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1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM 10-KSB
Annual report
THE SECURITIES ACT OF 1933
____________________
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from __________ to
__________
Silver Screen Studios, Inc.
(Exact Name of Registrant as Specified in Its Charter)
GEORGIA 20-0097368
(State or Other Jurisdiction of (I.R.S. Employer
Commission
Incorporation or Organization) Identification
No.)
101 Marietta St., Suite 1070
Atlanta, GA 30303
(Address of Principal Executive Offices, Including Zip Code)
____________________
Thomas Ware, Esq.
Rosenfeld, Goldman & Ware, Inc.
101 Marietta St., Suite 1070
Atlanta, GA 30303
404-522-1202
(Name, Address, and Telephone Number of Agent for Service)
Securities registered under Section 12(b) of the
Exchange
Act: NONE
Securities registered under Section 12(g) of the
Exchange
Act: COMMON
Check whether the issuer: (1) filed all reports
required to be filed by Sections 13 or 15(d) of the
Exchange Act during the past 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 [ ]
Check if there is no disclosure of delinquent
filers in response to Item 405 of Regulation S-B
contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal
year: $0.0 for the year ended December 31, 2003.
As of December 31, 2003, the aggregate market value
of the common stock of the issuer held by non-
affiliates, based on the average bid and asked price of
the common stock as quoted on the OTC Bulletin Board,
was $5,024,247. As of December 31, 2003, 106,000,000
shares of common stock of the issuer were outstanding.
Transitional Small Business Disclosure Format:
Yes [ ]
No [X]
PART I
ITEM 1
Page
Description of Business
3
Description of Property
22
Legal Proceedings
22
Submission of Matters to a Vote of Security Holders
22
Market for Common Equity and Related Stockholders Matters
22
Management's Discussion and Analysis or Plan of Operation
23
Financial Statements
27
Changes In and Disagreements with Accountants
27
Controls and Procedures
27
Directors, Executive Officers, Compliance with Section
16(a) of the Exchange Act.
28
Executive Compensation
29
Security Ownership of Certain Beneficial owners and
Management and Related Stockholders Matters
30
Certain Relationships and Related Transactions
30
Exhibits, Financial Statements and Reports on Form 8-K
30
Principal Accountant Fees and Services
31
CAUTIONARY STATEMENT FOR FORWARD-LOOKING STATEMENTS
This ANNUAL Report on Form 10-KSB includes forward-looking
statements within the meaning of Section 27A of the Securities
Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of
1934, as amended. We
have based these forward-looking statements on our current
expectations and
projections about future events. These forward-looking
statements are subject to
known and unknown risks, uncertainties and assumptions about us
that may cause
our actual results, levels of activity, performance or
achievements to be
materially different from any future results, levels of
activity, performance or
achievements expressed or implied by such forward-looking
statements. In some
cases, you can identify forward-looking statements by
terminology such as "may,"
"will," "should," "could," "would," "expect," "plan,"
anticipate," believe,"
estimate," continue," or the negative of such terms or other
similar
expressions. Factors that might cause or contribute to such a
discrepancy
include, but are not limited to, those in our other Securities
and Exchange
Commission filings, including our Quarterly Report on Form 10-
QSB filed on November 21, 2003. The following discussion should
be read in conjunction with our Consolidated Financial
Statements and related Notes thereto included elsewhere in
this report.
PART I
ITEM 1 DESCRIPTION OF BUSINESS
OVERVIEW:
Organization
Silver Screen Studios, Inc. ("the Company") was organized to
engage in the business of, development, production,
financing and distribution of entertainment related
products. The Company was incorporated in the State of
Georgia in May of 2003. The company is the result of a
reverse holding company merger formed by Group Management
and SSSG Acquisition Corp. on August 23, 2003. Silver
Screen Studios, Inc. trades on the Over the Counter Bulletin
Board under the symbol SSSU. Silver Screen Studios, Inc.
began operations on August 23, 2003 in Atlanta, GA. Group
Management Corp. was undergoing a restructuring of its
operations and management concluded due to the business
conditions of Group Management Corp. a merger was in the
best interest of the shareholders of Group Management Corp.
General
We are a multimedia entertainment company with a focus on
developing entertainment content. We develop, produce and
distribute a broad range of music, motion picture and other
filmed entertainment content through our following operating
subsidiaries:
In addition, we intend to establish a music publishing
division, a television production division and a
producer/artist management division. We have identified a
market opportunity in the entertainment industry resulting
from the convergence of music and film in the world's fastest
growing consumer entertainment product, the digital video
disc ("DVD"). The percentage of DVD unit sales has increased
in market share for entertainment content delivery to
consumers faster than any format in entertainment history. The
DVD has received overwhelming market acceptance and response.
The music industry has used the DVD to enhance the sale of its
products. Many music fans have responded favorably to concert
DVD's and music video DVD's of their favorite artists. It is
the vision of our management team, our Chief Executive Officer,
and industry consultants to focus on the DVD format as a means
to identify and enable creative artists to combine their visual
and audio talents in a consumer product that will protect the
proprietary nature of the content. Our mission is to become an
independent multimedia entertainment company combining state-of-
the-art technologies with creative product that meets the
growing demand of today's market.
As the demand for cost-effective entertainment product,
including digitally recorded music, television programming and
film, continues to increase, we believe that more of the major
entertainment companies, including radio, television, cable,
film and Internet service providers, will be turning towards
independent entertainment companies and production facilities
to deliver product and programming to improve their
profitability and create market share.
The Film Division
Green Light Productions, Inc. operates our film
division. Green Light acts as our in-house production arm that
produces, distributes and markets feature-length DVD films and
movies, taking projects from initial creative development
through principal photography, post-production, distribution
and ancillary sales. We believe that fans of Hip-Hop and Urban
Music are active consumers throughout the world, purchasing
CDs, DVDs, records, clothes and concert tickets. In addition,
members of the Hip-Hop audience are a highly coveted
demographic group targeted by advertising retailers due to
their age and spending habits. We believe that outside of
traditional Hollywood productions, there is a shortage of
"Lifestyle Specific" DVD products for the Hip-Hop audience.
Green Light Productions, Inc. will produce low budget
films with plots and marquee name music artists and that are
relevant to the mainstream youth culture, particularly the Hip-
Hop and Urban Music audience. Kadalak Entertainment Group,
Inc., our music arm will produce soundtracks featuring the
aforementioned artists to be sold as a CD packaged with a DVD
for retail sale to consumers.
Pursuant to our international business development
strategy, we plan to form joint ventures for co-production of
entertainment projects on a territory-by-territory basis. On
occasion we will also obtain the rights to distribute and
exploit entertainment projects in US and foreign markets as
well as co-venture projects for release and development in
various media formats.
Film Production
---------------
Our goal is to produce quality films in the low budget
range with total costs of $20,000 to $1,000,000 per film. Our
current strategic plan calls for the production or co-
production of five to ten films annually. Our ability to
execute this plan is dependent upon our ability to raise
additional financing necessary to fund such productions.
Currently, we are reviewing film projects for development and
production and upon obtaining additional working capital, we
will begin the production of new films. We did not produce
any films in Fiscal 2003.
