Six months ended December 31, 2004 versus Six months ended December 31, 2003
The Companys operating revenue for the six months ended December 31, 2004 was $1,270,557 as compared to $404,774 for the same period ended December 31, 2003 for an increase of $865,783. The increase was attributable to an increase in producer fees of $894,500 offset by a decrease in royalties and other revenues of $28,717 (See Note 3 to the Unaudited Consolidated Condensed Financial Statements). These swings are normal fluctuations from period to period based on the timing of when a project goes into production and when royalties are received.
Costs relating to the operating revenues i.e. film amortization and/or film write-off costs) were $877,061 for the six months ended December 31, 2004 as compared to $623,970 for the same period ended December 31, 2003 for an increase of $253,091 (See Note 3 to the Unaudited Consolidated Condensed Financial Statements). This increase is mainly attributable to a $490,314 increase in amortization of producer fees, offset by a decrease of $232,950 in write-offs of projects with costs less than $100,000. The timing of the write-off of such lower cost projects is based upon when management is able to make a determination that the projects are not going to achieve economic return.
The Company's gross margin for the six-month period ended December 31, 2004 was $393,496 as compared to $(214,923) for the same period ended December 31, 2003 for an improvement of $608,419. The improvement in gross margin is directly attributable to the fluctuations in film revenues and film amortization for the respective time periods as discussed above.
Selling, general and administrative expenses were $585,114 for the six months ended December 31, 2004 compared to $875,159 for the same period ended December 31, 2003 for a decrease of $290,045. The decrease in selling, general and administrative expenses was attributable to an decrease in business consulting expense and fees of $468,828 offset by an increase in salaries and benefits of $68,122, rent increase of $17,536, film festival costs of $21,119, communication expense increase of $6,513, depreciation expense increase of $21,736, promotion and publicity expenses of $16,741 and increases of $27,016 in miscellaneous items.
Interest expense of $64,697 for the six months ended December 31, 2004 compared to $216,091 for the same period ended December 31, 2003 for a decrease of $151,394. The decline in interest expense was a result of the Company experiencing no conversions of high effective interest rate convertible debt in 2004 as compared to significant conversions in 2003. FMLYs convertible debt generally includes warrants issued for origination, beneficial conversion features and significant cash origination fees. In 2003, the conversions experienced by FMLY led to the immediate recognition of approximately $180,000 of debt costs as interest expense. This event accounts for the significant fluctuation in interest expense.
The Company reported a net loss of $(254,600) for the six months ended December 31, 2004 as compared to a net loss of $(1,306,173) for the same period ended December 31 2003 of a decrease loss of $1,051,573.
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