UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

xT QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED ~~JUNE~~SEPTEMBER 30, 2011

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

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

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 o

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

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	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 o No x

The number of shares of registrant’s common stock outstanding, as ~~August~~November 511, 2011 was ~~379~~439,~~830~~690,~~474~~238.

PLATINUM STUDIOS, INC.

INDEX

PART I: FINANCIAL INFORMATION
ITEM 1:	CONDENSED FINANCIAL STATEMENTS (Unaudited)
	Condensed Consolidated Balance Sheets	F-1
	Condensed Consolidated Statements of Operations	F-3
	Condensed Consolidated Statement of Shareholders’ Deficit	F-4
	Condensed Consolidated Statements of Cash Flows	F-5
	Notes to the Condensed Consolidated Financial Statements	3
ITEM 2:	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	1922
ITEM 3:	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	25
ITEM 3 :	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	30
ITEM 4:	CONTROLS AND PROCEDURES	2530
PART II: OTHER INFORMATION
Item 1	LEGAL PROCEEDINGS	2631
ITEM 1A:	RISK FACTORS	27
ITEM 1A :	RISK FACTORS	32
ITEM 2	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	2732
ITEM 3	DEFAULTS UPON SENIOR SECURITIES	2733
ITEM 4	REMOVED AND RESERVED	2833
ITEM 5	OTHER INFORMATION	2833
ITEM 6:	EXHIBITS	2833
SIGNATURES		2833

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PLATINUM STUDIOS, INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30, 2011		December 31,
	September 30, 2011		December 31, 2010
	(Unaudited)		~~2010~~
ASSETS
Current assets:
Cash and cash equivalents	$	6369,~~131~~262	$	76,275
Prepaid expenses		126,429		100,940
Accounts receivable		200,000		-
Other current assets		609,387		438,799
Prepaid expenses		46,549		100,940
Total current assets		798,947		616,014
Other current assets		1,017,557		438,799
Property and equipment, net		65,554		76,631
Total current assets		1,333,368		616,014
Investment in film library, net		4,423,692		9,449,207
Property and equipment, net		56,975		76,631
Investment in film library, net		295,919		9,449,207
Assets held for sale		12,000		12,000
Deposits and other		~~313~~60,~~312~~812		321,160
Total assets	$	51,~~613~~759,~~505~~074	$	10,475,012

(Continued)

F-1

PLATINUM STUDIOS, INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (continued)

	June 30, 2011			December 31,
	September 30, 2011			December 31, 2010
	(Unaudited)			~~2010~~
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable	$	1,~~170~~257,~~392~~540		$	1,195,673
Accrued expenses and other current liabilities		12,~~810~~660,~~009~~378			1,278,092
Deferred revenue		~~247~~49,~~833~~583			3,973,738
Short term notes payable		95,~~729~~672,~~711~~410			10,960,274
Related party payable		~~617~~447,~~625~~500			347,500
Related party notes payable, net of debt discount		3662,~~750,000~~286			1,279,018
Derivative liability		1018,~~761~~947,~~698~~707			7,763,968
Accrued interest - related party notes payable		~~347,062~~-			189,770
Capital leases payable		5,893			11,627
Total current liabilities		2829,~~440~~703,~~223~~297			26,999,660
Commitments and contingencies
Shareholders' Deficit:
Common stock, $.0001 par value; 500,000,000 shares authorized; 348,096,215 and 310,345,811 issued and outstanding, respectively		34,810			31,035
Common stock, $.0001 par value; 2,500,000,000 shares authorized; 413,234,555 and 310,345,811 issued and outstanding, respectively		41,323			31,035
Additional paid in capital		1819,~~711~~881,~~458~~312			17,478,740
Accumulated deficit		(4147,~~572~~866,~~986~~858	)		(34,034,423	)
Total shareholders' deficit		(2227,~~826~~944,~~718~~223	)		(16,524,648	)
Total liabilities and shareholders' deficit	$	51,~~613~~759,~~505~~074		$	10,475,012

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

F-2

PLATINUM STUDIOS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months Ended						~~Six~~Nine Months Ended
	June 30,						June 30,
	September 30,						September 30,
	2011			2010			2011			2010
Net revenue	$	4,~~999~~943,~~699~~963		$	2150,~~065,365~~645		$	510,~~525~~469,~~481~~444		$	2,~~098~~248,~~048~~693
Costs and expenses:
Cost of revenues		4,~~952~~692,~~522~~049			~~478~~14,~~499~~378			510,~~474~~167,~~958~~007			~~479~~493,~~582~~960
Operating expenses		~~642~~1,~~167~~009,398			~~913~~650,~~722~~260			12,~~266~~276,~~945~~343			12,~~601~~251,~~231~~495
Development costs		~~204~~194,~~361~~298			74101,~~709~~307			~~320~~514,~~007~~305			~~138~~240,~~942~~246
Total costs and expenses		5,~~799~~895,~~050~~745			1765,~~466,930~~945			712,~~061~~957,~~910~~655			2,~~219~~985,~~755~~701
Operating income (loss)		(799,351	)		598,435			(1,536,429	)		(121,707	)
Operating loss		(951,782	)		(615,300	)		(2,488,211	)		(737,008	)
Other income (expense):
Gain on disposition of assets		-			~~194~~55,~~020~~200			-			~~194~~249,~~020~~220
Gain (loss) on settlement of debt		(8079,~~443~~126	)		8227,~~457~~492			(~~166~~245,~~569~~695	)		82109,~~457~~949
Loss on valuation of derivative liability		(4,456,378	)		(1,060,000	)		(2,997,730	)		(770,000	)
Gain (Loss) on valuation of derivative liability		(1,282,318	)		525,000			(4,280,048	)		(245,000	)
Interest expense		(976,246	)		(380,578	)		(2,837,835	)		(958,165	)
Cost of Financing		(3,153,691	)		-			(3,153,691	)		-
Total other income (expense):		(5,513,067	)		(1,164,101	)		(6,002,134	)		(1,451,688	)
Interest expense		(826,955	)		(121,279	)		(3,664,790	)		(1,079,444	)
Net loss	$	(6,312,418	)	$	(565,666	)	$	(7,538,563	)	$	(1,573,395	)
Total other income (expense):		(5,342,090	)		486,413			(11,344,224	)		(965,275	)
Net loss per share	$	(0.02	)	$	(0.00	)	$	(0.02	)	$	(0.01	)
Net loss	$	(6,293,872	)	$	(128,887	)	$	(13,832,435	)	$	(1,702,283	)
Basic and diluted weighted average shares		328,559,407			287,060,884			320,155,706			279,219,105
Net loss per share	$	(0.02	)	$	(0.00	)	$	(0.04	)	$	(0.01	)
Basic and diluted weighted average shares		376,150,663			289,778,706			339,050,861			282,777,651

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

F-3

PLATINUM STUDIOS, INC.

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ DEFICIT

(UNAUDITED)

~~Six~~Nine Months Ended ~~June~~September 30, 2011

	Common Stock Shares			Common Stock Amount			Additional Paid-In Capital		Accumulated Deficit			Total
Balance at December 31, 2010		310,345,811		$	31,035		$	17,478,740	$	(34,034,423	)	$	(16,524,648	)
Shares returned		(337,000	)		(34	)		34		-			-
Common stock issued for services.		1441,~~630~~323,~~004~~534			14,~~464~~132			~~581~~894,~~471~~146		-			~~582~~898,~~935~~278
Common stock issued for conversion of debt and accounts payable		520,~~394~~929,~~997~~736			~~539~~2,093			~~250~~503,~~286~~257		-			~~250~~505,~~825~~350
Shares sold under equity credit line		1840,~~062~~972,~~403~~474			14,~~806~~097			~~400~~1,~~927~~005,135		-			~~402~~1,~~733~~009,232
Net Loss		-			-			-		(713,~~538~~832,~~563~~435	)		(713,~~538~~832,~~563~~435	)
Balance at June 30, 2011		348,096,215		$	34,810		$	18,711,458	$	(41,572,986	)	$	(22,826,718	)
Balance at September 30, 2011		413,234,555		$	41,323		$	19,881,312	$	(47,866,858	)	$	(27,944,223	)

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

F-4

PLATINUM STUDIOS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Six Months Ended June 30,
	Nine Months Ended September 30,
	2011			2010
Cash flows from operating activities
Net loss	$	(713,~~538~~832,~~563~~435	)	$	(1,~~573~~702,~~395~~283	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation		1725,~~203~~782			3239,~~299~~188
Amortization of film library		59,~~025~~153,~~515~~288			45,652
Gain on disposal of assets		-			(~~194~~249,~~020~~220	)
(Gain) Loss on settlement of debt		~~166~~245,~~569~~695			(82109,~~457~~949	)
Fair value of stock issued for services		~~476~~594,~~027~~380			~~217~~395,~~290~~890
Amortization of debt discount		23,~~470~~133,~~982~~268			729,088
Loss on valuation of derivative liability		27,~~997~~433,~~730~~739			~~770~~245,000
Decrease (increase) in operating assets:
Restricted cash		-			7330,~~758~~342
Accounts receivable		-(200,000	)		10,313
Investment in film library		-			(~~948~~1,~~403~~204,668	)
Prepaid expenses and other current assets		(~~196~~524,~~076~~367	)		~~611~~(1,~~675~~065,906	)
Deposits and other assets		7260,~~848~~348			-
Increase (decrease) in operating liabilities:
Accounts payable		41454,~~882~~858			~~427~~120,~~127~~636
Related party payables		1381,~~125~~875			285,000
Accrued expenses		~~573~~832,~~309~~605			~~284~~178,~~283~~038
Accrued interest		157,292			~~150~~(30,~~550~~844	)
Interest added to short term notes payable		~~161~~234,~~989~~477			-
Deferred revenue		(3,~~725~~924,~~905~~155	)		~~177~~2,~~087~~015,630
Net cash flows provided by operating activities		648,927			1,015,847
Net cash flows (used in) provided by operating activities		4,126,650			(268,093	)
Cash flows from investing activities
Proceeds from sales of property and equipment and intangibles		-			~~249~~309,800
Purchases of property and equipment		(6,126	)		(916,~~685~~788	)
Net cash flows (used in) provided by investing activities		(6,126	)		~~240~~293,~~115~~012
Cash flows from financing activities
Proceeds from short-term notes payable		~~253~~335,~~000~~500			~~899~~1,~~118~~034,853
Proceeds from related party notes payable		257,000			7,500
Payments on short-term notes payable		(15,~~562~~723,~~944~~536	)		(~~785~~1,~~377~~278,832	)
Payments on related party notes payable		-			(8390,~~062~~562	)
Payments on capital leases		(5,734	)		(8286,~~644~~248	)
Issuance of common stock, net of offering costs		~~402~~1,~~733~~009,233			~~587~~722,~~474~~549
Net cash flows (used in) provided by financing activities		(~~655~~4,~~945~~127,537	)		~~543~~309,~~009~~260
Net increase (decrease) in cash		(137,~~144~~013	)		1334,~~798,971~~179
Cash, at beginning of year		76,275			152,067
Cash, at end of period	$	6369,~~131~~262		$	1486,~~951,038~~246

	Six Months Ended June 30,
	Nine Months Ended September 30,
	2011		2010
Supplemental disclosure of cash flow information:
Cash paid for interest	$	37,~~362~~684	$	71337,~~064~~632
Non-cash investing and financing activities:
Stock issued as payments of notes payable, accounts payable and accrued interest	$	250,825	$	53,773
Fair value of note discount	$	3,750,000	$	-
Stock issued as payments of notes payable, accounts payable and accrued interest	$	809,248	$	53,773

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

F-5

PLATINUM STUDIOS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~Six~~Nine ~~Months~~months Ended ~~June~~September 30, 2011 and 2010

(UNAUDITED)

( 1 ) Description of business

Nature of operations – The Company controls a library consisting of more than 5,000 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 principal photography commenced on a feature film by a certain date. 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, ~~holding~~whose outstanding debt ofbalance was $84,~~897~~916,~~561~~665 as of ~~June~~September 30, 2011. 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. Long Distance Films, Inc was created for the sole purpose of producing “Dead of Night.” At the time of the acquisition, Long Distance Films, Inc. had no assets or liabilities and no consideration was paid by the Company for the acquisition and no value was assigned to the transaction, which would be eliminated in consolidation.

