10-Q 1 v203377_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2010

¨ TRANSITION REPORT UNDER SECTION13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM __________ TO __________

COMMISSION FILE NUMBER: 333-145871

PLATINUM STUDIOS, INC.

(Name of registrant in its charter)

CALIFORNIA		20-5611551
(State or other jurisdiction of incorporation or		(I.R.S. Employer Identification No.)
organization)

2029 S. Westgate Ave., Los Angeles, CA 90025

(Address of principal executive offices) (Zip Code)

Issuer’s telephone Number: (310) 807-8100

Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

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

Large accelerated filer ¨		Accelerated filer ¨
Non-accelerated filer ¨		Smaller reporting company x

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

The number of shares of registrant’s common stock outstanding, as October 31, 2010 was 307,902,966.

PLATINUM STUDIOS, INC.

INDEX

PART I: FINANCIAL INFORMATION
ITEM 1:	FINANCIAL STATEMENTS (Unaudited)
	Consolidated Balance Sheets	F-1
	Consolidated Statements of Operations	F-3
	Consolidated Statements of Cash Flows	F-4
	Notes to the Consolidated Financial Statements	3
ITEM 2:	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	24
ITEM 3 :	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	32
ITEM 4:	CONTROLS AND PROCEDURES	33
PART II: OTHER INFORMATION
Item 1	LEGAL PROCEEDINGS	34
ITEM 1A :	RISK FACTORS	35
ITEM 2	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	35
ITEM 3	DEFAULTS UPON SENIOR SECURITIES	36
ITEM 4	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	36
ITEM 5	OTHER INFORMATION	N/A
ITEM 6:	EXHIBITS	36
SIGNATURES		36

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PLATINUM STUDIOS, INC

CONSOLIDATED BALANCE SHEETS

	September 30, 2010		December 31, 2009
	(Unaudited)
ASSETS

Current assets:
Cash and cash equivalents	$	486,246	$	152,067
Restricted cash		97,549		127,890
Accounts receivable, net		13,503		23,817
Prepaid expenses		33,500		156,132
Other current assets		2,008,981		863,234
Total current assets		2,639,779		1,323,140


Property and equipment, net		63,317		122,295
Investment in film library		12,837,051		11,492,135
Assets held for sale		16,000		40,000
Character rights, net		-		45,652
Deposits and other		340,909		298,118
Total assets	$	15,897,056	$	13,321,340

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

F-1

PLATINUM STUDIOS, INC

CONSOLIDATED BALANCE SHEETS (continued)

	September 30, 2010			December 31, 2009
	(Unaudited)
LIABILITIES AND SHAREOLDERS' DEFICIT

Current liabilities:
Accounts payable	$	1,290,468		$	1,324,780
Accrued expenses and other current liabilities		1,404,318			1,325,304
Deferred revenue		3,697,283			1,681,653
Short term notes payable		12,437,374			12,541,105
Related party payable		285,000			-
Related party notes payable, net of debt discount		3,750,000			3,103,973
Warrant derivative liability		1,446,000			1,201,000
Accrued interest - related party notes payable		151,159			182,003
Capital leases payable, current		19,036			48,406
Total current liabilities		24,480,638			21,408,224

Capital leases payable, non-current		-			11,627
Total liabilities		24,480,638			21,419,851

Commitments and Contingencies

Shareholders' Deficit:
Common stock, $.0001 par value; 500,000,000 shares authorized; 290,859,613 and 271,255,629 issued and outstanding, respectively		29,086			27,126
Common stock subscribed		715,125			732,196
Additional paid in capital		16,469,390			15,237,067
Accumulated deficit		(25,797,183	)		(24,094,900	)
Total shareholders' deficit		(8,583,582	)		(8,098,511	)
Total liabilities and shareholders' deficit	$	15,897,056		$	13,321,340

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

F-2

PLATINUM STUDIOS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2010			2009			2010			2009
Net revenue	$	150,645		$	66,159		$	2,248,693		$	222,250

Costs and expenses:
Cost of revenues (excluding depreciation expense)		14,378			22			493,960			10,022
Operating expenses		489,774			373,695			1,904,360			1,410,466
Research and development		101,307			54,748			240,246			139,796
Stock option expense		153,600			-			262,295			100,947
Depreciation and amortization		6,886			35,977			84,840			117,372

Total costs and expenses		765,945			464,442			2,985,701			1,778,603

Operating loss		(615,300	)		(398,283	)		(737,008	)		(1,556,353	)

Other income (expense):

Gain on disposition of assets		55,200			-			249,220			-
Gain (loss) on settlement of debt		27,492			(28,517	)		109,949			453,451
Gain (loss) on valuation of derivative liability		525,000			(1,210,000	)		(245,000	)		(1,210,000	)
Interest expense		(121,279	)		(525,557	)		(1,079,444	)		(874,855	)
Bad debt expense		-			-			-			(4,750	)
Total other income (expense):		486,413			(1,764,074	)		(965,275	)		(1,636,154	)
Loss before provision for income taxes		(128,887	)		(2,162,357	)		(1,702,283	)		(3,192,507	)
Provision for income taxes		-			-			-			-
Loss from continuing operations		(128,887	)		(2,162,357	)		(1,702,283	)		(3,192,507	)
Loss from discontinued operations		-			-			-			(52,354	)
Net loss	$	(128,887	)	$	(2,162,357	)	$	(1,702,283	)	$	(3,244,861	)

Basic and diluted loss per share:
Loss from continuing operations	$	(0.00	)	$	(0.01	)	$	(0.01	)	$	(0.01	)
Loss from discontinued operations		-			-			-			(0.00	)

Net loss per share	$	(0.00	)	$	(0.01	)	$	(0.01	)	$	(0.01	)
Basic and diluted weighted average shares		289,778,706			268,318,558			282,777,651			265,010,009

The accompanying footnotes are an integral part of these consolidated financial statements

F-3

PLATINUM STUDIOS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Nine Months Ended September 30,
	2010			2009
Cash flows from operating activities
Net loss	$	(1,702,283	)	$	(3,244,861	)
Adjustments to reconcile net loss to net cash provided (used) from operating activities:
Depreciation		39,188			50,854
Amortization		45,652			68,478
Gain on diposal of assets		(249,220	)		-
Gain on settlement of debt		(109,949	)		(453,451	)
Equity instruments issued for services		395,890			197,939
Amortization of debt discount		729,088			513,444
Loss on valuation of derivative liability		245,000			1,210,000
Decrease (increase) in operating assets:
Restricted cash		30,342			(492,694	)
Accounts receivable		10,313			(11,702	)
Investment in film library		(1,204,668	)		(13,612,242	)
Prepaid expenses and other current assets		(1,065,906	)		(258,187	)
Increase (decrease) in operating liabilities:
Accounts payable and related party payables		405,636			209,402
Accrued expenses		178,038			534,782
Accrued interest		(30,844	)		170,811
Deferred revenue		2,015,630			59,792
Net cash flows used in operating activities		(268,093	)		(15,057,635	)

Cash flows from investing activities
Proceeds from sales of property and equipment and intangibles		309,800			-
Investment in property and equipment		(16,788	)		(2,956	)
Net cash flows proviced (used) in investing activities		293,012			(2,956	)

Cash flows from financing activities
Proceeds from non-related loans		1,034,853			14,411,320
Proceeds from related party loans		7,500			1,103,534
Payments on non-related party loans		(1,278,832	)		(22,313	)
Payments on related party loans		(90,562	)		(539,243	)
Payments on capital leases		(86,248	)		(14,559	)
Issuance of common stock, net of offering costs		722,549			120,000
Net cash flows provided by financing activities		309,260			15,058,739

Net increase (decrease) in cash		334,179			(1,852	)
Cash, at beginning of year		152,067			42,023
Cash, at end of period	$	486,246		$	40,171

	Nine Months Ended June 30,
	2010			2009
Supplemental disclosure of cash flow information:

Cash paid for interest	$	337,632		$	50,113
Equity instrument issued for debt discount	$	-		$	1,649,000
Warrant derivative liability	$	-		$	934,000
Non-cash financing activities related to the acquisition of Wowio, LLC	$	-		$	1,618,355
Stock issued as payments of notes payable, accounts payable and accrued interest	$	53,773		$	813,857

The accompanying footnotes are an integral part of these consolidated financial statements

F-4

PLATINUM STUDIOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2010

(UNAUDITED)

( 1 )

Description of business

Nature of operations – The Company controls a library consisting of more than 4,000 characters and is engaged principally as a comics-based entertainment company adapting characters and storylines for production in film, television, publishing and all other media.

