eceived last night BELOW
1. The first two comments suggest that the Company has “lied” in court and “forged” documents. This appears to refer to a finding by Justice Peter Smith in a UK case in which SAE was not involved, under which my daughter was charged by Justice Smith with “forging” a document. The “forgery” in question was that there was an “as of” date to a document signed by Kate, a common practice in the United States, which was not only disclosed to the court but which the party in question (not an affiliate of SAE) indicated it would not rely on. Justice Smith is known for intemperate comments of this nature and immediately upon issuance of his opinion, the Court of Appeal granted review of his decision. This matter has now been settled under favorable terms and the opinion of Justice Smith will be withdrawn. There is no basis to the claim of “lying in court.” Justice Smith in this proceeding stated that a declaration made by me regarding a request for a delay in trial due to other matters on the Company’s agenda (as we were supporting the defendant in that case), was untrue. Justice Smith stated no basis for his statement, which in any event had nothing to do with any substantive matter in question. I assure you there was no “lie” of any kind, and this just represents the sort of intemperate comments for which Justice Smith is so widely known on the UK bench. This matter has exactly zero effect on the Company’s business.
2. SAE and its predecessor Seven Arts Pictures plc (“PLC”) have never at any time filed inaccurate accounts. This is clearly a libelous statement, and the Company would pursue legal action if we can find who this individual is so that action could be brought.
3. There have been no failure to record the stock ownership of the Company. which has always been properly disclosed. No person has never stated or suggested this to us.
4. SAE and its predecessor PLC have always reported all material transactions as required under both English and the US reporting systems. No one has again suggested that there was no material transaction that was not reported and we are aware of none. Again, this is a clearly libelous statement which would be prosecuted if we could locate the person in question.
5. The statement is made that our accounts do not even “add up” even though all have been audited by independent public accountants, and in one case reaudited when the books were moved to a different accountant system in the US. This is, of course, complete nonsense.
6. The statement is made that Seven Arts has failed to record material liabilities. There has been no failure of the Company to record any material liabilities, and no such claim has ever been made. All material liabilities to which the Company is subject are disclosed on the financial statements and in the legal proceedings sections.
7. Seven Arts has delivered several pictures within the last five years, all of which are listed in the Annual Report on 20-F for PLC filed on June 30, 2011. There is a schedule of pictures in that filing and their delivery dates are listed making this statement ridiculously false. We just released Drunkboat and will shortly release Nine Miles Down. We have also recently taken delivery and released in this same period Pool Boys, Autopsy, Night of the Demons and several others as listed.
8. The bizarre statement is made that we have repeated an announcement of a picture that was released three years ago. Since this statement is obviously ridiculous on its face, it is hard to know how to respond. There are pictures that are delivered for certain territories but only released in the United States at a later period of time. Seven Arts has never stated that a picture has been released in the United States (or in any particular territory) more than once.
9. The writer’s opinion is that Seven Arts is unable to borrow money in a normal manner to fund movies. She does not make clear what “in a normal manner” is. Seven Arts has engaged in several lending transactions over the course of these years to fund films (obviously). These include banks and private funding groups, particularly Palm Finance, which has been the Company’s principal lender. I think Palm Finance would be quite surprised to learn that its funding was “not in a normal manner.” The Company has borrowed more than $14,000,000 from Palm in aggregate.
10. There is no investigation in the UK of the insolvency of SAE or the behavior of its directors. There has been a request for an investigation of the Asset Transfer Agreement from PLC to SAE at the time the Company determined to redomicile in the United States which was made for reasons unrelated to any creditor claims. That investigation will likely be undertaken and the Company is quite comfortable, as disclosed in its filings, that the consideration paid on that transfer was perfectly fair. There is no issue about the Company being under investigation for insolvency or the behavior of directors, and that statement is false.
11. Louisiana investigation is against me personally and does not involve the Company or any other officers. It relates to prior audits that were approved and signed by an auditing firm in Louisiana that has since gotten into difficulties on other matters. The film infrastructure expenditures in issue have been reaudited and that audit has now been filed with the state. The new audit is by a different accountant and has shown a greater amount than originally claimed. These matters, of course, are fully disclosed.
12. There was no “raid” by UK tax authorities. There was an appearance at our office to obtain records of a tax preferred transaction that PLC completed back in 2008 and 2009. Those records were provided to the UK revenue authorities as disclosed in our public filings. Also as disclosed in our public filings we believe that this investigation is directed against the taxpayers that participated in that scheme and neither the Company nor any of its affiliates expect to have any liability or exposure in this regard. As those who follow UK taxing authorities know, UK taxing authorities have made similar charges against virtually every film related structure that was utilized in the United Kingdom in the last five years. None of these have resulted in anything other than an effort to shut down the promoters (SAE and PLC not being promoters) and has no effect on the ongoing business of SAE.
