**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

**FORM 10-KSB**

 
| **ý**                                                                                                                                                                             | ** ** | **ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------|
| **For the  year ended February 28, 2005**                                                                                                                                         |
|                                                                                                                                                                                   |       |                                                                                          |
| **o**                                                                                                                                                                                  | ** ** | **TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF  THE EXCHANGE ACT OF 1934**        |
| **For the  transition period  from            to            ** |

 

**CommissionFile No. 0-29901**

 

**PUBLIC MEDIA WORKS, INC.**

(Exact name of registrant asspecified in its charter)

 
| **Delaware**                                                   | ** ** | **98-0220849**                           |
|----------------------------------------------------------------|------------|------------------------------------------|
| (State or jurisdiction or  incorporation or organization)      |       | (I.R.S. Employer  Identification Number) |
|                                                           |       |                                     |
| **14759  Oxnard Street  Van Nuys, California 91411**           |
| (Address and telephone  number of principal executive offices) |
|                                                           |       |                                     |
| **818-904-9029**                                               |
| (Issuer’s telephone number)                               |

 

Securities registered under Section 12(b) ofthe Exchange Act:

 
| **Title of class** | ** ** | **Name of each exchange on which  registered** |
|--------------------|------------|------------------------------------------------|
| None               |       | None                                           |

 

Securities registered under Section 12(g) ofthe Exchange Act:

 

**CommonStock, Par Value $0.0001**

 

Check whether the issuer (1) filed all reportsrequired to be filed Section 13 or 15(d) of the Exchange Act duringthe past 12 months (or for such shorter period for which the registrant wasrequired to file reports), and (2) has been subject to such filingrequirements for the past 90 days.  ýYes o No

 

Check if there is no disclosure of delinquent filersin response to Item 405 of Regulation S-B is not contained in this form, and nodisclosure will be contained, to the best of registrant’s knowledge, indefinitive proxy or information statements incorporated by reference in Part IIIof this Form 10-KSB or any amendment to this Form 10-KSB: o

 

Issuer’s revenues for the fiscal year ending February 28,2005 were $125,000.

 

The aggregate market value of voting common sharesheld by non-affiliates of the issuer was $6,386,875 as of May 31, 2005(computed by reference to closing price of the issuer’s Common Stock on thatdate as reported by the OTC Bulletin Board ($.55), times the number of votingcommon shares held by non-affiliates (11,612,500), without regard to derivativesecurities holdings).

 

There were 26,652,500 shares outstanding of theissuer’s Common Stock as of May 31, 2005.

 

Transitional Small Business Disclosure Format (Checkone):   Yes o  No ý

 

 

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**SPECIALNOTE REGARDING FORWARD-LOOKING STATEMENTS**

 

This annual report on Form 10-KSBcontains “forward-looking statements” which are based on its currentexpectations, assumptions, estimates and projections about its business and itsindustry. Words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “may,”and other similar expressions identify forward-looking statements. In addition,any statements that refer to expectations, projections or othercharacterizations of future events or circumstances are forward-lookingstatements. These forward-looking statements are subject to certain risks anduncertainties that could cause actual results to differ materially from thosereflected in the forward-looking statements.

 

Factors that might cause such a difference include,but are not limited to, those discussed in the section of this reporttitled “Item 6. Management’s Discussion and Analysis and Plan of Operations”.You are cautioned not to place undue reliance on these forward-lookingstatements, which relate only to events as of the date on which the statementsare made. The Company undertakes no obligation to publicly revise theseforward-looking statements to reflect events or circumstances that arise afterthe date hereof. Please refer to and carefully review the information in futuredocuments the Company files with the Securities and Exchange Commission.

 

**ITEM 1.****                                                    ****DESCRIPTION OF BUSINESS**

 

**Overview**

 

TheCompany is engaged in the development, production, marketing and distributionof “tailor made” entertainment for specifically targeted, fan based audiences.  This entertainment currently includes filmand television, and may include music, theater and sports in the future.  By targeting these dedicated consumers, theCompany believes it can streamline the development, production, marketing anddistribution processes, which will significantly reduce project costs.  The Company also believes that targeting aspecific fan-base will create unique opportunities to market and distribute theprojects and related merchandise, provide a mechanism for audience input, andenhance the Company’s ability to develop sponsorship relationships, all ofwhich are expected to increase project revenues.

 

**Development**

 

TheCompany develops each project for a specific fan base.  For example, with its first feature film “CarpoolGuy,” which is expected to be released in late Summer 2005, the Company hastargeted the dedicated, worldwide fan base of daytime Soap Operas.  There are an estimated 300,000,000 people whowatch U.S. Soap Operas daily.  With sucha large target audience, the Company believes it only needs to tap into afraction of this audience base for the film to be commercially successful.  The Company’s first television project indevelopment, “Fastest Car in America,” is targeted to the audience of NASCARfans.  There are estimated to be over75,000,000 Americans who tune into a variety of NASCAR programming eachyear.  The Company is developing otherprojects aimed at Star Trek fans, horror movie fans, and specific game and teamrelated sports fans. Other groups being considered by the Company are Westernmovie fans and the audience for Christian and faith-based entertainment.

 

# **Production**

# ** **

Aseach project moves from development into production, the Company believes itcan draw directly from the pool of talent working in that genre.  For example, “Carpool Guy” featured nine topdaytime stars in the ensemble cast.  Thisis expected to draw immediate support of that “Soap Opera” fan base, as well asthe associated media outlets.  Also, thecommercial success of “Carpool Guy” would be expected to lead to interest amongSoap Opera fans to see additional movies featuring Soap Opera stars, andcontinued interest among Soap Opera stars to work in such films.

 

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**Marketing**

 

Byidentifying the target audience for each project, the Company is able to engagethat consumer from project inception. This engagement is expected to occur in two ways.  First, the Company intends to create aninteractive website for each individual project.  This will allow the fans to have full accessto the production of the projects, including rare “behind the scenes”privileges.  In the case of a film ortelevision show, these privileges are expected to include access to the script,early screenings and samplings of material shots or recordings, and frequentupdates on the production in “real time.” These privileges may also include allowing the audience to have inputinto the production process through online voting.  Such voting may include the selection of anactor, or the placement of sponsored products into the film.

 

Thesecond aspect of the marketing strategy involves creating alliances with themedia outlets that serve the targeted fan-base. For example, in the case of “Carpool Guy,” the Company has developedrelationships with audience specific media, including *Soap OperaDigest* and *Soap Opera Weekly. *These media outlets  reach a weekly audience of approximately onemillion consumers in the films target demographic. The Company has also developedrelationships with Soap Net, the cable channel for Soap Fans, and SoapCity.com,one of the largest Internet outlets targeting Soap fans.  These relationships allow the Company tobegin directing the attention of the fans to the project early in the developmentand production process.  The Companybelieves that this approach will give the targeted audience a vested andongoing interest in each project, and increase the likelihood they will thenpurchase the final product and related merchandise.

 

# **Distribution**

# ** **

Afteridentifying the consumer from project inception, selecting talent intended toattract those consumers, and offering rare fan privileges to create a vestedinterest in each project, the Company then plans to sell the final productsdirectly to the consumers that have been involved throughout the process.  These final products would include DVDs andCDs, as well as project related merchandise such as scripts, clothing andset-related items.  The direct sales areanticipated to be completed through the project website, infomercials, and massretailers. For example, with “Carpool Guy”, consumers may go towww.carpoolguy.com to purchase advance copies of the movie, and movie relatedmerchandise such as clothing or a directors chair, as well as provide input asto the selection of the official movie poster for the film.  As the Company produces additional projects,and further refines the website associated with each project, it is anticipatedthat there will be more opportunities for fan interaction at earlier stages inthe process.

 

TheCompany also intends to utilize traditional theatrical and televisiondistribution. The Company believes its ability to create cost savings and drivethe targeted audience to a theater or television set is greatly enhance by therelationships developed with the audience throughout the production process.

 

InFebruary 2004 the Company entered into an agreement with RegentEntertainment (‘Regent”) to distribute three of the Company’s films to theatersand/or in retail form (such as DVD or VHS videocassette) worldwide, each ofwhich must have a production budget over $1 million.  The agreementprovides that for each proposed film that is accepted for distribution, Regentmust secure pre-sold revenues in varying amounts from various Europeanterritories. Under the terms of the agreement, for each film distributed inthis manner, the Company will pay a fee equal to 25% of its gross revenues foreach film, as well as marketing expenses, up to $100,000 per film.  This agreementexpires on December 31, 2005.  TheCompany has not yet formally presented any films to Regent for distribution.

 

InMay 2005 the Company entered into a licensing and distribution agreementwith L.A. Ideas for the marketing and distribution of its first film, “CarpoolGuy.”  Under the terms of the agreement,L.A. Ideas has certain rights to market and distribute the film in exchange fora share of the revenue.

 

In February 2004 the Company entered into adistribution agreement with OBN Holdings (“OBN”).  OBN conducts television distribution via itssubsidiary, Omni Broadcasting.  OBN is a national television

 

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network with one owned station and 115 independentbroadcast and cable affiliates throughout the United States.  OBN airsboth created and licensed content.   The Company’s agreement with OBNprovides that OBN will provide free airtime in exchange for 50% of the revenuegenerated by sponsors advertising on its broadcast shows.  Under the termsof the Agreement, the Company has agreed to provide six feature-length films,one hour-long dramatic series, and one half-hour situation comedy.  Forevery Company developed television program accepted by OBN, OBN will distributethe programs to approximately 40,000,000 households, representing approximately38% of this market.

 

The Company has also granted OBN a limited “firstlook” provision.  Pursuant to this provision, the Company may presentprojects to OBN which the Company believes are suitable for distribution ontheir network.  Once the Company presents a project, OBN then has a 60 dayperiod during which theyhavethe exclusive right to determine whether or not they will distribute thetelevision show on their network.  At the close of the 60 day “first look”period, if OBN chooses not to distribute the show, the Company may then presentthe show to other distributors and/or networks.  This provision is ineffect for the duration of the agreement.  This agreement expires August 20,2005, and is self-renewing unless terminated by either party.

 

**Feature Film and Television Projects**

 

As of the date of this report, the Company is invarious stages of development on numerous film and television projects.  Asummary table of the Company’s film and television projects as of the date ofthis report is below.  The anticipatedrelease dates are subject to change due to a variety of factors, including theCompany’s ability to obtain funding for the projects; the availability oflimited production time from third parties; the availability of actors; theCompany’s ability to secure appropriate sets and locations; the Company’sability to secure suitable outlets for the release of the film; and the Company’selection to change its production schedule for new projects.

 
| **Film Projects**          | ** ** | **Status**                                       | ** ** | **Anticipated Release Date** | ** ** |
|----------------------------|------------|--------------------------------------------------|------------|------------------------------|------------|
|                       |       |                                             |       |                         |       |
| “Carpool Guy”    |       | Production Complete                              |       | Late Summer 2005             |       |
| “Over The Hedge” |       | Script Complete/Funding  Required For Production |       | Spring 2006                  |       |
| “3 Day Test”     |       | Script Complete/Funding  Required For Production |       | Christmas 2006               |       |
| “The Action”     |       | Script Complete/Funding  Required For Production |       | Not Yet Determined           |       |

 
| **Television Projects**                 | ** ** | **Status**                                  | ** ** | **Anticipated Release Date** | ** ** |
|-----------------------------------------|------------|---------------------------------------------|------------|------------------------------|------------|
|                                    |       |                                        |       |                         |       |
| “The Fastest Car in  America” |       | Actively Seeking TV  Network Order          |       | Subject to TV Network  Order |       |
| “A Taste of History”          |       | In Development                              |       | Subject to TV Network Order  |       |
| “TechStyle”                   |       | In Development                              |       | Subject to TV Network Order  |       |
| “3 Day Test Reality Show”     |       | In Development                              |       | Subject to TV Network Order  |       |
| “Run and Gun”                 |       | In Negotiations with Potential Distributors |       | Subject to TV Network Order  |       |

 

**Virtual Studio**

 

The Company has developed a proprietary virtualstudio for fans of each project.  Thevirtual studio is intended to be an online, virtual presentation that mirrorsthe physical studio lot where the Company’s shows or movies will be filmed.  The virtual studio is intended to allowviewers who wish to view real-time filming of the Company’s productions toregister on the virtual studio website associated with each individualproject.  Once viewers register and logon to the Company’s website, they will become virtual

 

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“associate producers.”  Viewers will then beable to vote to influence content style in the pre-production phase, view thefilming, and interact with the actors in the production once filmingcommences.  The Company plans tointegrate its virtual studio with varying levels of interaction for eachproduction, depending on the type of production, the potential audience forsuch production, as well as potential revenues through sponsorship fromadvertising and the licensing of its virtual studio to third party productioncompanies.  For example, if the filmingis in pre-production, viewers will be encouraged to make various decisionswhich, when votes are tabulated, will be implemented in the actual productionof the movie or show.  These decisions will include general and specificselections for props, locations, wardrobe, set design, set dressing andtransportation.  As the pre-production progresses, viewers will be able toinfluence the look and feel of each scene by selecting from various props,wardrobes, and set elements provided by sponsors of each production.

 

Once the filming enters production, viewers will notbe able to change aspects of the filming, but will be able to view the otherareas of the virtual studio in addition to viewing actual filming.  Thevirtual studio will permit viewers to view recently shot footage of projects inproduction, out-takes of their favorite stars, rough cuts of content prior totheir release, trailers from films currently in theaters, selections from anextensive library of classic movie trailers and old television commercials, andchat with actors during production.

 

The Company anticipates developing and implementingcomponents of the virtual studio through 2007. Once fully developed and operational, the virtual studio will measureviewer interest in real time, and create a database of viewers, along with aviewer profile, including geographic and demographic information.  Asviewers continue to interact with the virtual studio, the volume and precisionof information in the database will increase, resulting in a complex andspecific profile of the Company’s viewers and their preferences.

 

**Virtual Studio Revenue Opportunities**

 

The Company plans to have a virtual studio store foreach project with suggested purchases, including books, posters, andcollectibles.  The Company does not plan to fulfill any orders directly,but will receive a negotiated commission from vendors for all sales.  Thecommission will vary from vendor to vendor, and will cover items purchased fromeach vendor by viewers, as well as items purchased within a defined period ofdays from the original date of connecting from its link to the vendor’ssite.  In May 2002 the Company entered into ongoing, self-renewingaffiliation agreements with Amazon.com and Allposters.com.  Both of theseagreements are standard affiliation commission agreements, which arenon-negotiated agreements that allow these vendors to track purchases from itsviewers.

 

The Company intends to sell proprietary collectiblesand items related to its films and shows.  In addition, the Company plansto sell press release kits of its films and shows, which will include shootingschedules, scripts, autographed head shots of actors in the production, andother collectibles and memorabilia related to each project.  Once the filmor show enters post-production, viewers will again have the opportunity toselect from a variety of film-related marketing materials, including posters,music, and soundtrack selections.  The Company intends to use its sponsorsand advertisers in the same manner as its pre-production process, which willprovide these advertisers and sponsors similar access to its direct marketingdatabase.

 

While Company management believes there is asignificant opportunity for generating revenues from its virtual studio, theCompany did not generate any such revenues during the fiscal year ending February 28,2005, and there can be no assurances the Company will be able to generate anysignificant revenues from the virtual studio. However, the Company commenced commercial operations of itswww.carpoolguy.com website in April 2005 and has begun generating revenuefrom sales of the film and film-related merchandise.

 

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**Future Opportunities**

 

TheCompany expects there will also be revenue opportunities arising from thecreation of an allegiance of varied fan-bases over the course of multipleentertainment projects. The Company’s current plans include two suchopportunities, one relating to sponsorship, and the other relating to thecreation of an “entertainment destination”.

 

First, by building a dedicated a fan-base withineach genre, the Company can seek sponsors that desire to reach that fan-base ina new way.  For instance, once theCompany can illustrate that it has built a sizeable following of dedicated SoapOpera fans, it is likely that there will be sponsors that want to reach thesefans.  One method for sponsors to reachthis fan base would be to allow the fans to select sponsored products to beplaced in each project.  For example, ifa maker of designer sunglasses wanted to reach the Company’s Soap Opera fans,for a fee from the sponsor, the Company could host a vote on the film’s websiteduring the production process.  TheCompany could then present fans with a choice between several pairs of thesponsor’s sunglasses, and the pair getting the most votes would be worn by oneof the stars in the film.  Thissponsorship model is intended to benefit the sponsor, the Company and thefans.  The sponsor would reach a veryspecific target audience in a new manner, while having “star cache” attached toits products at a significantly reduced cost. The Company would receive ancillary revenues for the film through thesponsorship program, and build the vested interest of the fan-base.  The fans are permitted to provide input tothe film, and experience the enjoyment associated with seeing their selectionsmade part of the final product.   WhileCompany management believes there is an opportunity for generating marketingand sponsorship revenue, the Company has not generated such revenue as of thedate of this report and there can be no assurances the Company will enter intosuch arrangements or generate such revenue.

