UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15D-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of September, 2007
PEACE ARCH ENTERTAINMENT GROUP INC. |
(Translation of Registrant’s name into English) |
407-124 Merton Street, Toronto, Ontario M4S 2Z2 |
(Address of principal executive office) |
[Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20F or Form 40-F.
Form 20-F
þ
Form 40-F
o
[Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes
o
No
þ
This Form 6-K shall be incorporated by reference into the Registration Statement on Form S-8 (File No. 333-134552) and any other Registration Statement filed by the Registrant which by its terms automatically incorporates the Registrant's filings and submissions with the SEC under Sections 13(a), 13(c) or 15(d) of the Securities Exchange Act of 1934.
(If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):
82-_______________
FORM 51-102F4
BUSINESS ACQUISITION REPORT
ITEM 1
IDENTITY OF COMPANY
1.1
Name and Address of Company
Peace Arch Entertainment Group Inc. (“PAE” or the “Company”)
1867 Yonge Street, Ste. 650
Toronto, Ontario
M4S 1Y5
1.2
Executive Officer
The following executive officer of PAE is knowledgeable about the significant acquisition described herein and this business acquisition report.
Mara Di Pasquale
Chief Financial Officer
416-783-8383 x 222
ITEM 2
DETAILS OF ACQUISITION
0.1
Nature of Business Acquired
On July 3, 2007, PAE acquired 100% of the membership interests of Trinity Home Entertainment LLC (“Trinity”) a privately owned business in the United States who sells, markets, licenses and distributes films and television products and properties via DVDs, videos and ancillary merchandise as well as facilitates the distribution of film and television products and properties owned by or licensed to third parties.
0.2
Date of Acquisition
The Company acquired Trinity on July 3, 2007.
0.3
Consideration
On July 3, 2007, the Company acquired 100% of the issued and outstanding interest in Trinity. The cost of the purchase was $8,544,000 consisting of 229,358 common shares of the Company valued at $530,000 and cash consideration of $8,014,000. The fair value of the common shares issued of $2.18 per share was based on the date the agreement was reached. The cash component of the acquisition was financed by the proceeds of a private placement of 13,200,000 common shares for gross proceeds of $33,000,000 (net proceeds $30,708,000), completed on June 8, 2007.
The purchase agreement also provided for payment of a maximum additional consideration of $2,135,000 based on Trinity’s achieving certain financial results as reported on their audited financial statements for the years ended December 31, 2006 and 2005. The audited financial statements gave rise to $1,850,000 of the contingent consideration becoming payable. The additional consideration has been included as a cost of the purchase and was paid for on September 10, 2007 from the proceeds of the private placement completed on June 8, 2007.
0.4
Effect on Financial Position
The Company has no plans or proposals for any material changes in the business of Trinity Home Entertainment that would have a significant effect on the results of operations and financial position of the Company.
0.5
Prior Valuations
No valuation opinion has been obtained within the last 12 months in respect of Trinity to support the consideration paid by the Company.
0.6
Parties to Transaction
The parties to the Purchase Agreement in respect of the acquisition are the Company, Thent, LLC, Trient, LLC, and Topaz Entertainment LLC who collectively owned 100% of Trinity. Each of Thent, LLC, Trient, LLC and Topaz Entertainment LLC, was at arm’s length to PAE at the time of the acquisition and no insider of PAE had an interest, directly or indirectly in the acquisition.
0.7
Date of Report
September 14, 2007
ITEM 3
FINANCIAL STATEMENTS
Attached hereto as Schedule A.
PEACE ARCH ENTERTAINMENT GROUP INC.
FORM 51-102F4
BUSINESS ACQUISITION REPORT
SUPPLEMENTARY SCHEDULE A – FINANCIAL STATEMENTS
The following financial statements accompany and form part of this Business Acquisition Report.
Peace Arch Entertainment Group Inc.
·
Unaudited proforma condensed consolidated balance sheet as at May 31, 2007;
·
Unaudited proforma condensed consolidated statement of earnings for the nine months ended May 31, 2007;
·
Unaudited proforma condensed consolidated statement of income for the year ended August 31, 2006;
The following documents filed with the securities commission or similar authorities in each of the provinces of Canada are specifically incorporated by reference.
·
Audited consolidated financial statements for the years ended August 31, 2006 and 2005;
·
Unaudited consolidated interim financial statements for the nine months ended May 31, 2007 and 2006.
Trinity Home Entertainment, LLC
·
Trinity Home Entertainment, LLC audited financial statements for the years ended December 31, 2006 and 2005;
·
Trinity Home Entertainment, LLC unaudited interim financial statements for the six months ended June 30, 2007 and 2006.
The following tables set forth the unaudited pro forma condensed consolidated information of Peace Arch Entertainment Group Inc. ("PAE") as at May 31, 2007, for the nine month period ended May 31, 2007 and for the year ended August 31, 2006 giving effect to the acquisition of 100% membership interests of Trinity Home Entertainment, LLC ("Trinity"), an independent DVD distributor of feature films and television programming in the United States.
The statements of earnings are prepared giving effect to the acquisition as of September 1, 2006 for the nine month period ended May 31, 2007 and September 1, 2005 for the year ended August 31, 2006, and as at May 31, 2007 for the balance sheet.
