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EX-32.1 - CERTIFICATION - Writ Media Group, Inc.writ_ex321.htm
EX-31.2 - CERTIFICATION - Writ Media Group, Inc.writ_ex312.htm
EX-31.1 - CERTIFICATION - Writ Media Group, Inc.writ_ex311.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended September 30, 2017

 

 

WRIT MEDIA GROUP, INC.

 

a Delaware corporation

 

8200 Wilshire Boulevard,

Suite 200

Beverly Hills, CA 90211

310.461.3739

 

Commission file number: 333-156832

 

I.R.S. Employer I.D. #: 56-2646829

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 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 (§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 o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

 

Large accelerated filer

o

Accelerated filer 

o

Non-accelerated filer 

o

Smaller reporting company

x

(Do not check if a smaller reporting company)

 

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

 

The number of shares outstanding of our Common Stock is 57,410,603 as of November 20, 2017.

 

The number of shares outstanding of our Preferred Stock is 2,290 as of November 20, 2017.

 

There are no other classes of stock.

 

 
 
 
 

FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

WRIT Media Group, Inc.

Consolidated Balance Sheets

(Unaudited)

 

 

 

 

 

 

 

 

 

September 30,

 

 

March 31,

 

 

 

2017

 

 

2017

 

Assets

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$ 47,977

 

 

$ 8,112

 

Prepaid expense and other current assets

 

 

-

 

 

 

615

 

Total current assets

 

 

47,977

 

 

 

8,727

 

 

 

 

 

 

 

 

 

 

Non-current Assets

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

8,354

 

 

 

 

 

Intangible assets, net of accumulated amortization of $315,350 and $0, respectively

 

 

4,515,319

 

 

 

4,760,000

 

Total Assets

 

$ 4,571,650

 

 

$ 4,768,727

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders' Deficit

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$ 84,739

 

 

$ 90,972

 

Accrued liabilities

 

 

348,853

 

 

 

582,243

 

Convertible debts

 

 

229,175

 

 

 

229,175

 

Notes payable

 

 

-

 

 

 

7,500

 

Notes payable - related party

 

 

125,000

 

 

 

125,000

 

Deferred Revenue

 

 

55,395

 

 

 

55,395

 

Total current liabilities

 

 

843,162

 

 

 

1,090,285

 

 

 

 

 

 

 

 

 

 

Total Liabilities

 

 

843,162

 

 

 

1,090,285

 

 

 

 

 

 

 

 

 

 

Shareholders' Equity

 

 

 

 

 

 

 

 

Preferred Stock:

 

 

 

 

 

 

 

 

Series A convertible preferred stock, $.00001 par, 130,000,000 shares authorized, 2,290 and 2,290 shares issued and outstanding, respectively

 

 

-

 

 

 

-

 

Series B convertible preferred stock, $.00001 par, 70,000,000 shares authorized, none issued and outstanding

 

 

-

 

 

 

-

 

Series C convertible preferred stock, $.00001 par, 20,000,000 shares authorized, none issued and outstanding

 

 

-

 

 

 

-

 

Common stock, $0.00001 par, 20,000,000,000 shares authorized, 55,842,130 and 39,857,269 shares issued and outstanding, respectively

 

 

558

 

 

 

398

 

Additional paid in capital

 

 

8,443,148

 

 

 

7,555,477

 

Accumulated deficit

 

 

(4,715,218 )

 

 

(3,877,433 )

Total shareholders' Equity

 

 

3,728,488

 

 

 

3,678,442

 

Total Liabilities and Shareholders' Equity

 

$ 4,571,650

 

 

$ 4,768,727

 

 

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

 

 
2
 
 

 

WRIT Media Group, Inc.

Consolidated Statements of Operations

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For The Three Months Ended

September 30,

 

 

For The Nine Months Ended

September 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

92,263

 

 

 

-

 

 

 

157,248

 

 

 

-

 

Cost of Services Sold

 

 

 

 

 

 

-

 

 

 

 

 

 

 

-

 

Cost of Services Sold

 

 

76,299

 

 

 

-

 

 

 

128,812

 

 

 

-

 

Amortization of intagible assets

 

 

189,210

 

 

 

-

 

 

 

315,350

 

 

 

-

 

Gross Loss

 

 

(173,246 )

 

 

-

 

 

 

(286,914 )

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Costs and Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative

 

 

266,222

 

 

 

211,212

 

 

 

478,237

 

 

 

315,266

 

Total operating expenses

 

 

266,222

 

 

 

211,212

 

 

 

478,237

 

 

 

315,266

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(439,468 )

 

 

(211,212 )

 

 

(765,151 )

 

 

(315,266 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(54,710 )

 

 

(11,812 )

 

 

(72,634 )

 

 

(28,095 )

Net loss

 

 

(494,178 )

 

 

(223,024 )

 

 

(837,785 )

 

 

(343,361 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$ (0.01 )

 

$ (0.01 )

 

$ (0.02 )

 

$ (0.01 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

53,077,339

 

 

 

31,169,449

 

 

 

50,650,137

 

 

 

24,826,666

 

 

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

 

 
3
 
 

 

WRIT Media Group, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

For The Six Months Ended

September 30,

 

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

Cash Flows From Operating Activities

 

 

 

 

 

 

Net loss

 

$ (837,785 )

 

$ (343,361 )

