item 14 principal accounting fees services audit fees date filing aggregate fees billed comiskey company pc audit company’s financial statements 3000 fiscal years ended may 31 2011 2010 audit related fees comiskey company pc bill company amounts assurance related services related audit review company’s financial statements fiscal year ended may 31 2010 fiscal year ended may 31 2011 tax fees aggregate fees billed comiskey company pc tax compliance advice planning 000 fiscal year ended may 31 2010 000 fiscal year may 31 2011 fees comiskey company pc bill company products services foregoing fiscal year ended may 31 2010 may 31 2011 audit committees preapproval policies procedures ibi acquisitions inc blind pool reporting company yet publicly traded separate audit committee current board directors functions audit committee item 15 item 14 principal accounting fees services audit fees 1 aggregate fees billed larry o’donnell cpa pcfor audit company’s financial statements 2500 fiscal year ended may 31 2010 2870 fiscal year ended may 31 2009 audit related fees 2 larry o’donnell cpa pc bill company amounts assurance related services related audit review company’s financial statements fiscal years ended 2010 2009 tax fees 3 aggregate fees billed larry o’donnell cpa pc tax compliance advice planning 000 fiscal year ended may 31 2010 000 fiscal year ended may 31 2009 fees 4 larry o’donnell cpa pc bill company products services foregoing fiscal years ended 2010 2009 audit committees preapproval policies procedures 5 ibi acquisitions inc blind pool reporting company yet publicly traded separate audit committee current board directors functions audit committee item 15 item 14 principal accounting fees services albert wong company certified public accountants company’s principal accountant fiscal years ended march 31 2012 2011 fees billed professional services rendered principal accountant follows fiscal auditrelated year audit fees tax fees 3312011 124000 3312012 83000 preapproval policies procedures board directors must preapprove use independent accountants nonaudit services auditors approved whole board subject review whole board item 15 item 14 principal accounting fees services audit fees 1 aggregate fees billed larry o’donnell cpa pc audit company’s financial statements 2870 fiscal year ended december 31 2008 aggregate audit fees billed ronald r chadwick pc 6250 including 3250 relating fiscal year ended may 31 2008 3000 relating fiscal year ended may 31 2009 audit related fees 2 neither larry o’donnell cpa pc ronald r chadwick pc billed company amounts assurance related services related audit review company’s financial statements fiscal years ended 2008 2007 tax fees 3 aggregate fees billed larry o’donnell cpa pc tax compliance advice planning 000 fiscal year ended december 31 2007 aggregate fees billed ronald r chadwick pc tax compliance advice planning 000 fiscal year ended december 31 2007 fees 4 neither larry o’donnell cpa pc ronald r chadwick pcbilled company products services foregoing fiscal years ended 2008 2007 audit committees preapproval policies procedures 5 ibi acquisitions inc blind pool reporting company yet publicly traded separate audit committee current board directors functions audit committee item 15 item 7 managements discussion analysis plan operation special note caution regarding forwardlooking statements certain statements report including statements following discussion known forward looking statements basically statements future reason statements involve risk uncertainty since one accurately predict future words plans intends hopes seeks anticipates expects like often identify forward looking statements indication statement forward looking statement forward looking statements include statements concerning plans objectives respect present future operations company statements express imply present future operations may produce revenues income profits numerous factors future events could cause company change plans objectives fail successfully implement plans achieve objectives cause present future operations fail produce revenues income profits therefore reader advised following discussion considered light discussion risks factors contained report form 10k companys filings securities exchange commission statements contained following discussion construed guarantee assurance future performance future results plan operation company organized vehicle investigate investigation warrants acquire target company business seeking perceived advantages publicly held corporation principal business objective next 12 months beyond time achieve longterm growth potential combination business rather immediate shortterm earnings company restrict potential candidate target companies specific business industry geographical location thus may acquire type business company currently engage business activities provide cash flow costs investigating analyzing business combinations next 12 months beyond time paid available working capital next 12 months anticipate incurring costs related 1 filing exchange act reports 2 costs relating consummating acquisition believe able meet costs use currently available funds deferral fees certain service providers additional amounts necessary loaned invested us stockholders management investors company may consider business recently commenced operations developing company need additional funds expansion new products markets seeking develop new product service established business may experiencing financial operating difficulties need additional capital alternative business combination may involve acquisition merger company need substantial additional capital desires establish public trading market shares avoiding among things time delays significant expense loss voting control may occur public offering none officers directors preliminary contact discussions representative entity regarding business combination us target business selected may financially unstable company entity early stages development growth including entities without established records sales earnings event subject numerous risks inherent business operations financially unstable early stage potential emerging growth companies addition may effect business combination entity industry characterized high level risk although management endeavor evaluate risks inherent particular target business assurance properly ascertain assess significant risks company anticipates selection business combination complex extremely risky general economic conditions rapid technological advances made industries shortages available capital management believes numerous firms seeking even limited additional capital andor perceived benefits becoming publicly traded corporation perceived benefits becoming publicly traded corporation include among things facilitating improving terms additional equity financing may obtained providing liquidity principals investors business creating means providing incentive stock options similar benefits key employees offering greater flexibility structuring acquisitions joint ventures like issuance stock potentially available business combinations may occur many different industries various stages development make task comparative investigation analysis business opportunities extremely difficult complex item 7a item 7 managements discussion analysis plan operation special note caution regarding forwardlooking statements certain statements report including statements following discussion known forward looking statements basically statements future reason statements involve risk uncertainty since one accurately predict future words plans intends hopes seeks anticipates expects like often identify forward looking statements indication statement forward looking statement forward looking statements include statements concerning plans objectives respect present future operations company statements express imply present future operations may produce revenues income profits numerous factors future events could cause company change plans objectives fail successfully implement plans achieve objectives cause present future operations fail produce revenues income profits therefore reader advised following discussion considered light discussion risks factors contained report form 10k companys filings securities exchange commission statements contained following discussion construed guarantee assurance future performance future results plan operation company organized vehicle investigate investigation warrants acquire target company business seeking perceived advantages publicly held corporation principal business objective next 12 months beyond time achieve longterm growth potential combination business rather immediate shortterm earnings company restrict potential candidate target companies specific business industry geographical location thus may acquire type business company currently engage business activities provide cash flow costs investigating analyzing business combinations next 12 months beyond time paid available working capital next 12 months anticipate incurring costs related 1 filing exchange act reports 2 costs relating consummating acquisition believe able meet costs use currently available funds deferral fees certain service providers additional amounts necessary loaned invested us stockholders management investors company may consider business recently commenced operations developing company need additional funds expansion new products markets seeking develop new product service established business may experiencing financial operating difficulties need additional capital alternative business combination may involve acquisition merger company need substantial additional capital desires establish public trading market shares avoiding among things time delays significant expense loss voting control may occur public offering none officers directors preliminary contact discussions representative entity regarding business combination us target business selected may financially unstable company entity early stages development growth including entities without established records sales earnings event subject numerous risks inherent business operations financially unstable early stage potential emerging growth companies addition may effect business combination entity industry characterized high level risk although management endeavor evaluate risks inherent particular target business assurance properly ascertain assess significant risks company anticipates selection business combination complex extremely risky general economic conditions rapid technological advances made industries shortages available capital management believes numerous firms seeking even limited additional capital andor perceived benefits becoming publicly traded corporation perceived benefits becoming publicly traded corporation include among things facilitating improving terms additional equity financing may obtained providing liquidity principals investors business creating means providing incentive stock options similar benefits key employees offering greater flexibility structuring acquisitions joint ventures like issuance stock potentially available business combinations may occur many different industries various stages development make task comparative investigation analysis business opportunities extremely difficult complex item 7a item 7 managements discussion analysis financial condition results operation special note caution regarding forwardlooking statements certain statements report including statements following discussion known forward looking statements basically statements future reason statements involve risk uncertainty since one accurately predict future words plans intends hopes seeks anticipates expects like often identify forward looking statements indication statement forward looking statement forward looking statements include statements concerning plans objectives respect present future operations company statements express imply present future operations may produce revenues income profits numerous factors future events could cause company change plans objectives fail successfully implement plans achieve objectives cause present future operations fail produce revenues income profits therefore reader advised following discussion considered light discussion risks factors contained report form 10k companys filings securities exchange commission statements contained following discussion construed guarantee assurance future performance future results background incorporated state colorado may 22 2008 since inception engaged organizational efforts obtaining initial financing company formed vehicle pursue possible business combination january 3 2012 entered investment agreements shareholders toe japan “investors” pursuant investment agreements investors agreed make direct investment registrant form contribution registrant shares common stock toe japan owned investor “toe japan shares” consideration investment registrant toe japan shares investor registrant agreed issue investors approximately 6893 shares common stock registrant toe japan share invested registrant twenty investors holders one hundred percent 100 outstanding shares toe japan invested registrant time closing investment agreements investors invested total 4596 toe japan shares registrant representing 100 outstanding stock toe japan registrant issued total 31680000 shares common stock investors effect transaction make toe japan subsidiaries “toe group” whollyowned subsidiaries registrant cause change control registrant toe japan formed 2003 initially acted agent authors cartoonists mainly involved publishing books 2007 toe japan entered production segment entertainment industry production animated films straight jacket coproduction manga entertainment starz entertainment group 2007 toe japan’s growth continued japan formed first subsidiary outside japan “overseas” united kingdom opened office london 2008 toe set branch office korea 2009 toe japan set subsidiary singapore branch office russia incorporated 2011 2010 toe group set sales office los angeles offices set order facilitate business expansion markets offices limited staff mainly operate assistance main office ebisu japan representative london office recently resigned leaving office dormant find replacement currently engaged two industry segments film entertainment consists principally production distribution animated live action feature films including distribution films dvd’s bluray discs jointly referred “dvd” ii publishing distribution books addition toe group possesses intellectual