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U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

[X]

Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended August 31, 2014

 

[ ]

Transition Report under Section 13 or 15(d) of the Exchange Act for the Transition Period from ________ to ___________

 

Commission File Number: 000-54211

 

FUTURA PICTURES, INC.

(Exact name of small business issuer as specified in its charter)

 

Delaware

(State or other jurisdiction of incorporation

or organization)

56-2495218

(I.R.S. Employer Identification No.)

 

17337 Ventura Boulevard, Suite 312

Encino, California    91316

Issuer's Telephone Number: (818) 784-0040

(Address and phone number of principal executive offices)

 

Indicate by a check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or 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 [_]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [_] No [_]

 

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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐

Accelerated filer ☐

  

  

Non-accelerated filer ☐

(Do not check if smaller reporting company)

Smaller reporting company ☒

 

Check whether the issuer is a “shell company” as defined in Rule 12b-2 of the Exchange Act Yes [_] No [X ]

 

As of October14, 2014 the issuer had 1,599,750 shares of common stock outstanding.

 

 
1

 

 

INDEX TO QUARTERLY REPORT

ON FORM 10-Q

 

 

PART I

FINANCIAL INFORMATION

Page

  

  

  

Item 1.

Financial Statements (Unaudited)

3

  

Condensed Balance Sheets August 31, 2014 and February 28, 2014

4

  

Condensed Statements of Operations For the Three and Six Months Ended August 31, 2014 and 2013

5

  

Condensed Statements of Stockholders’ Deficit For the Six Months Ended August 31, 2014

6

  

Condensed Statements of Cash Flows For the Six Months Ended August 31, 2014 and 2013

7

  

Notes to Condensed Financial Statements

8

  

  

  

Item 2.

Management’s Discussion and Analysis or Plan of Operation

12

  

  

  

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

15

  

  

  

Item 4

Controls and Procedures

15

  

  

  

PART II

OTHER INFORMATION

  

  

  

  

Item 1.

Legal Proceedings

17

  

  

  

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

17

  

  

  

Item 3.

Defaults upon Senior Securities

17

  

  

  

Item 4.

Mine Safety Disclosures

17

  

  

  

Item 5.

Other Information

17

  

  

  

Item 6.

Exhibits

17

  

  

  

Signatures

  

18

 

 
2

 

 

 FINANCIAL INFORMATION

 

 

 

ITEM 1.     FINANCIAL STATEMENTS (UNAUDITED)

 

 
3

 

 

FUTURA PICTURES, INC.

CONDENSED BALANCE SHEETS

(UNAUDITED)

 

   

August 31,

2014

   

February 28,

2014

 

ASSETS

               
                 

Cash

  $ 2,935     $ 6,855  

Accounts receivable, net

    2,968       4,867  
                 

TOTAL ASSETS

  $ 5,903     $ 11,722  
                 

LIABILITIES

               
                 

Accrued expenses

  $ 27,132     $ 25,616  

Unearned revenue

    1,300       1,300  

Accrued interest – related party

    55,789       47,575  

Loan payable – related party

    228,254       192,604  
                 

TOTAL LIABILITIES

    312,475       267,095  
                 

STOCKHOLDERS’ DEFICIT

               
                 

Common stock, par value $0.0001 per share, Authorized – 100,000,000 shares, Issued and outstanding – 1,599,750 shares

    160       160  

Additional paid-in capital

    437,604       421,804  

Accumulated deficit

    (744,336

)

    (677,337

)

                 

TOTAL STOCKHOLDERS’ DEFICIT

    (306,572

)

    (255,373

)

                 

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT

  $ 5,903     $ 11,722  

 

 

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

 

 
4

 

  

FUTURA PICTURES, INC.