 

The second opportunity is for the creation of an “entertainmentdestination.” This opportunity would become possible only after the Company hasa completed multiple projects. Until the completion of multiple projects, eachproject and its associated fan base will be isolated within the confines of theproject website.  As the Companycompletes each additional project, it plans to create an increasing associationwith the Company’s corporate website at www.publicmediaworks.com.  Each of the individual project fan-baseswould then be placed within reach of the other fan-bases, at a commondestination, building an even larger “fan-centric” community.  With this destination, the project specificaudiences would migrate from being a single fan-base into a larger fan-basewith the common interest of “dedicated fan enthusiasm.” This entertainmentdestination is expected to create an even greater opportunity to attractsponsors, as well as advertisers desiring to place traditional banner adswithin the Company’s corporate website. The creation of an “entertainment destination” would also provide fanswith direct access and a unique and privileged insight into the world ofentertainment, and the chance to be a part of that world.

 

In January 2004 the Company entered into anonexclusive agency representative agreement with U4oria Inc., whereby U4oriawill seek out and procure advertisers and corporate sponsors for its films andshows, and for incorporation into its virtual studio operations.  Inexchange, U4oria will receive 20% of all gross sponsorship sales revenue up to$1 million, then 15% on all gross over $1 million.  U4oria will alsoreceive 10% on all gross sponsorship when shared with any other representativefor the duration of the agreement.  All fees are to be paid within 10 daysof its receipt of the revenue.  This agreement is commission-based anddoes not expire unless terminated by either party.  WhileCompany management believes there is an opportunity for revenue from thisadvertising, the Company does not have any agreements for standard sponsors atthis time, and there can be no assurances the Company will enter into suchagreements or generate such revenue.

 

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**Suppliers**

 

The Company has identified a pool of independent orfreelance screenwriters for its film projects.  The Company entered intoan agreement with one of these freelance writers, Peter Soldinger, for thedevelopment of both “Carpool Guy” and “The Action.”  The Company’sPresident, Corbin Bernsen, is the author of “3 Day Test” and “Over the Hedge,”and will continue to serve as screenwriter for specific Company projects. Mr. Bernsen does not receive additional compensation forscriptwriting.  The Company does not anticipate paying more than $5,000for the development of any script or treatment. These payments may increase up to the minimum payment set by the WritersGuild of America (the “WGA”) for any specific project that reachesproduction.  The WGA minimum pay varies according to each project’s budgetand various other factors determined by the WGA.

 

The Company has identified a pool of independent orfreelance scriptwriters which the Company will use for development of itstelevision shows as necessary.  The Company has not yet commissioned anyscripts for any of its internally developed treatments.  The Company doesnot anticipate paying more than $500 per week for the development of any scriptor treatment, regardless of production status.

 

**Public Relations**

 

In September 2003 the Company retained CharlesSherman Public Relations to engage and manage public relations and itspublicity needs.  Mr. Sherman was formerly the Director of PublicRelations for 15 years for CBS daytime drama “The Young and the Restless”, andprimarily develops and maintains the Company’s relationships with leadingentertainment publications. Mr. Sherman works with a variety ofpublications geared to specific audiences, who provide editorial coverage ofthe Company’s films and shows based upon the interests of their coreaudiences.  The Company does not maintain written agreements with any ofthese publications, and only provides content for their publications asappropriate and accepted by each publication.  The Company has retainedthis firm on a monthly basis for a fee of $2,000 per month, and the agreementcan be terminated by either party upon thirty days notice.

 

**Company Intellectual Property**

 

The Company owns and maintains the Internet domainnames www.publicfilmworks.com, www.publicmediaworks.com, andwww.publicmusicworks.com (for future content development).  The Companyhas also registered numerous Internet domain names for specific projects.

 

The Company intends to apply for process and designpatents related primarily to several areas of the virtual studio and designpatents for new, original, and ornamental designs, as well as for articles ofmanufacture specific to its company television and motion picture relatedproducts, and specific point-of-sale merchandise.  Although the Companyhas not yet submitted applications for these patents to the United StatesPatent and Trademark Office, the Company intends to submit such applications.  There can be no assurances, however, that theCompany will be granted such patents.

 

The Company owns a service mark for “PublicFilmWorks”(registration no. 2806883).  The Company also intends to protect variousother words, names, symbols, and devices that are used with goods produced bythe Company to distinguish them from those produced by others through the useof trademarks, and will identify and distinguish the source of several of itsservices through the use of service marks.  These include “Public MediaWorks” and its logo.  The Company intends to register and maintain bothtrademarks and service marks through the United States Patent and TrademarkOffice.  The Company has not filed applications to protect any other tradeor service marks, and there can be no assurances the Company will receive suchtrade or service mark protection.

 

The Company intends to copyright all screenplays,project treatments, and other original material that it produces.  TheCompany intends to use copyrights issued and maintained by the Copyright Officeof the Library of Congress as the primary form of protection for all originalworks of authorship, including literary, dramatic, musical, artistic, andcertain other intellectual works, both published and unpublished.

 

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The 1976 Copyright Act allows Public Media theexclusive right to reproduce the copyrighted work, to prepare derivative works,to distribute the copyrighted work, to perform the copyrighted work, and todisplay the copyrighted work publicly.  The Company will also registerapplicable screenplays and scripts with the Writers Guild of America.

 

The Company has registered the following screenplaysand scripts with the Writers Guild of America.

 
| **Title**                | ** ** | **Medium**   | ** ** | **Type**  | ** ** |
|--------------------------|------------|--------------|------------|-----------|------------|
|                     |       |         |       |      |       |
| TechStyle                |       | Television   |       | Treatment |       |
| Taste of  History        |       | Television   |       | Treatment |       |
| 3 Day Test               |       | Feature Film |       | Treatment |       |
| 3 Day Test  Reality Show |       | Television   |       | Treatment |       |
| The Ultimate  18         |       | Television   |       | Treatment |       |
| Run and Gun              |       | Television   |       | Treatment |       |
| The Action               |       | Feature Film |       | Treatment |       |
| Fastest Car  in America  |       | Television   |       | Treatment |       |
| Carpool Guy              |       | Feature Film |       | Treatment |       |

 

All treatments for its films and shows are developedinternally, and are the property of the Company.  All agreements withindependent and freelance writers will require that all content, treatments,ideology, screenplays, scripts and full use become and remain the sole andexclusive property of the Company for all time and in all markets. However, there can be no assurance that the Company can protect its intellectualproperty, or that the Companywill be able to receive all benefits from its intellectual property.

 

# **Market and Competition**

# ** **

According to the 2002 Nielsen Media Report, theUnited States theatrical box office revenues were $9.5 billion.  Accordingto ABI Research, the United States cable market exceeded $60 billion inrevenue, and there are approximately 108,410,160 television households in theUnited States, within 210 designated market areas, generating an additional $60billion in national and local advertising (Nielsen Media Report).  The2004 Advertising Age Agency Income Report stated that United States mediaagencies received $1.51 billion, and estimated total global revenues foradvertising at $10.66 billion.  The advent of new technologies, such asfast-forward and advertisement-skipping functions on video-on-demand services,personal video recorders and TiVO, has limited the reach of many advertisers,while not reducing their cost by a comparable amount.  While the Company believes that advertiserswill still use television, theatrical and traditional distribution products toreach the broadest possible audience, the Company and its management alsobelieve that advertisers will increasingly link their products and brands toprogramming, and advertisers will search for different methods to incorporatetheir products into television shows and films.  More importantly, theCompany believes that advertisers need a method to measure and analyze theirsuccess, and maximize their return on investment with targeted advertisementsto a receptive audience.

 

*Feature Film Production(Theatrical release) Competition*

 

United States box office receipts grew 13% in 2002(the last complete statistical year) to $9.5 billion.  According to the 2002 Nielsen Media Researchreport, the top 20 films in the United States made up 40% of the total domesticbox office.  The Company competes with major and independent studios,which include Viacom, Fox, Pixar and MGM for market share, as these competitorsrepresent the leading productions which capture a significant percentage ofvolume.

 

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*Television Production Competition*

 

According to Nielsen Media Research, there areapproximately 108,410,160 television households in the United States with 210designated market areas.  However, there are a number of companiesproducing and distributing television shows, including but not limited to thesix national networks, hundreds of cable channels and numerous private productioncompanies, such as Carsey-Werner-Mandabach or Mark Burnett Productions. These competitors have greater resources, market presence and name recognitionthan its company.  Moreover, although the Company has several televisionshows under development, the Company has not yet produced a show fordistribution.  Consequently, the Company has not yet established aposition in the television industry, and faces intense competition upon entry.

 

*Market Share for Film andTelevision*

 

The movie and television production industry remainshighly varied and fragmented.  Primary participants in the industrycontinue to drive production and competition for distribution revenue and adshare.  The production industry grew to $115 billion in 2002 comprised ofthe following significant public companies (information provided byVariety.com, published 2004):

 

**STUDIO MARKET SHARE**

**2004**

**January 2to May 2, 2004**

**OverallGross: $2,779,403,652**

 
| **Rank** | ** ** | **LW** | ** ** | **Distributor**  | ** ** | **Market Share** | ** ** | **Total Gross*** | ** ** | **Movies  Tracked** | ** ** | **2004  Movies**** | ** ** |
|----------|------------|--------|------------|------------------|------------|------------------|------------|------------------|------------|---------------------|------------|--------------------|------------|
| 1        |       | 1      |       | Sony             | ** ** | **15.8**         | **%**      | $                | 439.6      |                | 12         |               | 6          |   |
| 2        |       | 2      |       | Newmarket        | ** ** | **14.4**         | **%**      | $                | 400.9      |                | 2          |               | 1          |   |
| 3        |       | 3      |       | Warner Bros.     | ** ** | **12.3**         | **%**      | $                | 343.1      |                | 16         |               | 10         |   |
| 4        |       | 4      |       | Buena Vista      | ** ** | **11.3**         | **%**      | $                | 314.9      |                | 15         |               | 7          |   |
| 5        |       | 6      |       | Miramax          | ** ** | **6.7**          | **%**      | $                | 186.5      |                | 13         |               | 6          |   |
| 6        |       | 7      |       | New Line         | ** ** | **6.6**          | **%**      | $                | 184.5      |                | 6          |               | 3          |   |
| 7        |       | 5      |       | Universal        | ** ** | **6.6**          | **%**      | $                | 184.2      |                | 8          |               | 3          |   |
| 8        |       | 8      |       | 20th Century Fox | ** ** | **6.6**          | **%**      | $                | 182.4      |                | 8          |               | 4          |   |
| 9        |       | 9      |       | MGM/UA           | ** ** | **4.7**          | **%**      | $                | 131.4      |                | 7          |               | 4          |   |
| 10       |       | 10     |       | Paramount        | ** ** | **4.3**          | **%**      | $                | 119.7      |                | 8          |               | 5          |   |
| 11       |       | 11     |       | Lions Gate       | ** ** | **2.5**          | **%**      | $                | 70.0       |                | 9          |               | 6          |   |
| 12       |       | 12     |       | Focus            | ** ** | **2.0**          | **%**      | $                | 54.9       |                | 4          |               | 2          |   |
| 13       |       | 13     |       | Fox Searchlight  | ** ** | **1.9**          | **%**      | $                | 52.0       |                | 5          |               | 4          |   |
| 14       |       | 14     |       | DreamWorks       | ** ** | **1.8**          | **%**      | $                | 50.4       |                | 4          |               | 3          |   |
| 15       |       | 15     |       | Sony Classics    | ** ** | **0.7**          | **%**      | $                | 19.5       |                | 12         |               | 5          |   |
| 16       |       | 16     |       | Dimension        | ** ** | **0.2**          | **%**      | $                | 6.8        |                | 3          |               | 0          |   |
| 17       |       | 17     |       | IFC              | ** ** | **0.2**          | **%**      | $                | 5.4        |                | 3          |               | 3          |   |

 

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* In millions. ** # of total movies tracked thatwere 2004 releases.

Copyright © 1998-2004 by **Box Office Mojo**. All rights reserved

 

No information regarding specific market shares forindividual companies within the television industry is available.

 

During the fiscal year ended February 28, 2005,the Company has generated $125,000 from feature film production and televisionproduction.  This revenue would representsubstantially less than 1% of the total overall film and television revenuesfor the United States and international market. However, the Company

 

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only recently completed its first film production, “CarpoolGuy” in March 2005.  Companymanagement believes that the Company’s virtual studio will generate marketawareness during pre-production and production of its films, which will resultin increased revenues and market share for its productions once the films arein theaters.

 

*Virtual Studio Competition*

 

The Company believes that the virtual studio thatthe Company has developed is unique and does not have any directcompetition.  The Company and its management do believe, however, that thevirtual studio implementation on the Internet competes with other entertainmentand information websites for a share of the consumer’s attention.  Severaland varied games, interactive website, portals, studio information sites, andcommerce sites contain elements of the Company’s virtual studio and competewith us for a finite number of potential consumers.

 

*Sponsorship and Marketing Competition*

 

The Company believes that the creation of anintegrated virtual studio coupled with an inbound and outbound marketing andbranding campaign is new and unique.  The Company and its management alsobelieve, however, that the Company must compete with other new and alsoincumbent marketing and branding techniques and companies.   TheCompany’s most direct competitors include Grey Advertising ($1.3 billion inrevenues in 2003), Ogilvy and Mather ($720 million in revenues in 2003), McCann-Erickson($1.22 billion in revenues in 2003), and Y & R Advertising ($517million in revenues in 2003).    The largest industrycompetitors and their market shares are indicated below:

 

 

Many of the Company’s competitors have greaterresources, market presence and name recognition than its company. However, the Company intends to compete with the large domestic advertisingagencies.  This competition will includeintroducing the virtual studio concept to leading United States advertisers to demonstratedits ability to offer focused information on its users and their consumers (suchas geographic and demographic information, determinations regarding whichspecific products and models are most and least desired, and whichadvertisements are most likely to lead to purchase).

 

*Competition In Retail and Internet Sales*

 

The Company intends to sell its films, along withscripts, posters and related products, through its website.  The Company’sprimary competitors in this area consist of all of the competitors previouslylisted under the subheadings “Film (Theatrical release)” and “Television”, asthey generally also sell their products online.  The Company intends tocompete with these companies by directing its sales efforts in a more targetedmanner to those individuals who have indicated their interest in certain of itsproducts, or certain of its related products. The Company believes that, by offering specific products to targetedcustomers, it will be able to effectively compete in the Internet marketplace.

 

**GovernmentRegulation and Self-Regulating Associations**

 

The Company does not require any government approvalfor the operation of its business.  The Company’s operations are subjectto various federal, state and local requirements which affect businessesgenerally, such as taxes, postal regulations, labor laws, and environmental andzoning regulations and ordinances. The Company’s costs for compliance withenvironmental laws are negligible.

 

The Company’s films are subject to ratingclassifications from the Motion Picture Association of America (or MPAA), whichis a nongovernmental, self-regulating association.  The Company intends to produce movies in amanner that will ultimately obtain the expected rating. However, it isdifficult to predict the rating classification that the MPAA will ultimatelyassign to the movie. If the expected rating were not

 

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obtained, distribution support (including marketingand advertising) may be reduced, resulting in fewer distribution venues andsmaller viewing audience. Further, censors in foreign jurisdictions may findelements of a movie objectionable.

 

**Researchand Development**

 

The Company’s research and development costscurrently consist of web development costs and film development costs.  Inthe fiscal year ended February 29, 2004, the Company spent $121,744 onresearch and development, 95.7% of which was dedicated to web developmentcosts, and 4.3% of which was dedicated to film development costs.  In thefiscal year ended February 28, 2005, the Company spent $139,639 onresearch and development, 57% of which was dedicated to web development costs,and 43% of which was dedicated to film development costs.  All researchand development costs related to web development are fully expensed, and theCompany’s film development costs are capitalized until each project isdeveloped, at which point they become expensed.  None of the Company’s researchand development costs flow through to its viewers.

 

**Employees**

 

As of the date of this report, the Company employs 4individuals, and one part-time employee.  The Company considers itsrelations with its employees to be good, and do not have employment agreementswith any of its employees.

 

**Incorporation and Share Exchange**

 

The Company was incorporated in the State ofDelaware on March 3, 2000 under the name “Burnam Management, Inc.” (“Burnam”)and registered its common stock with the Securities and Exchange Commission on March 9,2000.  From incorporation until August 30, 2003, Burnam essentiallyfunctioned as a public shell without any operations or business plan and didnot trade on any exchange or trading system.  The original Public MediaWorks, Inc. (“PMW”) was a privately held company incorporated in the Stateof Delaware on May 15, 2000.  PMW decided to enter into a merger withBurnam in order to rapidly effectuate a public market and public presencewithin its industry, and Burnam and its shareholders entered into the merger inorder to increase the value of Burnam by obtaining an operating business.

