Item 405 of
Regulation S-B 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. o
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o No x
The
Registrant generated $60,176 in revenues from discontinued operations, which
amount is embedded in
the Company’s overall net loss of $609,726 from
discontinued
operations for the twelve months ended December 31, 2007.
The
aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant, based on the closing price of the common
stock
on the OTC Electronic Bulletin Board on March
2008, was $385,524.
The
Registrant’s common stock outstanding as of March 25, 2008, was 24,535,632
shares.
Documents
incorporated by reference: None.
Transitional
Small Business Disclosure Format (Check One): Yes o No x
Mac
Filmworks, Inc.
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Page
No.
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Part
I
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Item
1.
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Item
2.
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Item
3.
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Item
4.
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Part
II
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Item
5.
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Item
6.
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Item
7.
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Item
8.
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Item
8A.
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Item
8B.
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Part
III
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Item
9.
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Item
10.
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Item
11.
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Item
12.
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Item
13.
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Item
14.
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FORWARD-LOOKING
STATEMENTS
This
Annual Report of Mac Filmworks, Inc. (“Mac Filmworks” or the “Company”) contains
forward-looking statements. These statements relate to future events
or future financial performance and involve known and unknown risks,
uncertainties and other factors that may cause the Company’s or its industry’s
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 the forward-looking
statements.
In
some cases, you can identify
forward-looking statements by terminology such as “may,” “will,” “should,”
“expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,”
“potential,” or the negative of these terms or other comparable
terminology. These statements are only predictions. Actual
events or results may differ materially.
Although
the Company believes that the
expectations reflected in the forward-looking statements are reasonable, the
Company cannot guarantee future results, levels of activity, performance or
achievements. Moreover, neither the Company nor any other person
assumes responsibility for the accuracy and completeness of these
forward-looking statements. The Company is under no duty to update
any of the forward-looking statements after the date of this report to conform
its prior statements to actual results.
Business
Strategy
The
Company has ceased all business
operations and intends to remain a dormant company while it seeks potential
business opportunities. The Company does not currently have any plans
or arrangements to acquire any new specific business or company. The
Company recognizes that as a result of its limited financial, managerial and
other resources, the number of suitable potential businesses that may be
available to it will be extremely limited. The Company’s principal
business objective will be to seek long-term growth potential in the business
if
which it participates rather than immediate short-term earnings. In
seeking to obtain its business objectives, the Company will not restrict its
search to any particular industry. Rather, the Company may
investigate businesses of essentially any kind or nature. The
Company’s discretion is unrestricted, and the Company may participate in any
business whatsoever that may meet the business objectives discussed
herein. It is emphasized that such business objectives are extremely
general and are not intended to be restrictive upon the discretion of the
Company.
The
Company will not restrict its search to any specific industry, but may acquire
an entity that is (i) in its preliminary or development stage or (ii) a going
concern. At this time, it is impossible to determine the needs of the
business in which the Company may seek to participate, and whether such business
may require additional capital or may be seeking other advantages that the
Company may offer. In other instances, possible business endeavors
may involve the acquisition of a company that does not need additional equity,
but, rather, seeks to establish a public trading market for its
securities. At the current time, the Company has not chosen the
particular area of business in which it proposes to engage.
Employees
The
Company currently has one sole officer and director and he is not being paid
any
salary.
Organizational
History and Background
We
are a
development stage company with a limited operating history organized as a
Delaware corporation in September 1997. In September 2007, the
Company issued 3,846,154 shares of its common stock to John Thomas Bridge and Opportunity
Fund,
LLP (“John Thomas”) in exchange for $100,000. In October 2007,
the Company (i) sold substantially all of the assets of the Company to Jim
McCullough, the Company's then chief executive officer, and issued 8,300,205
shares of the Company’s common stock to McCullough in exchange for McCullough
forgiving $405,673 in debt owed to him and his affiliates by the Company, (ii)
accepted the resignation of Jim McCullough and Richard Mann as members of the
Company's board of directors, (iii) elected Dwayne Deslatte to serve as the
Company's sole director, (iv) accepted the resignation of Jim McCullough as
its
president, and (v) appointed Dwayne Deslatte to serve as the Company's sole
executive officer. Upon completion of the sale of all of the
Company’s assets, the Company ceased all business operations and began seeking
potential acquisition opportunities. As of the date hereof, the
Company has not entered into any acquisition arrangements.
In
October 2007, Jim McCullough sold
11,100,205 of his shares of Mac Filmworks to John Thomas in exchange for
$200,000. These shares, plus the 3,846,154 shares purchased from the Company
by
John Thomas, resulted in John Thomas acquiring approximately 62% ownership
of
Mac Filmworks.
ITEM
2.
DESCRIPTION OF PROPERTY
The
Company’s current principal office of 200 square feet on a rent-free basis is
located at 3 Riverway, Suite 1800, Houston, Texas 77056.
None.
In
October 2007, the Company’s stockholders owning 6,577,416 shares, or 56% of the
then outstanding shares of common stock, took the following action by written
consent: (i) approved the sale of substantially all of the assets of the
Company; (ii) approved the sale and issuance of 3,846,154 shares of the
Company’s common stock to John Thomas at a purchase price of $0.026 per share;
and (iii) elected Dwayne Deslatte to serve as the Company’s sole
director.
In
November 2007, the Company’s majority shareholder, owning 14,946,359 shares, or
62% of the then outstanding shares of the common stock approved the amendment
to
the Company’s certificate of incorporation to implement a reverse stock split of
the Company’s common stock at a ratio of not less than 10-for-1 and not greater
than 30-for-1, with the exact ratio to be set within such range in the
discretion of the Board of Directors, without further approval or authorization
of shareholders, provided that the Board of Directors determines to effect
the
reverse stock split and such amendment is filed with the Delaware Secretary
of
State no later than December 31, 2008.
Market
Information
Our
common stock trades
on the OTC Bulletin Board under the symbol “MFWO.” The market for our common
stock on the OTC Bulletin Board is limited, sporadic and highly volatile. The
following table sets forth the approximately high and low closing sales prices
per share as reported on the OTC Bulletin Board for our common stock for the
last two fiscal years. Our common stock commenced trading on the OTC Bulletin
Board on January 24, 2004. The quotations reflect inter-dealer prices, without
retail markups, markdowns, or commissions and may not represent actual
transactions.
|
High
|
Low
|
|||||||
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Year
2007
|
||||||||
|
Quarter
ended December 31
|
0.03 | 0.02 | ||||||
|
Quarter
ended September 30
|
0.10 | 0.03 | ||||||
|
Quarter
ended June 30
|
0.40 | 0.12 | ||||||
|
Quarter
ended March 31
|
0.25 | -- | ||||||
|
Year
2006(1)
|
||||||||
|
Quarter
ended December 31
|
-- | -- | ||||||
|
Quarter
ended September 30
|
-- | -- | ||||||
|
Quarter
ended June 30
|
-- | -- | ||||||
|
Quarter
ended March 31
|
-- | -- | ||||||
__________
(1)
The Company’s common stock did not trade during this time period.
Equity
Compensation Plan Information
In
January 1998, the Board of Directors and majority stockholders adopted a stock
option plan under which 500,000 shares of common stock have been reserved for
issuance. As of the date hereof, no options have been granted under the
plan.
Holders
of Record
As
of
March 25, 2008, we had 192 shareholders of record.
Recent
Sales of Unregistered Securities
Set
forth
below is certain information concerning issuances of common stock that were
not
registered under the Securities Act of 1933 (“Securities Act”) that occurred in
the fourth quarter of fiscal 2007 and to date:
In
September 2007, the Company issued 3,846,154 shares of its common stock to
John Thomas at a purchase price
of
$0.026 per share for an aggregate investment of $100,000.
In
October 2007, Mac Filmworks completed
an asset sale transaction whereby Mac Filmworks issued 8,300,205 shares of
the
Company’s common stock and transferred substantially all of the Company’s assets
to Jim McCullough, its then chief executive officer, in exchange for McCullough
forgiving $405,673 in debt owed by Mac Filmworks to McCullough and his
affiliates.
In
February 2008, the Company issued
100,000 shares of the Company’s Common Stock to Dwayne Deslatte, its sole
officer and director, for services rendered. The shares were valued
at $2,000.
In
February 2008, the Company issued
100,000 shares of the Company’s Common Stock to a third party consultant for
services rendered. The shares were valued at
$2,000.
In
February 2008, the Company sold
384,615 shares of the Company’s Common Stock to John Thomas at a purchase price
of $0.026 per share for an aggregate investment of $10,000.
The
issuances referenced above were consummated pursuant to Section 4(2) of the
Securities Act and the rules and regulations promulgated thereunder on the
basis
that such transactions did not involve a public offering and the offerees were
sophisticated, accredited investors with access to the kind of information
that
registration would provide. The recipients of these securities represented
their
intention to acquire the securities for investment only and not with a view
to
or for sale in connection with any distribution thereof and appropriate legends
were affixed to the share certificates and other instruments issued in such
transactions. No sales commissions were paid.
The
following discussion of our financial condition and results of operations should
be read in conjunction with the accompanying financial statements and the
related footnotes thereto.
Overview
Through
September 2007, the Company was an entertainment company with a business
strategy to acquire, license, distribute and/or sell classic movies, TV serials
and other film products. Since our inception, we have operated as a development
stage company. In
September 2007, the Company sold substantially all the assets of the Company
to
Jim McCullough, its then chief executive officer. Upon
completion of the sale of all of the Company’s assets, the Company ceased all
business operations and began seeking potential acquisition
opportunities.
Management
plans to maintain the
long-term financial viability of the Company by
seeking another entity
with
which to consummate an acquisition
or merger
agreement. Management believes its plan will provide us with the wherewithal
to
continue in existence. As of the date
hereof, the
Company has not entered into any acquisition arrangements.
The
Company’s financial statements have
been prepared assuming that the Company will continue as a going concern.
The Company incurred net loss from operations for the twelve months
ended
December 31, 2007, and has negative cash flows from operations for the twelve
months ended December 31, 2007. These conditions raise substantial doubt as
to
the Company’s ability to continue as a going concern.
Critical
Accounting Policies
The
Financial Statements and Notes to Financial Statements contain information
that
is pertinent to this management's discussion and analysis. The preparation
of
financial statements in conformity with accounting principles generally accepted
in the United States requires management to make estimates and assumptions
that
affect the reported amounts of assets and liabilities and disclosure of any
contingent assets and liabilities. Management believes these accounting policies
involve judgment due to the sensitivity of the methods, assumptions and
estimates necessary in determining the related asset and liability amounts.
Management believes it has exercised proper judgment in determining these
estimates based on the facts and circumstances available to its management
at
the time the estimates were made. The significant accounting policies are
described in the Company's financial statements (See Note 1 in the Notes to
Financial Statements).
Revenue
Recognition
We
have
ceased operations and do not anticipate generating revenues in the foreseeable
future. Historically, we recognized revenue in accordance with
Statement of Accounting Position 00-2 "Accounting by Producers or Distributors
of Films." Revenue was recognized from a sale or licensing arrangement of a
film
when persuasive evidence of a sale or licensing arrangement with a customer
exists; the film was complete and, in accordance with the terms of the
arrangement, had been delivered or was available for immediate and unconditional
delivery; the license period of the arrangement had begun and the customer
began
its exploitation, exhibition or sale; the arrangement fee was fixed or
determinable; and collection of the arrangement fee was reasonably
assured.
Income
Taxes
Mac
Filmworks recognizes deferred tax assets and liabilities based on differences
between the financial reporting and tax bases of assets and liabilities using
the enacted tax rates and laws that are expected to be in effect when the
differences are expected to be recovered. Mac Filmworks provides a valuation
allowance for deferred tax assets for which it does not consider realization
of
such assets to be more likely than not.
Results
of Operations
The
Company generated $60,176 in revenues from discontinued operations, which amount
is embedded the Company’s overall net loss of $609,726 from discontinued
operations for fiscal 2007. The Company had net loss from discontinued
operations in the amount of $691,791 for fiscal 2006. Total operating expenses increased
from
zero in 2006 to $21,443 in 2007. Loss from discontinued operations
decreased from $691,791 in 2006 to $599,590 in 2007.
In
fiscal
2007 and fiscal 2006, the net cash used in discontinued operations was $325,450
and $365,919, respectively. Net cash used in investing activities was
$41,660 in 2007, and net cash provided by investing activities was 175,000
in
2006. Net cash provided by financing activities was $216,240 in 2007
and $1,253 in 2006.
Discontinued
Operations
In
October 2007, the Company sold its assets to the then chief executive officer
and entered into a series of transactions that resulted in a change of control
and a new business direction, as was discussed in the Description of Business
section of Item I. The Company’s operations in the film business are
presented as discontinued operations. As part of the
discontinued operations, the Company recognized $60,176 in revenues and a net
loss from discontinued operations of ($609,726) for the twelve months ended
December 31, 2007.
Liquidity
As
of
December 31, 2007, we had $9,410 in cash, $35,277 in current liabilities, which
amount primarily constitutes professional fees owed, and a working capital
deficit of $25867. In September 2007, our Company ceased distributing
and selling film products and has generated no revenues since that
time. We do not anticipate generating any revenues in the foreseeable
future.
During
the next twelve months, our Company's only foreseeable cash requirements will
relate to maintaining our good standing in the State of Delaware and reporting
obligations as a publicly-traded company. On February 18, 2008, to assist in
funding these obligations, the Company sold 384,615 shares of the Company’s
Common Stock to John Thomas at a purchase price of $0.026 per share for an
aggregate investment of $10,000. Our Company does not have any
additional cash reserves to pay for our administrative expenses for the next
12
months. In the event that additional funding is required in order to keep our
Company in good standing, we will attempt to raise such funding through a
private placement of our common stock to accredited investors.
As
of
December 31, 2007, the Company had no contractual commitments.
Off-Balance
Sheet Arrangements
As
of
December 31, 2007, the Company had no off-balance sheet
arrangements.
To
the Board of
Directors
Mac
Filmworks, Inc.
(A
Development Stage
Company)
3
Riverway, Suite
1800
Houston,
Texas 77056
We
have audited the accompanying balance
sheets of Mac Filmworks, Inc. (A Development Stage Company) as of December
31,
2007, and the related statements of operations, stockholders' deficit, and
cash
flows for each of the years then ended December 31, 2007 and 2006, and for
the
period from November 22, 1994 (Inception) through December 31, 2007. These
financial statements are the responsibility of Company’s management. Our
responsibility is to express an opinion on these financial statements based
on
our audits.
We
conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan
and perform the audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration
of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose
of
expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. Accordingly, we express no such opinion. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well
as evaluating the overall financial statement presentation. We believe that
our
audits provide a reasonable basis for our opinion.
In
our opinion, the financial statements
referred to above present fairly, in all material respects, the financial
position of Mac Filmworks, Inc. at December 31, 2007, and the results of its
operations and its cash flows for each of the years ended December 31, 2007
and
2006 and the period from November 22, 1994 (Inception) through December 31,
2007, in conformity with accounting principles generally accepted in the United
States of America.
The
accompanying financial statements
have been prepared assuming that the Company will continue as a going concern.
As discussed in Note 2 to the financial statements, the Company has incurred
losses from operations and has negative cash flows from operations which raises
substantial doubt about its ability to continue as a going concern. Management's
plans concerning these matters are described in Note 2. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
Malone
&
Bailey,
PC
Houston,
Texas
www.malone-bailey.com
March
27, 2008
(A
Development Stage Company)
December
31, 2007
|
Assets
|
||||
|
Current
Assets
|
||||
|
Cash
|
$
|
9,410
|
||
|
Total
Assets
|
$
|
9,410
|
||
|
Liabilities
and Stockholders'
Deficit
|
||||
|
Current
Liabilities
|
||||
|
Accounts
payable
|
$ |
35,277
|
||
|
Total
Current
Liabilities
|
35,277
|
|||
|
Contingencies
|
--
|
|||
|
Stockholders'
Deficit
|
||||
|
Preferred
stock, $.0001 par,
10,000,000 shares
|
||||
|
authorized,
no shares issued or
outstanding
|
--
|
|||
|
Common
stock, $.0001 par,
50,000,000 shares
|
||||
|
authorized,
23,951,017 shares
issued and outstanding
|
2,395
|
|||
|
Paid-in
capital | ||||