CONDENSED STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED AUGUST 31,

(UNAUDITED)

 

   

For the Three

Months Ended

August 31, 2014

   

For the Three

Months Ended

August 31, 2013

   

For the Six

Months Ended

August 31, 2014

   

For the Six

Months Ended

August 31, 2013

 
                                 

REVENUE

  $ 10,200     $ 16,889     $ 22,427     $ 38,564  
                                 

COST OF REVENUE

    -       1,062       554       5,065  
                                 

GROSS PROFIT

    10,200       15,827       21,873       33,499  
                                 

OPERATING EXPENSES

                               

Selling, general and administrative

    51,026       36,344       82,158       61,547  
                                 

TOTAL OPERATING EXPENSES

    51,026       36,344       82,158       61,547  
                                 

LOSS FROM OPERATIONS

    (40,826 )     (20,517 )     (60,285 )     (28,048 )
                                 

OTHER (EXPENSE)

                               

Other income

    -       -       2,857       -  

Interest expense

    (4,652 )     (4,308 )     (8,771 )     (8,686 )
                                 

TOTAL OTHER (EXPENSE)

    (4,652 )     (4,308 )     (5,914 )     (8,686 )
                                 

LOSS BEFORE INCOME TAXES

    (45,478 )     (24,825 )     (66,199 )     (36,734 )
                                 

Income tax expense

    -       -       800       800  
                                 

NET LOSS

  $ (45,478 )   $ (24,825 )   $ (66,999 )   $ (37,534 )
                                 

NET LOSS PER COMMON SHARE

                               

Basic and diluted

  $ (0.03 )   $ (0.01 )   $ (0.04 )   $ (0.02 )
                                 

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING

                               

Basic and diluted

    1,599,750       1,599,750       1,599,750       1,599,750  

 

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

 

 
5

 

 

FUTURA PICTURES, INC.

CONDENSED STATEMENT OF STOCKHOLDERS’ DEFICIT

FOR THE SIX MONTHS ENDED AUGUST 31, 2014

(UNAUDITED)

 

   

Common Stock

   

Additional

Paid-in

   

Accumulated

   

Total Stockholders’

 
   

Shares

   

Amount

   

Capital

   

Deficit

   

Equity (Deficit)

 

Balance, March 1, 2014

    1,599,750     $ 160     $ 421,804     $ (677,337

)

  $ (255,373

)

                                         

Contributed services

    -       -       15,800       -       15,800  
                                         

Net loss for the six months ended August 31, 2014

    -       -       -       (66,999

)

    (66,999

)

                                         

Balance, August 31, 2014

    1,599,750     $ 160     $ 437,604     $ (744,336

)

  $ (306,572

)

 

 

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

 

 
6

 

 

 

 

FUTURA PICTURES, INC.

CONDENSED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED AUGUST 31,

(UNAUDITED)

 

   

2014

   

2013

 
                 

CASH FLOWS FROM OPERATING ACTIVITIES:

               

Net loss

  $ (66,999

)

  $ (37,534

)

Adjustments to reconcile net loss to net cash (used) provided by operating activities:

               

Contributed services

    15,800       31,600  

Bad debt expense

    1,928       -  

Changes in operating assets and liabilities:

               

Accounts receivable

    (29

)

    2,729  

Accrued expenses

    9,730       2,219  
                 

NET CASH USED BY OPERATING ACTIVITIES

    (39,570

)

    (986

)

                 

CASH FLOWS FROM FINANCING ACTIVITIES:

               

Proceeds from loan payable – related party

    37,500       9,250  

Repayment of loan payable – related party

    (1,850

)

    (8,000

)

                 

NET CASH PROVIDED BY FINANCING ACTIVITIES

    35,650       1,250  
                 

NET INCREASE (DECREASE) IN CASH

    (3,920

)

    264  
                 

CASH AT THE BEGINNING OF THE PERIOD

    6,855       5,972  
                 

CASH AT THE END OF THE PERIOD

  $ 2,935     $ 6,236  
                 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

               
                 

Interest paid

  $ 557     $ 1,255  

Taxes paid

  $ 800     $ 800  

 

 

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

 

 
7

 

 

 

 

FUTURA PICTURES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

AUGUST 31, 2014

(UNAUDITED)

 

NOTE 1                 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Organization and Nature of Business

 

Futura Pictures, Inc. (the “Company”) was incorporated under the laws of the state of Delaware on December 10, 2003. The Company was formed to engage in the production and the co-financing of films, documentaries and similar products produced solely for distribution directly to the domestic and international home video markets.