 

On August 30, 2003, PMW entered into a reversemerger with Burnam, the terms of which are as follows. On August 29, 2003,Burnam entered into a Share Exchange Agreement to acquire PMW.  At thetime of the exchange, there were 5,000,000 shares of Burnam common stock issuedand outstanding.  Under the terms of the agreement, Burnam issued20,000,000 restricted shares of common stock to all outstanding PMW securityholders on a pro-rata basis, in exchange for which Burnam received 20,000,000shares of PMW common stock, representing all of the issued and outstanding shares ofPMW.  The share exchange took effect on August 30,2003, at which time Burnam’s sole officer and director, Rick Plotnikoff,resigned after electing Thomas Szabo, Shaun Edwardes, and Corbin Bernsen as thenew directors.  Upon the effective date of the merger, the Company changedits name from “Burnham Management, Inc.” to “Public Media Works, Inc.”  PMW remains a wholly-owned subsidiary of theCompany and has no operations.  Nofinders or other third parties were used in connection with the share exchangeand merger, and no finders’ fees or commissions were paid in conjunction withthe merger.

 

In order to maintain clarity in this report,references to the original company known as Public Media Works, Inc. priorto the merger on August 30, 2003 will be indicated as “PMW.” References to “Public Media Works, Inc.,” “Public Media,” the “Company,” “we,”“us” or “our” refer to the Company and its subsidiary after the merger.

 

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**PubliclyAvailable Information**

 

The Company is required to file annual, quarterlyand current reports, proxy statements and other information with the Securitiesand Exchange Commission.  For further information with respect to theCompany and its common stock, please review the Company’s filings, includingexhibits and schedules thereto.  The Company’s filings with the Commissionare available to the public from the Commission’s website at www.sec.gov.  You may also read and copy any materials theCompany files with the Securities and Exchange Commission at the SEC’s publicreference room at 450 Fifth Street N.W., Washington, D.C. 20549. Please callthe SEC at 1-800-SEC-0330 for further information on theoperation of the public reference rooms.

 

**ITEM 2****.****                                                    ****DESCRIPTION OF PROPERTY**

 

As of the date of this report, the Company leases approximately1,800 square feet of converted and remodeled warehouse space on amonth-to-month basis from Chandler Associates, an unaffiliated entity, at arate of $900 per month.  The Company does not have a lease agreement withChandler Associates.  The Company operates this converted space as itsCompany headquarters which is located at 14759 Oxnard Street, Van Nuys,California.  The office space is in goodcondition.

 

**ITEM 3.****                                                    ****LEGAL PROCEEDINGS.**

 

In May 2005 the Company received a copy of acomplaint filed in Los Angeles Superior Court in Van Nuys, California byAlexandra Wortsman for a breach of contract action alleging nonpayment of feesin the amount of $43,748.28 for services performed on behalf of the Company.  The Company is reviewing the complaint.

 

Other than as described above, there are nothreatened or actual legal proceedings to which the Company is a party at thistime.  Further, its officers and directors know ofno legal proceedings against the Company, or its property contemplated by anygovernmental authority.

 

**ITEM 4.****                                                    ****SUBMISSION OF MATTERS TO AVOTE SECURITY HOLDERS**

 

No matters were submitted to a vote of securityholders during the fourth quarter of the fiscal year covered by this report.

 

**PART II**

 

**ITEM 5.****                                                    ****MARKET FOR COMMON EQUITY ANDRELATED STOCKHOLDER MATTERS**

 

**MarketInformation**

 

During the period covered by this report, there wasnot a public trading market for the Company’s securities.  Subsequent to the end of the period coveredby this report, on February 28, 2005, our Common Stock commenced tradingon the OTC Bulletin Board, under the symbol “PMWI.OB”.

 

**Holders**

 

As of February 28, 2005, 25,552,500 shares ofour common stock (par value $0.0001) were issued and outstanding, and held byapproximately 47 shareholders of record.

 

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**TransferAgent**

 

Our transfer agent is Holladay Stock Transfer, 2939North 67th Place, Scottsdale, Arizona 85251, telephone (480) 481-3940.

 

**Dividends**

 

The Company has never declared or paid any cashdividends on its common stock.  For the foreseeable future, the Companyintends to retain any earnings to finance the development and expansion of itsbusiness, and the Company does not anticipate paying any cash dividends on itscommon stock.  Any future determination to pay dividends will be at thediscretion of the Company’s Board of Directors.

 

**Recent Salesof Unregistered Securities**

 

As used herein, “Burnam Management” refers to BurnamManagement, Inc. prior to August 30, 2003.  “PMW” refers toPublic Media Works, Inc. prior to August 30, 2003.  The “Company”refers to the company after August 30, 2003.  BurnamManagement did not issue any stock for the three years prior to the merger on August 30,2003.

 

From April 1, 2003 to August 6, 2003 PMWsold 2,100,000 shares of restricted common stock to 20 investors in exchangefor $840,000. All investors were “accredited” within the meaning of the Act andall investors were unaffiliated. No brokers or finders were used in conjunctionwith this transaction and no commissions were paid in connection with thistransaction. This transaction was exempt from registration under the actpursuant to Section 4(2) and Rule 506 of the Act.  Thistransaction was not conducted in connection with a public offering, and nopublic solicitation or advertisement was made or relied upon by any investorsin connection with this offering.

 

On August 30, 2003, PMW conducted a shareexchange with Burnam Management.  At the time of the exchange, there were5,000,000 shares of Burnam common stock issued and outstanding.  Under theterms of the agreement, Burnam issued 20,000,000 restricted shares of commonstock to all outstanding PMW security holders on a pro-rata basis, in exchangefor which Burnam received 20,000,000 shares of PMW common stock, representingall of the issued and outstanding shares of PMW.  No brokers or finderswere used in conjunction with this transaction and no commissions were paid inconnection with this transaction. This transaction was exempt from registrationunder the act pursuant to Section 4(2) of the Act. This transactionwas not conducted in connection with a public offering, and no public solicitationor advertisement was made or relied upon by any investors in connection withthis offering.

 

From September 1, 2003 through February 23,2004 the Company sold 512,500 shares of restricted common stock to 6 investorsin exchange for $205,000. All investors were “accredited” within the meaning ofthe Act, and all investors were unaffiliated. This transaction was exempt fromregistration under the actpursuant to Section 4(2) and Rule 506 of the Act. Thistransaction was not conducted in connection with a public offering, and nopublic solicitation or advertisement was made or relied upon by any investorsin connection with this offering.

 

On February 13, 2005, the Company issued 40,000shares of its common stock at a price of $.75 per share to one investor.  This transaction was exempt fromregistration under the act pursuant to Section 4(2) ofthe Act. This transaction was not conducted in connection with a publicoffering, and no public solicitation or advertisement was made or relied uponby any investors in connection with this offering.

 

On May 4, 2005, the Company issued 1,100,000shares of its common stock to two companies in exchange for providingconsulting services to the Company for the period commencing July 11, 2004through July 10, 2005.  Thistransaction was exempt fromregistrationunder the act pursuant to Section 4(2) of the Act. This transactionwas not conducted in connection with a public offering, and no publicsolicitation or advertisement was made or relied upon by any investors inconnection with this offering.

 

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**ITEM 6.****                                                    ****MANAGEMENT’S DISCUSSION AND ANALYSISOR PLAN OF OPERATIONS**

 

*The following discussion andanalysis of its plan of operation should be read in conjunction with itsfinancial statements and the related notes.  This discussion containsforward-looking statements based upon current expectations that involve risksand uncertainties, such as its plans, objectives, expectations and intentions.Its actual results and the timing of certain events could differ materiallyfrom those anticipated in these forward-looking statements.*

 

The Company’s revenues for the fiscal year ended February 28,2005 were $125,000.  The Company did notgenerate any revenues during the fiscal year ending February 29, 2004 orany previous fiscal years.  The Company’splan of operations for the fiscal year ending February 28, 2006 is setforth below.

 

**Cash Requirements and Outstanding Debt Obligations**

 

The Company had a net loss of ($1,100,561) for thefiscal year ended February 28, 2005, and from March 3, 2000(inception of Burnam Management) through February 28, 2005, the Companyreported a cumulative net loss of ($2,945,074).

 

To date, the Company has funded its operationsthrough the issuance of common stock in exchange for cash and services, as wellas through unsecured notes payable to stockholders and third parties.  As of February 28, 2005, the Company hasissued 15,000,000 shares of Common Stock to its management team in exchange fortheir services.  As of February 28,2005, the Company has an aggregate outstanding balance of $1,086,524 under thefollowing obligations:

 

•                  The Company entered into an unsecuredpromissory note with George Mainas, a Company stockholder, on August 30,2000 in the principal amount of $340,000, bearing interest at 8%.  The promissory note is payable ondemand.  As of February 28, 2005, the Company had an outstandingbalance of $532,960 under the promissory note, including accrued interest.

 

•                  On August 18, 2004, the Company enteredinto an unsecured line of credit with Mainas Development Corporation.  Mr. Mainas, a stockholder of theCompany, serves as Managing Director of Mainas Development Corporation. The non-revolving line of credit has a maximum draw-down of $250,000, bearsinterest of 9% annually, does not maintain an outstanding balance limitation,and expires on August 17, 2005.  The outstanding balance on thisaccount as of February 28, 2005 was $171,123 including accrued interest.  The amount outstanding under this letter ofcredit is payable on demand.

 

•                  In May 2002 the Company entered into an unwritten,unsecured promissory obligation to Denis Schusterman, a stockholder, inexchange for his payment of approximately $16,000 in general and administrativeexpenses on behalf of the Company.  This obligation is payable upon demandand bears no interest.  As of February 28, 2005, the outstandingbalance under this obligation was $16,715.

 

•                  On June 1, 2004, the Company enteredinto a promissory note with Michael Wittlin. The principal balance of this note was $225,000, bearing interest at 6%,and maturing on June 1, 2005.  As of February 28, 2005, theoutstanding balance under this note was $234,863, including accrued interest.

 

•                  On August 15, 2004, the Company enteredinto a promissory note with Mr. F. James McCarl, an unaffiliated thirdparty.  The principal balance of this note was $100,000, bearing interestat 6%, and became due and payable on February 15, 2005.  On February 28,2005, the outstanding balance under this note was $103,238, including accruedinterest.  Mr. McCarl has agreed toconvert the amount outstanding under the note into shares of common stock ofthe Company.

 

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•                  On October 1, 2004, the Company enteredinto a promissory note with Eric and Sharon Pearlman, an unaffiliated thirdparty.  The principal balance of this note was $24,000, bearing interestat 6%, and maturing on October 1, 2005. On February 28, 2005, the outstanding balance under this note was$24,596, including accrued interest.

 

•                  In January 2005, Mr. Szabo, the CEOand a director of the Company, loaned the Company $3,000. bearing interest at6% and is due on demand.  On February 28,2005, the outstanding balance under this loan was $3,029.

 

The proceeds from these notes were used to meet thegeneral working capital needs of the Company.  This included the development of the Company’s main website virtualstudio which was developed in conjunction with MMT Solutions (“MMT”) and New MediaDimensions, Inc. (“New Media”).  In August 2000 the Companyentered into an agreement with MMT to begin the basic development of thevirtual studio, in exchange for two payments of $115,000, the first of whichwas made in September 2000.  The development was not completedaccording to the terms of the Company’s agreement, and the Company terminatedthe agreement in November 2000, with no further payment to MMT.  TheCompany executed a letter of termination and release with MMT in June 2003and no further claims or obligations exist on the part of either party.  InAugust 2003 the Company entered into an agreement with New Media tocomplete the development of the Company’s virtual studio and the Company’s mainwebsite, and to act as host and server for the Company’s virtual studio andwebsite.  The development of the virtual studio and main website, as wellas software development, was completed January 2004, for which the Companypaid New Media Dimensions $70,000.  The Company also paid New Media an additional$7,732 for the purchase of two Pentium-based server hosts and hardware.

 

The Company utilized the services of three separatewebsite development companies during fiscal year 2004.  The Company paid New Media approximately$10,481, and 8Sharp $41,667, to maintain the Company’s virtual studio and mainwebsite and to act as host and server to the Company’s sites until October 2004.  In October 2004, the Company enteredinto an agreement with Savvior Technology Solutions to maintain the Company’svirtual studio and main website and to act as host and server to the Company’ssites.   The term of the agreementis until December 2006 and provides for an average monthly payment by theCompany of $6,500.

 

The Company anticipates that the research anddevelopment costs related to its website and virtual studio for the next twelvemonths will be approximately $3,000 per month.

 

In September 2003, the Company entered into anagreement with Charles Sherman Public Relations to engage and manage publicrelations and the Company’s publicity needs. The Company has retained this firmon a monthly basis for a fee of $2,000 per month.

 

The Company’s general monthly expenses for fiscalyear 2004 were approximately $53,000.  These expenses included rental andmaintenance for its offices, which are approximately $4,000 per month, andoperating expenses which are approximately $49,000 in the aggregate, andincluded: salaries and travel reimbursement, approximately $3,000 per month forthe continued maintenance and development its website and virtual studio. TheCompany continues to expense its web development costs, which were $79,767 inthe aggregate as of February 28, 2005.

 

The Company officers agreed to reduce the Company’sexpenditures by waiving the payment of their salaries during the period from September 2004until April 2005.

 

**Anticipated Revenue**

 

The Company has several projects in progress that areexpected to be the Company’s primary sources of revenue during the currentfiscal year.  While management believes these projects will generaterevenue for the Company during the current fiscal year, there can be noassurances that such projects will be completed

 

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in the fiscal year, or that such projects willresult in any revenues.  The following isa description of several Company projects which are expected to generaterevenues during the current fiscal year.

 

***“Car Pool Guy”***

 

The Company finished principal photography of itsfirst feature film “Carpool Guy” in March 2005   The Company anticipates release of the filmin July 2005.  The Company commencedpre-sales of DVDs for the film in May 2005.  The Company funded film through its own fundsand by entering into an Exclusive Production Agreement in October 2004with Carpool Partners LLC (the “Carpool LLC”). Pursuant to the terms of the agreement, the Company’s financing partner,Carpool Guy Partners, LLC, owns 60% of the final production, and the Companyowns 40%.  Two of the principals of Carpool LLC are Thomas Szabo, theCompany’s Chief Executive Officer, and Mr. Mike Wittlin, a former Company employee,each of whom owns 33% of the LLC.  The Company anticipates receivingrevenue from this film in the current fiscal year.

 

***“Fastest Car In America”***

 

The Company has developed the concept for areality-based street racing television show called “Fastest Car In America.”   The Company has retained an agency torepresent the Company to obtain an order for the show from a televisionnetwork.  The Company expects to receiverevenue from this project during the current fiscal year if the show is orderedby a television network.

 

***“Reveal”***

 

On August 17, 2004, the Company entered into ajoint venture agreement with Neon DVD, Inc. and Familian Productions, LLCfor the production of a reality-based television show entitled “Reveal.”   Pursuant to the agreement, the Company andthe other two parties formed NFPMW, LLC for the purpose of developing,producing and distributing the half-hour pilot for “Reveal.” Pursuant to theterms of the agreement, in exchange for the Company’s production services, theCompany received a production fee of $75,000 and twenty-five percent (25%)interest in NFPMW, LLC and the production.  The Company received $75,000in revenue from the project during fiscal year 2004.  The Company completed post-production, anddelivered the final product to NFPMW on or about December 6, 2004.  NFPMW,LLC has entered into a twelve-month distribution agreement with CinamourEntertainment pursuant to which Cinamour will receive a fee of twenty-fivepercent (25%) of the gross receipts derived from domestic sales and thirtypercent (30%) of the gross receipts derived from international sales of theprogram during the term of the distribution agreement. The Company expects toreceive revenue from this project during the current fiscal year if the show isordered by a television network.

 

**Other Anticipated Revenue**

 

The Company also anticipates generating revenues duringthe current fiscal year from its sale of film and television related productsand sponsorship and marketing relationships.

 

**Critical Accounting Policies**

 

Our discussion and analysis of our financialcondition and results of operations is based upon our financial statements,which have been prepared in accordance with accounting principles generallyaccepted in the United States of America. These principles require us to makeestimates and judgments that affect the reported amounts of assets,liabilities, revenues and expenses and related disclosure of contingent assets andliabilities. We base our estimates on historical experience and on variousother assumptions that are believed to be reasonable under the circumstances.Estimated amounts may differ under different assumptions or conditions, andactual results could differ from the estimates. There are many criticalaccounting policies discussed in the notes to our financial statements,including the following critical accounting policy that affects the judgmentsused in the preparation of our financial statements:

 

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***Revenue Recognition***

 

Revenueis recognized by the Company on the accrual basis of accounting when earned.The Company’s primary business generates revenue from selling movie scripts andproducing movies and television shows. Revenue is recognized in accordance withthe provisions of Statement of Position 00-2, Accounting by Producers orDistributors of Films. Revenue is recognized only after all of the followingconditions are met:

 

(i)                                     Persuasive evidence of a sale or licensingarrangement with a customer exists;

(ii)                                  The film is complete and, in accordance withthe terms of the arrangement, has been delivered or is available for immediateand unconditional delivery;

(iii)                               The license period of the arrangement hasbegun and the customer can begin its exploitation, exhibition, or sale;

(iv)                              The arrangement fee is fixed or determinable;and

(v)                                 Collection of the arrangement fee isreasonably assured.