( 2 ) ~~Basis~~Authorized ~~of financial statement presentation and consolidation~~Shares

~~The~~During ~~accompanying~~August, ~~unaudited~~2011, ~~condensed~~the ~~consolidated~~Board ~~financial~~of ~~statements~~Directors of the Company ~~have~~approved ~~been~~an ~~prepared~~increase in ~~accordance with United States generally accepted accounting principles for interim financial statements and with~~ the ~~instructions~~number ~~to Form 10-Q and Article 10~~ of ~~Regulation~~authorized ~~S-X,~~shares ~~promulgated~~from ~~by the Securities and Exchange Commission (the “SEC”). Accordingly~~500,000 ~~they~~to 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 its wholly-owned subsidiaries2, ~~Long Distance Films~~500, ~~Inc~~000., ~~Platinum~~In ~~Studios Productions~~October, ~~Inc. and Platinum Studios Entertainment~~2011, ~~Inc.~~the ~~Intercompany~~Company ~~balances~~filed ~~and~~a ~~transactions~~Certificate ~~have been eliminated in consolidation. In the opinion~~ of ~~management,~~Amendment ~~all adjustments (consisting~~ of ~~normal~~Articles ~~recurring adjustments) considered necessary for a fair presentation have been included. The results~~ of ~~operations~~Incorporation ~~for~~with ~~interim~~the ~~periods~~State ~~are not necessarily indicative~~ of ~~the~~California ~~results~~to ~~that~~increase ~~may be expected for~~ the ~~fiscal~~authorized ~~year~~shares. The ~~condensed~~amendment ~~consolidated~~to ~~financial~~the ~~statements~~Articles ~~should~~was beapproved ~~read~~by ~~in conjunction with~~ the ~~Company’s~~required ~~December~~vote ~~31,~~of ~~2010~~shareholders ~~consolidated financial statements and accompanying notes included~~ in ~~the~~accordance ~~Company’s~~with ~~Annual Report on Form 10-K (~~the ~~“Annual~~California ~~Report”).~~Corporations ~~All terms used but not defined elsewhere herein have the meanings ascribed to them in the Annual Report~~Code.

( 3 )

Basis of financial statement presentation and consolidation

The accompanying unaudited condensed consolidated 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 its wholly-owned subsidiaries, Long Distance Films, Inc., Platinum Studios Productions, Inc. and Platinum Studios Entertainment, Inc. 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 condensed consolidated financial statements should be read in conjunction with the Company’s December 31, 2010 consolidated 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, 2010 has been derived from the audited consolidated 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 4 ) Going concern

During the ~~six~~nine months ended ~~June~~September 30, 2011, the Company had a net loss of $713,~~538~~832,~~563~~435. At ~~June 30~~September, 2011, the Company had a working capital deficit of $169,~~879~~422,~~578~~222 (excluding its derivative liability) and a shareholders’ deficiency of $2227,~~826~~944,~~718~~223. The Company is also delinquent in payment of $~~117~~116,~~824~~308 for payroll taxes as of ~~June~~September 30, 2011 and in default of certain of its short term notes payable including it $4,916,665 note payable to Standard Chartered Bank. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from this uncertainty. The Company intends to raise funds to finance operations until the Company achieves profitable operations. The Company’s capital requirements for the next 12 months will continue to be significant. If adequate funds are not available to satisfy either medium or long-term capital requirements, the Company’s operations and liquidity could be materially adversely affected and the Company could be forced to cut back its operations. Subsequent to June 30, 2011, the Company raised $42,500 through the issuance of convertible notes payable and $572,835 through the issuance of common stock pursuant to the Dutchess Opportunity Fund agreement (See Note 13).

(4~~) Summary of significant accounting policies~~

( 5 )

Summary of significant accounting policies

Revenue recognition - Revenue from the licensing of characters and storylines (“the properties”) owned by the Company are recognized in accordance with guidance of the Financial Accounting Standards Board (“FASB”) 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 the sale of 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 under Staff Accounting Bulletin 104 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.

The Company recognizes revenue from television and film productions pursuant to FASB ASC Topic 926, Entertainment-Films. The following conditions must be met in order to recognize revenue under Topic 926: (i) persuasive evidence of a sale or licensing arrangement exists; (ii) the program is complete and has been delivered or is available for immediate and unconditional delivery; (iii) the license period of the arrangement has begun and the customer can begin its exploitation, exhibition or sale; (iv) the arrangement fee is fixed or determinable; and (v) collection of the arrangement fee is reasonably assured. Advance payments received from buyers or licensees are included in the condensed consolidated financial statements as a component of deferred revenue.

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 the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Those estimates and assumptions include estimates for reserves of uncollectible accounts, analysis of impairments of recorded intangibles and investments in film library, accruals for potential liabilities, and assumptions made in valuing stock instruments issued for services and in valuing derivative liabilities.

Concentrations of risk - During the three and six months and ended June 30, 2011 and 2010, the Company had customer revenues representing a concentration of the Company’s total revenues. For the three months ended June 30, 2011, three customers represented approximately 35%, 25% and 19% of total revenues. For the six months ended June 30, 2011, three customers represented approximately 32%, 23% and 18% of total revenues. For the three and six months ended June 30, 2010, one customer represented approximately 99% of total revenues.

Concentrations of risk - During the three and nine months and ended September 30, 2011 and 2010, the Company had customer revenues representing a concentration of the Company’s total revenues. For the three months ended September 30, 2011, one customer represented approximately 78% of total revenues. For the nine months ended September 30, 2011, three customers represented approximately 46%, 17% and 12% of 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.

Derivative Instruments – The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the condensed consolidated statements of operations. For stock-based derivative financial instruments, the Company uses the Binomial option pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

Fair Value of Financial Instruments – Fair value measurements are determined by the Company’'s adoption of authoritative guidance issued by the FASB, with the exception of the application of the statement to non-recurring, non-financial assets and liabilities as permitted. The adoption of the authoritative guidance did not have a material impact on the Company’'s fair value measurements. Fair value is defined in the authoritative guidance as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy was established, which prioritizes the inputs used in measuring fair value into three broad levels as follows:

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

Level 2—Inputs, other than the quoted prices in active markets, are observable either directly or indirectly.

Level 3—Unobservable inputs based on the Company’'s assumptions.

The Company is required to use observable market data if such data is available without undue cost and effort.

The following table presents certain investments and liabilities of the Company’s financial assets measured and recorded at fair value on the Company’s consolidated balance sheets on a recurring basis and their level within the fair value hierarchy as of ~~June~~September 30, 2011 and December 31, 2010:

June 30, 2011 (unaudited)

September 30, 2011 (unaudited)

Level 1

Level 2

Level 3

Total

Fair value of convertible note conversion feature

37,~~796~~540,~~267~~494

Fair value of warrants

611,~~965~~407,~~431~~213

1018,~~761~~947,~~698~~707

	December 31, 2010
	Level 1		Level 2		Level 3		Total
Fair value of convertible note conversion feature	$	-	$	-	$	2,017,663	$	2,017,663
Fair value of warrants		-		-		5,746,305		5,746,305
	$	-	$	-	$	7,763,968	$	7,763,968

See Notes 78 and 89 for more information on these financial instruments.

Development costs - Development costs, primarily character development costs and design not associated with an identifiable revenue opportunity, are charged to operations as incurred. For the three months ended ~~June~~September 30, 2011 and 2010, development costs were $~~204~~194,~~361~~298 and $74101,~~709~~307, respectively. For the ~~six~~nine months ended ~~June~~September 30, 2011 and 2010, development costs were $~~320~~514,~~007~~305 and $~~138~~240,~~942~~246, respectively.

Net 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 treasury stock method, unless the effect is anti-dilutive. Since the Company incurred net losses for the ~~six~~nine months ended ~~June~~September 30, 2011 and 2010, any increase in the denominator would be anti-dilutive and therefore, the denominator is the same for basic and diluted weighted average shares.

The potentially dilutive securities consisted of the following as of ~~June~~September 30, 2011 and 2010:

	June 30, 2011		June 30, 2010
Warrants		388,979,855		41,958,600
Options		14,865,000		20,985,000
Convertible Notes		333,850,421		85,526,319
		737,695,276		148,469,919

The Company presently does not have enough authorized shares to effect the conversion of the above listed potentially dilutive securities. The Company plans to increase the number of authorized shares via a proxy vote by the shareholders.

	September 30, 2011		September 30, 2010

Warrants		1,005,426,136		41,958,600
Options		14,265,000		24,585,000
Convertible Notes		877,975,080		85,526,319
		1,897,666,216		152,069,919

Recently issued accounting pronouncements

~~Standards~~In ~~Update~~May ~~(ASU) No.~~ 2011-4, ~~which amends~~ the ~~Fair~~Financial ~~Value~~Accounting ~~Measurements~~Standards ~~Topic~~Board of(“FASB”) ~~the~~issued Accounting Standards ~~Codification~~Update (~~ASC~~ASU) to ~~help~~No. ~~achieve~~2011-04, ~~common~~“Amendments ~~fair~~to ~~value~~Achieve ~~measurement~~Common Fair Value Measurement and ~~disclosure~~Disclosure ~~requirements~~Requirements in U.S. GAAP and ~~IFRS~~IFRSs”. ASU No. 2011-4 does not require additional fair value measurements and is not intended to establish valuation standards or affect valuation practices outside of financial reporting. The ASU is effective for interim and annual periods beginning after December 15, 2011. The Company will adopt the ASU as required. The ASU will affect the Company’s fair value disclosures, but will not affect the Company’s results of operations, financial condition or liquidity.

In June 2011, the FASB issued ASU No. 2011-505, ~~which~~“Presentation ~~amends~~of ~~the~~ Comprehensive Income ~~Topic of the ASC~~”. The ASU eliminates the option to present the components of other comprehensive income as part of the statement of changes in shareholders’ equity, and instead requires consecutive presentation of the statement of net income and other comprehensive income either in a continuous statement of comprehensive income or in two separate but consecutive statements. ASU No. 2011-5 is effective for interim and annual periods beginning after December 15, 2011. The Company will adopt the ASU as required. It will have no affect on the Company’s results of operations, financial condition or liquidity.

~~Other~~In ~~recent~~September ~~accounting~~2011, ~~pronouncements~~the FASB issued ASU 2011-08, “Testing Goodwill for Impairment”, an update to existing guidance on the assessment of goodwill impairment. This update simplifies the assessment of goodwill for impairment by allowing companies to consider qualitative factors to determine whether it is more likely than not that the ~~FASB~~fair ~~(including~~value of a reporting unit is less than its ~~Emerging~~carrying ~~Issues~~amount ~~Task~~before ~~Force),~~performing the ~~AICPA,~~two ~~and~~step ~~the~~impairment ~~Securities~~review ~~Exchange~~process. ~~Commission~~It (also amends the ~~“SEC”)~~examples ~~did~~of ~~not~~events or circumstances that would be considered in a goodwill impairment evaluation. The amendments are ~~not~~effective ~~believed~~for byannual ~~management~~and tointerim ~~have~~goodwill aimpairment ~~material~~tests ~~impact~~performed for fiscal years beginning after December 15, 2011. Early adoption is permitted. The Company will adopt the ASU as required. It will have no affect on the Company’s ~~present~~results orof ~~future~~operations, ~~consolidated~~ financial ~~statements~~condition or liquidity.

Other recent accounting pronouncements issued by the FASB (5including its Emerging Issues Task Force), ~~Investment~~the inAICPA, ~~Film~~and ~~Library~~the Securities Exchange Commission (the "SEC") did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.