 

As a result of not being able to raise the necessary funds to either co-finance or produce any motion pictures, management changed the Company’s business plan to that of producing and distributing self-improvement/educational DVDs and workforce training programs.

 

Effective January 1, 2011, pursuant to an Asset Transfer, Assignment and Assumption Agreement, the Company acquired from Progressive Training, Inc. all of its assets and liabilities related to Progressive’s workforce training business.

 

Unclassified Balance Sheet

 

The Company has elected to present an unclassified condensed balance sheet.

 

The accompanying condensed financial statements have been prepared without audit and reflect all adjustments, consisting of normal recurring adjustments, which are, in the opinion of management, necessary for a fair statement of financial position and the results of operations for the interim periods.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts and timing of revenues and expenses, the reported amounts and classification of assets and liabilities, and the disclosure of contingent assets and liabilities. These estimates and assumptions are based on the Company's historical results as well as management's future expectations. The Company's actual results could vary materially from management's estimates and assumptions. Additionally, interim results may not be indicative of the Company’s results for future interim periods, or the Company’s annual results.  

 

Disclosure About Fair Value of Financial Instruments

 

The Company estimates that the fair value of all financial instruments at August 31, 2014 and 2013 do not differ materially from the aggregate carrying values of its financial instruments recorded in the accompanying condensed balance sheets. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. Considerable judgment is required in interpreting market data to develop the estimates of fair value, and accordingly, the estimates are not necessarily indicative of the amounts that the Company could realize in a current market exchange.

 

Concentrations and Credit Risk

 

Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of accounts receivable.

 

Four customers represented approximately 50% (10%, 13%, 13% and 14%) of total gross accounts receivable as of August 31, 2014.  Four customers represented approximately 63% (10%, 13%, 16% and 24%) of total gross accounts receivable as of February 28, 2014.  

 

 
8

 

 

Three customers in the six months ended August 31, 2014 represented approximately 40% (11%, 14% and 15%) of total revenues for that period.  One customer in the six months ended August 31, 2013 represented approximately 43% of total revenues for that period.

  

No other individual customer represented greater than 10% of total revenues in the six months ended August 31, 2014 or 2013. No other individual customer balance represented more than 10% of the total gross accounts receivable at August 31, 2014 or February 28, 2014.

 

Revenue Recognition

 

The Company sells videos produced by the Company, as well as videos produced by third parties. Sales are recognized upon shipment of videos to the customer or upon website download by the customer. The products sold may not be returned by the customer. Accordingly, the Company has made no provision for returns.

  

Accounts Receivable and Allowance for Doubtful Accounts

 

The Company establishes the allowance for doubtful accounts based on its assessment of the collectability of individual customer accounts. The adequacy of these allowances is regularly reviewed by considering internal factors such as historical experience, credit quality and age of the receivable balances as well as external factors such as economic and political conditions that may affect a customer's ability to pay, historical default rates, and long-term historical loss rates published by major third-party credit-rating agencies. The Company also considers the concentration of receivables outstanding with a particular customer in assessing the adequacy of its allowances. An allowance for doubtful accounts is provided for at the point it is probable that the receivable is uncollectible. An Allowance for Doubtful Accounts amounting to $8,880 and $6,952 is recorded as of August 31, 2014 and February 28, 2014, respectively. The Company does not require collateral to support its accounts receivables nor does it accrue interest thereon.

 

Production Costs

 

The Company expenses production costs as incurred when the costs are related to videos where there is no historical revenue to aid the Company in accurately forecasting revenues to be earned on the related videos.

 

Value of Stock Issued for Services

 

The Company periodically issues shares of its common stock in exchange for, or in settlement of, services. The Company’s management values the shares issued in such transactions at either the then market price of the Company’s common stock, as determined by the Board of Directors and after taking into consideration factors such as volume of shares issued or trading restrictions, or the value of the services rendered, whichever is more readily determinable.