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

1,664

 

 

 

560

 

Shares issued for services

 

 

67,626

 

 

 

46,500

 

Amortization of debt discount

 

 

42,122

 

 

 

4,475

 

Amortization of intangible assets

 

 

315,350

 

 

 

-

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expense and other current assets

 

 

615

 

 

 

-

 

Accounts payable

 

 

48,767

 

 

 

(52,743 )

Accrued liabilities

 

 

127,943

 

 

 

203,620

 

Net cash used in operating activities

 

 

(233,698 )

 

 

(140,949 )

 

 

 

 

 

 

 

 

 

Cash Flows From Investing Activities

 

 

 

 

 

 

 

 

Cash paid for intangible assets

 

 

(70,669 )

 

 

-

 

Cash paid for property and equipment

 

 

(10,018 )

 

 

-

 

Net cash used in investing activities

 

 

(80,687 )

 

 

-

 

 

 

 

 

 

 

 

 

 

Cash Flows From Financing Activities

 

 

 

 

 

 

 

 

Advances from related party

 

 

66,348

 

 

 

52,431

 

Repayment of advances from related party

 

 

(66,348 )

 

 

(2,400 )

Proceeds from sale of stock

 

 

331,750

 

 

 

35,917

 

Repayment on notes payable

 

 

(7,500 )

 

 

-

 

Borrowings from note payable

 

 

30,000

 

 

 

5,000

 

Borrowings from related party

 

 

-

 

 

 

50,000

 

Net cash provided by financing activities

 

 

354,250

 

 

 

140,948

 

 

 

 

 

 

 

 

 

 

Net decrease in cash and cash equivalents

 

 

39,865

 

 

 

(1 )

Cash and cash equivalents, beginning of period

 

 

8,112

 

 

 

264

 

Cash and cash equivalents, end of period

 

$ 47,977

 

 

$ 263

 

 

 

 

 

 

 

 

 

 

Supplemental disclsoure information:

 

 

 

 

 

 

 

 

Income taxes paid

 

$ -

 

 

$ -

 

Interest paid

 

$ 11,530

 

 

$ -

 

Non-cash financing activities:

 

 

 

 

 

 

 

 

Common shares issued for asset purchase

 

$ -

 

 

$ 4,760,000

 

Common shares issued for convertible debt and accrued interest

 

$ -

 

 

$ 4,475

 

Debt discount due to beneficial conversion feature

 

$ -

 

 

$ 4,475

 

Debt discount from relative fair value of warrants

 

$ 42,122

 

 

$ -

 

Expenses paid directly by third party investors on behalf of Company

 

$ 25,000

 

 

$ -

 

Expenses paid directly by third party debt holder on behalf of Company

 

$ 30,000

 

 

$ -

 

Common shares issued for series A convertible preferred stock

 

$ 73

 

 

$ -

 

Common shares issued for accrued compensation

 

$ 361,333

 

 

$ -

 

Exercise of warrants offset against note payable

 

$ 60,000

 

 

$ -

 

 

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

 

 
4
 
 

 

WRIT MEDIA GROUP, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2017

 

NOTE 1 – ORGANIZATION, BUSINESS OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

 

Organization and Business Operations

 

WRIT Media Group, Inc. (“we”, “our”, “WRIT” or the “Company”) was incorporated in Delaware on March 9, 2007 to produce films, television programs and similar entertainment programs for various media formats. The Company has four wholly owned subsidiaries: Front Row Networks, Inc., Amiga Games, Inc., and Retro Infinity, Inc., and Pandora Venture Capital Corp.

 

Front Row Networks, Inc. is a content creation company which produces, acquires and distributes live concerts in 3D for initial worldwide digital broadcast into digitally-enabled movie theaters, TV and mobile streaming providers.

 

On August 19, 2013, the Company acquired certain software through the purchase of 100% of Amiga Games Inc. in exchange for 500,000 shares. Amiga Games Inc. became WRIT’s wholly-owned subsidiary.

 

Amiga Games Inc. licenses classic pre-Windows computer game libraries and adapts and republishes the most popular titles for smartphones, modern game consoles, PCs, tablets, and other television streaming devices.

 

WRIT also established a new company, Retro Infinity Inc., to publish and brand games that were not originally released for Amiga brand computers. The two companies tap into the growing “retro gaming” marketplace, building on the "Amiga", “Atari”, and “MS-DOS” brands, delivering retro-gaming titles adapted for modern devices as well as merchandise featuring brands and characters from the games.

 

On January 22, 2014, the Company changed the name of the corporation to WRIT Media Group, Inc.

 

On June 20, 2016, WRIT Media Group, Inc. acquired Pandora Venture Capital Corp, a Florida based company that develops digital currency, Blockchain technology, and digital currency trading software. The Company acquired Pandora Venture Capital Corp through the issuance of 14,000,000 restricted shares of its common stock to the shareholders of Pandora, in exchange for all issued and outstanding shares of Pandora, making Pandora a wholly-owned subsidiary of WRIT Media Group, Inc.

 

On August 2, 2017, Pandora Venture Capital Corp. changed its corporate name to Skylab USA, Inc.

 

Basis of presentation

 

The accompanying unaudited interim consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s annual report on Form 10-K for the year ended March 31, 2017 as filed with the SEC. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the consolidated financial statements which would substantially duplicate the disclosure contained in the audited financial statements as reported in the annual report on Form 10-K have been omitted.