Unaudited Pro Forma Condensed Consolidated Balance Sheet As at May 31, 2007
(expressed in thousands of Canadian dollars)
| Pro Forma | PAE | |||||||||||||
| PAE | Trinity $US | Trinity $Cdn | Adjustments | Pro Forma | ||||||||||
| ASSETS | 5 | 5 | ||||||||||||
| Cash and cash equivalents | $ | 1,130 | $ | 731 | $ | 779 | $ | - | 2,3 | $ | 1,909 | |||
| Accounts and other receivables | $ | 41,192 | $ | 4,180 | $ | 4,453 | 2 | $ | 45,645 | |||||
| Investment in film and television programming | $ | 42,924 | $ | 2,121 | $ | 2,260 | 2 | $ | 45,184 | |||||
| Other assets | $ | 7,265 | $ | 1,184 | $ | 1,261 | 2 | $ | 8,526 | |||||
| Goodwill | $ | 8,744 | $ | 7,849 | 2 | $ | 16,593 | |||||||
| Restricted term deposits | $ | 22,211 | $ | 22,211 | ||||||||||
| $ | 123,466 | $ | 8,216 | $ | 8,753 | $ | 7,849 | $ | 140,068 | |||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||||
| Bank credit facility | $ | 3,000 | $ | 3,000 | ||||||||||
| Accounts payable and accrued liabilities | $ | 20,426 | $ | 5,827 | $ | 6,208 | 2 | $ | 26,634 | |||||
| Term loan | $ | 2,738 | $ | 2,738 | ||||||||||
| Note payable | $ | 267 | $ | 267 | ||||||||||
| Production loans | $ | 46,447 | $ | 46,447 | ||||||||||
| Deferred revenue | $ | 1,336 | $ | 1,336 | ||||||||||
| Future income tax liability | $ | 716 | $ | 716 | ||||||||||
| Revenue guarantee obligation | $ | 22,211 | $ | 22,211 | ||||||||||
| $ | 97,141 | $ | 5,827 | $ | 6,208 | $ | 103,349 | |||||||
| SHAREHOLDERS' EQUITY | ||||||||||||||
| Members equity | $ | 2,389 | $ | 2,545 | $ | (2,545 | ) | 2 | ||||||
| Capital stock | $ | 26,814 | $ | 10,394 | 3 | $ | 37,208 | |||||||
| Contributed surplus | $ | 3,282 | $ | 3,282 | ||||||||||
| Warrants | $ | 309 | $ | 309 | ||||||||||
| Other paid-in capital | $ | 680 | $ | 680 | ||||||||||
| Deficit | $ | (4,760 | ) | $ | (4,760 | ) | ||||||||
| $ | 123,466 | $ | 8,216 | $ | 8,753 | $ | 7,849 | $ | 140,068 | |||||
5 Trinity Balance Sheet as at June 30, 2007
The unaudited proforma condensed consolidated balance sheet has been prepared as at June 30, 2007.
The accounting policies in accordance with those used in the preparation of the consolidated financial statements of PAE. Some reclassifications have been made to the Trinity statements of earnings in order to conform to the presentation adopted by PAE. The statements are in US dollars and have been converted to Cdn dollars using a rate of 1.0654.
Unaudited Pro Forma Condensed Consolidated Statement of Earnings For the nine months ended May 31, 2007
(expressed in thousands of Canadian dollars, except per share information)
| Pro Forma | PAE | |||||||||||||||
| PAE | Trinity $US | Trinity $Cdn | Adjustments | Pro Forma | ||||||||||||
| 5 | 5 | |||||||||||||||
| Revenues | $ | 51,612 | $ | 17,096 | $ | 19,426 | $ | 71,038 | ||||||||
| Expenses | ||||||||||||||||
| Amortization of investment in film and television programming | ||||||||||||||||
| and other production costs | $ | 26,344 | $ | 26,344 | ||||||||||||
| Home Entertainment direct costs | $ | 12,059 | $ | 13,710 | $ | 15,579 | $ | 27,638 | ||||||||
| Selling, general and administrative | $ | 7,840 | $ | 969 | $ | 1,101 | $ | 8,941 | ||||||||
| Other amortization | $ | 463 | $ | 463 | ||||||||||||
| $ | 46,706 | $ | 14,679 | $ | 16,680 | $ | 63,386 | |||||||||
| Earnings (loss) from operations before the undernoted | $ | 4,906 | $ | 2,417 | $ | 2,746 | $ | 7,652 | ||||||||
| Interest income | $ | 1,075 | $ | 1,075 | ||||||||||||
| Interest expense | $ | (2,654 | ) | $ | (47 | ) | $ | (53 | ) | $ | (2,707 | ) | ||||
| Foreign exchange gain | $ | 196 | $ | 196 | ||||||||||||
| Gain on sale of asset | $ | - | $ | - | ||||||||||||
| Legal settlement | $ | 957 | $ | 957 | ||||||||||||
| Loss on settlement of obligations | $ | (409 | ) | $ | (409 | ) | ||||||||||
| Earnings before income taxes | $ | 4,071 | $ | 2,370 | $ | 2,693 | $ | 6,764 | ||||||||
| Provision for Income taxes | $ | 167 | $ | (12 | ) | $ | (14 | ) | $ | (1,063 | ) | 4 | $ | (910 | ) | |
| Net earnings for the period | $ | 4,238 | $ | 2,358 | $ | 2,679 | $ | 5,854 | ||||||||
| Net earnings per common share | ||||||||||||||||
| Basic | $ | 0.12 | $ | 0.15 | ||||||||||||
| Diluted | $ | 0.11 | $ | 0.13 | ||||||||||||
| Average number of shares used in calculating net earnings | ||||||||||||||||
| per share - basic | 32,212 | 36,805 | ||||||||||||||
| Average number of shares used in calculating net earnings | ||||||||||||||||
| per share - diluted | 39,653 | 44,246 |
5 Trinity financial statements for the period October 1, 2006 - June 30, 2007
The unaudited proforma condensed consolidated statements of earnings has been prepared using the nine month period from October 1, 2006 - June 30, 2007 for Trinity. The accounting policies are in accordance with those used in the preparation of the consolidated financial statements of PAE. Some reclassifications have been made to the Trinity statements of earnings in order to conform to the presentation adopted by PAE. The statements are in US dollars and have been converted to Cdn dollars using an average rate of 1.1363 for the statement of income. These financial statements were prepared for the purpose of preparing the proforma financial statements and do not conform with the financial statements for the business included elsewhere in this report.