 

Net Income (Loss) Per Share

 

Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Any anti-dilutive effects on net income (loss) per share are excluded. The Company has no potentially dilutive securities outstanding as of the six months ended August 31, 2014 and 2013.

 

Income Taxes

 

Provisions for income taxes are based on taxes payable or refundable for the current year and deferred taxes on temporary differences between the amount of taxable income and pretax financial income and between the tax bases of assets and liabilities and their reported amounts in the financial statements. Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.

 

In assessing the recoverability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon generation of future taxable income during the periods in which temporary differences such as loss carry-forwards and tax credits become deductible. Management considers projected future taxable income and tax planning strategies in making this assessment and ensuring that the deferred tax asset valuation allowance is adjusted as appropriate.

 

 
9

 

 

Recent Pronouncements 

 

In August 2014, the Financial Accounting Standards Board issued Accounting Standards Update ASU No. 2014-15, “Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” (“ASU 2014-15”), which requires management to evaluate, at each annual and interim reporting period, whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued and provide related disclosures.  ASU 2014-15 is effective for  annual periods  ending after December 15, 2016 and interim periods thereafter. Early application is permitted.  The adoption of ASU 2014-15 is not expected to have a material effect on our condensed financial statements or disclosures.

 

 

NOTE 2

SIGNIFICANT UNCERTAINTY REGARDING THE COMPANY’S ABILITY TO CONTINUE AS A GOING CONCERN AND MANAGEMENT PLANS

 

The Company has incurred significant losses over recent years and currently has a working capital deficit of approximately $307,000. The accompanying condensed financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

 

The Company's current financial resources are not considered adequate to fund its planned operations. This condition raises substantial doubt about its ability to continue as a going concern. The accompanying condensed financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

The Company's continuation as a going concern currently is dependent upon timely procuring significant external debt and/or equity financing to fund its immediate and near-term operations, and subsequently realizing operating cash flows from sales of its film products sufficient to sustain its longer-term operations and growth initiatives. During the next 12 months the Company will be seeking to produce, or acquire more “self-improvement/educational” DVDs, and to expand their library of workforce training programs.

  

 

NOTE 3                 UNEARNED REVENUE

  

On October 17, 2012, the Company signed an agreement with EBSCO Publishing, Inc., licensing them the distribution rights to four DVD’s owned by the Company in exchange for royalties on the net revenue collected. Under the terms of the agreement, the Company received a $1,200 advance on royalties. The entire amount is classified as part of Unearned Revenue on the accompanying condensed balance sheets as of August 31, 2014 and February 28, 2014 as there have not been any sales of the DVD reported to the Company.

 

 

NOTE 4                 RELATED PARTY TRANSACTION

 

Prepaid Loan Commitment

 

On February 16, 2005, the Company’s President, Buddy Young, accepted an unsecured promissory note from the Company and agreed to lend up to $300,000 to the Company to fund any cash shortfalls through March 31, 2015. The note bears interest at 8% and is due upon demand, no later than June 30, 2015. The outstanding balance was $228,254 and $192,604 as of August 31, 2014 and February 28, 2014 respectively.

 

Effective June 1, 2014, the Board of Directors agreed to a compensation amount of $12,500 per month for Mr. Young’s services; the compensation will be accrued each month and paid once funds become available. The Company has included these accruals for the current quarter in the Loan Payable – related party balance on the accompanying condensed balance sheet as of August 31, 2014.

  

NOTE 5                 STOCKHOLDERS’ DEFICIT

 

For the six months ended August 31, 2014 and 2013, the Company’s President devoted time to the operations of the Company. Beginning in fiscal year 2014, the President devoted more time than in the past to cover certain bookkeeping functions of the Company in order to save costs on outside consultants. Compensation expense totaling $15,800 and $31,600 has been recorded for the six months ended August 31, 2014 and 2013, respectively. The President has waived reimbursement of the entire amount during each of the six months ended August 31, 2014 and 2013, respectively, and accordingly the amounts have been recorded as a contribution to capital.