13. SAE has issued more than 60 million shares of stock since it became a US issuer. However, none of these were “toxic” in any sense. All were sold at modest discounts to the market price on the day issued, and all were properly disclosed in the 10-Q’s filed by the Company. Nothing was “concealed” in the least, and the Company’s operations in this matter were well-known to the market place. What the writer does not mention is that the purpose of these was to increase the shareholders’ equity from approximately $2,000,000 (under PLC) to more than $25,000,000 today. This is not toxic in our view.
14. We have not “buddied up” with Ironridge or any other Company that are known to fatally depress share prices. While we did have a discussion with Ironridge, we have decided not to proceed with any transaction with them and have not done any transaction with them. We did do a deal with Asher for very small sums of money (about $200,000) in the middle of 2011 which we now regret, now understanding their reputation. Asher, of course, disputes this characterization of them, but all current transactions undertaken by the Company are sales for fixed prices and for relatively small sums of money.
15. There is a mention of “share pump scams like Media4 Equity.” We have no deal with Media4 Equity are not involved in any share pump scams of any kind or nature whatsoever. We believe this is again just false slander by a person who is probably shorting the shock.
16. The falling shareholder value is obviously distressing to us, but it has nothing to do with mismanagement of the Company which is stronger than ever and has substantially increased its balance sheet. This is a reflection of stock market activity driven by both the number of shares we have issued as we improved the balance sheet and lies and slanders of the sort put out by this woman.
17. While of course we have a substantial disclosure of a related party transactions, the writer fails to mention that the intercompany agreement (also disclosed) provides that neither my family or I can receive any benefit whatsoever, other than my salary, from any of these transactions which were all undertaken prior to the redomicile of PLC to the US. I have in fact lent the Company more than $1,500,000. The transactions were done for tax planning and legal purposes and had absolutely no effect on the earnings of profitability or cash flow in the Company as is clear from the disclosures.
18. To suggest that the Company has “built a palace” in Louisiana for my wife is utter nonsense. As is clear from the disclosures, this building will house a post-production facility which should generate approximately $8,000,000 in refundable tax credits, all of which are payable to SAE. The building will also be operated by an affiliate of the Company as a post-production facility, and all profits will be for the account of SAE, and none of which are for me, my wife or anybody but the Company.
19. We are unaware of any “convicted criminals” who have ever been a director of this Company. This is an outrageous lie for which she will be called to account if she is ever found. John Bryan is a good friend of mine and has been over the years. We have done some consulting work with him back many years ago, but Mr. Bryan has not been involved actively in the Company for the last three years. We are aware of no “collapsed companies” associated with David Michery. Jake Shapiro is merely a consultant to the Company. Mr. Shapiro is not an officer or director of the Company. Mr. Shapiro’s prior business activities, which were thoroughly investigated by the Company, showed no inappropriate behavior on his part, and the failures of those companies have nothing to do with the music assets that will be managed and controlled by SAE, not Mr. Shapiro.
20. There is nothing “odd” about the tax affairs of the Company. The Company in fact has substantial operating losses for tax purposes due to the tax book differences common in the film business and the taxation revenues and expenses in the UK and some in the US (one of the related party structure). There absolutely no unusual tax benefits obtained by the Company and the only tax benefits obtained are reporting the money either in the UK or the US (but not both), reporting expenses in every course of business in either the UK or US (but not both).
21. The Company has received substantial forgiveness of debt income which has been explained in our public releases. I am not sure why these clear gains are a matter of concern to the writer. The writer does not even suggest that they were not in fact actual reductions of debt (which they were) and in fact represent simply the readjustment of the limited recourse financing in the motion picture business, apparently unknown to the writer.
22. We are aware of no breaking of UK rules for any years including 656 of the Company. We have been represented by well-known law firms for years and the only thing the Company has been “guilty” of is late filing of its accounts, mainly when there were questions raised about US accountings could certify the English accounts.
23. All late SEC filings were when PLC was a foreign issuer, and the Company has been timely on all its US filings. The shift in accounting firms as the Company shifted from the UK rules to the US rules was a cause of these delays, which have all been rectified. These matters are years old and of absolutely no relevance at the present time or at any time.
24. We are unaware of what amendments to SEC filings has been issued to which the writer refers. There have no material amendments to any SEC filings to my knowledge.
25. We have put out a release on the suspension of the short term suspension of trading by NASDAQ based on a dispute regarding the voting rights of the SEC preferred stock and for nothing else. This is all detailed in a release approved by NASDAQ that is available for all to see. To make this something negative about the Company shows the intent and lack of good faith of the writer.
