Thursday, January 04, 2007 2:19:30 AM
Form 10KSB/A for BUCKEYE VENTURES, INC.
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22-Dec-2006
Annual Report
Item 7. Management's Discussion and Analysis or Plan of Operations.
Management's discussion and analysis of financial condition and results of operation should be read in conjunction with the consolidated financial statements and related notes.
RESULTS OF OPERATIONS
Year ended December 31, 2004 compared to year ended December 31, 2005
For the year ended December 31, 2004, net loss was $73,173. For the year ended December 31, 2005, net loss was $124,428.
Basic administrative expenses have remained constant over the past 3 years. Operating expenses have increased slightly due to increased marketing efforts regarding the motion picture 'Amy'. Losses in 2004 and 2005 are primarily attributable the issuance of common stock for services.
The operating revenue decrease of $17,675 (42%) from $42,254 in 2004 to $24,579 in 2005 resulted from less fee income received for production and distribution services. Non-operating income for 2005 was $962 due to interest income.
Operating costs and expenses decreased $535 (0%) from $149,677 in 2004 to $149,142 in 2005. The decrease in 2005 was due to a $15,500 reduction in the provision for doubtful accounts and a $19,158 reduction in stock based compensation offset partially by increases in other general and administrative expenses.
The Company has presented a consolidated balance sheet which includes four wholly-owned active subsidiaries: World Wide Inc., World Wide Productions Inc., World Wide Film & Television Institute, and World Wide Entertainment Inc. The Company's charter allows it to branch into diversified fields of enterprise provided management concludes there is a significant potential for profit. Since the primary business objective of the Company is to increase the value of its stockholders' equity, if and when opportunities arise to make profits for the corporation in a diversified industry, the Company shall investigate and if appropriate, pursue such opportunities. Until year end 2005, the motion picture and television segment of the Company's current or planned operations was the only segment material to the Company's financial statements or condition.
The Company's motion picture and television business participation strategy has primarily been to expend its resources and to set in place strategic relationships and contracts in preparation for the continued development, acquisitions, production and/or marketing/distribution of quality moderate budget feature length motion pictures, documentaries, docudramas and television productions. The strategy additionally includes the acquisition of screenplays and teleplays suitable for development/packaging and completed motion pictures and television projects for licensing and marketing/distribution opportunities for all applicable sales territories throughout the world. At such time that additional working capital is secured, it is the Motion Picture and Television Subsidiary's opinion that sufficient revenue will be generated by the existing film and television library and future distribution of potential new product, ultimately realizing its projected return on investment.
Previous arrangements for participation by the Company in various feature film and television productions effecting cost and revenue over the last 5 years include gross and net revenue participations in the following feature film and television productions ranging between 2-60% of worldwide revenue potential including all markets and all media that the particular production is distributed in.
(1) In 1997 and 1998, post production and distribution preparation of the documentary entitled THE OUTLAW TRAIL, 100 YEARS REVISITED, in association with Western Sunset Films, an 8-year old Los Angeles based documentary production company. (2) In 1998, development and production of the series television production entitled CLASSIC CAR, in association with SLIM, Inc., a 4-year old Los Angeles based television production company. (3) In 1999, the acquisition and preparation for marketing and distribution of the feature film entitled WHAT'S IN A COOKIE produced by production company Rocinante Productions Inc. and providing 50% of gross revenue participation to the Company in perpetuity. (4) In 2000, the acquisition and preparation for marketing and distribution of the feature films entitled MALEVOLENCE and THE SECOND COMING produced by production company Sig Larsen Productions Inc. and providing 50% of gross revenue participation to the Company in perpetuity. Other arrangements include preparation for Internet marketing and distribution of a feature length film acquired by the Company entitled CITIZEN SOLDIER originally produced by M&D Productions, a 7-year old Los Angeles based film production company, purchased by the Company in 1995 and providing a 60% gross revenue participation to the Company in perpetuity.
In 1998, all financing for the completion of the feature length production entitled SHATTERED ILLUSIONS featuring Morgan Fairchild, Bruce Weitz, Richard Lynch and Dan Monahan was secured and the production was completed. In 1999, the Company entered into an agreement with representative RGH/Lions Share Pictures Inc., a 15-year old, Los Angeles based distribution company for the purpose of conducting all foreign sales arrangements of the film.
In August, 1999, the Company entered into an agreement with Jaguar Entertainment Inc., a 12-year old Los Angeles based distribution company, for the purpose of marketing and distributing the feature length motion picture entitled NINTH STREET featuring Martin Sheen and Isaac Hayes to all domestic non-theatrical ancillary markets including home video, pay television, network television, satellite and DVD.
In August, 1999, the Company entered into an agreement with Rocinante Productions Inc., a 6 year old Los Angeles based production company, for the purpose of acquiring all of the right, title, and interest in the feature length motion picture entitled WHAT'S IN A COOKIE? The agreement also encompassed the acquisition by the Company of all foreign and domestic distribution rights to the film in perpetuity.
In August and September, 1999, the Company entered into an agreement with GTL Productions Inc., a 7-year old Omaha based production company for the purpose of acquiring the domestic and foreign marketing and distribution rights to a documentary series entitled ON THESE RUINS encompassing the titles of ANARTICA, THE GALAPOGOS ISLAND and EASTER ISLAND.
In June, 2000, the Company entered into an agreement for the development of an electronic commerce marketing arrangement with Pix Media Inc., a 2 year old Los Angeles based Internet company, for the purpose of providing a national and international e-commerce exploitation venue for various titles within the Company's completed film and television library.