property rights 24 films including animated live action toe group derives revenue rights receipts royalties depending nature intellectual property royalty revenues derived various distribution channels stated derive revenue production distribution animated live action films television programs receive percentage ticket revenue generated theatrical release films addition receive revenue post theatrical release includes sale andor license dvd’s bluray discs sale rental products generally occurs variety retail outlets video specialty stores mass merchants convenience stores recently films become available rental mail various companies downloading internet normally post theatrical release occurs 3 6 months theatrical release broadcasting television additional revenue generated payperview television allows cable satellite television subscribers purchase individual programs including recently released films “per use” basis subscriber fees typically divided among program distributor payperview operator cable system operator pay television allows subscribers view premium channels offered cable satellite system operators monthly subscription fee broadcast television provides programming air basic cable fee based service provides programming via cable satellite transmission broadcasters cable satellite systems pay fees us right air programming specified number times however revenue generated source currently rather insignificant toe addition content produced us may occasion purchase license right create distribute dvd bluray discs products produced companies distribution divided outsources internal distribution profitability based ability control cost production careful selection production houses subcontractors monitoring ongoing projects cost budget selection appropriate distribution channel products initial business representing authors creative talent result relationships established also began engage publishing works addition works created authors represent also acquire rights translate foreign nonjapanese titles published japan book publishing sector revenues derived sale books publish publication wholesalers instances also sales directly retailers sales compete distributor profitability portion business based ability control cost production careful selection printers publication wholesalers book published critical accounting policies estimates consolidated financial statements filed exhibits current report form 8k prepared using going concern basis accounting contemplates realization assets satisfaction liabilities normal course business march 31 2012 company accumulated deficit 4724986 current liabilities exceeded current assets 6773922 included noncurrent assets march 31 2012 5387482 film costs expensed future revenues require use cash included current liabilities march 31 2012 7861505 deferred revenue accounted approximately 56 current liabilities represents projects production deferred revenue represent cash liability excluding deferred revenue march 31 2012 would working capital 1087583 view matters described recoverability major portion recorded asset amounts realization portion current liabilities revenue shown accompanying balance sheets dependent upon continued operations turn dependent upon ability raise additional financing succeed future operations management taken steps believes sufficient revise operating financial requirements provide us ability continue going concern actively pursuing additional funding would enhance capital employed strategic partners would increase revenue bases reduce production costs management believes actions allow us continue operations throughout next fiscal year use estimates preparation financial statements conformity generally accepted accounting principles united states america “gaap” requires management make estimates judgments assumptions affect amounts reported consolidated financial statements footnotes thereto actual results could differ estimates significant estimates judgments inherent preparation consolidated financial statements include among things accounting asset impairments allowances doubtful accounts depreciation amortization determination ultimate revenues relates amortization capitalized film costs participations residuals books dvd sales returns equitybased compensation income taxes contingencies accounts receivable accounts receivable recognized carried net realizable value allowance doubtful accounts recorded period loss probable based assessment specific evidence indicating troubled collection historical experience accounts aging ongoing business relation factors accounts written exhaustive efforts collection accounts receivable provided written would recognized consolidated statement operations within operating expenses march 31 2012 2011 allowance doubtful accounts per managements judgment based best knowledge march 31 2012 2011 longest credit term customers 60 days provision sales returns doubtful accounts management’s estimate product sales returned pricing rebates grant amount receivables ultimately collected area judgment affecting reported revenues net income estimating product sales returned management analyzes vendor sales product historical return trends current economic conditions changes customer demand based information management reserves percentage product sales provide customer right return provision sales returns reflected reduction revenues related sale company’s products subject return primarily include books dvds sales primarily related film production company maintains allowance doubtful accounts reserve potentially uncollectible receivables reviews accounts receivable amounts due customers past due identify specific customers known disputes collectability issues determining amount reserve company makes judgments creditworthiness customers based past collection experience ongoing credit risk evaluations fair value financial accounting standards board “fasb” accounting standards codification “asc” topic 820 “fair value measurement disclosures” “asc 820” establishes threetier fair value hierarchy prioritizes inputs used measuring fair value hierarchy prioritizes inputs three levels based extent inputs used measuring fair value observable market tiers include · level 1defined observable inputs quoted prices active markets · level 2defined inputs quoted prices active markets either directly indirectly observable · level 3defined unobservable inputs little market data exists therefore requiring entity develop assumptions financial instruments consist cash equivalents trade receivables payables long term debt carrying values cash equivalents trade receivables payables approximate fair value due short maturities carrying value long term debt approximates fair value debt similar terms remaining maturities available company warrants conversion features embedded convertible notes accounted liabilities treated derivative instruments measured reporting date fair value using level 2 inputs nonfinancial assets measured recurring basis nonfinancial assets measured impairment annually measurement date reporting unit level using level 3 inputs assets asc 820 requires impact changes resulting application applied prospectively year statement initially applied nonfinancial assets measured nonrecurring basis include property plant equipment finiteuse intangible assets measured recoverability indicators impairment present asc 820 requires companies disclose assets liabilities measured nonrecurring basis period remeasurement fair value performed valued outstanding convertible bonds using level 3 criterion september 30 2011 valuations resulted gain derivatives 10507 investments animations films investments animation films includes company’s investments coproduction animation films generally less 50 ownership produced investors ventures equity method accounting adopted investments animations films income loss unconsolidated entities year ended march 31 2012 2011 389081 240176 respectively film costs revenues feature films typically produced initial exhibition theaters followed distribution home video electronic sellthrough videoondemand pay cable basic cable broadcast network sectors generally distribution home video videoondemand pay cable basic cable broadcast network sectors commence within range approximately one five years initial theatrical release theatrical revenues recognized films exhibited revenues home video sales recognized later delivery date video units made widely available sale rental retailers based gross sales less provision estimated returns warranty period six months usually provided us films produced arranged us based management’s past experience report defects claims compensation upfront guaranteed payments licensing intellectual property recognized revenue arrangement signed customer ii customer’s right use otherwise exploit intellectual property commenced requirement significant continued performance us iii licensing fees either fixed determinable iv collectability fees reasonably assured event significant continued performance required arrangements revenue recognized related services performed film costs include unamortized cost completed films production film rights preparation development film costs stated lower cost less accumulated amortization fair value amount capitalized film costs recognized cost revenues given film exhibited various sectors throughout life cycle determined using film forecast computation method amortization capitalized costs accrual participations residuals based proportion film’s revenues recognized period film’s estimated remaining ultimate revenues process estimating film’s ultimate revenues ie total revenue received throughout film’s life cycle discussed “film cost recognition impairments” film cost recognition impairments film costs include direct production costs production overhead acquisition costs films stated lower unamortized cost estimated fair value classified noncurrent assets accounting film costs well related revenues requires exercise judgment relating process estimating film’s ultimate revenues important two reasons first film produced related costs capitalized well time film released necessary management estimate ultimate revenues less additional costs incurred including exploitation participation costs order determine whether value film impaired thus requires immediate writeoff unrecoverable film costs second necessary management determine using film forecast computation method amount capitalized film costs amount participations residuals recognized costs revenues given film particular period extent film’s ultimate revenues adjusted resulting gross margin reported exploitation film period also adjusted prior theatrical release film management bases estimates ultimate revenues film factors historical performance similar films rating genre film prerelease market research including test market screenings expected number theaters film released management updates estimates based information available film’s production upon release actual results film changes estimates ultimate revenues period affect amount film costs amortized given period therefore could impact financial results period example prior film’s release often test market film’s targeted demographic film received favorably may reduce film’s estimated ultimate revenues ii revise film could cause production costs increase iii perform combination similarly film generates lowerthanexpected theatrical revenues initial weeks release would theatrical home video ultimate revenues adjusted downward collaborative arrangements entered collaborative arrangements film business one active participants jointly finance produce andor distribute motion picture television programs active participants share risks rewards ownership arrangements referred coproduction distribution arrangements typically record asset portion film finance participants typically distribute product different media markets revenues earned expenses incurred media markets distribute product typically recorded gross basis typically record revenues earned expenses incurred participants distribute product participants typically share profits distribution product media markets films product net receiver 1 share profits media markets distributed participants less 2 participants’ share profits media markets distributed us net amount recorded net sales net payer net amount recorded cost sales years ended march 31 2012 2011 242421 2478149 respectively deducted revenue amount owed participants 39830 664657 respectively recorded revenue amounts due participants collaborative arrangements march 31 2012 2011 gross versus net revenue recognition normal course business act use intermediary agent executing transactions third parties connection arrangements must determine whether report revenue based gross amount billed ultimate customer net amount received customer commissions payments third parties extent revenues recorded gross basis commissions payments third parties recorded expense net amount gross revenues less expense reflected operating income accordingly impact operating income whether record revenue gross net basis determination whether revenue reported gross net based assessment whether acting principal agent transaction acting principal transaction report revenue gross basis acting agent transaction report revenue net basis determination whether acting principal agent transaction involves judgment based evaluation terms arrangement serve principal transactions substantial risks rewards ownership software use rights license software use rights licenses finite useful lives generally amortized straightline basis generally five years foreign currency translation company’s reporting currency united states dollar “” accompanying consolidated financial statements expressed united states dollars company’s functional currency japanese yen “¥” addition operating subsidiaries united kingdom singapore russia maintain books record respective local currencies british pound “£” singapore dollar “sg” russian ruble “rub” functional currency primary currency economic environment operations conducted accordance asc topic 830 “translation financial statements” capital accounts consolidated financial statements translated ¥ historical exchange rates capital transactions occurred assets liabilities translated exchange rates balance sheet date income expenditures translated average exchange rate respective year resulting exchange differences recorded consolidated statement operations yearend ¥ 1 exchange rate 8197 8286 average yearly ¥ 1 exchange rate 7874 8570 yearend £ 1 