 

 
5
 
 

 

Intangible assets

 

Intangible assets are initially measured at fair value. The intangible assets related to acquired software are amortized over its estimated useful life of three years using the straight-line method.

 

Intangible assets subject to amortization are reviewed for impairment in accordance with FASB ASC 360. The Company determined that the intangible assets related to the acquired software are not impaired as of September 30, 2017.

 

Fair value measurements

 

The Company considers the carrying values of cash and cash equivalents, prepaid expenses and other assets, accounts payable and accrued liabilities and debt to approximate the fair value of these accounts because of the short period of time since origination or the short period of time between origination of the instruments and their expected realization and related rates of interest approximate current market rates.

 

The Company has no financial instruments at September 30, 2017 and March 31, 2017 that are required to be fair valued on a recurring basis.

 

Earnings per share

 

Basic earnings per share is calculated by dividing net income (loss) available to common stockholders by the weighted average number of shares of the Company’s stock outstanding during the period. “Diluted earnings per share” reflects the potential dilution that could occur if our share-based awards, stock warrants and convertible securities were exercised or converted into common stock. The dilutive effect of our share-based awards is computed using the treasury stock method, which assumes all share-based awards are exercised and the hypothetical proceeds from exercise are used to purchase common stock at the average market price during the period. The incremental shares (difference between shares assumed to be issued versus purchased), to the extent they would have been dilutive, are included in the denominator of the diluted EPS calculation. The dilutive effect of our convertible preferred stock, stock warrants, and convertible debentures is computed using the if-converted method, which assumes conversion at the beginning of the year.

 

For the six months ended September 30, 2017 and 2016, common stock equivalents related to share-based awards, stock warrants, and convertible securities are 226,206,637 and 128,033,809 respectively.

 

Recent accounting pronouncements

 

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements.

 

In May 2014, the FASB issued ASU 2014-09--Revenue from Contracts with Customers (Topic 606). The guidance requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The FASB delayed the effective date to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. In addition, in March and April 2016, the FASB issued new guidance intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. Both amendments permit the use of either a retrospective or cumulative effect transition method and are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early application permitted. The Company is currently evaluating the impact the adoption of this ASU will have on its financial statements.

 

In February 2016, the FASB issued ASU 2016-02, “Leases,” which will require lessees to recognize assets and liabilities for the rights and obligations created by most leases on the balance sheet. The changes become effective for the Company’s fiscal year beginning July 1, 2019. Modified retrospective adoption for all leases existing at, or entered into after, the date of initial application, is required with an option to use certain transition relief. The Company is currently evaluating the impact the adoption of this ASU will have on its financial statements.

 

NOTE 2 – GOING CONCERN

 

As reflected in the accompanying consolidated financial statements, the Company has an accumulated deficit of $4,715,218 which includes a loss of $837,785 at September 30, 2017 and a working capital deficiency of $795,185. These factors raise substantial doubt about the ability of the Company to continue as a going concern. The consolidated financial statements have been prepared on a going concern basis and do not include any adjustments that might result from outcome of this uncertainty. Although management is currently attempting to implement its business plan, and is seeking additional sources of equity or debt financing, there is no assurance these activities will be successful.

 

 
6
 
 

 

NOTE 3 – INTANGIBLE ASSETS

 

On June 20, 2016, the Company issued 14,000,000 common shares to acquire a 100% ownership interest in Pandora Venture Capital Corp. The Company evaluated the transaction under ASC 805 and determined that it should be accounted for as an asset acquisition. Pandora has developed business solutions for digital currency, blockchain technology, and digital currency trading. Pandora’s Pelecoin digital currency is a product which utilizes unique “value event” emission protocol and can be utilized with trade exchanges, loyalty rewards and a payment support platform. Pandora’s CrypFXPro is an online platform which allows investors to trade digital currencies similar to a stock exchange. Underlying the digital currency and trading software platforms is an enterprise blockchain platform that enables institutions to design, deploy, and operate financial networks that can power assets in various markets. The 14,000,000 shares were valued using the $0.34 per share closing price on the acquisition date for a total purchase price consideration of $4,760,000.

 

The Company fair valued the different software components that make up the intangible assets in accordance with ASC 820-10-35 and allocated the purchase consideration to the different software components acquired based on their relative fair values. The Company determined the valuation of the software for each component of the asset from which the Company intends to generate a practical product. The software code was divided into three components based on product type to determine a valuation for each, based on the replacement cost of that component. The Company used the intermediate COCOMO Level II model to determine the replacement cost. The following table summarizes the composition and allocation of intangible assets as of September 30, 2017.

 

Pelecoin digital currency software platform

 

$ 2,270,520

 

Digital currency trading software

 

 

1,704,080

 

Blockchain “smart contract” software

 

 

785,400

 

Total intangible assets

 

 

4,760,000

 

Plus: Software Development

 

 

70,669

 

Less – accumulated amortization

 

 

(315,350 )

 

 

$ 4,515,319

 

 

For the six months ended September 30, 2017, the Company capitalized software development costs of $70,669, and the Company recognized amortization expense of $315,350 on the Pelecoin digital currency software platform. Ongoing software development cost is currently being done on the remaining software components and as such are not amortized as of September 30, 2017.