 

***Recent Accounting Pronouncements***

 

OnDecember 16, 2004, the Financial Accounting Standards Board issued SFAS No. 123(revised 2004), “Share-Based Payment” (“SFAS No. 123(R)”), which is arevision of SFAS No. 123, “Accounting for Stock-Based Compensation.” SFAS No. 123(R)supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees,”and amends SFAS No. 95, “Statement of Cash Flows.” Generally, the approachin SFAS No. 123(R) is similar to the approach described in SFAS No. 123.However, SFAS No. 123(R) requires all share-based payments to employees,including grants of employee stock options, to be recognized in the incomestatement based on their fair values. Pro forma disclosure is no longer analternative. The new standard will be effective for public entities in thefirst interim or annual reporting period beginning after June 15, 2005.The Company has not yet assessed the impact of adopting this new standard.

 

**Liquidity**

 

As of February 28, 2005, the Company had a cashbalance of $11,560.

 

As discussed above, on August 18, 2004, theCompany entered into an unsecured line of credit with Mainas DevelopmentCorporation.  The non-revolving line ofcredit has a maximum draw-down of $250,000, bears interest of 9% annually, doesnot maintain an outstanding balance limitation, and expires on August 17,2005.  The proceeds of this line are used for general corporate purposesand working capital.  The outstanding balance on this account as of February 28,2005 was $171,123, including accrued interest. The amount outstanding under this letter of credit is payable on demand.

 

Management believes the Company currently has cashon hand to satisfy the Company’s total operating costs and continueddevelopment of the Company’s actual and potential revenue sources until throughJune 2005.  The Company anticipates raising additional funds througha revolving credit facility, debt, convertible debt, or through the sale ofequity.  The Company has not entered into an agreement with JPC CapitalPartners to raise up to $5,000,000 of addition financing and has had preliminarydiscussions with several potential investors. There can be no assurance as to whether, when, or upon what terms theCompany will be able to consummate any financing.  The Company also anticipates entering intojoint ventures with third parties to fund specific television and filmprojects.  None of the Company’sagreements with production companies, actors or distribution companies,including but not limited to letters of intent, require additional capitalcontributions other than as described herein.

 

Over the next twelve months, the Company does notanticipate significant changes in the number of the Company’s employees, nordoes the Company anticipate the purchase or sale of any significant equipment.

 

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The Company previously considered acquiring aproduction studio, and entered into a non-binding letter of intent on December 8,2003 with Old Tucson Company (“Old Tucson”) in Tucson, Arizona. Subsequently, four of Old Tucson’s shareholders invested in the Company, eachand in the aggregate holding less than 5% ownership in the Company.  TheseCompany stockholders in the aggregate represented a controlling interest in OldTucson.  While beginning its due diligence, it came to the Company’sattention that Old Tucson did not have enough liquidity to continue operationsduring the term of the Company’s diligence, and no other avenues of immediatefinancing were available for Old Tucson Company.  While engaged in theletter of intent, the Company’s management determined that the cessation of aprospective acquisition’s operations, including attendant issues regarding lostopportunities and costs associated with restarting operations, was not in thebest interests of the Company or its stockholders. Accordingly, in December 2003the Company loaned $125,000 to Old Tucson for operations.  The note to OldTucson matured on June 20, 2004, and bears interest at 4%.  Theoutstanding balance under the note on February 28, 2005 was $125,986,including accrued and unpaid interest.   The note is secured by allof the shareholders’ stock in the Company.  As a result of the Company’smutual shareholders, the Company’s loan to Old Tucson may have been deemed aloan to a related party.  During the course of the Company’s continued duediligence, the Company elected not to pursue the acquisition of Old Tucson, andthe letter of intent expired unexercised on January 15, 2004.  The note remains an account receivable forthe Company.  The Company does not currently have any affiliation with anyof the four shareholders or Old Tucson, although the four Old Tucsonshareholders still retain their equity interest in the Company.  TheCompany is currently in negotiations with Old Tucson to extend the term of thisnote.

 

**Off-BalanceSheet Transactions**

 

The Company does not have any off-balance sheettransactions.

 

**RISKFACTORS**

 

*In addition to the otherinformation in this report, you should carefully consider the risks describedbelow before investing in our publicly-traded securities. The risks describedbelow are not the only ones facing us. Our business is also subject to therisks that affect many other companies, such as competition, technologicalobsolescence, labor relations, general economic conditions and geopoliticalchanges. Additional risks not currently known to us or that we currentlybelieve are immaterial also may impair our business operations and ourliquidity.*

 

***Risks Related ToOur Financial Condition***

 

**We Have A Limited OperatingHistory, So It Will Be Difficult For Investors To Evaluate The Success Of OurBusiness Model and The Effectiveness of Our Management.  In Addition, We are Currently In An EarlyStage of Operations, We Are Experiencing Significant Expenditures Related ToFunding Our Initial Operations, And We Are Currently Carrying a Net Loss.  If Our Business Model Is Not Successful, OurManagement Is Not Effective, Or We Are Unable To Generate Sufficient Revenue ToOffset Our Start-Up Expenditures, We May Not Become Profitable, And TheValue Of Your Investment May Decline Or Be Lost Entirely.**

 

We are a newly organized corporation and have alimited operating history from which to evaluate our business and prospects. Wehave earned $125,000 in revenue from our inception to February 28, 2005.For the fiscal year ended February 28, 2005, we had a net loss of ($1,100,561)and we had a cumulative net loss of ($2,945,074) for the period since inceptionat March 3, 2000 to February 28, 2005. We cannot assure you that ourfuture operations will be implemented successfully or that we will ever haveprofits. Moreover, we may not realize revenue from our current projects for asubstantial period of time, which may result in our inability to continuefinancing our operations. If we are unable to sustain our operations, we willbe forced to cease operations entirely, and you may lose your entireinvestment. Furthermore, we are experiencing the initial costs anduncertainties of a newly formed business, including additional

 

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expenditures, unforeseen costs and difficulties,complications, and delays, all of which must be resolved and/or paid withoutthe benefit of a predictable revenue stream. These risks and uncertaintiesinclude the following:

 

• our business model and strategy are stillevolving and are continually being reviewed and revised;

• we may not be able to successfully implement our business model andstrategy; and

• our management has not worked together for very long.

 

We cannot be sure that we will be successful inmeeting these challenges and addressing these risks and uncertainties. If weare unable to do so, our business will not be successful and the value of yourinvestment in our company will decline or may be lost altogether.

 

**Our Auditors Have ExpressedSubstantial Doubt Regarding Our Ability To Continue As A Going Concern.  If We Are Unable To Continue As A GoingConcern, We May Be Required To Substantially Revise Our Business Plan orCease Operations.**

 

As of the date of our most recent audit, whichincluded the fiscal years ended February 28, 2005 and February 29,2004, we had not generated sufficient revenues for our cash flow needs. As aresult, our auditors have expressed substantial doubt about our ability tocontinue as a going concern. Although we have since begun to generate revenue,we are still operating at a net loss, and expect to continue to incursubstantial losses as we complete the development of our business. We have notestablished any other source of equity or debt financing other than that whichis described in our discussion entitled “Management’s Discussion andAnalysis—Plan of Operations—Liquidity.” We cannot assure you that we will beable to obtain sufficient funds to continue the development and pre-productionof television shows and motion pictures, that we will be able to produce andsell our scripts, shows and motion pictures, or that our virtual studio willbecome self-funding. We also cannot assure you that we will be able to generatesufficient revenue from advertisers and sponsors to fund our business orprevent strong fluctuations in our financial position based upon both demandand our ability to meet such demand in film and show development. If we cannotcontinue as a going concern, we may need to substantially revise our businessplan or cease operations, which may reduce or negate the value of yourinvestment.

 

**To Satisfy Our CapitalRequirements, We May Seek To Raise Funds In The Public or Private CapitalMarkets, Which May Not Be Given on Terms Favorable To Us, Or We May NotBe Able To Raise Funds At All.  In TheEvent That We Receive Funds on Undesirable Terms, Or Are Unable To ReceiveAdditional Funds, We May Not Be Able To Fund Our Operations and Will NotBe Able to Continue As A Going Concern. In Addition, The Additional Funding May Have Terms Which WillDilute The Value of Your Investment.**

 

Our ability to raise additional funds in the publicor private markets will be adversely affected if the results of our businessoperations are not favorable, or if any of the scripts or films we develop arenot well-received. We may seek additional funding through corporatecollaborations and other financing vehicles or from loans, credit facilities orinvestments from new or existing stockholders. We cannot assure you that anysuch funding will be available to us, or if available, that it will beavailable on terms favorable to us. If adequate funds are not available, wewill not be able to complete the production of our developed projects. As aresult, we may be required to discontinue our operations without obtaining anyvalue for our scripts or projects under development, thereby reducing oreliminating the value of our equity, or we could be forced to relinquish rightsto some or all of our projects under development in return for an amount substantiallyless than we expended to develop such products. If we are successful inobtaining additional funds, the terms of the financing may have the effect ofdiluting your interest in our company.

 

**For The Fiscal Year Ended February 28,2005, 100% Of Our Revenues Were Generated By Two Clients.  If We Lose These Clients, Or Fail ToDiversify Our Revenue Base, We May Not Be Able To**

 

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**Generate Sufficient Revenues ToMeet Our Expenditures.  In This Event, WeMay Not Be Able To Continue Our Business Operations.**

 

As of February 28, 2005, 100% of our revenueswere derived from Behind the Hedge Productions and a joint venture with NeonDVD, Inc. and Familian Productions, LLC. We have generated all of ourrevenue from our agreement with these clients, and do not have an ongoingcontract to do further work with either the joint venture or Behind the HedgeProductions as of February 28, 2005. Accordingly, if we fail to generateadditional sources of revenue, we may not be able to continue our businessoperations.

 

***Risks Related To Our Business***

 

**If Our Films and Television Shows Are Note Commercially Successful, We May NotBe Able To Generate Sufficient Revenue To Fund Our Operations, And May BeUnable to Continue As A Going Concern.**

 

Producing television shows and feature length filmsinvolves substantial risks, because they require that we spend significantfunds based entirely on our preliminary evaluation of the screenplay’scommercial potential as a film. Although some of our films and shows will befunded and produced by third parties, we will not retain ownership of thesefilms and shows. We may wish to retain ownership of a portion of our developedshows and films, and will require additional funding to produce these films andshows, and will be subject to risks of ownership, including lack of assuranceof profitability and revenues. It is impossible to predict the success of anyfilm or show before the production starts. The ability of a show or film togenerate revenues will depend upon a variety of unpredictable factors,including:

 

• public taste, which is always subject tochange;

•the quantity and popularity of other films and shows and leisure activitiesavailable to the public at the time of our release;

•the competition for exhibition at movie theatres, through video retailers, oncable television and through other forms of distribution; and

•the fact that not all shows and films are distributed in all media forms.

 

For any of these reasons, the shows and films thatwe produce may be commercially unsuccessful, and the value of our equityinterest in any or all of them may be reduced or eliminated entirely. Weoperate in a particularly unpredictable industry, and, if we are unable toproduce products which are commercially successful in this industry, we may notbe able to recoup our expenses and/or generate revenues. In the event that weare unable to generate revenues, we may not be able to continue operating as aviable business, and you may lose your investment entirely.

 

**If We Lose The Services Of KeyPersonnel, It May Substantially Harm Our Ability To Operate and EarnRevenue.**

 

Oursuccess is highly dependent upon the continued services of key members of ourmanagement, including our Chairman and Chief Executive Officer, Thomas A.Szabo, our President and director, Corbin Bernsen, and our Executive VicePresident, Acting Chief Financial Officer and director, Shaun D.C. Edwardes.Virtually all decisions concerning the conduct of our business, including theproperties and rights to be created or acquired by Public Media and thearrangements to be made for such distribution, are made by or controlled by Messrs. Szabo,Bernsen and Edwardes.  The loss of any ofthese individuals could have a material adverse effect on us. We have notentered into any agreement with Messrs. Szabo, Bernsen and Edwardes thatwould prevent them from leaving us, nor have we obtained any key man lifeinsurance. If we lose either of their services, we may not be able to hire andretain other officers with comparable experience or contacts. As a result, theloss of the services of any of these individuals may limit our ability toproperly conduct our operations in a cost-effective manner, and will require usto identify, employ and train new personnel, which will require both financialresources and the time of our remaining employees. Should we be unable tolocate adequate replacement personnel, we may not be sufficiently competitivein

 

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ourmarket to generate sufficient revenue to finance our continuing operations.Accordingly, the loss of any of these individuals may result in our inabilityto continue operations in the same manner and with the same level of industryand investment interest as may exist prior to their departure, which, as aresult, may reduce the value of your investment.

 

**Since Our Officers and Directors DoNot Devote Their Full Business Time To Our Business, We May Not Be Able ToAct On Our Business Opportunities Or Respond To Industry Or Market Forces In ATimely Manner, Which May Reduce Our Competitiveness and, As A Result, TheViability Of Our Business and Operations.**

 

The persons serving as our officers and directorshave existing responsibilities and may have additional responsibilities toprovide management and services to other entities. Each anticipates that hewill devote significantly more hours if we begin generating significantrevenue. We cannot guarantee that any of our officers or directors will be ableto devote sufficient amounts of their business time to enable us to implementour business plan. If any or all of our officers or directors do not devote asufficient amount of their business time to the management of our business, wemay lose our ability to rapidly and appropriately respond to market conditionsand opportunities, which may limit our competitiveness. Such a loss ofcompetitiveness may result in our inability to generate sufficient revenue tofinance our continuing operations. This may reduce the value of our companyand, accordingly, the value of your investment.

 

**Our Officers and Directors Own AControlling Percentage Of Our Outstanding Shares Of Common Stock Which AllowsThem To Make Key Decisions Or Effect Transactions Without Further ShareholderApproval, And Their Interests May Differ From Those Of Other Shareholders**

 

Our officers and directors own 56.4% of our issuedand outstanding shares in the aggregate, and effectively control our company.Accordingly, our officers and directors will be able to elect all of ourdirectors and inhibit your ability to cause a change in the course of ouroperations. Further, our officers and directors may effect a major transactionsuch as a merger without further shareholder approval. Our articles ofincorporation do not provide for cumulative voting. They also have the power toprevent or cause a change in control and, without their consent, we could beprevented from entering into transactions that could be beneficial to us. Theinterests of these shareholders may differ from the interests of the othershareholders, and may limit the ability of other shareholders to affect ourmanagement and affairs.

 

**We May Not Be Able To ProtectOur Proprietary Rights and May Infringe On The Proprietary Rights Of Others,Should We Be Deemed To Infringe Upon The Propriety Rights Of Others, We May FaceLitigation And/Or Be Required To Alter Out Content Which Contains The ContestedIntellectual Property.  In This Event, WeMay Be Required To Expend Significant Amounts Of Capital In Defending OurIntellectual Property, And May Lose Revenue If We Are Unable ToSuccessfully Defend Our Use Of Such Content And Are Unable To Create ASuccessful Alternative.**

 

Establishment of trademarks, copyrights and otherproprietary rights is important to our success and our competitive position.Accordingly, we intend to devote substantial resources to the establishment andprotection of copyrights and other proprietary rights. We cannot assure youthat the actions taken by us to establish and protect any patents or otherproprietary rights will be adequate to prevent imitation of our products byothers or to prevent others from prohibiting sales of any products we maydevelop in violation of the copyrights, trademarks and proprietary rights ofothers. Moreover, we cannot assure you that others will not assert rights in,or ownership of, trademarks, copyrights and other proprietary rights we mayestablish or acquire or that we will be able to successfully resolve suchconflicts.

 

We have not received patent certification from theUnited States Patent and Trademark Office for our virtual studio. As a result,if another production company is able to develop a software model identical orsimilar to our virtual studio, we may not be able to successfully prosecute ourpatent. Accordingly, we may be forced to compete with other companies forviewers, sponsors, advertisers, film production companies and televisionproduction companies with respect to our virtual studio. If these companies havegreater

 

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resources than we do for revenue generation, we maynot be able to form a self-sustaining virtual studio business unit. As ourvirtual studio is a key point of distinction from our competitors, as well as apotentially significant revenue source for us, if we are unable to protect ourrights to use this technology, or are otherwise prohibited from using it by anexisting patent, our ability to compete in our industry will be severelylimited, and your interest in our company may be reduced or lost entirely.