exchange rate 063 062 average yearly £ 1 exchange rate 063 064 yearend sg 1 exchange rate 126 average yearly sg 1 exchange rate 125 133 yearend rub exchange rate 2941 2846 average yearly rub exchange rate 2959 2937 comprehensive income comprehensive income defined include changes equity except resulting investments owners distributions owners among disclosures items required recognized current accounting standards components comprehensive income required reported financial statement presented prominence financial statements comprehensive income includes net income foreign currency translation changes sharebased compensation sharebased compensation includes stock options granted employees directors services accounted asc topic 718 compensation stock compensation “asc 718” warrants common stock awards granted consultants accounted asc topic 505 equitybased payment nonemployees “asc 505” grants stock optionswarrants employees directors consultants recognized financial statements based grant date fair values company elected recognize compensation expense stock optionswarrants granted service conditions graded vesting schedule corresponding charge paidin capital fair value stock options estimated using blacksholes model since readily available trading price company’s stock company’s expected volatility assumption based historical volatility stock prices entertainment industry average japan expected life assumption primarily based expiration date option riskfree interest rate expected term option based us treasury yield curve effect time grant stock option expense recognized based awards expected vest forfeiture rate estimated zero customary japan employees employed company retirement asc 718 requires forfeitures estimated time grant revised subsequent periods necessary actual forfeitures differ estimates stock option based expense year ended march 31 2012 2011 segment reporting currently engaged two segments filmed entertainment consisting principally anime featured film production distribution publishing consisting principally books publishing major operations located japan singapore united kingdom 90 company’s total revenue derived filmed entertainment segment generated japan advertising expenses advertising costs expensed incurred asc topic 720 “advertising costs” advertising expenses incurred years ended march 31 2012 2011 nominal recent pronouncements reviewed recently issued yet effective accounting pronouncements believe future adoptions pronouncements may expected cause material impact financial condition results operations results operations revenue fiscal years ended march 31 2012 2011 27217067 and16026448 respectively net income loss fiscal years ended march 31 2012 2011 1492953 2008846 respectively comprehensive income loss fiscal years ended march 31 2012 2011 1264132 2296143 respectively march 31 2012 cumulative net losses cumulative comprehensive loss 4724986 554683 respectively results operations fiscal year ended march 31 2012 compared fiscal year ended march 31 2011 references 2012 2011 fiscal years ended march 31 2012 2011 respectively unless otherwise specified revenue increased 11190619 698 16026448 2011 27217067 2012 increase due increased number projects 2012 compared 2011 2012 participated one film project distribution 17 dvds 5 book titles 2011 feel quantitative value revenue increased qualitative value also increased example 2012 increased involvement international coproduction korean company telecast japan also korea efforts dvd number productions international geographic distribution successful year book division 28 books released favorable sales results sales new release 4745182 revenue total sales books year 5228237 anticipate growth continue participate larger projects coming years cost revenue increased 7508251 489 15341851 2011 22850102 2012 terms percentage revenue cost revenue 8395 2012 compared 9573 2011 cost revenue film entertainment segment approximately 933 2012 compared 955 2011 cost revenue calculated using fraction denominator estimate ultimate revenue production produce numerator revenue achieved accounting period unamortized film cost project multiplied percentage calculated extent film’s ultimate revenues adjusted resulting gross margin reported exploitation film period also adjusted changes estimates ultimate revenues period affect amount film costs amortized given period therefore impact financial results period example prior film’s release often test market film’s targeted demographic film received favorably may reduce film’s estimated ultimate revenues ii revise film could cause production costs increase iii perform combination similarly film generates lowerthanexpected theatrical revenues initial weeks release would theatrical home video ultimate revenues adjusted downward see film costs revenues included critical accounting policies estimates detailed explanation accounting changes estimate ultimate revenue lower 2012 2011 resulted lower cost revenue cost revenue book publishing segment approximately 446 2012 compared 992 2011 significant decrease cost revenue attributable greater reader acceptance titles published 2012 total gross profit increased 3682368 538 684597 2011 4366965 2012 terms percentage revenue gross profit percentage increased 1604 2012 compared 427 2011 selling general administrative expenses decreased 46401 16 2830022 2011 2783621 2012 increase generally due increase number projects releases made 2012 compared 2011 following summary selling general administrative expenses years ended march 31 2012 2011 significant cost personnel costs include salaries benefits payroll taxes costs decreased 353229 23 1534778 2011 1181549 2012 26 march 31 2010 28 march 31 2011 35 march 31 2012 increase number employees due increasing activity projects production 2012 2011 anticipate personnel costs continue rise future periods becomes necessary increase staff order continue increase number projects simultaneously process incurred 117392 subcontractor fees 2012 included costs lieu salaries replaced approximately 3 employees director fees increased 122609 307 398880 2011 521489 2012 private company director fees discretionary establishing fee program directors future periods rental expenses increased 47455 13 364682 2011 412137 2012 required additional space 2012 result increased activity travel entertainment increased 42645 251 169476 2011 212121 2012 increase directly relates increase activity number projects travel cost associated merger legal professional fees increased 30412 116 26236 2011 56648 2012 primarily result merger took place 2012 expenses include items subcontractor fees office expenses software related costs telephone variety miscellaneous costs subcontractor fees mentioned none cost individually increased significantly anticipate incur higher general administrative expenses public company expect professional fees cost transfer agent investor relations costs stock related costs increase also anticipate selling general administrative expenses concurrently increase increased activity future increase proportion revenue income loss operations increased 3728769 174 loss 2145425 2011 income 1583344 2012 income expense consists income loss unconsolidated entities 389081 240176 2012 2011 respectively mergers expenses amounting 282999 arising reverse merger transactions interest expense 160904 2012 compared 118420 2011 net income loss increased 3501799 125 loss 2008846 2011 income 1492953 2012 results operations fiscal year ended march 31 2011 compared fiscal year ended march 31 2010 references 2011 2010 fiscal years ended march 31 2011 2010 respectively unless otherwise specified revenue increased 2195625 159 13830823 2010 16026448 2011 increase due increased number projects 2011 compared 2010 2011 participated one film project distribution 17 dvds 5 book titles 2010 feel quantitative value revenue increased qualitative value also increased example 2011 involved international coproduction korean company telecast japan also korea efforts dvd number productions international geographic distribution anticipate growth continue participate larger projects coming years cost revenue increased 1900042 129 13441809 2010 15341851 2011 terms percentage revenue cost revenue 957 2011 compared 971 2010 cost revenue calculated using fraction denominator estimate ultimate revenue production produce numerator revenue achieved accounting period unamortized film cost project multiplied percentage calculated extent film’s ultimate revenues adjusted resulting gross margin reported exploitation film period also adjusted changes estimates ultimate revenues period affect amount film costs amortized given period therefore impact financial results period example prior film’s release often test market film’s targeted demographic film received favorably may reduce film’s estimated ultimate revenues ii revise film could cause production costs increase iii perform combination similarly film generates lowerthanexpected theatrical revenues initial weeks release would theatrical home video ultimate revenues adjusted downward see film costs revenues included critical accounting policies estimates detailed explanation accounting year ended march 31 2010 adjusted estimates ultimate revenue films release date wrote approximately 276000 cost revenue effect increasing percentage cost approximately 2 without adjustment cost revenue percentage basis would 951 2010 957 2011 gross profit increased 295584 76 389013 2010 684597 2011 terms percentage revenue gross profit percentage increased 43 2011 compared 28 2010 selling general administrative expenses increased 255825 99 2574197 2010 2830022for 2011 increase generally due increase number projects releases made 2011 compared 2010 following summary selling general administrative expenses years ended march 31 2011 2010 significant cost personnel costs include salaries benefits payroll taxes costs increased 285380 228 1249398 2010 1534778 2011 21 employees april 1 2009 26 march 31 2010 28 march 31 2011 increase number employees due increasing activity projects production 2011 2010 anticipate personnel costs continue rise future periods becomes necessary increase staff order continue increase number projects simultaneously process director fees increased 112551 393 286329 2010 398880 2011 private company director fees discretionary establishing fee program directors future periods rental expenses increased 50446 161 314236 2010 364682 2011 required additional space 2011 result increased activity personnel travel entertainment increased 45570 368 123906 2010 169476 2011 increase directly relates increase activity number projects new options granted 2011 expenses include items office expenses software related costs telephone variety miscellaneous costs none cost individually increased significantly anticipate incur higher general administrative expenses public company expect professional fees cost transfer agent investor relations costs stock related costs increase also anticipate selling general administrative expenses concurrently increase increased activity future increase proportion revenue loss operations decreased 39939 18 2185184 2010 2145245 2011 income expenses materially change net loss decreased 306092 132 2314938 2010 2008846 2011 liquidity capital resources march 31 2012 working capital deficit 6773922 compared working capital deficit 6945547 march 31 2011 working capital deficit march 31 2012 7861505 deferred revenue represent cash liability amount included future revenue addition 5387482 film costs asset result receipt cash amount used cost revenue future excluding amounts deferred revenue would working capital 1087583 march 31 2012 year ended march 31 2012 operating activities provided cash 968618 year ended march 31 2011 used cash operations 839761 year ended march 31 2012 investing activities used 1184995 cash year ended march 31 2011 investing activities used 496963 cash year ended march 31 2012 financing activities provided 327505 cash year ended march 31 2011 financing activities provided 1302135 cash year ended march 31 2012 new bank borrowings short long term 2934870 offset repayments 2608458 compared borrowings 4083727 repayments 2781592 year ended march 31 2010 dependent third party financing provide liquidity fund future projects past funding provided bank loans guaranteed chief executive officer additional guarantee third party commercialized credit guarantee company assurances able continue financing projects manner currently exploring alternatives might include equity financing addition bank financing prior years issued convertible bonds shareholder original amount ¥84000000 approximately us1103758 bonds bear interest fluctuating rate interest rate equal prime lending rate longterm credit established mizuho corp bank first day interest payment period plus 03 based prime rate interest due payable semiannually bonds due payable full september 30 2012 time prior redemption bonds convertible holder shares common stock company conversion price approximately us0105 per share sufficient cash repay obligation holder convert assurances able renegotiate terms bonds scheduled maturities longterm debt march 31 2012 follows years ending march 31 858953 761524 597507 438773 305976 thereafter 934117 total 3896851 aggregate minimum requirements noncancellable leases march 31 2012 follows years ending march 31 610135 997406 989786 247447 total 2844774 summary generally speaking production video footage animation movies takes 2 years planning screened public currently involved projects previous years started number projects 2012 continue see results future periods total 5387482 costs capitalized film costs offset future revenue also deferred revenue 7861505 result revenue future periods addition increased number dvd’s produced number books produced entertainment industry financial success based upon audience acceptance products produced although selective choice projects guarantee productions widely received order minimize risk acceptance audiences plan sequels titles well 2013 also prepare new titles production team produced hits main target group “otaku” known tendency purchasing related products books approximately 29 titles sorcerous stabber orphan series began releasing market september 2011 intend continue releasing titles rate approximately one two per month released intend start “paper back” series autumn 2012 main target market japan popular titles previously released republished ‘paper back’ binding new titles also published new ‘paper back” series offering readers options expanding sales believe affinity games