UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2002
or
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to ______________________
Commission File Number 0-13245
NEW YORK FILM WORKS INC.
(Exact name of registrant as specified in its charter)
New York | 13-3051895 |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
928 Broadway, New York, New York | 10010 |
(Address of principal executive offices) | (Zip Code) |
(212) 475-5700
(Registrant's telephone number, including area code)
Check whether the Registrant (1) has filed all reports required to be filed 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 | |
As of December 30, 2003, the Registrant had 103,500,000 outstanding shares of common stock.
PART I. FINANCIAL INFORMATION
Item 1.Financial Statements.
NEW YORK FILM WORKS, INC.
BALANCE SHEET
APRIL 30, 2002
(UNAUDITED)
ASSETS | |
Current assets | |
Cash and cash equivalents | $ 17,854 |
Accounts receivable, net of allowance | |
for doubtful accounts of $7,000 | 90,263 |
Inventory | 13,068 |
Prepaid expenses | 7,210 |
Total current assets | 128,395 |
Property and equipment, net of accumulated depreciation of $2,387,307 | 154,847 |
Security deposits | 32,058 |
| $ 315,300 |
LIABILITIES AND STOCKHOLDERS’ EQUITY | |
Current liabilities | |
Accounts payable and accrued expenses | $ 74,015 |
Current portion of capital lease obligation | 30,788 |
Loan payable | 15,000 |
Total current liabilities | 119,803 |
Capital lease obligation, net of current portion | 66,983 |
Total liabilities | 186,786 |
Stockholders’ equity | |
Common stock, $.001 par value; 120,000,000 authorized; | |
91,000,000 shares issued and outstanding | 91,000 |
Additional paid-in capital | 3,271,808 |
Accumulated deficit | (3,234,294) |
Total stockholders’ equity | 128,514 |
$ 315,300 |
See accompanying notes to the financial statements.
NEW YORK FILM WORKS, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
Three Months ended | Six Months ended | |||||||
April 30, 2002 | April 30, 2001 | April 30, 2002 | April 30, 2001 | |||||
Net sales | $ 244,610 | $ 302,443 | $ 508,340 | $ 647,486 | ||||
Costs of sales | 168,770 | 198,406 | 378,288 | 400,792 | ||||
Gross profit | 75,840 | 104,037 | 130,052 | 246,694 | ||||
Operating expenses: | ||||||||
Selling expenses | 29,891 | 28,944 | 63,434 | 68,793 | ||||
General and administrative expenses | 87,436 | 97,119 | 172,782 | 212,801 | ||||
Total operating expenses | 117,327 | 126,063 | 236,216 | 281,594 | ||||
Net loss from operations | (41,487) | (22,026) | (106,164) | (34,900) | ||||
Interest expense | 3,087 | 3,302 | 4,696 | 7,383 | ||||
Net loss | $ (44,574) | $ (25,328) | $ (110,860) | $ (42,283) | ||||
Loss per share | $ (0.000) | $ (0.000) | $ (0.001) | $ (0.001) | ||||
Weighted average, number of shares | 91,000,000 | 83,500,000 | 91,000,000 | 83,500,000 | ||||
See accompanying notes to the financial statements.
NEW YORK FILM WORKS, INC.
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED APRIL 30, 2002 AND 2001
(UNAUDITED)
2002 | 2001 | ||||
| |||||
Cash flows from operating activities: | |||||
Net loss | $ (110,860) | $ (42,283) | |||
Adjustments to reconcile net loss to net | |||||
cash used in operating activities: | |||||
Depreciation | 13,837 | 19,674 | |||
Increase (decrease) in cash flows from | |||||
operating activities resulting from changes in: | |||||
Accounts receivable | 10,790 | 10,574 | |||
Inventory | (180) | (958) | |||
Prepaid expenses | (1,810) | 1,533 | |||
Security deposits | - | 140 | |||
Accounts payable and accrued expenses | 9,557 | (5,881) | |||
Net cash used in operating activities | (78,666) | (17,201) | |||
Cash flows from investing activities: | |||||
Purchases of fixed assets | (535) | (13,502) | |||
Cash flows from financing activities: | |||||
Payments reducing capital lease obligations | (13,893) | (13,065) | |||
Net decrease in cash | (93,094) | (43,768) | |||
Cash -- beginning of the period | 110,948 | 197,326 | |||
Cash --- end of the period | $ 17,854 | $ 153,558 | |||
Supplemental disclosures of cash flow information: | |||||
Interest paid | $ 4,696 | $ 7,383 | |||
See accompanying notes to the financial statements.