Unaudited Pro Forma Condensed Consolidated Statement of Earnings For the year ended August 31, 2006
(expressed in thousands of Canadian dollars, except per share information)
| Pro Forma | PAE | |||||||||||||||
| PAE | Trinity $US | Trinity $Cdn | Adjustments | Pro Forma | ||||||||||||
| 6 | 6 | |||||||||||||||
| Revenues | $ | 21,258 | $ | 16,687 | $ | 19,070 | $ | 40,328 | ||||||||
| Expenses | ||||||||||||||||
| Amortization of investment in film and television programming | ||||||||||||||||
| and other production costs | $ | 8,432 | $ | 8,432 | ||||||||||||
| Home Entertainment direct costs | $ | 7,538 | $ | 12,701 | $ | 14,515 | $ | 22,053 | ||||||||
| Selling, general and administrative | $ | 8,085 | $ | 2,421 | $ | 2,767 | $ | 10,852 | ||||||||
| Other amortization | $ | 347 | $ | 347 | ||||||||||||
| $ | 24,402 | $ | 15,122 | $ | 17,282 | $ | 41,684 | |||||||||
| Earnings (loss) from operations before the undernoted | $ | (3,144 | ) | $ | 1,565 | $ | 1,787 | $ | (1,357 | ) | ||||||
| Interest income | $ | 1,126 | $ | 1,126 | ||||||||||||
| Interest expense | $ | (2,872 | ) | $ | (34 | ) | $ | (39 | ) | $ | (2,911 | ) | ||||
| Foreign exchange gain | $ | 659 | $ | 659 | ||||||||||||
| Gain on sale of asset | $ | 44 | $ | 44 | ||||||||||||
| Legal settlement | $ | - | $ | - | ||||||||||||
| Loss on settlement of obligations | $ | (41 | ) | $ | (41 | ) | ||||||||||
| Earnings (loss) before income taxes | $ | (4,228 | ) | $ | 1,531 | $ | 1,749 | $ | (2,479 | ) | ||||||
| Provision for Income taxes | $ | 108 | $ | (13 | ) | $ | (15 | ) | $ | (685 | ) | 4 | $ | (592 | ) | |
| Net earnings (loss) for the year | $ | (4,120 | ) | $ | 1,518 | $ | 1,734 | $ | (3,071 | ) | ||||||
| Net earnings (loss) per common share | ||||||||||||||||
| Basic | $ | (0.19 | ) | $ | (0.12 | ) | ||||||||||
| Diluted | $ | (0.19 | ) | $ | (0.12 | ) | ||||||||||
| Average number of shares used in calculating net earnings (loss) | ||||||||||||||||
| per share - basic | 23,741 | 28,334 | ||||||||||||||
| Average number of shares used in calculating net earnings (loss) | ||||||||||||||||
| per share - diluted | 23,741 | 28,334 | ||||||||||||||
6 Trinity financial statements for the period October 1, 2005 - September 30, 2006
The unaudited proforma condensed consolidated statements of earnings has been prepared using the twelve month period from October 1, 2005 - September 30, 2006 for Trinity. The accounting policies are in accordance with those used in the preparation of the consolidated financial statements of PAE. Some reclassifications have been made to the Trinity statements of earnings in order to conform to the presentation adopted by PAE. The statements are in US dollars and have been converted to Cdn dollars using an average rate of 1.1428. These financial statements were prepared for the purpose of preparing the proforma financial statements and do not conform with the financial statements for the business included elsewhere in this report.
Notes to Unaudited Proforma Condensed Consolidated Financial Statements
(expressed in thousands of Canadian dollars)
| 1 | Basis of presentation | |
| The accompanying unaudited proforma condensed consolidated financial statements give effect to the acquisition of Trinity Home Entertainment, LLC as if had occurred as at: | ||
| May 31, 2007 for the purposes of the unaudited proforma condensed consolidated balance sheet; | ||
| September 1, 2006 for purposes of the unaudited proforma condensed consolidated statements of earnings for the nine months ended May 31, 2007 | ||
| September 1, 2005 for purposes of the unaudited proforma condensed consolidated statements of earnings for the year ended August 31, 2006; | ||
| The statements have been prepared by management in accordance with Canadian Generally Accepted Accounting Principles. | ||
| The statements have been prepared using the following information: | ||
| Audited consolidated financial statements of Peace Arch Entertainment Group Inc. as at and for the year ended August 31, 2006 | ||
| Unaudited interim consolidated financial statements of Peace Arch Entertainment Group Inc. as at and for the nine months ended May 31, 2007 | ||
| Unaudited financial statements of Trinity Home Entertainment, LLC. for the period October 1, 2006 - June 30, 2007 | ||
| Unaudited financial statements of Trinity Home Entertainment, LLC. for the period October 1, 2005 - September 30, 2006 | ||
| The statements are not necessarily indicative of the results of operations or financial position that would have resulted had the acquisition been effected on the dates indicated, or the results that may be obtained in the future. | ||
| 2 | Accounting for the Acquisition | |
| The acquisition will be accounted for by the purchase method of accounting. | ||
| $ Cdn | (000 | ) | |
| Capitalized transaction costs | 100 | ||
| Consideration paid | 8,444 | ||
| Contingent consideration paid | 1,850 | ||
| Total purchase consideration (at 100%) | 10,394 | ||
| Fair value of assets acquired | |||
| Cash and cash equivalents | 779 | ||
| Accounts receivable | 4,453 | ||
| Investment in film | 2,260 | ||
| Other assets | 1,261 | ||
| 8,753 | |||
| Less: liabilities assumed | |||
| Accounts payable and accrued liabilities | 6,208 | ||
| 6,208 | |||
| Net assets acquired | 2,545 | ||
| Goodwill | 7,849 |
The unaudited proforma condensed consolidated balance sheet incorporates the following adjustments:
| (i) | Cash has been increased by | 779 |
| (ii) | Accounts receivable have been increased by | 4,453 |
| (iii) | Investment in film and television programming has been increased by | 2,260 |
| (iv) | Other assets has been increased by | 1,261 |
| (v) | Goodwill has been increased by | 7,849 |
| (vi) | Accounts payable and accrued liabilities has been increased by | 6,208 |
| (vii) | The elimination of members equity on consolidation | 2,545 |
In preparation of these statements, the purchase consideration has been allocated on a preliminary basis to the fair value of the assets acquired and liabilities assumed based on management's best estimates and taking into account all the relevant information available at the time these statements were prepared. Management expects that the actual amounts for each of the assets and liabilities will vary from the pro forma amounts and the variation may be material.
Notes to Unaudited Proforma Condensed Consolidated Financial Statements
(expressed in thousands of Canadian dollars)
| 3 | The acquisition was financed as follows: | $ Cdn | (000 | ) |
| Capitalized transaction costs | 100 | |||
| Consideration paid (cash & shares) | 8,444 | |||
| Contingent consideration paid | 1,850 | |||
| Total purchase consideration (at 100%) | 10,394 | |||
| Issuance of 229,358 common shares of the Company @ US$2.18 | 530 | |||
| Portion of net proceeds of private placement June 8, 2007 (a) | 9,864 |
(a) On June 8, 2007 the Company completed a private placement of 13,200,000 common shares for $2.50 for gross proceeds of $33,000,000 (net proceeds $29,843,000).
A portion of these net proceeds in the amount of $9,864,000 were used to finance the acquisition of Trinity, as per above.