 

 
10

 

 

NOTE 6                 INCOME TAXES

  

Deferred Tax Components

 

Significant components of the Company’s deferred tax assets are as follows at August 31, 2014:

 

Net operating loss carry-forward

  $ 61,378  

Less valuation allowance

    (61,378

)

Net deferred tax assets, August 31, 2014

  $ -  

  

Summary of valuation allowance:

 

Balance March 1, 2014

 

$

50,631

 

Additions for the six months August 31, 2014

 

 

10,747

 

Balance, August 31, 2014

 

$

61,378

 

 

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.

 

Net Operating Loss

 

The Company has approximately $315,000 in net operating loss tax carry-forwards, which expire in various years beginning in 2024.

 

Examination

 

The Company’s tax returns are open to examination for the prior three years for Federal purposes, and four years for State purposes. The Company recognizes and measures uncertain tax positions using a more-likely-than-not approach. The Company had no material uncertain tax positions at August 31, 2014.

 

 
11

 

 

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

 

You should read this section together with our condensed financial statements and related notes thereto included elsewhere in this report. In addition to the historical information contained herein, this report contains forward-looking statements that are subject to risks and uncertainties. Forward-looking statements are not based on historical information but relate to future operations, strategies, financial results or other developments. Forward-looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. Certain statements contained in this Form 10, including, without limitation, statements containing the words "believe," "anticipate," "estimate," "expect," "are of the opinion that" and words of similar import, constitute "forward-looking statements." You should not place any undue reliance on these forward-looking statements.

  

You should be aware that our results from operations could materially be effected by a number of factors, which include, but are not limited to the following: economic and business conditions specific to the television and home video industries; competition from other producers of home video content; and television documentaries, our ability to control costs and expenses, access to capital, and our ability to meet contractual obligations. There may be other factors not mentioned above or included elsewhere in this report that may cause actual results to differ materially from any forward-looking information.

 

Going Concern

 

The accompanying condensed financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  The Company's current financial resources are not considered adequate to fund its planned operations.  This condition raises substantial doubt about its ability to continue as a going concern.  The accompanying condensed financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

The Company's continuation as a going concern currently is dependent upon timely procuring significant external debt and/or equity financing to fund its immediate and near-term operations, and subsequently realizing operating cash flows from sales of its film products sufficient to sustain its longer-term operations and growth initiatives, including its desired marketing and new potential film screenplays.

 

General

 

Effective January 1, 2011, pursuant to an Asset Transfer, Assignment and Assumption Agreement, we acquired from Progressive Training, Inc. all of its assets and liabilities related to Progressive’s workforce training business.  Among the assets we acquired in the transaction described above are fourteen training video programs including: Twelve Angry Men: Teams That Don't Quit.  The video is based on the classic film starring Henry Fonda and utilizes 12 minutes of clips from the film, The Cuban Missile Crisis: A Case Study in Decision Making and Its Consequences.  This video is based on the decision making process of President Kennedy and his Cabinet during the Cuban missile crisis, It’s a Wonderful Life: Leading Through Service, features film clips from the classic motion picture It’s a Wonderful Life, starring Jimmy Stewart, along with on-camera commentary by Dr. Wheatley, How Do You Put A Giraffe Into A Refrigerator?  an animated short that is used as a meeting opener to stimulate the thinking of the participants, Character in Action: The United States Coast Guard on Leadership. This video demonstrates the highest qualities of leadership, and how to apply them, using the example of the United States Coast Guard.  Additionally, we acquired the best-selling and critically acclaimed training video entitled Work Teams and The Wizard of Oz.

 

In addition to the assets listed above, we acquired a website, www.advancedknowledge.com for the online sale and marketing of our products. We market and sell all our training programs and self-improvement DVDs under the Company’s dba Advanced Knowledge.

 

 
12

 

 

Since the acquisition mentioned above we have worked to expand both our domestic and foreign distributor network. We have succeeded in establishing non-exclusive distribution agreements with a number of additional distributors to market and sell our product.  In many instances, we have mutual non-exclusive distribution agreements to market/distribute their products.