Platinum Studios, LLC was formed and operated as a California limited liability company from its inception on November 20, 1996 through September 14, 2006. On September 15, 2006, Platinum Studios, LLC filed with the State of California to convert Platinum Studios, LLC into Platinum Studios, Inc., (“the Company”, “Platinum”) a California corporation. This change to the Company structure was made in preparation of a private placement memorandum and common stock offering in October, 2006.

On December 10, 2008, the Company purchased Long Distance Films, Inc. to facilitate the financing and production of the film currently titled “Dead of Night”. The Company’s license to the underlying rights of the “Dead of Nights” characters was due to expire unless principle photography commenced on a feature film by a date certain. The Company had previously licensed these rights to Long Distance Films, Inc. The Company then purchased Long Distance Films, Inc., with its production subsidiary, Dead of Night Productions, LLC in order to expedite and finalize the financing of the film with Standard Chartered Bank and Omnilab Pty, Ltd., currently holding debt of $11,250,481 and $485,000, respectively. Long Distance Films, Inc.’s only assets are investments in its subsidiaries related to the film production of “Dead of Night” and has no liabilities or equity other than 100 shares of common stock wholly owned by Platinum Studios, Inc. No consideration was paid by the Company for the acquisition of Long Distance Films, Inc. and no value was assigned to the transaction, which would be eliminated on consolidation.

( 2 )

Basis of financial statement presentation and consolidation

The accompanying unaudited financial statements of the Company have been prepared in accordance with United States generally accepted accounting principles for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X, promulgated by the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and disclosures required by United States generally accepted accounting principles for complete financial statements. The consolidated financial statements include the financial condition and results of operations of our wholly-owned subsidiary, Long Distance Films, Inc. and its two wholly-owned subsidiaries Dead Of Night Investment Company, LLC and Dead Of Night Production Company, LLC. Intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for interim periods are not necessarily indicative of the results that may be expected for the fiscal year. The financial statements should be read in conjunction with the Company’s December 31, 2009 financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K (the “Annual Report”). All terms used but not defined elsewhere herein have the meanings ascribed to them in the Annual Report.

The balance sheet at December 31, 2009 has been derived from the audited financial statements at that date but does not include all the information and footnotes required by United States generally accepted accounting principles for complete financial statements.

( 3 )

Going concern

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred significant losses which have resulted in an accumulated deficit of $25,797,183 as of September 30, 2010. The Company plans to seek additional financing in order to execute its business plan, but there is no assurance the Company will be able to obtain such financing on terms favorable to the Company or at all. These items raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects related to recovery and classification of assets, or the amounts and classifications of liabilities that might result from the outcome of this uncertainty.

( 4 )

Summary of significant accounting policies

Reclassifications – Certain prior year amounts have been reclassified in order to conform to the current year’s presentation.

Revenue recognition - Revenue from the licensing of characters and storylines (“the properties”) owned by the Company are recognized in accordance with FASB guidance where revenue is recognized when the earnings process is complete. This is considered to have occurred when persuasive evidence of an agreement between the customer and the Company exists, when the properties are made available to the licensee and the Company has satisfied its obligations under the agreement, when the fee is fixed or determinable and when collection is reasonably assured.

The Company derives its licensing revenue primarily from options to purchase rights, the purchase of rights to properties and first look deals. For options that contain non-refundable minimum payment obligations, revenue is recognized ratably over the option period, provided all the criteria for revenue recognition have been met. Option fees that are applicable to the purchase price are deferred and recognized as revenue at the later of the expiration of the option period or in accordance with the terms of the purchase agreement. Revenue received under first look deals is recognized ratably over the first look period, which varies by contract provided all the criteria for revenue recognition have been met.

For licenses requiring material continuing involvement or performance based obligations, by the Company, the revenue is recognized as and when such obligations are fulfilled.

The Company records as deferred revenue any licensing fees collected in advance of obligations being fulfilled or if a licensee is not sufficiently creditworthy, the Company will record deferred revenue until payments are received.

License agreements typically include reversion rights which allow the Company to repurchase property rights which have not been used by the studio (the buyer) in production within a specified period of time as defined in the purchase agreement. The cost to repurchase the rights is generally based on the costs incurred by the studio to further develop the characters and story lines.

Use of estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Cash and cash equivalents – The Company considers all highly liquid investment securities with an original maturity date of three months or less to be cash equivalents.

Restricted cash – These funds are related to the draws on a production loan for “Dead of Night” and can only be used for production expenses related to this film.

Concentrations of risk - Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of uninsured cash balances. The Company maintains its cash balances with what management believes to be a high credit quality financial institution. At times, balances within the Company’s cash accounts may exceed the Federal Deposit Insurance Corporation (FDIC) limit of $250,000. During the three and nine months ended September 30, 2010 and 2009, the Company had customer revenues representing a concentration of the Company’s total revenues. For the three months ended September 30, 2010, two customers represented approximately 66% and 13% of total revenues, respectively. For the nine months ended September 30, 2010, one customer represented approximately 91% of total revenues. For the three and nine months ended September 30, 2009, one customer represented approximately 94% of total revenues.

Derivative Instruments – Platinum Studios entered into a Credit Agreement on May 6, 2009, with Scott Rosenberg, the Company’s CEO and Chairman, in connection with the issuance of two secured promissory notes and an unsecured promissory note. Two warrants were issued to Scott Rosenberg in connection with the issuance of various promissory notes as of May 6, 2009 and June 3, 2009.

A description of the notes is as follows:

May 6, 2009 Secured Debt - The May 6, 2009 Secured Debt has an aggregate principal amount of $2,400,000, and is convertible into shares of the Company’s common stock at a conversion price of $0.048. The May 6, 2009 Secured Debt bears interest at the rate of eight percent per annum. Upon the occurrence of an event of default, the May 6, 2009 Secured Debt bears interest at the rate of ten percent per annum. Interest is payable upon the expiration of the notes on May 6, 2010. The original principal amount of $2,400,000 is to be repaid upon the expiration of the notes on May 6, 2010. The notes were subsequently extended thru November 30, 2010. The May 6, 2009 Secured Debt has the following features that can be considered to be embedded derivatives: (i) the conversion feature of the notes, (ii) a holder’s right to force a redemption of the Notes upon an event of default, and, (iii) the increased interest rate upon an event of default. In connection with this debt the Company also issued warrants to purchase 25,000,000 shares of the Company’s common stock for $0.048 per share. The debt is secured by all the assets of the Company,

June 3, 2009 Secured Debt - The June 3, 2009 Secured Debt has an aggregate principal amount of $1,350,000, and is convertible into shares of the Company’s common stock at a conversion price of $0.038. The June 3, 2009 Secured Debt bears interest at the rate of eight percent per annum. Upon the occurrence of an event of default, the June 3, 2009 Secured Debt bears interest at the rate of ten percent per annum. Interest is payable upon the expiration of the notes on June 3, 2010. The original principal amount of $1,350,000 is to be repaid upon the expiration of the notes on June 3, 2010. The notes were subsequently extended thru November 30, 2010. The Company may prepay the notes at any time. The June 3, 2009 Secured Debt has the following features that can be considered to be embedded derivatives: (i) the conversion feature of the notes, (ii) a holder’s right to force a redemption of the Notes upon an event of default, and, (iii) the increased interest rate upon an event of default. In connection with this debt the Company also issued warrants to purchase 14,062,500 shares of the Company’s common stock for $0.038 per share. The debt is secured by all the assets of the Company.