The unaudited proforma condensed consolidated balance sheet incorporates the following adjustments:
| (i) | Capital stock has been increased as a result of the issuance of | 530 | ||
| 229,358 common shares at US$2.18 | ||||
| (ii) | Capital stock has been increased by the portion of the net proceeds of the | |||
| private placement used to finance the Trinity acquisition | 9,864 | |||
| (assume 4,363,000 shares at net proceeds after issuance costs of $2.26 per share, or $9,864,000) | 10,394 | |||
| (iii) | Cash has been increased by the portion of the net proceeds of private placement | 9,864 | ||
| (iv) | Cash has been decreased by payment of cash portion for Trinity as follows: | |||
| (v) | Capitalized transaction costs | $ | (100 | ) |
| (vi) | Cash portion of purchase price | $ | (7,914 | ) |
| (vii) | Contingent consideration paid in cash | $ | (1,850 | ) |
| 0 |
4 The unaudited proforma condensed consolidated statement of earnings incorporates the following adjustments:
Adjustments have been made to provision for income taxes to reflect changes to the tax structure as a result of the acquisition described in note 2 to the financial statements. The tax rate used to calculate the adjustment to the tax provision is 40% for US based taxes.
5 Trinity financial statements for the period October 1, 2006 - June 30, 2007
The unaudited proforma condensed consolidated statements of earnings has been prepared using the nine month period from October 1, 2006 - June 30, 2007 for Trinity. The accounting policies are in accordance with those used in the preparation of the consolidated financial statements of PAE. Some reclassifications have been made to the Trinity statements of earnings in order to conform to the presentation adopted by PAE. The statements are in US dollars and have been converted to Cdn dollars using an average rate of 1.1363 for the statement of income and 1.0654 for the balance sheet. These financial statements were prepared for the purpose of preparing the proforma financial statements and do not conform with the financial statements for the business included elsewhere in this report.
6 Trinity financial statements for the period October 1, 2005 - September 30, 2006
The unaudited proforma condensed consolidated statements of earnings has been prepared using the twelve month period from October 1, 2005 - September 30, 2006 for Trinity. The accounting policies are in accordance with those used in the preparation of the consolidated financial statements of PAE. Some reclassifications have been made to the Trinity statements of earnings in order to conform to the presentation adopted by PAE. The statements are in US dollars and have been converted to Cdn dollars using an average rate of 1.1428. These financial statements were prepared for the purpose of preparing the proforma financial statements and do not conform with the financial statements for the business included elsewhere in this report.
TRINITY HOME ENTERTAINMENT, LLC
FINANCIAL STATEMENTS
DECEMBER 31, 2006 AND 2005
TRINITY HOME ENTERTAINMENT, LLC
FINANCIAL STATEMENTS
DECEMBER 31, 2006 AND 2005
TABLE OF CONTENTS
PAGE
INDPENDENT AUDITORS’ REPORT
FINANCIAL STATEMENTS:
Balance Sheets
December 31, 2006 and 2005
2
Statements of Income
Years Ended December 31, 2006 and 2005
3
Statements of Changes in Members’ Equity
Years Ended December 31, 2006 and 2005
4
Statements of Cash Flows
Years Ended December 31, 2006 and 2005
5
Notes to Financial Statements
6-13
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Members of
Trinity Home Entertainment, LLC
We have audited the accompanying balance sheets of Trinity Home Entertainment, LLC
(the “Company”) as of December 31, 2006 and 2005 and the related statements of income, members’ equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2006 and 2005, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States.
/s/ Farber Hass Hurley & McEwen LLP
July 15, 2007
Camarillo, California
Page 2
TRINITY HOME ENTERTAINMENT, LLC
BALANCE SHEETS
DECEMBER 31, 2006 AND 2005
ASSETS | ||||
|
|
|
|
|
|
| 2006 |
| 2005 |
|
|
|
|
|
Cash | $425,112 |
| $238,234 | |
Accounts receivable, net | 6,132,340 |
| 2,272,655 | |
Related party accounts receivable | 25,063 |
| 529,090 | |
Related party advance receivable | 651,328 |
|
| |
Due from related party | 40,000 |
|
| |
Employee advance | 1,000 | |||
DVD inventories | 1,522,520 |
| 1,369,057 | |
|
|
|
|
|
| Total Current Assets | 8,796,363 |
| 4,410,036 |
|
|
|
|
|
FILM COSTS, net of accumulated amortization of | ||||
$1,818,817 and $824,906, respectively | 2,150,223 |
| 2,586,303 | |
|
|
|
|
|
EQUIPMENT, net of accumulated depreciation of | ||||
$24,577 and $12,999, respectively | 12,429 |
| 20,199 | |
|
|
|
|
|
OTHER ASSETS | 2,518 |
| 649,162 | |
|
|
|
|
|
| Total Assets | $10,961,533 |
| $7,665,700 |
|
|
|
|
|
LIABILITIES AND MEMBERS' EQUITY | ||||
|
|
|
|
|
CURRENT LIABILITIES: | ||||
| Accounts payable | $3,998,972 |
| $1,951,054 |
| Related party accounts payable | 395,511 |
| 1,444,556 |
| Accrued expenses | 1,565,207 |
| 266,414 |
| Distributions payable - related parties | 800,000 |
| - |
| Interest payable | 102,375 |
| 68,250 |
| Income tax payable | 11,790 |
| 11,790 |
| Notes payable - related parties | 617,452 |
| 617,452 |
| Deferred revenue | - |
| 9,189 |
|
|
|
|
|
| Total Current Liabilities | 7,491,307 |
| 4,368,705 |
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES | ||||
|
|
|
|
|
MEMBERS' EQUITY | 3,470,226 |
| 3,296,995 | |
|
|
|
|
|
|
|
|
|
|
| Total Liabilities and Members' Equity | $10,961,533 |
| $7,665,700 |
See Accompanying Independent Auditors’ Report
and Notes to Financial Statements
Page 3
TRINITY HOME ENTERTAINMENT, LLC
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2006 AND 2005
|
| 2006 |
| 2005 |
|
|
|
|
|
REVENUES | $19,236,724 |
| $12,616,128 | |
|
|
|
|
|
COST OF REVENUES | 14,897,765 |
| 8,830,016 | |
|
|
|
|
|
| Gross Profit | 4,338,959 |
| 3,786,112 |
|
|
|
|
|
OPERATING EXPENSES | ||||
| General and administrative expenses | 1,570,430 |
| 1,500,162 |
|
|
|
|
|
| Operating Profit | 2,768,529 |
| 2,285,950 |
|
|
|
|
|
OTHER EXPENSES: | ||||
| Interest | 34,125 |
| 34,125 |
| Other Income | 583 |
| 348,654 |
|
|
|
|
|
| Total Other Expenses | 34,708 |
| 382,779 |
|
|
|
|
|
INCOME BEFORE PROVISION FOR INCOME TAXES | 2,733,821 |
| 1,903,171 | |
|
|
|
|
|
PROVISION FOR INCOME TAXES | 12,590 |
| 12,590 | |
|
|
|
|
|
| Net Income | $2,721,231 |
| $1,890,581 |
See Accompanying Independent Auditors’ Report
and Notes to Financial Statements
Page 4
TRINITY HOME ENTERTAINMENT, LLC