 

NOTE 4 – NOTES PAYABLE

 

Notes payable consists of the following:

 

 

 

September 30,

2017

 

 

March 31,

2017

 

Short term:

 

 

 

 

 

 

 

 

Notes payable (unsecured)

 

$ -

 

 

$ 7,500

 

Notes payable – related party (see Note 7) (secured)

 

$ 125,000

 

 

$ 125,000

 

 

Falmouth Street Holdings, LLC

 

On September 11, 2017, the Company paid the noteholder $9,997, of which $7,500 was principal and $2,497 was interest. This promissory note has been paid in its entirety and has been surrendered to the Company

 

Bluway Marketing, LLC

 

On April 16, 2017, the Company borrowed $60,000 from Bluway Marketing, LLC (“Bluway”), of which $30,000 was expenses paid directly on behalf of Company. The maturity date of this note is April 17, 2019 and this loan bears an interest rate of 0% per annum from the issuance date. Along with the promissory note, the Company issued warrants to purchase 1,650,000 shares of common stock. The warrants expire on April 17, 2019 and have an exercise price of $0.05. The warrants do not entitle the holder to any voting rights or other rights as a shareholder of the Company.

 

On August 17, 2017 Bluway exercised the 1,650,000 warrants in exchange for 1,650,000 shares of the Company’s common stock at the price of $0.05 per share. The total consideration was for $82,500, of which $60,000 was offset against the note and the remaining $22,500 was paid in cash. As of September 30, 2017, the outstanding balance on the Bluway note was zero.

 

 
7
 
 

 

The Company used the Black-Scholes model to calculate the fair value of the warrants, and record the relative fair value as a debt discount to the note. The fair value of the warrants was determined using the following assumptions: stock price of $0.05; term of 2 years, volatility of 439% and risk-free rate of 1.21%. The relative fair value of the warrants recorded as a debt discount amounted to $42,122 of which $42,122 has been amortized to interest expense for the six months ended September 30, 2017.

 

NOTE 5 – PREFERRED STOCK

 

On April 15, 2017, EAM Delaware LLC, a Delaware Limited Liability company controlled by Eric Mitchell, the current President and Chairman of WRIT Media Group, Inc., converted 110 Preferred Series A shares into 7,307,166 common shares.

 

NOTE 6 – EQUITY

 

Common Shares issued for cash

 

During the six months ended September 30, 2017, the Company issued 3,915,310 common shares for cash totaling $334,250 of which $25,000 was for expenses paid directly by investors on behalf of Company.

 

Common Shares issued for services

 

During the six months ended September 30, 2017, the Company issued 234,000 common shares for services with a fair value of $67,626.

 

Common Shares issued for accrued compensation

 

During the six months ended September 30, 2017, the Company issued 2,878,385 shares, with a fair value of $361,333, to employee Eric Mitchell, the current President and Chairman of WRIT Media Group, Inc, as payment of accrued compensation.

 

Common Shares issued for convertible Series A Preferred stock:

 

During the six months ended September 30, 2017, EAM Delaware LLC, a Delaware Limited Liability Company controlled by Eric Mitchell, the current President and Chairman of WRIT Media Group, Inc., converted 110 Preferred Series A shares into 7,307,166 common shares.

 

Warrants

 

The following table summarizes the Company’s warrant activity for the six months ended September 30, 2017:

 

 

 

Number of

Units

 

 

Weighted

Average

Exercise

Price

 

 

Weighted-

Average

Remaining Contractual

Term (in years)

 

 

Intrinsic

value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding and exercisable at March 31, 2017

 

 

-

 

 

$ -

 

 

 

-

 

 

$ -

 

Issuance

 

 

1,650,000

 

 

 

0.05

 

 

 

2.0

 

 

 

 

 

Exercises

 

 

1,650,000

 

 

 

0.05

 

 

 

-

 

 

 

-

 

Forfeitures

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Outstanding and exercisable at September 30, 2017

 

 

-

 

 

$ -

 

 

 

-

 

 

$ -

 

 

 
8
 
 

 

NOTE 7 – RELATED PARTY BALANCES AND TRANSACTIONS

 

During the six months ended September 30, 2017, the Company incurred $210,000 compensation expense for Eric Mitchell, the Company CEO and CFO, and $444,333 of accrued compensation owed to Eric Mitchell was paid; $83,000 was paid in cash and $361,333 was paid by issuance of common stock. As of September 30, 2017, the accrued compensation owed to Eric Mitchell, is $219,619 (presented as part of accrued liability balance on the accompanying consolidated balance sheets).

 

On August 4, 2016, the Company borrowed $50,000 from related party EAM Delaware LLC, for expenses paid directly to third party on behalf of Company. The maturity date of this secured note is August 5, 2017 and this loan bears an interest rate of 12% per annum from the issuance date. On August 4, 2017 the Company entered into a debt modification agreement with debt holder EAM Delaware LLC. The modified secured note bears an extended maturity date of August 4, 2018, an interest rate of 14% per annum, and a one-time interest payment of $500 due upon acceptance of debt modification agreement. The secured note is still outstanding as of September 30, 2017.

