
situations defined by statute. We believe that the indemnification provisions
in
our By-laws, as amended, are necessary to attract and retain qualified persons
as directors and officers.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933
(the
“Act” or “Securities Act”) may be permitted to directors, officers or persons
controlling us pursuant to the foregoing provisions, or otherwise, we have
been
advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
ITEM
25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The
following table sets forth an itemization of all estimated expenses, all of
which we will pay, in connection with the issuance and distribution of the
securities being registered:
NATURE
OF EXPENSE AMOUNT
SEC
Registration fee
$
203.41
Accounting
fees and expenses
15,000.00
*
Legal
fees and expenses
40,000.00
*
Miscellaneous
4,796.59
*
TOTAL
$
60,000.00
*
·
Estimated
ITEM
26. RECENT SALES OF UNREGISTERED SECURITIES.
In
October 2006, we entered into Subscription Agreements with various accredited
investors (the “October 2006 Private Placement”) pursuant to which the investors
subscribed to purchase a total of 49,047,250 shares of our common stock,
resulting in proceeds to the company of $4,904,725, less offering costs of
$222,518, which stock we issued to the selling stockholders prior to the
date of
this prospectus. We granted registration rights to our investors in
our October 2006 Private Placement.
On
July1, 2007, we entered into a Cancellation of Indebtedness Agreement with CEO
Scott
Mitchell Rosenberg, pursuant to which we agreed to issue 17,208,575 shares
in
exchange for canceling $1,625,000 in long-term debt and $95,857 in interest
expense.
*We
claim
an exemption from the registration requirements of the Act for the private
placement of these securities pursuant to Section 4(2) of the Act and/or
Regulation D promulgated thereunder since, among other things, the transaction
did not involve a public offering, the investors were accredited investors
and/or qualified institutional buyers, the investors had access to information
about us and their investment, the investors took the securities for investment
and not resale, and we took appropriate measures to restrict the transfer of
the
securities.
II-1
ITEM
27. EXHIBITS.
The
following exhibits are included as part of this Form SB-2.
Exhibit
No.
Description
3.1
Articles
of Incorporation of Platinum Studios, Inc. filed with the Secretary
of
State of the State of California on September 15, 2006. (Incorporated
by
reference to the Registrant’s registration statement on Form SB-2 as filed
on September 4, 2007)
Distribution
Agreement between Platinum Studios, Inc. and Top Cow Productions,
Inc.
effective as of January 1, 2007 (Incorporated by reference to the
Registrant’s registration statement on Form SB-2 as filed on October 31,2007)
10.3
Publisher
Distribution Agreement between Ingram Periodicals Inc. and Platinum
Studios, Inc. dated as of 7/13/07 (Incorporated by reference to
the Registrant’s registration statement on Form SB-2 as filed on October31, 2007)
Cancellation
of Indebtedness Agreement dates as of July 1, 2007 (Incorporated
by
reference to the Registrant’s registration statement on Form SB-2 as filed
on September 4, 2007)
(1)
File,
during any period in which offers or sales are being made, a post-effective
amendment to this registration statement to:
(i)
Include any prospectus required by Section 10(a)(3) of the Securities Act of
1933, as amended (the "Securities Act");
(ii)
Reflect in the prospectus any facts or events which, individually or together,
represent a fundamental change in the information in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of the securities offered would not exceed
that which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) under the Securities Act
if,
in the aggregate, the changes in volume and price represent no more than a
20%
change in the maximum aggregate offering price set forth in the "Calculation
of
Registration Fee" table in the effective registration statement,
and
(iii)
Include any additional or changed material information on the plan of
distribution.
(2)
For
determining liability under the Securities Act, treat each post-effective
amendment as a new registration statement of the securities offered, and the
offering of the securities at that time to be the initial bona fide
offering.
(3)
File
a post-effective amendment to remove from registration any of the securities
that remain unsold at the end of the offering.
(4)
For
determining liability of the undersigned small business issuer under the
Securities Act to any purchaser in the initial distribution of the securities,
the undersigned small business issuer undertakes that in a primary offering
of
securities of the undersigned small business issuer pursuant to this
registration statement, regardless of the underwriting method used to sell
the
securities to the purchaser, if the securities are offered or sold to such
purchaser by means of any of the following communications, the undersigned
small
business issuer will be a seller to the purchaser and will be considered to
offer or sell such securities to such purchaser:
(i)
Any
preliminary prospectus or prospectus of the undersigned small business issuer
relating to the offering required to be filed pursuant to Rule 424;
(ii)
Any
free writing prospectus relating to the offering prepared by or on behalf of
the
undersigned small business issuer or used or referred to by the undersigned
small business issuer;
(iii)
The
portion of any other free writing prospectus relating to the offering containing
material information about the undersigned small business issuer or its
securities provided by or on behalf of the undersigned small business issuer;
and
(iv)
Any
other communication that is an offer in the offering made by the undersigned
small business issuer to the purchaser.
(
5) For
determining any liability under the Securities Act, treat each post-effective
amendment that contains a form of prospectus as a new registration statement
for
the securities offered in the registration statement, and that offering of
the
securities at that time as the initial bona fide offering of those
securities.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act
and
is, therefore, unenforceable.
In
the
event that a claim for indemnification against such liabilities (other than
the
payment by the registrant of expenses incurred or paid by a director, officer
or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
(6) Each
prospectus filed pursuant to Rule 424(b) as part of a registration statement
relating to an offering, other than registration statements relying on Rule
430B
or other than prospectuses filed in reliance on Rule 430A , shall be deemed
to
be part of and included in the registration statement as of the date it is
first
used after effectiveness. Provided, however, that no statement made in a
registration statement or prospectus that is part of the registration statement
or made in a document incorporated or deemed incorporated by reference into
the
registration statement or prospectus that is part of the registration statement
will, as to a purchaser with a time of contract of sale prior to such first
use,
supersede or modify any statement that was made in the registration statement
or
prospectus that was part of the registration statement or made in any such
document immediately prior to such date of first use.
II-4
SIGNATURES
In
accordance with the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form SB-2 and authorized this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the
City of Los Angeles, State of California, on December 14, 2007.
KNOW
ALL
MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Brian Altounian his true and lawful attorneys-in-fact,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities to sign any and all amendments
(including post-effective amendments) to this registration statement and to
sign
a registration statement pursuant to Section 462(b) of the Securities Act of
1933, and to file the same with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto
said attorneys-in-fact, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact or
his
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
In
accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities
and
on the dates stated: