ITEM 1. BUSINESS
Statements in this Form 10-K Annual Report may be “forward-looking statements.” Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by our management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and probably will, differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors, including those described above and those risks discussed from time to time in this Form 10-K Annual Report, including the risks described under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in other documents which we file with the Securities and Exchange Commission (“SEC”).
In addition, such statements could be affected by risks and uncertainties related to our financial condition, factors that affect our industry, market and customer acceptance, competition, government regulations and requirements, pricing, general industry and market conditions, growth rates, and general economic conditions. Any forward-looking statements speak only as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this Form 10-K Annual Report.
General Development of Business
Fulucai Productions Ltd. was incorporated on March 26, 2010 under the laws of the State of Nevada and is referenced herein as either "Fulucai", "the Company", "we", "us" or "our". We are a development stage independent concept developer in the field of television and motion pictures having our principal office located at 55 Broad Street, 15th Floor, New York, NY10004. Our phone number is (646) 967-4459 and our e-mail is rthayercapital@aol.com. Our website is at www.fulucai.tv.
Currently, we are a television and movie production company. Our initial plan of operation was to develop reality-based show concepts for sale to television and Internet production interests. This planned development was expected to include the production of “trailers”. Trailers are short videos that demonstrate the concept to potential buyers. We developed our first reality show, however, we were unable to find a buyer and we determined to undertake production of a full-length feature film, “Inevitable” which was completed as of May 20, 2012 for approximately $11,000.
On March 28, 2011, the Company and Octacation Productions Ltd. (“Octacation”) entered into a Development Agreement under which the Company was to provide video production and post-production services for the development of a marketing video for Octacation’s movie, “Smack in the Middle of Nowhere”.
Under the terms of the Agreement, the Company was to provide video production and post-production services, voice acquisition and mixing, sound effects, non-union actors, craft services, direction, and editing. Any and all other services, including music, are considered extras and billed on a cost-plus-20% basis. During May, 2011, Octacation experienced a disruption in its operations due to a situation where it could not access its funds in order to progress the contract with the Company and on May 31, 2011 due to a lack of available funding Octacation terminated its agreement with the Company.
On October 14, 2011, the Company and its President at the time, James Durward, entered into a Royalty Agreement whereby the Company acquired all rights to the intellectual property known as “All the Wrong Reasons” as registered with the Writer’s Guild of America Registration Number 1533357 (the “Production”). Mr. Durward will receive a 20% gross overriding royalty on any and all worldwide revenues generated by, or derived from, the production. The production was re-named “Inevitable” and is referred to previously in this section.
On April 4, 2012, the Company and SFT Diversified Global LLC (“SFT”) entered into an Assignment Agreement (the “Agreement”) whereby SFT assigned all rights and interest in an option agreement between SFT and Orion Oil & Gas Properties, a Texas General Partnership (the “Option”). Under the terms of the Option, the Company acquired the rights to acquire certain surface and sub-surface mineral rights, including but not limited to natural gas and oil mineral rights being, lying and situated in the Counties of Cherokee, DeKalb, Etowah, Jackson and Marshall, in the State of Alabama, subject to an initial deposit for the Option of $1,000,000. The Company was unable to raise the funds required under the Option and on May 31, 2012, the Agreement was in default and the Company determined in early June not to pursue the Option.
On June 29, 2012, we finalized negotiations with Equine Venture Group, Inc. (“Equine”) and entered into an acquisition agreement with Equine and Equine’s sole shareholder, Jennifer Serek (“Serek”) to acquire all of the issued and outstanding shares of Equine. The transaction with Equine was not completed.
The Company submitted the Production to a variety of film festivals world-wide in an attempt to have it picked up for distribution. Effective November 15, 2012, the Company entered into a licensing and distribution agreement with ConvergTV (CGTV) whereby CTV was granted the worldwide rights and license to the movie Inevitable (the “Program”) for a period of two years commencing November 15, 2012. CGTV will get any and all License Rights, all rights of distribution, the right to copy and reproduce the Program, the right to create derivative works of the Program for the purpose of creating branding elements and short form promotional materials (“Promotional Works”), the right to sell copies, the right to import and export the Program and the Promotional Works, the right to display the Program and Promotional Works publicity, the right to transmit the Program and Promotional Works through any transmission or delivery method that exists today, or that is created in the future, to any number of devices or users, including transmission through simultaneous delivery or streaming, and the right to sublicense and/or assign some or all of these rights to others. The Company will receive a share of the revenues from revenues earned by CGTV in regard to its licensing and distribution. There have been no revenues or expenses related to the CGTV contract in regard to Inevitable to the date of this filing. ConvergTV has advised that the channel that is supposed to carry Inevitable has not yet been launched and that the launch date is not known at this time.
The Company intends to continue to pursue its original business plan, however, the loss of James Durward and Gordon Rix as directors and officers may make it more difficult for the Company to progress its currently planned business.
On April 26, 2013, the Board of Directors appointed Robert Thayer as the President, Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer of the Company. Mr. Thayer intends to review the currently business of the Company and also to review other business opportunities that may be available to the Company.
On July 23, 2013, Mr. Thayer resigned as Chief Executive Officer of the Company and Mr. Mohammad Fazil was appointed Chief Executive Officer, a member of the Board of Directors and Chairman of the Board.
OUR CURRENT BUSINESS IN TELEVISION AND MOVIE PRODUCTION
TELEVISION CONCEPT
The Real Deal
The Real Deal was our first reality show television concept. The first series of The Real Deal was completed in March, 2011 and, using the first series as a marketing tool, we started to seek licensors for the concept. We were unable to find any licensors of The Real Deal.
Video and Post Production Contract - Movie Script
On March 28, 2011, the Company and Octacation Productions Ltd. (“Octacation”) entered into a Development Agreement whereby the Company was to provide video production and post-production services for the development of a marketing video for Octacation’s movie, “Smack in the Middle of Nowhere”.
Under the terms of the Agreement the Company was to provide video production and post-production services, voice acquisition and mixing, sound effects, non-union actors, craft services, direction, and editing. Any and all other services, including music, will be considered extras and billed on a cost-plus-20% basis.
On or before April 29, 2011, Octacation was to provide the Company with ten (10) storyboarded scenes and scripted dialogue, if any, to be used by the Company as guidance for the Trailer production. Prior to April 29, 2011, Octacation delivered to the Company the required storyboarded scenes and planning of the trailer commenced. During May, 2011, Octacation experienced a disruption in its operations due to a situation where it could not access its funds in order to progress the contract with the Company and on May 31, 2011 due to a lack of available funding Octacation terminated its agreement with the Company.
Movie Production Agreement
On October 14, 2011, the Company and its President at the time, James Durward, entered into a Royalty Agreement whereby the Company has acquired all rights (“Rights”) to the intellectual property known as “All the Wrong Reasons” as registered with the Writer’s Guild of America Registration Number 1533357 (the “Production”). The Production has been re-named "Inevitable". In return for the Rights, the Company has agreed to pay James Durward a 20% gross overriding royalty on any and all worldwide revenues generated by, or derived from, the Production.
As of February 20, 2012, the Production was completed under the name “Inevitable”. Production costs were approximately $11,000. The Company submitted the Production to a variety of film festivals world-wide in an attempt to have it picked up for distribution. .The Company has entered into a distribution agreement with CGTV as described above.
Television Industry Overview
United States Television Distribution
Television rights in the United States are generally licensed first to pay television for an exhibition period following home video release, thereafter to network television for an exhibition period, then to pay television again, and finally syndicated to independent stations. Therefore, the owner of a property may receive payments resulting from television licenses over a period of six years or more.
Movie Distribution
The availability of low-cost, high-quality production equipment combined with the ability to distribute product via the Internet, may be fundamentally changing the way feature-length movies are distributed. Often, a movie that was accepted by a distributor would see a revenue split, reasonably expected in the 50-50 range, and with no guarantee of distribution or revenue. In some cases, an up-front pay might be paid to offset production costs. Today, movies can be self-distributed via the Internet without the involvement of a distributor. This said, there are material costs associated with Internet marketing and those costs could render the movie unprofitable. Independent films, such as the company produces, may be inexpensive to produce but they are very difficult to have seen. Submissions to film festivals are an attempt to attract distributors but there is no guarantee that film festivals will generate any distribution agreements.