NEW YORK FILM WORKS, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
SIX MONTHS ENDED APRIL 30, 2002
(UNAUDITED)
Common | Additional | ||||
Common | Stock | Paid-In | Accumulated | ||
Shares | Amount | Capital | Deficit | Total | |
November 1, 2001 | 91,000,000 | $ 91,000 | $ 3,271,808 | $ (3,123,434) | $ 239,374 |
Net loss | - | - | - | (110,860) | (110,860) |
April 30, 2002 | 91,000,000 | $ 91,000 | $ (3,271,808) | $ (3,234,294) | $ 128,514 |
See accompanying notes to the financial statements.
NEW YORK FILM WORKS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 – NATURE OF BUSINESS AND BASIS OF PRESENTATION
The Company provides a variety of film processing, film finishing and image conversion and related services to professional photographers, corporate and institutional clients and to the amateur photography market throughout the New York Metropolitan area. In addition, the Company operates a full service dark-room/laboratory facilities and retail photography services.
The accompanying condensed financial statements have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. However, the Company believes the disclosures are adequate to make the information presented not misleading. The condensed financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s annual report on Form 10-KSB for the year ending October 31, 2002 filed by the Company with the Securities and Exchange Commission on October 20, 2003.
The accompanying condensed financial statements reflect, in the opinion of management, all adjustments (consisting primarily only of normal recurring adjustments) necessary to present fairly the results for the interim periods. The results of operations for the three and six months ended April 30, 2002 are not necessarily indicative of results to be expected for the entire year ending October 31, 2002.
NOTE 2 – RECENTLY ISSUED ACCOUNTING STANDARDS
In January 2003, the FASB issued FASB Interpretation ("FIN") No. 46, Consolidation of Variable Interest Entities, which requires variable interest entities (commonly referred to as SPEs) to be consolidated by the primary beneficiary of the entity if certain criteria are met. FIN No. 46 is effective immediately for all new variable interest entities created or acquired after January 31, 2003. The adoption of this statement does not impact the Company's historical or present financial statements, as the Company has not created or acquired any variable interest entities, nor does it expect to in the future.
In December 2002, the FASB issued SFAS No. 148 Accounting for Stock-Based Compensation, Transition, and Disclosure. SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. SFAS No. 148 also required that disclosures of the pro forma effect of using the fair value method of accounting for stock-based employee compensation be displayed more prominently and in a tabular format. Additionally, SFAS No. 148 required disclosure of the pro forma effect in interim financial statements. The transition and annual disclosure requirements of SFAS No. 148 are effective for fiscal years ended after December 15, 2002. The interim disclosure requirements of SFAS No. 148 are effective for interim periods beginning after December 15, 2002. The adoption of the provisions of SFAS No. 148 did not have an impact on the Company's financial statements. The Company will modify its disclosures in its quarterly reports, as provided for in the new standard.
In November 2002, the EITF reached a consensus on EITF No. 00-21, Revenue Arrangements with Multiple Deliverables. EITF No. 00-21 provides guidance on how to account for arrangements that involve the delivery or performance of multiple products, services and / or rights to use assets. The provisions of EITF No. 00-21 will apply to revenue arrangements entered into in fiscal periods beginning after June 15, 2003. The Company believes that its current accounting is consistent with the provisions of EITF 00-21 and therefore does not expect that the application of the provisions of EITF 00-21 will have a material impact on the Company's financial statements.
In November 2002, the EITF reached a consensus on EITF No. 02-16, Accounting for Consideration Received from a Vendor by a Customer. EITF No. 02-16 provides guidance as to how customers should account for cash consideration received from a vendor. EITF No. 02-16 presumes that cash received from a vendor represents a reduction of the prices of the vendor's products or services, unless the cash received represents a payment for assets or services provided to the vendor or a reimbursement of costs incurred by the customer to sell the vendor's products. The provisions of EITF No. 02-16 will apply to all agreements entered into or modified after December 31, 2002. Management does not expect the provisions of EITF No. 02-16 to have a material impact on the Company's financial statements.