Further, during fiscal year 2000 and in addition to continuing to exploit existing film and television projects such as the feature length films entitled "Shattered Illusions" and "Ninth Street", the Company negotiated and signed a North American Distribution contract on June 17, 2000, for the theatrical and ancillary exploitation of a full length feature film entitled "Amy". A domestic U.S. only, Distribution Agreement was executed with a sub-agent for First Motion Picture Inc. in Toronto, Ontario, Canada, on March 27, 2000, for the exploitation of ancillary rights to the full length feature film entitled "Jigsaw"; and on May 8, 2000, a domestic U.S. Distribution Agreement was executed with Praxis Entertainment Inc. in Dallas, Texas for the exploitation of ancillary rights to five full length feature films entitled "Flying Changes", "Winning Colors", "Shadow Dancer", "Trance", and "Corndog Man".
In February, 2001, the Company commenced theatrical marketing and distribution of the feature film entitled "Amy" with a Los Angeles premier of the film at the AMC Century City theaters, the MANN Westwood Cinema, the Loew's Cineplex, Beverly Center and throughout the Edwards theater circuit in Orange County, California. During the first and second quarters of 2001, the theatrical showings of the film continued with a rollout across the United States in cities including New York, Detroit, Seattle and Palm Springs.
In 2001, 2002, 2003, 2004 and 2005, certain other film and television participations of the Company included development and packaging arrangements, the Company's review and in certain cases, advice and counsel on screenplays and screenplay development scenarios for the subsequent possible packaging and production and distribution of a particular project. The most significant of these productions, their production companies, and percentage of future gross revenue allocated to the Company, were the feature length film entitled CORKLESBY offered by co-production company Northstar Entertainment Inc., a 4-year old Los Angeles based production company, (50%); and the feature length film entitled ALONG FOR THE RIDE offered by production company Wittman Productions Inc., a 4-year old Los Angeles based production company, (50%); the animated children's television show entitled "Skateboy" represented by U.S. syndicator Aristea Films.
GENERAL
Relative to the Company's desire for diversification and balanced cash flow, the Company and Buckeye Ventures Inc. ("Buckeye") and certain subsidiaries and shareholders of Buckeye have closed on the proposed Share Exchange (reverse acquisition) Agreement dated October 14, 2005, and reported in the Company's 8-K filed October 18, 2005. This transaction concluded on February 22, 2006, with pursuant agreements effective March 1, 2006, as reported in the Company's 8-K filed March 7, 2006. As a result, all of the shareholders of Buckeye exchanged their shares of Buckeye for more than eighty percent (80%) of the outstanding shares of the Company. Buckeye became a wholly owned subsidiary of the Company and the Buckeye shareholders became the controlling shareholders of the Company. The consistent revenues from the HVAC business with the occasional surge of revenue from a successful film projects should enhance the value of Company's shareholders investment.
Buckeye was formed by Alan Mintz and Larry Weinstein in June 2005 for the purpose of acquiring and operating businesses in the Heating Ventilation and Air Conditioning (HVAC) and plumbing industries. Buckeye's objective is to create a national brand for the consumer in their industry. Buckeye plans to acquire, integrate and grow these residential service companies using established systems and procedures to be carried out by an experienced management team. Buckeye believes that these low risk, high margin businesses will benefit from best practices and synergies of multiple locations nationwide with the potential to realize significant appreciation.
Buckeye acquired its first residential service location in Boston, which has approximately $4.7 million in revenues, and also has signed Letters of Intent to acquire additional companies and facilities. Negotiations are underway to acquire additional businesses in Phoenix, Tucson, Sacramento, San Francisco, San Diego, Las Vegas, Tampa and in Virginia with combined annual revenues in excess of $45 million. Buckeye has assembled a management team that includes experienced executives and operators in this industry, with years of combined experience on the management and operations side of large multi-location companies. The market for these residential HVAC and plumbing service businesses, while currently a very fragmented industry, is estimated to be a $50 billion dollar industry. The Company's plan is to seek to become a significant factor in the industry by providing many small and mid-sized local and regional operators with the opportunity to become part of a growing national conglomerate that is a public reporting company. Buckeye's management team has the expertise to consolidate its planned and future acquisitions and develop effective and cost efficient ways of working within its industry. Buckeye has devoted more than a year and a half developing the underlying model including the addition of key executives, securing early acquisitions and building strong industry relationships that puts Buckeye in a position for profitable growth.
The Company will continue its existing business as an independent subsidiary of Buckeye. The closing of the Share Exchange (reverse acquisition) follows the consummation of all due diligence procedures and shareholder approval, including written consent of shareholders representing 68.5% of outstanding shares. Regarding this transaction, the Company filed a 14F1 information statement on December 22, 2005, and a Definitive 14C information statement on January 27, 2006, which give further details of the plan of acquisition and were mailed to all shareholders of record on February 1, 2006. There were no dissenting shareholders.
In fiscal 2004 and 2005, the Company continued its involvement in a variety of film and television projects relative to development, acquisitions, packaging, production and marketing/distribution activities. The Company also continued to pursue potential diversified business opportunities that have cash flow possibilities such as the Share Exchange with Buckeye Ventures, Inc. Management believes that a film or television production's economic success is dependent upon several overlapping factors including general public appetite of a potential genre or performer at the time of release, domestic and international marketing philosophy, applicable usage of existing and new and emerging technology, advertising strategy with resultant penetration and the overall quality of the finished production. The Company's film and television productions may compete for sales with numerous independent and foreign productions as well as projects produced and distributed by a number of major domestic and foreign companies, many of which are units of conglomerate corporations with assets and resources substantially greater than the Company's.