Cable and Pay Television
Pay television rights include rights granted to cable, direct broadcast satellite, microwave, pay per view and other services paid for by subscribers. Cable and pay television networks usually license properties for initial exhibition commencing six to twelve months after initial domestic theatrical release (if any), as well as for subsequent showings. Some pay television services have required exclusivity as a precondition to such contracts. The pay television market is characterized by a large number of sellers and few buyers. However, the number of properties utilized by these buyers is extremely large.
Network Television
In the United States, broadcast network rights are granted to ABC, CBS, NBC, FOX or other entities formed to distribute programming to a large group of stations. The commercial television networks in the United States license properties for a limited number of exhibitions.
Television Syndication
If the producer has entered into a commercial television network license the property may be shown shortly after its completion through a number of outlets. This activity, known as “syndication,” has become an important source of revenues as the number of, and competition for, programming among local television stations has increased.
Foreign Television Syndication
Properties are now being licensed in the foreign television market in a manner similar to that in the United States. The number of foreign television stations as well as the modes of transmission (i.e., pay, cable, network, satellite, etc.) have been expanding rapidly, and the value of such markets has been likewise increasing and we believe will continue to expand. Producers may license properties to foreign television stations during the same period they license such properties to television stations in the United States; however, governmental restrictions and the timing of the initial foreign theatrical release of the property in the territory may delay the exhibition of such properties in such territory.
Re-licensing
The collective retained rights in a group of previously produced properties is often a key asset, as such properties may be re-licensed in the pay and commercial television, home video and non-theatrical markets.
Production
The Company intends to produce its trailers and movies at the lowest possible cost consistent with the quality that it seeks to achieve. The Company will attempt to avoid the substantial overhead associated with major production companies by maintaining minimal staff. The Company owns some production equipment, but will adopt the standard industry practice of renting production facilities and equipment and engaging free-lance production staff on an “as-needed” basis.
The Company expects the total production period for a Company-produced trailer to generally continue for as long as three months and in some instances, even longer. Feature-length movie production may take up to 12 months or longer. Multiple projects may run concurrently, should we have sufficient funds available to do so.
Distribution Approach
From a business perspective, the primary goal of the Company's ventures is to maximize its revenues to it and to seek to maximize the return on investment of its shareholders; however, there can be no assurance that this goal will be achieved or that increased revenues will equate to a higher return on investment. The ultimate commercial success of any video product is dependent on its distribution. The Company believes that the most important initial objective in achieving this goal is to maximize proceeds from the North American licensing of its concepts, since it considers such markets to be the single most important determinant of a picture's performance in the subsequent markets of home Video/DVD/Podcasts, pay cable and free broadcast television and foreign television syndication.
The Company plans to approach prospective distributors with a completed trailer, thus potentially enhancing its bargaining position with respect to negotiating the terms of the distribution arrangements. The Company may present the trailers at the major television markets held each year in the USA. The producers believe they will have designed trailers to be attractive to distributors since elements of the trailers will be specifically conceived to appeal to some of the most important segments of the reality show-viewing public.
The same approach, augmented by festival submissions, will be used with movie products.
Current Projects
The Company has developed two (2) projects in-house. One is the reality television concept, “The Real Deal”, Writers Guild of Canada Reg. # S10-00417. The Real Deal is a reality show concept that features companies competing for a potential financing. Expert panelists listen to corporate presentations and, through a series of elimination rounds, determine which company is worthy of receiving a financing offer. The target audience is that of popular investment-related shows such as CNBC’s Mad Money and ABC’s Shark Tank (both in the US) and Dragon’s Den and BNN (in Canada). All rights to The Real Deal were acquired from our President at the time, James Durward in return for a 5% gross overriding royalty on all revenues generated by all of the Company’s present and future properties. We have also agreed to pay, to Mr. Gordon Rix who was an officer and director of the Company, a royalty of 1% on all broadcast licensing revenues related to The Real Deal until such time as the Company sells or otherwise disposes of The Real Deal rights. We have also agreed to pay, to Douglas MacLeod, an unaffiliated consultant, a royalty of .5% on all broadcast licensing revenues related to The Real Deal until such time as the Company sells or otherwise disposes of The Real Deal rights. There are no plans to sell or otherwise dispose of these rights at this time.
We have purchased equipment necessary to operate a small video production facility, that equipment is currently in the possession of our controlling stockholder and past President, James Durward where he stores it free of charge in exchange for its use on other projects he is undertaking.
On October 14, 2011, the Company and its President at the time, James Durward, entered into a Royalty Agreement whereby the Company has acquired all rights (“Rights”) to the intellectual property known as “All the Wrong Reasons” as registered with the Writer’s Guild of America Registration Number 1533357 (the “Production”). The Production has been re-named "Inevitable". In return for the Rights, the Company has agreed to pay James Durward a 20% gross overriding royalty on any and all worldwide revenues generated by, or derived from, the Production.
The Company submitted the Production to a variety of film festivals world-wide in an attempt to have it picked up for distribution. Effective November 15, 2012, the Company entered into a licensing and distribution agreement with ConvergTV (CGTV) whereby CTV was granted the worldwide rights and license to the movie Inevitable (the “Program”) for a period of two years commencing November 15, 2012. CGTV will get any and all License Rights, all rights of distribution, the right to copy and reproduce the Program, the right to create derivative works of the Program for the purpose of creating branding elements and short form promotional materials (“Promotional Works”), the right to sell copies, the right to import and export the Program and the Promotional Works, the right to display the Program and Promotional Works publicity, the right to transmit the Program and Promotional Works through any transmission or delivery method that exists today, or that is created in the future, to any number of devices or users, including transmission through simultaneous delivery or streaming, and the right to sublicense and/or assign some or all of these rights to others. The Company will receive a share of the revenues from revenues earned by CGTV in regard to its licensing and distribution. There have been no revenues or expenses related to the CGTV contract for Inevitable to the date of this filing. ConvergTV has advised that the channel that is supposed to carry Inevitable has not yet been launched and that the launch date is not known at this time.
Distribution Arrangements
Effective distribution is critical to the economic success of a television or movie product, particularly when made by an independent production company. We have not as yet negotiated any distribution agreements.
For any television concepts, we intend to market our trailers to existing distribution companies, primarily independent distributors. We will retain the right for ourselves to market our product on a jurisdiction-by-jurisdiction basis throughout the rest of the world and to market television and other uses separately. In many instances, depending upon the nature of distribution terms available, it may be advantageous or necessary for us to license all, or substantially all, distribution rights through one major distributor. For feature-length movies, we intend to attract distribution by way of film festival submissions and by direct Internet marketing should funds be available to do so.
To the extent that we may engage in foreign distribution of our products, we will be subject to all of the additional risks of doing business abroad including, but not limited to, government censorship, currency fluctuations, exchange controls, greater risk of "piracy" copying, and licensing or qualification fees.
It is not possible to predict, with certainty, the nature of the distribution arrangements, if any, that we may secure for our development concepts.
Competition
The television and movie production industries are intensely competitive. Competition comes from companies within the same business and companies in other entertainment media that create alternative forms of entertainment. The industry is currently evolving in such a way that certain multinational multimedia firms will be able to dominate this space because of their control over key film, magazine, and television content, as well as key network and cable outlets. These organizations have numerous competitive advantages, such as the ability to acquire financing for their projects and to make favorable arrangements for the distribution of completed product. All of our competitors will likely be organizations of substantially larger size and capacity, with far greater financial and personnel resources and longer operating histories, and may be better able to acquire properties, personnel and financing, and enter into more favorable distribution agreements. Our success will depend on public taste, which is both unpredictable and susceptible to rapid change. As an independent production company, we most likely will not have the backing of a major studio for production and distribution support. Consequently, we may not be able to complete a distribution deal.