 

On September 30, 2016 the Company converted related party advances by EAM Delaware LLC of $75,000 into an secured note payable. The secured note payable includes a prior year advance amount of $25,452. The maturity date of this note is October 1, 2017 and this loan bears an interest rate of 12% per annum from the issuance date. On September 30, 2017 the Company entered into a debt modification agreement with debt holder EAM Delaware LLC. The modified secured note bears an extended maturity date of September 30, 2018, an interest rate of 14% per annum, and a one-time interest payment of $710 due upon acceptance of debt modification agreement. The secured note is still outstanding as of September 30, 2017.

 

The Company evaluated the modification of the notes under ASC 470-50 and determined that the modification was not considered substantial.

 

During the six months ended September 30, 2017, an aggregate amount of $66,348 was advanced by Eric Mitchell and a total of $66,348 of advances was repaid by the Company to Eric Mitchell. $0 in advances were owed to Eric Mitchell as of September 30, 2017.

 

NOTE 8 – SUBSEQUENT EVENTS

 

On October 25, 2017, the Company issued 150,000 common shares for services totaling $24,450.

 

In October 2017, the Company issued 153,473 common shares for cash totaling $13,000.

 

On October 17, 2017 the Company approved a special stock dividend distribution for 1,250,000 shares of common stock of Skylab USA, Inc., its wholly-owned subsidiary, with a shareholders of record date of November 14, 2017 and a distribution date of November 28, 2017.

 

On November 9, 2017 the Company issued 159,948 common shares for cash totaling $15,000.

 

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

 

Special Note Regarding Forward Looking Statements

 

In addition to historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We use words such as “believe,” “expect,” “anticipate,” “project,” “target,” “plan,” “optimistic,” “intend,” “aim,” “will” or similar expressions which are intended to identify forward-looking statements. Such statements include, among others, those concerning market and industry segment growth and demand and acceptance of new and existing products; any projections of sales, earnings, revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; as well as all assumptions, expectations, predictions, intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those identified in Item 1A “Risk Factors” in our annual report on Form 10-K for fiscal year ended March 31, 2016, as well as assumptions, which, if they were to ever materialize or prove incorrect, could cause the results of the Company to differ materially from those expressed or implied by such forward-looking statements. Forward looking statements made by penny stock issuers are excluded from the safe harbors in Section 27A of the Securities Act of 1933 and in Section 21E of the Securities Exchange Act of 1934.

 

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

 

Overview

 

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

 

Front Row Networks (“FRN”) was incorporated on July 27, 2010 in the State of Nevada. The Company is a content creation company which was launched to produce, acquire, license, and distribute music-related content in 3D and ultra-high definition (4K) for initial worldwide digital broadcast into digitally-enabled movie theaters. Through the distribution of music-related “alternative content,” the Company intends to present live concerts, music documentaries, and other music-related content at affordable prices, to a massive fan base worldwide in a cost-effective manner. The Company intends to shift its focus from 3D to developing ultra-high definition (4K) content for distribution in the Americas and Asia. In some cases, Front Row Networks will also sell merchandising and other products, bolstered by both in-theater and in-App advertising, tailored around each Artist and/or event, to maximize potential merchandising and sponsorship revenues.

 

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

 

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

 

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

 

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

 

On August 19, 2013, the Company completed an acquisition transaction through a share exchange with Amiga Games Inc., whereby WRIT acquired 100% of the issued and outstanding capital stock, assets, and trademarks of Amiga Games Inc. in exchange for 500,000 shares of the Common Stock of WRIT. As a result of the acquisition, Amiga Games Inc. became WRIT’s wholly-owned subsidiary.

 

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

 

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

 

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

 

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

 

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

 

In September 2014 the Company launched two online point of sale platforms; www.RetroInfinity.com and www.AmigaGamesInc.com to market its “retro” gaming titles directly to consumers. Both sales platforms initially offer only downloads for windows based computers. The online store launch was completed in conjunction with an initial marketing program which featured NASCAR, the RWR Retro Infinity NASCAR race team, and the “Drive to Championship Weekend” branding program. In December 2014 the Company intended to launch additional titles on additional mobile platforms, such as Windows phone, iOS, and Android platforms, so that the video game titles can be downloaded as Apps on various mobile devices, the Company experienced additional financing delays which interrupted software development and caused the Company to reschedule the anticipated release on mobile platforms into 2015. The online store launch generated an increase in consumer traffic to the Company’s websites and created awareness in the Company’s product, but generated minimal sales, most consumers were interested only in the mobile versions of the gaming titles, which were not yet available.

 

The websites are currently being modified to accept payment for crowdfunding transactions, and we launched the Retro Infinity/Amiga Games crowdfunding platform, supported by a social marketing campaign, in the 3rd quarter of 2015. The initial campaign was not successful, so the Company is seeking additional financing from strategic partners that will allow the Company to resume and complete software development, and commence product marketing activities, or seeking to sell all or some of the video gaming assets.

 

On June 25, 2015, the Company authorized a 1 for 200 reverse split of the Company’s issued and outstanding shares of Common Stock. The equity restructuring was authorized to achieve the following: (a) price per share -- the rollback will increase the price per share to above $0.01, sub-penny markets are getting harder to trade and next to impossible to finance; (b) funding -- with a sub penny share price the Company was unable to fund because of dilution, post rollback the share price should be well above $0.01 and allow management to close on numerous funding opportunities that have been presented; (c) larger potential audience -- with a higher share price the Company will have access to investors who do not trade sub penny stocks such as institutions and Europeans; (d) listing in Europe -- the Company will now be able to list its common shares for trading on a European Stock Exchange, as co-listings in Europe are not accepted with a sub penny share price; and (e) acquisitions -- the Company will be able to use common shares to acquire larger assets and other industry related companies. 