As of June 30, 2011 and December 31, 2010, the investment in film library of $4,423,692 and $9,449,207, respectively, is related to the “Dead of Night” production, a completed film and is net of amortization of $5,025,515 and $0, respectively. The film was released theatrically in Italy on March 16, 2011 and in the United States on April 29, 2011. The majority of the remaining foreign territories were available for release upon the United States release date. During the six months ended June 30, 2011, the Company recognized $5,495,279 of revenue upon the availability of the film in all of the territories and the theatrical release in the United States. The balance of the remaining ultimate revenues and unamortized costs of $4,423,692 should be principally amortized during the third and fourth quarters of 2011.

( 6 ) ~~Short-term~~Investment ~~notes~~in ~~payable~~Film Library

Short-term notes payable consists of the following as of:
	June 30, 2011		December 31,
	(Unaudited)		2010
Loans payable to various parties, including minority shareholders, unsecured, interest at 12% per annum, due on demand	$	452,560	$	482,085
Convertible note payable to a minority shareholder, unsecured, interest at 12% per annum, due on December 31, 2011. Note is convertible into Company's Common Stock at $0.048 per share.		102,853		161,023
Bank term loan, unsecured, interest at 7.5% per annum, payable in monthly installments of principal and interest		23,737		32,288
Standard Chartered Bank note payable of $13,365,000 loan secured 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% per annum. $4,850,000 is guaranteed by Omnilab Pty Ltd. of which $1,000,000 has been paid with the balance due on October 1, 2011. The remaining note balance of $5,047,561 was due April 1, 2011 and the Company is currently in default		8,897,561		9,799,878
Note payable to 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% per annum.		-		485,000
Convertible notes payable, unsecured, interest at 8% per annum, due from October 12, 2011 to November 28, 2011. Note is convertible into the Company's stock at 61% of the average of the lowest three trading days during the ten day trading period prior to conversion.		153,000		-
Convertible note payable, unsecured, interest at 9.875% (semi-annually), due from September 17, 2011 to October 8, 2011. Note is convertible into the Company's stock at lessor of 75% of the average of the last five trading days prior to conversion or closing price on the day prior to conversion, not to exceed $0.05.		100,000		-
Total	$	9,729,711	$	10,960,274

As of September 30, 2011 and December 31, 2010, the investment in film library of $295,919 and $9,449,207, respectively, is related to the “Dead of Night” production, a completed film and is net of amortization of $9,153,288 and $0, respectively. The film was released theatrically in Italy on March 16, 2011 and in the United States on April 29, 2011. The majority of the remaining foreign territories were available for release upon the United States release date. During the nine months ended September 30, 2011, the Company recognized $10,207,479 of revenue upon the availability of the film in all of the territories and the theatrical release in the United States. The balance of the remaining ultimate revenues and unamortized costs of $295,919 should be principally amortized during the fourth quarter of 2011.

( 7 ) ~~Related~~Short-term ~~Party~~notes ~~Notes Payable~~payable

~~Related~~Short-term ~~party~~ notes payable ~~consist~~consists of the following as of:

	June 30, 2011 (Unaudited)		December 31, 2010
	September 30, 2011 (Unaudited)		December 31, 2010
May 6, 2009 secured convertible notes payable	$	2,400,000	$	2,400,000
Loans payable to various parties, including minority shareholders, unsecured, interest at 12% per annum, due on demand	$	450,039	$	482,085
June 3, 2009 secured convertible notes payable		1,350,000		1,350,000
Convertible note payable to a minority shareholder, unsecured, interest at 12% per annum, due on December 31, 2011. Note is convertible into Company's Common Stock at $0.048 per share.		102,853		161,023
Related party notes payable		3,750,000		3,750,000
Bank term loan, unsecured, interest at 7.5% per annum, payable in monthly installments of principal and interest		20,353		32,288
Less valuation discount		-		(2,470,982	)
Standard Chartered Bank note payable of $13,365,000 loan secured by all rights in the sales agency agreement and the distribution agreement in connection with the film "Dead of Night". Company is currently in default. The interest rate is currently the default rate of Libor plus 8%.		4,916,665		9,799,878
Total short-term notes payable	$	3,750,000	$	1,279,018
Note payable to 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% per annum.		-		485,000
Convertible notes payable, unsecured, interest at 8% per annum, due from October 12, 2011 to May 8, 2012. Note is convertible into the Company's stock at 61% of the average of the lowest three trading days during the ten day trading period prior to conversion.		82,500		-
Convertible note payable, unsecured, interest at 9.875% (semi-annually), due from September 17, 2011 to October 8, 2011. Note is convertible into the Company's stock at lessor of 75% of the average of the last five trading days prior to conversion or closing price on the day prior to conversion, not to exceed $0.05. See Note 13.		100,000		-
Total	$	5,672,410	$	10,960,274

On October 22, 2010, the Company entered into a series of agreements with its CEO, Chairman, and a major shareholder to extend the due date of certain existing loans made by the CEO. Pursuant to the terms of the agreements, the new due date for the secured convertible notes payable totaling $2,400,000 was extended to May 6, 2011 and the new due date for the secured convertible notes payable totaling $1,350,000 was extended to June 3, 2011. The interest rate under these loans was increased from 8% to 10%, effective upon the original due date of May 6, 2010 and June 3, 2010, respectively.

In exchange for these due date extensions, the Company granted to the CEO:

(1) Two additional sets of warrants to purchase the Company’s common stock. The first set allowing for the exercise of up to 40,000,000 warrants to purchase shares of the Company’s common stock, at an exercise price of $0.11 per share, and the second set allowing for the acquisition of up to $3,750,000 in stock, also at an exercise price of $0.11 per share. Both sets (“New Warrants”) vested immediately and will expire on October 22, 2020; and

(2) As more fully described in the Intellectual Property Rights Assignment Agreement between the Company and Scott Rosenberg (included as an exhibit to the Company’s 8K filing, as amended, on December 28, 2010), 25% of gross revenues from those certain co-ownership rights assigned to Scott Rosenberg. A list of intellectual property that is excluded from this agreement is also in the exhibit to the 8K filing.

The notes are past due and the Company is currently negotiating with the note holder for an additional extension.

The notes, warrants and co-ownership rights were assigned to an entity that is managed by the CEO and a Director of the Company.

~~The warrants and convertible notes all contain adjustments to the exercise price for dilutive issuances. If the Company sells or issues Additional Shares of Common Stock~~ (~~defined~~ as8 ~~all~~) ~~shares~~Notes ofPayable ~~common~~Initially ~~stock~~ issued ~~other than stock issued~~ to ~~officers,~~Related directors or employees for work performed, shares issued upon the exercise of these warrants to purchases of common stock and shares issued in connection with the acquisition of the Company of voting control by another business entity) at a price less than the exercise or conversion price of the warrants or convertible note in excess of $200,000, then the exercise or conversion price is reduced to a price equal to the lowest price per share at which any Additional Shares of Common Stock were sold.Party

~~The~~Related ~~dilutive~~party ~~issuances provisions of the warrants and convertible~~ notes ~~were~~payable ~~triggered~~consist ~~during the second quarter~~ of ~~2011 due to issuances of common stock pursuant to~~ the ~~Dutchesss~~following ~~Opportunity~~as ~~Fund Agreement. The revised pricing on the warrants and conversions is now set at $0.0121.~~of:

The Company considered authoritative guidance and determined that the debt modification represented a substantial debt modification. As such the proper accounting treatment for the conversion price was reevaluated. FASB guidance indicates that any adjustment to the fixed amount (either conversion price or number of shares) of the instrument (or embedded feature), regardless of the probability or whether or not within the issuers’ control, means the instrument is not indexed to the issuers own stock. Accordingly, the embedded conversion feature of the notes and the conversion feature of the warrants resulted in a derivative liability being recorded by the Company when the Notes were modified and the New Warrants were granted (see Note 8). The Company determined the fair value of the conversion feature of the Notes was $2,697,162 and the fair value of the New Warrants was $4,295,197 based on a binominal valuation model with the following assumptions: risk-free interest rate of 0.21% to 2.60%; dividend yield of 0%; volatility factor of 89.7%; and an expected life of 6 months to 10 years, resulting in total derivative at modification of $6,992,359. For financial statement purposes, $3,750,000 of this amount was allocated to debt discount (i.e. up to face amount of the Notes) and is being amortized over the term of the Notes. For the three and six months ended June 30, 2011, $1,644,452 and $2,470,982 of discount amortization is included in interest expense, respectively. At June 30, 2011, the unamortized balance of the discount is $0.

	September 30, 2011 (Unaudited)			December 31, 2010

May 6, 2009 secured convertible notes payable	$	2,400,000		$	2,400,000
June 3, 2009 secured convertible notes payable		1,350,000			1,350,000

Related party notes payable		3,750,000			3,750,000
Less valuation discount		(3,087,714	)		(2,470,982	)
Total short-term notes payable	$	662,286		$	1,279,018

The Company entered into a Credit Agreement on May 6, 2009, with Mr. Rosenberg, its Chairman and Chief Executive Office, in connection with the issuance of two secured promissory notes. Two warrants were issued to Mr. Rosenberg in connection with the issuance of various promissory notes as of May 6, 2009 and June 3, 2009. The advances in 2009 increased Rosenberg’s security interest held in the Company’s assets to approximately $3,750,000. These transactions were:

May 6, 2009 Secured Debt - The May 6, 2009 secured debt has an aggregate principal amount of $2,400,000, is convertible into shares of the Company’s common stock at a conversion price of $0.048 and bears interest at the rate of eight percent per annum. The original principal amount of $2,400,000 is to be repaid upon the expiration of the notes on May 6, 2010. The Company may prepay the notes at any time. In connection with this debt the Company also issued ten-year warrants to purchase 25,000,000 shares of the Company’s common stock for $0.048 per share.

June 3, 2009 Secured Debt - The June 3, 2009 secured debt amounted to an aggregate principal amount of $1,350,000, is convertible into shares of the Company’s common stock at a conversion price of $0.038 and bears interest at the rate of eight percent per annum. The original principal amount of $1,350,000 is to be repaid upon the expiration of the notes on June 3, 2010 but may be prepaid at any time. In connection with this debt the Company also issued ten-year warrants to purchase 14,062,500 shares of the Company’s common stock for $0.038 per share.

First Modification of Secured Convertible Notes Payable – On October 22, 2010, the Company entered into a series of agreements with its CEO, Chairman, and a major shareholder to extend the due date of certain existing loans made by the CEO. Pursuant to the terms of the agreements, the new due date for the secured convertible notes payable totaling $2,400,000 was extended to May 6, 2011 and the new due date for the secured convertible notes payable totaling $1,350,000 was extended to June 3, 2011. The interest rate under these loans was increased from 8% to 10%, effective upon the original due date of May 6, 2010 and June 3, 2010, respectively.