In order to be competitive, we intend to create and/or acquire innovative concepts that may appeal to a wide range of public tastes both in the United States and abroad. Moreover, by producing our products in Canada we believe that we will be able to significantly reduce production costs, and thereby offer our products to distributors at competitive pricing. Investors must be aware that at this time we have completed one production known as “Inevitable”, which Production has been submitted to a variety of film festivals world-wide in an attempt to have it picked up for distribution. No such distribution arrangements exist at this time and the terms and conditions of any such a distribution deal, if reached, are unknown. The Company entered into a contract for distribution with CGTV more particularly described above.
Intellectual Property Rights
Rights to motion pictures are granted legal protection under the copyright laws of the United States and most foreign countries, including Canada. These laws provide substantial civil and criminal penalties for unauthorized duplication and exhibition of motion pictures. Motion pictures, musical works, sound recordings, artwork, and still photography are separately subject to copyright under most copyright laws. We plan to take appropriate and reasonable measures to secure, protect, and maintain copyright protection for all of our products under the laws of the applicable jurisdictions. Motion picture piracy is an industry-wide problem. The motion picture industry trade association provides a piracy hotline and investigates all piracy reports. The results of such investigations may warrant legal action, by the owner of the rights, and, depending on the scope of the piracy, investigation by the Federal Bureau of Investigation and/or the Royal Canadian Mounted Police with the possibility of criminal prosecution.
Under the copyright laws of Canada and the United States, copyright in a motion picture is automatically secured when the work is created and "fixed" in a copy. We intend to register our films for copyright with both the Canadian Copyright Office and the United States Copyright Office. Both offices will register claims to copyright and issue certificates of registration but neither will "grant" or "issue" copyrights. Only the expression (camera work, dialogue, sounds, etc.) fixed in a motion picture can be protected under copyright. Copyright in both Canada and the United States does not cover the idea or concept behind the work or any characters portrayed in the work. Registration with the appropriate office establishes a public record of the copyright claim.
Ordinarily, a number of individuals contribute authorship to a motion picture, including the writer, director, producer, camera operator, editor, and others. Under the laws of both the United States, and Canada, these individuals are not always considered the "authors," however, because a motion picture is frequently a "work made for hire." In the case of a work made for hire, the employer, not the individuals who actually created the work, is considered the author for copyright purposes. We intend all of our films to be works made for hire in which we will be the authors and thereby own the copyright to our films.
Canada's copyright law is distinguished from that of the United States by recognizing the moral rights of authors. Moral rights refer to the rights of authors to have their names associated with their work, and the right to not have their work distorted, mutilated or otherwise modified, or used in association with a product, service, cause or institution in a way that is prejudicial to their honor or reputation. Moral rights cannot be sold or transferred, but they can be waived. We intend that all individuals who contribute to the creation of any of our motion pictures will be required to waive any such moral rights that they may have in the motion picture.
For copyright purposes, publication of a motion picture takes place when one or more copies are distributed to the public by sale, rental, lease or lending, or when an offering is made to distribute copies to a group of persons (wholesalers, retailers, broadcasters, motion picture distributors, and the like) for purposes of further distribution or public performance. A work that is created (fixed in tangible form for the first time) on or after January 1, 1978, is automatically protected from the moment of its creation and is ordinarily given a term enduring for the author's life plus an additional 70 years after the author's death. For works made for hire, the duration of copyright will be 95 years from publication or 120 years from creation, whichever is shorter.
Although we plan to copyright all of our film properties and projects, there is no practical protection from films being copied by others without payment to us, especially overseas. We may lose an indeterminate amount of revenue as a result of motion picture piracy. Being a small company, with limited resources, it will be difficult, if not impossible, to pursue our various remedies. Motion picture piracy is an international as well as a domestic problem. It is extensive in many parts of the world. In addition to the Motion Picture Association of America, the Motion Picture Export Association, the American Film Marketing Association, and the American Film Export Association monitor the progress and efforts made by various countries to limit or prevent piracy. In the past, these various trade associations have enacted voluntary embargoes of motion picture exports to certain countries in order to pressure the governments of those countries to become more aggressive in preventing motion picture piracy. The United States government has publicly considered trade sanctions against specific countries that do not prevent copyright infringement of American motion pictures. There can be no assurance that voluntary industry embargoes or United States government trade sanctions will be enacted. If enacted, such actions may impact the revenue that we realize from the international exploitation of our motion pictures. If not enacted or if other measures are not taken, the motion picture industry, including us, may lose an indeterminate amount of revenue as a result of motion picture piracy. (Motion Picture Academy of America, United Drive-In Theater Owners Association and National Association of Theater Owners annual reports 2007, 2008)
Labor Laws
We are aware that the cost of producing and distributing filmed entertainment has increased substantially in recent years. This is due, among other things, to the increasing demands of creative talent as well as industry-wide collective bargaining agreements. Many of the screenplay writers, performers, directors and technical personnel in the entertainment industry who will be involved in our productions are members of guilds or unions that bargain collectively on an industry-wide basis. We have found that actions by these guilds or unions can result in increased costs of production and can occasionally disrupt production operations. If such actions impede our ability to operate or produce a motion picture, it may substantially harm our ability to earn revenue and result in our business to fail. (Screen Actors Guild Codified Agreement). We will use non-unionized talent whenever possible to reduce our costs of production. Notwithstanding, many individuals associated with our productions, including actors, writers and directors, will be members of guilds or unions, that bargain collectively with producers on an industry-wide basis from time to time. Our operations will be dependent upon our compliance with the provisions of collective bargaining agreements governing relationships with these guilds and unions. Strikes or other work stoppages by members of these unions could delay or disrupt our activities. The extent to which the existence of collective bargaining agreements may affect us in the future is not currently known.
Description of Property
We own no real estate property or production facilities. We are presently using office space in New York City, New York, provided at no cost by our President.
Number of Total Employees
Fulucai is currently in the development stage. During the development stage, we plan to rely exclusively on the services of our officers and directors to set up our business operations. Our Officers and Directors currently provide services to the Company at no cost. The President, Mr. Robert Thayer currently works as needed on our business. We believe that our operations are currently on a small scale that is manageable by our Officers and Directors.
The film production professionals we plan to utilize will be considered independent contractors. We do not intend to enter into any employment agreements with any of these professionals. Thus, these persons are not intended to be employees of our Company.
Employment Agreements
There are currently no employment agreements.. There is a gross overriding royalty agreement between the Company and Douglas McLeod whereby Mr. McLeod will provide creative input and project management recommendations with regard to the trailer development and marketing in return for a .5% (one half of one percent) gross overriding royalty on all broadcast licensing revenues generated by the Real Deal. A .5% gross royalty interest in The Real Deal means that for every dollar ($1.00) that is generated as revenue, Mr. McLeod will be entitled to receive $0.005. Douglas MacLeod is a Calgary based independent producer who has been involved in the Canadian film and television industry for over thirty-five years, executive producing and producing feature films, television movies and prime time dramatic series for domestic and international markets. Doug has also served on the Board of Directors of the Canadian Film & Television Production Association, is a former co-chair of the Government of Alberta’s Film and Television Advisory Committee and is a Past President of the Alberta Motion Picture Industry Association. Douglas McLeod is unaffiliated with the Company.
Intellectual Properties
James Durward, the past President and CEO of the Company and our controlling stockholder, contributed all right, title and interest he held along with all ancillary rights in the original works written by himself and as registered with the Writers Guild of Canada (“WGC”) Registration Number S10-00417, and named “The Real Deal”. In return he was granted a 5% gross royalty interest in all of the Company’s products which means that for every dollar that is generated as revenue, Mr. Durward will be entitled to receive $0.05. We have placed no value on these current properties due to the additional difficulty and expense of securing appraisals to comply with the American Institute of Certified Public Accountant’s Statement of Position 00-2.
On October 14, 2011, the Company and its then President, James Durward, entered into a Royalty Agreement whereby the Company has acquired all rights (“Rights”) to the intellectual property known as “All the Wrong Reasons” as registered with the Writer’s Guild of America Registration Number 1533357 (the “Production”). The Production has been re-named "Inevitable". In return for the Rights, the Company has agreed to pay James Durward a 20% gross overriding royalty on any and all worldwide revenues generated by, or derived from, the Production.