Distribution
------------
We formed our on internal distribution arm via Silver Screen
Distributions, Inc. to take advantage of the synergies of the
vertical integration of our business model. Silver Screen
Distribution will distribute the production of our internal
products as well as the products of third parties.
The Murder by Deception project will be given a minimal
theatrical release in approximately two to three theaters in
several major markets in the United States to create awareness
about a particular film. The end product at retail will be a
DVD/CD package that will have a retail price of approximately
$19.99 to $34.99 with an approximate $16 to $20 wholesale
price. Our sales goal is 100,000 to 500,000 units worldwide
for each project. We intend to distribute to the rental market
using direct distribution and revenue share output arrangements
with Blockbuster and other leading rental retailers.
In addition, when the opportunity arises we intend to
distribute or sell directly to mass merchandisers, such as Wal-
Mart Stores Inc., Costco Wholesale Corporation, Target
Corporation, Best Buy Co. Inc., and others who buy large
volumes of videos and DVDs to sell directly to the consumer.
Currently there have been very few products released in the
DVD/CD combination package. It is very uncommon for major and
independent distribution companies in film and music to come
together on one product for distribution. Historically, film
companies have been reluctant to give DVDs to music companies
and music companies have been reluctant to give CDs to film
companies for distribution. Our goal is to effectively
pioneer this format and become a leader in this marketplace.
Each film project will have the potential to allow us to
capitalize on every potential revenue stream across the board
for each of our divisions in terms of film, studio,
publishing and management operations.
Pay and Free Television Distribution
------------------------------------
We intend to license our own productions and productions
acquired from third parties to the domestic and international
marketplace on a project basis through Sony or independent
distributors on a territory-by-territory basis.
The Record Division
Kadalak Entertainment Group, Inc. operates our record
division. We believe that the next five years will offer
important opportunities for the organization and growth of
viable, newly created record companies. We believe that such
companies will be more competitive because they have the
ability to be flexible, responsive and are not constrained by
the typical large company bureaucracy.
A popular music record company depends on its ability to
sign and retain artists who will appeal to popular taste over a
period of time. We will employ a popular music artist and
repertoire ("A&R") staff whose task will be to identify both
new artists with potential appeal and established artists who
will complement our planned artist roster or whose potential we
believe has not been fully exploited. The A&R staff, which is
headed by our management team, will include a group of
producers/songwriters and will meet on a regular basis to
discuss tapes of artists who have been previously screened by
staff members. If a consensus is reached to attempt to sign an
artist, a strategy will be developed for a contract proposal.
Currently, we are evaluating several artists with whom we would
consider entering contracts. However, such considerations are
contingent upon our ability to obtain a sufficient amount of
additional financing. There can be no assurance that we will
be able to attract and sign artists or that such artists will
be successful.
Independent Label
-----------------
Artist Recording Contracts
--------------------------
We will concentrate on the development of new talent rather
than competing with larger companies to acquire established
artists. We believe that the risks involved with higher
advances and royalties demanded by established artists may be
difficult to justify financially. In addition to the lower
financial cost of signing and developing new talent, we believe
that it generally is easier to negotiate a longer contract
term with new talent, whereas established artists demand higher
payments accompanied by shorter contract terms. We recognize
that established artists have existing fan support and name
recognition. However, we have determined that the cost
associated with retaining established artists represents a
significantly greater financial risk if a recording project
fails to achieve minimum consumer sales in an intensely
competitive market. From time to time we may sign artists who
require advances because they have established sales bases.
Pursuant to our strategy of identifying, signing and
developing new talent, the artists whom we intend to sign will
generally have limited recording industry backgrounds. For the
most part, these artists will be identified and contracted by
us after analysis of demonstration tapes by our A&R department
and after consultation among our senior management.
The Rock and Pop music genres will enable us to compete in a
market segment comprising 33.7% of gross business in the United
States record industry. Likewise, activity in the Rap/Hip-Hop,
R&B/Urban segment of the market will put us into an additional
25% of gross business in the United States record industry. We
may seek to develop divisions that will address the remaining
segments of the market, which includes jazz, Latin and other
musical styles.
Although we may from time to time license already completed
master recordings for a fixed price plus royalty, we will
primarily be involved in the actual production of master
recordings. This aspect of the recording business will require
our management to approve a specific project and then contract
with recording artists, musicians and producers to produce a
master recording. The artist and producer will each receive
either a minimum fee plus a percentage royalty based on the
proceeds received by us from distribution of a recording or a
percentage royalty without a minimum fee. The fee and royalty
arrangements will be negotiated on a recording-by-recording
basis. We will produce recordings in our own studios or by
renting time at any one of a number of recording studios.
Management therefore seeks to reduce or eliminate certain costs
and to match the specific configuration of a particular studio
to the requirements of a particular artist or producer.
Certain production and acquisition costs, such as artists' and
producers' royalties, are contingent upon subsequent sales
while other costs, such as salaries, overhead, manufacturing,
studio time and other expenses, are payable regardless of
sales. Although the appeal of a particular artist may be
transitory, we believe that increasing the size and diversity
of our planned artist roster gives us a measure of protection
against sudden shifts in taste. Further, we believe that
acquisition of interests in recorded music composition
catalogues will provide an important and relatively stable
source of future sales in addition to revenue generated from
new releases.
Promotion and Marketing
-----------------------
We plan to release records primarily in pop, neo-classical
soul and Rap/Hip-Hop, dance and alternative music fields.
Accordingly, we expect to market our records to the principal
buying groups in the 12 to 45 year old categories broadly
representative of the American population in that age group.
We plan to promote our recordings, as is generally the
case throughout the record industry, primarily through radio
time and utilizing the internet and high speed broadband
connection of the TCP/IP transmission protocol. To supplement
our staff, we may engage independent promotion specialists on a
record-by-record basis to generate airplay. As sales increase,
management may add additional promotion staff.
Cable operations, such as MTV, VH-1 BET and other music
television channels, as well as certain commercial television
stations, have provided significant exposure to new music
groups. We intend to utilize television as a promotional tool.
In addition, we intend to produce promotional videotapes, CDs
and DVDs featuring our artists, and maintain effective cost
controls through the use of our own music video production
department.
The music video and DVD market has grown significantly over
the past few years and we believe that the music video and DVD
business is a natural extension of our other planned
activities in the music business. Our music video department
will concentrate primarily upon promotional activities for our
artists to produce videos of single songs for promotional
purposes. Generally, income from music videos is derived from
television broadcasts and from the sale of videocassettes, CDs
and DVDs. We may make electronic press kits ("EPKs"), long-
form videos and enhanced videos or CD-ROMS playable on
computer. We also may combine artist videos and EPKs for
release on DVD, providing a whole new format for viewing which
was previously limited to television broadcasts. Our music and
videos may also be included in real player packages. We
anticipate experiencing increased activity as we enter into
contracts with additional artists. In such event, longer music
programs, such as DVDs or concert programs, are contemplated.
The marketing methods which we plan to use are customary
in the music
industry. These methods will include:
o radio;
o television;
o newspaper and magazine advertising;
o distribution of posters featuring our artists and records;
o street teams;
o wrapped vans and trucks;
o bus backs, bus stops and benches;
o billboards;
o marquee style movie lights at label sponsored events and
artists shows; and
o coordinated promotions with retail stores such as in-store
displays and appearances by performers.