~~(8)~~In ~~Derivative~~exchange ~~Liabilities~~for these due date extensions, the Company granted to the CEO:

In1. ~~June~~Two ~~2008,~~additional ~~the~~sets ~~FASB~~of ~~issued~~warrants ~~authoritative guidance on determining whether an instrument (or embedded feature) is indexed~~ to anpurchase ~~entity~~the Company’s ~~own~~common stock. ~~Under~~ ~~the~~The ~~authoritative~~first ~~guidance,~~set ~~effective~~allowing ~~January~~for 1,the ~~2009,~~exercise ~~instruments~~of ~~which~~up doto ~~not~~40,000,000 ~~have~~warrants ~~fixed settlement provisions are deemed~~ to bepurchase ~~derivative~~shares ~~instruments. The conversion feature~~ of the Company’s ~~secured~~common ~~convertible~~stock, ~~related~~at ~~party~~an ~~notes~~exercise ~~payable~~price ~~(described~~of in$0.11 ~~Note~~per 7)share, and the ~~related~~second ~~warrants,~~set doallowing ~~not~~for ~~have~~the ~~fixed~~acquisition ~~settlement~~of ~~provisions~~up ~~because~~to ~~their conversion and exercise prices~~$3, ~~respectively~~750,000 ~~may~~in bestock, ~~lowered~~also ~~if the Company issues securities~~ at ~~lower~~an ~~prices~~exercise inprice ~~the~~of ~~future~~$0.11 Inper ~~accordance~~share. ~~with~~Both ~~the~~sets ~~FASB authoritative guidance, the conversion feature of the Notes was separated from the host contract~~ (~~i.e.,~~“New ~~the Notes~~Warrants”) ~~and~~vested ~~recognized~~immediately ~~as a derivative instrument. Both the conversion feature of the Notes~~ and ~~the~~will ~~related~~expire ~~warrants~~on ~~have~~October ~~been~~22, ~~characterized~~2020; ~~as derivative liabilities to be re-measured at the end of every reporting period with the change in value reported in the statement of operations.~~ and

~~The~~2. ~~derivative~~As ~~liabilities~~more ~~were~~fully ~~valued~~described ~~using~~in the ~~Binomial~~Intellectual ~~valuation~~Property ~~technique~~Rights ~~with~~Assignment Agreement between the ~~following~~Company ~~assumptions:~~and Scott Rosenberg (included as an exhibit to the Company’s 8K filing, as amended, on December 28, 2010), 25% of gross revenues from those certain co-ownership rights assigned to Scott Rosenberg. A list of intellectual property that is excluded from this agreement is also in the exhibit to the 8K filing.

	June 30,			December 31,
	July 3, 1905			July 2, 1905
Conversion Feature:
Risk-free interest rate		0.19	%		0.21	%
Expected volatility		169.9	%		91.5	%
Expected life (in months)	10 to 11			4 to 5
Expected dividend yield		0	%		0	%
Warrants:
Risk-free interest rate	2.5 to 3.2		%	2.6 to 2.8		%
Expected volatility		169.9	%	91 to 92		%
Expected life (in years)	8 to 9.5			8.42 to 9.83
Expected dividend yield		0	%		0	%
Fair Value:
Conversion feature	$	3,796,267		$	2,017,663
Warrants		6,965,431			5,746,305
	$	10,761,698		$	7,763,968

The notes and warrants were assigned in October, 2010 to Assignment & Collateral Holdings, LLC “(ACH)”, an entity managed at that time by a Director of the Company and Mr. Rosenberg, the CEO and Chairman of the Company.

~~The~~Second ~~risk-free~~Modification ~~interest~~of ~~rate~~Secured ~~was~~Convertible ~~based~~Notes onPayable ~~rates~~– ~~established~~In byAugust, 2011, the ~~Federal Reserve Bank. The~~ Company ~~uses~~entered ~~the~~into ~~historical~~a ~~volatility~~series of ~~its~~agreements ~~common~~with ~~stock.~~ACH ~~The~~to ~~expected~~extend ~~life of~~ the ~~conversion~~due ~~feature~~date of ~~the~~certain ~~notes~~existing ~~was~~loans ~~based~~originally onmade ~~the~~by ~~term of~~ the ~~notes~~CEO. ~~and~~Pursuant to the ~~expected~~terms ~~life~~ of the ~~warrants~~agreements, ~~was determined by~~ the ~~expiration~~new due date offor the ~~warrants.~~secured ~~The~~convertible ~~expected~~notes ~~dividend~~payable ~~yield~~totaling $2,400,000 was ~~based~~extended onto ~~the~~May ~~fact~~6, ~~that~~2012 and the ~~Company~~new ~~has~~due ~~not~~date ~~paid~~for ~~dividends to common shareholders in~~ the ~~past~~secured ~~and~~convertible ~~does~~notes ~~not~~payable ~~expect~~totaling to$1,350,000 ~~pay~~was ~~dividends~~extended to ~~common~~June ~~shareholders~~3, ~~in the future~~2012.

AsIn ofexchange ~~June~~for ~~30,~~these ~~2011~~due ~~and~~date ~~December 31~~extensions, ~~2010,~~ the ~~fair value of the derivative liability was $10,761,698 and $7,763,968, respectively. For the three and six months ended June 30, 2011, the~~ Company ~~recorded~~granted ato ~~change in fair value of the derivative liabilities of ($4,456,378) and ($2,997,730), respectively.~~ACH:

Two additional sets of warrants to purchase the Company’s common stock. The first set allowing for the exercise of up to 40,000,000 warrants to purchase shares of the Company’s common stock, at an exercise price of $0.11 per share, and the second set allowing for the acquisition of up to $3,750,000 in stock, also at an exercise price of $0.11 per share. Both sets (“New Warrants”) vested immediately and will expire on August 12, 2021.

The exercise price and the number of shares underlying the warrants 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. The dilutive issuances provisions of the warrants and convertible notes were triggered during the second quarter of 2011 due to issuances of common stock pursuant to the Dutchesss Opportunity Fund Agreement. As of June 30, 2011, the revised pricing on the warrants and conversions was set at $0.0121. The revised pricing was reduced further during the third quarter of 2011 due to conversions of debt by holders of convertible notes. As of September 30, 2011, the revised pricing on the warrants and conversion is now set at $0.0044 for the warrants that were issued originally and as part of the first debt modification.

The Company considered authoritative guidance and determined that the debt modification represented a substantial debt modification. As such the proper accounting treatment for the conversion price was reevaluated. FASB guidance indicates that any adjustment to the fixed amount (9either conversion price or number of shares) ~~Commitments~~of the instrument (or embedded feature), regardless of the probability or whether or not within the issuers’ control, means the instrument is not indexed to the issuers own stock. Accordingly, the embedded conversion feature of the notes and ~~Contingencies~~the conversion feature of the warrants resulted in a derivative liability being recorded by the Company when the Notes were modified and the New Warrants were granted (see Note 8). The Company determined the fair value at the second modification of the conversion feature of the Notes was $5,421,917 and the fair value of the New Warrants was $1,481,774 based on a binominal valuation model with the following assumptions: risk-free interest rate of 0.11% to 2.24%; dividend yield of 0%; volatility factor of 279%; and an expected life of 8 months to 10 years, resulting in total derivative at modification of $6,903,691. For financial statement purposes, $3,750,000 of this amount was allocated to debt discount (i.e. up to face amount of the Notes) and is being amortized over the term of the Notes. The balance of the derivative of $3,153,691 represents excess of the fair value of the derivatives over the face amount of the notes and has been recognized as Cost of Financing during the three and nine months ended September 30, 2011. For the three months ended September 30, 2011, $662,286 of discount amortization is included in interest expense. For the nine months ended September 30, 2011, $3,133,268 of discount amortization is included in interest expense, of which $2,470,982 was related to the first modification and $662,286 related to the second modification. At September 30, 2011, the unamortized balance of the discount is $3,087,717.

Due to the resignation of Mr. Rosenberg in May of 2011 as manager of ACH and the Director’s resignation as manager in September, 2011, the Company no longer considers ACH a related party.

( 9 )

Derivative Liabilities

In September 2008, the FASB issued authoritative guidance on determining whether an instrument (or embedded feature) is indexed to an entity’s own stock. Under the authoritative guidance, effective January 1, 2009, instruments which do not have fixed settlement provisions are deemed to be derivative instruments. The conversion feature of the Company’s secured convertible related party notes payable (described in Note 7), and the related warrants, do not have fixed settlement provisions because their conversion and exercise prices, respectively, may be lowered if the Company issues securities at lower prices in the future. In accordance with the FASB authoritative guidance, the conversion feature of the Notes was separated from the host contract (i.e., the Notes) and recognized as a derivative instrument. Both the conversion feature of the Notes and the related warrants have been characterized as derivative liabilities to be re-measured at the end of every reporting period with the change in value reported in the statement of operations.

The derivative liabilities were valued using a Binomial valuation model with the following assumptions:

				August 12,
	September 30,			2011			December 31,
	2011			(Modification)			2010

Conversion Feature:
Risk-free interest rate		0.13	%		0.11	%		0.21	%
Expected volatility		173	%		279	%		91.5	%
Expected life (in months)	8 to 9			9 to 10			4 to 5
Expected dividend yield		0	%		0	%		0	%

Warrants:
Risk-free interest rate	1.43 to 1.92		%		2.24	%	2.6 to 2.8		%
Expected volatility		173	%		279	%	91 to 92		%
Expected life (in years)	7.62 to 10				10		8.42 to 9.83
Expected dividend yield		0	%		0	%		0	%

Fair Value:
Conversion feature	$	7,540,494		$	5,421,917		$	2,017,663
Warrants		11,407,213			1,481,774			5,746,305
	$	18,947,707		$	6,903,691		$	7,763,968

The risk-free interest rate was based on rates established by the Federal Reserve Bank. The Company uses the historical volatility of its common stock. The expected life of the conversion feature of the notes was based on the term of the notes and the expected life of the warrants was determined by the expiration date of the warrants. The expected dividend yield was based on the fact that the Company has not paid dividends to common shareholders in the past and does not expect to pay dividends to common shareholders in the future.

As of September 30, 2011, August 12, 2011 and December 31, 2010, the fair value of the derivative liability was $18,947,707, $6,903,691 and $7,763,968, respectively. For the three and nine months ended September 30, 2011, the Company recorded a change in fair value of the derivative liabilities of ($1,282,318) and ($4,280,048), respectively.

( 10 )

Commitments and Contingencies

Commitments

Payroll Tax Penalties – As of ~~June~~September 30, 2011 and December 31, 2010, the Company’s liabilities include a payable to the Internal Revenue Service in the amount of $~~117~~116,~~824~~308 and $123,248, respectively, 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 entered into an installment agreement with the Internal Revenue Service in the amount of $1,000 per month.

Contingencies

The Company’s legal proceedings are as follows:

~~Transcontinental~~Rustemagic ~~Printing~~ v. Rosenberg & Platinum Studios. On or about ~~July~~June 230, 2009, ~~Transcontinental~~Ervin ~~Printing,~~Rustemagic ~~a New York corporation,~~ filed suit against the Company and its President, Scott Rosenberg, in the California Superior Court, for the County of Los Angeles (Case No. ~~SC103801~~BC416936) alleging that the Company ~~failed~~(and toMr. ~~pay~~Rosenberg) ~~for~~breached ~~certain~~an ~~goods~~agreement ~~and~~with ~~services~~Mr. ~~provided~~Rustemagic bythereby ~~Transcontinental~~causing damages totaling $125,000. The matter was settled through arbitration in April, 2011 with only minimal liability to the ~~total~~Company. Under ~~amount~~the ofsettlement ~~$106~~agreement,~~593.~~ ~~The~~the Company ~~settled~~has ~~the~~guaranteed ~~suit~~additional ~~agreeing~~payments todue ~~pay~~by Scott Rosenberg in the amount of $9277,000 and that payment by Rosenberg has ~~paid~~not ~~that~~been made, leading to additional litigation over the guaranteed amount asand a subsequent judgment for the sum in excess of ~~June~~$125,000, 30with interest, ~~2011~~currently due and payable.