 

**We May Face Additional RisksDue To Our Reliance On Outsourced Production Studios For Films and TelevisionShows We Choose To Product Ourselves. These Risks Include Our Inability To Fully Control The Quality andBudgeting Constraints For Any Outsourced Studio.  Whether Or Not We Are Able To Mitigate OurLoss, Should We Experience Significant Deficiencies With Any Outsourced Studio,We May Face Increased Costs And/Or Product With Decreased Or Poor Quality,Which Will Limit The Amount of Revenue We May Be Able To Generate FromThat Particular Project, And, If A Repeated Occurrence, May Harm OurCompetitiveness Within Our Industry.**

 

In order to minimize our expenses relative to ourrevenue, we have outsourced substantially all of our production requirementsfor the television shows and films we choose to produce. We do not intend tomaintain a relationship with one particular studio or production group.Consequently, we may be subject to certain risks associated with outsourcing,which include, but may not be limited to:

 

• theoutsourcing production studio’s ability to products shows or films that meetour technical specification and that have minimal defects;

• the outsourcing production studio’s abilityto honor the agreed-upon budget estimates and deadlines;

• the financial solvency, labor concerns andgeneral business condition of our outsourcing production studio;

•unexpected changes in regulatory requirements;

•inadequate protection of intellectual property in the entertainment industry;

•risks of fire, flood or acts of God affecting production studio facilities; and

•our ability to meet our financial obligations to our outsourcing productionstudio.

 

In addition, our outsourcing production studios mayrequire further supplies and talent from various third parties, and similarrisks are involved in such procurement efforts. Moreover, we may not receivecompetitive pricing from our production studios as we do not intend toform a relationship with one particular studio. Due to our dependency onoutsourced production studios and the inherent difficulty in replacingoutsourced production studios in an efficient or expeditious manner, theoccurrence of any condition preventing or hindering the production or deliveryof our films and shows by any one or more of our outsourcing production studiosmay require us to mitigate our actual or potential loss by switching outsourcedproduction studios. Whether or not we are able to mitigate such loss, we may faceincreased costs and/or be forced to market a product of decreased or poorquality, which will limit the amount of revenue we may be able to generate fromthat particular project. If such a problem occurs repeatedly, our reputation inour industry may suffer, and we may not be sufficiently competitive to generateadequate revenue to fund our operations.

 

**We Are Responsible For TheIndemnification Of Our Officers and Directors. Should Our Officers And/Or Directors Require Us To Contribute To TheirDefense, We May Be Required To Spend Significant Amount Of Our Capital,Which Will Then Be Unavailable For Product Development or OtherRevenue-Generating Activity, Resulting In Decreased Earnings For Our Company.**

 

Our by-laws provide for the indemnification of ourdirectors, officers, employees, and agents, under certain circumstances,against attorney’s fees and other expenses incurred by them in any litigationto which they become a party arising from their association with or activitieson behalf of our company. This indemnification policy could result insubstantial expenditures, which we may be unable to recoup. If theseexpenditures are significant, or involve issues which result in significantliability for our key personnel, we may be unable to continue operating as agoing concern, and you may lose your investment entirely.

 

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**If We Exceed Our Budges In OurProjects, We May Be Unable To Recoup Our Costs, Which May Result InOur Inability To Fund Our Continuing Operations, As Well As Limit The Amount OfCapital We Have Available To Finance Other Projects Which May GenerateRevenue**

 

Our business model requires that we be efficient inproduction of our projects. Actual production costs often exceed their budget, sometimessubstantially. The production, completion and distribution of our projects aresubject to a number of uncertainties, including delays and increasedexpenditures due to creative differences among key cast members and other keycreative personnel or other disruptions or events beyond our control. Riskssuch as death or disability of star performers, technical complications withspecial effects or other aspects of production, shortages of necessaryequipment, damage to film negatives, master tapes and recordings or adverseweather conditions may cause cost overruns and delay or frustrate completion ofa production. If a production incurs substantial budget overruns, we may berequired to seek additional financing from outside sources to complete production.We cannot make assurances regarding the availability of such financing on termsacceptable to us.

 

In addition, if a production incurs substantialbudget overruns, we cannot assure you that we will be able to recoup thesecosts, which could have a material adverse effect on our business, results ofoperations or financial condition. Increased costs incurred with respect to aparticular project may result in the delayed release of a project at theintended time and potentially the postponement to a less favorable time, all ofwhich could cause a decline in box office revenue and the overall financialsuccess of the movie. Budget overruns could also prevent a movie from beingcompleted or released, and may leave us with insufficient resources to fund otherprojects. In this event, if we are unable to finance our operations from otherrevenues, bank resources or capital financing, we may be unable to continueoperations as described in our plan of operations. In addition, if we areforced to incur debt, or are unable to continue operations, the value of ourcompany may be significantly reduced.

 

**Our Revenues May FluctuateSignificantly Based On The Financing Arrangements For Particular Projects, AndThe Commercial Success Of Individual Projects, Consequently, Our Results OfOperations May Be Difficult To Predict, Which May Cause Our MarketPrice To Fluctuate Unpredictably, Or Reduce It Overall**

 

Revenues and results of operations are difficult topredict and depend on a variety of factors. For example, our clients generallyretain us on a project-by-project basis, rather than under long-term contracts.As a result, a client may or may not engage us for further services once aproject is completed or may unilaterally reduce the scope of, or terminate,existing projects. The absence of long-term contracts and the need for newclients create an uncertain and uneven revenue stream, which could harm ourability to finance our operations. Our revenues and results of operations willdepend significantly upon the commercial success of our projects that weproduce and distribute, which we cannot predict with certainty. Consequently,our revenues and results of operations may fluctuate significantly from periodto period, and the results of any one period may not be indicative of theresults for any future periods. We cannot assure you that we will manage theacquisition, production, and distribution of our projects as profitably fromperiod to period. Accordingly, you should not rely on the results of any onequarter as an indication of our future performance. If in some future quarterour results of operations were to fall below the expectations of securitiesanalysts and investors, the trading price of our common stock would likelydecline.

 

**Work Strikes Or Other Union JobActions Could Result in Delays And Could Result In Delays And Failures ToComplete Projects According To Defined Deadlines And Within PrescribedBudgets.  As A Result, We May FaceIncreased Costs and Reduced Revenues As Well As a Limited Ability To MarketFuture Projects.**

 

The projects that we intend to produce generallywill utilize actors, directors, and writers who are members of the ScreenActors Guild, Directors Guild of America, and Writers Guild of America,respectively, pursuant to industry-wide collective bargaining agreements. Astrike by one or more of the unions that provide personnel essential to theproduction of our projects could delay or halt our ongoing productionactivities for that project. A union-related halt or delay, depending on thelength of time, could cause a

 

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delay or interruption in our release of any projectsconducted with the use of union labor. As a result, we may experiencesignificant delays and/or reductions in revenues for our union-producedprojects, which may limit our ability to invest in new projects on a short-termbasis.

 

**Under The Terms Of Completion BondsCovering A Motion Picture Project, In The Event We Fail To Complete The MovieOn Schedule And Within Budget, The Bond Company May TakeoeverProduction, Which May Reduce The Artistic Integrity And CommercialPotential Of The Movie, Resulting In Reduced Revenue For The Company.**

 

We may need to obtain a completion bond for eachfilm we produce. If we do not fund a film internally, and a completion bond isrequired by the investors of the film, our inability to complete a movie on schedule orwithin budget may result in the completion bond company taking over production.In this event, the bond company will have the right to replace any member ofthe production personnel, including members of the film’s management team. Thereplacement of the production personnel may change the artistic quality of themovie, reduce our equity interest in the film, and/or limit our ability topromote distribution of the movie.

 

Our ability to adhere to the production schedule andbudget will be subject to many factors not within our control, including

 

• the ability to attract suitable productionand creative staff within our budget,

• the availability of our production personnel,including directors, producers, and actors (particularly the lead andsupporting actors) on the scheduled basis,

•the weather conditions (seasonable or unseasonable, predicted or unpredicted)during the production phase,

• the availability of desirable locations froma cost or timing viewpoint, and

• the ability to utilize appropriatefacilities for post-production phase on a timely basis.

 

**In Most Cases Our Movies Will BeSubject To Ratings Restrictions and Censorship That May Result In RatingsThat May Reduce Distribution And Revenue Potential.**

 

Our films and television shows are generallytargeted to very specific audiences, which require us to produce projects thatobtain ratings suitable for each such audience. Certain pre-productiondistribution arrangements we expect to obtain may be based upon the subjectmovie having a particular rating classification from the Motion PictureAssociation of America (or MPAA). With these arrangements in place, we will intendto produce the movie in a manner that will ultimately obtain the expectedrating. However, it is difficult to predict the rating classification that theMPAA will ultimately assign to the movie. If the expected rating were notobtained, distribution support (including marketing and advertising) may bereduced, resulting in fewer distribution venues and smaller viewing audience.Further, censors in foreign jurisdictions may find elements of a movieobjectionable.

 

At additional and unbudgeted costs, we may berequired to revise the movie to obtain the desired rating classification or toremove the objectionable elements of the movie. Even following revision of themovie, the release in certain jurisdictions may be denied. These events mayresult in release and distribution delays, which may limit the commercialpotential of the movie, resulting in reduced revenues for our company, and,accordingly, reducing the value of your investment.

 

**We Intend To Distribute Our Showsand Films Internationally, And May Be Subject To Additional Risks Due ToOur International Operations.  TheseRisks May Reduce Or Limit Our Potential Revenue From InternationalSources, Which May Significantly Reduce Our Revenue.**

 

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We intend to distribute our productions outside theUnited States through third party licenses and derive revenues from thesesources. As a result, our business is subject to certain risks inherent ininternational business, many of which are beyond our control. These risksinclude:

 

• changesin local regulatory requirements, including restrictions on content;

•  changesin laws and policies affecting trade, investment and taxes (including laws andpolicies relating to the repatriation of funds and to withholding taxes);

• differingdegrees of protection for intellectual property;

• instabilityof foreign economies and governments;

• culturalbarriers; and

• warsand acts of terrorism, to the extent such threats or acts limit or preventpotential viewers of our films from attending theaters.

 

**ITEM 7.****                 ****FINANCIAL STATEMENTS**

 

PUBLIC MEDIA WORKS, INC. ANDSUBSIDIARY

 

CONSOLIDATED FINANCIAL STATEMENTS

 

FEBRUARY 28, 2005 AND FEBRUARY 29,2004

 

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PUBLIC MEDIA WORKS, INC. ANDSUBSIDIARY

 

TABLE OF CONTENTS

 
| Financial Statements:                                    |   |
|----------------------------------------------------------|--------|
|                                                     |   |
| Report of Independent Registered Public  Accounting Firm |   |
|                                                     |   |
| Consolidated Balance Sheets                              |   |
|                                                     |   |
| Consolidated Statements of Operations                    |   |
|                                                     |   |
| Consolidated Statements of Stockholders’  Equity    |   |
|                                                     |   |
| Consolidated Statements of Cash Flows                    |   |
|                                                     |   |
| Notes to Consolidated Financial Statements               |   |

 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholdersof Public Media Works, Inc.

 

We have audited the accompanying consolidated balance sheets of PublicMedia Works, Inc. and subsidiary (a Delaware corporation) as of February 28,2005 and February 29, 2004, and the related consolidated statements ofoperations, stockholders’ equity and cash flows for each of the three years inthe period ended February 28, 2005. These consolidated financialstatements are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these consolidated financialstatements based on our audits.

 

We conducted our audits in accordance with the standards of the PublicCompany Accounting Oversight Board (United States).  Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the consolidatedfinancial statements are free of material misstatement.  An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the consolidated financialstatements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overallfinancial statement presentation.  We believethat our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to abovepresent fairly, in all material respects, the financial position of PublicMedia Works, Inc. and subsidiary as of February 28, 2005 and February 29,2004, and the results of its operations and its cash flows for each of thethree years in the period ended February 28, 2005 in conformity with U.S.generally accepted accounting principles.

 

The accompanying consolidated financial statements have been prepared assumingthat the Company will continue as a going concern. As disclosed in Note 14 tothe financial statements, the Company incurred a net loss of $1,100,561 and$779,427, respectively, during the year ended February 28, 2005 and theyear ended February 29, 2004, and as of February 28, 2005, theCompany’s current liabilities exceeded its current assets by $1,433,637. Thesefactors create an uncertainty as to the Company’s ability to continue as agoing concern. The ability of the Company to continue as a going concern isdependent upon additional capital contributions from the sale of stock and theability to generate operating revenue as the Company transitions from adevelopment stage company to an operating company. The financial statements donot include any adjustments that might be necessary should the company beunable to continue as a going concern.

 

Salt Lake City, Utah

May 6, 2005

 

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PUBLIC MEDIA WORKS, INC. ANDSUBSIDIARY

 

CONSOLIDATEDBALANCE SHEETS

 

FEBRUARY 28, 2005 AND FEBRUARY 29,2004

 
| ** **                                                                                                       | ** ** | **2005**   | ** ** | **2004**   | ** ** |
|------------------------------------------------------------------------------------------------------------------|------------|------------|------------|------------|------------|
| Assets                                                                                                           |       |       |       |       |       |
| Current  Assets:                                                                                                 |       |       |       |       |       |
| Cash                                                                                                             |       | $          | 11,560     |       | $          | 12,200 |   |
| Note  receivable, related party                                                                                  |       | —     |       | 125,000    |       |
| Prepaid  expenses and other current assets                                                                       |       | —     |       | 2,140      |       |
| Accounts  receivable, less allowance for doubtful accounts of $-0-                                               |       | 3,876      |       | —     |       |
| Stock  subscriptions receivable                                                                                  |       | —     |       | 155,000    |       |
| Receivable,  officers and directors                                                                              |       | —     |       | 65,000     |       |
| Total  current assets                                                                                            |       | 15,436     |       | 359,340    |       |
| Property and  equipment, net                                                                                     |       | 22,967     |       | 36,246     |       |
| Other  Assets:                                                                                                   |       |       |       |       |       |
| Film  development costs                                                                                          |       | 4,000      |       | 5,500      |       |
| Note  receivable, related party                                                                                  |       | 125,000    |       | —     |       |
| Investment  in limited liability company                                                                         |       | 24,000     |       | —     |       |
| Total other  assets                                                                                              |       | 153,000    |       | 5,500      |       |
| Total Assets                                                                                                     |       | $          | 191,403    |       | $          | 401,086 |   |
| Liabilities  and Stockholders’ Equity                                                                       |       |       |       |       |       |
| Current  Liabilities:                                                                                            |       |       |       |       |       |
| Accounts  payable and accrued expenses                                                                           |       | $          | 255,351    |       | $          | 65,719 |   |
| Accrued  salaries and related taxes                                                                              |       | 97,198     |       | —     |       |
| Accrued  interest, stockholders                                                                                  |       | 128,889    |       | 95,299     |       |
| Accrued  interest                                                                                                |       | 10,459     |       | —     |       |
| Deferred revenue                                                                                                 |       | 10,000     |       | —     |       |
| Notes  payable                                                                                                   |       | 249,000    |       | —     |       |
| Notes  payable, stockholders                                                                                     |       | 530,176    |       | 427,176    |       |
| Notes  payable, line of credit, related party                                                                    |       | 168,000    |       | —     |       |
| Total  current liabilities                                                                                       |       | 1,449,073  |       | 588,194    |       |
| Stockholders’  Equity:                                                                                      |       |       |       |       |       |
| Common  stock, $.0001 par value 100,000,000 shares authorized, 25,552,500 and  25,512,500 issued and outstanding |       | 2,555      |       | 2,551      |       |
| Additional  paid-in capital                                                                                      |       | 1,684,849  |       | 1,654,854  |       |
| Accumulated  deficit                                                                                             |       | (2,945,074 | )          | (1,844,513 | )          |
| Total  stockholders’ equity                                                                                 |       | (1,257,670 | )          | (187,108   | )          |
| Total  Liabilities and Stockholders’ Equity                                                                 |       | $          | 191,403    |       | $          | 401,086 |   |

 

The accompanying notes are an integralPart of the financial statements.