In November 2002, the FASB issued FIN No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN No. 45 requires that a liability be recorded in the guarantor's balance sheet upon issuance of a guarantee. In addition, FIN No. 45 requires disclosures about the guarantees that an entity has issued, including a reconciliation of changes in the entity's product warranty liabilities. The initial recognition and initial measurement provisions of FIN No. 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002, irrespective of the guarantor's fiscal year-end. The disclosure requirements of FIN No. 45 are effective for financial statements of interim or annual periods ending after December 15, 2002. The Company does not guarantee the indebtedn ess of others, therefore, there will not be any impact on the Company's financial statements and there was no need for the Company to modify its disclosures herein as required.
In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associates with Exit or Disposal Activities. SFAS No. 146 nullifies the accounting for restructuring costs provided in EITF Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit and Activity (including Certain Costs Incurred in a Restructuring). SFAS No. 146 requires that a liability associated with an exit or disposal activity be recognized and measured at fair value only when incurred. In addition, onetime termination benefits should be recognized over the period employees will render service, if the service period required is beyond a minimum retention period. SFAS No. 146 is effective for exit or disposal activities initiated after December 31, 2002. Management does not expect that the application of the provi sions of SFAS No. 146 will have a material impact on the Company’s financial statements.
In January 2002, the Financial Accounting Standards Board’s (“FASB”) Emerging Issues Task Force (“EITF”) reached a consensus on EITF No. 01-14, Income Statement Characterization of Reimbursements Received for “Out-of-Pocket” Expense. EITF No. 01-14 required that reimbursements received for out-of-pocket expenses be classified as revenue on the income statement. This change has no material impact on the Company’s historical and present financial statements.
In November 2001, the FASB's EITF reached a consensus on EITF Issue No. 01-09, Accounting for Consideration Given by a Vendor to a Customer or a Reseller of the Vendor’s Products, which is which is a codification of EITF Nos. 00-14, 00-22 and 00-25. This issue presumes that consideration from a vendor to a customer or reseller of the vendor's products to be a reduction in the selling prices of the vendor's product and, therefore, should be characterized as a reduction of revenue when recognized in the vendor's income statement and could lead to negative revenue under certain circumstances. Revenue reduction is required unless consideration related to a separate identifiable benefit and the benefit's fair value can be established. This issue is to be applied retroactively in the first fiscal quarter beginning after December 15, 2001. The Company adopted this statement o n February 1, 2002 with no material impact on its financial statements.
In October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment of Disposal of Long-Lived Assets. SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets and discontinued operations. The Company adopted this statement on May 1, 2002 with no material impact on its financial statements.
In July 2001, the FASB issued SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. Under these new standards, all acquisitions subsequent to June 30, 2001 must be accounted for under the purchase method of accounting, and purchased goodwill is no longer amortized over its useful life. Rather, goodwill will be subject to a periodic impairment test based upon its fair value. In fiscal 2002 the Company adopted this statement, which did not impact the results of operations, financial position or cash flows.
In July 2001, the FASB issued SFAS No. 143, Accounting for Assets Retirement Obligations. SFAS No. 143 established accounting standards for recognition and measurement of a liability for the cost of asset retirement obligations. Under SFAS No. 143, the costs of retiring an asset will be recorded as a liability when the retirement obligation arises, and will be amortized to expense over the life of the assets. The Company adopted this statement on November 1, 2001 and it did not have a material impact on its financial statements.
NOTE 3 – SUBSEQUENT EVENTS
In April 2003, the Company borrowed $115,000 from a Gerald Cohen, a principal shareholder. The note is due on demand and bears interest at 7.5% per annum. In addition during the period from August 2003 through October 10, 2003 Mr. Cohen advanced the Company an additional $115,000. These advances are short-term notes with interest at 7% per annum.
In June 2003, the Board of Directors of the Company approved a “Share Exchange Agreement” with the shareholders of Bladon Studios Limited (“Bladon”), a company organized under the laws of England and Wales, engaged in providing specialty facilities for natural history film and television makers and website design. Pursuant to SFAS 141, the Share Exchange Agreement will be accounted for as a “reverse acquisition,” resulting in the Company being accounted for as the “acquired company.”