~~Rustemagic~~Harrison Kordestani v. ~~Rosenberg~~Platinum. &Harrison ~~Platinum~~Kordestani ~~Studios.~~was Ona orprincipal ~~about~~of ~~June~~Arclight 30Films, 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, ~~Ervin~~Mr. ~~Rustemagic~~Krodestani ~~filed~~had ~~suit~~an ~~against~~attorney contact the Company ~~and~~as well as its ~~President,~~new ~~Scott~~partners ~~Rosenberg,~~who inwere on the ~~California~~verge ~~Superior~~of ~~Court~~closing the financing for the ~~County~~“Dead of ~~Los~~Night.” ~~Angeles~~Mr. ~~(Case~~Kordestani, ~~No.~~through ~~BC416936)~~his ~~alleging~~counsel, ~~that~~claimed he was entitled to reimbursement for certain monies invested in the ~~Company~~film ~~(and~~while it had been subject to the Arclight slate agreement. Mr. ~~Rosenberg)~~Krodestani’s ~~breached~~claim was wholly without merit and an ~~agreement~~attempt ~~with~~to ~~Mr.~~force ~~Rustemagic~~an ~~thereby~~unwarranted ~~causing~~settlement ~~damages~~because ~~totaling~~he ~~$125,000~~knew we were about to close a deal. ~~The~~ ~~matter~~We ~~was~~responded ~~settled~~immediately through ~~arbitration~~outside counsel and asserted that he was engaging in ~~April,~~extortion ~~2011~~and ~~with~~the ~~only~~company ~~minimal~~would ~~liability~~pursue him vigorously if he continued to ~~the~~try ~~Company. Under~~and ~~the~~interfere ~~settlement~~with ~~agreement,~~our ~~the~~deal. ~~Company~~The company has ~~guaranteed~~not ~~additional~~heard ~~payments~~anything ~~due~~further byfrom ~~Scott~~Mr. ~~Rosenberg~~Kordestani inbut ~~the~~will ~~amount~~vigorously ofdefend ~~$77,000,~~any ~~which~~suit ~~payments~~that ~~have~~Mr. ~~not~~Kordestani ~~been~~attempts ~~made~~to ~~and~~bring. The ~~litigation~~Company has ~~subsequently~~not ~~been~~reserved ~~reinstituted~~any payable for this proceeding.

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 a 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.15

13Douglass 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 previously 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 office 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. In January, 2011, Douglas Emmett served the Company a new lawsuit to recover unpaid rent and damages. The parties are in meaningful discussions for a settlement. The accounts payable of the Company include a balance to Douglass Emmet sufficient to cover the liability, in managements’ assessment.

~~Douglass~~Franklin ~~Emmet~~ v. Platinum ~~Studios~~(and Ona ~~August~~derivative 20action, ~~2009,~~by ~~Douglas Emmet 1995~~Franklin, ~~LLC filed an Unlawful Detainer action~~ against ~~the~~Scott ~~Company~~Rosenberg) During ~~with~~mid-September ~~regard~~2011, toJeff ~~the~~Franklin, ~~office~~an ~~space~~independent ~~previously~~contractor ~~occupied~~with by the Company., ~~The suit~~ was ~~filed in the California Superior Court~~terminated, ~~County of Los Angeles~~and, ~~(Case~~after ~~No.~~settlement ~~SC104504)~~discussions ~~and~~as ~~alleged that the Company had failed~~ to ~~make~~his ~~certain~~termination ~~lease~~ payments tobroke ~~the~~down, ~~Plaintiff~~Franklin ~~and~~initiated ~~was~~arbitration, ~~therefore,~~under inhis ~~default~~January of2010 ~~its~~written ~~lease~~agreement, ~~obligations.~~against ~~The~~Platinum ~~Plaintiff prevailed~~ on ~~its claims at trial and, subsequently, on~~ October 145, ~~2009~~2011. Franklin ~~entered~~is ~~into~~seeking aapproximately ~~Forbearance Agreement with the Company pursuant to which Douglas Emmet agreed to forebear on moving forward with eviction until December 31~~$350,000 ~~2009, if the Company agreed to pay to Douglas Emmet 50% of three month’s rent,~~ in ~~advance~~cash, ~~for~~10% ~~the months~~ of ~~October, November and December 2009. As of January 1, 2010,~~ the Company ~~was~~in ~~required~~an toequity ~~pay to Douglas Emmet the sum of $466~~position,~~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~~25% of ~~its~~all ~~rent~~intellectual atproperty ~~the~~rights ~~beginning of the month and the landlord holds back~~ on ~~eviction~~certain ~~and~~film ~~enforcement~~projects offor ~~judgment while they evaluated whether they will consider negotiating a new lease with~~ the ~~Company~~next ~~that~~five ~~would potentially demise some of the Company’s office space back to the landlord as well as potentially forgive some of the past due rent~~years. ~~As of June 30, 2010, the Company abandoned the leasehold and moved to new offices. In January, 2011, Douglas Emmett served the Company a new lawsuit to recover unpaid rent and damages.~~ The Company has ~~responded~~countered towith ~~the~~a ~~summons~~claim ~~and~~for ~~requested~~ a ~~settlement~~return ~~conference. The~~of ~~accounts~~approximately ~~payable~~$80,000 ofthat ~~the~~it ~~Company~~believes ~~include~~was aover-paid ~~balance~~ to ~~Douglass~~Franklin ~~Emmet~~against ~~sufficient~~commissions todue ~~cover~~under the ~~liability,~~written ~~in managements’ assessment~~agreement.

On a parallel track, Franklin, claiming the position of lead plaintiff, is asserting the right, on behalf of the Company to sue Scott Rosenberg for intellectual property transfers that Franklin believes are injurious to Platinum and which were conducted in a fraudulent and derogatory manner by both Scott Rosenberg and the Board of Directors. The parties were served on October 16th and October 23rd.

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.

(10 11 ) Related party transactions

The Company has an exclusive option to enter licensing/acquisition of rights agreements for individual characters, subject to existing third party rights, within the RIP Awesome Library of RIP Media, Inc., an entity in which Scott Rosenberg is the Manager. Scott Mitchell Rosenberg also provides production consulting services to the Company’s customers (production companies) through Scott Mitchell Rosenberg Productions (another related entity) wholly owned by Scott Mitchell Rosenberg. At the time the Company enters into a purchase agreement with a production company, a separate contract may be entered into between the related entity and the production company. 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 production company.

As consideration for the Amendment of the assigned secured convertible notes payable to an entity managed by the CEO and one of the Company’s Directors, the Company must pay to such entity 25% of all gross revenues derived from Co-Owned intellectual property, including the merchandising revenue received from the film, “Cowboys and Aliens”. During the three and six months ended June 30, 2011, the Company incurred participation fees relating to this agreement of $9,375 and $13,125. As of June 30, 2011, the Company had unpaid fees relating to this agreement of $360,625.16

14As consideration for the Amendment of the assigned secured convertible notes payable to an entity managed by the CEO and one of the Company’s Directors, the Company must pay to such entity 25% of all gross revenues derived from Co-Owned intellectual property, including the merchandising revenue received from the film, “Cowboys and Aliens”. During the three and nine months ended September 30, 2011, the Company incurred participation fees relating to this agreement of $18,750 and $31,875. As of September 30, 2011, the Company had unpaid fees relating to this agreement of $379,375. As of September 30, 2011, the entity was no longer managed by CEO nor one of the Company’s directors and is now considered an unrelated party.

In ~~June~~September 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 with a cost basis of $40,000. The selling price totaled $1,000,000 which was comprised of $500,000 in cash to be paid in installments through October 28, 2010 and $500,000 in future royalties. For accounting purposes, the Company determined recognition of this sale on the installment method was appropriate since the collection of the purchase price could not be assured. The Company has received $350,000, or 70% of the cash proceeds with the balance past due as of ~~June~~September 30, 2011. The Company will also receive payments equal to 10% of Net Revenues generated from the website until the $500,000 in royalties is received. The Company retains partial ownership until the total selling price has been received.

As of ~~June~~September 30, 2011 and December 31, 2010, the Company had accrued payroll, included in Accrued expenses and other current liabilities, of $~~626~~584,~~884~~576 and $502,784, respectively, accrued interest, included in Accrued interest-related party notes payable, of $~~347,062~~0 and $189,770, respectively, and accrued participation fees, included in Related party payable, of $~~360,625 and $~~347,500, ~~respectively,~~ due to Scott Rosenberg or entities in which he is a manager. Related party payable as of ~~June~~September, 2011 also includes a short term loan of $~~257~~100,000 from an entity which is managed by Scott Rosenberg.

(11 12 ) Common Stock

Common stock consists of $0.0001 par value, 2,500,000,000 shares authorized, ~~348~~413,~~096~~234,~~215~~555 shares issued and outstanding as of ~~June~~September 30, 2011 and 310,345,811 shares issued and outstanding as of December 31, 2010.

During the ~~six~~nine months ended ~~June~~September 30, 2011, 337,000 shares that were previously issued as a finder’s fee were returned to the Company.

During the six months ended June 30, 2011, the Company issued 14,630,004 shares of common stock for services with a total value of $582,935. The number of shares issued for the services was based upon the fair market value of the stock on the date of issuance, with the differences between the fair market value of the stock and the fair market value of the services, or $476,027, recognized as loss on extinguishment of debt of $106,907.17

During the ~~six~~nine months ended ~~June~~September 30, 2011, the Company issued 541,~~394~~323,~~997~~534 shares of common stock for ~~conversion~~services ~~of debt or payment of accounts payable~~ with a total value of $~~250~~898,~~825~~278. The number of shares issued for the ~~conversion~~services ~~of debt and payment of accounts payable~~ was based upon the fair market value of the stock on the date of ~~conversion or payment~~issuance, with the differences between the fair market value of the stock and the fair market value of the ~~debt recognized~~services, or $~~191~~791,~~163~~371, recognized as loss on extinguishment of debt of $59106,~~662.~~907

15During the nine months ended September 30, 2011, the Company issued 20,929,737 shares of common stock for conversion of debt or payment of accounts payable with a total value of $505,350. The number of shares issued for the conversion of debt and payment of accounts payable was based upon the fair market value of the stock on the date of conversion or payment, with differences between the fair market value of the stock and the fair market value of the debt recognized, or $366,562, as loss on extinguishment of debt of $138,788.

In July, 2011, the Company established a compensation and benefit plan to provide incentive to employees and consultants. The Company filed Form S-8 to register 15,000,000 shares for the plan. The Company issued 11,860,085 shares under the plan.

In January, 2011, the Company’s S-1 filing became effective with 41,000,000 shares available pursuant to the Dutchess Opportunity Fund agreement. Of such shares, (i) Dutchess has agreed to purchase 41,000,000 pursuant to the investment agreement dated January 12, 2010, between Dutchess and the Company, and (ii) NO shares were issued to Dutchess in consideration for the investment. Subject to the terms and conditions of such investment agreement, we have the right to put up to $5,000,000 in shares of our common stock to Dutchess. This arrangement is sometimes referred to as an Equity Line.

We will not receive any proceeds from the resale of these shares of common stock offered by Dutchess. We will, however, receive proceeds from the sale of shares to Dutchess pursuant to the Equity Line. When we put an amount of shares to Dutchess, the per share purchase price that Dutchess will pay to us in respect of such put will be determined in accordance with a formula set forth in the Investment Agreement. Generally, in respect of each put, Dutchess will pay us a per share purchase price equal to ninety-five percent (95%) of the daily volume weighted average price of our common stock during the five (5) consecutive trading day period beginning on the trading day immediately following the date of delivery of the applicable put notice.

Dutchess may sell the shares of common stock from time to time at the prevailing market price on the Over-the Counter (OTC) Bulletin Board, or on an exchange if our shares of common stock become listed for trading on such an exchange, or in negotiated transactions. Dutchess is an underwriter within the meaning of the Securities Act of 1933, as amended (the “"Securities Act”") in connection with the resale of our common stock under the Equity Line.

Pursuant to the agreement, the Company sold 1840,~~062~~972,~~403~~474 shares of the Company’s common stock during the first ~~six~~nine months of 2011 to Dutchess Opportunity Fund for $~~412~~1,~~733~~019,232, resulting in net proceeds to the Company of $~~402~~1,~~733~~009,232 after costs.

~~(12) Stock Options and Warrants~~18

( 13 )

Stock Options and Warrants

Stock Options

In 2007, the Company adopted the Platinum Studios, Inc. 2007 Incentive Plan (the “Plan”). The options under the plan shall be granted from time to time by the Board of Directors. Individuals eligible to receive options include employees of the Company, consultants to the Company and directors of the Company. The options shall have a fixed price, which will not be less than 100% of the fair market value per share on the grant date. The total number of options authorized is 45,000,000.

During the ~~six~~nine months ended ~~June~~September 30, 2011, the Company issued no options to purchase the Company’'s common stock. The aggregate value of the options vesting, net of forfeitures, during the ~~six~~nine months ended ~~June~~September 30, 2011 and 2010 was $0 and $108,695, respectively and has been reflected as compensation cost. As of ~~June~~September 30, 2011, the aggregate value of unvested options was $4,560, which will be amortized as compensation cost as the options vest, over 82 months.