June 3, 2009 Unsecured Debt - The June 3, 2009 Unsecured Debt has an aggregate principal amount of $544,826, and is convertible into shares of the Company’s common stock at a conversion price of $0.048. The June 3, 2009 Unsecured Debt bears interest at the rate of eight percent per annum. Upon the occurrence of an event of default, the June 3, 2009 Unsecured Debt bears interest at the rate of ten percent per annum. The Company is required to make payments of $29,687 per month. The monthly payments are to be applied first to interest and second to principal. The remaining principal amount is to be repaid upon the expiration of the note on June 3, 2010. The Company may prepay the note at any time. The June 3, 2009 Unsecured Debt has the following features that can be considered to be embedded derivatives: (i) the conversion feature of the notes, (ii) a holder’s right to force a redemption of the Notes upon an event of default, and, (iii) the increased interest rate upon an event of default. The note balance was paid in full on April 1, 2010.

In determining the fair market value of the embedded derivatives, we used discounted cash flows analysis. We also used a binomial option pricing model to value the warrants issued in connection with these debts. The Company determined the initial fair value of the embedded derivatives to be $715,904 and the initial fair value of the warrants to be $934,000 as of June 30, 2009. The embedded derivatives have been accounted for as a debt discount that will be amortized over the one year life of the notes. Amortization of the debt discount has resulted in $0 and a $729,088 increase to interest expense for the three and nine months ended September 30, 2010, respectively.

A description of the Warrants is as follows:

1) The May 6, 2009 warrant entitles the holder to purchase up to 25,000,000 shares of the Company’s common stock at a price of $0.048 per share. The May 6, 2009 warrant is exercisable up until May 6, 2019. The May 6, 2009 warrant shall expire and no longer be exercisable upon a change in control. The exercise price and the number of shares underlying the warrant are subject to anti-dilution adjustments from time to time if the Company issues common stock at below the exercise price at that time for the warrants.

2) The June 3, 2009 warrant entitles the holder to purchase up to 14,062,500 shares of the Company’s common stock at a price of $0.038 per share. The June 3, 2009 warrant is exercisable up until June 3, 2019. The June 3, 2009 warrant shall expire and no longer be exercisable upon a change in control. The exercise price and the number of shares underlying the warrant are subject to anti-dilution adjustments from time to time if the Company issues common stock at below the exercise price at that time for the warrants.

In determining the fair market value of the Warrants, we used the binomial model with the following significant assumptions: exercise price $0.038 – $0.048, trading prices $0.01 - $0.08, expected volatility 124.4%, expected life of 60 months, dividend yield of 0.00% and a risk free rate of 3.59%. The fair value of these warrants has been recorded as part of the debt discount as discussed above as well as being recognized as a derivative liability. The derivative liability is re-valued at each reporting date with changes in value being recognized as part of current earnings. This revaluation for the three and nine months ended September 30, 2010 resulted in a gain of $525,000 and a loss of $245,000, respectively.

Depreciation - Depreciation is computed on the straight-line method over the following estimated useful lives:

Fixed assets		Useful Lives

Furniture and fixtures		7 years
Computer equipment		5 years
Office equipment		5 years
Software		3 years
Leasehold improvements		Shorter of lease term or useful economic life

Character development costs - Character development costs consist primarily of costs to acquire properties from the creator, development of the property using internal or independent writers and artists, and the registration of a property for a trademark or copyright. These costs are capitalized in the year incurred if the Company has executed a contract or is negotiating a revenue generating opportunity for the property. If the property derives a revenue stream that is estimable, the capitalized costs associated with the property are expensed as revenue is recognized.

If the Company determines there is no determinable market for a property, it is deemed impaired and is written off.

Fair Value of Financial Instruments – The Company follows a framework for consistently measuring fair value under generally accepted accounting principles, and the disclosures of fair value measurements. The framework provides a fair value hierarchy to classify the source of the information.

The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value and include the following:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The carrying amounts reported in the balance sheets for cash on hand, receivables, payables and accrued expenses approximate their fair values due to the short term nature of these financial instruments.

Investment in Film Library – Investment in film library includes the unamortized costs of one completed, unreleased film. The capitalized costs include all direct production and financing costs, capitalized interest and production overhead. The costs of the film productions are amortized using the individual-film-forecast-method, whereby the costs are amortized and participations and residual costs are accrued in proportion that current year’s revenues bears to managements’ estimate of ultimate revenue at the beginning of the current year expected to be recognized from exploitation, exhibition or sale of the film. Ultimate revenue includes estimates over a period not to exceed ten years following the date of initial release.

Film development costs are stated at the lower of amortized cost or estimated fair value. The valuation of the film development costs are reviewed on a title by title basis, when an event or change in circumstances indicates the fair value of the film is less than the unamortized cost. The fair value of the film is determined using managements’ future revenue and cost estimates in an undiscounted cash flow approach. Additional amortization is recorded in an amount by which unamortized costs exceed the estimated fair value of the film. Estimates of future revenue involve measurement uncertainty and it is therefore possible that reductions in the carry costs of film development costs may be required as a consequence of changes in managements’ future revenue estimates.

Purchased intangible assets and long-lived assets – Intangible assets are capitalized at acquisition costs and intangible assets with definite lives are amortized on the straight-line basis. The Company periodically reviews the carrying amounts of intangible assets and property. Long-lived assets, such as property and equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, the impairment charge to be recognized is measured by the excess of the carrying amount over the fair value of the asset.

Advertising costs - Advertising costs are expensed the later of when incurred or when the advertisement is first run. For the three and nine months ended September 30, 2010 and 2009, advertising expenses were $0.

Research and development - Research and development costs, primarily character development costs and design not associated with an identifiable revenue opportunity, are charged to operations as incurred. For the three and nine months ended September 30, 2010, research and development expenses were $101,307 and $240,249, respectively. For the three and nine months ended September 30, 2009, research and development expenses were $54,748 and $139,796, respectively.

Income taxes – Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in the tax laws and rates on the date of enactment.

Net income/(loss) per share – Basic income per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of shares of common stock outstanding during the periods, excluding shares subject to repurchase or forfeiture. Diluted income per share increases the shares outstanding for the assumption of the vesting of restricted stock and the exercise of dilutive stock options and warrants, using the treasure stock method, unless the effect is anti-dilutive.

Recently issued accounting pronouncements – In January 2010, the FASB issued Accounting Standards Update 2010-06, “Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements.” This guidance amends the disclosure requirements related to recurring and nonrecurring fair value measurements and requires new disclosures on the transfers of assets and liabilities between Level 1 (quoted prices in active market for identical assets or liabilities) and Level 2 (significant other observable inputs) of the fair value measurement hierarchy, including the reasons and the timing of the transfers. Additionally, the guidance requires a roll forward of activities on purchases, sales, issuance and settlements of the assets and liabilities measured using significant unobservable inputs (Level 3 fair value measurements). The guidance became effective for the reporting period beginning January 1, 2010, except for the disclosure on the roll forward activities for Level 3 fair value measurements, which will become effective for the reporting period beginning January 1, 2011. Other than requiring additional disclosures, adoption of this new guidance will not have a material impact on our financial statements.

The FASB issued guidance under Accounting Standards Update (“ASU”) No. 2010-08, “Technical Corrections to Various topics. The ASU eliminates certain inconsistencies and outdate provisions and provides needed clarifications. The changes are generally nonsubstantive nature and will not result in pervasive changes to current practice. However, the amendments that clarify the guidance on embedded derivatives and hedging (ASU Subtopic 815-15) may cause a change in the application of the Subtopic. The clarifications of the guidance on embedded derivatives and hedging (Subtopic 815-15) are effective for fiscal years beginning after December 15, 2009.

On February 24, 2010, the FASB issued Accounting Standards Update (ASU) 2010-09, Amendments to Certain Recognition and Disclosure Requirements. The amendments to the FASB Accounting Standards Codification (TM) (ASC) 855, Subsequent Events, included in the ASU make a number of changes to the existing requirements of ASC 855. The amended guidance was effective on its issuance date, except that the use of the issued date by conduit bond obligors will be effective for interim or annual periods ending after June 15, 2010. As a result of the amendments, SEC filers that file financial statements after February 24, 2010 are not required to disclose the date through which subsequent events have been evaluated.

On March 5, 2010, the FASB issued Accounting Standards Update (ASU) 2010-11, Scope Exception Related to Embedded Credit Derivatives. The ASU address questions that have arisen in practice about the intended breath of the embedded credit derivative scope exception in FASB ASC 815. The amended guidance clarifies that the scope exception applies to contracts that contain an embedded credit derivative that is only in the form of subordination of one financial instrument to another. The amended guidance is effective at the beginning of an entity’s first fiscal quarter beginning after June 15, 2010 and will not have any impact on our financial statements.