 

On June 20, 2016, the Company issued 14,000,000 common shares to acquire 100% ownership interest in Pandora Venture Capital Corp. The transaction was accounted for as an asset acquisition. Pandora has developed business solutions for digital currency, blockchain technology, and digital currency trading. The assets include Pelecoin, a digital currency is a product which utilizes unique “value event” emission protocol and can be utilized with trade exchanges, loyalty rewards and a payment support platform, CrypFXPro, an online platform which allows investors to trade digital currencies similar to a stock exchange, and Pelecoin’s enterprise blockchain platform that enables institutions to design, deploy, and operate financial networks that can power assets in various markets. The 14,000,000 shares were valued using the $0.34 per share closing price on the acquisition date for total purchase price consideration of $4,760,000.

 

In the six-month period ended September 30, 2017, the Company generated $157,248 in revenue from the launch of its Pelecoin product. We believe WRIT is well positioned to continue this growth and benefit from the developing marketplace in digital currency trading platforms and products, and blockchain and “smart contracts” technology applications, and intend to continue to look for opportunities to explore business relationships with entities that have the resources to offer financing, licensing, distribution and marketing of WRIT’s product.

 

 
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Results of Operations

 

Three Months Ended September 30, 2017 and 2016

 

Revenues. Revenues of $92,263 increased by $92,263 and 100% for the six months ended September 30, 2017 as compared to the same period in 2016. The increase is mainly due to the launch of the Company’s Pelecoin software product.

 

Wages and benefits. Wages and benefits expense of $105,000 increased by $15,000 and 17% for the three months ended September 30, 2017 as compared to the same period in 2016. The increase is mainly due to an increase in compensation policy.

 

Audit and accounting. Audit and accounting expense of $24,000 increased by $3,000 and 14% for the three months ended September 30, 2017 as compared to the same period in 2016. The increase in the audit and accounting expense is mainly related to the timing and Company’s accrual of accounting expenses.

 

Legal Fee. Legal fee expense of $3,500 decreased by $8,750 and 71% for the three months ended September 30, 2017 as compared to the same period in 2016. The decrease in the legal fee is related to a decrease in services required for certain corporate actions and litigation.

 

Other general and administrative expenses. Other general and administrative expense of $133,722 increased by $45,760 and 52% for the three months ended September 30, 2017 as compared to the same period in 2016. Those expenses consist primarily of company’s business development including advertising and promotion programs, consulting fees and other expenses incurred in connection with general operations and the business acquisition.

 

Loss from operations. Our loss from operations was $439,468 for the three months ended September 30, 2017 and a loss of $211,212 for the same period in 2016.

 

Interest expense. We incurred $54,710 of interest expense for the three months ended September 30, 2017 and $11,812 for the same period in 2016. The increase in interest expense is mainly related to the increase in debt balances and amortization of debt discount.

 

Net income or loss. As a result of the foregoing factors, we generated a net loss of $494,178 for the three months ended September 30, 2017, and we generated a net loss of $223,024 for the same period in 2016.

 

Six Months Ended September 30, 2017 and 2016

 

Revenues. Revenues of $157,248 increased by $157,248 and 100% for the six months ended September 30, 2017 as compared to the same period in 2016. The increase is mainly due to the launch of the Company’s Pelecoin software product.

 

Wages and benefits. Wages and benefits expense of $210,000 increased by $30,000 and 17% for the three months ended September 30, 2017 as compared to the same period in 2016. The increase is mainly due to an increase in compensation policy.

 

Audit and accounting. Audit and accounting expense of $36,500 increased by $15,500 and 74% for the six months ended September 30, 2017 as compared to the same period in 2016. The increase in the audit and accounting expense is related to an increase in corporate finance activities and the timing of services invoiced.

 

Legal fee. Legal fee of $33,124 increased by $20,874 and 270% for the six months ended September 30, 2017 as compared to the same period in 2016. The decrease in the legal fee is related to a decrease in services required for certain corporate actions.

 

Other general and administrative expenses. Other general and administrative expense of $198,613 increased by $96,597 and 95% for the six months ended September 30, 2017 as compared to the same period in 2016. Those expenses consist primarily of company’s business development including a new advertising and promotion program, consulting fees and other expenses incurred relating to general operations. The increase is mainly related to the decrease in software development activities from the prior year.

 

 
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Loss from operations. Our loss from operations was $765,151 for the six months ended September 30, 2017 and $315,266 for the same period in 2016. . The increase is mainly related to the increase in interest expense and operating expenses and amortization of intangible assets from the same period in 2016.

 

Interest expense. We incurred $72,634 in interest expense for the six months ended September 30, 2017 and $28,095 for the same period in 2016. The increase in interest expense is mainly related to the increase of debt balances and amortization of debt discount.

 

Net income or loss. As a result of the foregoing factors, we generated a net loss of $837,785 for the six months ended September 30, 2017, and a net loss of $343,361 for the same period in 2016. The increase is mainly related to the increase in interest expense and operating expenses and amortization of intangible assets from the same period in 2016.