As part of this agreement the Company issued warrants to two Bladon shareholders to purchase for $100 a total of 940,909,091 shares of the Company’s common stock, which will represent 89% of the Company’s issued and outstanding common stock. These warrants are exercisable when the Company’s Certificate of Incorporation is amended to authorize sufficient shares of its common stock to allow such exercise.
The warrants will terminate and the purchase of Bladon will be rescinded in the event that the amendment to the Certificate of Incorporation is not completed by June 30, 2004.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Results of Operations - Three Months and Six Months ended April 30, 2001 and 2002
Total Sales include the selling price of the products and services sold by us. Total Sales for the three months ended April 30, 2002 were $244,610 as compared to sales of $302,443 for the corresponding period ended April 30, 2001. The demand for our products and services decreased by $57,833. Total Sales for the six month period ended April 30, 2002 decreased by $139,146 from the corresponding period ended April 30, 2001; Total Sales for the current six month period were $508,340 as compared to Total Sales of $647,486 for the six months ended April 30, 2001. Nearly all of our sales were generated by sales to professional photographers, film dealers and photographic editors of magazines and periodicals. No single customer accounted for 10% or more of our sales revenues. Sales were lower due to the general poor conditions in the photographic marketplace.
The Cost of Sales decreased to $168,770 for the three months ended April 30, 2002 as compared to the reported Cost of Sales of $198,406 for the corresponding period ended April 30, 2001. During the six months ended April 30, 2002, Cost of Sales decreased by approximately $22,504 from the corresponding period ended April 30, 2001; Cost of Sales for the current six month period were $378,288 as compared to Cost of Sales of $400,792 for the six months ending April 30, 2001. Gross profit as a percentage of sales decreased from 34.4% to 31% for the three month period and from 38.1% to 25.6% for the six month period.
Our General and Administrative Expenses consist of payroll, executive and administrative personnel expenses and other general corporate related expenses. Our General and Administrative Expenses decreased to $87,436 for the three months ended April 30, 2002 from $97,119 the three months ended April 30, 2001. General and Administrative Expenses for the six months ended April 30, 2002 decreased to $172,782 from $212,801 for the six months ended April 30, 2001. Our Selling and Shipping Expenses, increased from $28,944 for the three months ended April 30, 2001 to $29,891 for the three months ended April 30, 2002. Our Selling and Shipping Expenses for the six months ended April 30, 2002 were $63,434 as compared to $68,793 for the corresponding period ended April 30, 2001.
Liquidity and Capital Resources
At April 30, 2002 our Company's Cash and Cash Equivalents were $17,854. Our Company had positive working capital of $8,592 ended April 30, 2002. The Company has been funded by a loan of $15,000 from a stockholder. The Company’s cash has been reduced from $110,948 to $17,854. Any projection of future cash needs is subject to substantial uncertainty. We finance our operations primarily with existing capital and funds generated from operations.
Item 3. Controls and Procedures
Based upon an evaluation performed within 90 days of this report, our CEO and CFO have concluded that our disclosure controls and procedures are effective to ensure that material information relating to our company is made known to management, including the CEO and CFO, particularly during the period when our periodic reports are being prepared, and that our internal controls are effective to provide reasonable assurance that our financial statements are fairly presented in conformity with generally accepted accounting principles.
In accord with SEC requirements, the CEO and CFO note that, since the date of their evaluations to the date of this Quarterly Report, there have been no significant changes in internal controls or in other factors that could significantly affect internal controls, including any corrective actions with regard to significant deficiencies and material weaknesses.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
31.1 Chief Executive Officer - Rule 13a-14(a) Certification
31.2 Chief Executive Officer - Rule 13a-14(a) Certification
32.1 Chief Executive Officer - Sarbanes-Oxley Act Section 906 Certification
32.2 Chief Financial Officer - Sarbanes-Oxley Act Section 906 Certification
(b) We have not filed any reports on Form 8-K during the last quarter of the period covered by this report.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
NEW YORK FILM WORKS INC.
Date: December 31, 2003 | /s/ Roger Bailey |
Roger Bailey | |
Chief Executive Officer | |
|
/s/ Barrington J. Fludgate |
| Barrington J. Fludgate |
| Chief Financial Officer |