Management of the Company believes that in recent years there has been an increase in competition in virtually all facets of the motion pictures and television business. Specifically, the motion picture industry competes with the internet and other forms of leisure-time entertainment. Since the Company may for certain undetermined markets and products distribute its product to all markets and media worldwide, it is not possible to determine how its business as a whole will be affected by these developments and accordingly, the resultant impact on the financial statements.
Subject to current market conditions, the Company has currently obtained or arranged for the investment capital to produce and/or distribute a minimum of four full length feature films or specialty television productions within the next two years. In addition to the development, financing, production, and distribution of motion picture and television product, the Company expects to continue to exploit a portion or portions of the Company's completed film and television library to a wide variety of distribution outlets including network television, cable television, satellite broadcast, pay-per-view, home video/DVD and internet exploitation sales. Specifically, live action motion pictures are generally licensed for broadcast on commercial television following limited or wide release distribution to theatrical outlets (theaters), home video/DVD and pay television. Licensing to commercial television is generally accomplished pursuant to agreements which allow a fixed number of telecasts over a prescribed period of time for a specified license fee. Television license fees vary widely, from several thousand to millions of dollars depending on the film or television production, the number of times it may be broadcast, whether it is licensed to a network or a local station and, with respect to local stations, whether the agreement provides for prime-time or off-time telecasting. Licensing to domestic and foreign television stations (syndication) is an important potential source of revenue for the Company, although in recent years the prices obtainable for individual film and television product in domestic syndication have declined as pay television licensing has grown. The growth of pay television and home video technologies, i.e. DVD (Digital Video Disk) and HDTV (High Definition television), has had an adverse affect on the fees obtainable from the licensing of film and television product to networks and local television stations, thereby potentially affecting the Company's ability to generate substantive revenue from this particular venue, however increasing revenue potential in other areas. Conversely, the Company may derive revenue from the marketing and sale, either directly or through licensees, of motion pictures and other filmed or videotaped product on videocassette or DVD for playback on a television set or monitor through the use of videocassette recorders ("VCRs"), DVD players and continued advancements of pay television (cable), satellite broadcast technologies,pay-per-view, and Internet applications domestically and internationally.
The Company currently holds the distribution rights to 314 motion picture and television titles. The revenue competition relative to existing or pending exploitation agreements of the Company's film and television product library and current and future production and distribution of projects is volatile due to the many technological and innovative changes in the industry and also changes regularly occurring in the international economy.
Because the commercial potential of individual motion pictures and television programming varies dramatically, and does not bear any relationship to their production, acquisition or marketing costs, it is impossible to predict or project a trend of the Company's income or loss. However, the likelihood of the Company reporting losses in the short term is increased by the industry's general method of accounting which requires the early recognition of the entire loss (through increased amortization) in instances where a motion picture or television program produced or acquired is not expected to recover the Company's investment. On the other hand, the profit from a successful film or television production is deferred and recognized over the entire period that revenues are generated by that motion picture or television program. This method of accounting may also result in significant fluctuations in reported income or loss, particularly on a quarterly basis, depending on the Company's release of product into the marketplace and overall domestic/international exploitation schedule and the performance of individual motion pictures or television programs.
The company's revenue is derived from a variety of sources. Currently the most substantial of these sources are its fees as packager and/or the managing production company of various film and television projects (including feature length motion pictures, documentaries, docudramas, and television productions), film and television marketing & distribution fees, fees from the licensing and/or rental of its completed film and television library and related entertainment industry consultation fees.
A significant portion of the Company's assets was purchased with the issuance of shares of its common and preferred stock. In the absence of a consistent market for the securities issued, the value of the film and television product purchased by the Company was agreed to by the sellers and the purchaser in arms length transactions in accordance with generally accepted accounting standards and additionally, internal evaluation and auditing procedures. The purchase and production costs of acquired and produced films over the past 24 years is $25,320,927. The films and television productions in the Company's library have uncertain future revenues that may be expected to grow or diminish along with all of the ancillary markets now and in the future that are available for exploitation. In some cases, individual films or television productions may be timeless and irreplaceable; in many cases their book value is nil having been amortized based on revenues received several years ago and the inability to estimate a market value or reasonable expected revenue. Certain of the inventory product without book value produce income and, in light of new and emerging technologies, the Company expects additional revenue from these sources.
The Company's film and television library consists of newly produced and historical film and videotaped product and rights thereto purchased as an investment and/or exploited by leasing and/or rental to a wide variety of domestic and international outlets. Many film and television libraries such as the Company's that were purchased for investment over a span of many years, have appreciated considerably in value as a direct result of new and emerging technologies, revived or newly created public appeal for a certain performer or genre, unique applications of particular production process (special digital effects) and standard and newly developed non-theatrical ancillary markets throughout the world. New technological advances such as DVD (Digital Video Disk), HDTV (High Definition Television), CD-ROM, DVD ROM, DVD Audio, Pay-Per-View and Internet applications have enhanced and are greatly expanding resale and leasing capability of film or television product no longer in the legal or physical possession of the original producers or distributors.
