**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

Washington, D.C. 20549

**FORM 10-Q**

 

 

 

 

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

 

For the Quarterly Period Ended **June 30, 2012**

 

 

 ̈

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From                          to                        

 

 

**INDEPENDENT FILM DEVELOPMENT CORPORATION**

(Name of small business issuer specified in its charter)

 

 

 

 

 

                  Nevada                  

                   56-2676759                

(State or other jurisdiction of

(I.R.S. Employer Identification No.)

incorporation or organization)

 

 

 

9107 Wilshire Blvd., Suite 450

Beverly Hills, California

90210

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (310) 295-1711

6399 Wilshire Blvd., Suite 507, Los Angeles, California 90048

(Former address of principle offices)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:   Yes  x        No   ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every 

Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.)  Yes x    No  ̈    

Indicate by check mark whether the registrant is a large accelerated filer, a non–accelerated filer, or a smaller reporting company.   See definitions of large accelerated filer, accelerated filer and smaller reporting company in Section 12b-2 of the Exchange Act.

 

 

 

 

 

 

 

 

Large accelerated filer

 ̈

Accelerated filer                      

 ̈

Non-accelerated filer                

 ̈

Smaller reporting company    

x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes   ̈      No x

As of August 14, 2012, the issuer had 26,120,991 shares of common stock outstanding.

Transitional Small Business Disclosure Format:    Yes     ̈      No   x

2

**Independent Film Development Corporation**

**(a Development Stage Company)**

**FORM 10-Q**

**For the Quarterly Period Ended June 30, 2012**

**INDEX**

  
 

 

 

**PART I**

**Financial Information**

4

Item 1.

Financial Statements

4

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

26

Item 4.

Controls and Procedures

26

 

 

 

**PART II**

**Other Information**

28

Item 1.

Legal Proceedings

28

Item 1A.

Risk Factors

28

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

30

Item 3.

Defaults Upon Senior Securities

32

Item 4.

Mining Safety Disclosures

32

Item 5.

Other Information

32

Item 6.

Exhibits

32

Signatures

34

  

3

**PART I****–** FINANCIAL INFORMATION

Item 1. Financial Statements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**Independent Film Development Corporation**

**(a Development Stage Company)**

**Balance Sheets**

 

 

 

 

 

 

 

 

 

 

 

June 30, 2012

 

 

September 30, 2011

 

 

(Unaudited)

 

 

(Restated)

**ASSETS**

 

 

 

 

 

 

 

 

 

 

 

   Cash

 $

-

 

 $

5,222

Accounts receivable

 

2,270

 

 

-

Other receivable

 

1,000

 

 

-

          Total Current Assets

 

3,270

 

 

5,222

 

 

 

 

 

 

Other Assets

 

 

 

 

 

     Website properties, net of accumulated amortization

 

818,521

 

 

350,000

   Total Assets

 $

821,791

 

$ 

 355,222

**LIABILITIES AND STOCKHOLERS' EQUITY (DEFICIT)**

 

 

 

 

 

 

 

 

 

 

 

 Current Liabilities

 

 

 

 

 

   Cash overdraft

$

11

 

$

-

   Accounts payable

 

16,590

 

 

18,228

   Accounts payable, related party

 

20,270

 

 

25,270

   Accrued expenses

 

48,817

 

 

8,824

   Accrued officer compensation

 

295,401

 

 

218,450

   Advances from officers

 

2,960

 

 

7,837

   Due to a related party

 

440

 

 

790

Derivative liability

 

410,702

 

 

116,504

   Convertible debentures (net of discount of $256,281 and $55,998, respectively) (see Note 5)

 

749,769

 

 

309,002

          Total Liabilities

 

1,544,960

 

 

704,905

 

 

 

 

 

 

Stockholders' Equity (Deficit)

 

 

 

 

 

    Preferred Stock, $.0001 par value, 15,000,0000

shares authorized, none issued and outstanding

 

-

 

 

-

   Common stock , $.0001 par value, 485,000,000

 

 

 

 

 

shares authorized, 26,120,991 and 24,120,991  issued and outstanding, respectively

 

2,612

 

 

2,412 

    Additional paid in capital

 

3,134,638

 

 

2,826,660 

    Common stock subscribed

 

709,500

 

 

779,000

Deficit accumulated during development stage

 

(4,569,919)

 

 

 (3,957,755)

          Total Stockholders' Equity (Deficit)

 

(723,169)

 

 

(349,683) 

          Total Liabilities and Stockholders' Equity (Deficit)

$

821,791

 

 $

355,222 

 

 

 

 

 

 

The accompanying notes are an integral part of these financial statements.

 

 

 

 

 

 

4

 

 

 

 

 

 

 

 

**Independent Film Development Corporation**

**(a Development Stage Company)**

**Statements of Operations**

**(Unaudited)**

 

 

For the Nine Months Ended

 

 

For the Three Months Ended

 

September 14, 2007

 

 

June 30,

 

 

June 30,

 

 (inception) through

 

 

2012

 

 

2011

 

 

2012

 

2011

 

June 30, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

$

3,770

 

$

-

 

$

3,770

$

-

$

        3,770

Cost of revenue

 

 -

 

 

 -

 

 

- 

 

 -

 

-

Gross revenue

$

3,770

 

$

-

 

$

3,770

$

-

$

3,770

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

  Officer compensation

 

191,251

 

 

884,500

 

 

40,275

 

213,000

 

1,013,751

  Professional fees

 

138,754

 

 

91,450

 

 

90,118

 

2,050

 

574,011

  Director fees

 

-

 

 

38,000

 

 

-

 

-

 

38,000

  Bad debt expense for stock subscription receivable

 

-

 

 

-

 

 

-

 

-

 

70,365

  General and administrative

 

53,244

 

 

26,189

 

 

43,746

 

23,310

 

2,575,547

    Total operating expenses

 

383,249

 

 

1,040,139

 

 

174,139

 

238,360

 

4,271,674

Loss from operations

 

(379,479)

 

 

(1,040,139)

 

 

(170,369)

 

(238,360)

 

(4,267,904)

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income and (expense):

 

 

 

 

 

 

 

 

 

 

 

 

  Interest expense

 

(113,992)

 

 

-

 

 

(53,135)

 

-

 

(132,332)

Gain (loss) on derivative liability

 

(118,693)

 

 

-

 

 

(62,097)

 

-

 

(169,683)

Total other expense

 

(232,685)

 

 

-

 

 

(115,242)

 

-

 

(302,015)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 $

(612,164)

 

$

(1,040,139)

 

$

(285,611)

$

(238,360)

$

(4,569,919)

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss per share

 

 

 

 

 

 

 

 

 

 

 

 

  Basic and diluted

$

(0.02)

 

$

(0.04)

 

$

(0.01)

$

(0.01)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares

 

 

 

 

 

 

 

 

 

 

 

 

outstanding basic and  diluted

 

24,591,064

 

 

23,128,319

 

 

25,417,694

 

23,413,068

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these financial statements.

 

 

5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**Independent Film Development Corporation**

**(a Development Stage Company)**

**Statement of Stockholders’ Equity (Deficit)**

 

 

Number of Shares Outstanding

 

 

Common Stock at Par Value

 

 

Paid in Capital   

 

 

Deficit Accumulated During

Development

 

 

Common Stock Subscribed

 

 

Stock Subscription Receivable

 

 

Total     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

                              -

 

$

                   -

 

$

               -

 

$

                      -

 

$

                  -

 

$

                     -

 

$

                    -

Stock issued for cash

                         125

 

 

                   -

 

 

           500

 

 

                      -

 

 

                  -

 

 

                     -

 

 

500  

Balance at September 30, 2007

125

 

 

                   -

 

 

500

 

 

                      -

 

 

                  -

 

 

                     -

 

 

500

Stock issued for cash

18,492

 

 

2

 

 

35,940

 

 

                      -

 

 

-

 

 

-

 

 

35,942

Net loss for the  year ended September 30, 2008

                              -

 

 

                   -

 

 

               -

 

 

   (33,413)

 

 

                  -

 

 

                     -

 

 

(33,413)

Balance at September 30, 2008

18,617

 

 

2

 

 

36,440

 

 

    (33,413)

 

 

                  -

 

 

                     -

 

 

3,029

Stock issued for cash

34,803

 

 

3

 

 

109,997

 

 

                      -

 

 

-

 

 

(85,000)

 

 

25,000

Stock issued for compensation

22,300,000

 

 

2,230

 

 

2,227,770

 

 

-

 

 

-

 

 

-

 

 

2,230,000

Net loss for year ended September 30, 2009

                              -

 

 

 -

 

 

               -

 

 

(2,258,311)

 

 

 -

 

 

 -

 

 

(2,258,311)

Balance at September 30, 2009

22,353,420

 

 

2,235

 

 

2,374,207

 

 

(2,291,724)

 

 

-

 

 

(85,000)

 

 

(282)

Stock issued for cash

626,571

 

 

63

 

 

197,032

 

 

-

 

 

-

 

 

-

 

 

197,095

Stock issued for compensation

4,000

 

 

-

 

 

2,000

 

 

-

 

 

-

 

 

-

 

 

2,000

Stock subscription receivable

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

22,660

 

 

22,660

Net loss for year ended September 30, 2010

-

 

 

-

 

 

-

 

 

(217,881)

 

 

-

 

 

-

 

 

(217,881)

Balance at September 30, 2010

22,983,991

 

 

2,298

 

 

2,573,239

 

 

(2,509,605)

 

 

-

 

 

(62,340)

 

 

3,592

Stock for other services

556,000

 

 

56

 

 

211,224

 

 

-

 

 

171,000

 

 

-

 

 

382,280

Stock for officer compensation

-

 

 

-

 

 

-

 

 

-

 

 

570,000

 

 

-

 

 

570,000

6

Number of Shares Outstanding 

Common Stock at Par Value 

Paid in Capital 

Deficit Accumulated During 

Development 

Common Stock Subscribed 

Stock Subscription Receivable 

Total 

Stock for Director fees

-

-

-

-

38,000

-

38,000

Stock issued for cash

575,000

57

39,918

-

-

(8,025)

31,950

Common stock issued for lock up agreement

6,000

1

2,279

-

-

-

2,280

Write off of stock subscription receivable

-

-

-

-

-

70,365

70,365

Net loss for the year ended September 30, 2011

-

-

-

(1,448,150)

-

-

(1,448,150)

Balance at September 30, 2011

24,120,991

2,412

2,826,660

(3,957,755)

779,000

-

(349,683)

Write off of stock payable (unaudited)

-

-

95,000

-

(95,000)

-

Stock for officer compensation (unaudited)

-

-

-

-

25,500

-

25,500

Settlement of derivative liability (unaudited)

-

-

61,188

-

-

-

61,188

Stock issued in conversion of note payable (unaudited)

2,000,000

200

138,290

-

-

-

138,490

Contributed capital (unaudited)

-

-

13,500

-

-

-

13,500

Net loss for the period ended June 30, 2012 (unaudited)

-

-

-

(612,164)

-

-

(612,164)

Balance at June 30, 2012 (unaudited)

26,120,991

$

2,612

$

3,134,638

$

(4,569,919)

$

709,500

$

-

$

(723,169)

The accompanying notes are an integral part of these financial statements.