STATEMENTS OF CHANGES IN MEMBERS’ EQUITY
YEARS ENDED DECEMBER 31, 2006 AND 2005
| Balance - December 31, 2004 | $ | 1,520,836 | |
| Contributions | 13,578 | ||
| Distributions | (128,000 | ) | |
| Net Income | 1,890,581 | ||
| Balance - December 31, 2005 | 3,296,995 | ||
| Distributions | (2,548,000 | ) | |
| Net Income | 2,721,231 | ||
| Balance - December 31, 2006 | $ | 3,470,226 |
See Accompanying Independent Auditors’ Report
and Notes to Financial Statements
Page 5
TRINITY HOME ENTERTAINMENT, LLC
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2006 AND 2005
|
|
|
| 2006 |
| 2005 |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||
| Net income | $2,721,231 |
| $1,890,581 | ||
| Adjustments to reconcile net income to net cash | |||||
| provided by operating activities: | |||||
|
| Amortization of film costs | 993,911 |
| 363,342 | |
|
| Depreciation of property and equipment | 11,578 |
| - | |
|
| (Increase) decrease in: | ||||
|
|
| Accounts receivable | (3,859,685) |
| 1,105,255 |
|
|
| Related party accounts receivable | 504,027 |
| (529,090) |
|
|
| Related Party advance receivable | (651,328) |
|
|
|
|
| Due from related party | (40,000) |
|
|
|
|
| Employee advance | 1,000 |
| (1,000) |
|
|
| DVD inventories | (153,463) |
| 892,848 |
|
|
| Other assets | 646,644 |
|
|
|
|
|
|
|
|
|
|
| Increase (decrease) in: | ||||
|
|
| Accounts payable | 2,047,918 |
| (3,944,289) |
|
|
| Related party accounts payable | (1,049,045) |
| 1,085,319 |
|
|
| Accrued expenses | 1,298,793 |
| 266,414 |
|
|
| Interest payable | 34,125 |
| 34,125 |
|
|
| Income tax payable | (800) | ||
|
|
| Deferred revenue | (9,189) |
| (477,024) |
|
|
| Net Cash Provided by Operating Activities | 2,496,517 |
| 685,681 |
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||
| Acquisition of film rights | (557,831) |
| (977,786) | ||
| Acquisition of equipment | (3,808) |
| (1,724) | ||
| Advances regarding distribution contract | - |
| (299,212) | ||
|
|
| Net Cash Used by Investing Activities | (561,639) |
| (1,278,722) |
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||
| Cash contribution by Members | - |
| 13,578 | ||
| Distributions to Members | (1,748,000) |
| (128,000) | ||
|
|
| Net Cash Used by Financing Activities | (1,748,000) |
| (114,422) |
|
|
|
|
|
|
|
|
|
| Net Increase (Decrease) in Cash | 186,878 |
| (707,463) |
|
|
|
|
|
|
|
CASH - Beginning of Year | 238,234 |
| 945,697 | |||
|
|
|
|
|
|
|
CASH - End of Year | $425,112 |
| $238,234 | |||
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES: | ||||||
| Cash paid during the years ended December 31, 2006 and 2005: | |||||
|
| Interest | $- |
| $- | |
|
| Income taxes | $12,590 |
| $12,590 | |
See Accompanying Independent Auditors’ Report
and Notes to Financial Statements
Page 6
TRINITY HOME ENTERTAINMENT, LLC
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2006 AND 2005
1.
DESCRIPTION OF BUSINESS AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Trinity Home Entertainment, LLC (the “Company”) is a California limited liability company (“LLC”) that was converted to an LLC on January 4, 2004. The Company's operations are conducted through its administrative offices located in Westlake Village, California. In addition, the Company maintains its inventory at various outside warehouses in the United States of America and Canada. The Company distributes movie titles on predominantly digital video disc (“DVD”) to retail companies for ultimate sale to end-users. The rights to distribute the titles are acquired through license and distribution agreements with terms ranging from several years to perpetuity.
Operating Segment Information
The Company operates as one segment in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 131, “Disclosures about Segments of an Enterprise and Related Information.” The Company’s management personnel view the Company’s performance and make resource allocation decisions by looking at the Company as a whole. Although there may be different media lines within the Company, they are economically similar and are also similar in terms of the five criteria set forth in SFAS No. 131 that must be met to combine segments. The types and class of customers are similar across all product lines, and products are distributed through common channels and networks.
Basis of Accounting
The accompanying financial statements have been prepared on the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized in the accounting period in which they are earned, while expenses are recognized in the accounting period in which they are incurred regardless of when cash is received and disbursed. The financial statements are presented in conformity with generally accepted accounting principles in the United States of America ("U.S. GAAP").
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
See Accompanying Independent Auditors’ Report
Page 7
TRINITY HOME ENTERTAINMENT, LLC
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2006 AND 2005
1.
DESCRIPTION OF BUSINESS AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Fair Value of Financial Instruments
The carrying value of all financial instruments potentially subject to valuation risk (principally consisting of accounts receivable, accounts payable, notes receivable and notes payable) approximates fair value based upon prevailing interest rates available to the Company.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist of cash and accounts receivable.
Cash is maintained at a national financial institution. At times, such balances may exceed the Federal Deposit Insurance Corporation (“FDIC”) limit. At December 31, 2006 the bank balance exceeded the FDIC limit by $325,112.
The Company normally sells to a few large customers. Such customers are normally large reputable companies or the entities of the United States government. At December 31, 2006, two customers represented 55% and 11% of total annual sales. At December 31, 2005, four customers represented 26%, 21%, 12% and 11% of total annual sales.
At December 31, 2006, three customers represented 48%, 18% and 13% of total trade receivables. The majority of the trade receivables at December 31, 2006 are contracts with entities of the United States government. At December 31, 2005, four customers represented 31%, 16%, 15% and 12% of total trade receivables.
Accounts Receivable
Accounts receivable are reported at the customers’ outstanding balances less any
allowance for doubtful accounts. Interest is not accrued on overdue accounts
receivable. The Company normally does not require collateral on sales.