The film and television inventory of the Company is regularly reviewed and evaluated on a film-by-film basis by the Company's management. Forecasting any film or television project's future revenues is a difficult and uncertain art, even for major film distributors and television syndicators. The accounting principles and industry practices in these areas leave unusual discretion with the film and/or television company executives and often result in "unusual" changes in individual periods. The Company has periodically, from a cost basis of $20,451,441 in the year 1996, substantially revalued its inventory of film and television product, resulting in a net realizable value and net book value reduction in the stated value on the balance sheet. Although the Company has personnel on its Board of Directors and professional staff which are qualified to estimate the value of its film and television inventory for internal verification purposes, it retains the services of independent appraisers who regularly review the Company's film and television library, ensuring a greater measure of objectivity.
The Company is continually negotiating with various potential lessors of portions of the film and television library for the implementation of exploitation possibilities. The results of such negotiations may materially affect the asset section of the Company's balance sheet. The Company currently uses state-of-the-art exploitation including Internet based technologies to expose its library catalog to the public. Full exploitation of the Company's investment in its film and television product inventory is dependent on the acquisition of additional capital. The Company amortizes the cost of each film or television program starting with its specific exploitation by the Company. The Company continues to occasionally promote inventory properties it considers potentially revenue producing.
Significant current and potential revenue may accrue to the Company from a number of contracts and arrangements where no tangible asset is involved.
The Company reviews the current pronouncements of the accounting, government and industry professionals. In that regard, it continually analyzes its accounting policies to ensure that it stays up-to-date in the presentation of its financial statements. The Company believes it is not materially affected by any current issues at this time.
LIQUIDITY AND CAPITAL RESOURCES
Cash increased $33,916 to $103,088 at December 31, 2005 from $69,172 at December 31, 2004. This increase was mainly due to $90,440 proceeds from sales of common stock, offset by $51,869 cash used in operating activities.
At December 31, 2005, the Company had lines of credit with three financial institutions totaling approximately $100,000 with available credit of approximately $89,338. The company also has an excellent Dun and Bradstreet rating resulting in additional substantial credit with suppliers and vendors, the use of which during film production, previously has exceeded $200,000.
In accordance with the Securities and Exchange Commission "Regulation D", and subject to Rule 144 restrictions, in 2004 the Company issued 10,000 shares of its common stock and no shares of its preferred stock for cash and 9,237,000 shares of its common stock and no shares of its preferred stock for product and services acquired by or provided to the Company. Subsequently, 1,500,000 of these shares were cancelled and the related product was not acquired. An additional 1,500,000 were issued relative to a proposed Acquisition Memorandum. In 2005 the Company issued 1,649,667 shares of its common stock and no shares of its preferred stock for cash and 1,058,733 shares of its common stock and no shares of its preferred stock for product and services acquired by or provided to the Company of which 687,733 shares were issued to officers and directors of the Company, partially to accommodate the Share Exchange (reverse acquisition) between the Company and Buckeye Ventures, Inc. Also, in 2005, a total of 275,000 sharesof Series Q and Series R preferred stock were converted to 2,750,000 shares of common stock.
Relative to the Share Exchange (reverse acquisition) and pursuant to agreements between World Wide and Buckeye which became effective as of March 1, 2006, a total of 72,114,848 restricted shares of the Company's common stock and 796,869 shares of the Company's preferred stock were issued to shareholders of Buckeye. Buckeye shareholders now beneficially own 79,792,001 restricted shares of the Company's common stock (81% of outstanding) and 796,869 shares of the Company's preferred stock (80% of outstanding).
Primarily due to the Share Exchange, the outstanding shares of common stock of the Company increased from 29,170,152 as of December 31, 2005 to 98,462,859 as of March 31, 2006. The outstanding shares of the Company's preferred stock increased from 201,217 to 998,086. The number of shares authorized to issue remains at 100,000,000 common stock and 1,000,000 preferred stock. In order to facilitate the Share Exchange, certain significant shareholders, in addition to their existing Rule 144 sale of stock restrictions, have signed agreements in accordance with all applicable law, further restricting the sale of their common stock shares for a total period of 24 months. The pertinent provisions of these agreements limit the shareholder to the sale of 5,000 shares per seven day period and no sales at less than a market price of $0.25. Under certain conditions, for example a merger or reorganization of the Company, 70% of the Board of Directors of the Company or 70% of the outstanding individual shareholders may waive these restrictions. The total of such restricted shares is 83,608,000 .
The Company's principal liquidity at the end of 2004 included cash of $69,172 and no accounts receivable, and at the end of 2005 included cash of $103,088 and no accounts receivable. The Company's liquidity position has remained sufficient to support on-going general administrative expense, pilot programs, strategic position, and the garnering of contracts, relationships and film and television product for addition to the Company's library, and the financing, packaging, development and production of two feature films and marketing and distribution of specialty television projects and product.
Although the Company during 2004 and 2005 earned revenues, unless the Company has an influx of additional capital, the Company will not be able to accomplish its planned objectives and revenue projections. Accordingly, the Company intends to resolve and provide for its liquidity needs, as well as provide for the needed capital resources to expand its operations, through future financing.
The Company expects its marketing operations to expand considerably over the next three years. The current inventory and contracts acquired by the Company are now beginning to be more vigorously exploited as the Company's focus moves from extensive accumulation of product and contracts in an ownership capacity to capital acquisition specifically for marketing purposes using recently developed technologies. Although the Company is conservative regarding its policy concerning the use of borrowed operating capital, it is now in a position to use its reputation and contacts to leverage operating funds profitably.