The WGC is a guild which represents any/all aspects of writers including but not limited to registration of materials and collective bargaining of/for contracts. Please visit their website at www.wgc.ca for further information. Registration with the WGC is not the same as maintaining a registered copyright. Under U.S. copyright law, all literary works receive copyright protection when a work is complete, registration simply established a definitive date of a work and gives the holder of the copyright the right to, among other things, collect attorney’s fees in the prosecution of infringement claims. Registration with the WGC does not afford the registrant with a right to collect attorney’s fees but it does establish an objective date of a literary work. The Company has not sought copyright protection on its property at this point because a script tends to be revised many times and is generally not complete until production is complete. Once production is completed on each of its projects, the Company intends to file for copyright protection.
Investments in Marketable and Non-Marketable Securities
None
ITEM 1A.
ITEM 1A. RISK FACTORS
The Company is a smaller reporting company and is not required to provide this information.
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS
The Company is a smaller reporting company and is not required to provide this information.
ITEM 2.
ITEM 2. PROPERTIES
The Company does not own any properties or any real estate. Currently office space is provided by our sole officer and director, Robert Thayer, free of charge.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
We know of no pending proceedings to which any director, member of senior management, or affiliate is either a party adverse to us, or has a material interest adverse to us.
ITEM 4.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information, Holders and Dividends
The Company's common stock is currently quoted on the Over-the-Counter Markets (OTC/BB) under the trading symbol “FCPS”.
Following is a report of high and low closing bid prices for each quarterly period for the fiscal year ended April 30, 2013 and April 30, 2012.
The above information was taken from information on OTC Markets. The quotations provided may reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
Holders
As of July 1, 2013, there were 39 record holders of the Company’s common stock (which number does not include the number of stockholders whose shares are held by a brokerage house or clearing agency, but does include such brokerage houses or clearing agencies as one record holder.)
Dividends
We have never declared or paid any cash dividends on our common stock. We intend to retain earnings, if any, to support the development of our business and therefore do not anticipate paying cash dividends for the foreseeable future. Payment of future dividends, if any, will be at the discretion of our board of directors after taking into account various factors, including current financial condition, operating results and current and anticipated cash needs.
Securities Authorized for Issuance under Equity Compensation Plans
The Company does not currently have any equity compensation plans.
Recent Sales of Unregistered Securities
There were no unregistered securities sold or issued by the Company without the registration of these securities under the Securities Act of 1933 in reliance on exemptions from such registration requirements, within the period covered by this report, which have not been previously included in a Quarterly Report on Form 10-Q or a Current Report on Form 8-K.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The Company is a smaller reporting company and is not required to provide this information.
ITEM 7.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Forward-Looking Statements
This annual report contains forward-looking statements relating to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "intends", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential", or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors which may cause our or our industry's actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity or performance. You should not place undue reliance on these statements, which speak only as of the date that they were made. These cautionary statements should be considered with any written or oral forward-looking statements that we may issue in the future. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results, later events or circumstances or to reflect the occurrence of unanticipated events.
In this annual report unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares of our capital stock. The management’s discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP").
Liquidity and Capital Resources
As of April 30, 2013, we had total assets of $11,027 ($17,407 as at April 30, 2012) comprised of $3,836 ($2,718 - April 30, 2012) in cash and $7,191 ($14,689 - April 30, 2012) in fixed assets, being equipment and software. This reflects a decrease of $6,380 in the value of our total assets from $17,407 on April 30, 2012. The decrease in assets is mainly due to the depreciation of our property and equipment in the amount of $7,498 during the fiscal year ended April 30, 2013. As of April 30, 2013, our total liabilities increased to $72,985 from $20,244 as of April 30, 2012 mainly due to an increase in loans payable totaling $67,482 which were used to pay down our accounts payable and operating expenses.
During the fiscal year ended April 30, 2013 we did not generate any revenues as compared to the fiscal year ended April 30, 2012 when we generated $15,750 in revenues due to a production contract for our services.
We do not have sufficient working capital to satisfy our cash requirements for the next twelve months of operations.
Management has determined it will continue with the Company’s movie production business and seek other potential acquisitions to increase stockholder value. Effective November 15, 2012, the Company entered into a licensing and distribution agreement with ConvergTV (CGTV) whereby CTV was granted the worldwide rights and license to the movie Inevitable (the “Program”) for a period of two years commencing November 15, 2012. CGTV will get any and all License Rights, all rights of distribution, the right to copy and reproduce the Program, the right to create derivative works of the Program for the purpose of creating branding elements and short form promotional materials (“Promotional Works”), the right to sell copies, the right to import and export the Program and the Promotional Works, the right to display the Program and Promotional Works publicity, the right to transmit the Program and Promotional Works through any transmission or delivery method that exists today, or that is created in the future, to any number of devices or users, including transmission through simultaneous delivery or streaming, and the right to sublicense and/or assign some or all of these rights to others. The Company will receive a share of the revenues from revenues earned by CGTV in regard to its licensing and distribution. At this time the Company has no way to determine what revenues, if any, it will receive from this agreement. The Company has been advised by CGTV that the station which is to air the Program has not yet been launched and there is no definitive launch date yet announced. No revenues or expenses in regard to the CGTV contract have been generated from this agreement to date.
We anticipate we will require a minimum of $125,000 to settle debt and for working capital as we estimate $50,000 for general and administrative expenses and to pay the fees required to maintain our filing status with the Securities and Exchange Commission and the Alberta Securities Commission, where we are also required to file, for the next twelve months. This amount does not assume any costs for additional productions or additional acquisitions, the amounts of which we cannot estimate at this time. The Company has not determined whether to undertake further production projects at this time, but will continue to seek agreements to license its currently developed projects. We will be required to raise additional capital to continue operations. There can be no assurance that we will be able to raise any funds on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will not be able to meet our other obligations as they become due and we may be forced to cease the operation of the business. We currently do not have any negotiated funding available. It is unsure as to how we will raise the required funds to continue our current business or to fund our required filings with the requisite regulatory bodies. It will be important that we access funding or seek new projects which are easily funded if we are to maintain our filings and build shareholder value.
There is substantial doubt about our ability to continue as a going concern as the continuation of our business is dependent upon achieving success in our television and movie production efforts and ultimately having a profitable level of operations or finding and acquiring other business opportunities that may generate revenue. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.
Results of Operations
Our operating results for the fiscal year ended April 30, 2013 and 2012 are described below.
Revenues
During the fiscal year ended April 30, 2013 we did not earn any revenue as compared to revenue earned of $15,750 during the comparable period ended April 30, 2012.
There can be no assurance that we will continue to generate revenues from our current business or any new business opportunities we may identify and acquire.
Expenses
Our operations losses for fiscal 2013 and 2012 remained relatively constant. Our operating loss, for the fiscal year ended April 30, 2013 was $57,436 as compared to a net loss of $58,595 for the same period ended April 30, 2012, of which $7,498 for the twelve month period ended April 30, 2013 was depreciation as compared to $6,901 for the same period ended April 30, 2012, $27,216 ($35,513 - 2012) was incurred for professional fees, including legal and audit, and $17,722 ($16,931 - 2012) for general office expenses, $5,000 for directors fees ($Nil - 2012,), offset by a reduction in consulting fees to nil from $7,000 (2012) and reduction in video production fees to nil from $8,000 (2012). Interest expense was $1,685 for the twelve months ended April 30, 2013 ($nil - 2012) resulting in a net loss of $59,121 for the fiscal year ended April 30, 2013 ($58,595 - 2012).
Basic and diluted loss per share for the fiscal year ended April 30, 2013 and 2012 was ($0.00).
Tabular Disclosure of Contractual Obligations
There are no Contractual Obligations.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
This Company is a smaller reporting company and is not required to provide this information.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements and supplementary data required by this Item 8 are listed in Item 15(a) (1) and begin on page of this Annual Report on Form 10-K.
FULUCAI PRODUCTIONS LTD.
FINANCIAL STATEMENTS
REPORTED IN UNITED STATES DOLLARS
Russell E. Anderson, CPA
Russ Bradshaw, CPA
William R. Denney, CPA
Sandra Chen, CPA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
FULUCAI PRODUCTIONS LTD.