Allowance for Doubtful Accounts and Estimated Returns
At December 31, 2006 and 2005, the Company has reserved for uncollectible accounts
totaling $252,657 and $0, respectively and, has reserved for estimated returns totaling
$549,895 and $521,935, respectively. Trade accounts receivable at December 31, 2006
and 2005 are net of such allowances. The Company routinely evaluates the credit
worthiness of its customers and the collectibility of accounts receivable based on how
recently payments have been received. The Company provides an allowance for
doubtful accounts and estimated returns based upon management's evaluation of
See Accompanying Independent Auditors’ Report
Page 8
TRINITY HOME ENTERTAINMENT, LLC
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2006 AND 2005
1.
DESCRIPTION OF BUSINESS AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
outstanding accounts receivable and historical trends of sales returns.
DVD Inventories
Inventories consist primarily of DVD's with related packaging and are valued at lower of cost or market, determined using the average cost method.
Long-Lived Assets
The Company recognizes impairment losses on long-lived assets used in operations when the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amount. In such circumstances, those assets are written down to estimate fair value.
Film Costs
Film costs include the costs of licensing distribution rights and developing masters. Film costs are stated at the lower of unamortized cost or market. In accordance with Statement of Position (“SOP”) 00-2 “Accounting by Producers or Distributors of Films”, film costs are amortized using the film-forecast-computation method. Utilizing this method, costs are amortized by film groups or individually, based on the ratio of actual current period gross revenues to estimated remaining total lifetime revenues. These estimates are reviewed by management periodically. Amortization is included in cost of goods sold in the Statements of Income. The average life of film titles acquired prior to December 31, 2006 is estimated to be six years.
Equipment
Property and equipment are recorded at cost. Expenditures for maintenance and repairs are charged to expense as incurred, while renewals and betterments are capitalized. Depreciation is provided using the straight-line method over the following estimated useful lives:
Computers
3 years
Furniture and Fixtures
5 years
Significant Vendors
Three vendors accounted for 56%, 15% and 12% of the Company's inventory purchases for the year ended December 31, 2006. Four vendors accounted for 30%, 16%, 13% and 12% of the Company's inventory purchases for the year ended
See Accompanying Independent Auditors’ Report
Page 9
TRINITY HOME ENTERTAINMENT, LLC
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2006 AND 2005
1.
DESCRIPTION OF BUSINESS AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
December 31, 2005. The Company concentrates its reproduction of DVD’s and other media primarily with three vendors. Since the Company has the rights to distribution
and maintains the media masters the Company is not significantly impacted by the loss of any single vendor in the near term. Sales delivery times may be momentarily affected due to production setup at new vendors.
Revenue Recognition
Revenues from film distribution are recognized when all recognition requirements of SOP 00-2 and Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition” are satisfied. Home video product revenues, including revenues generated from sales of DVDs, net of actual returns, are recognized upon availability and shipment of the product for retail sale to customers.
Revenues also include license fee income derived from agreements wherein the Company has transferred the distribution rights to another entity, royalty income relates to historical, undocumented agreements on five specific titles and distribution fees that are determined by written agreement between the Company and either related parties or unrelated entities.
Shipping and Handling
Shipping and handling costs associated with inbound freight are included in cost of revenues.
Advertising
The Company expenses advertising costs as incurred. At December 31, 2006 and 2005, the Company expensed $23,913 and $16,874, respectively, for printed material.
Recent Pronouncements and Accounting Changes
In February 2007, the Financial Accounting Standards Board (“ FASB”) issued SFAS No. 159, which permits entities to choose to measure many financial instruments and certain other items at fair value. SFAS No. 159 also includes an amendment to SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities” which applies to all entities with available-for-sale and trading securities. This Statement is effective as of an entity’s first fiscal year that begins after November 15, 2007. The Company is assessing the impact of SFAS No. 159 and has not determined whether it
See Accompanying Independent Auditors’ Report
Page 10
TRINITY HOME ENTERTAINMENT, LLC
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2006 AND 2005
1.
DESCRIPTION OF BUSINESS AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
will have a material impact on the Company’s results of operations or financial position.
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” The Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value
measurements, and does not require any new fair value measurements. This Statement applies to other accounting pronouncements that require or permit fair value measurements. The Statement is effective for the fiscal years beginning after
November 15, 2007. The Company is assessing SFAS No. 157 and has not determined the impact the adoption of SFAS No. 157 will have on its results of operations or financial position.
2.
EQUIPMENT
Equipment is as follows at December 31:
|
| 2006 |
| 2005 |
|
|
|
|
|
Furniture and fixtures | $25,618 |
| $21,480 | |
Computers | 11,388 |
| 11,718 | |
|
|
|
|
|
| Total | 37,006 |
| 33,198 |
Less: | Accumulated depreciation | (24,577) |
| (12,999) |
|
|
|
|
|
| Equipment, Net | $12,429 |
| $20,199 |
Depreciation expense of $11,577 and $0 was recorded for the years ended December 31, 2006 and 2005, respectively
3.
RELATED PARTY RECIVABLE
The related party receivable represents distribution advances totaling $651,328 at December 31, 2006 paid to 905 Corporation, a company wholly owned by a consultant to the Company. The advances were made to 905 Corporation to assist it in the acquisition of licensing rights for a library of films. The receivable is due on demand. In connection with the sale of the Company subsequent to year-end, the receivable was satisfied in full. See Note 10.
See Accompanying Independent Auditors’ Report
Page 11
TRINITY HOME ENTERTAINMENT, LLC
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2006 AND 2005
4.
NOTES PAYABLE – RELATED PARTIES
As stated in Note 1, the Company was converted from a California corporation ("the Corporation") to a California limited liability company ("LLC") on January 4, 2004. In December of 2002, the Corporation was purchased by a Hong Kong trading company, which owned the Corporation until December 2003 when it rescinded its Ownership. During the period of the trading company's ownership, it advanced funds in the amount of $487,500 to the Corporation. Upon rescission of ownership, a note was drawn for the $487,500 and the liability passed through to the LLC upon conversion. Interest accrued at 7% per annum and the note matured in December 2005. The maturity date was extended without a stated fixed date under the same terms and conditions as the original note. The note was paid in June 2007. The note was personally guaranteed by a shareholder and officer of the Corporation. At December 31, 2006 and 2005, accrued interest totaled $102,375 and $68,250, respectively. Interest expense related to this note payable totaled $34,125 for each of the years ended December 31, 2006 and 2005, respectively.
In August 2002, the Company received a non-interest bearing advance of $129,980 from a related party that is payable on demand.
5.
RELATED PARTY TRANSACTIONS
In October 2006, the Company made a non-interest bearing advance of $40,000 to a related party. The amount was repaid in May 2007.