16Additional information regarding options outstanding as of September 30, 2011 is as follows:

Additional information regarding options outstanding as of June 30, 2011 is as follows:

		Options Outstanding at September 30, 2011						Options Exercisable at September 30, 2011
Range of Exercise Price		Number of Shares Outstanding		Weighted Average Remaining Contractual Life (years)		Weighted Average Exercise Price		Number of Shares Exercisable		Weighted Average Exercise Price

$	0.01 - $0.05		4,000,000		.50	$	0.05		4,000,000	$	0.05
$	0.06 - $0.10		10,265,000		3.05	$	0.10		10, 115,000	$	0.10
			14,265,000						14,115,000

	Options Outstanding at June 30, 2011						Options Exercisable at June 30, 2011
Range of Exercise Price	Number of Shares Outstanding		Weighted Average Remaining Contractual Life (years)		Weighted Average Exercise Price		Number of Shares Exercisable		Weighted Average Exercise Price
$0.01 - $0.05		4,000,000		.76	$	0.05		4,000,000	$	0.05
$0.06 - $0.10		10,865,000		3.32	$	0.10		10,715,000	$	0.10
		14,865,000						14,715,000

The options had no intrinsic value as of September 30, 2011.

The options had no intrinsic value as of June 30, 2011.

Stock Warrants

The following table summarizes the outstanding warrants to purchase Common Stock at ~~June~~September 30, 2011:

Number		Exercise Price		Expiration Dates
	25,000,000	$	0.0121	May 2019
	14,062,500	$	0.0121	June 2019
	40,000,000	$	0.0121	October 2020
	309,917,355	$	0.0121	October 2020
	388,979,855

As of June 30, 2011, the intrinsic value of the warrants outstanding was $3,072,941 based upon the trading price of the common shares as of that date.

Number		Exercise Price		Expiration Dates

	25,000,000	$	0.0044	May, 2019
	14,062,500	$	0.0044	June, 2019
	40,000,000	$	0.0044	October, 2020
	852,272,727	$	0.0044	October, 2020
	40,000,000	$	0.11	August, 2021
	34,090,909	$	0.11	August, 2021
	1,005,426,136

~~(13)~~As ~~Subsequent~~of ~~events~~September 30, 2011, the intrinsic value of the warrants outstanding was $6,519,347 based upon the trading price of the common shares as of that date.

~~Convertible~~( ~~Promissory~~14 ~~Note~~) ~~and~~ Subsequent ~~Issuance of Common Stock for Conversion of Debt~~events

InCommon July, 2011, the Company executed a convertible promissory note in the amount of $42,500 for cash consideration. The note is due March 26, 2012 with interest at 8%. The note is convertible into the Company’s common stock at a 39% discount to the average of the three lowest days trading prices for the Company’s common stock during the ten trading day period prior to conversion. Stock

17In October, 2011, the Company filed a Certificate of Amendment of Articles of Incorporation with the State of California to increase is authorized shares from 500,000 to 2,500,000.

In August, 2011, the Company issued 5,159,554 shares of its common stock to settle convertible promissory notes with a value of $100,000.

Common Stock Issued for Conversion of Debt

In ~~July~~October and November, 2011, the Company issued 14,~~109~~745,~~750~~454 shares of its common stock to settle ~~accounts~~convertible ~~payable~~promissory ~~and~~notes ~~accrued~~with ~~expenses~~a ~~totaling~~value of $2324,~~097~~202.

~~Common~~In ~~Stock~~October ~~Issued~~and ~~for~~November, ~~Services~~2011, the Company issued 21,710,228 shares of its common stock to settle accounts payable and accrued expenses totaling $108,660.

In July, 2011, the Company issued 3,116,911 shares of its common stock to consultants as payment for services in the amount of $70,000.

Equity Line of Credit

In November, 2011, the Company’s signed a new Investment Agreement and Registration Rights Agreement with Dutchess Opportunity Fund II, LP, or "Dutchess". Pursuant to the agreement, Dutchess ~~the~~has ~~Company~~agreed ~~sold~~to 20purchase 98,~~826~~000,~~304~~000 shares of the Company’s common stock. Subject ~~during~~to ~~July~~the terms and ~~August~~conditions of ~~2011~~such toinvestment ~~Dutchess~~agreement, ~~Opportunity~~we ~~Fund~~have ~~for~~the right to put up to $~~572~~10,~~835~~000,000 in shares of our common stock to Dutchess. This arrangement is sometimes referred to as an Equity Line.

~~Stock~~We ~~Compensation~~will ~~and~~not ~~Benefit~~receive ~~Plan~~any proceeds from the resale of these shares of common stock offered by Dutchess. We will, however, receive proceeds from the sale of shares to Dutchess pursuant to the Equity Line. When we put an amount of shares to Dutchess, the per share purchase price that Dutchess will pay to us in respect of such put will be determined in accordance with a formula set forth in the Investment Agreement. Generally, in respect of each put, Dutchess will pay us a per share purchase price equal to ninety-five percent (95%) of the daily volume weighted average price of our common stock during the five (5) consecutive trading day period beginning on the trading day immediately following the date of delivery of the applicable put notice.

~~In July, 2011, the Company established a compensation and benefit plan to provide incentive to employees and consultants. The Company filed Form S-8 to register 15,000,000 shares for the plan.~~20

18Dutchess may sell the shares of common stock from time to time at the prevailing market price on the Over-the Counter (OTC) Bulletin Board, or on an exchange if our shares of common stock become listed for trading on such an exchange, or in negotiated transactions. Dutchess is an underwriter within the meaning of the Securities Act of 1933, as amended (the "Securities Act") in connection with the resale of our common stock under the Equity Line.

Pursuant to the terms of a Registration Rights Agreement, dated July 25, 2011, between Dutchess and us, we are obligated to file one or more registration statements with the SEC to register the resale by Dutchess of shares of common stock issued or issuable under the Investment Agreement. We must file with the SEC an initial registration statement on Form S-1 of which this prospectus forms a part, in order to access the credit line, covering the resale of the 98,000,000 shares of common stock which is less than one-third (1/3) of our current public float (where "public float" shall be derived by subtracting the number of shares of common stock held by our officers, directors and "affiliates" (as such term is defined in Rule 144(a)(1) of the 1933 Act) from the total number of shares of our common stock then outstanding). After the later of (i) sixty (60) days after the time that Dutchess shall have resold substantially all of the shares registered for resale under the initial registration statement, or (ii) six (6) months after the effective date of the initial registration statement, we are obligated to register for resale another portion of the credit line amount, utilizing available equity equal to one-third (1/3) of our then outstanding public float. This registration process will continue until such time as all of the dollar amounts available under the credit line, using shares of common stock issuable under the Investment Agreement, have been registered for resale on effective registration statements. In no event will we be obligated to register for resale more than $10,000,000 in value of shares of common stock.

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

FORWARD-LOOKING STATEMENTS

Some of the information in this quarterly report 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.~~

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.

GENERAL

We are a comics-based entertainment company. We own the rights to a library of over 5,000 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 complementary 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.

During 2009 and 2010, the Company produced a feature film entitled “Dylan Dog: Dead of Night” which was released ~~primarily~~ during ~~the second quarter of~~ 2011.

We derive revenues from a number of sources including: Print 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 three and six months ended June 30, 2011 and 2010. The following discussion should be read in conjunction with the information set forth in the condensed consolidated financial statements and the related notes thereto appearing elsewhere in this report.22

~~RESULTS~~Set OFforth ~~CONSOLIDATED~~below ~~OPERATIONS~~is –a ~~THREE AND~~discussion ~~SIX~~of ~~MONTHS~~the ~~ENDED~~financial ~~JUNE~~condition 30and results of operations of Platinum Studios, ~~2011~~Inc. ~~COMPARED~~(the TO“Company”, ~~THE~~“we”, ~~THREE~~“us,” ~~AND~~and ~~SIX~~“our”) ~~MONTHS~~for ~~ENDED~~the ~~JUNE~~three and nine months ended September 30, 2011 and 2010. The following discussion should be read in conjunction with the information set forth in the condensed consolidated financial statements and the related notes thereto appearing elsewhere in this report.

RESULTS OF CONSOLIDATED OPERATIONS – THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2011 COMPARED TO THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010

NET REVENUE (UNAUDITED)

Net revenue for the three and ~~six~~nine months ended ~~June~~September 30, 2011 was $4,~~999~~943,~~699~~963 and $510,~~525~~469,~~481~~444, respectively, as compared to $2150,~~065,365~~645 and $2,~~098~~248,~~048~~693 for the three and ~~six~~nine months ended ~~June~~September 30, 2010. Currently the Company derives most of its revenue from film licensing, options to purchase rights, the purchase of rights to properties and first look deals. This type of revenue can vary significantly between quarters and years. The revenues for the three and ~~six~~nine months ended ~~June~~September 30, 2011 were primarily related to film licensing revenue from the release of “Dylan Dog: Dead of Night.”

The net revenue for the three and ~~six~~nine months ended ~~June~~September 30, 2010 was primarily purchase rights revenue from one customer as principal photography initiated on one of the Company’s properties, “Cowboys and Aliens.”

Cost of revenues

For the three and ~~six~~nine months ended ~~June~~September 30, 2011 costs of revenue were $4,~~952~~692,~~522~~049 and $510,~~474~~167,~~958~~007, respectively compared to $~~478~~14,~~499~~378 and $~~479~~493,~~582~~960 for the three and ~~six~~nine months ended ~~June~~September 30, 2010. The costs for the three and ~~six~~nine months ended ~~June~~September 30, 2011 were primarily ~~related~~amortization toof ~~amortization~~film costs related to the licensing revenue for the film “Dylan Dog: Dead of Night.” The costs for the three and ~~six~~nine months ended ~~June~~September 30, 2010 were primarily ~~related to~~ participation costs related to the purchase rights revenues on “Cowboys and Aliens.”

Operating expenses

Operating expenses ~~decreased~~increased $~~271~~359,~~555~~138 or 3055% for the three months ended ~~June~~September 30, 2011 to $~~642~~1,~~167~~009,398 as compared to $~~913~~650,~~722~~260 for the three months ended ~~June~~September 30, 2010. ~~These~~This ~~decreases~~increase ~~were~~was related to aan ~~decrease~~increase in ~~rent~~marketing and promotional entertainment expenses of $7444,000 as the ~~company~~Company ~~moved~~promoted to“Cowboys ~~smaller~~and ~~office~~Aliens,” ~~space~~an increase in ~~June~~commissions of ~~2010~~$53,000 arelated ~~decrease~~to “Dylan Dog: Dead of Night” and on licensing agreement revenues from “Cowboys and Aliens,” an increase in legal fees of $~~130~~178,000 due to lawsuits and new licensing contracts, an increase in consulting fees of $173,000 as the Company used consultants instead of hiring more permanent staff, an increase in insurance of $17,000 due to increases in group health insurance costs and the addition of D&O coverage and an increase in foreign withholding taxes of $22,000 related to foreign licensing revenues on “Dylan Dog: Dead of Night,” and These increases were offset by a decrease in salaries of $34,000 and a decrease in stock option expense of $65154,000.

Operating expenses decreased $334,286 or 21% for the six months ended June 30, 2011 to $1,266,945 as compared to $1,601,231 for the six months ended June 30, 2010. These decreases were related to a decrease in rent of $135,000 as the company moved to smaller office space in June of 2010, a decrease in legal fees of $210,000, a decrease in depreciation and amortization of $61,000, a decrease in stock option expense of $109,000 and a decrease in other operating costs of $80,000. These decreases were offset by increases of $113,000 in consulting fees and $131,000 in directors’ compensation.23

Operating expenses increased $24,848 or 1% for the nine months ended September 30, 2011 to $2,276,343 as compared to $2,251,495 for the nine months ended September 30, 2010 as cost remained consistent across the nine month periods.