Initially, our principal efforts will be focused on radio
promotion through radio play of artist's singles to develop
consumer recognition and product demand. We plan future
advertising in national music consumer publications and
industry trade publications as artists achieve increasing
consumer recognition, provided such additional advertising, in
management's opinion, would enhance sales.
Licensing of Recordings
----------------------
We also intend to license rights in certain of our
recordings to other major record labels for manufacture and
distribution in foreign markets. These labels normally pay all
distribution and marketing costs and, in addition, pay us an
advance plus a royalty based on sales, which is payable after
recovery of the advance. A portion of any royalties received by
us from sales will be used to pay artists' and producers'
royalties or the owner of a master recording, as the case may
be.
We will seek agreements to license recordings of
several of our future artists through various record and
licensing companies in Europe and Japan. We intend to
negotiate with several foreign distributors for the right to
license other artists. We intend to direct a material part of
our future activities toward the development of international
markets.
Copyright
---------
Our business, like that of other record companies,
primarily rests on ownership or control and exploitation of
musical works and sound and audio-visual recordings.
Rights and royalties relating to particular recordings
vary from case to case. When a recording is made, copyright in
that recording vests either in the recording artist and is
licensed to a record company or in the company itself,
depending on the terms of agreement between the recording
artist and the record company. Similarly, when a musical
composition is written, copyright in the composition vests
either in the writer and is licensed to a music publishing
company or in the publishing company. Artists generally record
songs that are controlled by music publishers. The rights to
reproduce such songs on tapes and CDs are obtained by the
company from music publishers or collection societies on their
behalf. The manufacture and sale of tapes and CDs results in
royalties
being payable by the record company to the publishing company
at industry agreed or statutory rates for the use of the
composition and the publishing company in turn pays a royalty
to the writer and by the record company to the recording
artist for the use of the recording.
Record companies are largely dependent upon legislation to
protect their rights against unauthorized reproduction,
importation or rental. In all territories where we intend to
operate, our products will receive some degree of copyright
protection. The period of protection varies widely from 75
years from first publication in the United States, to 50 years
in the United Kingdom, to 30 years from date of recording in
Japan.
Piracy, or the unauthorized reproduction of recordings for
commercial sales and Internet file sharing exists throughout
the world. Sales in certain markets are very difficult, and
some markets are virtually closed to legitimate record
companies because of the dominance of pirated product, which is
substantially cheaper than legitimate products due to lower
quality standards and the absence of recording and royalty
costs. In recent years, however certain countries, particularly
in Southeast Asia, have enforced copyrights
resulting in a reduction in piracy. There can be no assurance
that the proliferation of piracy of entertainment content
through the Internet or other means will be reduced in the
future. The proliferation of these practices, if continued,
could have a material adverse affect on the entertainment
industry.
Home taping, or the unauthorized reproduction for personal
use of recordings, has been a global problem since the advent
of cassette tapes and CDs, which existing copyright laws have
done little to contain. In some countries, the industry has
been successful in securing the introduction of a levy on
hardware used for such reproduction or on blank tapes. However,
such levies, which are generally shared among those involved in
the production of recordings, including the record companies
and the artists, do not adequately compensate for the losses
suffered from home taping. CD recording technology may increase
the opportunity for consumers to make high-quality copies for
home use.
There can be no assurance that the proliferation of piracy of
entertainment content through the Internet or other means will
be reduced in the future that, if continued, could have a
material adverse affect on the entertainment industry.
Rental of tapes and CDs is a problem in those countries whose
copyright laws do not provide adequate protection. Those
countries include Japan, where a levy on rental income is paid
to domestic rights owners, but not in respect of foreign
repertoire, and Germany.
The recorded music industry has been affected by piracy, and in
particular, the home copying and file sharing of recorded music
over the Internet. Recording technologies have been developed
that enable consumers to make high quality duplicates of
recorded music from original CDs and the Internet. In the
absence of adequate copyright protection, CD recording
technology may adversely affect sales of CDs. We cannot predict
the extent to which our CD sales would be affected by such
technology. However, we generally believe that as we focus on
the development of new artists and have a limited release
schedule, we are not materially dependent upon foreign sales in
markets
unregulated by copyright laws and that piracy or illegal home
taping will not have a material adverse impact on our business
or operations in the near or foreseeable future.
The Music Publishing Division
We intend to establish a music publishing division. Music
publishing involves the acquisition of rights to the
exploitation of musical compositions as opposed to musical
recordings. Principal sources of revenue are royalties from
the reproduction of musical works on cassette tapes, CDs, DVDs,
license fees from the radio and television broadcast (i.e.,
public performances) of such musical works, and film
soundtracks of recordings embodying the compositions
concerned.
We intend to create a music publishing operation to collect
performance royalties for our products through ASCAP and BMI.
ASCAP and BMI are collecting societies licensed to collect
performance royalties due from radio, television, jukeboxes,
film and similar venues for public performance of musical
compositions.
We may receive publishing royalties on master recordings which
we produce. Moreover, we intend to negotiate with recording
artists a percentage of the copyright rate that is set by
statute and modified from time to time by the Copyright Royalty
Tribunal.
Once we form a publishing operation, we plan to seek to acquire
copyright ownership of, or other rights in, the songs written
by or for our artists. We propose to develop a catalogue of
songs, retaining present and future publishing rights.
Additionally, we intend to employ songwriters and producers
to develop music products with publishing rights retained by
us. We plan to acquire interests in original songs that will be
developed at our
facilities. We do not deem the acquisition of these songs to be
material in that presently none have been recorded or used in
any of our activities, including promotion, and we have no
present intention or plans to use them in any capacity. In the
future, it is conceivable that songs commissioned or acquired
by us may be included on albums or produced as singles,
although no assurance can be given as to this use. We have not
determined an international publishing agent to administer our
songs outside of the United States.
The Studio Division
Kadalak operates our studio division, which provides support
for he in-house recording of our artists. Metropolitan is an
audio recording facility that provides us with "start to
finish" music recording services.
We intend to provide audio recording services to the music
industry, including national and international recording
companies, independent record producers and other entities
which request the services of the recording facilities. The
studio division will seek to combine technological expertise
and creative, experienced management in the state-of-the-art
commercial recording facilities.
Metropolitan consists of three studios and is capable of
tracking to tape or digitally. The studio features custom
acoustical design treatments, which provide a critically
accurate listening environment. The studio's equipment
includes:
a Pro-tool LE digital recording module;
a top-of-the-line recording/mixing console;
a Phat Planet Sound Module
Kadalak's operation of the music division affords us the added
benefit of vertical integration in the recorded music industry.
also includes fully equipped digital film and editing
facilities for film, video and television productions. We view
the sound studios principally as a catalyst to attract artists
and to record their products in-house. We will sell studio
time when the studios are not in use for in-house production.
INDUSTRY BACKGROUND
The Recorded Music Industry
The recorded music industry has experienced substantial
revenue growth since its inception and is dominated by four
major international entertainment companies:
o Universal Music Group;
o Time Warner Inc.;
o Sony Corp. (Sony Music Entertainment)/Bertelsmann AG
(BMG); and
o EMI Group PLC.