 

 

 

 

7

 

 

**Independent Film Development Corporation**

**(a Development Stage Company)**

**Statements of Cash Flows**

**(Unaudited)**

 

 

For the Nine Months Ended

 

 

September 14, 2007

 

 

June 30,

 

 

(inception) through

 

 

2012

 

2011

 

 

June 30, 2012

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

Net loss

 

$

(612,164)

 

$

(1,040,139)

 

$

(4,569,919)

Adjustments to reconcile net loss to total cash used in operations:

 

 

 

 

 

 

 

 

 

      Common stock for compensation

 

 

25,500

 

 

570,000

 

 

2,827,500

      Common stock for other services

 

 

-

 

 

384,560

 

 

384,560

      Common stock for Director's fees

 

 

-

 

 

38,000

 

 

38,000

Amortization expense

 

 

31,479

 

 

-

 

 

31,479

(Gain) loss on derivative liability

 

 

118,693

 

 

-

 

 

169,683

      Bad debt expense for stock subscription receivable   

 

 

-

 

 

-

 

 

70,365

Debt discount amortization

 

 

74,900

 

 

-

 

 

84,416

   Change in assets and liabilities:

 

 

 

 

 

 

 

 

 

(Increase) in accounts receivable

 

 

(2,270)

 

 

-

 

 

(2,270)

(Increase) in other receivable

 

 

(1,000)

 

 

-

 

 

(1,000)

     Increase (decrease) in accounts payable

 

 

(1,639)

 

 

8,850

 

 

16,589

     Increase in accounts payable, related party

 

 

(5,000)

 

 

-

 

 

20,270

     Increase in accrued expenses

 

 

39,993

 

 

-

 

 

48,817

     Increase in accrued compensation

 

 

76,952

 

 

-

 

 

295,402

           Net cash used in operating activities

 

 

(254,556)

 

 

(38,729)

 

 

(586,108)

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

-

 

 

-

 

 

-

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 Cash overdraft

 

 

11

 

 

-

 

 

11

     Proceeds/payments on loan, related party

 

 

(350)

 

 

500

 

 

440

     Proceeds from debentures

 

 

241,050

 

 

-

 

 

256,050

     Proceeds from subscriptions receivable

 

 

-

 

 

-

 

 

22,660

 Contributed capital

 

 

13,500

 

 

-

 

 

13,500

     Advances from officers

 

 

125

 

 

7,426

 

 

7,962

     Payments to officers

 

 

(5,002)

 

 

-

 

 

(5,002)

     Proceeds from the sale of common stock

 

 

-

 

 

26,950

 

 

290,487

          Net cash provided by financing activities

 

 

249,334

 

 

34,873

 

 

586,108

Net increase (decrease) in cash

 

 

(5,222)

 

 

(3,856)

 

 

-

Cash at beginning of period

 

 

5,222

 

 

3,882

 

 

-

Cash at end of period

 

$

-

 

$

26

 

$

-

Cash paid for:

 

 

 

 

 

 

 

 

 

   Interest

 

$

-

 

$

-

 

$

-

   Taxes

 

$

-

 

$

-

 

$

-

Supplemental disclosure of non cash activities

 

 

 

 

 

 

 

 

 

Website property acquired with convertible  debenture

 

$

500,000

 

$

-

 

$

850,000

Common stock issued for conversion of debt

 

$

100,000

 

$

-

 

$

100,000

Settlement of derivative liability

 

$

99,678

 

$

-

 

$

99,678

Debt discount on convertible notes payable

 

$

275,183

 

$

-

 

$

275,183

Forgiveness of stock payable

 

$

95,000

 

$

-

 

$

95,000

The accompanying notes are an integral part of these financial statements.

8

**Independent Film Development Corporation**

**(A Development Stage Company)**

**Notes to Financial Statements**

**June 30, 2012**

**(Unaudited)**

**NOTE 1: HISTORY OF OPERATIONS**

Business Activity

Independent Film Development Corporation was incorporated in the State of Nevada on September 14, 2007. Effective April 24, 2008 we commenced operating as a Business Development Company ("BDC") under Section 54(a) of the Investment Company Act of 1940 ("1940 Act").  On September 30, 2009, our board of directors elected to cease operating as a BDC.  

Our current plan of operations is to acquire and develop independent films for production, sales and distribution, with a goal toward significant partnerships with mini-major and the major film studios, such as Lionsgate and Sony, while simultaneously emulating those companies’ recipes for success.

The Company is in the development stage as defined under Statement on Financial Accounting Standards Accounting Standards Codification FASB ASC 915-205 "Development-Stage Entities.”

**NOTE 2: SIGNIFICANT ACCOUNTING POLICIES**

Preparation of Financial Statements

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the United States Securities and Exchange Commission for interim financial information.  While these statements reflect all normal recurring adjustments which are, in the opinion of management, necessary for fair presentation of the results of the interim period, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the financial statements and footnotes thereto, which are included in the Company’s Annual Report on form 10-K, as amended, previously filed with the Commission.

The unaudited interim financial statements should be read in conjunction with the Company’s annual report on Form 10-K, as amended, which contains the audited financial statements and notes thereto, together with the Management’s Discussion and Analysis, for the fiscal year ended September 30, 2011.  The interim results for the nine months ended June 30, 2012 are not necessarily indicative of the results for the full fiscal year.

Management further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud. The Company's system of internal accounting control is designed to assure, among other items, that 1) recorded transactions are valid; 2) valid transactions are recorded; and 3) transactions are recorded in the proper period in a timely manner to produce financial statements which present fairly the financial condition, results of operations and cash flows of the Company for the respective periods being presented.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. There were no cash equivalents as of June 30, 2012 and September 30, 2011.

Stock Based Compensation

We account for equity instruments issued in exchange for the receipt of goods or services from non-employees. Costs are measured at the fair market value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earlier of the date on which there first exists a firm commitment for performance by the provider of goods or services or on the date performance is complete. The Company recognizes the fair value of the equity instruments issued that result in an asset or expense being recorded by the company, in the same period(s) and in the same manner, as if the 

9

Company has paid cash for the goods or services.

Use of Estimates

The presentation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Fair Value of Financial Instruments

The carrying amount of cash, notes receivable, accounts payable, accrued liabilities and notes payable, as applicable, approximates fair value due to the short-term nature of these items. The fair value of the related party notes payable cannot be determined because of the Company's affiliation with the parties with whom the agreements exist. The use of different assumptions or methodologies may have a material effect on the estimates of fair values.

ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, “Financial Instruments,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures.  The carrying amounts reported in the balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:

· Level 1:  Observable inputs such as quoted prices in active markets;

· Level 2:  Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; 

· Level 3:  Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

 

The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity,” and ASC 815.

The following table presents assets and liabilities that are measured and recognized at fair value as of September 30, 2011 and June 30, 2012 on a recurring basis:

September 30, 2011

Description

 

Level 1

 

Level 2

 

Level 3

 

Total Gains and (Losses)

Derivative

 

 

-

 

 

-

 

 

(116,504)

 

 

(50,990)

Total

 

$

-

 

$

-

 

$

(116,504)

 

$

(50,990)

June 30, 2012

Description

 

Level 1

 

Level 2

 

Level 3

 

Total Gains and (Losses)

Derivative

 

 

-

 

 

-

 

 

(410,702)

 

 

(118,693)

Total

 

$

-

 

$

-

 

$

(410,702)

 

$

(118,693)

Long Lived Assets

Long lived assets are carried at cost and amortized over their estimated useful lives, generally on a straight-line basis. The Company reviews identifiable amortizable assets to be held and used for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Determination of recoverability is based on the lowest level of identifiable estimated undiscounted cash flows resulting from use of the asset and its eventual disposition. Measurement of any impairment loss is based on the excess of the carrying value of the asset over its fair value.

10

 Income Taxes

Accounting Standards Codification Topic No. 740 “Income Taxes” (ASC 740) requires the asset and liability method of accounting be used for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Net deferred tax assets consist of the following components as of:

 

 

 

 

 

 

 

**June 30, 2012**

 

**September 30, 2011**

NOL

$

(612,164)

$

 (277,605)

Net Loss

 

(598,664)

 

 (1,448,150)

Bad debt expense

 

-

 

70,365

Loss on derivative liability

 

118,693

 

50,990

Debt discount amortization

 

74,900

 

9,516

Common stock for Director's fees

 

-

 

38,000

Amortization expense

 

31,479

 

-

Common stock for other services

 

-

 

384,560

Common stock for compensation

 

25,500

 

570,000

NOL at end of period

$

(960,256)

$

 (602,234)

Effective Rate

 

0.34

 

0.34

Deferred Tax Asset

 

(326,487)

 

 (204,790)

Valuation

 

326,487

 

204,790

Deferred Tax Asset

$

-

$

-

In June 2006, the FASB interpreted its standard for accounting for uncertainty in income taxes, an interpretation of accounting for income taxes.  This interpretation clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance the minimum recognition threshold and measurement attributable to a tax position taken on a tax return is required to be met before being recognized in the financial statements.

The FASB’s interpretation had no material impact on the Company’s financial statements for the period ended June 30, 2012. As of June 30, 2012, the Company had a net operating loss carry forward for income tax reporting purposes of approximately $960,000 that may be offset against future taxable income through 2027. Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited. No tax benefit has been reported in the financial statements, because the Company believes there is a 50% or greater chance the carry forwards will expire unused. Accordingly, the potential tax benefits of the loss carry forwards are offset by a valuation allowance of the same amount.

Derivative Liabilities 

The Company records the fair value of  its derivative financial instruments in accordance with ASC815, *Derivatives and Hedging*. The fair value of the derivatives was calculated using a multi-nominal lattice model performed by an independent qualified business valuator. The fair value of the derivative liability is revalued on each balance sheet date with

corresponding gains and losses recorded in the consolidated statement of operations.

Derivative financial instruments should be recorded as liabilities in the balance sheet and measured at fair value. For purposes of the Company’s financial statements fair value was used as the basis for formulating an analysis which has been defined by the Financial Accounting Standards Board (“FASB”) as “the amount for which an asset (or liability) could be exchanged in a current transaction between knowledgeable, unrelated willing parties when neither party is acting under compulsion”. The FASB has provided guidance that its definition of fair value is consistent with the definition of fair market value in IRS Rev. Rule 59-60. In determining the fair value of the derivatives it was assumed that the Company’s business would be conducted as a going concern. These derivative liabilities will need to be marked-to-market each quarter with the change in fair value recorded in the income statement.

11

Revenue Recognition

The Company recognizes revenue when persuasive evidence of an arrangement exists, services have been rendered, the sales price is fixed or determinable, and collection is reasonably assured. The Company currently generates revenue from two sources. The first is through its website property IndieBackers.com, from which the Company receives a percentage of the funds raised for film projects featured on its site. IndieBackers.com is administered and maintained by ibacking Corp. who which the Company has a convertible debenture (Note 5). The second is fees earned from services provided in the capacity of producer and/or sales agent. The company’s primary focus will be to act as a sales agent for independent film producers by providing the sales and marketing services for films.