Development costs

Development costs increased $~~129~~92,~~652~~991 or ~~174~~92% for the three months ended ~~June~~September 30, 2011 to $~~204~~194,~~361~~298 as compared to $74101,~~709~~307 for the three months ended ~~June~~September 30, 2010. Development costs increased $~~181~~274,~~065~~059 or ~~130~~114% for the ~~six~~nine months ended ~~June~~September 30, 2011 to $~~320~~514,~~007~~305 as compared to $~~138~~240,~~942~~246 for the ~~six~~nine months ended ~~June~~September 30, 2010. These increases were primarily due to expenditures for outside artwork and writing fees required to develop the Company’s comic book characters and costs related to an animated comic book series.

Gain (loss) on settlement of debt

The company recorded a los on settlement of debt for the three and ~~six~~nine months ended ~~June~~September 30, 2011 of $(8079,~~443~~126) and $(~~166~~245,~~569~~695), respectively, as compared to a gain on settlement of debt ~~of $82,457~~ for the three and ~~six~~nine months ended ~~June~~September 30, 2010 of $27,492 and $109,949, respectively. The losses for the three and ~~six~~nine months ended ~~June~~September 30, 2011 were primarily related to settlement of ~~notes and~~ accounts payable by issuance of the Company’s common stock at a discount to the value of the payable and the conversion of convertible notes payable at a discount. The gain for the three and ~~six~~nine months ended ~~June~~September 30, 2010 was primarily related to the settlement of leases in default at a discount to amount remaining on the lease.

Loss on derivative liability

The Company recorded a loss on derivative liability of $41,~~456~~282,~~378~~318 and $24,~~997~~280,~~730~~048 for the three and ~~six~~nine months ended ~~June~~September 30, 2011, respectively. The derivative liability, recorded in connection with secured convertible debts payable toand ~~the~~related ~~Company’s~~warrants ~~CEO,~~that isare re-valued at each reporting date with changes in value being recognized as part of current earnings.

Cost of Financing

The cost of financing for the three and nine months ended September 30, 2011 of $3,153,691 is related to the extensions of the secured debt formerly held by the Company’s Chairman and CEO, Scott Rosenberg. In August 2011, the debts that were originally due in May and June of 2011 were extended to May and June of 2012. As part of the consideration of the extensions, new warrants were issued. The cost of financing is the value of the conversion feature of the debt and the value of the new warrants less the debt discount recorded. The value of the conversion feature and the new warrants was $6,903,691, less the debt discount of $3,750,000.

Interest expense

For the three and ~~six~~nine months ended ~~June~~September 30, 2011, interest expense was $~~976~~826,~~246~~955 and $23,~~837~~664,~~835~~790, respectively as compared to $~~380~~121,~~578~~279 and $~~958~~1,~~165~~079,444 for the three and ~~six~~nine months ended ~~June~~September 30, 2010. The increase is primarily related to amortization of debt discount recorded as interest expense in connection with ~~debts~~secured ~~payable~~convertible todebts ~~the Company’s CEO~~payable.

As a result of the foregoing, the net loss increased by $56,~~746~~164,~~752~~985 and $512,~~965~~130,~~168~~152 for the three and ~~six~~nine months ended ~~June~~September 30, 2011 to $6,~~312~~293,~~418~~872 and $713,~~538~~832,~~563~~435 as compared to the same periods in 2010.

LIQUIDITY AND CAPITAL RESOURCES (UNAUDITED)

OnNET ~~October~~CASH ~~22,~~FLOW ~~2010,~~FOR ~~the~~THE ~~Company~~NINE ~~entered~~MONTHS ~~into~~ENDED aSEPTEMBER ~~series of agreements with its CEO~~30, Chairman and major note holder, Scott M. Rosenberg to extend the due dates of certain existing loans made by Mr. Rosenberg to the Company. Pursuant to the terms of the agreements, the new due date for certain loans totaling $2,400,000 was May 6, 2011 and the new due date for other loans totaling $1,350,000 was June 3, 2011. The interest rate on all of these loans has been increased from 8% to 10%, effective upon the original due dates of May 6, 2010, and June 3, 2010, respectively.

InNet ~~exchange~~cash flow provided by operations during the nine months ended September 30, 2011 was $3,977,148 as compared to net cash flow used by operations of $268,093 for ~~these~~the ~~due~~nine ~~date~~months ~~extensions~~ended September 30, 2010. The increase in cash flows from operations for the ~~Company~~nine ~~granted~~months ended September 30, 2011 as compared to ~~Mr.~~the ~~Rosenberg:~~nine months ended September 30, 2010 was primarily due an increase in amortization of film library of $9,107,636, an increase in amortization of debt discount of $2,404,180, an increase in loss on valuation of derivative liability of $4,035,048, an increase in the cost of financing of $3,153,691, a decrease in investment in film library of $1,204,668, a decrease in deferred revenue of $5,939,785 and an increase in net loss of $12,130,152.

~~(1)~~Net ~~Two~~cash ~~additional~~used ~~sets~~by ofinvesting ~~warrants~~activities towas ~~purchase~~$6,126 ~~the Company’s common stock. The first set allowing~~ for the ~~exercise~~nine ofmonths upended toSeptember 4030,~~000,000~~ ~~warrants~~2011 ~~to purchase shares of the Company’s common stock, at an exercise price of $0.11 per share, and the second set allowing~~ for the ~~acquisition~~purchase of upoffice ~~to $3,750,000 in stock, by exercise of warrants at $0~~equipment.~~11 per share. Both sets will expire on October 22, 2020; and~~

~~(2)~~Net Ascash ~~more~~used ~~fully described~~ in ~~the~~financing ~~Intellectual~~activities ~~Property~~was ~~Rights~~$3,978,035 ~~Assignment~~for ~~Agreement between~~ the ~~Company~~nine ~~and~~months ~~Scott~~ended ~~Rosenberg~~September ~~(included~~30, 2011 as ancompared ~~exhibit~~ to ~~the~~net ~~Company’s~~cash 8Kprovided ~~filing~~of $309,260 asfor ~~amended,~~the onnine ~~December~~months 28ended September 30, 2010),. ~~25%~~The ofdecrease ~~gross~~in ~~revenues~~cash ~~from~~provided ~~those~~by ~~certain~~financing ~~co-ownership~~activities ~~rights~~is ~~assigned~~attributed to ~~Scott~~a ~~Rosenberg. A~~decrease ~~list~~in ofproceeds ~~intellectual~~from ~~property~~short-term ~~that~~notes ispayable ~~excluded~~of ~~from~~$492,353, ~~this~~and ~~agreement~~an isincrease ~~also~~ in ~~the~~payments ~~exhibit~~on toshort-term ~~the~~notes 8Kpayable ~~filing~~of $4,345,201.

At September 30, 2011 the Company had cash balances of $69,262. The ~~notes~~Company ~~are~~will ~~past~~issue ~~due~~additional equity and may consider debt financing to fund future growth opportunities and support operations. Although the Company isbelieves ~~currently~~its unique intellectual content offers the opportunity for significantly improved operating results in ~~negotiations~~future ~~with~~quarters, no assurance can be given that the ~~note~~Company ~~holder~~will ~~for~~operate anon ~~additional~~a ~~extension~~profitable basis in 2011, or ever, as such performance is subject to numerous variables and uncertainties, many of which are out of the Company’s control.

~~The notes, warrants and co-ownership rights were assigned to an entity that is managed by the CEO and a Director of the Company.~~25

In December, 2008, the Company, through 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 original amount of $13,365,000. The amount due on this note as of June 30, 2011 was $8,897,561. The loan is collateralized by all rights in the sales agency agreement and the distribution agreements in connection with the production. $4,850,000 of the loan is guaranteed by Omnilab Pty Ltd. of which $1,000,000 has been paid with the balance due on October 1, 2011. The remaining note balance of $5,047,561 was due April 1, 2011 and the Company is currently in default

The company has unpaid liabilities due to the Internal Revenue Service for employee obligations, which is approximately $117,000. We have entered into payment plans to pay off these liabilities but there can be no guarantee that the Company will be able to continue making such payments. If the Company defaults on its payment plans, the governmental entities involved might exercise their collection powers, which may be abrupt and immediate, and could possibly levy upon existing accounts of the Company, with no notice or little advance warning.

Net cash flow provided by operations during the six months ended June 30, 2011 was $648,927 as compared to $1,015,847 for the six months ended June 30, 2010. The decrease in cash flows from operations for the six months ended June 30, 2011 as compared to the six months ended June 30, 2010 was primarily due an increase in amortization of $5,025,515, an increase in fair value of stock issued for services of $258,737, an increase in amortization of debt discount of $1,741,894, an increase in loss on valuation of derivative liability of $2,227,730, a decrease in investment in film library of $948,403, an increase in prepaid expense and other current assets of $807,751, a decrease in accounts payable of $385,245, an increase in accrued expenses of $289,026, a decrease in deferred revenue of $3,902,992 and an increase in net loss of $5,965,168.

Net cash used by investing activities was $6,126 for the six months ended June 30, 2011 for the purchase of office equipment.

Net cash used in financing activities was $655,945 for the six months ended June 30, 2011 as compared to cash provided of $543,009 for the six months ended June 30, 2010. The decrease in cash provided by financing activities is attributed to a decrease in proceeds from short-term notes payable of $646,118, an increase in related party loans of $249,500, an increase in payments on short-term notes payable of $777,567, a decrease in payments on related party loans of $83,062 and a decrease in issuance of common stock of $184,741.

At June 30, 2011 the Company had cash balances of $63,131. 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 2011, or ever, as such performance is subject to numerous variables and uncertainties, many of which are out of the Company’s control.

GOING CONCERN

During the ~~six~~nine months ended ~~June~~September 30, 2011, the Company had a net loss of $713,~~538~~832,~~563~~435. At ~~June~~September 30, 2011, the Company had a working capital deficit of $169,~~879~~422,~~578~~222 (excluding its derivative liability) and a shareholders’ deficiency of $2227,~~826~~944,~~718~~223. The Company is also delinquent in payment of $~~117~~116,~~824~~308 for payroll taxes as of ~~June~~September 30, 2011 and in default of certain of its short term notes payable including its $4,916,665 note payable to Standard Chartered Bank.. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from this uncertainty. The Company intends to raise funds to finance operations until the Company achieves profitable operations. The Company’s capital requirements for the next 12 months will continue to be significant. If adequate funds are not available to satisfy either medium or long-term capital requirements, the Company’s operations and liquidity could be materially adversely affected and the Company could be forced to cut back its operations. Subsequent to June 30, 2011, the Company raised $42,500 through the issuance of convertible notes payable and $572,835 through the issuance of common stock pursuant to the Dutchess Opportunity Fund agreement.

NOTES PAYABLE TO RELATED PARTY

The Company entered into a Credit Agreement on May 6, 2009, with Mr. Rosenberg, its Chariman and Chief Executive Office, in connection with the issuance of two secured promissory notes. Two warrants were issued to Mr. Rosenberg in connection with the issuance of various promissory notes as of May 6, 2009 and June 3, 2009. The advances in 2009 increased Rosenberg’s security interest held in the Company’s assets to approximately $3,750,000. These transactions were:

In exchange for these due date extensions, Company granted to the CEO:

As more fully described in the Intellectual Property Rights Assignment Agreement between the Company and Scott Rosenberg (included as an exhibit to the Company’s 8K filing, as amended, on December 28, 2010), 25% of gross revenues from those certain co-ownership rights assigned to Scott Rosenberg. A list of intellectual property that is excluded from this agreement is also in the exhibit to the 8K filing.

Second Modification of Secured Convertible Notes Payable – In August , 2011, the Company entered into a series of agreements with ACH to extend the due date of certain existing loans originally made by the CEO. Pursuant to the terms of the agreements, the new due date for the secured convertible notes payable totaling $2,400,000 was extended to May 6, 2012 and the new due date for the secured convertible notes payable totaling $1,350,000 was extended to June 3, 2012.