( 5)	Other Current Assets

Other current assets consist primarily of receipts on “Dead of Night” from sales in foreign territories. These receipts are held in a collection account and managed by a collection agency pursuant to a collection account maintenance agreement. These receipts are remitted on a regular basis to Standard Chartered Bank as pay down on the production loan per the collection account maintenance agreeement.

( 6 )

Property and equipment

Property and equipment are recorded at cost. The cost of repairs and maintenance are expensed when incurred, while expenditures refurbishments and improvements that significantly add to the productive capacity or extend the useful life of an asset are capitalized. Upon asset retirement or disposal, any resulting gain or loss is included in the results of operations.

	September 30, 2010
	(Unaudited)			December 31, 2009
Property and equipment, cost:
Office equipment	$	12,920		$	13,207
Furniture and fixtures		78,335			118,140
Computer equipment		76,103			149,387
Software		74,251			93,149
Leasehold improvements		5,200			20,557
		246,809			394,440
Less accumulated depreciation		(183,492	)		(272,145	)

Net property and equipment	$	63,317		$	122,295

( 7 )

Character rights

Character rights are recorded at cost. The Top Cow rights agreement expired in June, 2010. The Company continues to have rights on certain projects that are in development for an additional year and potentially beyond if certain milestones are achieved.

( 8 )

Short-term and long-term debt

Short-term debt	September 30, 2010 (Unaudited)		December 31, 2009

Loan payable to officer - uncollateralized; interest only at 5%. Due upon demand.	$	-	$	1,405

Loan payable to shareholder - uncollateralized; payable in monthly installments of interest only at 12%. Due upon demand.		100,000		100,000

Loan payable to shareholder - uncollateralized; payable in monthly installments of interest only at 12%. Due upon demand.		25,000		25,000

Loan payable to shareholder - uncollateralized; payable in monthly installments of interest only at 12%. Due July 1, 2011.		169,897		253,283

Bank line of credit - uncollateralized; payable in monthly installments of 5% of principal plus interest		37,665		50,000

Loan payable to shareholder - uncollateralized; payable in monthly installments of interest only at 12%. Due upon demand.		3,328		28,328

Loan payable to shareholder - uncollateralized; payable in monthly installments of interest only at 12%. Due upon demand.		10,000		10,000

Loan payable to shareholder - uncollateralized; payable in monthly installments of interest only at 12%. Due upon demand.		10,000		10,000

Loan payable to shareholder - uncollateralized; payable in monthly installments of interest only at 12%. Due upon demand.		46,003		89,780

Loan payable to shareholder - uncollateralized; payable in monthly installments of interest only at 12%. Due upon demand.		300,000		300,000

( 8 )

Short-term and long-term debt (continued)

Short-term debt	September 30, 2010 (Unaudited)		December 31, 2009
Loan payable to officer - The interest rate is 8.00%. Balance plus accrued interest is due June 3, 2011. Secured by all the assets of the Company		1,350,000		1,350,000

Loan payable to officer - payable in monthly installments of $29,688 per month. The interest rate is 8.00%. Balance due June 3, 2010.		-		81,657

Loan payable to officer - The interest rate is 8.00%. Balance plus accrued interest is due May 6, 2011. Secured by all the assets of the Company		2,400,000		2,400,000

Standard Chartered Bank note payable of $13,365,000 loan collateralized by all rights in the sales agency agreement and the distribution agreement in connection with the film "Dead of Night". Interest rate of Libor plus 2%, due April 1, 2011 at the latest.		11,250,481		10,945,932

Omnilab Pty Ltd - 10% funded of gap investment of $4,850,000 for production "Dead of Night," to be recovered from gross receipts in North America. Interest rate of 4.09%, due April 1, 2011 at the latest.		485,000		485,000

DON Tax Credits, LLC - collateralized by the Louisiana motion picture investor, tax credits issued by the State of Louisiana and by the Parish of Jefferson, Louisiana. Interest rate of 7%. Due October 1, 2009.		-		243,782

Discounts on related party debt		-		(729,088	)
Total short-term debt		16,187,374		15,645,079
less: related party notes payable, net of discounts		3,750,000		3,103,974
Total short-term notes payable	$	12,437,374	$	12,541,105

( 9 )

Operating and capital leases

The Company has entered into operating leases having expiration dates through 2011 for real estate and various equipment needs, including office facilities, computers, office equipment and a vehicle.

On July 10, 2006, the Company entered into an operating agreement for the lease of real property located in Los Angeles, California. The agreement has a five year term, commencing September 1, 2006 and ending August 31, 2011. The Company is currently in default of its lease agreement and has abandoned the leasehold as of June 30, 2010.

On May 18, 2010, the Company entered into an operating agreement for the lease of real property located in Los Angeles, CA. The agreement has a three year term commencing on June 15, 2010 and ending on June 15, 2013.

Rent expense under non-cancelable operating leases was $17,366 and $202,173 for the three and nine months ended September 30, 2010, respectively.

The Company has various non-cancelable leases for computers, software, and furniture, at a cost of $195,434 and $264,248 at September 30, 2010 and December 31, 2009, respectively. The capital leases are secured by the assets which cannot be freely sold until the maturity date of the lease. Accumulated amortization for equipment under capital lease totaled $151,252 and $174,569 at September 30, 2010 and December 31, 2009, respectively. The Company is currently in default on a majority of its lease agreements and as a result, all future payments are immediately due. The Company is negotiating settlements on the leases in default.

At September 30, 2010, future minimum rental payments required under non-cancelable capital leases that have initial or remaining terms in excess of one year are as follows:

Years Ending December 31,	Capital Leases
2010	$	8,000
2011		12,000
2012		-
Thereafter		-
Total minimum obligations		20,000
Less amounts representing interest		964
Present value of net minimum obligations		19,036
Less current portion		-
Long-term portion	$	19,036

( 10 )

Commitments and Contingencies

As of September 30, 2010, seven unsecured short term notes totaling $494,331 have exceeded their maturity date, are due upon demand, and could be considered in default. The Company is currently negotiating with the note holders to extend the maturity dates of these notes.

As of September 30, 2010, the Company’s liabilities included a payable to the Internal Revenue Service in the amount of $216,772 associated with payroll tax liabilities for the second, third and fourth quarters of 2008, along with associated penalties and interest for late payment. The Company has been making monthly payments of $10,000 towards this balance and plans to liquidate the balance in full from receipts due on the sale of its Drunkduck.com website.

The Company’s legal proceeds are as follows:

Transcontinental Printing v. Platinum. On or about July 2, 2009, Transcontinental Printing, a New York corporation, filed suit against the Company in Superior Court, County of Los Angeles (Case No. SC103801) alleging that the Company failed to pay for certain goods and services provided by Transcontinental in the total amount of $106,593. The Company believes that Transcontinental failed to mitigate damages and, therefore, the amount owed is in dispute. The Company settled the suit agreeing to pay $92,000 plus interest at 10% per annum with a payment schedule of $2,000 per month for five months and then increasing to $10,000 per month until paid in full. The company has made all scheduled payments to date. As of September 30, 2010, the accounts payable of the Company included a balance of $64,945 for this settlement.

Harrison Kordestani v. Platinum. Harrison Kordestani was a principal of Arclight Films, with whom the Company had entered into a film slate agreement. One of the properties that had been subject to the slate agreement was “Dead of Night.” Arclight fired Mr. Kordestani and subsequently released Dead of Night from the slate agreement. In late January 2009, Mr. Krodestani had an attorney contact the Company as well as its new partners who were on the verge of closing the financing for the “Dead of Night.” Mr. Kordestani, through his counsel, claimed he was entitled to reimbursement for certain monies invested in the film while it had been subject to the Arclight slate agreement. Mr. Krodestani’s claim was wholly without merit and an attempt to force an unwarranted settlement because he knew we were about to close a deal. We responded immediately through outside counsel and asserted that he was engaging in extortion and the company would pursue him vigorously if he continued to try and interfere with our deal. The company has not heard anything further from Mr. Kordestani but will vigorously defend any suit that Mr. Kordestani attempts to bring. The Company has not reserved any payable for this proceeding.