Earnings (Loss) Per Share

Basic earnings (loss) per share are computed by dividing the net income (loss) by the weighted-average number of shares of common stock and common stock equivalents (primarily outstanding options and warrants). Common stock equivalents represent the dilutive effect of the assumed exercise of the outstanding stock options and warrants, using the treasury stock method. The calculation of fully diluted earnings (loss) per share assumes the dilutive effect of the exercise of outstanding options and warrants at either the beginning of the respective period presented or the date of issuance, whichever is later. At June 30, 2012 and September 30, 2011, the Company had no outstanding options or warrants.

**NOTE 3: RECENT ACCOUNTING PRONOUNCEMENTS**

In September 2011 Accounting Standards Update No. 2011-08, Intangibles - Goodwill and Other (Topic 350): Testing Goodwill for impairment. This ASU's objective is to simplify the process of performing impairment testing for Goodwill. With this update a company is allowed to asses qualitative factors, first, to determine if it is more likely than not (greater than 50%) that the FV is less than the carrying amount. This would be done, prior to performing the two-step goodwill impairment testing, as prescribed by Topic 350.  Prior to this ASU, all entities were required to test, annually, their good will for impairment by Step 1 - comparing the FV to the carrying amount, and if impaired, then step 2 - calculate and recognize the impairment. Therefore, the fair value measurement is not required, until the "more likely than not" reasonableness test is concluded. Effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011.

In May 2011, FASB issued Accounting Standards Update No. 2011-04, Fair Value Measurement (Topic 820):*Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs* .    This ASU clarifies the board's intent of current guidance, modifies and changes certain guidance and principles, and adds additional disclosure requirements concerning the 3 levels of fair value measurements. Specific amendments are applied to FASB ASC 820-10-35, Subsequent Measurement and FASB ASC 820-10-50, Disclosures. This ASU is effective for interim and annual periods beginning after December 15, 2011.

In June 2011, FASB issued Accounting Standards Update No. 2011-05, Comprehensive Income (Topic 220):*Presentation of Comprehensive Income* . - ASU 2011-05. Current US GAAP allows companies to present the components of comprehensive income as a part of the statement of changes in stockholders' equity. This ASU eliminates that option.  in this Update, an  entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income This ASU is effective interim and annual periods beginning after December 15, 2011.  This ASU should be applied retrospectively. There are no specific transition disclosures

The Company has implemented all new accounting pronouncements that are in effect.  These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

12

**NOTE 4: WEBSITE PROPERTIES**

During the fourth quarter of fiscal year 2011 the Company hired a third party to develop HollywoodIndy.com. The website promises to be an Internet based entertainment web property specializing in social networking and resourcing, production, development and distribution for independent film and television industry. The revenue model is to sell and market services to the community of entertainment professionals and non professionals in the form of classifieds, education forums and advertising, as well as providing a stable for unique projects to fit in the overall company umbrella. The model provides a unique revenue platform that includes anyone from established professionals looking for the next generation talent to young up-and-coming professionals breaking into the industry. The initial cost of the website of $350,000 has been capitalized due to the future economic benefits it will bring to the company. The cost will be amortized over five years beginning March 6, 2012, the date the website was launched to the public. On July 1, 2011 the company executed a convertible debenture for $350,000 (Note 5) as payment for the development of the website.

During the third quarter of fiscal year 2012 the Company hired a third party to develop Indiebackers.com (IndieBacker). The website is a donation based crowdfunding platform for Indie producers. This platform allows the producer to embark on a project while at the same time obtaining the much needed development money for such a project. IndieBacker is a crowdfunding solution for early stage projects allowing filmmakers to list their new projects on the site for budgets anywhere from $1,000 to $500,000. IndieBacker uses a donation base platform allowing producers to generate a following while raising capital. The revenue model is gross margin of approximately 6% of funds raised for all completed projects. Additional plans call for the brand to also incorporate an equity based platform once crowdfunding laws are fully passed in early 2013.  The initial cost of the website of $500,000 has been capitalized due to the future economic benefits it will bring to the company. The cost will be amortized over five years beginning May 29, 2012, the date the website was launched to the public. On May 29, 2012 the company executed a convertible debenture for $500,000 (Note 5) as payment for the development of the website.

**NOTE 5: CONVERTIBLE DEBENTURE**

On July 1, 2011, the Company entered into an exchange agreement with Junior Capital Inc. (“Junior”), pursuant to which Junior exchanged a $350,000 promissory note for a $350,000 convertible debenture (the “Junior Debenture”). The Junior Debenture accrues interest of 10% and matures on July 1, 2012. Junior has the right to convert all or a portion of the principal into shares of common stock at a conversion price equal to fifty percent (50%) of the average of the closing bid price of common stock during the five trading days immediately preceding the conversion date, or fifty percent (50%) of the closing bid price of the common stock on the date of issuance, or $0.05 per share of common stock on the date of conversion as quoted by Bloomberg, LP. Pursuant to the terms of this debenture, the holder shall not be entitled to convert a number of shares that would exceed 4.99% of the outstanding shares of the Company’s common stock. As of June 30, 2012, $100,000 of the $350,000 debenture was converted into 2,000,000 shares of common stock. 

On October 25, 2011 the Company issued a convertible debenture/note payable to Junior Capital, Inc. for $20,000; $15,000 of this amount was advanced to the Company prior to signing the debenture and prior to the year ended September 30, 2011. The remaining $5,000 was received in October 2011.  The Debenture accrues interest of 10% beginning on October 25, 2011 and matures on October 25, 2012. Junior has the right to convert all or a portion of the principal into shares of common stock at a conversion price equal to fifty percent (50%) of the average of the closing bid price of common stock during the five trading days immediately preceding the conversion date, or fifty percent (50%) of the closing bid price of the common stock on the date of issuance as quoted by Bloomberg, LP. Pursuant to the terms of this debenture, the holder shall not be entitled to convert a number of shares that would exceed 4.99% of the outstanding shares of the Company’s common stock. As of June 30, 2012 $20,000 of the principal face value of the Junior Debenture remains outstanding.

On October 28, 2011, the Company entered into an exchange agreement with Editor Newswire Inc. (“Editor”), pursuant to which Editor exchanged a $20,000 promissory note for a $20,000 convertible debenture (the “Editor Debenture”). The Editor Debenture accrues interest of 10% and matures on October 28, 2012. Editor has the right to convert all or a portion of the principal into shares of common stock at a conversion price equal to fifty percent (50%) of the average of the closing bid price of common stock during the five trading days immediately preceding the conversion date, or fifty percent (50%) of the closing bid price of the common stock on the date of issuance as quoted by Bloomberg, LP. Pursuant to the terms of this debenture, the holder shall not be entitled to convert a number of shares that would exceed 4.99% of the outstanding shares of the Company’s common stock. As of June 30, 2012 $20,000 of the principal face value of the Debenture remains outstanding.

13

On November 18, 2011, the Company entered into an exchange agreement with Editor Newswire Inc. (“Editor”), pursuant to which Editor exchanged a $25,000 promissory note dated November 18, 2011 for a $25,000 convertible debenture (the “Editor Debenture”). The Editor Debenture accrues interest of 10% and matures on November 18, 2012. Editor has the right to convert all or a portion of the principal into shares of common stock at a conversion price equal to fifty percent (50%) of the average of the closing bid price of common stock during the five trading days immediately preceding the conversion date, or fifty percent (50%) of the closing bid price of the Common Stock on the date of issuance as quoted by Bloomberg, LP. Pursuant to the terms of this debenture, the holder shall not be entitled to convert a number of shares that would exceed 4.99% of the outstanding shares of the Company’s common stock. As of June 30, $25,000 of the principal face value of the Debenture remains outstanding.

On January 11, 2012, the Company entered into a $33,000 convertible debenture with Junior Capital Inc. (“Junior”). The Junior Debenture accrues interest of 10% and matures on January 11, 2013. Junior has the right to convert all or a portion of the principal into shares of common stock at a conversion price equal to fifty percent (50%) of the average of the closing bid price of common stock during the five trading days immediately preceding the conversion date, or fifty percent (50%) of the closing bid price of the Common Stock on the date of issuance as quoted by Bloomberg, LP. Pursuant to the terms of this debenture, the holder shall not be entitled to convert a number of shares that would exceed 4.99% of the outstanding shares of the Company’s common stock. As of June 30, 2012 $33,000 of the principal face value of the Debenture remains outstanding.

On March 15, 2012, the Company entered into a $40,000 convertible debenture with Junior Capital Inc. (“Junior”). The Junior Debenture accrues interest of 12% and matures on March 15, 2013. Junior has the right to convert all or a portion of the principal into shares of common stock at a conversion price equal to fifty percent (50%) of the average of the closing bid price of common stock during the five trading days immediately preceding the conversion date, or fifty percent (50%) of the closing bid price of the Common Stock on the date of issuance as quoted by Bloomberg, LP. Pursuant to the terms of this debenture, the holder shall not be entitled to convert a number of shares that would exceed 4.99% of the outstanding shares of the Company’s common stock.  As of June 30, 2012 $40,000 of the principal face value of the Debenture remains outstanding.

On April 9, 2012, the Company entered into a $100,000 convertible debenture with Neil Linder. The debenture accrues interest of 12% and matures on April 9, 2013. Mr. Linder has the right to convert all or a portion of the principal into shares of common stock at a conversion price equal to the lesser of fifty percent (50%) of the average of the closing bid price of common stock during the five trading days immediately preceding the conversion date, or fifty percent (50%) of the closing bid price of the Common Stock on the date of issuance as quoted by Bloomberg, LP. Pursuant to the terms of this debenture, the holder shall not be entitled to convert a number of shares that would exceed 4.99% of the outstanding shares of the Company’s common stock.  As of June 30, 2012 $100,000 of the principal face value of the Debenture remains outstanding.

On May 29, 2012, the Company entered into a $500,000 convertible debenture with iBacking Corp. The iBacking Debenture accrues interest of 12% and matures on May 29, 2013. iBacking has the right to convert all or a portion of the principal into shares of common stock at a conversion price equal to the lesser of fifty percent (50%) of the lowest closing bid price of common stock during the ten trading days immediately preceding the conversion date, or fifty percent (50%) of the closing bid price of the Common Stock on the date of issuance as quoted by Bloomberg, LP. Pursuant to the terms of this debenture, the holder shall not be entitled to convert a number of shares that would exceed 4.99% of the outstanding shares of the Company’s common stock.  As of June 30, 2012 $500,000 of the principal face value of the Debenture remains outstanding.

On June 5, 2012, the Company entered into an $18,000 convertible debenture with Junior Capital Inc. (“Junior”). The Junior Debenture accrues interest of 12% and matures on June 5, 2013. Junior has the right to convert all or a portion of the principal into shares of common stock at a conversion price equal to fifty percent (50%) of the average of the closing bid price of common stock during the five trading days immediately preceding the conversion date, or fifty percent (50%) of the closing bid price of the Common Stock on the date of issuance as quoted by Bloomberg, LP. Pursuant to the terms of this debenture, the holder shall not be entitled to convert a number of shares that would exceed 4.99% of the outstanding shares of the Company’s common stock.  As of June 30, 2012 $18,000 of the principal face value of the Debenture remains outstanding.