animation high result formed international coproduction agreement electronic arts inc “ea” wellknown us game development company funimation one largest animation distributors us produce 3 animated titles based ea game properties first animation released dragon age based fantasy roleplaying game adults released november 2009 north america europe dragon age animation released japan february 2012 animated film mass effect originated roleplaying game series sold 7 million copies around world scheduled completion 2012 summer planned global release currently preparation stage live action film horror movie yet established date commencement production release date order achieve objective aggressive time frame require 3000000 5000000 additional financing either form equity debt currently financing available assurances obtain financing obtain financing rates costs acceptable company balance sheet arrangements march 31 2012 obligations would qualify disclosed offbalance sheet arrangements item 7a item 7 managements discussion analysis plan operation special note caution regarding forwardlooking statements certain statements report including statements following discussion known forward looking statements basically statements future reason statements involve risk uncertainty since one accurately predict future words plans intends hopes seeks anticipates expects like often identify forward looking statements indication statement forward looking statement forward looking statements include statements concerning plans objectives respect present future operations company statements express imply present future operations may produce revenues income profits numerous factors future events could cause company change plans objectives fail successfully implement plans achieve objectives cause present future operations fail produce revenues income profits therefore reader advised following discussion considered light discussion risks factors contained report form 10k companys filings securities exchange commission statements contained following discussion construed guarantee assurance future performance future results plan operation company organized vehicle investigate investigation warrants acquire target company business seeking perceived advantages publicly held corporation principal business objective next 12 months beyond time achieve longterm growth potential combination business rather immediate shortterm earnings company restrict potential candidate target companies specific business industry geographical location thus may acquire type business company currently engage business activities provide cash flow costs investigating analyzing business combinations next 12 months beyond time paid available working capital next 12 months anticipate incurring costs related 1 filing exchange act reports 2 costs relating consummating acquisition believe able meet costs use currently available funds deferral fees certain service providers additional amounts necessary loaned invested us stockholders management investors company may consider business recently commenced operations developing company need additional funds expansion new products markets seeking develop new product service established business may experiencing financial operating difficulties need additional capital alternative business combination may involve acquisition merger company need substantial additional capital desires establish public trading market shares avoiding among things time delays significant expense loss voting control may occur public offering none officers directors preliminary contact discussions representative entity regarding business combination us target business selected may financially unstable company entity early stages development growth including entities without established records sales earnings event subject numerous risks inherent business operations financially unstable early stage potential emerging growth companies addition may effect business combination entity industry characterized high level risk although management endeavor evaluate risks inherent particular target business assurance properly ascertain assess significant risks company anticipates selection business combination complex extremely risky general economic conditions rapid technological advances made industries shortages available capital management believes numerous firms seeking even limited additional capital andor perceived benefits becoming publicly traded corporation perceived benefits becoming publicly traded corporation include among things facilitating improving terms additional equity financing may obtained providing liquidity principals investors business creating means providing incentive stock options similar benefits key employees offering greater flexibility structuring acquisitions joint ventures like issuance stock potentially available business combinations may occur many different industries various stages development make task comparative investigation analysis business opportunities extremely difficult complex item 7a item 7a quantitative qualitative disclosures market risk applicable item 8 item 7a quantitative qualitative disclosures market risk applicable item 8 item 7a quantitative qualitative disclosures market risk applicable item 8 item 7a quantitative qualitative disclosures market risk applicable item 8 item 8 financial statements supplementary data financial statements company required article 3 regulation sx attached report ibi acquisitions inc development stage company financial statements period ended may 31 2011 index page report independent registered public accounting firm balance sheets statements operations statements stockholder’s deficit equity 1213 statements cash flows notes financial statements 1517 report independent registered public accounting firm board directors stockholders ibi acquisitions inc audited accompanying balance sheets ibi acquisitions may 31 2011 2010 related statements income stockholders’ equity cash flows years ended may 31 2011 2010 ibi acquisitions inc’s management responsible financial statements responsibility express opinion financial statements based audit conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement company required engaged perform audit internal control financial reporting audit included consideration internal control financial reporting basis designing audit procedures appropriate circumstances purpose expressing opinion effectiveness company’s internal control financial reporting accordingly express opinion audit also includes examining test basis evidence supporting amounts disclosures financial statements assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audit provides reasonable basis opinion financial statements referred present fairly material respects financial position ibi acquisitions inc may 31 2011 2010 results operations cash flows years ended may 31 2011 2010 conformity accounting principles generally accepted united states america accompanying financial statements prepared assuming company continue going concern described note 2 company recurring losses negative working capital total stockholders deficit raise substantial doubt ability continue going concern managements plans regard matter also discussed note 2 financial statements include adjustments might result outcome uncertainty scomiskey company professional corporation denver colorado august 19 2011 ibi acquisitions inc notes financial statements may 31 2011 2010 note 1 organization operations summary significant accounting policies ibi acquisitions inc “company” incorporated state colorado may 22 2008 company formed explore merger acquisitions opportunities companies company currently considered development stage generated revenues conducted limited activities cash equivalents company considers highly liquid investments original maturity three months less cash equivalents accounts receivable company reviews accounts receivable periodically collectability establishes allowance doubtful accounts records bad debt expense deemed necessary property equipment property equipment recorded cost depreciated accelerated methods items estimated useful life revenue recognition revenue recognized accrual basis services performed contract terms event price client fixed determinable collectability reasonably assured use estimates preparation financial statements conformity generally accepted accounting principles requires management make estimates assumptions affect reported amounts assets liabilities disclosure contingent assets liabilities date financial statements reported amounts revenues expenses reporting period actual results could differ estimates income tax company accounts income taxes statement accounting standards codification asc 740 wherein deferred taxes provided liability method whereby deferred tax assets recognized deductible temporary differences operating loss carryforwards deferred tax liabilities recognized taxable temporary differences temporary differences reported amounts assets liabilities tax bases deferred tax assets reduced valuation allowance opinion management likely portion deferred tax assets realized deferred tax assets liabilities adjusted effects changes tax laws rates date enactment record uncertain tax positions based estimate potential exposure accrual uncertain tax positions year end interest penalties assessed would charge interest expense ibi acquisitions inc notes financial statements may 31 2011 2010 note 1 organization operations summary significant accounting policies continued net income loss per share net income loss per share computed dividing net income loss weighted average number shares common outstanding warrants stock options common stock issuable upon conversion companys preferred stock included computation effect would antidilutive would increase earnings decrease loss per share financial instruments carrying value company’s financial instruments including cash equivalents accrued payables reported accompanying balance sheet approximates fair value note 2 going concern accompanying financial statements prepared conformity accounting principles generally accepted united states america contemplate continuation company going concern company incurred net losses since inception present source revenue may 31 2011 accumulated deficit 24370 conditions raise substantial doubt companys ability continue going concern financial statements include adjustments relating recoverability classification recorded asset amounts classification liabilities might necessary company unable continue going concern company may raise additional capital sale equity securities offering debt securities borrowings financial institutions company also hopes consummate merger acquisition transactions marking efforts management believes actions presently taken obtain additional funding provide opportunity company continue going concern note 3 change control september 15 2010 company change control date group buyers “buyers” acquired total 1254000 shares representing 95 issued outstanding common stock company shares purchased cash transaction resulted change control trout trading company inc colorado corporation acquired 427000 shares approximately 3235 issued outstanding stock five buyers including zeng mei ying chen shao xing zeng guo ji jiang hui fang zeng chen ti acquired 125400 shares 95 issued outstanding stock selling shareholders group retained ownership 66000 shares company connection change control previously outstanding unsecured 10 interest bearing loans accrued interest payable officer shareholders paid full satisfaction debt recorded contribution capital company ibi acquisitions inc notes financial statements may 31 2011 2010 note 4 income taxes reconciliation income taxes statutory rates follows company’s deferred tax assets consist entirely benefit federal state net operating loss carryforwards offset full valuation allowance company approximately 24000 federal state net operating tax loss carryforwards begin expire 2027 net operating losses may reduced eliminated upon change control company pursuant internal revenue code section 381 note 5 loan payable related parties company received loans current former officers shareholders may 31 2011 loans unsecured noninterest bearing balance 4000 may 31 2010 loans accrued interest rate 10 annually subject agreement whereby loans could converted common shares market value 002 per share may 31 2010 247 accrued interest payable mentioned note 2 connection change control former officer shareholders elected contribute outstanding loans plus accrued interest capital company rather converting stock item 9 item 8 financial statements supplementary data financial statements company required article 8 regulation sx attached report ibi acquisitions inc development stage company financial statements period ended may 31 2010 index page report independent registered public accounting firm balance sheet statements operations statements stockholder’s deficit equity statements cash flows notes financial statements 1415 larry odonnell cpa pc telephone 303 7454545 2228 south fraser street fax3033699384 unit email larryodonnellcpacomcastnet aurora colorado 80014 wwwlarryodonnellcpacom report independent registered public accounting firm board directors ibi acquisitions inc westminster colorado audited accompanying balance sheet ibi acquisitions inc may 31 2010 2009 related statements operations stockholders equity cash flows years ended period may 22 2008 inception may 31 2009 financial statements responsibility companys management responsibility express opinion financial statements based audit conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audit provides reasonable basis opinion financial statements referred present fairly material respects financial position ibi acquisitions inc may 31 2010 2009 results operations cash flows year ended period may 22 2008 inception may 31 2010 conformity accounting principles generally accepted united states america accompanying financial statements prepared assuming company continue going concern discussed note 3 financial statements company suffered loss operations conducted limited operations raise substantial doubt ability continue going concern managements plans regard matters also described note 3 financial statements include adjustments might result outcome uncertainty larry o’donnell cpa pc august 30 2010 ibi acquisitions inc notes financial statements note 1 organization operations summary significant accounting policies ibi acquisitions inc “company” incorporated state colorado may 22 2008 