In the late 1940's, record retail sales amounted to only
$48 million annually. By 1970, sales had grown to nearly $1.7
billion annually. By way of current comparison, the Recording
Industry Association of America ("RIAA") reported the sound
recording domestic market in 2002 to be $12.6 billion. The
International Federation of Phonographic Industry ("IFPI"), an
organization that represents the recording industry worldwide,
reported recorded music sales worldwide of $32 billion in 2002.
This revenue growth has resulted from a combination of
factors, the most important of which has been rapidly
developing technology. Since 1984, the value of sales industry
wide has increased at a faster rate than unit volume growth,
due in part to the introduction and acceptance of CDs, which
are priced substantially higher than vinyl records and tapes.
CDs represented 91 percent of all units shipped in 2002. IFPI
reports that sales of recorded music in 2002 to be largest in
the United Kingdom, the United States, Japan, Australia,
Germany, France, Canada and Spain. The proportion of global
music sales accounted for by the world's top ten markets was
84 percent in 2002. Globally, music video sales increased in
2002, boosted by the DVD video. The United States represents
approximately 40 percent of the total world music market. The
RIAA reports that, in 2002, Rock remained the most popular
genre of music in the United States with 24.7 percent of the
market followed by Rap/Hip-Hop with 13.8 percent, R&B/Urban
with 11.2 percent, Country music with 10.7 percent, Pop with
9.0 percent, Jazz with 3.2 percent and Classical with 3.1
percent of all music items purchased.
Both the RIAA and IFPI reported that the increased availability
of free music via mass digital copying and internet piracy have
had a substantial negative impact on the recorded music
industry in 2002 and the industry is aggressively pursuing
strategies to resolve the erosion of unit shipments and sales
in the world market. In 2002, digital copying and Internet
piracy have resulted in an approximate 7 percent decline in
worldwide revenues as well as an approximate 8 percent decline
in units sold worldwide. This decline continued in 2003.
Music is also an essential part of the advertising and
film industries. Music contributes significantly to the success
of advertising. Additionally, music has become an integral
part of film, as seen from the successes of many musical
soundtracks of popular movies. Film soundtracks have also
produced a number of hit singles worldwide. The growth of the
DVD format has demonstrated an increased demand for DVD
products.
Foreign record sales account for over one-half of worldwide
record sales. English versions of popular hits have achieved
acceptance and success throughout the globe. Music
publishing rights serve as an additional and significant source
of earnings for record companies. Publishing and sub-publishing
revenues are generated for each song contained in an album,
cassette or CD.
The Feature Film Industry
General
-------
The feature film industry encompasses the development,
production and distribution of feature-length motion pictures
and their subsequent distribution in the home video, television
and other ancillary markets. The major studios dominate the
industry, some of which have divisions that are promoted as
"independent" distributors of motion pictures, including:
Universal Pictures, Warner Bros. (including New Line Cinema and
Castle Rock Entertainment);
Twentieth Century Fox, Sony Pictures Entertainment (including
Columbia Pictures and Columbia Tristar Motion Picture Group);
Paramount Pictures;
The Walt Disney Company (including Buena Vista Pictures,
Touchstone
Pictures and Miramax Film Corp.); and
Metro-Goldwyn-Mayer Inc. (including MGM Pictures, United
Artists Pictures Inc., Orion Pictures Corporation and Goldwyn
Entertainment Company).
In recent years, however, true "independent" motion picture
production and distribution companies have played an important
role in the production of motion pictures for the worldwide
feature film market.
Independent Feature Film Production and Financing
-------------------------------------------------
Generally, independent production companies do not have
access to the extensive capital required to make feature-length
motion pictures, such as the "blockbuster" films produced by
the major studios. They also do not have the capital
necessary to maintain the substantial overhead that is typical
of operations of major studios. Independent producers target
their product at specialized markets and usually produce motion
pictures with budgets of less than $20 million. Generally,
independent producers do not maintain significant
infrastructure. They instead hire only creative and other
production personnel
and retain the other elements required for development, pre-
production, principal photography and post-production
activities on a project-by-project basis. Also, independent
production companies typically finance their production
activities from bank loans, pre-sales, equity offerings, co-
productions and joint ventures rather than out of operating
cash flow. They generally complete financing of an independent
motion picture prior to commencement of principal photography
to minimize the risk of loss.
Independent Feature Film Distribution
-------------------------------------
Film distribution encompasses the exploitation of motion
pictures in theatres and in markets, such as home DVD and
video, pay-per-view, pay television, free television and
ancillary markets, such as hotels, airlines and streaming films
on the Internet. Independent producers do not typically have
distribution capabilities. Instead, these producers rely on
advances from domestic and international distributors who
approve their projects before production commences, as well as
profit sharing or equity arrangements for individual projects.
Generally, the local distributor in any country or region will
acquire distribution rights for a motion picture from an
independent producer using one or more of these methods. The
local distributor will agree to advance the producer a non-
refundable minimum guarantee. The local distributor will then
generally receive a distribution fee of between 20% and 35% of
gross receipts, while the producer will receive a portion of
gross receipts in excess of the distribution fees, distribution
expenses and monies retained by exhibitors. The local
distributor and theatrical exhibitor generally will enter into
an arrangement providing for the exhibitor's payment to the
distributor of a percentage of the box-office receipts for the
exhibition period, generally 40%to 50%, depending upon the
success of the motion picture.
COMPETITION
The recorded music, motion picture, and music publishing
industries are highly competitive. We will compete with other
companies for artists, airtime and space in retail outlets. We
are not at present, and do not expect in the foreseeable
future, to be a significant participant in the marketplace. We
face competition from companies within the entertainment
business and from alternative forms of leisure entertainment,
such as travel, sporting events, outdoor recreation and other
cultural activities. We compete with the major media and
entertainment companies and studios, numerous independent
motion picture, recorded music, music publishing and television
production companies,
television networks and pay television systems for the
acquisition of literary and film properties, the services of
performing artists, directors, producers and other creative
and technical personnel and production financing. In addition,
our music and motion picture productions compete for audience
acceptance and exhibition outlets with music and motion
pictures produced and distributed by other larger more
established companies. As a result, the success of any of our
recorded music products or DVD/motion pictures is dependent on
not only the quality and acceptance of a particular production,
but also on the quality and acceptance of other competing
productions released into the marketplace at or near the same
time.
The entertainment industry is highly competitive, rapidly
evolving and subject to constant change. Other entertainment
companies currently offer one or more of each of the types of
products and services we plan to offer. Some of our competitors
in the entertainment market will include Time Warner, Sony/BMG,
EMI, Disney, Viacom and numerous independent companies. Some of
our competitors in the music business will include Motown, Time
Warner Inc., Universal Music Group, Interscope, Sony/BMG and
EMI. We expect that our film business will compete with well-
established companies, including MGM, Dreamworks, Time Warner
Inc. and numerous smaller independent companies, which produce,
develop or market films, DVD's, television and cable
programming.
EMPLOYEES
As of December 31, 2003 we had one full-time employee in our
operations. We use and plan to continue using independent
consultants, producers, professionals and contractors on an as
needed basis. Upon obtaining additional financing, we will
hire additional employees in connection with the production of
our recorded music and film productions. We believe that our
employee and labor relations are good. Our full-time employee
is not a member of any union. On film projects, we may employ
members of a number of unions, including the International
Alliance of Theatrical and Stage Employees, the Screen Actors
Guild and the Teamsters. A strike by one or more of the unions
that provide personnel essential to the production of films
could delay or halt our ongoing production activities. Such a
halt or delay, depending on the length of time involved, could
cause delay in our release of new films and thereby could
adversely affect our cash flow and revenues.