The following inputs and assumptions were used to value the secured convertible notes issued in the year ended September 30, 2011 and June 30, 2012:

14

·

The convertible promissory notes have a conversion price of the lesser of 50% of the average of the lowest closing bid stock prices (lowest closing bid price for the 5/29/12 note) over the last 5-10 days or 50% of the closing bid price at issuance (or $0.05 for the 7/1/11 note) and contains no dilutive reset feature.

·

The stock price would fluctuate with an annual volatility.  The projected volatility curve was based on historical volatilities of the 18 comparable companies in the entertainment industry.

·

The Holder would redeem based on availability of alternative financing, increasing 1.0% monthly to a maximum of 10%

·

The Holder would automatically convert the note at maturity if the registration was effective and the company was not in default.

A summary of the activity of the derivative liability is shown below:

Balance at September 30, 2010

 

 

 

 

$

-

Increase in derivative due to new issuances

 

 

65,514

Derivative loss due to new issuances

 

 

19,602

Derivative loss due to mark to market adjustment

 

 

     31,388

Balance at September 30, 2011

 

 

 

 

116,504 

Increase in derivative due to new issuances

 

275,183 

Derivative loss due to new issuances

 

85,169

Decrease in derivative due to settlement of debt

 

(99,678)

Derivative loss due to mark to market adjustment

 

33,524

Balance at June 30, 2012

 

 

 

$

410,702 

 **NOTE 6: COMMON STOCK TRANSACTIONS**

During the period from September 14, 2007 (inception) through September 30, 2007 the Company issued 125 common shares for $500 cash.

During the year ended September 30, 2008 the Company issued 18,492 common shares for $35,942 cash.

During the year ended September 30, 2009 the Company issued 34,803 common shares for $25,000 cash and a subscription receivable in the amount of $85,000. During the year ended September 30, 2010 the Company received $22,660 on its subscription receivable. As of December 31, 2011 it was determined that the remaining receivable would not be collected; as a result the company credited the stock subscription receivable account and debited bad debt expense for $62,340.

On September 30, 2009 the Company’s Board of Directors authorized the issuance of 200,000 common shares to Directors Robert Searcy and Patrick Peach, as compensation for two years’ services rendered, pursuant to Section 4(2) of the Securities Act of 1933. Due to the volatility of the market and the limited trading of the Company’s stock, shares were valued at $0.10 by the Board of Directors.

On September 30, 2009 the Company’s Board of Directors authorized the issuance of, 200,000 shares and 500,000 shares to Jeff Ritchie, the Company’s President and Director for compensation for two years’ services rendered, and 10 million shares in exchange for business opportunities assigned to the company, pursuant to Section 4(2) of the Securities Act of 1933. Due to the volatility of the market and the limited trading of the Company’s stock, shares were valued at $0.10 by the Board of Directors.

On September 30, 2009 the Company’s Board of Directors authorized the issuance of, 200,000 shares and 500,000 shares to Kenneth Eade, an Officer and Director for compensation for two years’ services rendered, 500,000 for two years’ legal services rendered, and 10 million shares in exchange for business opportunities assigned to the company, pursuant to Section 4(2) of the Securities Act of 1933. Due to the volatility of the market and the limited trading of the Company’s stock, shares were valued at $0.10 by the Board of Directors.

During the three month period ended December 31, 2009 the Company issued 90,000 common stock shares for total consideration of $45,000.

15

During the three months ended June 30, 2010 the Company issued 406,571 common shares for total consideration of $119,595.
During the three months ended June 30, 2010, the Company issued 4,000 common shares for services totaling $2,000. Due to the volatility of the market and the limited trading of the Company’s stock, shares were valued at $0.10 by the Board of Directors.

During the three months ended September 30, 2010, the Company issued 130,000 common shares for total consideration of $32,500.

On March 31, 2011 the Company’s Board of Directors authorized the issuance of 100,000 common shares for Director’s fees totaling $38,000, based on the value of the common stock on the date of authorization. As of June 30, 2012 these shares had not yet been issued and therefore have been recorded as a stock payable.

On March 31, 2011 the Company’s Board of Directors authorized the issuance of 750,000 shares each to Jeff Ritchie, the Company’s CEO and Kenneth Eade the Company’s former CFO, for compensation for services rendered in 2010, and an additional 200,000 shares to Kenneth Eade for legal services rendered, for total consideration of $646,000, based on the value of the common stock on the date of authorization. As of June 30, 2012 these shares had not yet been issued and therefore have been recorded as a stock payable.

During the three month period ended March 31, 2011, the Company authorized the issuance of 250,000 common shares for services valued at $95,000, based on the value of the common stock on the date of authorization. These shares were never issued and the Company’s original agreement with the service provider was modified. As such the Company is no longer obligated to issue the 250,000 shares and has written the $95,000 payable off to additional paid in capital, given that at the time the stock was authorized to be issued the service provider was a Director of the Company.

On May 10, 2011 the Company issued 300,000 common shares for cash proceeds of $6,975 and a subscription receivable in the amount of $8,025. As of December 31, 2011 it was determined that the remaining receivable would not be collected; as a result the company credited the stock subscription receivable account and debited bad debt expense for $8,025.

On May 9, 2011 the Company issued 6,000 common shares for a lock up agreement in which the stockholder agreed not to transfer any of his shares for an agreed upon time. The Company recorded an expense of $2,280 based on the value of the common stock on the date of authorization.

On May 10, 2011 the Company issued 6,000 common shares to a stockholder for shares authorized in a prior period. The Company recorded an expense of $2,280 based on the value of the common stock on the date of authorization.

On June 24, 2011, the Company authorized the issuance of 550,000 common shares for services valued at $209,000, based on the value of the common stock on the date of authorization. The shares were issued in July 2011.

During the year ended September 30, 2011, the Company issued 275,000 common shares for total consideration of $24,975.

On March 7, 2012, the Company authorized the issuance of 450,000 common shares in conversion of $22,500 of the Junior Capital debenture dated July 1, 2011. The shares were issued at $0.05 pursuant to the conversion terms of the debenture.

On March 28, 2012, the Company authorized the issuance of 450,000 common shares in conversion of $22,500 of the Junior Capital debenture dated July 1, 2011. The shares were issued at $0.05 pursuant to the conversion terms of the debenture

On February 7, 2012, the Company authorized the issuance of 50,000 common shares to Rachel Boulds, the Company’s CFO, for compensation of services. The shares were issued at $0.51 based on the value of the common stock on the date of authorization. As of June 30, 2012 the shares had not yet been issued and as such have been booked as a stock payable.

On April 20, 2012, the Company authorized the issuance of 450,000 common shares in conversion of $22,500 of the Junior Capital debenture dated July 1, 2011. The shares were issued at $0.05 pursuant to the conversion terms of the debenture

On June 13, 2012, the Company authorized the issuance of 250,000 common shares in conversion of $12,500 of the Junior Capital debenture dated July 1, 2011. The shares were issued at $0.05 pursuant to the conversion terms of the debenture

On June 28, 2012, the Company authorized the issuance of 400,000 common shares in conversion of $20,000 of the Junior Capital debenture dated July 1, 2011. The shares were issued at $0.05 pursuant to the conversion terms of the debenture

16

**NOTE 7: RELATED PARTY TRANSACTION**

During the three month period ended March 31, 2011, the Company authorized the issuance of 250,000 common shares for services valued at $95,000, based on the value of the common stock on the date of authorization. These shares were never issued and the Company’s original agreement with the service provider was modified. As such the Company is no longer obligated to issue the 250,000 shares and has written the $95,000 payable off to additional paid in capital, given that at the time the stock was authorized to be issued the service provider was a Director of the Company.

As of June 30, 2012, the Company owed its officers a total of $2,960. The money was loaned to the company to cover certain operating expenses. In addition, a relative of one of the Company’s officers is owed $150 and a shareholder is owed $290, for funds advanced to cover certain expenses. Amounts are due on demand and have no stated rate of interest.

On February 7, 2012, the Company authorized the issuance of 50,000 common shares to Rachel Boulds, the Company’s CFO for compensation of services. The shares were issued at $0.51 based on the value of the common stock on the date of authorization. As of June 30, 2012 the shares had not yet been issued and as such have been booked as a stock payable.

**NOTE 8: FINANICIAL STATEMENT RESTATEMENT**

As a result of the Company engaging a third party to perform a valuation analysis of its derivative instruments in the second quarter it became necessary to restate the financial statements for the year ended September 30, 2011. The results of that restatement are as follows.

1)

Increase of $2 due to rounding/balancing of financials.

2)

All changes are a result of the independent valuation analysis of the Company’s derivative instruments.

3)

It was subsequently determined that this receivable was deemed uncollectable as of September 30, 2011.

4)

Change due to restatement of the Year Ended September 30, 2011.

 

 

**September 30, 2011**

 

 

**As Reported**

 

**Adjustment**

 

 

**As Restated**

   Cash

$

        5,222 

$

-   

 

$

          5,222 

Website property, net of accumulated amortization

 

                 350,000 

 

                        -   

 

 

                 350,000 

         Total Assets

$

355,222

$

-   

 

$

 355,222

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

   Accounts payable

$

     20,228

$

-   

  

$

           20,228

   Accounts payable, related party

 

23,270

 

-

 

 

23,270

   Accrued expenses

 

8,822

 

2

1

 

8,824

   Accrued officer compensation

 

218,450

 

-

 

 

218,450

   Advances from officers

 

7,837

 

-

 

 

7,837

   Due to a related party

 

790

 

-

 

 

790

Derivative liability

 

-

 

116,504

2

 

116,504

   Convertible debentures , net of discount

 

88,225

 

220,777

2

 

309,002

Total Liabilities

 

367,622

 

337,283

 

 

704,905

 

 

 

 

 

 

 

 

Stockholders' Equity (Deficit)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock , $.0001 par value, 485,000,000 shares authorized, 24,570,991 and 24,120,991  issued and outstanding, respectively

 

2,412

 

-

 

 

2,412

    Additional paid in capital

 

3,191,660

 

(365,000)

2

 

2,826,660

    Common stock subscribed

 

779,000

 

-

 

 

779,000

Stock subscription receivable

 

(70,365)

 

70,365

3

 

-

17

 

Deficit accumulated during development stage

 

 (3,915,107)

 

(42,648)

4

 

 (3,957,755)

          Total Stockholders' Equity (Deficit)

 

 (12,400)

 

(337,283)

 

 

(349,683) 

          Total Liabilities and Stockholders' Equity (Deficit)

$

    355,222 

$

-

 

$

        355,222 

 

 

 

 

 

 

 

 

 

 

**For the Year Ended September 30, 2011**

 

 

**As Reported**

 

 

**Adjustment**

 

 

**As Restated**

Investment income

$

-

 

$

-

 

$

-

 

 

 

 

 

 

 

 

 

Total income

 

-

 

 

-

 

 

-

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

  Officer compensation

 

810,100

 

 

-

 

 

810,100

  Professional fees

 