We have audited the accompanying balance sheets of FULUCAI PRODUCTIONS LTD. (the “company”) as of April 30, 2013 and 2012, and the related statements of operations, changes in stockholders’ equity (deficit), and cash flows for the years ended April 30, 2013 and 2012, and for the period of March 26, 2010 (inception) to April 30, 2013. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
5296 S. Commerce Dr
Suite 300
Salt Lake City, Utah 84107
USA
(T) 801.281.4700
(F) 801.281.4701
Suite A, 5/F
Max Share Center
373 Kings Road
North Point
Hong Kong
(T) 852.21.555.333
(F) 852.21.165.222
abcpas.net
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the 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 audits 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 FULUCAI PRODUCTIONS LTD. as of April 30, 2013 and 2012, and the results of its operations and its cash flows for the years ended April 30, 2013 and 2012, and for the period of March 26, 2010 (inception) to April 30, 2013, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has recurring losses and has not generated significant revenues from its planned principal operations. These factors raise substantial doubt that the Company will be able to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Anderson Bradshaw PLLC
Salt Lake City, Utah
July 25, 2013
FULUCAI PRODUCTIONS LTD.
(A development stage enterprise)
Balance Sheets
The accompanying notes are an integral part of these financial statements
FULUCAI PRODUCTIONS LTD.
(A development stage enterprise)
Statements of Operations
The accompanying notes are an integral part of these financial statements
FULUCAI PRODUCTIONS LTD.
(A development stage enterprise)
Statement of Changes in Shareholders' Equity (Deficit)
The accompanying notes are an integral part of these financial statements
FULUCAI PRODUCTIONS LTD.
(A development stage enterprise)
Statements of Cash Flows
The accompanying notes are an integral part of these financial statements
FULUCAI PRODUCTIONS LTD.
(A development stage enterprise)
Notes to the Financial Statements
Note 1 - Organization and summary of significant accounting policies
Following is a summary of our organization and significant accounting policies:
Organization and nature of business - Fulucai Productions Ltd. (identified in these footnotes as “we” or “the Company”) is a Nevada corporation incorporated on March 26, 2010. The Company relocated its offices from Calgary, Alberta to New York, USA concurrent with the appointment in April 2013 of a new officer and director. We intend to operate in the U.S. and Canada. Our fiscal year end is April 30 for financial reporting purposes. Our website can be viewed at www.fulucai.tv.
Currently, we are a television and movie production company. Our initial plan of operation was to develop reality-based show concepts for sale to television and Internet production interests. This planned development was expected to include the production of “trailers”. Trailers are short videos that demonstrate the concept to potential buyers. We developed our first reality show, however, we were unable to find a buyer and we determined to undertake production of a full-length feature film which has been completed and is currently licensed as further described herein.
In the current development stage, we anticipate incurring operating losses as we implement our business plan.
Basis of presentation - The accounting and reporting policies of the Company conform to U.S. generally accepted accounting principles applicable to development stage enterprises.
Use of estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and cash equivalents - For purposes of the statement of cash flows, we consider all cash in banks, money market funds, and certificates of deposit with an original maturity of less than three months to be cash equivalents.
Fair value of financial instruments and derivative financial instruments - The carrying amounts of cash and current liabilities approximate fair value because of the short maturity of these items. These fair value estimates are subjective in nature and involve uncertainties and matters of significant judgment, and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect these estimates. We do not hold or issue financial instruments for trading purposes, nor do we utilize derivative instruments in the management of our foreign exchange, commodity price or interest rate market risks.
Fixed assets - Property, plant and equipment is valued at cost less accumulated depreciation and impairment losses. If the costs of certain components of an item of property, plant and equipment are significant in relation to the total cost of the item, they are accounted for and depreciated separately. Depreciation expense is recognized using the straight-line method and is amortized over the estimated useful life of the related asset. The following useful lives are assumed:
Furniture & office equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 - 5 years
FULUCAI PRODUCTIONS LTD.
(A development stage enterprise)
Notes to the Financial Statements
Note 1 - Organization and summary of significant accounting policies (continued)
Revenue recognition for services - The Company recognizes revenue for services using the completed performance method, which is applied when more than one act must be performed to complete a service, and when the final act is so significant to the entire transaction taken as a whole, that performance cannot be considered to have taken place until the performance of that final act occurs, at which time revenue in respect of the service will be recognized.
Federal income taxes - Deferred income taxes are reported for timing differences between items of income or expense reported in the financial statements and those reported for income tax purposes in accordance with ASC Topic 740 regarding Accounting for Income Taxes, which requires the use of the asset/liability method of accounting for income taxes. Deferred income taxes and tax benefits are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and for tax loss and credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company provides deferred taxes for the estimated future tax effects attributable to temporary differences and carryforwards when realization is more likely than not.
Net income per share of common stock - We have adopted ASC Topic 260 “Earnings per Share”, which requires presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. In the accompanying financial statements, basic earnings per share of common stock is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period.
Development Stage Company:
The accompanying financial statements have been prepared in accordance with ASC Topic 915 "Accounting and Reporting by Development Stage Enterprises". A development stage enterprise is one in which planned principal operations have not commenced or if its operations have commenced, there has been no significant revenue therefrom. Development stage companies report cumulative costs from the enterprise's inception.
Note 2 - Going concern:
At April 30, 2013, we had limited operations and we expect to incur development stage operating losses as we continue to develop our operating business. We raised sufficient funds under our prospectus offering to fund our initial business plan, and we have been able to raise sufficient funds by way of loans for ongoing operations. Based solely on limited operations of the Company to maintain its reporting requirements, we do not have sufficient funds to fund our operations over the next twelve months. We will need to raise additional capital for operations and to pursue any new business opportunities or to undertake any further production projects, the amounts of which cannot be known at this time.
There is substantial doubt about our ability to continue as a going concern as the continuation of our business is dependent upon achieving success with our current production and raising funds for operations and to expand our business and ultimately having a profitable level of operations.
FULUCAI PRODUCTIONS LTD.
(A development stage enterprise)
Notes to the Financial Statements
Note 3 - Acquisition of Media Rights:
On inception, our Company’s then CEO and director, Mr. James Durward, transferred all rights to the title and interest he held along with all ancillary rights in the following original work written by himself: “The Real Deal”, Writers Guild of Canada Reg. # S10-00417 (the “Properties”). Mr. Durward became the controlling shareholder of the Company on April 28, 2010. We have not placed any value on these Properties due to the additional difficulty and expense of securing appraisals to comply with ASC Topic 926 (Entertainment-Films). In respect of these and all future properties Mr. Durward has a 5% (five percent) gross overriding royalty on all revenues generated. Our then CFO, Secretary Treasurer and director Mr. Gordon Rix was granted a 1% (one percent) gross overriding royalty on all broadcast licensing revenues generated by “The Real Deal”. Mr. Douglas MacLeod, an unrelated third party also holds a .5% (one half of one percent) gross overriding royalty on all broadcast licensing revenues generated by “The Real Deal”, bringing total broadcast licensing royalties payable to all parties to 6.5% (six and one half percent).
On October 14, 2011, the Company and its then President, James Durward, entered into a Royalty Agreement whereby the Company has acquired all rights (“Rights”) to the intellectual property known as “All the Wrong Reasons” as registered with the Writer’s Guild of America Registration Number 1533357 (the “Production”). The Production has been re-named "Inevitable". In return for the Rights, the Company agreed to pay James Durward a 20% gross overriding royalty on any and all worldwide revenues generated by, or derived from, the Production.