In exchange for these due date extensions, Company granted to ACH:

Due to the resignation of Mr. Rosenberg in May of 2011 as manager of ACH and the Director’s resignation as manager in September, 2011, the Company no longer considers ACH a related party.

BANK NOTE PAYABLE

In December, 2008, the Company, through 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 original amount of $13,365,000. The amount due on this note as of September 30, 2011 was $4,916,665. As of October 14, 2011, the balance has been reduced to $4,621,655 through the receipts of funds other licensees. The loan is collateralized by all rights in the sales agency agreement and the distribution agreements in connection with the production. In August, 2011, Standard Chartered Bank delivered a default notice under the note.

OTHER

The company has unpaid liabilities due to the Internal Revenue Service for employee obligations, which is approximately $116,308. We have entered into payment plans to pay off these liabilities but there can be no guarantee that the Company will be able to continue making such payments. If the Company defaults on its payment plans, the governmental entities involved might exercise their collection powers, which may be abrupt and immediate, and could possibly levy upon existing accounts of the Company, with no notice or little advance warning.

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, 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 condensed 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.

DERIVATIVE LIABILITY. The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the condensed consolidated statements of operations. For stock-based derivative financial instruments, the Company uses the Binomial option pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

2428

The derivative liabilities are re-valued at each reporting date with changes in value being recognized as part of current earnings. This revaluation for the ~~six~~nine months ended ~~June~~September 30, 2011 resulted in a loss of $24,~~997~~280,~~730~~048. Any change in the significant assumptions could result in a different valuation that could affect the Company’s results of operations.

Recently issued accounting pronouncements

In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) No. 2011-404, ~~which~~“Amendments ~~amends~~to ~~the~~Achieve Common Fair Value ~~Measurements~~Measurement ~~Topic of the Accounting Standards Codification (ASC) to help achieve common fair value measurement~~ and ~~disclosure~~Disclosure ~~requirements~~Requirements in U.S. GAAP and ~~IFRS~~IFRSs”. ASU No. 2011-4 does not require additional fair value measurements and is not intended to establish valuation standards or affect valuation practices outside of financial reporting. The ASU is effective for interim and annual periods beginning after December 15, 2011. The Company will adopt the ASU as required. The ASU will affect the Company’s fair value disclosures, but will not affect the Company’s results of operations, financial condition or liquidity.

~~Other~~In ~~recent~~September ~~accounting~~2011, ~~pronouncements~~the FASB issued ASU 2011-08, “Testing Goodwill for Impairment”, an update to existing guidance on the assessment of goodwill impairment. This update simplifies the assessment of goodwill for impairment by allowing companies to consider qualitative factors to determine whether it is more likely than not that the ~~FASB~~fair ~~(including~~value of a reporting unit is less than its ~~Emerging~~carrying ~~Issues~~amount ~~Task~~before ~~Force),~~performing the ~~AICPA,~~two ~~and~~step ~~the~~impairment ~~Securities~~review ~~Exchange~~process. It ~~Commission~~also (amends the ~~“SEC”)~~examples ~~did~~of ~~not~~events or circumstances that would be considered in a goodwill impairment evaluation. The amendments are ~~not~~effective ~~believed~~for byannual ~~management~~and tointerim ~~have~~goodwill aimpairment ~~material~~tests ~~impact~~performed for fiscal years beginning after December 15, 2011. Early adoption is permitted. The Company will adopt the ASU as required. It will have no affect on the Company’s ~~present~~results orof ~~future~~operations, ~~consolidated~~ financial ~~statements~~condition or liquidity.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the Securities Exchange Commission (the "SEC") did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.

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.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

~~Rustemagic~~Harrison Kordestani v. ~~Rosenberg~~Platinum. &Harrison ~~Platinum~~Kordestani ~~Studios.~~was Ona orprincipal ~~about~~of ~~June~~Arclight 30Films, 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, ~~Ervin~~Mr. ~~Rustemagic~~Krodestani ~~filed~~had ~~suit~~an ~~against~~attorney contact the Company ~~and~~as well as its ~~President,~~new ~~Scott~~partners ~~Rosenberg,~~who inwere on the ~~California~~verge ~~Superior~~of ~~Court~~closing the financing for the ~~County~~“Dead of ~~Los~~Night.” ~~Angeles~~Mr. ~~(Case~~Kordestani, ~~No.~~through ~~BC416936)~~his ~~alleging~~counsel, ~~that~~claimed he was entitled to reimbursement for certain monies invested in the ~~Company~~film ~~(and~~while it had been subject to the Arclight slate agreement. Mr. ~~Rosenberg)~~Krodestani’s ~~breached~~claim was wholly without merit and an ~~agreement~~attempt ~~with~~to ~~Mr.~~force ~~Rustemagic~~an ~~thereby~~unwarranted ~~causing~~settlement ~~damages~~because ~~totaling~~he ~~$125,000~~knew we were about to close a deal. ~~The~~ ~~matter~~We ~~was~~responded ~~settled~~immediately through ~~arbitration~~outside counsel and asserted that he was engaging in ~~April,~~extortion ~~2011~~and ~~with~~the ~~only~~company ~~minimal~~would ~~liability~~pursue him vigorously if he continued to ~~the~~try ~~Company. Under~~and ~~the~~interfere ~~settlement~~with ~~agreement,~~our ~~the~~deal. ~~Company~~The company has ~~guaranteed~~not ~~additional~~heard ~~payments~~anything ~~due~~further byfrom ~~Scott~~Mr. ~~Rosenberg~~Kordestani inbut ~~the~~will ~~amount~~vigorously ofdefend ~~$77,000,~~any ~~which~~suit ~~payments~~that ~~have~~Mr. ~~not~~Kordestani ~~been~~attempts ~~made,~~to ~~and~~bring. The ~~litigation~~Company has ~~subsequently~~not ~~been~~reserved ~~reinstituted~~any payable for this proceeding.

~~Harrison~~Douglass ~~Kordestani~~Emmet v. Platinum. ~~Harrison~~Studios ~~Kordestani~~On ~~was~~August a20, ~~principal~~2009, ofDouglas ~~Arclight~~Emmet ~~Films~~1995, ~~with~~LLC ~~whom~~filed an Unlawful Detainer action against the Company ~~had~~with ~~entered~~regard ~~into~~to athe ~~film~~office ~~slate~~space ~~agreement.~~previously ~~One~~occupied ofby the ~~properties~~Company. ~~that~~The ~~had~~suit ~~been~~was ~~subject~~filed toin the ~~slate~~California ~~agreement~~Superior ~~was~~Court, ~~“Dead~~County of ~~Night.”~~Los ~~Arclight~~Angeles, ~~fired~~(Case MrNo. ~~Kordestani~~SC104504) and ~~subsequently~~alleged ~~released~~that ~~Dead~~the ofCompany ~~Night~~had ~~from~~failed to make certain lease payments to the ~~slate~~Plaintiff ~~agreement~~and was, therefore, in default of its lease obligations. InThe ~~late~~Plaintiff ~~January~~prevailed ~~2009~~on its claims at trial and, ~~Mr.~~subsequently, ~~Krodestani~~on ~~had~~October an14, ~~attorney~~2009 ~~contact~~entered into a Forbearance Agreement with the Company aspursuant ~~well~~to aswhich ~~its~~Douglas ~~new~~Emmet ~~partners~~agreed ~~who~~to ~~were~~forebear on moving forward with eviction until December 31, 2009, if the ~~verge~~Company agreed to pay to Douglas Emmet 50% of ~~closing~~three ~~the~~month’s ~~financing~~rent, in advance, for the ~~“Dead~~months of ~~Night.”~~October, MrNovember and December 2009. ~~Kordestani,~~As ~~through~~of ~~his~~January ~~counsel~~1, ~~claimed~~2010, hethe Company was ~~entitled~~required to ~~reimbursement~~pay ~~for~~to ~~certain~~Douglas ~~monies~~Emmet ~~invested~~the insum of $466,752 to become current under the ~~film~~existing ~~while~~lease itor ~~had~~face ~~been~~immediate ~~subject~~eviction toand ~~the~~judgment ~~Arclight~~for ~~slate~~that ~~agreement~~amount. ~~Mr.~~Prior ~~Krodestani’s~~to ~~claim~~January ~~was~~1, ~~wholly~~2010, ~~without~~Douglas ~~merit~~Emmet ~~and~~agreed anto ~~attempt~~a month-to-month ~~force~~situation anwhere ~~unwarranted~~Platinum ~~settlement~~pays ~~because~~50% heof ~~knew~~its werent ~~were~~at ~~about~~the tobeginning ~~close~~of athe ~~deal.~~month Weand ~~responded~~the ~~immediately~~landlord ~~through~~holds ~~outside~~back ~~counsel~~on eviction and ~~asserted~~enforcement ~~that~~of hejudgment ~~was~~while ~~engaging~~they inevaluated ~~extortion~~whether ~~and~~they will consider negotiating a new lease with the ~~company~~Company that would ~~pursue~~potentially ~~him~~demise ~~vigorously~~some ifof hethe ~~continued~~Company’s current office space back to ~~try~~the ~~and~~landlord ~~interfere~~as ~~with~~well aas ~~deal~~potentially forgive some of the past due rent. ~~The~~As ~~company~~of June 30, 2010, the Company has ~~not~~abandoned ~~heard~~the ~~anything~~leasehold ~~further~~and ~~from~~moved Mrto new offices. ~~Kordestani~~In ~~but~~January, ~~will~~2011, ~~vigorously~~Douglas ~~defend~~Emmett ~~any~~served ~~suit~~the ~~that~~Company ~~Mr.~~a ~~Kordestani~~new ~~attempts~~lawsuit to ~~bring~~recover unpaid rent and damages. The ~~Company~~parties ~~has~~are ~~not~~in ~~reserved~~meaningful ~~any~~discussions for a settlement. The accounts payable ~~for~~of ~~this~~the ~~proceeding~~Company include a balance to Douglass Emmet sufficient to cover the liability, in managements’ assessment.

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 previously 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 office space back to the landlord as well as potentially forgive some of the past due rent. As of June 30, 2010, the Company abandoned the leasehold and moved to new offices. In January, 2011, Douglas Emmett served the Company a new lawsuit to recover unpaid rent and damages. The Company has responded to the summons and requested a settlement conference. The accounts payable of the Company include a balance to Douglass Emmet sufficient to cover the liability, in managements’ assessment.

26Franklin v Platinum (and a derivative action, by Franklin, against Scott Rosenberg) During mid-September 2011, Jeff Franklin, an independent contractor with the Company, was terminated, and, after settlement discussions as to his termination payments broke down, Franklin initiated arbitration, under his January 2010 written agreement, against Platinum on October 5, 2011. Franklin is seeking approximately $350,000 in cash, 10% of the Company in an equity position, and 25% of all intellectual property rights on certain film projects for the next five years. The Company has countered with a claim for a return of approximately $80,000 that it believes was over-paid to Franklin against commissions due under the written agreement.

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, 2011.

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

During the three months ended ~~June~~September 30, 2011, the Company issued 115,~~459~~833,~~018~~444 shares of our common stock for services and settlement of accounts payable with a value of $55137,~~000~~942.

The Company relied on 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.

~~During the three months ended June 30, 2011, the Company issued 3,631,579 shares of our common stock in exchange for debt with a value of $151,579.~~32

During the three months ended September 30, 2011, the Company issued 14,534,740 shares of our common stock in exchange for debt with a value of $236,126.

The Company relied on an exemption from the registration requirements of the Act pursuant to Section 3 (a) (9).

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. REMOVED AND RESERVED

None

ITEM 5. OTHER INFORMATION

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

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

* 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 ~~August~~November 1917, 2011.

		Platinum Studios, Inc.

	By:	/s/ Scott Mitchell Rosenberg
		Scott Mitchell Rosenberg
		Chief Executive Officer,
		Chairman of the Board and Principal Financial and Accounting Officer

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