429,657

 

 

-

 

 

429,657

  Director fees

 

38,000

 

 

-

 

 

38,000

 Bad debt expense

 

-

 

 

70,365

3

 

70,365

 General and administrative

 

30,698

 

 

-

 

 

30,698

    Total operating expenses

 

1,308,455

 

 

   70,365

 

 

1,378,820

Net loss from operations

$

(1,308,455)

 

$

(70,365)

 

$

(1,378,820)

 

 

 

 

 

 

 

 

 

Other income and (expense)

 

 

 

 

 

 

 

 

   Gain on derivative liability

 

-

 

 

(50,990)

2

 

(50,990)

   Interest expense

 

(97,047)

 

 

78,707

2

 

(18,340)

Total other expense 

 

(97,047)

 

 

27,717

 

 

(69,330)

Net loss

$

(1,405,502)

 

$

(42,648)

4

$

(1,448,150)

 

 

 

 

 

 

 

 

 

Loss per share

 

 

 

 

 

 

 

 

  Basic and diluted

$

(0.06)

 

$

-

 

$

(0.06)

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding basic and  diluted

 

23,344,668

 

 

-

 

 

23,344,668

 

 

18

 

 

**December 31, 2011**

 

 

**As Reported**

 

 

**Adjustment**

 

 

**As Restated**

   Cash

$

                 -

 

$

                    -   

 

**$**

                     -

Website property, net of accumulated amortization

 

350,000

 

 

                        -   

 

 

350,000

         Total Assets

$

     350,000

 

$

-   

 

**$**

         350,000

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

   Cash overdraft

$

                2

 

$

                   -   

 

 

                2

   Accounts payable

 

15,080

 

 

-

 

 

15,080

   Accounts payable, related party

 

23,270

 

 

-

 

 

23,270

   Accrued expenses

 

23,156

 

 

123

 

 

23,279

   Accrued officer compensation

 

260,045

 

 

-

 

 

260,045

   Advances from officers

 

7,922

 

 

-

 

 

7,922

   Due to a related party

 

790

 

 

-

 

 

790

  Derivative liability

 

-

 

 

           123,895

2

 

123,895

   Convertible debentures , net of discount

 

187,762

 

 

137,014

2

 

324,776

Total Liabilities

 

     518,027

 

 

261,032

 

 

779,059

 

 

 

 

 

 

 

 

 

Stockholders' Equity (Deficit)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock , $.0001 par value, 485,000,000 shares authorized, 24,570,991 and 24,120,991  issued and outstanding, respectively

 

2,412

 

 

-

 

 

2,412

    Additional paid in capital

 

3,249,660

 

 

(365,000)

 

 

2,884,660

    Common stock subscribed

 

779,000

 

 

-

 

 

779,000

Deficit accumulated during development stage

 

(4,199,099)

 

 

103,968

 

 

 (4,095,131)

          Total Stockholders' Equity (Deficit)

 

(168,027)

 

 

(261,032)

 

 

(429,059)

          Total Liabilities and Stockholders' Equity (Deficit)

$

    350,000

 

$

-

 

$

         350,000

 

 

 

 

 

 

 

 

 

 

 

19

 

 

 

**For the Three Months Ended December 31, 2011**

 

 

**As Reported**

 

 

**Adjustment**

 

 

**As Restated**

Investment income

$

-

 

$

-

 

$

 

 

 

 

 

 

 

 

 

 

Total income

 

-

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 Officer compensation

 

75,000

 

 

-

 

 

75,000

  Professional fees

 

26,825

 

 

-

 

 

26,825

 Bad debt expense

 

70,365 

 

 

(70,365)

3

 

-

 General and administrative

 

2,431

 

 

-

 

 

2,431

    Total operating expenses

 

174,621

 

 

70,365

 

 

104,256

Net loss from operations

$

(174,621)

 

$

70,365

 

$

(104,256)

 

 

 

 

 

 

 

 

 

Other income and (expense)

 

 

 

 

 

 

 

 

  Loss on derivative liability

 

-

 

 

(7,391)

2

 

(7,391)

   Interest expense

 

(109,371)

 

 

83,642

2

 

(25,729)

Total other expense 

 

(109,371)

 

 

76,251

 

 

(33,120)

Net loss

$

(283,992)

 

$

146,616

 

 

(137,376)

 

 

 

 

 

 

 

 

 

**NOTE 9: GOING CONCERN**

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company has generated minimal revenue during the period September 14, 2007 (inception) through June 30, 2012, has an accumulated deficit of $4,569,919 and has funded its operations primarily through the issuance of debt and equity. This matter raises substantial doubt about the Company's ability to continue as a going concern.

These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Accordingly, the Company’s ability to accomplish its business strategy and to ultimately achieve profitable operations is dependent upon its ability to obtain additional debt or equity financing. Management plans to take the following steps that it believes will be sufficient to provide the Company with the ability to continue in existence.

Management intends to raise financing through private equity financing or other means and interests that it deems necessary. The Company, as described above, is in the business of investing in operations of other companies. There can be no assurance that the Company will be successful in its endeavor.    

**NOTE 10: SUBSEQUENT EVENTS**

 

The Company has performed an evaluation of subsequent events in accordance with ASC Topic 855.  The Company is not aware of any subsequent events which would require recognition or disclosure in the financial statements except as follows.

Subsequent to the quarter ended June 30, 2012, the Company authorized the issuance of 2,015,385 common shares in conversion of $65,500 of the Junior Capital debentures. The shares were issued at $0.0325, which was equal to fifty percent (50%) of the average of the closing bid price of common stock during the five trading days immediately preceding the conversion date.

On July 1, 2012, the Company’s $350,000 convertible debenture with Junior Capital Inc. was in default for nonpayment. As of the date of default the Company owed $250,000 plus accrued interest on the debenture.

On July 16, 2012, the Company entered into a Sales Agent Agreement with 3KG, LLC. The Company is to serve as Executive Producer and Sales Agent for the motion picture being made. The agreement has a term of fifteen years and includes a Producer fee, funds to cover expenses and commissions from gross proceeds of the film. 

On July 16, 2012, the Company authorized the issuance of 5,000 common shares for services.

20

 

**Item 2:  Management’s Discussion and Analysis or Plan of Operation**

The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and related notes to the financial statements included elsewhere in this filing as well as with Management’s Discussion and Analysis or Plan of Operations contained in the Company’s Report on Form 10-K, as amended, for the period ended September 30, 2011, filed with the Securities and Exchange Commission.  

**Forward Looking Statements**

This discussion and the accompanying financial statements (including the notes thereto) may contain “forward-looking statements” that relate to future events or our future financial performance, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward looking statements are based on the Company’s current expectations and beliefs concerning future developments and their potential effects on the Company. These statements involve known and unknown risks, uncertainties and other factors that may cause our 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 these forward-looking statements. These risks and other factors include, among others, those listed under “Risk Factors” in Part II Item 1a. and those included elsewhere in this filing.  For a more detailed discussion of risks and uncertainties, see the Company’s public filings made with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update any forward-looking statements.

**Plan of Operations**

Independent Film Development Corporation’s (IFDC’s) overall plan of operations is to acquire and develop independent films for production, sales and distribution, with a goal toward significant partnerships with mini-major and the major film studios, such as Lionsgate and Sony, while simultaneously emulating those companies’ recipes for success.   

IFDC’s mission is to develop, produce and acquire films with high profit margins and built in “profit” safety nets. We will seek to leverage the combined talents of an experienced management/producing and sales/distribution team to develop, produce and acquire films for sale and distribution, IFDC will look to incorporate and acquire additional entertainment businesses that compliment and assist us to increase the value of our overall securities, and enhance shareholder value.

 

IFDC’s plan of operations has three main components of film production and finance; co-financing, acquiring product in the development stage, and its own film production.  This, coupled with film distribution, makes up the revenue model for the Company.

**HollywoodIndy.Com:** HollywoodIndy.com is an Internet based entertainment company specializing in social networking and resourcing for independent film and television development, production and distribution.  The social networking component of HollywoodIndy, which will invite any person to become a member and create their own profile, will be unique in that its main purpose will be to connect people with an interest in film and television production.  HollywoodIndy’s interface will have active pages with video, graphics, interactive resumes, and links to other areas of the site as well as other member’s pages.  We are designing this aspect of the site to monetize the site through paid upgrades, which will allow upgraded members access to our jobs board and production /distribution resources.  Our resource database, which will be fed by working professionals in the industry, will offer immediate access to upgraded members to resources in film and television development, screen writing, casting, budgeting, scheduling, financing and tax incentives, as well as completion bonds, locations, personnel, film equipment, support services, sound and film lab, digital intermediate services, delivery services, and full access to the Company’s film distribution services.  Our goal in distribution is to evaluate and obtain distribution rights to independent films our management team feels will be the most profitable, while offering online distribution to a full spectrum of segmented video and short films to full length features, with an aim to emulating Netflix for independent film distribution, and monetizing the YouTube phenomenon.

**Indiebackers.com:** During the third quarter of fiscal year 2012 the Company hired a third party to develop Indiebackers.com (IndieBacker). The website is a donation based crowdfunding platform for Indie producers. This platform allows the producer to embark on a project while at the same time obtaining the much needed development money for such a project. IndieBacker is a crowdfunding solution for early stage projects allowing filmmakers to list their new projects on the site for budgets anywhere from $1,000 to $500,000. IndieBacker uses a donation base platform allowing producers to generate a following while raising capital. The platform will allow tracked users to donate as little as $1 up to as much money as they would like to any given project. The model allows early stage projects the opportunity to raise the much needed seed capital in the form of donation based sales. IndieBacker solves many problems in getting an early stage project off the ground. Not only will it provide the necessary early capital but also gives an opportunity to negotiate from a position of strength if it can demonstrate a broad following with capital, talent and production services. Plans call for the brand to accept 2,500 projects by the end of 2013 with estimated budgets of $25,000. The revenue model is gross margin of approximately 6% of funds raised for all completed projects. Additional plans call for the brand to also incorporate an equity based platform once croudfunding laws are fully passed in early 2013. The initial cost of the website of $500,000 has been capitalized due to the future economic benefits it will bring to the company. The cost will be amortized over five years beginning May 29, 2012, the date the website was launched to the public. On May 29, 2012 the company executed a convertible debenture for $500,000 (Note 5) as payment for the development of the website.

21

**Co-Financing**

Co-financing is where a company such as IFDC goes out looking for films that are already financed at 50% or more. This can afford IFDC an opportunity to come in with the remaining funds and as co-financier/executive producer.

The average co-financing deal usually requires a project that, subject to our review, has:

• A good script

• A solid Director

• Actors of some prominence

The film would also be required to have some type of distribution already in place from foreign, domestic or both.  If the project meets with our project requirements we would partner with the production and bring in the remaining cash.

For our investment we would expect an average of 110% to 130% return. Once IFDC and all other investors have recouped, then all additional income from the film would be split on a percentage basis based on the amount of the individual investor’s original investment.  In addition, IFDC would receive a presentation credit in the opening titles and normally one or two executive producer credits. This not only will build IFDC’s brand name nationally and internationally it also helps us gain the respect of our peers in the industry. IFDC will constantly be on the lookout for these types of co-financing projects.