For the year ended December 31, 2006, sales to related parties totaled $18,075, and purchases from related parties totaled $1,379,757. For the year ended December 31, 2005, sales to related parties totaled $535,437, and purchases totaled $1,721,369.
All transactions between related parties are conducted in cash.
In December 2006, the Company issued distribution checks to the Members totaling $800,000. Since the checks would have created an overdraft when issued, the Members did not deposit them until 2007 when cash was available. At December 31, 2006, the $800,000 was reported as "distributions payable – related parties".
See Accompanying Independent Auditors’ Report
Page 11
TRINITY HOME ENTERTAINMENT, LLC
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2006 AND 2005
6.
PROVISION FOR INCOME TAXES
The Company is a limited liability company and for federal and state income tax purposes is taxed as a partnership with all elements of income and deductions taxable to or deductible by its Members. A gross receipts tax is imposed by State taxing authorities; therefore, a tax provision of $12,590 has been recorded as of December 31, 2006 and 2005, respectively.
7.
COMMITMENTS
The Company leases office space under a month-to-month agreement. Rent expense for the years ended December 31, 2006 and 2005 were $26,500 and $19,550, respectively.
8.
CONTINGENCIES
From time to time, the Company has been involved in various claims and lawsuits which arose in the ordinary course of business. Management is not currently aware of any pending, threatened or unasserted claims.
9.
MEMBERS' EQUITY
Members' equity is divided into percentages of contributed capital. At December 31, 2006 and 2005, three Members held 50%, 25% and 25% of membership interests. Upon distribution of cash from operations or distribution of capital, all Members are in a first position as defined in the Company Agreement. Upon liquidation of the limited liability company, liquidation distributions shall place all Members equally in first position in proportion to their interest, as defined in the Company Agreement.
Each Member's liability is limited to his or her initial capital contribution. Members do not have any personal liability to contribute funds to satisfy liabilities or obligations of the Company, except where a Member or Members guarantee an obligation of the Company and a call is made on that obligation.
The term of the Company is through November 30, 2055.
10.
SUBSEQUENT EVENTS - (UNAUDITED)
In November 2006, the Members entered into an agreement with a corporation to sell the Members’ ownership interests in the Company. In connection with the agreement, certain individuals have guaranteed the Members’ performance and their assumption of liabilities contained in the agreement.
In February 2007, the Company entered into a five-year lease agreement for administrative office space. The base rent for the first year of the lease is $4,200 per month with a rent escalation clause based on an annual cost of living adjustment. The lease provides for three five-year options to extend beyond the base term.
In addition, distributions totaling approximately $1,000,000 were paid to the Members’ subsequent to year end.
See Accompanying Independent Auditors’ Report
TRINITY HOME ENTERTAINMENT, LLC
TRINITY HOME ENTERTAINMENT, LLC
TABLE OF CONTENTS
PAGE
FINANCIAL STATEMENTS:
Balance Sheets,
June 30, 2007 (Unaudited) and
December 31, 2006
2-3
Statements of Income (Unaudited)
for the Six Months Ended June 30, 2007 and 2006
4
Statements of Changes in Members' Equity (Unaudited)
for the Six Months Ended June 30, 2007 and 2006
5
Statements of Cash Flows (Unaudited)
for the Six Months Ended June 30, 2007 and 2006
6-7
| TRINITY
HOME ENTERTAINMENT, LLC BALANCE SHEETS JUNE 30, 2007 (UNAUDITED) AND DECEMBER 31, 2006 |
| June 30, | ||||
| 2007 | December 31, | |||
| (Unaudited) | 2006 | |||
| ASSETS | ||||
| CURRENT ASSETS: | ||||
| Cash | $ | 730,938 | $ | 425,112 |
| Accounts receivable, net | 3,508,730 | 6,132,340 | ||
| Related party accounts receivable | 20,453 | 25,063 | ||
| Related party advance receivable | 651,328 | 651,328 | ||
| Due from related party | 40,000 | |||
| Prepaid expenses | 25,000 | |||
| DVD inventories | 1,147,791 | 1,522,520 | ||
| Total current assets | 6,084,240 | 8,796,363 | ||
| FILM COSTS, Net of accumulated | ||||
| amortization of $2,222,935 and | ||||
| $1,818,817, respectively | 2,120,605 | 2,150,223 | ||
| EQUIPMENT, Net of accumulated | ||||
| depreciation of $27,945 and | ||||
| $24,577, respectively | 9,061 | 12,429 | ||
| OTHER ASSETS | 2,419 | 2,518 | ||
| TOTAL ASSETS | $ | 8,216,325 | $ | 10,961,533 |
(Continued)
TRINITY
HOME ENTERTAINMENT, LLC
BALANCE SHEETS - Continued
JUNE 30, 2007 (UNAUDITED)
AND DECEMBER 31, 2006
| June 30, | ||||
| 2007 | December 31, | |||
| (Unaudited) | 2006 | |||
| LIABILITIES AND MEMBERS' EQUITY | ||||
| CURRENT LIABILITIES: | ||||
| Accounts payable | $ | 5,341,670 | $ | 3,998,972 |
| Related party accounts payable | 32,111 | 395,511 | ||
| Accrued expenses | 453,541 | 1,565,207 | ||
| Distributions to related parties | 800,000 | |||
| Interest payable | 102,375 | |||
| Income tax payable related party | 11,790 | |||
| Notes payable - | 617,452 | |||
| Total current liabilities | 5,827,322 | 7,491,307 | ||
| COMMITMENTS AND CONTINGENCIES | ||||
| MEMBERS' EQUITY | 2,389,003 | 3,470,226 | ||
| TOTAL LIABILITIES AND MEMBERS' EQUITY | $ | 8,216,325 | $ | 10,961,533 |
TRINITY
HOME ENTERTAINMENT, LLC
STATEMENTS OF INCOME (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2007 AND 2006
| 2007 | 2006 | |||||
| REVENUES | $ | 9,786,500 | $ | 7,771,224 | ||
| COST OF REVENUES | 8,901,437 | 5,653,945 | ||||
| GROSS PROFIT | 885,063 | 2,117,279 | ||||
| GENERAL AND ADMINISTRATIVE EXPENSES | 868,313 | 1,013,050 | ||||
| INCOME FROM OPERATIONS | 16,750 | 1,104,229 | ||||
| OTHER INCOME (EXPENSE): | ||||||
| Other income | 900 | |||||
| Interest expense | (13,090 | ) | (17,062 | ) | ||
| Other expense, net | (12,190 | ) | (17,062 | ) | ||
| INCOME BEFORE PROVISION FOR INCOME TAXES | 4,560 | 1,087,167 | ||||
| PROVISION FOR INCOME TAXES | 800 | 800 | ||||
| NET INCOME | $ | 3,760 | $ | 1,086,367 |
TRINITY
HOME ENTERTAINMENT, LLC
STATEMENTS OF CHANGES IN MEMBERS' EQUITY (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2007 AND 2006
| 2007 | 2006 | |||||
| BEGINNING BALANCE | $ | 3,470,226 | $ | 3,296,995 | ||
| DISTRIBUTIONS | (1,084,983 | ) | (400,000 | ) | ||
| NET INCOME | 3,760 | 1,086,367 | ||||
| ENDING BALANCE | $ | 2,389,003 | $ | 3,983,362 |
TRINITY