   

During the second quarter of fiscal 2013, we completed and commenced the distribution of one new workforce training DVD. The DVD is based on the resourceful teamwork during the successful Chilean mine rescue. In the beginning of the third quarter of fiscal 2013, we completed and commenced the distribution of a second DVD that teaches the extraordinary elements of teamwork employed by the Navy’s world renowned Blue Angel flight demonstration team. Due to limited cash resources we did not produce any additional videos in the fourth quarter of fiscal 2013. During the first quarter of fiscal 2014, we produced and commenced distribution of a four minute inspirational meeting opener entitled “Fall Seven Times, Stand Up Eight.” The video uses quotes, pictures and video clips of world renowned personalities including: Winston Churchill, Steve Jobs, Oprah Winfrey and Michael Jordan. During the third quarter of fiscal 2014, we produced another meeting opener entitled, Diana Nyad: the Power of Persistence. Using Ms. Nyad’s quotes and photos, this four minute meeting opener relates the incredible persistence in achieving her goal of swimming from Cuba to Florida. If funds are available we plan to produce another meeting opener during the third quarter of fiscal 2015.

 

 

CRITICAL ACCOUNTING POLICIES

 

Our discussion and analysis of our financial condition and results of operations are based upon our statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these condensed financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. In consultation with our Board of Directors, we have identified two accounting policies that we believe are key to an understanding of our condensed financial statements. These are important accounting policies that require management's most difficult, subjective judgment.

 

 

 

Revenue Recognition. The Company sells videos produced by the Company, as well as videos produced by third parties. Sales are recognized upon shipment of videos to the customer or upon website download by the customer. The products sold may not be returned by the customer. Accordingly, the Company has made no provision for returns.

 

Value of Stock Issued for Services. The Company periodically issues shares of its common stock in exchange for, or in settlement of, services. Management values the shares issued in such transactions at either the then market value of the Company’s common stock, as determined by the Board of Directors and after taking into consideration factors such as the volume of shares issued or trading restrictions, or the value of the services received, whichever is more readily determinable.

 

 

Three-Month Period Ended August 31, 2014 Compared to Three-Month Period Ended August 31, 2013

 

Revenues

 

Our revenues for the three months ended August 31, 2014 were $10,200; of the total $10,200 in revenues, none was derived from the sale of third party videos. Revenues during the three months ended August 31, 2013 were $16,889; of the total $16,889 in revenues, $4,451 was derived from the sale of third party videos. The decrease of $6,689 in revenue is mainly the result of less third-party video sales during the current quarter.

 

Our revenues have been negatively affected by the growing change in the way employee training is conducted. During the past 12 months many companies have switched their method of employee training from the utilization of DVDs in a classroom setting with a session facilitator, to training their employees using computer based training courses. A major reason for the shift away from classroom training is the saving of money by not having the expense of bringing out of town employees to a central location. Additionally, employees can be trained while at home, thus not interfering with the workday.

 

The cost of revenues during the three months ended August 31, 2014, was zero. The cost of revenues during the three months ended August 31, 2013, was $1,062. Cost of revenues is mainly comprised of the cost of videos purchased for resale from other producers. The decrease noted is due to no third party video sales during the current period as compared to the prior period.

 

General and Administrative

 

To date, our expenses have consisted mainly of selling, general and administrative expenses. The main components being compensation to the Company’s President, Buddy Young, and professional services.

 

 
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During the three months ended August 31, 2014, we incurred a total of $51,026 selling, general and administrative expenses, compared to a total of $36,344 during the three months ended August 31, 2013. This represents an increase of $14,682. This increase is mainly the result of $21,700 in additional compensation accrued for the services of the Company’s President Buddy Young in the current period as compared to the prior period.

 

Interest Expense

 

We incurred $4,652 and $4,308 in interest expense during the three months ended August 31, 2014 and 2013, respectively. Of this amount, $4,353 and $3,744 is related to the interest charges we incur on our loan from Buddy Young in each period, respectively. The remaining interest expense relates to a company credit card.

 

While we cannot guarantee the level of our expenses in the future, we anticipate them to increase as we develop or acquire new educational/self- improvement and training videos.