company formed explore merger acquisitions opportunities companies company currently considered development stage generated revenues conducted limited activities cash equivalents company considers highly liquid investments original maturity three months less cash equivalents use estimates preparation financial statements conformity generally accepted accounting principles requires management make estimates assumptions affect reported amounts assets liabilities disclosure contingent assets liabilities date financial statements reported amounts revenues expenses reporting period actual results could differ estimates income tax company accounts income taxes statement financial accounting standards 109 “sfas 109” sfas 109 deferred taxes provided liability method whereby deferred tax assets recognized deductible temporary differences operating loss carryforwards deferred tax liabilities recognized taxable temporary differences temporary differences reported amounts assets liabilities tax bases deferred tax assets reduced valuation allowance opinion management likely portion deferred tax assets realized deferred tax assets liabilities adjusted effects changes tax laws rates date enactment net income loss per share net income loss per share computed dividing net income loss weighted average number shares common outstanding warrants stock options common stock issuable upon conversion companys preferred stock included computation effect would antidilutive would increase earnings decrease loss per share fiscal year company employs fiscal year ending may 31 ibi acquisitions inc notes financial statements note 1 organization operations summary significant accounting policies continued revenue recognition revenue recognized accrual basis services performed contract terms price client fixed determinable collectability reasonably assured property equipment property equipment recorded cost depreciated straight line method items estimated useful life financial instruments carrying value company’s financial instruments reported accompanying balance sheet approximates fair value stock based compensation company accounts employee nonemployee stock awards sfas 123r whereby equity instruments issued employees services recorded based fair value instrument issued nonemployees recorded based fair value consideration received fair value equity instrument whichever reliably measurable note 2 income taxes deferred income taxes arise temporary differences financial statement income tax recognition net operating losses loss carryovers limited internal revenue code significant change ownership occur company accounts income taxes pursuant sfas 109 may 31 2010 company approximately 19000 unused federal net operating loss carryforwards begin expire principally year 2027 deferred tax asset approximately 3800 resulting loss carryforward offset 100 valuation allowance change valuation allowance fiscal year 2010 approximately 3800 ibi acquisitions inc notes financial statements note 3 going concern company suffered loss operations limited operations likelihood required make significant future expenditures connection marketing efforts along general administrative expenses conditions raise substantial doubt company’s ability continue going concern company may raise additional capital sale equity securities offering debt securities borrowings financial institutions company hopes marketing efforts consummate merger acquisition transactions management believes actions presently taken obtain additional funding provide opportunity company continue going concern note 4 loan payable related parties company received loans officer shareholders loans unsecured accrue interest 10 annually discretion company’s board directors date agreement reached merge sell company cash payment principal accrued interest made lump sum converted common shares market value 002 per share may 31 2010 247 accrued interest payable item 9 item 8 financial statements supplementary data entertainment inc index consolidated financial statements page report independent registered public accounting firm consolidated balance sheets consolidated statements income comprehensive income consolidated statements changes stockholders’ deficit consolidated statements cash flows notes consolidated financial statements 44 62 albert wong co certified pubilc accountants room 701 7th floor nan dao commercial building 359361 queen’s road central hong kong tel 2851 7954 fax 2545 4086 albert wong bsoc sc aca llb cpapractising board directors stockholders entertainment inc subsidiaries report independent registered public accounting firm audited accompanying consolidated balance sheets entertainment inc subsidiaries “the company” march 31 2012 2011 related consolidated statements operations comprehensive income loss changes stockholders’ deficit cash flows years ended consolidated financial statements responsibility companys management responsibility express opinion financial statements based audit conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements referred present fairly material respects consolidated financial position entertainment inc march 31 2012 2011 results operations cash flows years ended conformity accounting principles generally accepted united states america accompanying consolidated financial statements prepared assuming company continue going concern discussed note 2 consolidated financial statements company profits operations suffered accumulated capital deficiency may raise doubt ability continue going concern managements plans regard matters also described note 2 consolidated financial statements include adjustments might result outcome uncertainty hong kong albert wong co july 5 2012 certified public accountants entertainment inc formerly known ibi acquisitions inc consolidated balance sheets march 31 2012 2011 see notes consolidated financial statements entertainment inc formerly known ibi acquisitions inc consolidated statements income comprehensive income years ended march 31 2012 2011 see notes consolidated financial statements entertainment inc formerly known ibi acquisitions inc consolidated statements changes stockholders’ deficit years ended march 31 2012 2011 see notes consolidated financial statements entertainment inc formerly known ibi acquisitions inc consolidated statements cash flows years ended march 31 2012 2011 see notes consolidated financial statements entertainment inc notes consolidated financial statements years ended march 31 2012 2011 note 1 organization principal activities entertainment inc formerly ibi acquisitions inc “ibi” “toe” “company” incorporated state colorado may 22 2008 company formed explore merger acquisitions opportunities companies march 5 2012 company changed name ibi acquisitions inc entertainment inc january 3 2012 pursuant terms investment agreements ibi entertainment inc japan “toe japan” shareholders invested 4596 toe japan’s common stock representing 100 outstanding stock ibi transferring ownership shares ibi issued total 31680000 common shares common stock toe japan’s shareholders exchange toe japan common shares transaction accounted “reverse merger” since original stockholders toe japan majority outstanding shares ibi’s common stock immediately following completion transaction toe japan legal acquiree deemed accounting acquirer ibi legal acquirer deemed accounting acquiree reverse merger historical financial statements prior acquisition accounting acquirer toe japan historical stockholders equity acquirer prior merger retroactively restated recapitalization equivalent number shares received merger operations prior merger acquirer completion transaction company’s consolidated financial statements include assets liabilities company subsidiaries operations cash flow company subsidiaries toe japan incorporated tokyo japan april 1 2003 engaged entertainment businesses include animated live feature film production distribution films dvd’s blue ray discs book publishing book publishing consists principally sale books toe japan rights print distribute reverse merger toe operating united states america japan republic singapore russian federation operations united kingdom dormant note 2 basis presentation summary significant accounting policies basis presentation accompanying consolidated financial statements prepared accordance generally accepted accounting principles united states america “gaap” expressed united states dollars financial statements prepared accordance gaap contemplate realization assets satisfaction liabilities normal course business march 31 2012 2011 company accumulate deficits 4724986 6217939 current liabilities exceed current assets 6773922 6945547 respectively included noncurrent assets march 31 2012 5387482 film costs expensed future revenues require use cash included current liabilities march 31 2012 7861505 deferred revenue accounted 56 current liabilities represents projects production deferred revenue represent cash liability excluding deferred revenue working capital march 31 2012 would 1087583 view matters described recoverability major portion recorded asset amounts realization portion current liabilities revenue shown accompanying balance sheets dependent upon continued operations company turn dependent upon companys ability raise additional financing succeed future operations financial statements include adjustments relating recoverability classification recorded asset amounts classification liabilities might necessary company unable continue going concern management taken following steps revise operating financial requirements believes sufficient provide company ability continue going concern company actively pursuing additional funding would enhance capital employed strategic partners would increase revenue bases reduce production costs management believes actions allow company continue operations throughout fiscal year entertainment inc notes consolidated financial statements years ended march 31 2012 2011 continued principles consolidation consolidated financial statements include assets liabilities revenues expenses cash flows entities company controlling interest “subsidiaries” intercompany accounts transactions consolidated companies eliminated consolidation consolidated financial statements prepared following reverse acquisition issued name legal parent accounting acquiree ie ibi continuation financial statements legal subsidiary accounting acquirer ie toe japan one adjustment retroactively adjust accounting acquirer’s legal capital reflect legal capital accounting acquiree adjustment required reflect capital legal parent accounting acquiree comparative information presented consolidated financial statements also retroactively adjusted reflect legal capital legal parent accounting acquiree consolidated financial statements include accounts entertainment inc following subsidiaries entertainment inc wholly owned subsidiary company incorporated japan private company april 1 2003 ii entertainment uk limited whollyowned subsidiary company incorporated england wales private company august 30 2007 iii entertainment singapore pte ltd whollyowned subsidiary company incorporated republic singapore private company april 18 2009 iv entertainment rus llc whollyowned subsidiary company incorporated russian federation private company july 21 2011 use estimates preparation financial statements conformity gaap requires management make estimates judgments assumptions affect amounts reported consolidated financial statements footnotes thereto actual results could differ estimates significant estimates judgments inherent preparation consolidated financial statements include among things accounting asset impairments allowances doubtful accounts depreciation amortization determination ultimate revenues relates amortization capitalized film costs participations residuals books dvd sales returns equitybased compensation income taxes contingencies cash equivalents cash equivalents consist cash hand bank deposits original maturities three months less unrestricted withdrawal use company maintains bank accounts united states america japan republic singapore republic korea russian federation accounts receivable accounts receivable recognized carried net realizable value allowance doubtful accounts recorded period loss probable based assessment specific evidence indicating troubled collection historical experience accounts aging ongoing business relation factors accounts written exhaustive efforts collection accounts receivable provided written would recognized consolidated statement operations within operating expenses march 31 2012 2011 company allowance doubtful accounts per managements judgment based best knowledge march 31 2012 2011 longest credit term certain customers 60 days provision sales returns doubtful accounts management’s estimate product sales returned pricing rebates grant amount receivables ultimately collected area judgment affecting reported revenues net income estimating product sales returned management analyzes vendor sales product historical return trends current economic conditions changes customer demand based information management reserves percentage product sales provide customer entertainment inc notes consolidated financial statements years ended march 31 2012 2011 continued right return provision sales returns reflected reduction revenues related sale company’s sales subject return primarily include books sales company maintains allowance doubtful accounts reserve potentially uncollectible receivables reviews accounts receivable amounts due customers past due identify specific customers known disputes collectability issues determining amount reserve company makes judgments creditworthiness customers based past collection experience ongoing credit risk evaluations inventories valued cost excess market cost determined “firstinfirstout” basis market value inventory determined net realizable value ie estimated selling prices ordinary course business less predictable costs completion disposal march 31 2012 allowance obsolescence 9268 nil year ended march 31 2011 prepayments represent cash paid advance service provider office premises owner subcontractor fee property plant equipment depreciation property plant equipment carried cost less accumulated depreciation amortization depreciation provided estimated useful lives using straightline method reducing balance method estimated useful lives follows expected useful life leasehold improvements 1015 years office equipment 35 years leasehold improvements amortized based shorter expected useful life leasehold terms premises case