HOME ENTERTAINMENT, LLC
STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2007 AND 2006
| 2007 | 2006 | ||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
| Net income | $ | 3,760 | $ | 1,086,367 | |||
| Adjustments to reconcile net income to net | |||||||
| cash provided by operating activities: | |||||||
| Amortization of film costs | 404,118 | 496,968 | |||||
| Depreciation of property and equipment | 3,368 | 5,788 | |||||
| Changes in operating assets and liabilities: | |||||||
| Accounts receivable | 2,623,610 | (614,139 | ) | ||||
| Related party accounts receivable | 4,610 | 523,659 | |||||
| Related party notes receivable | 40,000 | (651,328 | ) | ||||
| Other receivables | (36,174 | ) | |||||
| Prepaid expenses | (25,000 | ) | |||||
| DVD inventories | 374,729 | 140,018 | |||||
| Other assets | 99 | 646,644 | |||||
| Accounts payable | 1,342,698 | 510,404 | |||||
| Related party accounts payable | (363,400 | ) | (965,821 | ) | |||
| Accrued liabilities | (1,111,666 | ) | (230,001 | ) | |||
| Income tax payable | (11,790 | ) | (11,790 | ) | |||
| Interest payable | (102,375 | ) | 17,062 | ||||
| Deferred revenue | (9,189 | ) | |||||
| Related party notes payable | (617,452 | ) | |||||
| Net cash provided by operating activities | 2,565,309 | 908,468 | |||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
| Acquisition of film rights | (374,500 | ) | |||||
| Acquisition of equipment | (2,679 | ) | |||||
| Net cash used by investing activities | (374,500 | ) | (2,679 | ) | |||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
| Accrued distributions to Members | (800,000 | ) | |||||
| Distributions to Members | (1,084,983 | ) | (400,000 | ) | |||
| Net cash used by financing activities | (1,884,983 | ) | (400,000 | ) | |||
| NET INCREASE IN CASH | 305,826 | 505,789 | |||||
| CASH, BEGINNING OF PERIOD | 425,112 | 238,234 | |||||
| CASH, END OF PERIOD | $ | 730,938 | $ | 744,023 | |||
(Continued)
TRINITY
HOME ENTERTAINMENT, LLC
STATEMENTS OF CASH FLOWS (UNAUDITED) - Continued
FOR THE SIX MONTHS ENDED JUNE 30, 2007 AND 2006
| 2007 | 2006 | |||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||
| Cash paid during the period: | ||||||
| Interest | $ | 115,465 | $ | -0 | - | |
| Income taxes | $ | 11,790 | $ | 800 |
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.
|
Peace Arch Entertainment Group Inc. |
|||||
|
(Registrant)
|
|||||
|
Date |
September 14, 2007 |
By |
"Mara Di Pasquale" |
||
|
(Signature)* |
|||||
|
Mara Di Pasquale, Chief Financial Officer |
|||||
*Print the name and title under the signature of the signing officer.
GENERAL INSTRUCTIONS
A.
Rule as to Use of Form 6-K,
This form shall be used by foreign private issuers which are required to furnish reports pursuant to Rule 13a-16 or 15d-16 under the Securities Exchange Act of 1934.
B.
Information and Document required to be Furnished,
Subject to General Instruction D herein, an issuer furnishing a report on this form shall furnish whatever information, not required to be furnished on Form 40-F or previously furnished, such issuer (I) makes or is required to make public pursuant to the law of the jurisdiction of its domicile or in which it is incorporated or organized, or (ii) files or is required to file with a stock exchange on which its securities are traded and which was made public by that exchange, or (iii) distributes or is required to distribute to its security holders.
The information required to be furnished pursuant to (I), (ii) or (iii) above is that which is material with respect to the issuer and its subsidiaries concerning: changes in business; changes in management or control; acquisitions or dispositions of assets; bankruptcy or receivership; changes in registrant's certifying accountants; the financial condition and results of operations; material legal proceedings; changes in securities or in the security for registered securities; defaults upon senior securities; material increases or decreases in the amount outstanding of securities or indebtedness; the results of the submission of matters to a vote of security holders; transactions with directors, officers or principal security holders; the granting of options or payment of other compensation to directors or officers; and any other information which the registrant deems of material importance to security holders.
This report is required to be furnished promptly after the material contained in the report is made public as described above. The information and documents furnished in this report shall not be deemed to be "filed" for the purpose of Section 18 of the Act or otherwise subject to the liabilities of that section.
If a report furnished on this form incorporates by reference any information not previously filed with the Commission, such information must be attached as an exhibit and furnished with the form.
C.
Preparation and Filing of Report
This report shall consist of a cover page, the document or report furnished by the issuer, and a signature page. Eight complete copies of each report on this form shall be deposited with the Commission. At least one complete copy shall be filed with each United States stock exchange on which any security of the registrant is listed and registered under Section 12(b) of the Act. At least one of the copies deposited with the Commission and one filed with each such exchange shall be manually signed. Unsigned copies shall be conformed.
D.
Translations of Papers and Documents into English
Reference is made to Rule 12b-12(d) [17 CFR 240.12b-12(d)]. Information required to be furnished pursuant to General Instruction B in the form of press releases and all communications or materials distributed directly to security holders of each class of securities to which any reporting obligation under Section 13(a) or 15(d) of the Act relates shall be in the English language. English versions or adequate summaries in the English language of such materials may be furnished in lieu of original English translations.
Notwithstanding General Instruction B, no other documents or reports, including prospectuses or offering circulars relating to entirely foreign offerings, need be furnished unless the issuer otherwise has prepared or caused to be prepared English translations, English versions or summaries in English thereof. If no such English translations, versions or summary have been prepared, it will be sufficient to provide a brief description in English of any such documents or reports. In no event are copies of original language documents or reports required to be furnished.