Moon River is in default on the purchase of a film production equipment company and "time is running out" for it to meet major milestones in its efforts to build studios in Effingham County.
FONU2, doing business as Moon River, said in a report filed with the Securities and Exchange Commission Monday that it received a default notice on Sept. 3 for a $600,000 subordinated note owed to AppleBox.
"The company is in communication with AppleBox’s counsel, and expects the default to be cured shortly," the filing said.
Jake Shapiro, chairman of the board of FONU2, on Wednesday called the problem a "technical default" and said it would be cured "in the immediate future."
The company has touted the acquisition of AppleBox as a major step in its efforts to build film production studios on 1,600 acres of land owned by the Effingham County Industrial Development Authority (IDA) at Interstate 95 and Old River Road.
AppleBox has the equipment needed to make movies, including trucks, lights and generators. Moon River has said it will use the equipment on its own movie projects and rent it to other movie makers.
The IDA on Monday rejected a revised development schedule submitted by Moon River, saying it listed accomplishments but included no timetable for the next steps in the project. IDA CEO John Henry said the board asked for a new version by the end of the month.
Agreements the company has signed with the IDA call for Moon River to invest $20 million in the project by the end of this year, and create 50 jobs.
Earlier documents filed by the company also called for the first stages and warehouses to be operational by the end of this year.
Shapiro said Wednesday that construction on a road should begin in late September or early October and take five months to complete.
He said after the road is done, construction would begin on a studio building, which would take six to eight months to complete.
Shapiro said the company has made steady progress on the project since it was reorganized in February, getting a master plan approved and engineering work done and obtaining permits to start construction. The company originally was called "Medient."
Shapiro said recent financial problems in China should help the company's efforts to raise capital through the federal EB-5 program, which encourages foreign investment in U.S. projects that create jobs in exchange for visas.
Shapiro has said that's the main way the company plans to raise capital to start building the "studioplex" project.
He said Lexden Capital is doing studies and reports for the EB-5 effort and should go to market to raise money by the end of this year.
Chap Bennett, chairman of the IDA, declined Wednesday to speculate on whether the board might give the company more time to meet the requirements.
"We're going to play it out and follow the agreement we have to the letter and act in good faith, but the time is running out," Henry said.
The company has a 20-year lease on the land, with rent waived for two years. The first lease payment, more than $500,000, is due in February.
The IDA will spend $1.25 million to build a road and, after the company has created at least 250 jobs, as much as $3 million to provide water and sewer service.
Moon River has been issuing stock to pay many of its bills and its auditors say it doesn't have enough money to continue operating for long.