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22-Dec-2006
Annual Report
Item 7. Management's Discussion and Analysis or Plan of Operations.
Management's discussion and analysis of financial condition and results of operation should be read in conjunction with the consolidated financial statements and related notes.
RESULTS OF OPERATIONS
Year ended December 31, 2004 compared to year ended December 31, 2005
For the year ended December 31, 2004, net loss was $73,173. For the year ended December 31, 2005, net loss was $124,428.
Basic administrative expenses have remained constant over the past 3 years. Operating expenses have increased slightly due to increased marketing efforts regarding the motion picture 'Amy'. Losses in 2004 and 2005 are primarily attributable the issuance of common stock for services.
The operating revenue decrease of $17,675 (42%) from $42,254 in 2004 to $24,579 in 2005 resulted from less fee income received for production and distribution services. Non-operating income for 2005 was $962 due to interest income.
Operating costs and expenses decreased $535 (0%) from $149,677 in 2004 to $149,142 in 2005. The decrease in 2005 was due to a $15,500 reduction in the provision for doubtful accounts and a $19,158 reduction in stock based compensation offset partially by increases in other general and administrative expenses.
The Company has presented a consolidated balance sheet which includes four wholly-owned active subsidiaries: World Wide Inc., World Wide Productions Inc., World Wide Film & Television Institute, and World Wide Entertainment Inc. The Company's charter allows it to branch into diversified fields of enterprise provided management concludes there is a significant potential for profit. Since the primary business objective of the Company is to increase the value of its stockholders' equity, if and when opportunities arise to make profits for the corporation in a diversified industry, the Company shall investigate and if appropriate, pursue such opportunities. Until year end 2005, the motion picture and television segment of the Company's current or planned operations was the only segment material to the Company's financial statements or condition.
The Company's motion picture and television business participation strategy has primarily been to expend its resources and to set in place strategic relationships and contracts in preparation for the continued development, acquisitions, production and/or marketing/distribution of quality moderate budget feature length motion pictures, documentaries, docudramas and television productions. The strategy additionally includes the acquisition of screenplays and teleplays suitable for development/packaging and completed motion pictures and television projects for licensing and marketing/distribution opportunities for all applicable sales territories throughout the world. At such time that additional working capital is secured, it is the Motion Picture and Television Subsidiary's opinion that sufficient revenue will be generated by the existing film and television library and future distribution of potential new product, ultimately realizing its projected return on investment.
Previous arrangements for participation by the Company in various feature film and television productions effecting cost and revenue over the last 5 years include gross and net revenue participations in the following feature film and television productions ranging between 2-60% of worldwide revenue potential including all markets and all media that the particular production is distributed in.
(1) In 1997 and 1998, post production and distribution preparation of the documentary entitled THE OUTLAW TRAIL, 100 YEARS REVISITED, in association with Western Sunset Films, an 8-year old Los Angeles based documentary production company. (2) In 1998, development and production of the series television production entitled CLASSIC CAR, in association with SLIM, Inc., a 4-year old Los Angeles based television production company. (3) In 1999, the acquisition and preparation for marketing and distribution of the feature film entitled WHAT'S IN A COOKIE produced by production company Rocinante Productions Inc. and providing 50% of gross revenue participation to the Company in perpetuity. (4) In 2000, the acquisition and preparation for marketing and distribution of the feature films entitled MALEVOLENCE and THE SECOND COMING produced by production company Sig Larsen Productions Inc. and providing 50% of gross revenue participation to the Company in perpetuity. Other arrangements include preparation for Internet marketing and distribution of a feature length film acquired by the Company entitled CITIZEN SOLDIER originally produced by M&D Productions, a 7-year old Los Angeles based film production company, purchased by the Company in 1995 and providing a 60% gross revenue participation to the Company in perpetuity.
In 1998, all financing for the completion of the feature length production entitled SHATTERED ILLUSIONS featuring Morgan Fairchild, Bruce Weitz, Richard Lynch and Dan Monahan was secured and the production was completed. In 1999, the Company entered into an agreement with representative RGH/Lions Share Pictures Inc., a 15-year old, Los Angeles based distribution company for the purpose of conducting all foreign sales arrangements of the film.
In August, 1999, the Company entered into an agreement with Jaguar Entertainment Inc., a 12-year old Los Angeles based distribution company, for the purpose of marketing and distributing the feature length motion picture entitled NINTH STREET featuring Martin Sheen and Isaac Hayes to all domestic non-theatrical ancillary markets including home video, pay television, network television, satellite and DVD.
In August, 1999, the Company entered into an agreement with Rocinante Productions Inc., a 6 year old Los Angeles based production company, for the purpose of acquiring all of the right, title, and interest in the feature length motion picture entitled WHAT'S IN A COOKIE? The agreement also encompassed the acquisition by the Company of all foreign and domestic distribution rights to the film in perpetuity.
In August and September, 1999, the Company entered into an agreement with GTL Productions Inc., a 7-year old Omaha based production company for the purpose of acquiring the domestic and foreign marketing and distribution rights to a documentary series entitled ON THESE RUINS encompassing the titles of ANARTICA, THE GALAPOGOS ISLAND and EASTER ISLAND.
In June, 2000, the Company entered into an agreement for the development of an electronic commerce marketing arrangement with Pix Media Inc., a 2 year old Los Angeles based Internet company, for the purpose of providing a national and international e-commerce exploitation venue for various titles within the Company's completed film and television library.