leasehold term premises 4 years shorter expected useful life thus leasehold improvement amortized 4 years straightline based cost related accumulated depreciation assets sold otherwise retired eliminated accounts gain loss included statement income cost maintenance repairs charged expense incurred whereas significant renewals betterments capitalized long lived assets accordance financial accounting standards board “fasb” accounting standards codification “asc” topic 360 “property plant equipment” asc 360 longlived assets reviewed impairment whenever events changes circumstances indicate carrying amount asset may recoverable recoverability assets held used measured comparison carrying amount asset estimated undiscounted future cash flows expected generated asset carrying amount asset exceeds estimated future cash flows impairment charge recognized amount carrying amount asset exceeds fair value asset fair value determined using forecasted cash flows discounted using estimated average cost capital judgments assumptions made preparing cash flow projections consistent financial statement calculations disclosures assumptions used cash flow projections consistent forwardlooking information prepared company used internal budgets discussions third parties andor reporting management board directors however projecting cash flows impairment analysis involves significant estimates regard performance restaurant reasonably possible estimates cash flows may change near term impairment march 31 2012 2011 fair value entertainment inc notes consolidated financial statements years ended march 31 2012 2011 continued asc topic 820 “fair value measurement disclosures” establishes threetier fair value hierarchy prioritizes inputs used measuring fair value hierarchy prioritizes inputs three levels based extent inputs used measuring fair value observable market tiers include · level 1defined observable inputs quoted prices active markets · level 2defined inputs quoted prices active markets either directly indirectly observable · level 3defined unobservable inputs little market data exists therefore requiring entity develop assumptions company’s financial instruments consist cash equivalents trade receivables payables long term debt carrying values cash equivalents trade receivables payables approximate fair value due short maturities carrying value long term debt approximates fair value debt similar terms remaining maturities available company warrants conversion features embedded convertible notes accounted liabilities treated derivative instruments measured reporting date fair value using level 2 inputs company’s nonfinancial assets measured recurring basis nonfinancial assets measured impairment annually company’s measurement date reporting unit level using level 3 inputs assets asc 820 requires impact changes resulting application applied prospectively year statement initially applied company’s nonfinancial assets measured nonrecurring basis include company’s property plant equipment finiteuse intangible assets measured recoverability indicators impairment present asc 820 requires companies disclose assets liabilities measured nonrecurring basis period remeasurement fair value performed company valued convertible bonds using level 3 criterion march 31 2012 valuations resulted gain derivatives 26329 fair value financial instruments conversion features accordance asc topic 815 “derivatives hedging” conversion feature convertible bonds separated debt instrument accounted separately derivative instrument date company’s convertible bonds issued conversion feature recorded liability fair value future decreases fair value recognized earnings increases fair values recognized expenses interest expense company used blackscholesmerton “blackscholes” model obtain fair value conversion feature company’s expected volatility assumption based historical volatility stock prices entertainment industry average japan expected life assumption primarily based expiration date conversion features riskfree interest rate expected term conversion features based us treasury yield curve effect time measurement investments animations films investments animation films includes company’s investments coproduction animation films generally less 50 ownership produced investors ventures equity method accounting adopted investments animations films income loss investment projects years ended march 31 2012 2011was 389081 240176 respectively film costs revenues feature films typically produced initial exhibition theaters followed distribution home video electronic sellthrough videoondemand pay cable basic cable broadcast network sectors generally distribution home video videoondemand pay cable basic cable broadcast network sectors commence within range approximately one five entertainment inc notes consolidated financial statements years ended march 31 2012 2011 continued years initial theatrical release theatrical revenues recognized films exhibited revenues home video sales recognized later delivery date video units made widely available sale rental retailers based gross sales less provision estimated returns warranty period six months usually provided company film produced arranged company based management’s past experience report defects claim compensation upfront guaranteed payments licensing intellectual property recognized revenue arrangement signed customer ii customer’s right use otherwise exploit intellectual property commenced requirement significant continued performance company iii licensing fees either fixed determinable iv collectability fees reasonably assured event significant continued performance required arrangements revenue recognized related services performed film costs include unamortized cost completed films production film rights preparation development film costs stated lower cost less accumulated amortization fair value amount capitalized film costs recognized cost revenues given film exhibited various sectors throughout life cycle determined using film forecast computation method amortization capitalized costs accrual participations residuals based proportion film’s revenues recognized period film’s estimated remaining ultimate revenues process estimating film’s ultimate revenues ie total revenue received throughout film’s life cycle discussed “film cost recognition impairments” film cost recognition impairments film costs include direct production costs production overhead acquisition costs films stated lower unamortized cost estimated fair value classified noncurrent assets accounting film costs well related revenues requires exercise judgment relates process estimating film’s ultimate revenues important two reasons first film produced related costs capitalized well time film released necessary management estimate ultimate revenues less additional costs incurred including exploitation participation costs order determine whether value film impaired thus requires immediate writeoff unrecoverable film costs second necessary management determine using film forecast computation method amount capitalized film costs amount participations residuals recognized costs revenues given film particular period extent film’s ultimate revenues adjusted resulting gross margin reported exploitation film period also adjusted prior theatrical release film management bases estimates ultimate revenues film factors historical performance similar films rating genre film prerelease market research including test market screenings expected number theaters film released management updates estimates based information available film’s production upon release actual results film changes estimates ultimate revenues period affect amount film costs amortized given period therefore could impact company’s financial results period example prior film’s release company often test market film’s targeted demographic film received favorably company may reduce film’s estimated ultimate revenues ii revise film could cause production costs increase iii perform combination similarly film generates lowerthanexpected theatrical revenues initial weeks release would theatrical home video ultimate revenues adjusted downward collaborative arrangements company entered collaborative arrangements film business one active participants jointly finance produce andor distribute motion picture television product company active participants share risks rewards ownership arrangements referred coproduction distribution arrangements company typically records asset portion film owns finances company participants typically distribute product different media markets revenues earned expenses incurred media markets company distributes product typically recorded gross basis company typically entertainment inc notes consolidated financial statements years ended march 31 2012 2011 continued record revenues earned expenses incurred participants distribute product company participants typically share profits distribution product media markets films product company net receiver 1 company’s share profits media markets distributed participants less 2 participants’ share profits media markets distributed company net amount recorded net sales company net payer net amount recorded cost sales years ended march 31 2012 2011 242421 2478149 respectively deducted revenue amount owed participants 39830 664657 respectively recorded revenue amounts due participants collaborative arrangements march 31 2012 gross versus net revenue recognition normal course business company acts uses intermediary agent executing transactions third parties connection arrangements company must determine whether report revenue based gross amount billed ultimate customer net amount received customer commissions payments third parties extent revenues recorded gross basis commissions payments third parties recorded expense net amount gross revenues less expense reflected operating income accordingly impact operating income whether company records revenue gross net basis determination whether revenue reported gross net based assessment whether company acting principal agent transaction company acting principal transaction company reports revenue gross basis company acting agent transaction company reports revenue net basis determination whether company acting principal agent transaction involves judgment based evaluation terms arrangement company serves principal transactions substantial risks rewards ownership software use rights license software use rights licenses finite useful lives generally amortized straightline basis generally five years foreign currency translation company’s reporting currency united states dollar “” accompanying consolidated financial statements expressed united states dollars company’s functional currency japanese yen “¥” addition operating subsidiaries united kingdom singapore russia maintain books record respective local currencies british pound “£” singapore dollar “sg” russian ruble “rub” functional currency primary currency economic environment operations conducted accordance asc topic 830 “translation financial statements” capital accounts consolidated financial statements translated united states dollars jpy historical exchange rates capital transactions occurred assets liabilities translated exchange rates balance sheet date income expenditures translated average exchange rate respective year resulting exchange differences recorded consolidated statement operations yearend ¥ 1 exchange rate 8197 8286 average yearly ¥ 1 exchange rate 7874 8570 yearend £ 1 exchange rate 063 062 average yearly £ 1 exchange rate 063 064 yearend sg 1 exchange rate 126 average yearly sg 1 exchange rate 125 133 yearend rub exchange rate 2941 2846 average yearly rub exchange rate 2959 2937 comprehensive income entertainment inc notes consolidated financial statements years ended march 31 2012 2011 continued comprehensive income defined include changes equity except resulting investments owners distributions owners among disclosures items required recognized current accounting standards components comprehensive income required reported financial statement presented prominence financial statements comprehensive income includes net income foreign currency translation changes sharebased compensation sharebased compensation includes stock options granted employees directors services accounted asc topic 718 compensation stock compensation “asc 718” warrants common stock awards granted consultants accounted asc topic 505 equitybased payment nonemployees “asc 505” grants stock optionswarrants employees directors consultants recognized financial statements based grant date fair values company recognizes compensation expense stock optionswarrants granted service conditions graded vesting schedule corresponding charge paidin capital fair value stock options estimated using blacksholes model since readily available trading price company’s stock company’s expected volatility assumption based historical volatility stock prices entertainment industry average japan expected life assumption primarily based expiration date option riskfree interest rate expected term option based us treasury yield curve effect time grant stock option expense recognized based awards expected vest forfeiture rate estimated zero customary japan employees employed company retirement asc 718 requires forfeitures estimated time grant revised subsequent periods necessary actual forfeitures differ estimates stock option based expense years ended march 31 2012 2011 segment reporting company currently engages two segments filmed entertainment consisting principally anime featured film production distribution publishing consisting principally books publishing company’s major operations located japan offices singapore russia minor immaterial nature advertising expenses advertising costs expensed incurred asc topic 720 “advertising costs” advertising expenses incurred years ended march 31 2012 2011 nominal income taxes provision income taxes determined accordance provisions asc topic 740 “accounting income taxes” “asc 740” method deferred tax assets liabilities recognized future tax consequences attributable differences financial statement carrying amounts existing assets liabilities respective tax basis deferred tax assets liabilities measured using enacted income tax rates expected apply taxable income years temporary differences expected recovered settled effect deferred tax assets liabilities change tax rates recognized income period includes enactment date asc 740 prescribes comprehensive model companies recognize measure present disclose financial statements