TBF Financial Inc. v. Platinum. On or about August 20, 2009, TB Financial, Inc. filed suit against the Company in the Superior Court of California, County of Los Angeles (Case No. BC420336) alleging that the Company breached a written lease agreement for computer equipment and seeking damages of $42,307 plus interest at a rate of ten percent (10%) per annum from July 7, 2008. On November 19, 2009, TB Financial filed a Request for Default against the Company; however, the Company turned the matter over to Company counsel to oppose any requests for default. On February 24, 2010, a default judgment was entered against the Company in the amount of $51,506 and the Company received a request for Writ of Execution on March 1, 2010. On May 19, 2010, the Company settled with TBF Financial for $30,000 with three payments of $1,000 due on May 19, 2010 and June and July 15, 2010 with a final payment of $27,000 on July 31, 2010. In July, 2010, the Company made the final payment of $27,000 on the settlement.

Rustemagic v. Rosenberg & Platinum Studios. On or about June 30, 2009, Ervin Rustemagic filed suit against the Company and its President, Scott Rosenberg, in the California Superior Court for the County of Los Angeles (Case No. BC416936) alleging that the Company (and Mr. Rosenberg) breached an agreement with Mr. Rustemagic thereby causing damages totaling $125,000. According to the Complaint, Mr. Rustemagic was to receive 50% of producer fees paid in connection with the exploitation of certain comics-based properties. Rustemagic claims that he became entitled to such fees and was never paid. The Company and Rosenberg deny that Rustemagic is entitled to the gross total amount of money he is seeking. The matter has now been removed to arbitration. The Company has not reserved any payable for this proceeding.

Douglass Emmet v. Platinum Studios On August 20, 2009, Douglas Emmet 1995, LLC filed an Unlawful Detainer action against the Company with regard to the office space currently occupied by the Company. The suit was filed in the California Superior Court, County of Los Angeles, (Case No. SC104504) and alleged that the Company had failed to make certain lease payments to the Plaintiff and was, therefore, in default of its lease obligations. The Plaintiff prevailed on its claims at trial and, subsequently, on October 14, 2009 entered into a Forbearance Agreement with the Company pursuant to which Douglas Emmet agreed to forebear on moving forward with eviction until December 31, 2009, if the Company agreed to pay to Douglas Emmet 50% of three month’s rent, in advance, for the months of October, November and December 2009. As of January 1, 2010, the Company was required to pay to Douglas Emmet the sum of $466,752 to become current under the existing lease or face immediate eviction and judgment for that amount. Prior to January 1, 2010, Douglas Emmet agreed to a month-to-month situation where Platinum pays 50% of its rent at the beginning of the month and the landlord holds back on eviction and enforcement of judgment while they evaluated whether they will consider negotiating a new lease with the Company that would potentially demise some of the Company’s current officer space back to the landlord as well as potentially forgive some of the past due rent. As of June 30, 2010, the Company has abandoned the leasehold and moved to new offices.

With exception to the litigation disclosed above, we are not currently a party to, nor is any of our property currently the subject of, any additional pending legal proceeding that will have a material adverse effect on our business, nor are any of our directors, officers or affiliates involved in any proceedings adverse to our business or which have a material interest adverse to our business.

( 11 )

Investment in Films

Investment in films includes the unamortized costs of one completed, unreleased film. The capitalized costs include all direct production and financing costs, capitalized interest and production overhead. The costs of the film productions are amortized using the individual-film-forecast-method, whereby the costs are amortized and participations and residual costs are accrued in proportion that current year’s revenues bears to managements’ estimate of ultimate revenue at the beginning of the current year expected to be recognized from exploitation, exhibition or sale of the film. Ultimate revenue includes estimates over a period not to exceed ten years following the date of initial release.

Film development costs are stated at the lower of amortized cost or estimated fair value. The valuation of the film development costs are reviewed, when an event or change in circumstances indicates the fair value of the film is less than the unamortized cost. The fair value of the film is determined using managements’ future revenue and cost estimates in an undiscounted cash flow approach. Additional amortization is recorded in an amount by which unamortized costs exceed the estimated fair value of the film. Estimates of future revenue involve measurement uncertainty and it is therefore possible that reductions in the carry costs of film development costs may be required as a consequence of changes in managements’ future revenue estimates.

As of September 30, 2010, all of the investment in films is related to the “Dead of Night” production. Based on management’s assessment of ultimate revenue and anticipated release date of the film, the total film development cost of $12,837,051 will be amortized during 2011.

( 12 )

Related party transactions

The Company has an exclusive option to enter licensing of rights for agreements to individual characters, subject to existing third party rights, within the RIP Awesome Library of RIP Media, Inc., specific and only to those 404 Awesome Comics characters currently owned and controlled by RIP Media, Inc, a schedule of which has been provided to the Company. Rip Media, Inc is a related entity in which Scott Rosenberg has the economic benefit. Such licensing option includes all rights worldwide, not including print and digital comic publishing rights. The ownership of the intellectual property in its entirety, including copyright, trademark, and all other attributes of ownership including but not limited to additional material created after a license agreement from Rip Media to Platinum Studios, Inc (and however disbursed thereafter) shall be, stay and remain that of Rip Media in all documents with all parties, including the right to revoke such rights upon breaches, insolvency of the Company or insolvency of the licensee (s) or others related to exploitation of the intellectual property, and Platinum is obligated to state same in all contracts. In some cases, there are some other limitations on rights. Any licensing of rights from Rip Media to the Company is contingent upon and subject to Platinum’s due diligence and acceptance of Chain of Title. Currently, we have the above exclusive right to enter into agreements related to the licensing of motion picture rights and allied/ancillary rights until the date upon which Platinum Studios CEO, Scott Mitchell Rosenberg is no longer the Company s CEO and Chairman of the Board and holds at least 30% of the outstanding capital stock of the Company. Rip Media Inc retains the right on the above characters to enter directly into agreements to license rights, negotiate and sign option agreements with other parties in so far as Platinum is made aware of the agreement prior to its signing, and that there is economic participation to Platinum in a form similar to its agreement with Rip Media in general, and that if there is a material to change to the formula, that Platinum’s Board of Directors may require specific changes to the proposed agreement such that it conforms with other licenses from Rip Media made from January 1, 2010 forward. If the material change is cured, then Rip’s rights to enter into an agreement, still subject to its financial arrangement with Platinum, remain the same. We do not have access to other characters, stories, rights (including trademarks, trade names, url’s) controlled by Rosenberg or his related entities. In regards to new acquisitions, including trademarks, Rip Media must present to Platinum, for Platinum’s acquisition, any rights it desires to acquire, and may only acquire if Platinum does not choose to acquire (within 5 business days of notice), however this acquisition restriction on Rip Media does not apply to any properties or trademarks or trade names or copyrights or rights of any kind that Scott Rosenberg or any of his related entities or rights to entities he may own or acquire or create that are, used to be, or could be related in any fashion to Malibu Comics or Marvel Comics, including trademarks and trade names that may be acquired by Rip Media or other Rosenberg entities due to expiration or abandonment by Malibu, Marvel or other prior owners of marks from other comics or rights related companies, or, such as with trademarks, marks that may be similar only in name or a derivative of a name, which Rip has the unfettered right to acquire and exploit without compensation to Platinum. For the nine months ended September 30, 2010, RIP Media, Inc. earned $475,000 under this arrangement of which $190,000 was paid in cash and $285,000 was accrued.

Scott Mitchell Rosenberg is attached and credited at his election as producer or executive producer, without offset, to provide production consulting services to the Company’s Customers (Customer) (including but not limited to production companies, studios, financiers and any company related to filmed entertainment or audio visual productions) on all audio visual productions through Scott Mitchell Rosenberg Productions (another related entity which is often, in the entertainment industry, referred to as a “loan-out” company) wholly owned or controlled by Scott Mitchell Rosenberg or related entities. Rosenberg’s right is absolute and not subject to restriction or offset by Company. Often, at the time the Company enters into an agreement with a Customer, a separate contract is entered into between the related entity and the Customer. In addition, consulting services regarding development of characters and storylines may also be provided to the Company by this related entity. Revenue would be paid directly to the related entity by the Customer.