 

Liquidity and Capital Resources

 

As reflected in the accompanying consolidated financial statements, the Company has suffered recurring net losses and had a working capital deficiency of $795,175. These factors raise substantial doubt about the ability of the Company to continue as a going concern. Although management is currently attempting to implement its business plan, and is seeking additional sources of equity or debt financing, there is no assurance these activities will be successful.

 

As of September 30, 2017, and March 31, 2017, we have $47,977 and $8,112 in cash and cash equivalents, respectively. To date, we have financed our operations primarily through cash flows from borrowings from third and related parties.

 

Operating activities

 

Net Cash used in operating activities of $233,698 for the six months ended September 30, 2017 reflected our net loss of $837,785, adjusted for $315,350 of amortization of intangible assets, $42,122 of amortization of debt discount, depreciation of $1664, and $67,626 in stock based compensation. Uses of cash included a decrease in accrued liabilities of $127,943, a decrease in accounts payable of $48,767, and a decrease in prepaid expenses and other current assets of $615.

 

Net Cash used in operating activities of $140,949 for the six months ended September 30, 2016 reflected our net loss of $343,361, adjusted for $4,475 of amortization of debt discount, depreciation of $560, and $46,500 in stock based compensation. Additional sources of cash include an increase in accounts payable of $52,743. Uses of cash included a decrease in accrued liabilities of $203,620.

 

Investing activities

 

Net cash used in investing activities of $80,687 for the six months ended September 30, 2017 includes cash paid for intangible assets of $70,669, and cash paid for property and equipment of $10,018. Net cash used in investing activities is $0 for the six months ended September 30, 2016.

 

Financing activities

 

Net cash provided by financing activities of $354,250 for the six months ended September 30, 2017 includes advances from related party of $66,348, proceeds from the sale of stock of $331,750, borrowings from note payable of $30,000, less repayment of advances from related party of $66,348, and repayment of note payable of $7,500.

 

Net cash provided by financing activities of $140,948 for the six months ended September 30, 2016 includes cash received from subscriptions of $35,917, net advances from related parties of $50,031, borrowing on short term notes payable of $5,000, and borrowing on related party short term notes payable of $50,000.

 

 
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Loan Commitments

 

Borrowings from Related Parties

 

During the six months ended September 30, 2017, $66,348 was advanced by Eric Mitchell and the advance is due on demand with 0% interest. As of September 30, 2017, in total $66,348 in advances were repaid by the Company to Mr. Mitchell and the balance due is $0.

 

Borrowings from Third Parties

 

Bluway Marketing, LLC

 

On April 16, 2017, the Company borrowed $60,000 from Bluway Marketing, LLC (“Bluway”), of which $30,000 was expenses paid directly on behalf of Company. The maturity date of this note is April 17, 2019 and this loan bears an interest rate of 0% per annum from the issuance date. Along with the promissory note, the Company issued warrants to purchase 1,650,000 shares of common stock. The warrants expired on April 17, 2019 and have an exercise price of $0.05. The warrants do not entitle the holder to any voting rights or other rights as a shareholder of the Company.

 

On August 17, 2017 Bluway exercised the 1,650,000 warrants in exchange for 1,650,000 shares of the Company’s common stock at the price of $0.05 per share. The total consideration was for $82,500, of which $60,000 was offset against the note and the remaining $22,500 was paid in cash. As of September 30, 2017, the outstanding balance on the Bluway note was zero.

 

Falmouth Street Holdings, LLC

 

On September 11, 2017, the Company paid the noteholder $9,997, of which $7,500 was principal and $2,497 was interest. This promissory note has been paid in its entirety and has been surrendered to the Company.

 

Obligations under Material Contracts

 

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

 

Inflation

 

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

 

Off Balance Sheet Arrangements

 

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

 

Seasonality

 

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

 

 
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Critical Accounting Policies

 

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

 

Revenue Recognition:

 

The Company follows the guidance of the Securities and Exchange Commission’s Staff Accounting Bulletin (“SAB”) 104 for revenue recognition and Accounting Standards Codification (“ASC”) Topic 605, “Revenue Recognition.” Accordingly, the Company records revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the selling price to the customer is fixed or determinable and collectability of the revenue is reasonably assured.

 

Transaction Verification Services

 

Revenue earned from Pelecoin processing activities (“Transaction Verification Services”), commonly termed ‘mining’ activities, is recognized at the fair value of the bitcoins received as consideration on the date of actual receipt. The Company generates revenue by performing computer processing activities for Pelecoin generation. In the digital-currency industry such activity is generally referred to as Transaction Verification Services or Pelecoin mining. The Company receives consideration for performing such transaction verification activities in the form of Pelecoins. Revenue is recorded upon the actual receipt of Pelecoins.

 

Expenses consist of utilities paid to cover our electric costs, rent for our facility and personnel to run our facility. The expenses related to our Transaction Verification Services activities are affected by the level of activities and not the ultimate generation of Pelecoins. The Company expenses these costs as they are incurred.

 

Long Lived Assets

 

In accordance with ASC 360 "Property Plant and Equipment," the Company reviews the carrying value of intangibles subject to amortization and long-lived assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets is measured by comparison of its carrying amount to the undiscounted cash flows that the asset or asset group is expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the property, if any, exceeds its fair market value.