 

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PUBLIC MEDIA WORKS, INC. ANDSUBSIDIARY

 

CONSOLIDATED STATEMENTS OF OPERATIONS

 
| ** **                        | ** ** | **For the  Year Ended  February 28,  2005** | ** ** | **For the  Year Ended  February 29,  2004** | ** ** | **For the  Year Ended  February 28,  2003** | ** ** |
|-----------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|
|                              |       |                                             |       |                                             |       |                                             |       |
| Revenues:                         |       |                                             |       |                                             |       |                                             |       |
| Movie script  sales               |       | $                                                | 50,000     |                                             | $          | —                                           |       | $ | — |   |
| Producing  income                 |       | 75,000                                           |       | —                                           |       | —                                           |       |
| Total  revenues                   |       | 125,000                                          |       | —                                           |       | —                                           |       |
| Cost of film  development         |       | 59,872                                           |       | —                                           |       | —                                           |       |
| Gross profit                      |       | 65,128                                           |       | —                                           |       | —                                           |       |
| Operating  expenses:              |       |                                             |       |                                             |       |                                             |       |
| Advertising  and promotion        |       | 31,115                                           |       | 491                                              |       | —                                           |       |
| Auto  expenses                    |       | 33,193                                           |       | 33,815                                           |       | —                                           |       |
| Investor  relations               |       | 30,000                                           |       | —                                           |       | —                                           |       |
| Professional  fees                |       | 167,277                                          |       | 34,153                                           |       | 20,960                                           |       |
| Office  expenses                  |       | 20,558                                           |       | 25,079                                           |       | 2,586                                            |       |
| Rent                              |       | 10,800                                           |       | 12,600                                           |       | 1,000                                            |       |
| Salaries                          |       | 379,393                                          |       | 331,234                                          |       | 150,000                                          |       |
| Payroll  taxes                    |       | 29,359                                           |       | 21,888                                           |       | —                                           |       |
| Telephone  and utilities          |       | 17,172                                           |       | 10,116                                           |       | 1,139                                            |       |
| Consulting  costs                 |       | 112,090                                          |       | 49,700                                           |       | 21,361                                           |       |
| Web site  development costs       |       | 79,767                                           |       | 121,744                                          |       | —                                           |       |
| Depreciation                      |       | 13,672                                           |       | 12,224                                           |       | 11,451                                           |       |
| Travel and  entertainment         |       | 174,603                                          |       | 82,918                                           |       | 30,691                                           |       |
| Other                             |       | 21,041                                           |       | 10,973                                           |       | 974                                              |       |
| Total operating  expenses         |       | 1,120,040                                        |       | 746,935                                          |       | 240,162                                          |       |
| Operating  loss                   |       | (1,054,912                                       | )          | (746,935                                         | )          | (240,162                                         | )          |
|                              |       |                                             |       |                                             |       |                                             |       |
| Other income  (expense):          |       |                                             |       |                                             |       |                                             |       |
| Loss on  disposal of fixed assets |       | —                                           |       | —                                           |       | (4,656                                           | )          |
| Interest  income                  |       | —                                           |       | 986                                              |       | —                                           |       |
| Interest  expense                 |       | (44,049                                          | )          | (31,878                                          | )          | (27,200                                          | )          |
| Total other  income (expense)     |       | (44,049                                          | )          | (30,892                                          | )          | (31,856                                          | )          |
|                              |       |                                             |       |                                             |       |                                             |       |
| Loss before  income taxes         |       | (1,098,961                                       | )          | (777,827                                         | )          | (272,018                                         | )          |
|                              |       |                                             |       |                                             |       |                                             |       |
| Provision  for income taxes       |       | 1,600                                            |       | 1,600                                            |       | 800                                              |       |
|                              |       |                                             |       |                                             |       |                                             |       |
| Net loss                          |       | $                                                | (1,100,561 | )                                                | $          | (779,427                                         | )          | $ | (272,818 | ) |
|                              |       |                                             |       |                                             |       |                                             |       |
| Net loss per  share               |       | $                                                | (.04       | )                                                | $          | (.06                                             | )          | $ | (.05 | ) |

 

The accompanying notes are an integralpart of the financial statements.

 

29

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PUBLIC MEDIA WORKS, INC. ANDSUBSIDIARY

 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

 

FOR EACH OF THE THREE YEARS INTHE PERIOD ENDED FEBRUARY 28, 2005

 
| ** **                                                                                     | ** ** | ** **       | ** ** | ** **  | ** ** | **Additional**  | ** ** | ** **  | ** ** |
|------------------------------------------------------------------------------------------------|------------|------------------|------------|-------------|------------|-----------------|------------|-------------|------------|
| ** **                                                                                     | ** ** | **Common Stock** | ** ** | **Paid-in** | ** ** | **Accumulated** | ** ** |
| ** **                                                                                     | ** ** | **Shares**       | ** ** | **Amount**  | ** ** | **Capital**     | ** ** | **Deficit** | ** ** |
|                                                                                           |       |             |       |        |       |            |       |        |       |
| Balance, February 28,  2002                                                               |       | 5,000,000        |       | $           | 500        |            | $          | 409,055     |       | $ | (792,268 | ) |
| Cash  contributed and services rendered by shareholders                                        |       | —           |       | —      |       | 160,850         |       | —      |       |
| Net loss for  the year ended February 28, 2003                                            |       | —           |       | —      |       | —          |       | (272,818    | )          |
| Balance, February 28,  2003                                                               |       | 5,000,000        |       | 500         |       | 569,905         |       | (1,065,086  | )          |
| Common stock  issued in connection with the acquisition of subsidiary on August 30,  2003 |       | 20,000,000       |       | 2,000       |       | 880,000         |       | —      |       |
| Common stock  issued for $.40 a share in September 2003                                   |       | 12,500           |       | 1           |       | 4,999           |       | —      |       |
| Common stock  issued for $.40 a share in January and February 2004                   |       | 500,000          |       | 50          |       | 199,950         |       | —      |       |
| Net loss for  the year ended February 29, 2004                                            |       | —           |       | —      |       | —          |       | (779,427    | )          |
| Balance, February 29,  2004                                                               |       | 25,512,500       |       | 2,551       |       | 1,654,854       |       | (1,844,513  | )          |
| Common stock  issued for $.75 a share in February 2005                                    |       | 40,000           |       | 4           |       | 29,995          |       | —      |       |
| Net loss for  the year ended February 28, 2005                                            |       | —           |       | —      |       | —          |       | (1,100,561  | )          |
| Balance, February 28,  2005                                                               |       | 25,552,500       |       | $           | 2,555      |            | $          | 1,684,849   |       | $ | (2,945,074 | ) |

 

The accompanying notes are an integralpart of the financial statements.

 

30

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 PUBLIC MEDIA WORKS, INC. AND SUBSIDIARY

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 
| ** **                                                                   | ** ** | **For the  Year Ended  February 28,   2005** | ** ** | **For the  Year Ended  February 29,   2004** | ** ** | **For the  Year Ended  February 28,  2003** | ** ** |
|------------------------------------------------------------------------------|------------|---------------------------------------------------|------------|---------------------------------------------------|------------|--------------------------------------------------|------------|
| Cash flows  from operating activities:                                       |       |                                              |       |                                              |       |                                             |       |
| Net loss                                                                     |       | $                                                 | (1,100,561 | )                                                 | $          | (779,427                                         | )          | $ | (272,818 | ) |
|                                                                         |       |                                              |       |                                              |       |                                             |       |
| Adjustments  to reconcile net loss to cash provided by operating activities: |       |                                              |       |                                              |       |                                             |       |
| Expenses  paid directly by related party creditors                           |       | 3,000                                             |       | 17,325                                            |       | 66,715                                           |       |
| Loss on  disposal of fixed assets                                            |       | —                                            |       | —                                            |       | 4,656                                            |       |
| Depreciation                                                                 |       | 13,672                                            |       | 12,224                                            |       | 11,451                                           |       |
| Common stock  issued for services                                            |       | —                                            |       | —                                            |       | 150,000                                          |       |
| Increase in  accounts receivable                                             |       | (3,876                                            | )          | —                                            |       | —                                           |       |
| (Increase)  decrease in shareholder receivable                               |       | 65,000                                            |       | (65,000                                           | )          | —                                           |       |
| (Increase)  decrease in prepaid expenses and interest receivable             |       | 2,140                                             |       | (1,930                                            | )          | —                                           |       |
| Increase in  accounts payable and accrued expenses                           |       | 330,879                                           |       | 94,163                                            |       | 27,940                                           |       |
| Increase in  deferred revenue                                                |       | 10,000                                            |       | —                                            |       | —                                           |       |
| Net cash  used by operating activities:                                      |       | (679,746                                          | )          | (722,645                                          | )          | (12,056                                          | )          |
|                                                                         |       |                                              |       |                                              |       |                                             |       |
| Cash flows  from investing activities:                                       |       |                                              |       |                                              |       |                                             |       |
| Cash loaned  to related party                                                |       | —                                            |       | (125,000                                          | )          | —                                           |       |
| Purchase of  property and equipment                                          |       | (394                                              | )          | (16,655                                           | )          | —                                           |       |
| Film  development costs capitalized                                          |       | (2,500                                            | )          | (5,500                                            | )          | —                                           |       |
| Investment  in Car Pool Guy Partners, LLC                                    |       | (20,000                                           | )          | —                                            |       | —                                           |       |
| Net cash  used by investing activities                                       |       | $                                                 | (22,894    | )                                                 | $          | (147,155                                         | )          | $ | — |   |

 

The accompanying notes are an integralpart of the financial statements.

 

31

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| ** **                                     | ** ** | **For the  Year Ended  February 28,  2005** | ** ** | **For the  Year Ended  February 29,  2004** | ** ** | **For the  Year Ended  February 28,  2003** | ** ** |
|------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|
| Cash flows  from financing activities:         |       |                                             |       |                                             |       |                                             |       |
| Issuance of  common stock                      |       | $                                                | 185,000    |                                             | $          | 930,000                                          |       | $ | — |   |
| Cash  contributed by stockholders              |       | —                                           |       | 2,000                                            |       | 10,850                                           |       |
| Proceeds  from related party borrowings        |       | 268,000                                          |       | —                                           |       | 1,000                                            |       |
| Proceeds  from short-term borrowings           |       | 249,000                                          |       | —                                           |       | —                                           |       |
| Repayment of  related party borrowings         |       | —                                           |       | (50,000                                          | )          | —                                           |       |
|                                           |       |                                             |       |                                             |       |                                             |       |
| Net cash  provided by financing activities     |       | 702,000                                          |       | 882,000                                          |       | 11,850                                           |       |
|                                           |       |                                             |       |                                             |       |                                             |       |
| Net increase  (decrease) in cash               |       | (640                                             | )          | 12,200                                           |       | (206                                             | )          |
|                                           |       |                                             |       |                                             |       |                                             |       |
| Cash,  beginning of period                     |       | 12,200                                           |       | —                                           |       | 206                                              |       |
|                                           |       |                                             |       |                                             |       |                                             |       |
| Cash, end of  period                           |       | $                                                | 11,560     |                                             | $          | 12,200                                           |       | $ | — |   |
|                                           |       |                                             |       |                                             |       |                                             |       |
| Interest  paid                                 |       | $                                                | —     |                                             | $          | 145                                              |       | $ | — |   |
|                                           |       |                                             |       |                                             |       |                                             |       |
| Income taxes  paid                             |       | $                                                | 2,400      |                                             | $          | 1,600                                            |       | $ | — |   |
|                                           |       |                                             |       |                                             |       |                                             |       |
| Stock  subscriptions                           |       | $                                                | —     |                                             | $          | 155,000                                          |       | $ | — |   |
|                                           |       |                                             |       |                                             |       |                                             |       |
| Movie script  contributed to investment in LLC |       | $                                                | 4,000      |                                             | $          | —                                           |       | $ | — |   |

 

The accompanying notes are an integralpart of the financial statements.

 

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PUBLIC MEDIA WORKS, INC. ANDSUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

1.                   Summaryof Business and Significant Accounting Policies

 

a.             Summaryof Business

 

Public Media Works, Inc. (formerlyBurnam Management, Inc.) was incorporated under the laws of the State ofDelaware on March 3, 2000. The Company was formed to seek businessopportunities. On August 30, 2003, the Company entered into a shareexchange agreement with Public Media Works, Inc., a private company formedto pursue opportunities in the film/TV and entertainment industry. The Companyplans to utilize the concept of interactive marketing. Interactive marketing isa new method to market, promote and produce films. The new marketing methodwill presell product placement in films to help fund production costs in theinitial stages. The share exchange agreement is essentially a reverse mergerwith Public Media Works, Inc., the surviving company.

 

This is the first period that the Company hasnot been reported as a “Development Stage Company” because principal operationshave commenced and significant revenues are now being generated.

 

b.             Principlesof Consolidation

 

The consolidated financial statements containthe accounts of the company and its wholly-owned subsidiary. All significantinter-company balances and transactions have been eliminated.

 

c.             CashFlows

 

For purposes of the statement of cash flows,the Company considers all highly liquid investments purchased with a maturityof three months or less to be cash or cash equivalents.

 

d.             AccountsReceivable

 

Accounts receivable is recorded at the amountthe Company expects to collect on balances outstanding at year-end. Managementclosely monitors outstanding balances and writes off, as of year-end, allbalances that are deemed uncollectible by the time the financial statements areissued.

 

e.             Advertisingand Promotions

 

The Company expenses all advertising andpromotion costs as incurred.

 

f.              Propertyand Equipment

 

Property and equipment are stated at costless accumulated depreciation. Depreciation is provided using straight-linemethods based on estimated useful lives of five to seven

 

33

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years.

 

g.             RevenueRecognition

 

Revenue is recognized on the accrual basis ofaccounting when earned. The Company’s primary business generates revenue fromselling movie scripts and producing movies and television shows. Revenue is recognizedin accordance with the provisions of Statement of Position 00-2,Accounting by Producers or Distributors of Films. Revenue is recognized onlyafter all of the following conditions are met.

 

1.            Persuasiveevidence of a sale or licensing arrangement with a customer exists.

 

2.            Thefilm is complete and, in accordance with the terms of the arrangement, has beendelivered or is available for immediate and unconditional delivery.

 

3.            Thelicense period of the arrangement has begun and the customer can begin itsexploitation, exhibition, or sale.

 

4.            Thearrangement fee is fixed or determinable.

 

5.            Collectionof the arrangement fee is reasonably assured.

 

h.             NetLoss Per Share

 

The net loss per share calculation is basedon the weighted average number of shares outstanding during the period.

 

i.              Useof Estimates

 

The preparation of financial statements inconformity with generally accepted accounting principles requires management tomake estimates and assumptions that affect certain reported amounts and disclosures.Accordingly, actual results could differ from those estimates.

 

j.              FairValue of Financial Instruments

 

The amounts reported for cash, receivables,accounts payable, and other financial instruments, none of which are held fortrading purposes, are considered to approximate fair values based uponcomparable market information available at the respective balance sheet date.

 

2.                   Revenues

 

For the year ended February 28, 2005,the Company has recognized $125,000 of revenue. $50,000 was earned for writinga movie script in March 2004 called “Over the Hedge”. $75,000 was earnedfor producing a pilot for a potential television reality show.

 

34

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3.                   NoteReceivable, Related Party

 

On February 28, 2005 and February 29,2004, the Company has a $125,000 note receivable. On December 19, 2003,the Company loaned $125,000 to Old Tucson Corporation, a company owned bystockholders of Public Media Works, Inc. The note receivable bearsinterest at 4% and matured on June 20, 2004, which is now in default. Thenote is secured by the stockholders’ stock (625,000 common shares) in PublicMedia Works, Inc.  The Company iscurrently negotiating repayment terms on the note receivable. Under terms ofthe original agreement, $5,000 of interest income would have been recorded inthe year ending February 28, 2005, however, due to the non-payment,interest has not been recorded in the current year. $986 of interest income wasrecorded in the Statement of Operations for the year ended February 29,2004.

 

4.                   FilmDevelopment Costs

 

At February 28, 2005 and February 29,2004, the Company has capitalized $4,000 and $5,500 for film development costs.The Company paid a total of $8,000 for the purchase of two originalscreenplays. One screenplay was contributed to its investment in Car Pool GuyPartners, LLC at a cost of $4,000. See note 5. The Company intends to developthe remaining screenplay into a feature film within the next three years.

 

5.                   Investmentin Limited Liability Company

 

At February, 28, 2005, the Company hasinvested $24,000 in Car Pool Guy Partners, LLC. On October 15, 2004, theCompany contributed its “Car Pool Guy” screenplay to the LLC with a capitalizedcost of $4,000. For contribution of the screenplay and production and marketingof the movie, the Company will receive a producing fee of 10% of the finalproduction budget of $500,000. In addition, the Company will receive 40% of theremaining profit of the film after 10% is paid to the actors and $700,000 isreturned to the original investors of which the Company will receive $100,000.

 

The Company is to invest a total of $50,000into the project. At February 28, 2005, $20,000 has been invested by theCompany plus the $4,000 capitalized cost of the screenplay for a totalinvestment of $24,000.

 

An officer and stockholder of the Company isalso a one-third owner in the LLC. The investment has been accounted for by thecost method because the Company’s contributions are approximately 10% of theequity in the LLC.