**Acquire and Develop Original Product in Development Stage**

With this strategy we will seek projects at an early stage, usually with a finished script and possibly a director, producer or actor attached, or some amount of equity, usually in the range of 10% to 25%.

 

The requirements are very similar to all of our production strategies:

1.     Well written salable script with a genre that is on the wave of coming into popularity

2.     Salable actors attached or interested

3.     Director of some prominence (actor directors for example)

4.     Projects that have some hard money attached

5.     Projects that have some form of distribution (rarely found at this stage)

6.     Projects that have some studio interest (rarely found at this stage)

 

IFDC will seek out projects that have many of the points listed above, then “option” the projects for a period of one to three years for as little money as possible, sometimes without any cash up front at all.

IFDC will then set about developing the project to get it to the point of funding. This will include script re-writes, and attaching actors. We will also use any director or producer already attached to the film to help with the work thus enabling IFDC to have several projects developing at once while not straining our resources; we have the individual filmmakers do the lion’s share of the work while we supervise and advise.

 

If the project gets to a point where we think it is strong enough, we will attempt to procure financing through traditional film financing sources such as foreign and domestic deals. If we think the individual project is strong enough, we can try to raise a portion or all of the money ourselves through private investors.

 

If we are unsuccessful at any stage of the game we can stop devoting resources to the project and allow the option to simply expire.

 

22

With this strategy IFDC plans to harvest the best and strongest projects to proceed forward into production.  The advantages to acquisitions at the development stage are: the ability to guide the development process along, gearing it for success, steering the important decisions such as cast and director in a direction that will help make a more successful and profitable film. In addition we will be able to gauge the viability of the project with a small investment and will not risk big dollars, resources, and time before we can establish if the film is marketable or not.

 

The negatives are that we will spend small amounts of cash developing projects, some of which we will not bring to fruition, and so those projects will be a loss, but the films we do move forward on will be much more assured of financial success.

**Film Distribution**

IFDC’s plan of operations includes developing a distribution arm with the help of its management.

Each year, independent filmmakers produce over 15,000 films while only a small fraction are able to secure distribution for their product.  At the same time, the proliferation of theatrical and home entertainment outlets, including DVD/video (e.g., Netflix, Fox Video, Sony Video, Wal-Mart, Blockbuster), pay-per-view/video-on-demand (e.g., IN DEMAND), pay & free cable/satellite (e.g., HBO, Showtime), free television, new media (internet, pod-casting, web series, electronic delivery systems) and international markets, has resulted in an ever-increasing demand for filmed entertainment content around the globe.  * However, the market connecting the filmmakers and the buyers of content is controlled by a few players in the industry.*

The majority of the film distribution business will operate in a small, low risk, and profitable segment of the entertainment industry that connects the independent filmmakers and distribution outlets.  The company’s principal activities will consist of the following three complementary areas (in order of emphasis):

**Sales agent** – The Company licenses partially or fully completed films made by independent filmmakers to entertainment distributions companies such as those listed above.  The company recoups expenses and earns commissions from the first dollar collected under the licensing deals it generates.   Unlike film producers who make large investments in the production of their films (with little guarantee of return), the company is able to generate its revenue from these films with minimal investment and risk.

**Negative pickups** – The Company produces a film on behalf of a studio.  The company earns the difference between the predetermined budget and the actual cost of making the film, as well as a producer’s fee, typically generating between 5% - 10% of the total budget.

**Film production** – The Company identifies, produces, and secures distribution of a film.  The Company owns the film in perpetuity and directly participates in all revenue generated by the film.  The company will only produce films when distribution is secured in advance by its sales agent arm.

There are few significant players in the small independent film sales agent business. The more prominent companies in this sector now focus on larger independent films.  Companies such as New Line Cinema, LionsGate, and The Weinstein Company, all began selling and distributing low-budget independent films before being acquired by major studios or going public.  As these companies have grown, their business has progressed towards larger budget films, creating a large opportunity for The Company with smaller budgeted films.  In addition, investors such as Mark Cuban and Paul Allen are investing millions of dollars in entertainment production and distribution companies, such as Lions Gate, in order to secure content for their media outlets (HDNet and Charter Communications respectively).

**Distribution Products and Services**

The majority of the company’s distribution business will focus on the licensing of independently produced films to domestic and international distributors (as “sales agent”).  In addition, The company will produce small budget movies for major and sub-major studios (“negative pickups”) as well as produce movies that the Company will own (“internal productions”) in perpetuity.  All facets of The Company’s business are low-risk while the sales agent and internal production are highly complementary.

**Sales Agent**

The overwhelming majority of independent films are made without adequate financing and/or distribution arrangements.  Often independent filmmakers run out of money during the finishing stages of a film.  In some cases, films get “stuck” in post production due to lack of payment to suppliers or become foreclosed films held by financial institutions and/or post production houses. Those that have managed to complete their films then have the daunting undertaking of marketing the film to distributors.

23

 

The company’s primary focus will be to act as a sales agent for independent film producers by providing the sales and marketing services for films.  The company acquires the rights to license these films (which are either fully or partially completed) from the filmmakers for little or no cash outlay.  The company then licenses the films to distributors in the various outlets (i.e., theatrical, home video, cable, TV, international).  The process usually takes between 1 – 12 months beginning when the sales agreement is effected with the filmmaker.*  For a minimum cash outlay, The Company participates in the revenue streams of films that cost hundreds of thousands to millions of dollars to produce.   In addition, The Company earns commissions from the first dollar received and recoups its upfront expense before the producer receives any proceeds.*

The company’s principals have the relationships and credibility with independent filmmakers, production suppliers and the distribution companies.    Further, the production experience of the company’s principals enables them to enable the completion of any unfinished films quickly and efficiently.

**Acquisitions and Marketing**

The company will identify films through its network of independent filmmakers as well as industry festivals and trade shows including Sundance, Tribeca, Cannes, and Toronto.   

The company will acquire the rights to license (as sales agent) films for a period of 7-25 years in return for a commission ranging from 10-30% of the licensing fees paid by the distributors.  In some cases, the Company will incur minimal upfront costs including: advances to the filmmaker, costs for finalizing the film, and marketing costs.  Upon signing a sales agent agreement, the Company and the filmmakers agree on the “market attendance fees”, trailer/artwork and other marketing costs.  These costs, along with any advances to the filmmaker and/or costs to complete the film, are recouped by the Company after its commission, but before any proceeds are paid to the filmmaker.  The company will incur costs of approximately $40,000 to $150,000 per film to prepare marketing materials including the production of a trailer and artwork.

The company will market these films to distributors in all domestic and international outlets by utilizing its relationships with distributors for various markets as well as through industry shows and conferences (e.g., AFM, MIPCOM, NATPE).

***Negative Pickups***

Studios often hire film production companies to produce lower budgeted films.  In these situations, known as “negative pickups”, the studio and the production company agree on a budget for the film and the production company keeps the difference of the budget and the actual cost of producing the film, as well as a producer’s fee, typically generating between 5% - 10% of the total budget.

The company’s principals have profitably produced low budget films.  The company’s ability to produce quality films at or under budget stems from low overhead and excellent relationships with industry suppliers.  As the company does not receive funds (other than the producer’s fee which is paid over the course of production) from the studio until after the film is delivered, a credit facility would be arranged to cover the cost of producing the film.  

***Internal Production***

The financing and production of movies is often the riskiest and most rewarding part of the entertainment business. The company plans to mitigate the inherent risks by only producing films that have secured distribution in some or all markets.  In addition, the Company will act as the sales agent for the films it produces.  

Initially, the Company will produce quality, moderately budgeted feature-length motion pictures, from a variety of genres, for worldwide distribution, which it will generally develop internally.  Said films will have a majority of the production budget pre-sold prior to embarking on production.  The Company will look to have approximately 75% of any individual budget covered by license fees to mitigate the downside risk of production.

 *Late-Night Banner*

Under a Late Night banner, the Company will produce feature-length motion pictures, generally budgeted at approximately $200,000 each (inclusive of corporate overhead and distribution expenses), with erotic R-Rated content that is produced to be distributed worldwide to cable television channels (such as HBO, Showtime, Cinemax and Playboy TV.) worldwide during “late-night” time slots, and to and through the home entertainment distribution window (such as video and DVD). Depending on the products' genre and the audience the company wants to reach, this will determine which strategy needs to be implemented. IFDC has three strategies depending on the project:

24

 

1. Direct to Video (Home Video), Domestic and Foreign

2. Limited Theatrical, then Video, Domestic and Foreign

3. World Wide Theatrical then Video, Domestic and Foreign

All of these involve the company making a licensing agreement with a distribution company. We at IFDC strive to make strategic relationships with the best companies here in the United States and internationally. We will do this by fostering relationships at various festivals and film markets like MIPTV, MIFED, AFM and Cannes Market.

*Direct to Video* (Home Video) - this will be used to create equity by selling the licenses for our current back catalogue for home video market.

We will find a DVD label that is compatible with our vision for this title. They will make a good transfer and only use the best quality for production in the creation of the DVD.

The DVD label will do a cross-market promotion of IFDC and the title, via press releases, PR and various other media on the release of the DVD, and then reviews after the title is released.

IFDC's name and branding will be shared with the DVD Company on the DVD packaging.  IFDC will negotiate a good licensing fee with profits paid out every three months.

Direct to video will also be a possible route for some of IFDC’s smaller budget films that don’t meet to the standards of theatrical but are made with a small enough budget have a smaller overhead and so would be fine with a direct to video release.

*Limited Theatrical*

• 3 to 4 months, of festival support to garner hype and awards in various film festivals, both domestically and internationally

• We will then carry this hype and PR on to one of the major film markets where we will acquire a distribution deal with a sales company or a studio (if a deal is not already in place). In the deal we will attempt to procure a limited theatrical release based on the success and exposure of the film at the markets and festivals.

• After the limited theatrical run we will sell the rights to both foreign and domestic for DVD rights, via the direct-to-video plan mentioned in our first strategy.

*Full Theatrical*

This is where we would sell all rights to a studio or mini major, they in turn would handle all distribution and advertisement for both theatrical and home video markets.

**Results of Operations – Three Months Ended June 30, 2012 as Compared to the Three Months Ended June 30, 2011**

For the three months ended June 30, 2012 officer compensation was $40,275 as compared to $21,000 for the same period in the prior year. In the prior year the Company had no formal employment contracts in place. In the current period the Company now has employment agreements in place for its officers resulting in a more consistent expense going forward

For the three months ended June 30, 2012 professional fees increased $88,068 to $90,118 compared to $2,050 for the three months ended June 30, 2011. The increase is mainly attributed to expenses for public relations as the Company expands its efforts to market itself and its website properties. 

Net loss increased by $47,251 to $285,611 from $238,360 for the three months ended June 30, 2012 as compared to the three months ended June 30, 2011.  The increase can be largely attributed to an increase in interest expense.