The Company entered into a Credit Agreement on May 6, 2009, with Scott Rosenberg, the Company’s CEO and Chairman, in connection with the issuance of two secured promissory notes and an unsecured promissory note. Two warrants were issued to Scott Rosenberg in connection with the issuance of various promissory notes as of May 6, 2009 and June 3, 2009. During the nine months ended September 30, 2010, the Company made principle payments to Scott Rosenberg on the unsecured debt in the amount of $73,266.

A description of the notes is as follows:

June 3, 2009 Unsecured Debt - The June 3, 2009 Unsecured Debt has an aggregate principal amount of $544,826, and is convertible into shares of the Company’s common stock at a conversion price of $0.048. The June 3, 2009 Unsecured Debt bears interest at the rate of eight percent per annum. Upon the occurrence of an event of default, the June 3, 2009 Unsecured Debt bears interest at the rate of ten percent per annum. The Company is required to make payments of $29,687.50 per month. The monthly payments are to be applied first to interest and second to principal. The remaining principal amount is to be repaid upon the expiration of the note on June 3, 2010. The Company may prepay the note at any time. The June 3, 2009 Unsecured Debt has the following features that can be considered to be embedded derivatives: (i) the conversion feature of the notes, (ii) a holder’s right to force a redemption of the Notes upon an event of default, and, (iii) the increased interest rate upon an event of default. The note balance was paid in full on April 1, 2010.

A description of the Warrants is as follows:

1) The May 6, 2009 warrant entitles the holder to purchase up to 25,000,000 shares of the Company’s common stock at a price of $0.048 per share. The May 6, 2009 warrant is exercisable up until May 6, 2019. The May 6, 2009 warrant shall expire and no longer be exercisable upon a change in control. The exercise price and the number of shares underlying the warrant is subject to anti-dilution adjustments from time to time if the Company issues common stock at below the exercise price at that time for the warrants.

2) The June 3, 2009 warrant entitles the holder to purchase up to 14,062,500 shares of the Company’s common stock at a price of $0.038 per share. The June 3, 2009 warrant is exercisable up until June 3, 2019. The June 3, 2009 warrant shall expire and no longer be exercisable upon a change in control. The exercise price and the number of shares underlying the warrant is subject to anti-dilution adjustments from time to time if the Company issues common stock at below the exercise price at that time for the warrants.

In June, 2010, the Company consummated a sale of its Drunkduck.com website to an affiliate of Brian Altounian, President and Chief Operating Officer of the Company. The sale includes all components of the website, all copyrights, trade secrets, trademarks, trade names and all material contracts related to the website’s operations. The selling price totaled $1,000,000 comprised of $500,000 in cash and $500,000 in future royalties. The Company has already received $300,000 of the cash proceeds with the balance of $200,000 due October 28, 2010. The Company will also receive payments equal to ten percent of Net Revenues generated from the website until the $500,000 of royalties is received. The Company retains partial ownership until the total selling price has been received.

( 13 )

Shareholders equity

In March 2010, the Company issued to a consultant 183,000 shares of common stock for $0.05/share which represented market value on the date of issuance totaling $9,150. Related services represented a finders’ fee associated with the current private placement with the value of the services charged to additional paid-in capital.

In April 2010, the Company issued 15,143,924 in fulfillment of previously received common stock subscriptions. The Company also issued 2,764,335 shares with a value of $138,217 as payment for services and accrued wages. The Company issued an additional 300,000 shares to Brian Altounian, the President of the Company, with a value of $15,000 for salary due.

In September, 2010, the Company issued to a consultant 1,212,725 shares of commons stock for services performed. The issuance represented a market value of $70,000.

As of September 30, 2010, the Company had sold 14,302,500 shares related to a private placement offering valued at $715,125. The related shares had not been issued at September 30, 2010 and accordingly, the $715,125 value of the shares sold has been included in Common Stock Subscribed at September 30, 2010.

( 14 )

Common stock equivalents

Warrants and options outstanding at September 30, 2010 are summarized as follows:

	Outstanding								Exercisable
	Number Outstanding			Weighted Average Remaining Contractual Life		Weighted Average Exercise Price			Number Exercisable			Weighted Average Exercise Price

Warrants outstanding, December 31, 2009		41,958,600			1.78	$	0.10			41,958,600		$	0.10
Granted		-			-		-			-			-

Warrants outstanding, September 30, 2010		41,958,600			1.78	$	0.10			41,958,600		$	0.10

As of September 30, 2010, no warrants have been exercised.

Options outstanding December 31, 2009		19,085,000			6.25	$	0.10			18,547,190		$	0.10
Granted		6,000,000			4.03		0.06			6,237,810			0.06
Forfeited		(500,000	)		-		(0.10	)		(500,000	)		(0.10	)
Options outstanding September 30, 2010		24,585,000			6.03	$	0.10			24,285,000		$	0.10

( 15 )

Income taxes

Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in the tax laws and rates on the date of enactment.

The Company recognizes tax benefits from uncertain positions if it is "more likely than not" that the position is sustainable, based upon its technical merits. The initial measurement of the tax benefit is the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information.

The Company, as a matter of policy, would record any interest and penalties associated with uncertain tax positions as a component of income tax expense in its statement of operations. There are no penalties accrued as of September 30, 2010, as the Company has significant net operating loss carry forwards, even if certain of the Company’s tax positions were disallowed, it is not foreseen that the Company would have to pay any taxes in the near future. Consequently, the Company does not calculate the impact of interest or penalties on amounts that might be disallowed.

( 16 )

Subsequent events

In October, 2010, the Company issued 14,102,500 shares in fulfillment of previously received commons stock subscriptions with at value of $705,125.

In October, 2010 the Company issued 1,337,000 shares with a value of $66,850 which represented a finders’ fee associated with the current private placement with the value of the services charged to additional paid-in capital.

In October, 2010 the Company issued 1,603,853 shares with a value of $80,193 in settlement of debt.

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

FORWARD-LOOKING STATEMENTS

Some of the information in this prospectus contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as "may," "expect," "anticipate," "believe," "estimate" and "continue," or similar words. You should read statements that contain these words carefully because they:

·	discuss our future expectations;
·	contain projections of our future results of operations or of our financial condition; and
·	state other "forward-looking" information.

We believe it is important to communicate our expectations. However, there may be events in the future that we are not able to accurately predict or over which we have no control. Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under "Risk Factors," "Business" and elsewhere in this prospectus. See "Risk Factors."

GENERAL

We are a comics-based entertainment company. We own the rights to a library of over 4,000 comic book characters, which we adapt and produce for film, television and all other media. Our library contains characters in a full range of genre and styles. With deals in place with film studios and media players, our management believes we are positioned to become a leader in the creation of new content across all media.

We are focused on adding titles and expanding our library with the primary goal of creating new franchise properties and characters. In addition to in-house development and further acquisitions, we are developing content with professionals outside the realm of comic books. We have teamed up with screenwriters, producers, directors, movie stars, and novelists to develop entertainment content and potential new franchise properties. We believe our core brand offers a broader range of storylines and genres than the traditional superhero-centric genre. Management believes this approach is maintained with Hollywood in mind, as the storylines offer the film industry fresh, high-concept brandable content as a complimentary alternative to traditional super hero storylines.

Over the next several years, we are working to become the leading independent comic book commercialization producer for the entertainment industry across all platforms including film, television, direct-to-home, publishing, and digital media, creating merchandising vehicles through all retail product lines. Our management believes this will allow us to maximize the potential and value of our owned content creator relationships and acquisitions, story development and character/franchise brand-building capabilities while keeping required capital investment relatively low.

We derive revenues from a number of sources in each of the following areas: Print Publishing, Digital Publishing, Filmed Entertainment, and Merchandise/Licensing.

Set forth below is a discussion of the financial condition and results of operations of Platinum Studios, Inc. (the “Company”, “we”, “us,” and “our”) for the nine months ended September 30, 2010 and 2009. The following discussion should be read in conjunction with the information set forth in the consolidated financial statements and the related notes thereto appearing elsewhere in this report.