 

6.                   Propertyand Equipment

 

Property and equipment comprises thefollowing at February 28, 2005 and February 29, 2004:

 
| ** **                            | ** ** | **2005** | ** ** | **2004** | ** ** |
|---------------------------------------|------------|----------|------------|----------|------------|
| Furniture  and leasehold improvements |       | $        | 20,649     |     | $          | 20,649 |   |
| Computer and  office equipment        |       | 54,836   |       | 54,443   |       |
|                                  |       | 75,485   |       | 75,092   |       |
| Less:  accumulated depreciation       |       | 52,518   |       | 38,846   |       |
|                                  |       |     |       |     |       |
| Property and  equipment, net          |       | $        | 22,967     |     | $          | 36,246 |   |

 

35

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Depreciation expense for the years ended February 28,2005 and February 29, 2004 was $13,672 and $12,224, respectively.

 

7.                   DeferredRevenue

 

At February 28, 2005, the company hasreceived an advance of $10,000 for producing the film “Car Pool Guy”. See note5. In accordance with its revenue recognition policy, the producing fee hasbeen properly reported as deferred revenue until all conditions of revenuerecognition have been met.

 

8.                   NotePayable, Line of Credit, Related Party

 

On August 19, 2004, the Company obtaineda $250,000 unsecured line of credit with Mainas Development Corporation (a companyowned by a shareholder of Public Media Works, Inc.) to be drawn down uponas needed with an interest rate of 9%. The line of credit expires on August 18,2005. At February 28, 2005, the outstanding balance is $168,000.

 

9.                   NotePayable, Stockholders

 

Stockholder notes payable consist of thefollowing at February 28, 2005 and February 29, 2004:

 
| ** **                                                                                                                                                | ** ** | **2005** | ** ** | **2004** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|
| Note payable  to an individual, also a stockholder of the Company, interest is being  charged at 8% on $340,000, the note is unsecured and due on demand. |       | $        | 410,461    |     | $          | 410,461 |   |
|                                                                                                                                                      |       |     |       |     |       |
| Note payable  to an individual, also a stockholder of the Company, the note is unsecured,  due on demand and non-interest bearing.                        |       | 16,715   |       | 16,715   |       |
|                                                                                                                                                           |            |          |            |          |            |  |  |

 
| ** **                                                                                                                                                 | ** ** | **2005** | ** ** | **2004** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|
| Note payable  to an individual, also a stockholder of the Company, interest is being  charged at 6%, the note is unsecured and due February 15, 2005. |       | 100,000  |       | —   |       |
|                                                                                                                                                       |       |     |       |     |       |
| Note payable  to an individual, also an officer and stockholder of the Company, interest is  being charged at 6%, the note is unsecured and due on demand. |       | 3,000    |       | —   |       |
|                                                                                                                                                       |       |     |       |     |       |
|                                                                                                                                                       |       | $        | 530,176    |     | $          | 427,176 |   |
|                                                                                                                                                            |            |          |            |          |            |  |  |

 

36

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10.                 NotesPayable

 

Notes payable consist of the following at February 28,2005 and February 29, 2004:

 
| ** **                                                                                                            | ** ** | **2005** | ** ** | **2004** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|
| Note payable  to an individual, interest is being charged at 6%, the note is unsecured and  due June 1, 2005.    |       | $        | 225,000    |     | $          | — |   |
|                                                                                                                  |       |     |       |     |       |
| Note payable  to an individual, interest is being charged at 6%, the note is unsecured and  due October 1, 2005. |       | 24,000   |       | —   |       |
|                                                                                                                  |       |     |       |     |       |
|                                                                                                                  |       | $        | 249,000    |     | $          | — |   |
|                                                                                                                       |            |          |            |          |            |  |  |  |

 

11.                 Issuanceof Common Stock

 

The Company is authorized to issue100,000,000 shares of common stock at $.0001 par value.

 

On March 3, 2000, 5,000,000 shares ofcommon stock were issued for services rendered with an aggregate considerationof $210.

 

On August 30, 2003, 20,000,000 shares ofcommon stock were issued in a share exchange agreement with a private company,Public Media Works, Inc. (PMW). PMW is a wholly-owned subsidiary of theCompany and is considered the survivor. Burnam Management, Inc. had noassets, liabilities or operations at the time of the merger.

 

In September 2003 through February 2004,the Company issued 512,500 shares of its common stock at $.40 per share for atotal amount of $205,000.

 

On February 13, 2005, the Company issued40,000 shares of its common stock at $.75 per share for a total amount of$30,000.

 

12.                 StockOptions and Warrants

 

No options or warrants are outstanding toacquire the Company’s common stock.

 

13.                 IncomeTaxes

 

The provision for income tax consists of thefollowing components at February 28, 2005, February 29, 2004 and February 28,2003:

 
| ** **            | ** ** | **February 28,  2005** | ** ** | **February 29,  2004** | ** ** | **February 28,  2003** | ** ** |
|-----------------------|------------|-----------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| Current:              |       |                        |       |                        |       |                        |       |
| Federal  income taxes |       | $                           | —     |                        | $          | —                      |       | $ | — |   |
| State income  taxes   |       | 1,600                       |       | 1,600                       |       | 800                         |       |
| Deferred              |       | —                      |       | —                      |       | —                      |       |
|                  |       | $                           | 1,600      |                        | $          | 1,600                       |       | $ | 800 |   |

 

37

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The following reconciles income taxesreported in the financial statements to taxes that would be obtained byapplying regular tax rates to income before taxes:

 
| ** **                                | ** ** | **February 28,  2005** | ** ** | **February 29,  2004** | ** ** | **February 28,  2003** | ** ** |
|-------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| Expected tax  benefit using regular rates |       | $                           | (373,647   | )                           | $          | (264,461                    | )          | $ | (92,486 | ) |
| State  minimum tax                        |       | 1,600                       |       | 1,600                       |       | 800                         |       |
| Valuation  allowance                      |       | 373,647                     |       | 264,461                     |       | 92,486                      |       |
|                                      |       |                        |       |                        |       |                        |       |
| Tax  Provision                            |       | $                           | 1,600      |                        | $          | 1,600                       |       | $ | 800 |   |

 

Due to the Company transitioning from adevelopment stage company to an operating company and incurring net operatinglosses, a valuation allowance has been provided to reduce deferred tax assets tothe amount that is more likely to be realized. The net deferred tax assetsconsist of the following components:

 
| ** **                | ** ** | **February 28,  2005** | ** ** | **February 29,  2004** | ** ** | **February 28,  2003** | ** ** |
|---------------------------|------------|-----------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| Deferred tax  assets      |       | $                           | 980,656    |                        | $          | 621,584                     |       | $ | 356,771 |   |
| Valuation  allowance      |       | (980,656                    | )          | (621,584                    | )          | (356,771                    | )          |
| Deferred tax  liabilities |       | —                      |       | —                      |       | —                      |       |
|                      |       |                        |       |                        |       |                        |       |
| Net deferred  tax assets  |       | $                           | —     |                        | $          | —                      |       | $ | — |   |

 

The Company has loss carry-forwards totaling$2,297,125 that may be offset against future federal income taxes. If not used,the carry-forwards will expire as follows:

 
| ** ** | ** ** | **Operating  Losses** | ** ** |
|------------|------------|-----------------------|------------|
|       |       |                  |       |
| 2020       |       | $                     | 380,704    |   |
| 2021       |       | 128,030               |       |
| 2022       |       | 125,383               |       |
| 2023       |       | 657,670               |       |
| 2024       |       | 1,005,338             |       |
|       |       |                  |       |
|       |       | $                     | 2,297,125  |   |

 

14.                 GoingConcern

 

As shown in the accompanying financialstatements, the Company incurred a net loss of $1,100,561 during year ended February 28,2005 and accumulated losses of $2,945,074 since opening for business in 2000.The Company’s current liabilities exceed its current assets by $1,433,637 at February 28,2005. These factors create an uncertainty as to the Company’s ability to

 

38

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continue as a going concern. The ability ofthe Company to continue as a going concern is dependent upon the success ofraising additional capital through the issuance of common stock and the abilityto generate sufficient operating revenue. The financial statements do notinclude any adjustments that might be necessary should the Company be unable tocontinue as a going concern.

 

15.                 SubsequentEvent

 

On May 4, 2005, the Company issued1,100,000 of its authorized common shares to two companies in exchange forproviding consulting services for the period July 11, 2004 through July 10,2005. The consulting services are valued at $120,000 or $.109 per share.

 

16.                 Litigation

 

The Company has had a claim filed againstthem for non-payment of services provided. The Company is investigating theclaim and has accrued and recorded the amount in the February 28, 2005financial statements.

 

17.                 NewAccounting Pronouncements

 

On December 16, 2004, the FinancialAccounting Standards Board issued SFAS No. 123 (revised 2004), “Share-BasedPayment” (“SFAS No. 123(R)”), which is a revision of SFAS No. 123, “Accountingfor Stock-Based Compensation.” SFAS No. 123(R) supersedes APB Opinion No. 25,“Accounting for Stock Issued to Employees,” and amends SFAS No. 95, “Statementof Cash Flows.” Generally, the approach in SFAS No. 123(R) is similar tothe approach described in SFAS No. 123. However, SFAS No. 123(R)requires all share-based payments to employees, including grants of employeestock options, to be recognized in the income statement based on their fairvalues. Pro forma disclosure is no longer an alternative. The new standard willbe effective for public entities in the first interim or annual reportingperiod beginning after June 15, 2005. The Company has not yet assessed theimpact of adopting this new standard.

 

 

**ITEM 8.****               ****CHANGES IN AND DISAGREEMENTSWITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.**

 

We have not had any disputes or disagreements with Burnham &Schumm, P.C., our independent outside auditors, which have been engaged by theCompany since May 2003.

 

**ITEM8A.    CONTROLS AND PROCEDURES**

 

As of the end of the period covered by this annualreport, we carried out an evaluation, under the supervision and with theparticipation of our management, including our Chief Executive Officer and ActingChief Financial Officer, of the effectiveness of the design and operation ofour disclosure controls and procedures, as defined in Rules 13a-15(e) and15d-15(e) under the Securities Exchange Act of 1934, as amended.Based on this evaluation, the Chief Executive Officer and Acting ChiefFinancial Officer, concluded that as of the date of that evaluation ourdisclosure controls and procedures are effective in timely alerting them tomaterial information required to be included in our periodic SEC reports. Itshould be noted that the design of any systems of controls is based in partupon certain assumptions about the likelihood of future events, and there canbe no assurance that any design will succeed in achieving its stated goalsunder all potential future conditions, regardless of how remote.  Also,we have investments in certain unconsolidated entities.  Since we do not control or manage theseentities, our disclosure controls and procedures with respect to those entitiesare substantially more limited than those we maintain with respect to ourconsolidated subsidiaries.  These unconsolidatedentities are not considered material to our consolidated financial position orresults of operations.

 

Our management, includingthe Chief Executive Officer and Acting Chief Financial Officer, also conductedan evaluation of our internal control over financial reporting to determinewhether any changes occurred during the period covered by this report that havematerially affected, or are reasonably likely to materially affect, ourinternal control over financial reporting. Based on that evaluation, the Chief Executive Officer and Acting ChiefFinancial Officer concluded that there has been no such change during theperiod covered by the report that has materially affected, or is reasonablylikely to materially affect, our internal control over financial reporting.

 

There have been no significant changes in ourinternal controls or in other factors that could significantly affect internalcontrols subsequent to the date we carried out this evaluation.

 

39

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**PART III**

 

**ITEM 9.****               ****DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROLPERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.**

 

Each of its directors is elected by the stockholdersto a term of one (1) year and serves until his successor is elected andqualified.  Each of the officers is appointed by the Board of Directors toa term of one (1) year and serves until his successor is duly elected andqualified, or until he is removed from office.  The Board of Directors hasno nominating, audit, or compensation committees.

 

The following table sets forth certain informationregarding executive officers and directors of the Company as of February 28,2005:

 
| **Name and Address** | ** ** | **Age** | ** ** | **Position**                                                           | ** ** |
|----------------------|------------|---------|------------|------------------------------------------------------------------------|------------|
| Thomas A.  Szabo     |       | 44      |       | Chairman and Chief Executive Officer                                   |       |
| Corbin  Bernsen      |       | 50      |       | President and Director                                                 |       |
| Shaun D.C.  Edwardes |       | 41      |       | Executive Vice President, Acting Chief  Financial Officer and Director |       |

 

**THOMAS A. SZABO** has served as Chairman and Chief ExecutiveOfficer to its company since August 30, 2003.  From November 1,2002 to the date of its merger, he served as Chief Executive Officer andChairman to Public Media Works, Inc. its predecessor.  From May 1997to June 2002, Mr. Szabo served as Chairman and Chief ExecutiveOfficer to Digital On-Demand, Inc., and interactive digital entertainmentnetwork.  Mr. Szabo also served on the Board of Directors of AllianceEntertainment Corp., a privately held global entertainment distributor, from August 2000until the purchase of Alliance Entertainment by Source Interlink Companies in March 2005. In addition, Mr. Szabo serves as Chairman of Telanetix, Inc, a privatelyheld real-time interactive network for business and entertainmentcommunication, a position he has held since June 2002.  Mr. Szabo also currently serves on theBoard of Directors of Digital On-Demand, Inc.

 

**CORBIN BERNSEN** has served as President and a Director sinceAugust 30, 2003. Prior to that, Mr. Bernsen served as President and adirector to Public Media Works, Inc., its predecessor, from November 2002to August 30, 2003.  From February 2002 through July 2003, Mr. Bernsenwas Chief Executive Officer and a director to 1st Step, Inc., a privatelyheld entertainment consulting company. Mr. Bernsen served as ChiefExecutive Officer to Public Media Works from its inception in March 2000 untilNovember 2002. Mr. Bernsen continues to serve as sole owner of TeamCherokee, Inc., which serves as Mr. Bernsen’s vehicle for maintaininghis acting contracts and agreements, a position he has held since 1987.  Mr. Bernsencontinues to for work as an actor and scriptwriter for films and television.

 

**SHAUN D.C. EDWARDES** has served as Executive Vice President,Acting Chief Financial Officer and a Director since August 30, 2003. Prior to that time, he served as Executive Vice President, Acting Chief FinancialOfficer and a director to Public Media Works, its predecessor, from inceptionin May 2000 to August 30, 2003.  Mr. Edwardes served as adirector to 1st Step, Inc., a privately held entertainment consultingcompany, from February 2002 to June 2003.  Mr. Edwardesserved as Executive Vice President and interim Chief Executive Officer toEssTec, Inc., a privately held software platform development company, fromMarch 2002 to September 6, 2002.  Mr. Edwardes served asVice President of Business Development to Voxsurf Software Ltd., a privatesoftware development company, from August 1999 to January 2000. He also served as sole owner of DC Management, a talent management company forrecording artists, from January 1999 to August 1999.

 

40

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**Board of Directors**

 

The Company’s organizational documents authorizefive board members, three of which are currently filled by Mr. Szabo, Mr. Bernsen,and Mr. Edwardes.  The Company is currently seeking two independentdirectors for its Board of Directors.

 

The Company does not have any current arrangementregarding compensation of its directors, other than reimbursement of travelexpenses and other standard out-of-pocket expenditures.  The Company doesnot anticipate compensating its directors for board or committee participationor other service to the Company at this time.  The Company is seekingbetween one and two independent directors at this time, and anticipatesentering into some compensation arrangement with them, in addition toreimbursement of out-of-pocket expenditures, based upon its financial positionat the time of election.

 

**Board of Advisors**

 

The Company has engaged seven members from theentertainment community to act as its Board of Advisors.  These members are:

 

•              Steven Bochco - creator of “LA LAW”, “NYPDBlue”, “Hill Street Blues”

•              Denise Chamian - casting director “SavingPrivate Ryan”, “Eyes Wide Shut” and “Big Fish”

•              Kevin J. Foxe - producer “The Blair WitchProject”, “In the Eye of the Storm”

•              Sid Ganis - Vice Chairman of ColumbiaPicture, Emeritus

•              Barry Kemp - creator of “Newhart”, “Coach”, “PatchAdams” and “Catch Me if You Can”

•              Jordan Kerner - producer of “Less Than Zero”,“Fried Green Tomatoes”

•              Ed Scott - producer of “Young and theRestless”

 

The Board of Advisors consists of a number ofentertainment industry leaders with vast and varied experience in severalentertainment business sectors. The Company consults with its advisorsregularly for general insight on the entertainment industry, and specificadvice regarding actual or potential projects.  The Company’s consultationswith these members are informal and vary in frequency based upon the projectsthe Company are developing, and stage of development, at any given time. All members formally accepted their positions as advisors, and there are noterm limits for any of its advisors.  The Company does not have any formalagreements with any of its advisors, and none receive compensation for theirservices.

 

**Family Relationships**

 

There are no family relationships among members ofmanagement or the Board of Directors of the Company.