As of February 20, 2012, the Production was completed. Production costs were approximately $11,000. The Company submitted the Production to a variety of film festivals world-wide in an attempt to have it picked up for distribution. Effective November 15, 2012, the Company entered into a licensing and distribution agreement with ConvergTV (CGTV) whereby CTV was granted the worldwide rights and license to the movie Inevitable (the “Program”) for a period of two years commencing November 15, 2012. CGTV will get any and all License Rights, all rights of distribution, the right to copy and reproduce the Program, the right to create derivative works of the Program for the purpose of creating branding elements and short form promotional materials (“Promotional Works”), the right to sell copies, the right to import and export the Program and the Promotional Works, the right to display the Program and Promotional Works publicity, the right to transmit the Program and Promotional Works through any transmission or delivery method that exists today, or that is created in the future, to any number of devices or users, including transmission through simultaneous delivery or streaming, and the right to sublicense and/or assign some or all of these rights to others. The Company will receive a share of the revenues from revenues earned by CGTV in regard to its licensing and distribution. There have been no revenues or expenses related to Inevitable to April 30, 2013 since the agreement with CGTV began. ConvergTV has advised that the channel that is supposed to carry Inevitable has not yet been launched and that the launch date is not known at this time.
Note 4 - Service agreements
On March 28, 2011, Fulucai Productions Ltd. (the “Company”) and Octacation Productions Ltd. (“Octacation”) entered into a Development Agreement (the “Agreement”) whereby the Company was to provide video production and post-production services (the “Services”) for the development of a marketing video (the “Trailer”) for Octacation’s movie, “Smack in the Middle of Nowhere”.
Under the terms of the Agreement, the Company was to provide video production and post-production services, voice acquisition and mixing, sound effects, non-union actors, craft services, direction, and editing. Any and all other services, including music, are considered extras and billed on a cost-plus-20% basis.
Gordon Rix, a director and officer of the Company at the time of the transaction, licensed the rights to “Smack in the Middle of Nowhere” to Octacation Productions Ltd. Mr. Rix abstained from voting on the entry into the Agreement between Octacation and the Company.
FULUCAI PRODUCTIONS LTD.
(A development stage enterprise)
Notes to the Financial Statements
Note 4 - Service agreements (continued)
On or before April 29, 2011, Octacation was to provide the Company with ten (10) storyboarded scenes and scripted dialogue, if any, to be used by the Company as guidance for the Trailer production. Prior to April 29, 2011, Octacation delivered to the Company the required storyboarded scenes and planning of the trailer commenced.
Octacation agreed to pay the Company a total of US$40,000 for the Trailer development, $15,750 of which was paid upon signing of the Agreement with the balance due within 30 days of the closing of Octacation’s contemplated financing on Form S-1 Registration Statement, which was originally filed on March 22, 2011. The Company was required to deliver the complete Trailer within six months of the final payment. On May 31, 2011, Octacation advised the Company they had withdrawn their Form S-1 Registration Statement and would not be proceeding with the trailer. The Company invoiced Octacation for the amount of the deposit and recorded $15,750 as income for work completed on the project. The balance of the contract was cancelled.
Note 5 - Property and equipment
Property and Equipment consisted of the following at April 30, 2013 and April 30, 2012.
Note 6 - Loan Payable
During the year ended April 30, 2013, the Company received funds in the amount of $30,000 from a third party lender. The amounts owing are unsecured, bear interest at 8% per annum, and are due on demand. During the period ended April 30, 2013, an accrued interest expense in the amount of $26 was reflected in the balance sheets as accounts payable and accrued expenses.
Note 7 - Common Stock
As of April 30, 2013, the Company was authorized to issue 200,000,000 shares of common stock, par value $0.0001 common stock, of which 90,000,000 shares of common stock are issued and outstanding.
Note 8 - Related Party Transactions
During the three month period ended July 31, 2012, the Company received invoices from Mr. Durward, a former director and officer of the Company and a shareholder of the Company, totaling the amount of $9,455 (2011- $12,700) for costs related to video production, equipment, advances for the payment of Company invoices and general administration expenses paid by Mr. Durward on behalf of the Company. The Company made cash payments in the amount of $8,259 to Mr. Durward, leaving the amount of $6,253 due and owing, however, on September 27, 2012, the Company received notification of the assignment of debt from Mr. Durward to Able Star Capital Investment Ltd. (“Able Star”) therefore as at April 30, 2013 the debt to Mr. Durward was retired in full and assigned to a related party as Able Star is a shareholder of the Company.
Both Mr. Durward who is a former director and officer and the majority stockholder of the Company and Mr. Rix, a former director and officer of the Company hold gross overriding royalties on all revenues generated by the Company’s Properties. Please refer to Note 3 - Acquisition of Media Rights for further details.
FULUCAI PRODUCTIONS LTD.
(A development stage enterprise)
Notes to the Financial Statements
Note 8 - Related Party Transactions (continued)
On October 14, 2011, the Company and its then President, James Durward, entered into a Royalty Agreement whereby the Company has acquired all rights (“Rights”) to the intellectual property known as “All the Wrong Reasons” as registered with the Writer’s Guild of America Registration Number 1533357 (now “Inevitable”) (the “Production”). Mr. Durward will receive a 20% gross overriding royalty on any and all worldwide revenues generated by, or derived from, the Production. Please refer to Note 3 - Acquisition of Media Rights for further details.
During the three month period ended July 31, 2012, the Company received funds in the amount of $5,987 (CAD$6,000) from a shareholder of the Company. The Company received notification that as of September 27, 2012, the loan had been assigned to Able Star, a shareholder of the Company. During the year ended April 30, 2013, Able Star paid the amount of $29,290 (including CAD$5,000) due and owing to creditors of the Company. The Company repaid $4,835 during the period ended April 30, 2013 and therefore the total amount of the debt owing to Able Star as at April 30, 2013 was $37,482 which is reflected as loan payable - related party.
The amounts owing to Able Star are unsecured, bear interest at 8% per annum, and are due on demand. During the period ended April 30, 2013, an accrued interest expense in the amount of $1,659 was reflected in the balance sheets as accounts payable and accrued expenses - related party.
During the fiscal year ended April 30, 2013, the Company received invoices from John Demoleas, a former director of the Company for director’s fees totaling $5,000, of which $2,500 was paid during the year. $2,500 due and payable at year end was remitted in full on May 23, 2013.
On April 26, 2013, Mr. Malcolm Albery resigned as President, Secretary, Treasurer Chief Executive Officer and Chief Financial Officer of the Company. Mr. Albery currently remains a Director of On May 9, 2013, Mr. Malcolm Albery resigned as a director of the Company.
On April 26, 2013, Mr. Robert Thayer was elected as President, Secretary, Treasurer Chief Executive Officer and Chief Financial Officer and a director of the Company.
Note 9 - Income taxes
The provision (benefit) for income taxes for the years ended April 30, 2013, and 2012 was as follows (assuming a 34 percent effective tax rate):
FULUCAI PRODUCTIONS LTD.
(A development stage enterprise)
Notes to the Financial Statements
Note 9 - Income taxes (continued)
The Company had deferred income tax assets as of April 30, 2013, and 2012, as follows:
The Company provided a valuation allowance equal to the deferred income tax assets for the fiscal year ended April 30, 2013 because it is not presently known whether future taxable income will be sufficient to utilize the loss carryforwards. As of April 30, 2013, the Company had approximately $178,958 (April 30, 2012 - $119,837) in tax loss carryforwards that can be utilized in future periods to reduce taxable income, and begin to expire in the year 2030.
The Company accounts for income taxes in accordance with ASC Topic No. 740, “Income Taxes.” This standard requires the Company to provide a net deferred tax asset or liability equal to the expected future tax benefit or expense of temporary reporting differences between book and tax accounting and any available operating loss or tax credit carryforwards.
The Company has no tax positions at April 30, 2013 or April 30, 2012 for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.
The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. During the period ended April 30, 2013 the Company recognized no interest and penalties. The Company had no accruals for interest and penalties at April 30, 2013 or April 30, 2012.
The tax returns for the years ended April 30, 2013, 2012 and 2011 are subject to examination by the Internal Revenue Service.
Note 10 - Recent accounting pronouncements
There are no new pronouncements that have current application to the Company, or may be applicable to the Company's future financial reporting.
Note 11 - Subsequent Events
On May 9, 2013, Mr. Malcolm Albery resigned as a director of the Company.
On July 23, 2013, Mr. Robert Thayer resigned as the Chief Executive Officer of the Company and Mr. Mohammad Fazil was appointed a director, Chairman of the Board and Chief Executive Officer of the Company.