Further, during fiscal year 2000 and in addition to continuing to exploit existing film and television projects such as the feature length films entitled "Shattered Illusions" and "Ninth Street", the Company negotiated and signed a North American Distribution contract on June 17, 2000, for the theatrical and ancillary exploitation of a full length feature film entitled "Amy". A domestic U.S. only, Distribution Agreement was executed with a sub-agent for First Motion Picture Inc. in Toronto, Ontario, Canada, on March 27, 2000, for the exploitation of ancillary rights to the full length feature film entitled "Jigsaw"; and on May 8, 2000, a domestic U.S. Distribution Agreement was executed with Praxis Entertainment Inc. in Dallas, Texas for the exploitation of ancillary rights to five full length feature films entitled "Flying Changes", "Winning Colors", "Shadow Dancer", "Trance", and "Corndog Man".
In February, 2001, the Company commenced theatrical marketing and distribution of the feature film entitled "Amy" with a Los Angeles premier of the film at the AMC Century City theaters, the MANN Westwood Cinema, the Loew's Cineplex, Beverly Center and throughout the Edwards theater circuit in Orange County, California. During the first and second quarters of 2001, the theatrical showings of the film continued with a rollout across the United States in cities including New York, Detroit, Seattle and Palm Springs.
In 2001, 2002, 2003, 2004 and 2005, certain other film and television participations of the Company included development and packaging arrangements, the Company's review and in certain cases, advice and counsel on screenplays and screenplay development scenarios for the subsequent possible packaging and production and distribution of a particular project. The most significant of these productions, their production companies, and percentage of future gross revenue allocated to the Company, were the feature length film entitled CORKLESBY offered by co-production company Northstar Entertainment Inc., a 4-year old Los Angeles based production company, (50%); and the feature length film entitled ALONG FOR THE RIDE offered by production company Wittman Productions Inc., a 4-year old Los Angeles based production company, (50%); the animated children's television show entitled "Skateboy" represented by U.S. syndicator Aristea Films.
GENERAL
Relative to the Company's desire for diversification and balanced cash flow, the Company and Buckeye Ventures Inc. ("Buckeye") and certain subsidiaries and shareholders of Buckeye have closed on the proposed Share Exchange (reverse acquisition) Agreement dated October 14, 2005, and reported in the Company's 8-K filed October 18, 2005. This transaction concluded on February 22, 2006, with pursuant agreements effective March 1, 2006, as reported in the Company's 8-K filed March 7, 2006. As a result, all of the shareholders of Buckeye exchanged their shares of Buckeye for more than eighty percent (80%) of the outstanding shares of the Company. Buckeye became a wholly owned subsidiary of the Company and the Buckeye shareholders became the controlling shareholders of the Company. The consistent revenues from the HVAC business with the occasional surge of revenue from a successful film projects should enhance the value of Company's shareholders investment.
Buckeye was formed by Alan Mintz and Larry Weinstein in June 2005 for the purpose of acquiring and operating businesses in the Heating Ventilation and Air Conditioning (HVAC) and plumbing industries. Buckeye's objective is to create a national brand for the consumer in their industry. Buckeye plans to acquire, integrate and grow these residential service companies using established systems and procedures to be carried out by an experienced management team. Buckeye believes that these low risk, high margin businesses will benefit from best practices and synergies of multiple locations nationwide with the potential to realize significant appreciation.
Buckeye acquired its first residential service location in Boston, which has approximately $4.7 million in revenues, and also has signed Letters of Intent to acquire additional companies and facilities. Negotiations are underway to acquire additional businesses in Phoenix, Tucson, Sacramento, San Francisco, San Diego, Las Vegas, Tampa and in Virginia with combined annual revenues in excess of $45 million. Buckeye has assembled a management team that includes experienced executives and operators in this industry, with years of combined experience on the management and operations side of large multi-location companies. The market for these residential HVAC and plumbing service businesses, while currently a very fragmented industry, is estimated to be a $50 billion dollar industry. The Company's plan is to seek to become a significant factor in the industry by providing many small and mid-sized local and regional operators with the opportunity to become part of a growing national conglomerate that is a public reporting company. Buckeye's management team has the expertise to consolidate its planned and future acquisitions and develop effective and cost efficient ways of working within its industry. Buckeye has devoted more than a year and a half developing the underlying model including the addition of key executives, securing early acquisitions and building strong industry relationships that puts Buckeye in a position for profitable growth.
The Company will continue its existing business as an independent subsidiary of Buckeye. The closing of the Share Exchange (reverse acquisition) follows the consummation of all due diligence procedures and shareholder approval, including written consent of shareholders representing 68.5% of outstanding shares. Regarding this transaction, the Company filed a 14F1 information statement on December 22, 2005, and a Definitive 14C information statement on January 27, 2006, which give further details of the plan of acquisition and were mailed to all shareholders of record on February 1, 2006. There were no dissenting shareholders.
In fiscal 2004 and 2005, the Company continued its involvement in a variety of film and television projects relative to development, acquisitions, packaging, production and marketing/distribution activities. The Company also continued to pursue potential diversified business opportunities that have cash flow possibilities such as the Share Exchange with Buckeye Ventures, Inc. Management believes that a film or television production's economic success is dependent upon several overlapping factors including general public appetite of a potential genre or performer at the time of release, domestic and international marketing philosophy, applicable usage of existing and new and emerging technology, advertising strategy with resultant penetration and the overall quality of the finished production. The Company's film and television productions may compete for sales with numerous independent and foreign productions as well as projects produced and distributed by a number of major domestic and foreign companies, many of which are units of conglomerate corporations with assets and resources substantially greater than the Company's.