RESULTS OF CONSOLIDATED OPERATIONS – THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 COMPARED TO THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009

Net Revenue

Net revenue for the three and nine months ended September 30, 2010 was $150,645 and $2,248,693, respectively, as compared to $66,159 and $222,250 for the three and nine months ended September 30, 2009. Currently the Company derives most of its revenue from options to purchase rights and the purchase of rights to properties. This type of revenue can vary significantly between quarters and years. The net revenue for the three months ended September 30, 2010 was primarily related to purchase of rights to properties for merchandising. The net revenue for the nine months ended September 30, 2010 was primarily purchased rights revenue from one customer as principle photography initiated on one of the Company’s properties. The net revenue for the three and nine months ended September 30, 2009 primarily represented purchased rights revenue from one customer.

Cost of revenues

For the three and nine months ended September 30, 2010, costs of revenue were $14,378 and $493,960, respectively as compared to $22 and $10,022 for the three and nine months ended September 30, 2009. The increase is primarily due to participation fees to a related party, RIP Media, Inc. as discussed in the related party transactions footnote.

Operating expenses

Operating expenses increased $116,079 or 31% for the three months ended September 30, 2010 to $489,774 as compared to $373,695 for the three months ended September 30, 2009. The increase was primarily related to increases of $5,989 in moving expense related to the Company moving its office to a new location, $11,964 in office expense as the Company digitized its legal documents and incurred printing costs related to its new address, $14,645 in commission expense related to new licensing revenues, $16,404 in accounting fees primarily related to a new offering of Company stock, $64,817 in consulting fees as the Company brought in two consultants to help with its strategic planning and operations and $42,131 in payroll taxes. These increases were offset by decreases in salary of $33,342 as the Company reduced its workforce and rent of $11,665 due to lower rent at the Company’s new office.

Operating expenses increased $493,894 or 35% for the nine months ended September 30, 2010 to $1,904,360 as compared to $1,410,466 for the nine months ended September 30, 2009. The increase was primarily related to increases of $24,459 in moving expense related to the Company moving its office to a new location, $86,489 in rent expense as the Company paid additional rent during the first six months of 2010 as it tried to work out its lease with Douglass Emmet, $41,789 in commissions related to new licensing agreements, $75,000 in a write down of a prepaid option, $212,918 in legal expense related to a percentage fee on due licensing revenue received in the second quarter and $216,501 in consulting fees as the Company brought in two consultants to help with its strategic planning and operations. These increases were offset by decreases in salary of $208,425 as the company reduced its workforce and accounting and audit fees of $20,074.

Research and development

Research and development costs increased $46,559 or 85% and $100,450 or 72% for the three and nine months ended September 30, 2010, respectively. This increase was due to increased salaries and one additional employee added to the development group.

Stock option expense

Stock option expense for the three and nine months ended September 30, 2010 was $153,600 and $262,295 respectively, as compared to $0 and $100,947 for the three and nine months ended September 30, 2009. The expense for the three months ended September 30, 2010 was related to new option grants compared to $0 for the three months ended September 30, 2009. Stock option expense for the nine months ended September 30, 2010 increased $161,348 to $262,295 as compared to $100,947 for the nine months ended September 30, 2009, with $211,570 of the expense related to new options granted.

Depreciation and amortization

For the three and nine months ended Sept 30, 2010 depreciation and amortization was $6,886 and $84,840, respectively as compared to $35,977 and $117,372 for the three and nine months ended September 30, 2009.

Gain on disposition of assets

Gain on disposition of assets for the three and nine months ended September 30, 2010 was $55,200 and $249,220, respectively, as compared to $0 for the three and nine months ended September 30, 2009. The gain for the three and nine months ended September 30, 2010 was primarily related to receipt of funds for the sale of the Company’s Drunkduck.com website to a related party.

Gain (loss) on settlement of debt

The company recorded a gain on settlement of debt of $27,492 and $109,949 for the three and nine months ended September 30, 2010, respectively, as compared to a loss of $28,517 for the three months ended September 30, 2009 and a gain of $453,451 for the nine months ended September 30, 2009. The gain for the three and nine months ended September 30, 2010 was primarily related to the settlement of leases in default. The gain for the nine months ended September 30, 2009 was due to the final payment issued to the Wowio former partners. This transaction was paid in stock at a value less than the acquisition payable remaining.

Gain (loss) on derivative liability

The Company recorded a gain on derivative liability of $525,000 for the three months ended September 30, 2010 and a loss of $245,000 for the nine months ended September 30, 2010, as compared to a loss of $1,210,000 for the three and nine months ended September 30, 2009. The derivative liability, recorded in connection with debts payable to the Company’s CEO during the three months ended June 30, 2009, is re-valued at each reporting date with changes in value being recognized as part of current earnings.

Interest expense

For the three and nine months ended September 30, 2010, interest expense was $121,279 and $1,079,444, respectively, as compared to $525,557 and $874,855 for the three and nine months ended September 30, 2009. The decrease for the three months and the increase of the nine months is primarily related to the timing of amortization of debt discount recorded as interest expense in connection with debts payable to the Company’s CEO during 2009.

As a result of the foregoing, the net loss decreased by $2,033,470 for the three months ended September 30, 2010 to $(128,887) and decreased by $1,542,578 for the nine months ended September 30, 2010 to $(1,702,282) as compared to the same periods in 2009.

LIQUIDITY AND CAPITAL RESOURCES (UNAUDITED)

Platinum Studios entered into a Credit Agreement on May 6, 2009, with Scott Rosenberg, the Company’s CEO and Chairman, in connection with the issuance of two secured promissory notes and an unsecured promissory note.

A description of the notes is as follows:

In December, 2008, the Company, thru its subsidiary, Long Distance Films, Inc., entered into a promissory note with Standard Charted Bank to fund the production of “Dead of Night” in the amount of $13,365,000. The loan is collateralized by all rights in the sales agency agreement and the distribution agreement in connection with the production. The interest rate is Libor plus 2% with the principle and all accrued interest due on April 1, 2011.

Net cash used by operations during the nine months ended September 30, 2010 was $268,093 as compared to $15,057,635 for the nine months ended September 30, 2009. The reduction in the cash used by operations was primarily due to $1,204,668 used for production costs associated with “Dead of Night” for the nine months ended September 30, 2010 as compared to $13,612,242 for the nine months ended September 30, 2009. Additional reductions in the cash used by operations were related to an increase in deferred revenue of $2,015,630 for the nine months ended September 30, 2010 as compared to an increase of $59,792 for the nine months ended September 30, 2009. The deferred revenues are primarily related to cash received on foreign sales of the film “Dead of Night” as deposits prior to delivery of the film to the distributors. Additionally, cash flows used by operations decreased as the Company generated $2.4 million in revenues for the nine months ended September 30, 2010 as compared to $.2 million for nine months ended September 30, 2009. These additional revenues allowed the company to come closer to meeting its overhead obligations without addition of substantial financing or equity investment in the Company.

Net cash provided by investing activities was $293,012 for the nine months ended September 30, 2010 as compared to cash used by investing activities for the nine months ended September 30, 2009 of $2,956, primarily due to cash receipts related to the sale of the Company’s Drunk Duck website.

Net cash provided by financing activities was $309,260 for the nine months ended September 30, 2010 as compared to $15,058,739 for the nine months ended September 30, 2009. The reduction in cash provided by financing activities is primarily attributed to less financing required for the production of the film “Dead of Night” for the nine months ended September 30, 2010 of $1,034,853 as compared to $14,411,320 for the nine months ended September 30, 2009. The Company was also able to make payments of $1,278,832 on non-related party loans for the nine months ended September 30, 2010 as compared to $22,313 for the nine months ended September 30, 2009, primarily related to payments made on the production loan for “Dead of Night” to Standard Chartered Bank from deposits received on foreign sales.

At September 30, 2010 the Company had cash balances of $486,246 and a restricted cash balance of $97,549. Restricted cash will be used in the production of the film “Dead of Night”. The Company will issue additional equity and may consider debt financing to fund future growth opportunities and support operations. Although the Company believes its unique intellectual content offers the opportunity for significantly improved operating results in future quarters, no assurance can be given that the Company will operate on a profitable basis in 2010, or ever, as such performance is subject to numerous variables and uncertainties, many of which are out of the Company’s control.