RISK FACTORS
In addition to other information included in this
report, the following factors should be considered in
evaluating our business and future prospects.
We need to obtain financing in order to continue our
operations.
On a prospective basis, we will require both short-
term financing for operations and long-term capital to fund our
expected growth. We have no existing bank lines of credit and
have not established any definitive sources for additional
financing. Based on our current operating plan, we will not
have enough cash to meet our anticipated cash requirements
through January 31, 2005 if we do not raise at least $2,500,000
from the sale of our securities or other financing means. While
we are in discussions and have entered agreements with
potential financing sources, we currently do not have
definitive arrangements with respect to, or sources of,
additional financing. Additional financing may not be available
to us, or if available, then it may not be available upon terms
and conditions acceptable to us. If adequate funds are not
available, then we may be required to delay, reduce or
eliminate product development or marketing programs. The
entertainment industry is rapidly evolving. Our inability to
take advantage of opportunities in the industry because of
capital constraints may have a material adverse effect on our
business and our prospects.
Independent distributors will be a significant element of our
growth strategy.
We will rely on independent distributors to distribute
a significant portion of our entertainment products and
services when developed. A significant element of our growth
strategy will be to increase the sale and distribution of our
products and services by expanding our presence in local
markets and by extending this network into new markets either
by internal growth, joint ventures, licensing, acquisition or
other means. We may not be able to develop, recruit, maintain,
motivate, retain or control a network of independent
distributors. In addition, we have little control over the
resources that independent distributors will devote to
marketing our products and the amount of our competitors'
products that our independent distributors choose to market.
Any decision by a distributor to not distribute or promote our
products or services or to promote our competitors' products
and services could have a material adverse effect on our
business, results of operations or financial condition.
We have a limited operating history in the entertainment
industry.
We have a limited history in the entertainment
industry. In august , 2003, we entered into a merger with SSSG
Acquisition Corp providing the basis for our formation. Our
strategy is to become an independent multimedia entertainment
company. In addition to operating a music division, recording
studio division and film production company, we plan to
establish television, publishing and management operations.
Prior to entering into the Share Exchange Agreement, we did not
operate in the multimedia and entertainment industry.
Accordingly, we have a limited history in the industry in which
we operate. We have retained the law firm of Rosenfeld,
Goldman & Ware, Inc. of Atlanta, GA to act as our legal counsel
and to provide strategic legal planning on the entertainment
industry. We are dependent on the advice of Rosenfeld, Goldman
& Ware, Inc. and there is no assurance that Rosenfeld, Goldman
& Ware, Inc. will continue to represent our interests.
We have a history of losses and expect that losses may continue
in the future.
We have a history of losses and expect that losses may
continue in the
future.
Our net loss for the fiscal year ended December 31,
2003 totaled $0.0. Our operating expenses wee capitalized as
organization expenses. We expect that production and
development, marketing and operating expenses will increase
significantly during the next several years. In order to
achieve profitability, we will need to generate significant
revenue. We cannot be certain that we will generate sufficient
revenue to achieve profitability. We anticipate that we will
continue to generate operating losses and negative cash flow
from operations at least through the end of Fiscal 2004. We
cannot be certain that we will ever achieve, or if achieved,
maintain profitability. If our revenue grows at a slower rate
than we anticipate or if our project development, marketing and
operating expenses exceed our expectations or cannot be
adjusted accordingly, our business, results of operation and
financial condition will be materially adversely effected.
Shares of our common stock lack a significant trading market.
Shares of our common stock are not eligible for trading on any
national or regional exchange. Our common stock is eligible for
trading in the over-the-counter market on the Over-The-Counter
Bulletin Board pursuant to Rule 15c2-11 of the Securities
Exchange Act of 1934. This market tends to be highly illiquid,
in part because there is no national quotation system by which
potential investors can trace the market price of shares except
through information received or generated by certain selected
broker-dealers that make a market in that particular stock.
There are currently no plans, proposals, arrangements or
understandings with any person with regard to the development
of a trading market in our common stock. There can be no
assurance that an active trading market in our common stock
will develop, or if such a market develops, that it will be
sustained. In addition, there is a greater chance for market
volatility for securities that trade on the Over-The-Counter
Bulletin Board as opposed to securities that trade on a
national exchange or quotation system. This volatility may be
caused by a variety of factors, including the lack of readily
available quotations, the absence of consistent administrative
supervision of "bid" and "ask" quotations and generally lower
trading volume.
Our success will depend on external factors in the music and
film industries.
Operating in the music and film industries involves a
substantial degree of risk. Each planned music project, film
production is an individual artistic work, and unpredictable
audience reactions primarily determine commercial success. The
commercial success of a music project or a film production also
depends upon:
the quality and acceptance of other competing records or films
released into the marketplace at or near the same time;
critical reviews;
the availability of alternative forms of entertainment and
leisure activities;
general economic conditions; and other tangible and intangible
factors.
Each of these factors is subject to change and cannot be
predicted with certainty. There can be no assurance that our
planned music projects and film productions will obtain
favorable ratings or reviews or that consumers will purchase
our entertainment products and services.
Our success will be largely dependent upon our key executive
officers and other key personnel.
Our success will be largely dependent upon the continued
employment of our key executive officers and, particularly, our
continued employment of our law firm of Rosenfeld, Goldman &
Ware, Inc., ("RGW") The loss of Rosenfeld, Goldman & Ware,
Inc. services would have a material adverse effect on us. We
believe that our continued success will depend to a significant
extent upon the efforts and abilities of our executive officers
and our ability to retain them.. Although we believe that we
would be able to locate a suitable replacement for RGW if their
services were lost, we cannot assure you that we would be able
to do so. In addition, our future operating results will
substantially depend upon our ability to attract and retain
highly qualified management, financial, technical, creative and
administrative personnel. Competition for highly talented
personnel is intense and can lead to increased compensation
expenses. We cannot assure you that we will be able to attract
and retain the personnel necessary for the development of our
business.
Unauthorized use of our intellectual property and trade secrets
may affect our market share and profitability.
We protect intellectual property rights to our productions
through available copyright and trademark laws and licensing
and distribution arrangements with reputable international
companies in specific territories and media for limited
durations. Despite these precautions, existing copyright and
trademark laws afford only limited practical protection in
certain jurisdictions. We may distribute our products in some
jurisdictions in which there is no copyright and trademark
protection. As a result, it may be possible for unauthorized
third parties to copy and distribute our productions or certain
portions or applications of our intended productions. We will
rely on our copyrights, trademarks, trade secrets, know-how and
continuing technological advancement to establish a competitive
position in the marketplace. We will attempt to protect our
intellectual property through copyright and agreements with
future artists and employees. Other companies may independently
develop or otherwise acquire similar creative materials or gain
access to our intellectual property. Despite our precautions,
there can be no assurance that we will be able to adequately
protect our intellectual property from competitors in the
future. In addition, litigation may be necessary in the future
to:
enforce intellectual property rights;
to protect our trade secrets;
to determine the validity and scope of the rights of others; or
to defend against claims of infringement or invalidity.