uncertain tax positions taken expected taken tax return asc 740 tax positions must initially recognized financial statements likely position sustained upon examination tax authorities tax positions must initially subsequently measured largest amount tax benefit greater 50 likelihood realized upon ultimate settlement tax authority assuming full knowledge position relevant facts march 31 2012 2011 company significant unrecognized uncertain tax positions entertainment inc notes consolidated financial statements years ended march 31 2012 2011 continued recent pronouncements reviewed recently issued yet effective accounting pronouncements believe future adoptions pronouncements may expected cause material impact financial condition results operations note 3 cash equivalents company considers highly liquid investments purchased original maturities three months less cash equivalents march 31 2012 2011 cash equivalents consisted bank deposits note 4 inventories march 31 2012 2011 summarized follows inventories represent ending balance finished goods books dvds march 31 2012 2011 note 5 film costs film costs march 31 2012 2011 summarized follows cost completed films amounting 1965753 1233808 expected amortized next operating cycle ie 12 months date march 31 2012 2011 unamortized film cost march 31 2012 2011 expected amortized within three years march 31 2012 2011 entertainment inc notes consolidated financial statements years ended march 31 2012 2011 continued note 6 prepaid expenses assets march 31 2012 2011 consist following items prepayment represents prepayment tokyo credit guarantee association provided guarantee company bank loans see note 9 note 7 property plant equipment property equipment march 31 2012 2011 summarized follows depreciation leasehold improvement office equipment charged year ended march 31 2012 2011 48539 46477 note 8 deferred revenue deferred revenue represents amount money received participants films animation production stage deferred revenue realized company fulfills performance obligation stated production contracts entered participant march 31 2012 2011 company recorded 7861505 6323030 respectively deferred revenue entertainment inc notes consolidated financial statements years ended march 31 2012 2011 continued note 9 bank loans bank loans summarized follows 1 bank loans guaranteed company’s chief executive officer 2 bank loans guaranteed company’s chief executive officer tokyo credit guarantee association independent commercialized credit guarantee company 3 loans repaid year due dates scheduled maturities company’s bank loans follows years ending march 31 858953 761524 597507 438773 305976 thereafter 934118 total 3896851 entertainment inc notes consolidated financial statements years ended march 31 2012 2011 continued note 10 convertible bonds since inception company issued two unsecured convertible bonds aggregating 506879 amount original currency ¥42000000 undetectable conversion feature form warrant due september 30 2012 stockholders company first second issuance convertible bonds bears interest 03 top prime lending rate longterm credit first day interest payment period 3 per annum respectively convertible bonds include principal accrued interest thereon convertible common stock price “conversion price” 732 amount original currency ¥60000 per unit time period november 1 2007 september 29 2012 adjusted exchange shares merger mechanism conversion warrant holder elects convert bond receives warrant uses debt payment common stock based current guidance company concluded convertible bonds required accounted derivative guidance requires company bifurcate separately account conversion features convertible notes issued embedded derivatives derivative financial instruments initially measured fair value derivative financial instruments accounted liabilities derivative instrument initially recorded fair value revalued reporting date changes fair value reported charges credits income company used black scholes values compound embedded derivatives following variable inputs amount original currency ¥60000 based prior issuance price common stock detail derivative liability balances march 31 2012 march 31 2011 march 31 2011 additions gainloss valuation foreign translation gainloss march 31 2012 convertible bonds 27977 26329 1340 2988 note 11 share based compensation shares amounts restated retroactively reflect reverse merger august 29 2005 board directors passed resolution approved company’s stockholders permit grant incentive stock options officers employees consultants nonemployee directors november 2005 599691 stock options granted pursuant resolution option awards could exercised two years day allocation share option eight years exercise price option ¥725 per share 009 per share march 31 2012 october 25 2006 company exercised stock split ratio 13 accordingly number option granted price adjusted accordingly october 22 2007 board directors passed resolution approved company’s stockholders grant incentive options officers employees consultants nonemployee directors october 2007 16543200 stock options entertainment inc notes consolidated financial statements years ended march 31 2012 2011 continued granted pursuant resolution option awards could exercised two years day allocation share option eight years exercise price option ¥870 per share 011 per share march 31 2012 2008 516975 16543200 stock options automatically cancelled upon departure two employees granted stock options according stock option agreement january 20 2010 board directors passed resolution approved company’s shareholders special shareholder meeting held date grant incentive options business partner january 26 2011 689300 stock options granted pursuant resolution option awards could exercised following day date allocation share option ten years exercise price option ¥870 per share 011 per share march 31 2012 july 6 2010 137860 16543200 stock options automatically cancelled upon departure employee granted stock options according stock option agreement june 22 2011 1488888 stock options granted year 2005 exercised price ¥242 per share 003 per share june 22 2011 date 1723250 share options granted year 2011 exercised price ¥870 011 per share june 22 2011 fair value stock acquisition rights granted employees date grant used recognize compensation estimated using blackscholes model following weightedaverage assumptions dividend yield 000 volatility 3844314 risk free rate 442475 expected option life 810 years expense recorded years ended march 31 2012 2011 following table summarizes options outstanding issued employees march 31 2012 weighted average exercise prices original currency ¥ 804 ¥804 ¥856 april 1 2010 march 31 2011 2012 respectively average intrinsic values original currency ¥11310000 ¥11310000 ¥1275000 april 1 2010 march 31 2011 2012 respectively entertainment inc notes consolidated financial statements years ended march 31 2012 2011 continued stock option granted nonemployees services rendered signup bonus strengthen relationship business partners service providers fair values vesting nonemployee options determined using black scholes option pricing model following assumptions dividend yield 000 volatility 38 43 risk free rate 442 475 expected option life 8 10 years following table summarizes options outstanding issued nonemployees march 31 2012 weighted average exercise price original currency ¥870 march 31 2009 2011 2012 stock option expense nonemployee options incurred year ended march 31 2012 2011 following table summarizes options outstanding issued employee nonemployees march 31 2012 options outstanding options exercisable weighted average weighted average weighted range number remaining average number remaining average exercise price outstanding contractual life exercise price exercisable contractual life exercise price 003 310185 27 003 310185 27 003 011 14165115 57 011 14165115 57 011 689300 80 011 689300 80 011 total 15164600 weighted average exercise price original currency ¥193 march 31 2012 weighted average exercise price original currency ¥870 march 31 2012 although fair value stock options determined accordance asc 718 using optionpricing model value may indicative fair value observed willing buyerwilling seller market transaction note 12 income tax reconciliation income tax computed japan statutory rate company’s provision income tax follows entertainment inc notes consolidated financial statements years ended march 31 2012 2011 continued domestic foreign components income loss income taxes provision current deferred income taxes attributable income summarized follows summary company’s net deferred tax liabilities assets follows company recorded valuation allowances certain tax attribute carryforwards deferred tax assets due uncertainty exists regarding future realizability future company believes likely deferred tax benefits realized majority valuation allowances recognized consolidated statement operations entertainment inc notes consolidated financial statements years ended march 31 2012 2011 continued company interest penalty provided recognized income statements year ended march 31 2012 2011 balance sheet march 31 2012 2011 company uncertainty tax positions events leading uncertainty tax position within next 12 months company’s 2008 2009 2010 2011 japan business income tax return filed subject japan national tax agency examination singapore subsidiary 20082009 20092010 20102011 income tax return filing subject inland revenue authority singapore examination united kingdom subsidiary 2009 2011 corporation tax subject hm revenue customs examination year ended march 31 2011 company recorded deferred tax assets amounting 2378708 100 allowance provided company uncertain regarding future realizability time year ended march 31 2012 local tax authority allowed toe japan utilize taxable loss carried previous years year taxable profit result utilization toe japan required pay income tax year taxable profit owing uncertain future realization taxable benefit limited year ended march 31 2012 note 13 commitments contingencies march 31 2012 company’s commitments minimum lease payments noncancelable rental leases office premises warehouse car park director’s quarter follows 610135 997406 989786 247447 total 2844774 company entered operating lease agreement equipment expiring 2016 march 31 2012 company’s commitments minimum lease payments lease follow 5502 total 22008 note 14 investment animated films company invests coproduction animated films coproduction agreements generally less 50 ownership interest records investment coproductions using equity method accounting 20 50 ownership interest cost method accounting less 20 ownership interest prescribed asc topic 323 “investments equity method joint ventures” coproduction animated films account using equity method committee setup used coordinate relationship participating parties coproduction committee agreement allocates production duties ownership percentages among parties ownership ratio participants coproduction committee also adopted profit loss sharing ratio participants costs incurred participants upon performance duties coproduction agreement capitalized maximum cost capitalized limited estimated total cost production developed committee planning stage spending participant excess portion total estimated cost production specified coproduction agreement recorded expense capitalized entertainment inc notes consolidated financial statements years ended march 31 2012 2011 continued liabilities incurred coproduction participant bears responsibility portion cost production none investments liquidity transfer ownership restricted coproduction agreement following summarizes information 100 assets coproduction committee “investee” march 31 2012 stated liabilities investee level assets consist unamortized production costs incurred prorata share company’s investment animated film may different investee report gaap basis company report gaap basis project toe percentage ownership assets equity 20 707169 c 2131 775119 j 20 158872 k 20 1987283 l 20 225 2286005 p 20 2240284 total 8154732 following summarizes results operations investees year ended march 31 2012 operating expenses borne individual investor investee operating expenses project gross revenue operating expenses net income 448534 j 2063632 k 406672 l 707141 total 3625979 since coproduction accounting based gaap company makes adjustments amounts reported shares net income adjustments made order account amortization film cost required asc 926 “entertainment film” entertainment inc notes consolidated financial statements years ended march 31 2012 2011 continued revenue expense projects c p note 15 earning per share company calculates earnings per share accordance asc topic 260 “earnings per share” requires dual presentation basic diluted earnings per share basic earnings per share computed using weighted average number shares outstanding fiscal year diluted earnings per share represents basic earnings per share adjusted include potentially dilutive effect outstanding stock options warrants convertible note using ifconverted method dilutive earnings per share calculated exercise price outstanding stock options convertible price convertible bonds higher last trading price shares private investors well face value shares company march 31 2012 company recorded net loss net deficit year ended march 31 2011 therefore outstanding stock options warrants convertible note antidilutive calculated calculation basic diluted earnings per share attributable common stock holders based following data earnings profit loss purpose basic earnings per share 1492953 2008846 effect dilutive potential common stock profit loss purpose dilutive earnings per share 1492953 2008846 number shares weighted average number common stock purpose basic earnings per share 31998247 31680000 effect potential common stock issuable potential common stock option antidilutive therefore excluded calculation 18376738 2012 2011 potential common stock convertible bonds antidilutive therefore excluded calculation 4135800 2012 2011 weighted average number common stock purpose dilutive earnings per share 31998247 31680000 earnings per share basic earningsloss per share 005 006 represents recapitalized weighted average number common stock note 16 related party transactions related transaction reported year ended march 31 2012 note 17 segment reporting company two reportable business segments film entertainment consists principally production distribution animated live feature films including distribution films dvd bluray disc ii book publishing distribution