The Company has reduced its overhead by moving to smaller office space and negotiating settlements on various leases. The Company’s current cash requirements are generally related to overhead and development costs of approximately $250,000 per month. The company has been able to piggyback on its success in achieving licensing revenues on one of its properties associated with a major studio release for summer of 2011, by exploiting its retained rights. The Company generated $100,000 during the third quarter 2010 in new licensing revenues on the property, but there is no assurance the Company will be able to continue to achieve new licensing revenues. The Company plans to utilize approximately $1.8M of a projected $5M potential offering, although there is no assurance the offering will be completed or the S-1 filing declared effective. The Company also anticipates that it will be able to extend its secured debt until such time as it has the resources to repay the debt, although there is no assurance the secured lender, Scott Rosenberg, the Company’s CEO and Chairman, will continue to extend the debt and to defer interest payments when necessary due to current cash flows.

MARKET RISKS

We conduct our operations in the United States. Historically, neither fluctuations in foreign exchange rates nor changes in foreign economic conditions have had a significant impact on our financial condition or results of operations. We currently do not hedge any of our foreign currency exposures and are therefore subject to the risk of exchange rate fluctuations.

We are exposed to foreign exchange rate fluctuations as our foreign currency consumer receipts are converted into U.S. dollars. Foreign exchange rate fluctuations did not have a material impact on our financial results in the nine months ended September 30, 2010 or in the years ended December 31, 2009 and 2008.

Financial instruments which potentially subject us to concentrations of credit risk consist principally of cash and cash equivalents and trade accounts receivable. We place our cash and cash equivalents with high credit quality institutions to limit credit exposure. We believe no significant concentration of credit risk exists with respect to these investments.

Concentrations of credit risk with respect to trade accounts receivable are limited due to the wide variety of customers who are dispersed across many geographic regions.

GOING CONCERN

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, and results of operations, liquidity or capital expenditures.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles. Critical accounting policies and estimates are those that may be material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters of the susceptibility of such matters to change, and that may have an impact on financial condition or operating performance. For example, accounting for our investment in films requires us to estimate future revenue and expense amounts which, due to the inherent uncertainties involved in making such estimates, are likely to differ to some extent from actual results. For a summary of all of our accounting policies, including the accounting policies discussed below, see Note 4 to our consolidated financial statements.

CHARACTER DEVELOPMENT COSTS. Character development costs consist primarily of costs to acquire properties from the creator, development of the property using internal or independent writers and artists, and the registration of a property for a trademark or copyright. These costs are capitalized in the year incurred if the Company has executed a contract or is negotiating a revenue generating opportunity for the property. If the property derives a revenue stream that is estimable, the capitalized costs associated with the property are expensed as revenue is recognized. If the Company determines there is no determinable market for a property, it is deemed impaired and is written off.

INVESTMENT IN FILMS. Investment in films includes the unamortized costs of one completed unreleased film. The capitalized costs include all direct production and financing costs, capitalized interest and production overhead. The costs of the film productions are amortized using the individual-film-forecast-method, whereby the costs are amortized and participations and residual costs are accrued in proportion that current year’s revenues bears to managements’ estimate of ultimate revenue at the beginning of the current year expected to be recognized from exploitation, exhibition or sale of the film. Ultimate revenue includes estimates over a period not to exceed ten years following the date of initial release.

Investment in films are stated at the lower of amortized cost or estimated fair value. The valuation of the film development costs are reviewed by management, when an event or change in circumstances indicates the fair value of the film is less than the unamortized cost. The fair value of the film is determined using managements’ future revenue and cost estimates in an undiscounted cash flow approach. Additional amortization is recorded in an amount by which unamortized costs exceed the estimated fair value of the film. Estimates of future revenue involve measurement uncertainty and it is therefore possible that reductions in the carry costs of film development costs may be required as a consequence of changes in managements’ future revenue estimates.

Management’s current assessment of the fair value of its production, “Dead of Night” includes analysis of foreign territories sold, deposits received against foreign territory sales, estimated value of the unsold foreign territories and the guarantee by Omnilab Pty, Ltd of a domestic release of the film. Any change in these assessments could result in the write down of the investment in films.

INCOME TAXES. Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Because of our historical operating losses, we have provided a full valuation allowance against our net deferred tax assets. When we have a history of profitable operations sufficient to demonstrate that it is more likely than not that our deferred tax assets will be realized, the valuation allowance will be reversed. However, this assessment of our planned use of our deferred tax assets is an estimate which could change in the future depending upon the generation of taxable income in amounts sufficient to realize our deferred tax assets.

WARRANT DERIVATIVE LIABILITY. Platinum Studios entered into a Credit Agreement on May 6, 2009, with Scott Rosenberg in connection with the issuance of two secured promissory notes and an unsecured promissory note. Two warrants were issued to Scott Rosenberg in connection with the issuance of various promissory notes as of May 6, 2009 and June 3, 2009.

A description of the Warrants is as follows:

1) The May 6, 2009 warrant entitles the holder to purchase up to 25,000,000 shares of the Company’s common stock at a price of $0.048 per share. The May 6, 2009 warrant is exercisable up until May 6, 2019. The May 6, 2009 warrant shall expire and no longer be exercisable upon a change in control. The exercise price and the number of shares underlying the warrant is subject to anti-dilution adjustments from time to time if the Company issues common stock at below the exercise price at that time for the warrants.

2) The June 3, 2009 warrant entitles the holder to purchase up to 14,062,500 shares of the Company’s common stock at a price of $0.038 per share. The June 3, 2009 warrant is exercisable up until June 3, 2019. The June 3, 2009 warrant shall expire and no longer be exercisable upon a change in control. The exercise price and the number of shares underlying the warrant is subject to anti-dilution adjustments from time to time if the Company issues common stock at below the exercise price at that time for the warrants.

In determining the fair market value of the Warrants, we used the binomial model with the following significant assumptions: exercise price $0.038 – $0.048, trading prices $0.01 - $0.08, expected volatility 124.4%, expected life of 60 months, dividend yield of 0.00% and a risk free rate of 3.59%. The derivative liability is re-valued at each reporting date with changes in value being recognized as part of current earnings. This revaluation for the three and nine months ended September 30, 2010 resulted in a gain of $525,000 and a loss of $245,000, respectively. Any change in the significant assumptions could result in a different valuation that could effect the Company’s results of operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

n/a

ITEM 4T. CONTROLS AND PROCEDURES

As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (1) accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure; and (2) recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms. There was no change to our internal controls or in other factors that could affect these controls during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Transcontinental Printing v. Platinum. On or about July 2, 2009, Transcontinental Printing, a New York corporation, filed suit against the Company in Superior Court, County of Los Angeles (Case No. SC103801) alleging that the Company failed to pay for certain goods and services provided by Transcontinental in the total amount of $106,593. The Company settled the suit agreeing to pay $92,000 plus interest at 10% per annum with a payment schedule of $2,000 per month for five months and then increasing to $10,000 per month until paid in full. The company has made all scheduled payments to date. As of September 30, 2010, the accounts payable of the Company included a balance of $64,945 for this settlement.

ITEM 1A. RISK FACTORS

There are no material changes from the risk factors previously disclosed in the Registrant’s Form 10-K filed on April 15, 2010.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the nine months ended September 30, 2010, the Company sold 19,603,984 shares of our common stock valued at $989,563.

The Company relied an exemption from the registration requirements of the Act for the private placement of these securities pursuant to Section 4(2) of the Act and/or Regulation D promulgated there under since, among other things, the transaction did not involve a public offering, the investors were accredited investors and/or qualified institutional buyers, the investors had access to information about us and their investment, the investors took the securities for investment and not resale, and we took appropriate measures to restrict the transfer of the securities.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 6. EXHIBITS

31.1*

Certification by Chief Executive Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act

31.2*

Certification by Chief Financial Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act

32.1*

Certification by Chief Executive Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code

32.2*

Certification by Chief Financial Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code

* Filed herewith

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Los Angeles, State of California, on November 22, 2010.

	Platinum Studios, Inc.

By:	/s/ Scott Mitchell Rosenberg
	Scott Mitchell Rosenberg
	Chief Executive Officer
	and Chairman of the Board

By:	/s/ Orrin Halper
	Orrin Halper
	Chief Financial Officer