The Company has evaluated subsequent events from the balance sheet date through the date that the financial statements were issued and determined that there were no other events to disclose.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
In the fiscal years ended April 30, 2013 and 2012, there have been no changes in the Company’s accounting policies, nor have there been any disagreements with our accountants.
ITEM 9A.
ITEM 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, under supervision and with the participation of the Company’s Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures, as defined under Exchange Act Rule 13a-15(e). Based upon this evaluation, the Principal Executive Officer and Principal Financial Officer concluded that, as of April 30, 2013, because of the material weaknesses in our internal control over financial reporting (“ICFR”) described below, our disclosure controls and procedures were not effective.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that required information to be disclosed in our reports filed or submitted under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that required information to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined under Exchange Act Rules 13a-15(f) and 14d-14(f). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
All internal control systems, no matter how well designed, have inherent limitations and may not prevent or detect misstatements. Therefore, even those systems determined to be effective can only provide reasonable assurance with respect to financial reporting reliability and financial statement preparation and presentation. In addition, projections of any evaluation of effectiveness to future periods are subject to risk that controls become inadequate because of changes in conditions and that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of our internal control over financial reporting as of April 30, 2013. In making the assessment, management used the criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on its assessment, management concluded that, as of April 30, 2013, our internal control over financial reporting was not effective and that material weaknesses in ICFR existed as more fully described below.
As defined by Auditing Standard No. 5, “An Audit of Internal Control Over Financial Reporting that is Integrated with an Audit of Financial Statements” established by the Public Company Accounting Oversight Board (“PCAOB”), a material weakness is a deficiency or combination of deficiencies that results in more than a remote likelihood that a material misstatement of annual or interim financial statements will not be prevented or detected. In connection with the assessment described above, management identified the following control deficiencies that represent material weaknesses as of April 30, 2013:
1)
Lack of an independent audit committee or audit committee financial expert, and no independent directors. We do not have any members of the Board who are independent directors and we do not have an audit committee. These factors may be counter to corporate governance practices as defined by the various stock exchanges and may lead to less supervision over management;
2)
Inadequate staffing and supervision within our bookkeeping operations. We have one consultant involved in bookkeeping functions, who provides two staff members. The relatively small number of people who are responsible for bookkeeping functions and the fact that they are from the same firm of consultants prevents us from segregating duties within our internal control system. The inadequate segregation of duties is a weakness because it could lead to the untimely identification and resolution of accounting and disclosure matters or could lead to a failure to perform timely and effective reviews. This may result in a failure to detect errors in spreadsheets, calculations or assumptions used to compile the financial statements and related disclosures as filed with the SEC;
3)
Outsourcing of our accounting operations. Because there are no employees in our administration, we have outsourced all of our accounting functions to an independent firm. The employees of this firm are managed by supervisors within the firm and are not answerable to the Company’s management. This is a material weakness because it could result in a disjunction between the accounting policies adopted by our Board of Directors and the accounting practices applied by the independent firm;
4)
Insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements;
5)
Ineffective controls over period end financial disclosure and reporting processes.
Management's Remediation Initiatives
As of April 30, 2013, management assessed the effectiveness of our internal control over financial reporting. Based on that evaluation, it was concluded that during the period covered by this report, the internal controls and procedures were not effective due to deficiencies that existed in the design or operation of our internal controls over financial reporting. However, management believes these weaknesses did not have an effect on our financial results. During the course of their evaluation, we did not discover any fraud involving management or any other personnel who play a significant role in our disclosure controls and procedures or internal controls over financial reporting.
Due to a lack of financial and personnel resources, we are not able to, and do not intend to, immediately take any action to remediate these material weaknesses. We will not be able to do so until, if ever, we acquire sufficient financing and staff to do so. We will implement further controls as circumstances, cash flow, and working capital permits. Notwithstanding the assessment that our ICFR was not effective and that there were material weaknesses as identified in this report, we believe that our financial statements contained in our Annual Report on Form 10-K for the period ended April 30, 2013, fairly present our financial position, results of operations, and cash flows for the periods covered, as identified, in all material respects.
Management believes that the material weaknesses set forth above were the result of the scale of our operations and intrinsic to our small size. Management also believes that these weaknesses did not have an effect on our financial results.
We are committed to improving our financial organization. As part of this commitment, we will, as soon as funds are available to the Company (1) appoint outside directors to our board of directors sufficient to form an audit committee and who will undertake the oversight in the establishment and monitoring of required internal controls and procedures; (2) create a position to segregate duties consistent with control objectives and to increase our personnel resources. We will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary, and as funds allow.
This Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.
Changes in Internal Control over Financial Reporting
During the period covered by this report, there were no changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal controls over financial reporting that occurred that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE.
Directors, Executive Officers Promoters and Control Persons
The following table sets forth the name, age and position of each of the members of our board of directors, executive officers, and certain significant employees as of the fiscal year ending April 30, 2013.
Mr. Robert Thayer - Director, President, Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer
On April 26, 2013, the Board of Directors appointed Robert Thayer as the President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer and a Director of the Company. On July 23, 2013, Mr. Thayer resigned as Chief Executive Officer of the Company.
Mr. Thayer joined Federated Payments, Inc., a company providing the merchant services and support for small to midsize business merchants, in December, 2012. On May 2005, Mr. Thayer was President of Social Media Ventures, Inc., formerly NetSky Holdings, Inc., where his duties included the daily management of its social networking sites, ISP subscribers and its other websites.
Previously, from June of 1999 to November of 2005, Mr. Thayer served as Vice President of Sales and Marketing for YourNetPlus. Mr. Thayer held this position for six years and worked closely with both the CEO and President of YourNetPlus. His focus with YourNetPlus was on the retail side, most specifically with the YourNetPlus VISP Program. Mr. Thayer’s duties included developing and managing new channels for VISP distribution, developing strategic alliances, business development, training new sales people, developing sales literature and working with YourNetPlus programmers for new VISP features.
Before YourNetPlus, Mr. Thayer served as Assistant Vice President of Omega Capital in New Jersey for six years. His responsibilities included office management, cold calling and developmental strategies for various marketing opportunities.
Mr. Thayer will be seeking additional acquisitions for the Company in order to build shareholder value. It is expected that Mr. Thayer will be issued shares in relation to his appointment to the Board of Directors, however, it is not known at this time how many shares may be issued or when. Any issuances of shares for services will have to comply with both the regulations of the Securities and Exchange Commission and the Alberta Securities Commission as the Company is a reporting issuer in both the U.S. and Canada.
Mr. Thayer is not presently a director or officer of any other reporting issuers.
Mr. Malcolm Albery - Director
Mr. Albery was appointed President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer and a Director of the Company on November 23, 2012. On April 26, 2013, he resigned as an officer of the Company. On May 9, 2013 he resigned as director of the Company.
Mr. Albery , has been a shareholder and President of Zirco Inc., a company involved in the distribution of oilfield supplies and technology since 1997. Mr. Albery has a B.Sc. in Geology from the University of Calgary in Calgary, Alberta, Canada having graduated in 1985. From September 2008 to August 2010, Mr. Albery was a director and officer of BCO Hydrocarbon Ltd., a reporting issuer in the U.S.
Mr. Albery is not presently a director or officer of any other reporting issuers.
Each director of the Company serves for a term of one year or until the successor is elected at the Company's annual shareholders' meeting and is qualified, subject to removal by the Company's shareholders. Each officer serves, at the pleasure of the board of directors, for a term of one year and until the successor is elected at the annual meeting of the board of directors and is qualified.
There are no family relationships among directors and executive officers. There are no arrangements or understandings between any director or executive officer and any other person(s) pursuant to which a director or executive officer was selected. Our executive officers are elected annually by our Board of Directors.
We know of no pending proceedings to which any director, member of senior management or affiliate is either a party adverse to us, or has a material interest adverse to us.
None of our executive officers or directors within the last five years have been involved in any bankruptcy proceedings, been convicted in or have pending any criminal proceedings, been subject to any order, judgment or decree enjoining, barring, suspending or otherwise limiting involvement in any type of business, securities or banking activity or been found to have violated any federal, state or provincial securities or commodities law.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our Directors, executive officers, and stockholders holding more than 10% of our outstanding common stock, to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in beneficial ownership of our common stock. Executive officers, directors and greater-than-10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file.