 

Intangible Assets

 

The cost of intangible assets with determinable useful lives is amortized to reflect the pattern of economic benefits consumed, either on a straight-line or accelerated basis over the estimated periods benefited. Patents, technology and other intangibles with contractual terms are generally amortized over their respective legal or contractual lives. Software technology intangible assets with determinable lives are amortized over periods generally ranging from 3 to 5 years. When certain events or changes in operating conditions occur, an impairment assessment is performed and lives of intangible assets with determinable lives may be adjusted.

 

Recent Accounting Pronouncements

 

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

 

 
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CONTROLS AND PROCEDURES.

 

Evaluation of Disclosure Controls and Procedures 

 

As of the end of the period covered by this Quarterly Report, we conducted an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based on this evaluation, the CEO and CFO concluded that, because of the material weaknesses in our internal control over financial reporting described below, our disclosure controls and procedures were not effective as of September 30, 2017.

 

We have noted the following material weaknesses in our control environment: 

 

1. Material weaknesses in Our Control Environment. Our control environment did not sufficiently promote effective internal control over financial reporting throughout the organization. This material weakness exists because of the aggregate effect of multiple deficiencies in internal control which affect our control environment, including: a) the lack of an effective risk assessment process for the identification of fraud risks; b) the lack of an internal audit function or other effective mechanism for ongoing monitoring of the effectiveness of internal controls; c) and insufficient documentation and communication of our accounting policies and procedures as of September 30, 2017.

 

2. Material weaknesses in the staffing of our financial accounting department. Management had engaged an outside consultant to assist in the financial reporting. However, the number of qualified accounting personnel with experience in public company SEC reporting and GAAP is limited. This weakness does not enable us to maintain adequate controls over our financial accounting and reporting processes regarding the accounting for non-routine and non-systematic transactions. There is a risk that a material misstatement of the financial statements could be caused, or at least not be detected in a timely manner, by this shortage of qualified resources.

 

3. Material weaknesses in Segregation of Duties. The limited number of qualified accounting personnel results in an inability to have independent review and approval of financial accounting entries. Furthermore, management and financial accounting personnel have wide-spread access to create and post entries in our financial accounting system. There is a risk that a material misstatement of the financial statements could be caused, or at least not be detected in a timely manner, due to insufficient segregation of duties. Because of its inherent limitation, 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 is still determining additional measures to remediate deficiencies related to staffing.

 

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

 

Changes in Internal Controls

 

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

 

 
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LEGAL PROCEEDINGS

 

On July 21, 2016, Magna Equities II, LLC and Hanover Holdings I, LLC (collectively as “Magna”) filed a Summons with Notice of Appearance against the Company, and its former and current transfer agents (collectively as the “Parties”), in the Supreme Court of the State of New York, County of New York. The litigation is in its preliminary stages, the Company has not yet been served, and discovery has not yet commenced. Magna’s allegations against the Parties, which are briefly outlined in the summons, are to recover monetary damages related to Magna’s loan to the Company which has a principal balance equal to $85,750. Magna alleges breach of contract, breach of implied covenant of good faith and fair dealing, conversion and negligence against the Parties and seeks relief in excess of $1,500,000. Although the company has reason to believe that it will prevail on the merits of a summary judgment, the litigation could have a lengthy duration, and the ultimate outcome cannot be predicted at this time.

 

On July 27, 2016, Mr. George Sharp filed suit against the Company in the Superior Court of California, County of San Diego. Sharp had previously filed a similar lawsuit in 2011 which was dismissed on February 16, 2012, and included a settlement agreement signed by Sharp which was filed with the Superior Court of California, County of Los Angeles (Case Number: BC461550) Sharp alleges misrepresentation and violation of the Unfair Business Practices Act, and seeks unspecified damages. On February 28, 2017, the Company’s offer to compromise was accepted by Mr. Sharp and the litigation was settled in the amount of $20,000, of which $10,000 will be paid by the Company, and $10,000 will be paid by Eric Mitchell, CEO of the Company. Additionally, the Company needs to indemnify officers for any loss in lawsuits, therefore, the Company assumed $20,000 liability. As of June 30, 2017, $20,000 has been paid and the settlement obligation of $0 is recorded on book as liability.

 

On August 17, 2016, KBM Worldwide Inc. (“KBM”) filed a Summons in a Civil Action against the Company in the United States District Court for the Eastern District of New York. The litigation is in its preliminary stages, the Company has filed an answer to the complaint and a first counterclaim against the plaintiffs on November 1, 2016. KBM’s allegations which are briefly outlined in the summons, are to recover monetary damages related to KBM’s loans to the Company which have a principal balance equal to $142,765. KBM seeks equitable and injunctive relief against the Parties in excess of $142,765. Although the Company has reason to believe that it will prevail on the merits of its case against the plaintiff, the litigation could have a lengthy duration, and the ultimate outcome cannot be predicted at this time.

 

Exhibits.

 

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

 

Exhibit Index:

 

* Rule 15d-14(a) Certifications 

Exhibit (31)(i)and(ii)

* Section 1350 Certification

Exhibit (32)

 

 
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Signatures.

 

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

 

 

 

WRIT MEDIA GROUP, INC.

 

November 20, 2017

By:

/s/ Eric Mitchell

 

Eric Mitchell, President and Sole Director

 

By:

/s/ Eric Mitchell

 

Chief Financial Officer and

Chief Accounting Officer/Controller

 

 

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