 

 

Six-Month Period Ended August 31, 2014 Compared to Six-Month Period Ended August 31, 2013

 

Revenues

 

Our revenues for the six months ended August 31, 2014 were $22,427; of the $22,427 of revenues a total of $2,413 was the result of the sale of third party videos. Revenues during the six months ended August 31, 2013, were $38,564; of the total $38,564 in revenues, a total of $14,134 was the result of third party video sales. The major reason for the decrease in revenues is due to the aging of our library, as well as the fact that there were less third party video sales in the current period as compared to the prior period.

 

Additionally, as stated above, our revenues have been negatively affected by the growing change in the way employee training is conducted. During the past 12 months many companies have switched their method of employee training from the utilization of DVDs in a classroom setting with a session facilitator, to training their employees using computer based training courses.

 

During the six month period ended August 31, 2014, our revenues were mainly derived from the sale of videos totaling $8,275, and $14,151 in royalty payments received from international and domestic sub-distributors.

  

The cost of revenues during the six months ended August 31, 2014, was $554. The cost of revenues during the six months ended August 31, 2013, was $5,065. Cost of revenues is mainly comprised of the cost of videos purchased for resale from other producers. The decrease noted is due to less third party video sales during the current period as compared to the prior period.

 

General and Administrative

 

To date, our expenses have consisted mainly of selling, general and administrative expenses. The main components being compensation to the Company’s President, Buddy Young, and professional services.

 

During the six months ended August 31, 2014, we incurred a total of $82,158 selling, general and administrative expenses, compared to a total of $61,547 during the six months ended August 31, 2013. This represents an increase of $20,611. This increase is mainly the result of an additional $21,700 in compensation accrued for the the services of the Company’s President during the six months ended August 31, 2014.

 

Interest Expense

 

We incurred $8,771 and $8,686 in interest expense during the six months ended August 31, 2014 and 2013, respectively. Of this amount, $8,214 and $7,431 is related to the interest charges we incur on our loan from Buddy Young in each period, respectively. The remaining interest expense relates to a company credit card and our line of credit.

 

Plan of Operation

 

During the past twelve months we continued to concentrate our efforts on maximizing the revenue potential of the training programs we acquired in January 2011, by expanding our domestic and international distributor network, and to market our most recent productions “The Power of Teamwork” and “Chilean Mine Rescue: The Unstoppable Team”. Produced during fiscal 2013, “The Power of Teamwork” is based on the extraordinary elements of teamwork employed by the Navy’s world renowned Blue Angel flight demonstration team. “Chilean Mine Rescue: The Unstoppable Team,” also produced during fiscal 2013, focuses on the resourceful teamwork during the successful Chilean mine rescue. During fiscal 2014, we produced and commenced distribution of 2 four minute inspirational meeting openers entitled “Fall Seven Times, Stand Up Eight,” and Diana Nyad: The Power of Persistence. “Fall Seven Times, Stand Up Eight,” uses quotes, pictures and video clips of world renowned personalities including: Winston Churchill, Steve Jobs, Oprah Winfrey and Michael Jordan. “Diana Nyad: The Power of Persistence,” demonstrates the incredible persistence in achieving her goal of swimming from Cuba to Florida.

 

 
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Additionally, we are also continuing to license our library of training videos to sub-distributors who utilize new digital distribution platforms such as Learning Management Systems. To date, we have licensed our library to EBSCO Publishing and Mastery Technologies. Although we anticipate receiving future royalty revenue from these license agreements, we cannot predict their revenue potential.

 

As mentioned above the training of employees by many organizations has dramatically changed from the traditional method of group training using DVDs in a classroom setting, to individual training using computer based training courses.

While we will continue to market our existing DVD library, as a result of the above referenced trend we plan to convert and adapt many of our programs to computer based learning courses. Additionally, our efforts will continue to consist of: (a) raising funds through a private placement sale of equity, to be used for the purpose of adding to our library of programs, (b) continue to improve the functionality and visibility of our website advancedknowledge.com, (c) as financial resources permit increase revenue by hiring additional commissioned sales personnel, (d) concentrate on the further licensing of our library and (e) develop and produce new product.