Any such litigation could result in substantial costs and the
diversion of resources and could have a material adverse effect
on our business, operating results or financial condition.
Protecting and defending against intellectual property claims
may have a material adverse effect on our business.
From time to time, we may receive notice that others have
infringed on our proprietary rights or that we have infringed
on the intellectual property rights of others. There can be no
assurance that infringement or invalidity claims will not
materially adversely affect our business, financial condition
or results of operations. Regardless of the validity or the
success of the assertion of claims, we could incur significant
costs and diversion of resources in protecting or defending
against claims, which could have a material adverse
effect on our business, financial condition or results of
operations.
Piracy, illegal duplication of CDs and DVDs and file sharing of
music and film products over the Internet may have a material
adverse effect on our business.
Our ability to compete depends in part on the successful
protection of our intellectual property, including our music
and film productions. Piracy, illegal duplication and Internet
peer-to-peer file sharing of music and film products has had an
adverse effect on the entertainment industry as a whole. If new
legislation aimed at protecting entertainment companies against
piracy, illegal duplication and Internet peer-to-peer file
sharing is not enacted and enforced, and we are unable to
protect our music and film productions from piracy, illegal
duplication and Internet peer-to-peer file sharing, then such
continued activities may have a material adverse effect on our
business.
Advances in technology may have a material adverse effect on
our revenues.
Advances in technology may affect the manner in which
entertainment content is distributed to consumers. These
changes, which might affect the entertainment industry as a
whole, include the proliferation of digital music players,
services that allow individuals to download and store single
songs and pay-per-view movie services. These technological
advances have created new outlets for consumers to purchase
entertainment content. These new outlets may affect the
quantity of entertainment products that consumers purchase and
may reduce the amount that consumers are willing to pay for
particular products. As a result, this could have a negative
impact on our ability to sell DVD's, CD's and soundtracks. Any
failure to adapt our business model to these changes could have
a material adverse effect on our revenues.
Our success will depend on our artists.
We plan to enter into film and recording contracts
with several artists. We cannot assure you that we will be able
to retain the artists we plan to enter contracts with or that
we will be able to attract additional artists. We may not be
able to develop our artists successfully or in such a manner
that produces significant sales. Furthermore, each film and
recording is an individual artistic work, the public acceptance
of which cannot be known in advance. Accordingly, we cannot
assure you that any film or record released by any particular
artist will experience financial success. In addition, if any
particular artist experiences success, we cannot predict the
timing or longevity of such success or the extent of the
popularity of any particular artist.
We will depend on the continued popularity of urban
music.
We plan to produce records in multiple genres of music
including neo-classical soul and hip-hop. Our proposed artists
will be primarily in this segment of the market. If tastes move
away from this type of music and we do not develop any
alternatives, then we may not be able to sell enough
entertainment products and services to be profitable. Although
we believe that this sector will continue to grow, consumer
taste is unpredictable and constantly changing, and we cannot
predict with any certainty that this segment will continue to
remain popular.
Our growth as a multimedia entertainment company depends on
the success and increased use of entertainment products and
services.
The entertainment products and service market is
rapidly evolving. The demand and market acceptance of our
planned products and services is uncertain and subject to a
high degree of risk. In order for certain of our planned
entertainment products and services to be successfully accepted
in the marketplace, the production and content of our
entertainment products and services must be accepted as a
viable alternative to traditional entertainment products and
services. Because these markets may be new and evolving, it is
difficult to predict the size of the market and its growth
rate. If the market for our entertainment products and services
fails to develop or develops more slowly than we anticipate, we
will not be able to generate revenues from our entertainment
products and services at the rate we anticipate. In addition,
if demand for our entertainment products and services grows too
quickly, our infrastructure may not be able to support the
demands placed on us by this growth and our performance and
reliability may decline.
We will be in competition with companies that are larger, more
established and better capitalized than we are.
The entertainment industry is highly competitive,
rapidly evolving and subject to constant change. Other
entertainment companies currently offer one or more of each of
the products and services we plan to offer. Some of our
competitors in the entertainment market will include Time
Warner Inc., Sony/BMG, EMI, Disney and Viacom. Some of our
competitors in the music business will include Motown, Time
Warner Inc., Universal Music Group, Interscope, Sony/BMG, EMI
and numerous smaller independent companies. We expect that our
film business will compete with well-established companies,
including MGM, Dreamworks, Time Warner Inc. and numerous
smaller independent companies, which produce, develop or market
films, DVD's, television and cable programming. Many of our
competitors have:
greater financial, technical, personnel, promotional and
marketing resources;
longer operating histories;
greater name recognition;
and larger consumer bases than us.
We believe that existing competitors are likely to
continue to expand their products and service offerings.
Moreover, because there are few, if any, substantial barriers
to entry, we expect that new competitors are likely to enter
the entertainment market and attempt to market entertainment
products and services similar to our products and services,
which would result in greater competition. We cannot be certain
that we will be able to compete successfully in the
entertainment, multimedia, music, film, management or
television programming markets.
Future sales of our securities will dilute the
ownership interest of our current stockholders.
We expect to sell our equity securities in order to
raise the funds necessary to fund our operations. Any such
transactions will involve the issuance of our previously
authorized and unissued securities and will result in the
dilution of the ownership interests of our present
stockholders.
We might expand through acquisitions which may cause
dilution of our common stock and additional debt and expenses.
Any acquisitions of other companies which we complete
may result in potentially dilutive issuances of our equity
securities and the incurrence of additional debt, all of which
could have a material adverse effect on our business, results
of operations and financial condition. We plan to seek
acquisitions and joint ventures that will complement our
services, broaden our consumer base and improve our operating
efficiencies. Acquisitions involve numerous additional risks,
including difficulties in the assimilation of the operations,
services, products and personnel of acquired companies, which
could result in charges to earnings or otherwise adversely
affect our operating results. There can be no assurance that
acquisition or joint venture opportunities will be available,
that we will have access to the capital required to finance
potential acquisitions, that we will continue to acquire
businesses or that any acquired businesses will be profitable.
Operating internationally may expose us to additional and
unpredictable risks.
We intend to enter international markets, licensing
arrangements and to form joint ventures internationally to
expand sales of our planned entertainment products and to
market our entertainment products and services. International
operations are subject to inherent risks, including:
potentially weaker intellectual property rights;
changes in laws and policies affecting trade;
difficulties in obtaining foreign licenses;
changes in regulatory requirements;
instability of foreign economies and governments;
instances of war or terrorists activities;
unexpected changes in regulations and tariffs;
fluctuations in the value of foreign currencies;
intricate investment and tax laws, including laws and policies
relating to the repatriation of funds and to withholding taxes;
and
uncertain market acceptance and difficulties in marketing
efforts due to language and cultural differences.
Due to these risks, operating in international markets could
have a material adverse effect on our future business, results
of operations or financial condition.
Our shares of common stock are subject to penny stock
regulation.