 

25

**Results of Operations – Nine Months Ended June 30, 2012 as Compared to the Nine Months Ended June 30, 2011**

For the nine months ended June 30, 2012 officer compensation was $191,251 as compared to $884,500 for the same period in the prior year. In the prior year the Company had no formal employment contracts in place but did authorize the issuance of common shares, valued at $646,000, to its officers. In the current period the Company now has employment agreements in place for its officers resulting in a more consistent expense going forward. In addition to the regular compensation during the current period the Company authorized the issuance of shares for compensation valued at $25,500.

For the nine months ended June 30, 2012 professional fees increased $47,304 to $138,754 compared to $91,450 for the nine months ended June 30, 2011. Professional fees mainly consist of accounting, auditing and public relations. The increase is mainly attributed to expenses for public relations as the Company expands its efforts to market itself and its website properties. 

Net loss decreased by $427,975 to $612,164 from $1,040,139 for the nine months ended June 30, 2012 as compared to the nine months ended June 30, 2011.  The decrease can be largely attributed to a decrease in the issuance of stock for services.

For the nine months ended June 30, 2012 the Company incurred $199,161 of interest expense compared to $0 for the nine months ended June 30, 2011. In addition, the Company also recorded a $33,524 loss on derivative liability.

 ***Cash Flow***

During the nine months ended June 30, 2012, the Company used $254,556 of cash for operating activities and received net proceeds from financing activities of $249,334.

**Critical Accounting Estimates and Policies**

The discussion and analysis of our financial condition and plan of operations is based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates including, among others, those affecting revenue, the allowance for doubtful accounts, the salability of inventory and the useful lives of tangible and intangible assets. The discussion below is intended as a brief discussion of some of the judgments and uncertainties that can impact the application of these policies and the specific dollar amounts reported on our financial statements. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form our basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions, or if management made different judgments.

**Item 3.  Quantitative and Qualitative Disclosures about Market Risk**

The Company’s business activities contain elements of risk. The Company considers a principal type of market risk to be a valuation risk. All assets will be valued at fair value as determined in good faith by or under the direction of the Board of Directors and management.  Market prices of common equity securities in general, are subject to fluctuations which could cause the amount to be realized upon sale to differ significantly from the current reported value. The fluctuations may result from perceived changes in the underlying economic characteristics of the Company’s assets, general market conditions and supply and demand.
**Item 4: Controls and Procedures**

Evaluation of disclosure controls and procedures

Under the supervision and with the participation of our management, including our President, Chief Executive Officer/Chief Financial Officer (the “Certifying Officer”) we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”). Based upon that evaluation, the Certifying Officers concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were not effective. We identified material weaknesses discussed below in the managements report on internal control over financial reporting.

26

 

Report of Management on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

(i)    Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

(ii)  Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

(iii)   Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement to the Company’s annual or interim financial statements will not be prevented or detected.

  

 

In the course of management’s assessment, we have identified the following material weaknesses in internal control over financial reporting:

●  Segregation of Duties– As a result of limited resources, we did not maintain proper segregation of incompatible duties. Namely the lack of an audit committee, an understaffed financial and accounting function, and the need for additional personnel to prepare and analyze financial information in a timely manner and to allow review and on-going monitoring and enhancement of our controls. The effect of the lack of segregation of duties potentially affects multiple processes and procedures.

●   Maintenance of Current Accounting Records – This weakness specifically affects the payments and purchase cycle and therefore we failed to maintain effective internal controls over the completeness and cut off of accounts payable, expenses and other capital transactions.

We are in the continuous process of improving our internal control over financial reporting in an effort to eliminate these material weaknesses through improved supervision and training of our staff, but additional effort is needed to fully remedy these deficiencies. Management has engaged an accountant as a consultant to assist with the financial reporting process in an effort to mitigate some of the identified weaknesses.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

 

Changes in Internal Control over Financial Reporting

There have been no changes in internal control over financial reporting since the last fiscal quarter of calendar year 2011, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

27

 

**PART II – OTHER INFORMATION
**Item 1. Legal Proceedings**

We are not a party to any material pending legal proceedings and, to the best of our knowledge, no such action by or against the Company has been threatened, except that, on or about September 1, 2011, the company and its Chief Executive Officer and Chief Compliance Officer filed a complaint in federal court, Central District of California, Case No. CV-11-07233 DMG (MRWx), to recover 6,500,000 shares of common stock transferred to Consultants Marc Cifelli and Arriva Capital, LLC on the grounds of fraud and failure of consideration.  Both defendants were served on October 4, 2011, their defaults have been entered, and the company is in the process of obtaining default judgments.
**Item 1A Risk Factors**

We are subject to various risks which may materially harm our business, financial condition and results of operations. You should carefully consider the risks and uncertainties described below and the other information in this filing before deciding to purchase our common stock. If any of these risks or uncertainties actually occurs, our business, financial condition or operating results could be materially harmed. In that case, the trading price of our common stock could decline and you could lose all or part of your investment.

***We are a relatively young company with a limited operating history***

 

Since we are a young company, it is difficult to evaluate our business and prospects. At this stage of our business operations, even with our good faith efforts, potential investors have a high probability of losing their investment. Our future operating results will depend on many factors, including the ability to generate sustained and increased demand and acceptance of our products, the level of our competition, and our ability to attract and maintain key management and employees. While management believes their estimates of projected occurrences and events are within the timetable of their business plan, there can be no guarantees or assurances that the results anticipated will occur.

***We expect to incur net losses in future quarters.***

 

If we do not achieve profitability, our business may not grow or operate. We may not achieve sufficient revenues or profitability in any future period. We will need to generate revenues from the sales of our products or take steps to reduce operating costs to achieve and maintain profitability. Even if we are able to generate revenues, we may experience price competition that will lower our gross margins and our profitability. If we do achieve profitability, we cannot be certain that we can sustain or increase profitability on a quarterly or annual basis.

***We will require additional funds to operate in accordance with our business plan.***

 

We may not be able to obtain additional funds that we may require. We do not presently have adequate cash from operations or financing activities to meet our short or long-term needs.  If unanticipated expenses, problems, and unforeseen business difficulties occur, which result in material delays, we will not be able to operate within our budget. If we do not achieve our internally projected sales revenues and earnings, we will not be able to operate within our budget. If we do not operate within our budget, we will require additional funds to continue our business.

If we are unsuccessful in obtaining those funds, we cannot assure you of our ability to generate positive returns to the Company. Further, we may not be able to obtain the additional funds that we require on terms acceptable to us, if at all. We do not currently have any established third-party bank credit arrangements. If the additional funds that we may require are not available to us, we may be required to curtail significantly or to eliminate some or all of our development, manufacturing, or sales and marketing programs.

 

We may seek to obtain them primarily through equity or debt financings. Such additional financing, if available on terms and schedules acceptable to us, if available at all, could result in dilution to our current stockholders and to you. We may also attempt to obtain funds through arrangement with corporate partners or others. Those types of arrangements may require us to relinquish certain rights to our intellectual property or resulting products.

W***e are highly dependent on Jeff Ritchie, our CEO. The loss of Mr. Ritchie, whose knowledge, leadership, and technical expertise upon which we rely, would harm our ability to execute our business plan.***

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We are largely dependent on Jeff Ritchie, our CEO, for specific proprietary technical knowledge. Our ability to successfully market and distribute our products may be at risk from an unanticipated accident, injury, illness, incapacitation, or death of Mr. Ritchie. Upon such occurrence, unforeseen expenses, delays, losses and/or difficulties may be encountered.  Our success may also depend on our ability to attract and retain other qualified management and sales and marketing personnel. We compete for such persons with other companies and other organizations, some of which have substantially greater capital resources than we do. We cannot give you any assurance that we will be successful in recruiting or retaining personnel of the requisite caliber or in adequate numbers to enable us to conduct our business.

***If  capital  is  not  available  to  us to expand our business operations,  we  will  not  be able to pursue our business plan.***

We will require substantial additional capital  to  acquire additional properties and to participate in the development of those properties.  Cash flows from operations, to the extent available, will be used to fund these expenditures.  We intend to seek additional capital from loans from current shareholders and from public and private equity offerings.  Our  ability  to  access  capital  will  depend  on  its  success  in participating  in  properties that are successful in exploring for and producing oil  and gas at profitable prices.  It will also be dependent upon the status of the  capital  markets  at  the  time  such capital is sought.  Should sufficient capital not be available, the development of our business plan could be delayed and, accordingly, the implementation of the USD Energy's business strategy would be adversely affected. In such event it would not be likely that investors would obtain a profitable return on  their investments or a return of their investments.

***Nevada Law and Our Charter May Inhibit a Takeover of Our Company That Stockholders May Consider Favorable***

Provisions of Nevada law, such as its business combination statute, may have the effect of delaying, deferring or preventing a change in control of our company. As a result, these provisions could limit the price some investors might be willing to pay in the future for shares of our common stock.

***Our Officers and Directors Have the Ability to Exercise Significant Influence Over Matters Submitted for Stockholder Approval and Their Interests May Differ From Other Stockholders***

Our executive officers and directors, whether acting alone or together, may have significant influence in determining the outcome of any corporate transaction or other matter submitted to our stockholders for approval, including mergers, acquisitions, consolidations and the sale of all or substantially all of our assets, and also the power to prevent or cause a change in control. The interests of these executive officers and directors may differ from the interests of the other stockholders.

 ***Our Common Stock Has a Limited Market***

Our common stock currently trades on the over-the –counter bulletin board, but trading volume has been limited and our stock price volatile.   Our common stock has experienced, and is likely to experience in the future, significant price and volume fluctuations which could adversely affect the market price of our common stock without regard to our operating performance. In addition, we believe that factors such as quarterly fluctuations in our financial results and changes in the overall economy or the condition of the financial markets could cause the price of our common stock to fluctuate substantially. Substantial fluctuations in our stock price could significantly reduce the price of our stock.

***The Penny Stock Rules  cover our stock, which may make it difficult for a broker to sell investors shares.  This may make our stock less marketable, and liquid, and result in a lower market price.***

 Our common stock is a penny stock, which means that SEC rules require broker dealers who make transactions in the stock to comply with additional suitability assessments and disclosures than they would in stock that were not penny stocks, as follows:

Prior to the transaction, to approve the person's account for transactions in penny stocks by obtaining information from the person regarding his or her financial situation, investment experience and objectives, to reasonably determine based on that information that transactions in penny stocks are suitable for the person, and that the person has sufficient knowledge and experience in financial matters that the person or his or her independent advisor reasonably may be expected to be capable of evaluating the risks of transactions in penny stocks. In addition, the broker or dealer must deliver to the person a written statement setting forth the basis for the determination and advising in highlighted format that it is unlawful for the broker or dealer to effect a transaction in a penny stock unless the broker or dealer has received, prior to the transaction, a written agreement from the person. Further, the broker or dealer must receive a manually signed and dated written agreement from the person in order to effectuate any transactions is a penny stock.

29

 

Prior to the transaction, the broker or dealer must disclose to the customer the inside bid quotation for the penny stock and, if there is no inside bid quotation or inside offer quotation, he or she must disclose the offer price for the security transacted for a customer on a principal basis unless exempt from doing so under the rules.