 

Employees

 

Due to our very limited financial resources, the Company’s President, Buddy Young, along with Mel Powell, our Director of acquisitions, work on a part-time basis. Additionally, we regularly utilize the services of independent firms to handle our accounting and certain administrative matters. If and when our capital resource permits, we will hire full-time professional and administrative employees.

 

Liquidity and Capital Resources

 

We had a cash balance of $2,935 on August 31, 2014. Other than funds received from the sale of videos, our only other known cash resource comes from an agreement with our President and majority shareholder to fund any shortfall in cash flow up to $300,000 at 8% interest through March 31, 2015. As of August 31, 2014 the balance owing on this agreement is $228,254. Payment of principal and interest is due on this loan on June 30, 2015.

 

We believe that revenue derived from the sale of the above mentioned programs and further borrowings from our President will be sufficient to satisfy our budgeted cash requirement through February 28, 2015.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Based on the nature of our current operations, we have not identified any issues of market risk at this time.

  

 

ITEM 4. CONTROLS AND PROCEDURES

 

The Company has adopted and maintains disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), such as this Form 10-Q, is collected, recorded, processed, summarized and reported within the time periods specified in the rules of the Securities and Exchange Commission.  The Company’s disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to management to allow timely decisions regarding required disclosure.  As required under Rule 13a-15 of the Exchange Act, the Company’s management, including the Chief Executive Officer and Principal Financial Officer, has conducted an evaluation of the effectiveness of disclosure controls and procedures as of the end of the period covered by this report.  

 

Based upon its current evaluation, the Company has concluded that the Company’s current disclosure controls and procedures are not effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO, as appropriate, to allow timely decisions regarding required disclosure.

 

Management’s Report on Internal Control over Financial Reporting

 

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15 of the Exchange Act.  The Company’s internal control over financial reporting is designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of published financial statements.  Management conducted an assessment of the Company’s internal control over financial reporting based on the framework and criteria established by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework. Based on the assessment, management concluded that, as of August 31, 2014 the Company’s internal control over financial reporting is not effective. The assessment identified a material weakness in the internal control over financial reporting resulting from the Company not having adequate resources to employ sufficient personnel to provide adequate segregation of duties and have personnel knowledgeable in accounting and reporting.

 

 
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The Company’s management, including its Chief Executive Officer and Principal Financial Officer, does not expect that the Company’s disclosure controls and procedures and its internal control processes will prevent all error and all fraud.  A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of error or fraud, if any, within the Company have been detected.  These inherent limitations include the realities that judgments in decision-making can be faulty, and that the breakdowns can occur because of simple error or mistake.  Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.  The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.  Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.  Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.  However, these inherent limitations are known features of the financial reporting process.  Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

 

 
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Changes in Internal Control

 

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the quarter ended August 31, 2014, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

This quarterly report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission, which permanently exempt smaller reporting companies. 

 

 

PART II

OTHER INFORMATION

 

 

ITEM 1.          LEGAL PROCEEDINGS    None.

 

ITEM 1A        RISK FACTORS

This Item is not applicable because we are a "smaller reporting company," as defined by applicable SEC regulation.

 

ITEM 2.          UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS None.

 

ITEM 3.          DEFAULTS UPON SENIOR SECURITIES     None.

 

ITEM 4.          MINE SAFETY DISCLOSURES Non Applicable

 

ITEM 5.          OTHER INFORMATION     None.

 

ITEM 6.          EXHIBITS

 

 

31.1

Certification of CEO Pursuant to Securities Exchange Act Rules 13a-14 and 15d-14, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

  

 

32.1

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

101.INS

XBRL Instance Document

 

 

101.SCH

XBRL Taxonomy Extension Schema Document

 

 

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

 

 

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

 

 

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

 

 

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

 

 
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SIGNATURES

 

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

FUTURA PICTURES, INC.

 

 

(Registrant)

 

 

 

 

 

 

 

 Dated: October 15, 2014

/s/ Buddy Young

 

 

Buddy Young, President and Chief

 

 

Executive Officer

 

 

 

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