Holders of shares of our common stock may have
difficulty selling those shares because our common stock will
probably be subject to the penny stock rules. Shares of our
common stock are subject to rules adopted by the Securities and
Exchange Commission that regulate broker-dealer practices in
connection with transactions in "penny stocks". Penny stocks
are generally equity securities with a price of less than $5.00
which are not registered on certain national securities
exchanges or quoted on the NASDAQ system, provided that current
price and volume information with respect to transactions in
those securities is provided by the exchange or system. The
penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from those
rules, to deliver a standardized risk disclosure document
prepared by the Securities and Exchange Commission, which
contains the following:
description of the nature and level of risk in the market for
penny stocks in both public offerings and secondary trading;
a description of the broker's or dealer's duties to the
customer and of the rights and remedies available to the
customer with respect to violation to such duties or other
requirements of securities laws; a brief, clear, narrative
description of a dealer market, including "bid" and "ask"
prices for penny stocks and the significance of the spread
between the "bid" and "ask" price; a toll-free telephone
number for inquiries on disciplinary actions; definitions of
significant terms in the disclosure document or in the conduct
of trading in penny stocks; and such other information and is
in such form (including language, type, size and
format), as the Securities and Exchange Commission shall
require by rule or regulation.
Prior to effecting any transaction in penny stock, the broker-
dealer also must
provide the customer with the following:
the bid and offer quotations for the penny stock;
the compensation of the broker-dealer and its salesperson in
the
transaction;
the number of shares to which such bid and ask prices apply, or
other
comparable information relating to the depth and liquidity of
the
market for such stock; and
monthly account statements showing the market value of each
penny
stock held in the customer's account.
In addition, the penny stock rules require that, prior to a
transaction in a penny stock not otherwise exempt from those
rules, the broker-dealer must make a special written
determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written
acknowledgment of the receipt of a risk disclosure statement, a
written agreement to transactions involving penny stocks, and a
signed and dated copy of a written suitability statement. These
disclosure requirements may have the effect of reducing the
trading activity in the secondary market for a stock that
becomes subject to the penny stock rules.
Budget overruns may adversely affect our business.
Actual music projects or film production costs may
exceed their budget, sometimes significantly. Risks such as
labor disputes, death or disability of star performers, rapid
high technology changes relating to special effects or other
aspects of production, shortages of necessary equipment, damage
to film negatives, master tapes and recordings or adverse
weather conditions may cause cost overruns and delay or
frustrate completion of a production. If a music project or
film production incurs substantial budget overruns, then we may
have to seek additional financing from outside sources to
complete production. We cannot assure you that such financing
will be available to us, or if available, whether such funds
will be available to us on acceptable terms. In addition, if a
music project or film production incurs substantial budget
overruns, there can be no assurance that such costs will be
recouped, which could have a significant impact on our
business, results of operations or financial condition.
Our operating results may fluctuate significantly.
We expect that our future operating results may
fluctuate significantly
as a result of the following:
the timing of domestic and international releases of future
music projects, or films we produce;
the success of our future music projects or films;
the timing of the release of related products into their
respective
markets;
the costs to distribute and promote the future music projects
and films;
the success of our distributors in marketing our future music
projects and films;
the timing of receipt of proceeds generated by the music
projects,
and films from distributors;
the introduction of new music projects, and films by our future
competitors;
the timing and magnitude of operating expenses and capital
expenditures;
the level of unreimbursed production costs in excess of
budgeted maximum amounts;
the timing of the recognition of advertising costs for
accounting purposes under generally accepted accounting
principles; and general economic conditions, including
continued slowdown in advertiser spending.
As a result, we believe that our results of operations may
fluctuate significantly, and it is possible that our operating
results could be below the expectations of investors.
We do not intend to pay cash dividends on our shares
of common stock.
The future payment of dividends will be at the discretion of
our Board of Directors and will depend on our future earnings,
financial requirements and other similarly unpredictable
factors. For the foreseeable future, it is anticipated that any
earnings which may be generated from our operations will be
retained by us to finance and develop our business and that
dividends will not be paid to stockholders.
ITEM 2 DESCRIPTION OF PROPERTY
Our current address is 101 Marietta St., Suite 1070,
Atlanta, GA. This address is the office of our legal
counsel RGW. Our business has been located in this space
since 2003. We have secured a production facility located
at 2905 Suite E, Amwiler Rd., Atlanta, GA 30360. We plan to
locate our business operations to the production facility as
soon as preliminary construction is completed. We believe
that our current facilities are adequate to conduct our
business operations for the foreseeable future. We believe
that we will be able to renew this lease on similar terms
upon expiration. If we cannot renew the lease agreement, we
believe that we could find other suitable premises without
any material adverse impact on our operations.
ITEM 3 LEGAL PROCEEDINGS
The Company is not currently involved in any litigation
that it is aware of. However, the company is involved in
the entertainment industry and the Company could become
party to litigation in its ordinary course of business. We
do not believe that the ultimate disposition of any of these
matters will have a material adverse effect on our
consolidated financial position, results of operations or
liquidity.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITIES
HOLDERS
During the fiscal year ending on December 31, 2003 the
Company did not submit any proposals to the shareholders for
vote.
ITEM 5 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Period High bid Low Bid
August 25 thru Sept. $0.022 $0.010
30, 2003
October 1 thru $0.085 $0.009
December 31, 2003
Our common stock is currently quoted on the Over-The-Counter
Bulletin Board under the symbol "SSSU.OB".
Market Information
------------------
On August 25, 2003 our predecessor, Group Management Corp,
Inc., filed Form 8k-12G(3) with the Securities and Exchange
Commission registering our common stock under the Exchange
Act. Our shares of common stock were first quoted on the
Over-The-Counter Bulletin Board as SSSU in September of
2003. The following table presents the high and low bid
prices per share of our common stock as quoted for the years
ended December 31, 2003 which information was provided by
NASDAQ Trading and Market Services.
Period
High Bid
Low bid
August 25, 2003 thru Sept. 30, 2003
$0.022
$0.010
October 1, 2003 thu December 31, 2003
$0.085
$0.009
The above quotations reflect inter-dealer prices, without
retail mark-up, markdown or commission and may not reflect
actual transactions.
Holders
-------
As of December 31, 2003 we had 701 stockholders of
record of our common stock. Such number of record holders
was derived from the records maintained by our transfer
agent.
Dividends
---------
To date, we have not declared or paid any cash
dividends and do not intend to do so for the foreseeable
future. We intend to retain all earnings, if any, to finance
the continued development of our business. Any future
payment of dividends will be determined solely in the
discretion of our Board of Directors.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion and analysis of our financial
condition and results of operations should be read in
conjunction with our consolidated financial statements and
related notes appearing elsewhere in this report. This
discussion and analysis contains forward-looking statements
that involve risks, uncertainties, and assumptions. The
actual results may differ materially from those anticipated
in these forward-looking statements as a result of certain
factors, including but not limited to the risks discussed in
this report.
Overview
--------
We are a multimedia entertainment company that
operates a film division, a record division and a studio
division. During Fiscal 2003, after the merger with SSSG
Acquisition Corp. was completed, we completely restructured
our operation to enter the entertainment content creation
business. We currently operate as Silver Screen Studios,
Inc. with subsidiary companies operating to function as a
vertically integrated business. Our subsidiaries listed in
the table below to date have not generated any revenue,
however, management feels that once we locate to our
production facility the subsidiary companies will be
positioned to generate revenue. However, there is no
assurance that the subsidiaries companies will then, if ever
generate any revenue.