accounting policies segments described summary significant accounting policies operating profits segments excludes unallocated corporate items administrative staff costs commonly used entertainment inc notes consolidated financial statements years ended march 31 2012 2011 continued business segments indistinguishable following sets forth information operations business segments assets company used business segments segment differentiation cannot made 90 company’s total revenue derived japan accordingly geographic segment reporting included single customer accounts ten percent 10 company’s revenues either year ended march 31 2012 2011 note 18 common stock january 3 2012 pursuant terms investment agreements fully described note 1 financial statements issued total 31680000 common shares company’s common stock exchange issued outstanding common shares toe japan stated note 1 financial statements presented merger took place beginning periods presented entertainment inc notes consolidated financial statements years ended march 31 2012 2011 continued note 19 subsequent event company evaluated subsequent events july 5 2012 determined subsequent events transactions require recognition disclosures financial statements item 9 item 8 financial statements supplementary data financial statements company required article 8 regulation sx attached report ibi acquisitons inc development stage company financial statements period ended may 31 2009 index page report independent registered public accounting firm 2009 report independent registered public accounting firm 2008 balance sheet statements operations statements stockholder’s deficit equity statements cash flows notes financial statements 1516 larry odonnell cpa pc telephone 303 7454545 2228 south fraser street fax3033699384 unit email larryodonnellcpamsncom aurora colorado 80014 wwwlarryodonnellcpacom report independent registered public accounting firm board directors ibi acquisitions inc westminster colorado audited accompanying balance sheet ibi acquisitions inc may 31 2009 related statements operations stockholders equity cash flows year ended period may 22 2008 inception may 31 2009 financial statements responsibility companys management responsibility express opinion financial statements based audit conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audit provides reasonable basis opinion financial statements referred present fairly material respects financial position ibi acquisitions inc may 31 2009 results operations cash flows year ended period may 22 2008 inception may 31 2009 conformity accounting principles generally accepted united states america accompanying financial statements prepared assuming company continue going concern discussed note 3 financial statements company suffered loss operations conducted limited operations raise substantial doubt ability continue going concern managements plans regard matters also described note 3 financial statements include adjustments might result outcome uncertainty larry o’donnell cpa pc august 6 2009 ronald r chadwick pc certified public accountant 2851 south parker road suite 720 aurora colorado 80014 telephone 3033061967 fax 3033061944 report independent registered public accounting firm board directors ibi acquisitions inc westminster colorado audited accompanying balance sheet ibi acquisitions inc may 31 2008 related statements operations stockholders equity cash flows period may 22 2008 inception may 31 2008 financial statements responsibility companys management responsibility express opinion financial statements based audit conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audit provides reasonable basis opinion financial statements referred present fairly material respects financial position ibi acquisitions inc may 31 2008 results operations cash flows period may 22 2008 inception may 31 2008 conformity accounting principles generally accepted united states america accompanying financial statements prepared assuming company continue going concern discussed note 3 financial statements company suffered loss operations conducted limited operations raise substantial doubt ability continue going concern managements plans regard matters also described note 3 financial statements include adjustments might result outcome uncertainty aurora colorado ronald r chadwick pc june 12 2008 ronald r chadwick p ibi acquisitions inc notes financial statements note 1 organization operations summary significant accounting policies ibi acquisitions inc “company” incorporated state colorado may 22 2008 company formed explore merger acquisitions opportunities companies company currently considered development stage generated revenues conducted limited activities cash equivalents company considers highly liquid investments original maturity three months less cash equivalents use estimates preparation financial statements conformity generally accepted accounting principles requires management make estimates assumptions affect reported amounts assets liabilities disclosure contingent assets liabilities date financial statements reported amounts revenues expenses reporting period actual results could differ estimates income tax company accounts income taxes statement financial accounting standards 109 “sfas 109” sfas 109 deferred taxes provided liability method whereby deferred tax assets recognized deductible temporary differences operating loss carryforwards deferred tax liabilities recognized taxable temporary differences temporary differences reported amounts assets liabilities tax bases deferred tax assets reduced valuation allowance opinion management likely portion deferred tax assets realized deferred tax assets liabilities adjusted effects changes tax laws rates date enactment net income loss per share net income loss per share computed dividing net income loss weighted average number shares common outstanding warrants stock options common stock issuable upon conversion companys preferred stock included computation effect would antidilutive would increase earnings decrease loss per share fiscal year company employs fiscal year ending may 31 revenue recognition revenue recognized accrual basis services performed contract terms price client fixed determinable collectability reasonably assured ibi acquisitions inc notes financial statements note 1 organization operations summary significant accounting policies continued property equipment property equipment recorded cost depreciated straight line method items estimated useful life financial instruments carrying value company’s financial instruments reported accompanying balance sheet approximates fair value stock based compensation company accounts employee nonemployee stock awards sfas 123r whereby equity instruments issued employees services recorded based fair value instrument issued nonemployees recorded based fair value consideration received fair value equity instrument whichever reliably measurable note 2 income taxes deferred income taxes arise temporary differences financial statement income tax recognition net operating losses loss carryovers limited internal revenue code significant change ownership occur company accounts income taxes pursuant sfas 109 may 31 2009 company approximately 14000 unused federal net operating loss carryforwards begin expire principally year 2027 deferred tax asset approximately 2800 resulting loss carryforward offset 100 valuation allowance change valuation allowance fiscal year 2009 approximately 2800 note 3 going concern company suffered loss operations limited operations likelihood required make significant future expenditures connection marketing efforts along general administrative expenses conditions raise substantial doubt company’s ability continue going concern company may raise additional capital sale equity securities offering debt securities borrowings financial institutions company hopes marketing efforts consummate merger acquisition transactions management believes actions presently taken obtain additional funding provide opportunity company continue going concern item 9 item 15 exhibits financial statement schedules audited financial statements fiscal years ended may 31 2011 2010 b exhibits 31 certificate incorporation incorporated reference registration statement form 10sb filed securities exchange commission july 22 2008 32 bylaws incorporated reference registration statement form 10sb filed securities exchange commission july 22 2008 311 certifications pursuant rule 13a14a 15d14a securities exchange act 1934 amended adopted pursuant section 302 sarbanesoxley act 2002 312 certifications pursuant rule 13a14a 15d14a securities exchange act 1934 amended adopted pursuant section 302 sarbanesoxley act 2002 321 certifications pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 322 certifications pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 filed herewith signatures accordance section 13 15d exchange act registrant caused report signed behalf undersigned thereunto duly authorized ibi acquisistions inc jay lutsky jay lutsky ce0 date august 31 2011 accordance section 13 15d exchange act report signed following persons behalf registrant capacities dates indicated jay lutsky jay lutsky principal executive officer principal financial officer principal accounting officer director date august 31 2010 item 15 exhibits financial statement schedules audited financial statements fiscal year ended may 31 2010 b exhibits 31 certificate incorporation incorporated reference registration statement form 10sb filed securities exchange commission july 22 2008 32 bylaws incorporated reference registration statement form 10sb filed securities exchange commission july 22 2008 311 certifications pursuant rule 13a14a 15d14a securities exchange act 1934 amended adopted pursuant section 302 sarbanesoxley act 2002 312 certifications pursuant rule 13a14a 15d14a securities exchange act 1934 amended adopted pursuant section 302 sarbanesoxley act 2002 321 certifications pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 322 certifications pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 filed herewith signatures accordance section 13 15d exchange act registrant caused report signed behalf undersigned thereunto duly authorized ibi acquisistions inc patsy sessions patsy sessions president date august 30 2010 accordance section 13 15d exchange act report signed following persons behalf registrant capacities dates indicated patsy sessions patsy sessions principal executive officer director date august 30 2010 dean sessions dean sessions principal financial officer principal accounting officer director date august 30 2010 item 15 exhibits financial statement schedules audited financial statements fiscal years ended march 31 2012 2011 b exhibits exhibit description 21 form investment agreement dated january 3 2012 ibi acquisitions inc individual shareholders entertainment inc japan corporation incorporated reference current report form 8k filed securities exchange commission january 3 2012 31 articles incorporation ibi acquisitions inc incorporated reference registration statement form 1012g filed securities exchange commission july 21 2008 32 bylaws ibi acquisitions inc incorporated reference registration statement form 1012g filed securities exchange commission july 21 2008 101 rental agreement dated january 30 2009 sun frontier fudosan co ltd lessor entertainment inc lessee incorporated reference current report form 8k filed securities exchange commission january 3 2012 102 loan agreement dated august 13 2010 mizuho bank ltd lender entertainment inc borrower takeichi honda ceo tokyo credit guarantee association guarantors incorporated reference current report form 8k amendment 2 filed securities exchange commission may 24 2012 103 loan agreement dated may 26 2011 tomin bank lender entertainment inc borrower takeichi honda guarantor incorporated reference current report form 8k amendment 2 filed securities exchange commission may 24 2012 171 resignation letter jay lutsky director ibi acquisitions inc dated january 3 2012 incorporated reference current report form 8k filed securities exchange commission january 3 2012 311 rule 15d14a certification chief executive officer 312 rule 15d14a certification chief financial officer 321 certification pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 chief executive officer 322 certification pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 chief financial officer sch xbrl schema document ins xbrl instance document cal xbrl taxonomy extension calculation linkbase document lab xbrl taxonomy extension label linkbase document pre xbrl taxonomy extension presentation linkbase document def xbrl taxonomy extension definition linkbase document filed herewith signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized entertainment inc date july 11 2012 takeichi honda takeichi honda chief executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated signature title date takeichi honda chief executive officer director principal executive officer july 11 2012 takeichi honda arnold tinter chief financial officer principal financial officer july 11 2012 arnold tinter yui shibata director july 11 2012 yui shibata josephine chen director july 11 2012 josephine chen item 15 exhibits financial statement schedules audited financial statements fiscal year ended december 31 2008 b exhibits 31 certificate incorporation incorporated reference registration statement form 10sb filed securities exchange commission july 21 2008 32 bylaws incorporated reference registration statement form 10sb filed securities exchange commission july 21 2008 311 certifications pursuant rule 13a14a 15d14a securities exchange act 1934 amended adopted pursuant section 302 sarbanesoxley act 2002 312 certifications pursuant rule 13a14a 15d14a securities exchange act 1934 amended adopted pursuant section 302 sarbanesoxley act 2002 321 certifications pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 322 certifications pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 filed herewith signatures accordance section 13 15d exchange act registrant caused report signed behalf undersigned thereunto duly authorized ibi acquisistions inc patsy sessions patsy sessions president date august 28 2009 accordance section 13 15d exchange act report signed following persons behalf registrant capacities dates indicated patsy sessions patsy sessions principal executive officer director date august 28 2009 dean sessions dean sessions principal financial officer principal accounting officer director date august 28 2009