Management of the Company believes that in recent years there has been an increase in competition in virtually all facets of the motion pictures and television business. Specifically, the motion picture industry competes with the internet and other forms of leisure-time entertainment. Since the Company may for certain undetermined markets and products distribute its product to all markets and media worldwide, it is not possible to determine how its business as a whole will be affected by these developments and accordingly, the resultant impact on the financial statements.
Subject to current market conditions, the Company has currently obtained or arranged for the investment capital to produce and/or distribute a minimum of four full length feature films or specialty television productions within the next two years. In addition to the development, financing, production, and distribution of motion picture and television product, the Company expects to continue to exploit a portion or portions of the Company's completed film and television library to a wide variety of distribution outlets including network television, cable television, satellite broadcast, pay-per-view, home video/DVD and internet exploitation sales. Specifically, live action motion pictures are generally licensed for broadcast on commercial television following limited or wide release distribution to theatrical outlets (theaters), home video/DVD and pay television. Licensing to commercial television is generally accomplished pursuant to agreements which allow a fixed number of telecasts over a prescribed period of time for a specified license fee. Television license fees vary widely, from several thousand to millions of dollars depending on the film or television production, the number of times it may be broadcast, whether it is licensed to a network or a local station and, with respect to local stations, whether the agreement provides for prime-time or off-time telecasting. Licensing to domestic and foreign television stations (syndication) is an important potential source of revenue for the Company, although in recent years the prices obtainable for individual film and television product in domestic syndication have declined as pay television licensing has grown. The growth of pay television and home video technologies, i.e. DVD (Digital Video Disk) and HDTV (High Definition television), has had an adverse affect on the fees obtainable from the licensing of film and television product to networks and local television stations, thereby potentially affecting the Company's ability to generate substantive revenue from this particular venue, however increasing revenue potential in other areas. Conversely, the Company may derive revenue from the marketing and sale, either directly or through licensees, of motion pictures and other filmed or videotaped product on videocassette or DVD for playback on a television set or monitor through the use of videocassette recorders ("VCRs"), DVD players and continued advancements of pay television (cable), satellite broadcast technologies,pay-per-view, and Internet applications domestically and internationally.
The Company currently holds the distribution rights to 314 motion picture and television titles. The revenue competition relative to existing or pending exploitation agreements of the Company's film and television product library and current and future production and distribution of projects is volatile due to the many technological and innovative changes in the industry and also changes regularly occurring in the international economy.
Because the commercial potential of individual motion pictures and television programming varies dramatically, and does not bear any relationship to their production, acquisition or marketing costs, it is impossible to predict or project a trend of the Company's income or loss. However, the likelihood of the Company reporting losses in the short term is increased by the industry's general method of accounting which requires the early recognition of the entire loss (through increased amortization) in instances where a motion picture or television program produced or acquired is not expected to recover the Company's investment. On the other hand, the profit from a successful film or television production is deferred and recognized over the entire period that revenues are generated by that motion picture or television program. This method of accounting may also result in significant fluctuations in reported income or loss, particularly on a quarterly basis, depending on the Company's release of product into the marketplace and overall domestic/international exploitation schedule and the performance of individual motion pictures or television programs.
The company's revenue is derived from a variety of sources. Currently the most substantial of these sources are its fees as packager and/or the managing production company of various film and television projects (including feature length motion pictures, documentaries, docudramas, and television productions), film and television marketing & distribution fees, fees from the licensing and/or rental of its completed film and television library and related entertainment industry consultation fees.
A significant portion of the Company's assets was purchased with the issuance of shares of its common and preferred stock. In the absence of a consistent market for the securities issued, the value of the film and television product purchased by the Company was agreed to by the sellers and the purchaser in arms length transactions in accordance with generally accepted accounting standards and additionally, internal evaluation and auditing procedures. The purchase and production costs of acquired and produced films over the past 24 years is $25,320,927. The films and television productions in the Company's library have uncertain future revenues that may be expected to grow or diminish along with all of the ancillary markets now and in the future that are available for exploitation. In some cases, individual films or television productions may be timeless and irreplaceable; in many cases their book value is nil having been amortized based on revenues received several years ago and the inability to estimate a market value or reasonable expected revenue. Certain of the inventory product without book value produce income and, in light of new and emerging technologies, the Company expects additional revenue from these sources.
The Company's film and television library consists of newly produced and historical film and videotaped product and rights thereto purchased as an investment and/or exploited by leasing and/or rental to a wide variety of domestic and international outlets. Many film and television libraries such as the Company's that were purchased for investment over a span of many years, have appreciated considerably in value as a direct result of new and emerging technologies, revived or newly created public appeal for a certain performer or genre, unique applications of particular production process (special digital effects) and standard and newly developed non-theatrical ancillary markets throughout the world. New technological advances such as DVD (Digital Video Disk), HDTV (High Definition Television), CD-ROM, DVD ROM, DVD Audio, Pay-Per-View and Internet applications have enhanced and are greatly expanding resale and leasing capability of film or television product no longer in the legal or physical possession of the original producers or distributors.