Prior to the transaction, the broker or dealer must disclose the aggregate amount of compensation received or to be received by the broker or dealer in connection with the transaction, and the aggregate amount of cash compensation received or to be received by any associated person of the broker dealer, other than a person whose function in solely clerical or ministerial.

The broker or dealer, who has affected sales of penny stock to a customer, unless exempted by the rules, is required to send to the customer a written statement containing the identity and number of shares or units of each such security and the estimated market value of the security. Imposing these reporting and disclosure requirements on a broker or dealer make it unlawful for the broker or dealer to effect transactions in penny stocks on behalf of customers. Brokers or dealers may be discouraged from dealing in penny stocks, due to the additional time, responsibility involved, and, as a result, this may have a deleterious effect on the market for the Company 's stock.
**Item 2. Unregistered Sales and Issuances of Equity Securities and Use of Proceeds**

The following securities were sold and/or issued by the registrant from inception (September 17, 2007) to September 30, 2011, that were not registered under the Securities Act:

On September 24, 2007, 125 shares of common stock were issued to Kenneth Eade, pursuant to Section 4(2) of the Securities Act of 1933, in exchange for $500 cash.

On November 29, 2007, 1,000,000 shares of common stock were issued to officer and director Kenneth Eade, in exchange for preferred stock of Imperia Entertainment, Inc., pursuant to Section 4(2) of the Securities Act of 1933.  

On November 29, 2007, 1,000,000 shares of common stock were issued to officer and director George Ivakhnik, in exchange for preferred stock of Imperia Entertainment, Inc., pursuant to Section 4(2) of the Securities Act of 1933.  

  

On December 30, 2007, 1,245 shares of common stock were issued to Kenneth Eade, pursuant to Section 4(2) of the Securities Act of 1933, in exchange for $4,980 cash.  

On March 31, 2008, 2,691 shares of common stock were issued to Kenneth Eade, pursuant to Section 4(2) of the Securities Act of 1933, in exchange for $10,764 in cash.

On June 30, 2008, 9,439 shares of common stock were issued to Kenneth Eade, pursuant to Section 4(2) of the Securities Act of 1933, in exchange for $1,800 in cash and $35,396 in forgiveness of debt.

On or about July 22, 2008, 34,803 shares of common stock were issued to a non-affiliate investor, pursuant to Section 4(2) of the Securities Act of 1933, and Regulation D, Rule 506, in exchange for a $110,000 subscription, $25,000 of which was paid in cash and $85,000 of which was due on February 26, 2009. During the year ended September 30, 2010 the Company received $22,660 on its subscription receivable. As of December 31, 2011 it was determined that the remaining receivable would not be collected; as a result the company credited the stock subscription receivable account and debited bad debt expense for $62,340.

On August 22, 2008, 525 shares of common stock were issued to non-affiliate investors, pursuant to Section 4(2) of the Securities Act of 1933, and other applicable exemptions.

On August 26, 2008, the entire transaction by which shares of Imperia Entertainment, Inc. were acquired was mutually rescinded and the transaction was accounted for as follows:

On August 28, 2008, 1,250 shares of common stock were issued to non-affiliate investors, pursuant to Section 4(2) of the Securities Act of 1933, and other applicable exemptions.

On September 12, 2008, 125 shares of common stock were issued to non-affiliate investors, pursuant to Section 4(2) of the Securities Act of 1933, and other applicable exemptions.

On September 27, 2008, 717 shares of common stock were issued to non-affiliate investors, pursuant to Section 4(2) of the Securities Act of 1933, and other applicable exemptions.

30

On or about September 30, 2008, 3,573 shares of common stock were issued to affiliate Kenneth Eade, in exchange for cash and forgiveness of debt.

On or about September 30, 2009, 200,000 shares each were issued to Directors Robert Searcy and Patrick Peach, as compensation for two years’ services rendered, pursuant to Section 4(2) of the Securities Act of 1933.

On or about September 30, 2009, 200,000 shares and 500,000 shares were issued to Jeff Ritchie for compensation for two years’ services rendered, and 10 million shares in exchange for business opportunities assigned to the company, pursuant to Section 4(2) of the Securities Act of 1933.

On or about September 30, 2009, 200,000 shares and 500,000 shares were issued to Kenneth Eade for compensation for two years’ services rendered, 500,000 for two years’ legal services rendered, and 10,000,000 shares in exchange for business opportunities assigned to the company, pursuant to Section 4(2) of the Securities Act of 1933.

During the year ended September 30, 2010, the Company issued 626,521 shares of common stock for a total aggregate consideration of $197,051 to 11 investors, in reliance upon Section 4(2) of the Securities Act of 1933.

During the three month period ended March 31, 2011, the Company issued 250,000 common shares for total consideration of $19,975. The shares were issued pursuant to Section 4(2) of the Securities Act of 1933.

On May 10, 2011 the Company issued 300,000 common shares for cash proceeds of $6,975 and a subscription receivable in the amount of $8,025. The shares were issued pursuant to Section 4(2) of the Securities Act of 1933. As of December 31, 2011 it was determined that the remaining receivable would not be collected; as a result the company credited the stock subscription receivable account and debited bad debt expense for $8,025.

On May 9, 2011 the Company issued 6,000 common shares for a lock up agreement in which the stockholder agreed not to transfer any of his shares for an agreed upon time. The Company recorded an expense of $2,280 based on the value of the common stock on the date of issuance. The shares were issued pursuant to Section 4(2) of the Securities Act of 1933.

On or about May 10, 2011, 6,000 shares of common stock were issued to an investor who signed a subscription agreement and paid for the shares in 2009, but the shares were not issued in error.  The shares were issued pursuant to Section 4(2) of the Securities Act of 1933.

On or about June 24, 2011, 550,000 shares of common stock were issued in exchange for consulting services.  The shares were issued pursuant to Section 4(2) of the Securities Act of 1933.

On or about July 1, 2011, a $350,000 convertible debenture was issued to Junior Capital, Inc. The debenture was issued pursuant to Section 4(2) of the Securities Act of 1933.

On or about October 25, 2011, a $20,000 convertible debenture was issued to Junior Capital, Inc. The debenture was issued pursuant to Section 4(2) of the Securities Act of 1933.

On or about October 28, 2011, a $20,000 convertible debenture was issued to Editor Newswire, Inc. The debenture was issued pursuant to Section 4(2) of the Securities Act of 1933.

On or about November 18, 2011, a $25,000 convertible debenture was issued to Editor Newswire, Inc. The debenture was issued pursuant to Section 4(2) of the Securities Act of 1933.

On or about January 11, 2012, a $33,000 convertible debenture was issued to Junior Capital, Inc. The debenture was issued pursuant to Section 4(2) of the Securities Act of 1933.

On or about September 22, 2011, 25,000 common shares were issued to an investor in exchange for $5,000 cash.  The shares were issued pursuant to Section 4(2) of the Securities Act of 1933.

On or about March 15, 2012, a $40,000 convertible debenture was issued to Junior Capital, Inc. The debenture was issued pursuant to Section 4(2) of the Securities Act of 1933.

On March 7, 2012, the Company authorized the issuance of 450,000 common shares in conversion of $22,500 of the Junior Capital debenture dated July 1, 2011. The shares were issued at $0.05 pursuant to the conversion terms of the debenture. The shares were issued pursuant to Section 4(2) of the Securities Act of 1933.

31

 

On March 28, 2012, the Company authorized the issuance of 450,000 common shares in conversion of $22,500 of the Junior Capital debenture dated July 1, 2011. The shares were issued at $0.05 pursuant to the conversion terms of the debenture. As of June 30, 2012 the shares had not yet been issued and as such have been booked as a stock payable. The shares were issued pursuant to Section 4(2) of the Securities Act of 1933.

On February 7, 2012, the Company authorized the issuance of 50,000 common shares to Rachel Boulds, the Company’s CFO, for compensation of services. The shares were issued at $0.51 based on the value of the common stock on the date of authorization. As of June 30, 2012 the shares had not yet been issued and as such have been booked as a stock payable. The shares were issued pursuant to Section 4(2) of the Securities Act of 1933.

On April 20, 2012, the Company authorized the issuance of 450,000 common shares in conversion of $22,500 of the Junior Capital debenture dated July 1, 2011. The shares were issued at $0.05 pursuant to the conversion terms of the debenture

On June 13, 2012, the Company authorized the issuance of 250,000 common shares in conversion of $12,500 of the Junior Capital debenture dated July 1, 2011. The shares were issued at $0.05 pursuant to the conversion terms of the debenture

On June 28, 2012, the Company authorized the issuance of 400,000 common shares in conversion of $20,000 of the Junior Capital debenture dated July 1, 2011. The shares were issued at $0.05 pursuant to the conversion terms of the debenture

All shares were issued in reliance upon Section 4(2) of the Securities Act of 1933. No underwriters were used in any of the above-referenced sales.
**Item 3. Defaults Upon Senior Securities**

None.
**Item 4. Mining Safety Disclosures.**

Not applicable.
**Item 5. Other Information**

None.

**Item 6. Exhibits**

 

 

 

 

 

 

 

 

 

 

**Incorporated by reference**

**Exhibit**

**Exhibit Description**

**Filed herewith**

**Form**

**Period ending**

**Exhibit**

**Filing**

**date**

31.1

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

X

 

 

 

 

31.2

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

X

 

 

 

 

32.1

Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

X

 

 

 

 

 

32

 

 

 

 

 

 

 

 

32.2

Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

X

 

 

 

 

10.1

Convertible Debenture for $350,000 dated November 16, 2011 to Junior Capital, Inc.

 

10-K

9/30/2011

10.1

1/13/2012

10.2

Convertible Debenture for $20,000 dated October 25, 2011 to Junior Capital Inc.

 

10-K

9/30/2011

10.2

1/13/2012

10.3

Convertible Debenture for $20,000 dated October 28, 2011 to Editor Newswire Inc.

 

10-K

9/30/2011

10.3

1/13/2012

10.4

Convertible Debenture for $25,000 dated November 18, 2011 to Editor Newswire Inc.

 

10-K

9/30/2011

10.4

1/13/2012

10.5

Convertible Debenture for $33,000 dated January 11, 2012 to Junior Capital Inc.

 

10-Q

3/31/2012

10.5

5/18//2012

10.6

Convertible Debenture for $40,000 dated March 15, 2012 to Junior Capital Inc.

 

10-Q

 

 

 

10.7

Convertible Debenture for $18,000 dated June 5, 2012 to Junior Capital Inc.

X

10-Q

 

 

 

10.8

Convertible Debenture for $500,000 dated May 29, 2012 to iBacking Corp.

X

10-Q

 

 

 

10.9

Convertible Debenture for $100,000 dated April 9, 2012 Neil Linder

X

10-Q

 

 

 

 

33

**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

 

 

 

Date: August 17, 2012

 

**INDEPENDENT FILM DEVELOPMENT CORPORATION**

BY:      Jeff Ritchie

           /s/ Jeff Ritchie                                         

                Jeff Ritchie

                Chief Executive Officer and Director 

By:        Rachel Boulds

           /s/Rachel Boulds                                    

              Rachel Boulds               

              Chief Financial Officer

 

 

 

 

34

 **