Based on a review of Forms 3, 4, and 5 and amendments thereto furnished to the registrant during its most recent fiscal year ending April 30, 2013, the following represents each person who did not file on a timely basis reports required by Section 16(a) of the Exchange Act:
Code of Ethics
As of the date of this report, the Company has not adopted a code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. The Company will consider adopting a code of ethics as it adds additional directors and officers to the Board. Upon adoption, the Company will file a copy of its code of ethics with the Securities and Exchange Commission as an exhibit to its annual report for the period during which the code of ethics is adopted.
Nominating Committee
There have been no material changes to the procedures by which security holders may recommend nominees to the Company's board of directors.
Audit Committee
At this time, the Company is not required to have an audit committee. Further, since there are not sufficient independent members of the Board it is not feasible at this time to have an audit committee. The Board of Directors performs the same functions as an audit committee. The Board of Directors in performing its functions as an audit committee has determined that it does not have an audit committee financial expert.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth information for the individuals who served as the senior executive officers of the Company during any portion of the last two fiscal years.
SUMMARY COMPENSATION TABLE
DIRECTOR COMPENSATION
Name
Fees Earned or Paid in Cash
($)
Stock Awards
($)
Option Awards
($)
All Other Compensation
($)
Total
($)
John Demoleas
5,000
5,000
During the most recent fiscal year, John Demoleas invoiced $5,000 for his role as a director of the Company, of which he was paid $2,500 during the fiscal year ended April 30, 2013 and the balance subsequent to the fiscal year.
The Company has made no other arrangements for the cash remuneration of its directors, except that they will be entitled to receive reimbursement for actual, demonstrable out-of-pocket expenses, including travel expenses, if any, made on the Company’s behalf. No remuneration has been paid to the Company’s directors for services to date.
Compensation Committee
We do not currently have a compensation committee. The Company’s Executive Compensation is currently approved by the Board of Directors of the Company in the case of the Company’s Principal Executive Officer. For all other executive compensation contracts, the Principal Executive Officer will negotiate and approve the contracts and compensation.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
Security Ownership of Certain Beneficial Owners
The following table sets forth information, as of July 25, 2013, with respect to the beneficial ownership of the Company’s Common Stock by each person known by the Company to be the beneficial owner of more than 5% of the outstanding common stock. Information is also provided regarding beneficial ownership of common stock if all outstanding options, warrants, rights and conversion privileges (to which the applicable 5% stockholders have the right to exercise in the next 60 days) are exercised and additional shares of common stock are issued.
Title Of
Class
Name And Address Of Beneficial Owner
Amount And Nature Of Beneficial Owner
Percent Of
Class (1)
Common
James Durward, 3632-13 St SW, Calgary, Alberta, T2T 3R1
65,648,900 Common shares of which 65,000,000 are held directly and 648,900 are held indirectly.
72.94%
Common
Able Star Capital Investment Ltd.
1 Queen Road,
Central Hong Kong
4,750,000 common shares held directly.
5.28%
Security Ownership of Management
The following table shows, as of July 25, 2013, the shares of Fulucai Productions Ltd. Common Stock beneficially owned by each director (including each nominee), by each of the executive officers and by all directors and executive officers as a group. Information is also provided regarding beneficial ownership of common stock if all outstanding options, warrants, rights and conversion privileges (to which the applicable officers and directors have the right to exercise in the next 60 days) are exercised and additional shares of common stock are issued.
Title Of Class
Name Of Beneficial Owner
Amount And Nature Of Beneficial Ownership
Percent of Class
Common
Robert Thayer
Common
All Officers and Directors as a group
0%
Changes in Control
There were no changes in control during the fiscal year ended April 30, 2013.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Certain Relationships and Related Transactions
During the twelve month period ended April 30, 2012, the Company received invoices from Mr. Durward, a director and officer of the Company, totaling the amount of $47,295 (2011- $47,972) for costs related to video production, equipment, advances for payment of invoices received and general administration expenses paid by Mr. Durward on behalf of the Company. Further he invoiced the Company $7,000 for consulting services. The Company paid $49,238 in cash, leaving amount of $5,057 due and owing to Mr. Durward as accounts payable - related party as at April 30, 2012.
Mr. Durward, the majority stockholder of the Company, holds gross overriding royalties on all revenues generated by the Company’s properties. Please refer to Note 3 - Acquisition of Media Rights for further details.
On October 14, 2011, the Company and its then President, CEO, director and controlling stockholder, James Durward, entered into a Royalty Agreement whereby the Company has acquired all rights (“Rights”) to the intellectual property known as “All the Wrong Reasons” as registered with the Writer’s Guild of America Registration Number 1533357 (the “Production”). Mr. Durward will receive a 20% gross overriding royalty on any and all worldwide revenues generated by, or derived from, the Production.
Review, Approval or Ratification of Transactions with Related Persons
The Company does not currently have any written policies and procedures for the review, approval or ratification of any transactions with related persons.
Promoters and Certain Control Persons
None
Parents
There are no parents of the Company
Director Independence
As of the date of this Annual Report, we have no independent directors.
The Company has developed the following categorical standards for determining the materiality of relationships that the Directors may have with the Company. A Director shall not be deemed to have a material relationship with the Company that impairs the Director's independence as a result of any of the following relationships:
1.
the Director is an officer or other person holding a salaried position of an entity (other than a principal, equity partner or member of such entity) that provides professional services to the Company and the amount of all payments from the Company to such entity during the most recently completed fiscal year was less than two percent of such entity’s consolidated gross revenues;
2.
the Director is the beneficial owner of less than five (5%) per cent of the outstanding equity interests of an entity that does business with the Company;
3.
the Director is an executive officer of a civic, charitable or cultural institution that received less than the greater of one million ($1,000,000) dollars or two (2%) per cent of its consolidated gross revenues, as such term is construed by the New York Stock Exchange for purposes of Section 303A.02 (b)(v) of the Corporate Governance Standards, from the Company for each of the last three (3) fiscal years;
4.
the Director is an officer of an entity that is indebted to the Company, or to which the Company is indebted, and the total amount of either the Company's or the business entity's indebtedness is less than three (3%) per cent of the total consolidated assets of such entity as of the end of the previous fiscal year; and
5.
the Director obtained products or services from the Company on terms generally available to customers of the Company for such products or services. The Board retains the sole right to interpret and apply the foregoing standards in determining the materiality of any relationship.
The Board shall undertake an annual review of the independence of all non-management Directors. To enable the Board to evaluate each non-management Director, in advance of the meeting at which the review occurs, each non-management Director shall provide the Board with full information regarding the Director’s business and other relationships with the Company, its affiliates and senior management.
Directors must inform the Board whenever there are any material changes in their circumstances or relationships that could affect their independence, including all business relationships between a Director and the Company, its affiliates, or members of senior management, whether or not such business relationships would be deemed not to be material under any of the categorical standards set forth above. Following the receipt of such information, the Board shall re-evaluate the Director's independence.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth the fees billed to the Company for professional services rendered by the Company's principal accountant, for the year ended April 30, 2013 and 2012:
Services
$
$
Audit fees
6,000
5,500
Audit related fees
6,900
4,500
Tax fees
Total fees
13,500
10,500
Audit fees consist of fees for the audit of the Company's annual financial statements or services that are normally provided in connection with the statutory and regulatory filings of the annual financial statements.
Audit-related services include the review of the Company's financial statements and quarterly reports that are not reported as Audit fees.
Tax fees included tax planning and various taxation matters.
PART IV
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
EXHIBITS
**Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.
Financial Statements
The following consolidated financial statements of the Company are filed as part of this Annual Report on Form 10-K as follows:
All other schedules have been omitted because they are not applicable, not required under the instructions, or the information requested is set forth in the financial statements or related notes thereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated, who constitute the entire board of directors:
Date:
July 29, 2013
By:
/s/ Robert Thayer
Name:
Robert Thayer
Title:
Member of the Board of Directors
Date:
July 29, 2013
By:
/s/ Mohammad Fazil
Name:
Mohammad Fazil
Title:
Member of the Board of Directors