The film and television inventory of the Company is regularly reviewed and evaluated on a film-by-film basis by the Company's management. Forecasting any film or television project's future revenues is a difficult and uncertain art, even for major film distributors and television syndicators. The accounting principles and industry practices in these areas leave unusual discretion with the film and/or television company executives and often result in "unusual" changes in individual periods. The Company has periodically, from a cost basis of $20,451,441 in the year 1996, substantially revalued its inventory of film and television product, resulting in a net realizable value and net book value reduction in the stated value on the balance sheet. Although the Company has personnel on its Board of Directors and professional staff which are qualified to estimate the value of its film and television inventory for internal verification purposes, it retains the services of independent appraisers who regularly review the Company's film and television library, ensuring a greater measure of objectivity.
The Company is continually negotiating with various potential lessors of portions of the film and television library for the implementation of exploitation possibilities. The results of such negotiations may materially affect the asset section of the Company's balance sheet. The Company currently uses state-of-the-art exploitation including Internet based technologies to expose its library catalog to the public. Full exploitation of the Company's investment in its film and television product inventory is dependent on the acquisition of additional capital. The Company amortizes the cost of each film or television program starting with its specific exploitation by the Company. The Company continues to occasionally promote inventory properties it considers potentially revenue producing.
Significant current and potential revenue may accrue to the Company from a number of contracts and arrangements where no tangible asset is involved.
The Company reviews the current pronouncements of the accounting, government and industry professionals. In that regard, it continually analyzes its accounting policies to ensure that it stays up-to-date in the presentation of its financial statements. The Company believes it is not materially affected by any current issues at this time.
LIQUIDITY AND CAPITAL RESOURCES
Cash increased $33,916 to $103,088 at December 31, 2005 from $69,172 at December 31, 2004. This increase was mainly due to $90,440 proceeds from sales of common stock, offset by $51,869 cash used in operating activities.
At December 31, 2005, the Company had lines of credit with three financial institutions totaling approximately $100,000 with available credit of approximately $89,338. The company also has an excellent Dun and Bradstreet rating resulting in additional substantial credit with suppliers and vendors, the use of which during film production, previously has exceeded $200,000.
In accordance with the Securities and Exchange Commission "Regulation D", and subject to Rule 144 restrictions, in 2004 the Company issued 10,000 shares of its common stock and no shares of its preferred stock for cash and 9,237,000 shares of its common stock and no shares of its preferred stock for product and services acquired by or provided to the Company. Subsequently, 1,500,000 of these shares were cancelled and the related product was not acquired. An additional 1,500,000 were issued relative to a proposed Acquisition Memorandum. In 2005 the Company issued 1,649,667 shares of its common stock and no shares of its preferred stock for cash and 1,058,733 shares of its common stock and no shares of its preferred stock for product and services acquired by or provided to the Company of which 687,733 shares were issued to officers and directors of the Company, partially to accommodate the Share Exchange (reverse acquisition) between the Company and Buckeye Ventures, Inc. Also, in 2005, a total of 275,000 sharesof Series Q and Series R preferred stock were converted to 2,750,000 shares of common stock.
Relative to the Share Exchange (reverse acquisition) and pursuant to agreements between World Wide and Buckeye which became effective as of March 1, 2006, a total of 72,114,848 restricted shares of the Company's common stock and 796,869 shares of the Company's preferred stock were issued to shareholders of Buckeye. Buckeye shareholders now beneficially own 79,792,001 restricted shares of the Company's common stock (81% of outstanding) and 796,869 shares of the Company's preferred stock (80% of outstanding).
Primarily due to the Share Exchange, the outstanding shares of common stock of the Company increased from 29,170,152 as of December 31, 2005 to 98,462,859 as of March 31, 2006. The outstanding shares of the Company's preferred stock increased from 201,217 to 998,086. The number of shares authorized to issue remains at 100,000,000 common stock and 1,000,000 preferred stock. In order to facilitate the Share Exchange, certain significant shareholders, in addition to their existing Rule 144 sale of stock restrictions, have signed agreements in accordance with all applicable law, further restricting the sale of their common stock shares for a total period of 24 months. The pertinent provisions of these agreements limit the shareholder to the sale of 5,000 shares per seven day period and no sales at less than a market price of $0.25. Under certain conditions, for example a merger or reorganization of the Company, 70% of the Board of Directors of the Company or 70% of the outstanding individual shareholders may waive these restrictions. The total of such restricted shares is 83,608,000 .
The Company's principal liquidity at the end of 2004 included cash of $69,172 and no accounts receivable, and at the end of 2005 included cash of $103,088 and no accounts receivable. The Company's liquidity position has remained sufficient to support on-going general administrative expense, pilot programs, strategic position, and the garnering of contracts, relationships and film and television product for addition to the Company's library, and the financing, packaging, development and production of two feature films and marketing and distribution of specialty television projects and product.
Although the Company during 2004 and 2005 earned revenues, unless the Company has an influx of additional capital, the Company will not be able to accomplish its planned objectives and revenue projections. Accordingly, the Company intends to resolve and provide for its liquidity needs, as well as provide for the needed capital resources to expand its operations, through future financing.
The Company expects its marketing operations to expand considerably over the next three years. The current inventory and contracts acquired by the Company are now beginning to be more vigorously exploited as the Company's focus moves from extensive accumulation of product and contracts in an ownership capacity to capital acquisition specifically for marketing purposes using recently developed technologies. Although the Company is conservative regarding its policy concerning the use of borrowed operating capital, it is now in a position to use its reputation and contacts to leverage operating funds profitably.
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