We presently do not have sufficient cash to
implement our business plan. We have experienced this lack
of liquidity throughout Fiscal 2003, causing us to be unable
to produce any feature films. We believe that we need to
raise or otherwise obtain at least $2,500,000 in additional
financing in order to implement our business plan. If we are
successful in obtaining such financing, we may require an
additional nine to twelve months in order to complete
production of additional feature films for release and
distribution. Accordingly, in order to generate revenues in
Fiscal 2004, we may need to rely on other sources of revenue
such as acquiring the rights to distribute and exploit
feature films and other entertainment content produced by
third parties. If we are not successful in obtaining
additional financing, we will not be able to implement our
business plan.
History of the Company
----------------------
We are a Georgia corporation whose common stock is
eligible for quotation on the Over-The-Counter Bulletin
Board Trading System under the symbol "SSSU". From the date
of our formation in May, 2003 through December 31, 2003, we
have been engaged in the business of the entertainment
industry..
Pursuant to Rule 12g-3(a) under the Exchange Act,
we were the successor
issuer to Group Management Corp.. for reporting purposes
under the Exchange Act, and
our common stock is deemed to be registered pursuant to
Section 12(g) of the Exchange Act.
On September 2003, our trading symbol on the Over-
The-Counter Bulletin Board was changed from "GPMT" to
"SSSU".
Please also refer to the information in notes 1 and
2 to the consolidated financial statements. The following
discussion and analysis should be read in conjunction with
the consolidated financial statements and the related notes
thereto included in this Form 10-KSB.
Critical Accounting Policies
----------------------------
In presenting our financial statements in
conformity with accounting principles generally accepted in
the United States, we are required to make estimates and
assumptions that affect the amounts reported thereon.
Several of the estimates and assumptions we are required to
make relate to matters that are inherently uncertain as they
pertain to future events. However, events that are outside
of our control cannot be predicted and, as such, they cannot
be contemplated in evaluating such estimates and
assumptions. If there is a significant unfavorable change to
current conditions, it will likely result in a material
adverse impact to our consolidated results of operations,
financial position and in liquidity. We believe that the
estimates and assumptions we used when preparing our
financial statements were the most appropriate at that time.
Presented below are those accounting policies that we
believe require subjective and complex judgments that could
potentially affect reported results.
Revenue Recognition
-------------------
We are a development stage company and as such we have not
generated any revenue from our operations for any revenue
recognition. However, once revenue is generated from our
operations we intend to adopt the proper revenue recognition
standards.
Capitalized Film Costs
----------------------
We are a development stage company and as such we
have not generated any revenue from our operations for any
revenue recognition. However, once revenue is generated
from our operations we intend to adopt the proper revenue
recognition standards and the proper treatment of film
assets.
Results of Operations
Our operations during fiscal 2003 we concentrated on
restructuring the business model of Silver Screen Studios,
Inc. Our operations did not generate any revenue in fiscal
2003. However, the Company has several projects in
development, with the most advanced being, Murder by
Deception, ("MBD"). MBD will be the first feature film
produced by the Company through its production subsidiary
Greenlight Productions, Inc. MBD will be distributed by
Silver Screen Distributions, Inc. MBD will be a direct to
DVD production with an expect release date of second or
third quarter 2004.
The Company through it publishing division, Millennium
Publishing has two novels completed and ready for
publication. The first novel, Heirs to Murder will be
produced as an E-Book. The Company has created what we
believe is a novel concept in the publication of a novel.
The Company will utilize the E-book format to include in the
internals of the book various multi-media content, including
but not limited to, audio and video materials. We may
receive net revenues from the television and international
licensing rights during Fiscal 2004. However, there can be
no assurance that we will generate net revenues from any of
these arrangements.
Operating Loss
The net loss form operations for the fiscal year 2003
resulted primarily from the payment of legal and consulting
fees related to our complete restructuring of operations.
Going forward in fiscal year 2004 legal and consulting fees
should remain constant as we initiate operations of our
various subsidiary businesses. We did not comparisons with
previous years operating losses as fiscal 2003 was our first
year of operations.
Liquidity Resources
During Fiscal 2004, we anticipate continuing to pursue all
possible funding scenarios that will finance our business
operations. We intend to seek financing to fund our
operations for the next twelve months through sales of our
securities and/or a combination of alternative financing
structures including, but not limited to, joint or co-
ventures, licensing of projects, production subsidies, debt
financing, tax structured financing, a merger with or
acquisition of a foreign listed entity and partnerships for
individual or multiple projects. We are presently engaged in
negotiations of definitive agreements with two potential
sources of financing. However, we are not certain that these
financing transactions will close or whether we will be able
to obtain additional financing. We believe that it will be
necessary for us to raise at least $2,500,000 in order to
meet our anticipated cash requirements through January 31,
2005. There can be no assurances that we will be successful
in our efforts to raise this amount of additional financing.
In the event that we are unable to raise these funds, we
will then be required to delay our plans to grow our
business and we will rely on our net revenues to fund our
operations.
Default of Agreements
We are not currently in default of any agreements or loan
covenants.
In addition, we have accounts payable of $0.0 and accrued
expenses in the aggregate amount of $0.0.
We also have other no obligations which mature or may mature
in the next twelve months.
The nature of our business is such that significant cash
outlays are required to produce and acquire films,
television programs, music soundtracks and albums. However,
Net Revenues from these projects are earned over an extended
period of time after their completion or acquisition.
Accordingly, we will require a significant amount of cash to
fund our present operations and to continue to grow our
business. As our operations grow, our financing requirements
are expected to grow proportionately and we project the
continued use of cash in operating activities for the
foreseeable future. Therefore we are dependent on continued
access to external sources of financing. Our current
financing strategy is to sell our equity securities to raise
a substantial amount of our working capital. We also plan to
leverage investment in film and music productions through
operating credit facilities, co-ventures and single-purpose
production financing. We plan to obtain financing
commitments, including, in some cases, foreign distribution
commitments, to cover, on average, at least 50% of the
budgeted third-party costs of a project before commencing
production. We plan to outsource required services and
functions whenever possible. We plan to use independent
contractors and producers, consultants and professionals to
provide those services necessary to operate the corporate
and business operations in an effort to avoid build up of
overhead infrastructures, to maintain a flexible
organization and financial structure for productions and
ventures and to be responsive to business opportunities
worldwide. Accordingly, once we raise at least $2,500,000 in
additional financing, we believe that the net proceeds from
that financing together with cash flow from operations,
including our share of future film production, will be
available to meet known operational cash requirements. In
addition, we believe that our improved liquidity position
will enable us to qualify for new lines of credit on an as-
needed basis.
These matters raise substantial doubt about our
ability to continue as a going concern. We will need to
raise significant additional funding in order to satisfy our
existing obligations and to fully implement our business
plan. There can be no assurances that such funding will be
available on terms acceptable to us or at all. If we are
unable to generate sufficient funds, particularly at least
$1,500,000, then we may be forced to cease or substantially
curtail operations.
We do not pay and do not intend to pay cash
dividends on our common stock. We believe it to be in the
best interest of our stockholders to invest all available
cash in the expansion of our business.
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