 

**Compensation**

 

The Company does not have any stock option,retirement, incentive, defined benefit, actuarial, pension or profit-sharingprograms for the benefit of its officers or directors, although the Board ofDirectors may recommend adoption of one or more such programs in thefuture.  The Company has no employment contracts or compensatory plans orarrangements with any of its executive officers.

 

**Audit Committee**

 

The entire Board of Directors of the Company isacting as the Company’s Audit Committee.  The Company does not currentlyhave an “audit committee financial expert”.   The Company’s by-laws permit it to maintain aBoard consisting of up to five members.  Accordingly, the Company isseeking at least one additional director who is deemed a “financial expert” toserve as member of the audit committee, but as of the date of this report hasbeen unable to retain such a director.

 

41

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**Changes in Nominee Recommendation Procedures**

 

There are no material changes to the procedures bywhich stockholders can nominate directors.

 

**Compliance with Section 16(a) ofthe Exchange Act**

 

Based solely upon a reviewof Forms 3, 4 and 5 furnished to the Company pursuant to Section 16(a)-3eof the Securities Act of 1934, the Company notes the following delinquenciesfor the period ended February 28, 2005: Messrs. Szabo, Bernsen or Edwardes did not file their Forms 3 on atimely basis. Each Form 3 was filed on August 5, 2004.

 

**Company Code of Ethics**

 

The Company has adopted a Code of Business Ethicsand Conduct (the “Code”) that applies to the every officer of and director tothe Company.  The Code is attached anexhibit to its Form 10-KSB filed with the Commission on August 18,2004.  The Code is also available free ofcharge upon request to the Company at 14759 Oxnard Street, Van Nuys, California91411, Attention: Shaun Edwardes.

 

**ITEM 10.****              ****EXECUTIVE COMPENSATION**

 

**SummaryCompensation Table (1)**

 
| **Name and  Principal  Position** |   | **Year  (fiscal  year  ending  February  28 or 29** |   | **Salary** |   | **Bonus** |   | **Other Annual  Compensation** |   | **All Other  Compensation** |
|-----------------------------------|--------|-----------------------------------------------------|--------|------------|--------|-----------|--------|--------------------------------|--------|-----------------------------|
| ** **                        |   | ** **                                          |   | **($)**    |   | **($)**   |   | **($)**                        |   |                        |
| Thomas A. Szabo,                  |   | 2005                                                |   | 87,506     |   | N/A       |   | 11,000(3)                      |   | N/A                         |
| Chief Executive                   |   | 2004                                                |   | 110,000    |   | 5,000     |   | N/A                            |   | N/A                         |
| Officer                           |   | 2003(2)                                             |   | N/A        |   | N/A       |   | N/A                            |   | 5,000,000 shares(4)         |
|                              |   |                                                |   |       |   |      |   |                           |   |                        |
| Corbin Bernsen,                   |   | 2005                                                |   | 87,506     |   | N/A       |   | 11,000(3)                      |   | N/A                         |
| President                         |   | 2004                                                |   | 110,000    |   | 5,000     |   | N/A                            |   | N/A                         |
|                              |   | 2003(5)                                             |   | N/A        |   | N/A       |   | N/A                            |   | 5,000,000 shares (4)        |
|                              |   |                                                |   |       |   |      |   |                           |   |                        |
| Shaun Edwardes,                   |   | 2005                                                |   | 87,506     |   | 5,000     |   | 11,000(3)                      |   | N/A                         |
| Executive VP,                     |   | 2004                                                |   | 110,000    |   | 5,000     |   | N/A                            |   | N/A                         |
| Acting CFO                        |   | 2003                                                |   | N/A        |   | N/A       |   | N/A                            |   | 5,000,000 shares (4)        |

 

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(1)           The Company has not granted any options, SARs or LTIPs, nor does theCompany maintain any stock option, retirement, incentive, defined benefit,actuarial, pension or profit-sharing programs for the benefit of directors,officers or other employees, although the Board of Directors may recommendadoption of one or more such programs in the future.

(2)           Mr. Szabo became Chief Executive Officer in November 1,2002.  Prior to that time, Mr. Szabo was unaffiliated with theCompany.

(3)           Mr. Szabo, Mr. Bernsen and Mr. Edwardes each received acar allowance in the amount of $11,000 during fiscal year 2004.

(4)           There was no publicly traded market for these shares at the time ofissuance, and the Company had a negative net tangible book value. Accordingly, these shares were valued at par value of $0.0001.

(5)           Mr. Bernsen served as Chief Executive Officer and President from May 2000to October 31, 2002.

 

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**EmploymentContracts**

 

The Company has no employment contracts with itsexecutive officers.  The Company does not have a compensation committee,and the Company has not adopted any compensation policies.

 

The Board of Directors has established that each andall of its executive officers are compensated at a fixed rate of $10,000 permonth for services rendered, subject to adjustment by the Board ofDirectors.   As discussed above, theexecutive officers agreed to waive the payment of such salaries during aportion of fiscal year 2005. Executive officers are also entitled to payment orreimbursement of expenses incurred which are related to carrying out theirposition.  Executive officers serving in multiple capacities concurrentlyare not entitled to more than one salary as an executive officer, but may beprovided with additional compensation at the discretion of the Board ofDirectors.  The Board of Directors will re-evaluate the salary of each andall of the executive officers annually, and determine modifications incompensation based upon services rendered and the resources of the company thenavailable.  This compensation is in addition to any equity compensationreceived by any executive officer based upon individual merit or arrangement.  There is no compensation committee of theBoard of Directors and no compensation policies have been adopted.

 

**ITEM 11.****              ****SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS ANDMANAGEMENT.**

 

The following table sets forth certain informationas of May 9, 2005 with respect to the beneficial ownership of its commonstock by all persons known by us to be beneficial owners of more than 5% of anysuch outstanding classes, and by each director and executive officer, and byall officers and directors as a group.  Unless otherwise specified, thenamed beneficial owner has, to its knowledge, either sole or majority votingand investment power.

 
| **Title of Class**                                     | ** ** | **Name and Address of  Beneficial Owner (1)** | ** ** | **Number of Shares  Held** | ** ** | **Percent of Class (2)** |   |
|--------------------------------------------------------|------------|-----------------------------------------------|------------|----------------------------|------------|-------------------------------|--------|
| Common                                                 |       | Thomas A. Szabo (3)                           |       | 5,000,000                  |       | 18.8                          | %      |
| Common                                                 |       | Corbin Bernsen (4)                            |       | 5,000,000                  |       | 18.8                          | %      |
| Common                                                 |       | Shaun D.C. Edwardes (5)                       |       | 5,000,000                  |       | 18.8                          | %      |
| **All officers and directors as a  group (3 persons)** |       |                                          |       | 15,000,000                 |       | 56.4                          | %      |

 

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(1)           Unless otherwise indicated, all addresses are 14759 Oxnard Street, VanNuys, California 91411.

(2)           Percentages are based on 26,652,500 shares of common stock issued andoutstanding as of May 9, 2005.

(3)           Mr. Szabo is the Company’s Chairman and Chief Executive Officer.

(4)           Mr. Bernsen is the Company’s President and a Director.

(5)           Mr. Edwardes is the Company’s Acting Chief Financial Officer,Executive Vice President and a Director.

 

TheCompany does not have any securities authorized for issuance under equitycompensation plans.

 

**ITEM 12.****              ****CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.**

 

All material assets for the Company, which consistsprimarily of scripts, treatments and other intellectual property, were contributedto PMW prior to the merger in 2003 by Messrs. Edwardes, Szabo and Bernsen,who constitute the promoters of PMW.  Prior to the Company’s merger withBurnam Management in 2003, Burnam Management held no assets or capital. The sole shareholder of Burnam Management was Mr. Rick Plotnikoff, whopurchased all of the outstanding equity of Burnam Management from Mr. Gerald

 

43

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Ghini.  Mr. Plotnikoff and Mr. Ghiniconstituted the promoters of Burnam Management, neither of whom appears to havecontributed anything to Burnam Management other than the resources required topublicly register its equity securities and maintain such registration.

 

In May 2000, Mr. Bernsen and Mr. Edwardeseach received 5,000,000 restricted shares of common stock in PMW in exchangefor intellectual property contributed to PMW and services rendered to PMW.  In November 2002, Mr. Szaboreceived 5,000,000 shares of restricted stock of PMW in exchange for servicesrendered as Chief Executive Officer. On August 30, 2003, inconnection with the share exchange and merger between PMW and BurnamManagement, Mr. Bernsen, Mr. Edwardes and Mr. Szabo eachexchanged their 5,000,000 shares in PMW for 5,000,000 shares of Company CommonStock.

 

In August 2000 the Company entered into an unsecuredpromissory note with George Mainas, a Company stockholder, in the principalamount of $340,000, bearing interest at 8%. The promissory note is payable on demand.  As of February 28,2005, the Company had an outstanding balance of $532,960 under the promissorynote, including accrued interest.

 

In May 2002 the Company entered into anunwritten, unsecured promissory obligation to Denis Schusterman, a stockholder,in exchange for his payment of approximately $16,000 in general andadministrative expenses on behalf of the Company.  This obligation ispayable upon demand and bears no interest.  As of February 28, 2005,the outstanding balance under this obligation was $16,715.

 

On June 1, 2004, the Company entered into apromissory note with Michael Wittlin, an employee of the Company at such time.  The principal balance of this note was $225,000,bearing interest at 6%, and maturing on June 1, 2005.  As of February 28,2005, the outstanding balance under this note was $234,863, including accruedinterest.

 

On August 18, 2004, the Company entered into anunsecured line of credit with Mainas Development Corporation.  Mr. Mainas, a stockholder of theCompany, serves as Managing Director of Mainas Development Corporation. The non-revolving line of credit has a maximum draw-down of $250,000, bearsinterest of 9% annually, does not maintain an outstanding balance limitation,and expires on August 17, 2005.  The outstanding balance on thisaccount as of February 28, 2005 was $171,123, including accrued interest.  The amount outstanding under this letter ofcredit is payable on demand.

 

As discussed above, in December 2003 theCompany loaned $125,000 to Old Tucson Company (“Old Tucson”) foroperations.  The note to Old Tucson matured on June 20, 2004, andbears interest at 4%.  The outstanding balance under the note on February 28,2005 was $125,986, including accrued and unpaid interest.   The noteis secured by all of the shareholders’ stock in the Company.  Thecontrolling shareholders of Old Tucson own stock in the Company although eachand in the aggregate hold less than 5% ownership in the Company.  As aresult of the Company’s mutual shareholders, the Company’s loan to Old Tucsonmay have been deemed a loan to a related party.  The Company is currentlyin negotiations with Old Tucson to extend the term of this note.

 

As discussed above, two of the principals of CarpoolLLC are Thomas Szabo, the Company’s Chief Executive Officer, and Mr. MikeWittlin, a former Company employee, each of whom owns 33% of the LLC.

 

In January 2005, Mr. Szabo, the CEO and adirector of the Company, loaned the Company $3,000. bearing interest at 6% andpayable on demand.  On February 28,2005, the outstanding balance under this loan was $3,029.

 

The Company does not maintain a formal conflicts ofinterest policy with respect to related and/or affiliated parties.  Alltransactions with affiliated parties are conducted at arms-length.

 

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**ITEM 13.****              ****EXHIBITS AND REPORTS ON FORM 8-K.**

 

*(a) **Exhibits***

 
| **Exhibit  No.** | ** ** | **Description**                                                                                                                          |
|------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------|
|             |       |                                                                                                                                     |
| 2.1              |       | Share Exchange Agreement by and between Burnam  Management, Inc. and Public Media Works, Inc., dated August 30,  2003 (9) |
| 3.1              |       | Certificate of Incorporation of Burnam Management, Inc.  (1)                                                                        |
| 3.2              |       | Certificate of Amendment of Certificate of  Incorporation (2)                                                                            |
| 3.3              |       | By-laws of Burnam Management, Inc. (1)                                                                                              |
| 3.4              |       | Amended By-laws of Public Media Works, Inc.  (9)                                                                                    |
| 4.1              |       | Form of Stock Certificate (5)                                                                                                       |
| 5.1              |       | Opinion by David B. Stockard Attorney at Law (5)                                                                                         |
| 10.1             |       | Form of Letter of Intent for appearing talent  (5)                                                                                  |
| 10.2             |       | Writers Agreement between the Company and Peter  Soldinger dated September 11, 2003 (5)                                             |
| 10.3             |       | Writers Agreement between the Company and Peter  Soldinger dated February 3, 2004 (5)                                               |
| 10.4             |       | Distribution Agreement between the Company and  Regent Entertainment, Inc. dated February 9, 2004 (8)                          |
| 10.5             |       | Distribution Agreement between the Company and OBN  Holdings, Inc., dated February 20, 2004 (6)                                |
| 10.6             |       | Agreement between the Company and Stone-Stanley  Productions dated October 10, 2003 (6)                                             |
| 10.7             |       | Amendment to Agreement between the Company and  Stone-Stanley Productions dated April 22, 2004 (6)                                  |
| 10.8             |       | Agency Representative Agreement between the  Company and U4oria, Inc. dated January 29, 2004 (6)                               |
| 10.9             |       | Promissory Note with George Mainas dated August 30,  2000 (6)                                                                       |
| 10.10            |       | Memorialized Agreement between the Company and Mr. George  Mainas dated December 31, 2003 (5)                                  |
| 10.11            |       | Agreement between the Company and Behind the Hedge  Productions, dated February 27, 2004 (6)                                        |
| 10.12            |       | Agreement between the Company and the American  Basketball Association dated February 5, 2004 (5)                                   |
| 10.13            |       | Agreement between the Company and MMT Solutions,  dated August 25, 2000 (6)                                                         |
| 10.14            |       | Letter of Termination and Release between the  Company and MMT Solutions dated June 2, 2003 (6)                                     |
| 10.15            |       | Agreement between the Company and New Media  Dimensions, Inc. dated August 8, 2003 (6)                                         |
| 10.16            |       | Affiliation Agreement between the Company and  Amazon.com, Inc. dated May 14, 2002 (5)                                         |
| 10.17            |       | Affiliation Agreement between the Company and Allposters.com, Inc.  dated May 14, 2002 (5)                                     |
| 10.18            |       | Agreement between the Company and Charles Sherman  Public Relations, dated September 22, 2003 (6)                                   |
| 10.19            |       | Promissory Note with Old Tucson Company dated December 19,  2003 (6)                                                                |
| 10.20            |       | Letter of Intent between the Company and Old  Tucson Company dated December 8, 2003 (6)                                             |
| 10.21            |       | Agreement between the Company and Mike Wittlin  dated June 1, 2004 (7)                                                              |
| 10.22            |       | Agreement and letter of credit between the Company  and George Mainas dated August 18, 2004 (9)                                     |
| 10.23            |       | Agreement between the Company and F. James McCarl  dated August 15, 2004 (10)                                                       |
| 10.24            |       | Joint Venture and Production Agreement among the  Company, Neon DVD, Inc., and                                                      |

 

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|   |   | Familian Productions, LLC dated August 17, 2004  (10)                                                                           |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------|
| 10.25  |   | NFPMW, LLC Articles of Organization (11)                                                                                             |
| 10.26  |   | Exclusive Production Agreement between the Company  and Carpool Guy Partners, LLC dated October 15, 2004 (11)                   |
| 10.27  |   | Savvior Technology Solutions Sales Agreement dated  October 11, 2004                                                            |
| 10.28  |   | Distribution Agreement between the Company and  L.A. Ideas, Inc. dated April 1, 2005                                       |
| 14.1   |   | Code of Business Conduct and Ethics adopted June 16,  2004 (3)                                                                  |
| 31.1   |   | Certification pursuant to Rule 13a-14(a)/15d-14(a) of  the Securities Exchange Act, as amended, by Chief Executive Officer |
| 31.2   |   | Certification pursuant to Rule 13a-14(a)/15d-14(a) of  the Securities Exchange Act, as amended, by Chief Financial Officer |
| 32.1   |   | Certification pursuant to 18 U.S.C. §1350 by Chief  Executive Officer                                                           |
| 32.2   |   | Certification pursuant to 18 U.S.C. §1350 by Chief  Financial Officer                                                           |

 

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(1)           Incorporated by reference from the Company’s Form 10-SB,as filed on March 29, 2000 (File No.: 0-29901).

(2)           Incorporated by reference from the Company’s Form 8-K,as filed on September 8, 2003.

(3)           Incorporated by reference from the Company’s Form 10K-SB,as filed on August 18, 2004 (File No.: 0-29901)

(4)           [Intentionally omitted]

(5)           Incorporated by reference from Amendment No. 1to the Company’s Form SB-2, as filed on May 4, 2004.

(6)           Incorporated by reference from Amendment No. 2to the Company’s Form SB-2, as filed June 29, 2004.

(7)           Incorporated by reference from Amendment No. 1to the Company’s quarterly report on Form 10-QSB, as filed August 25,2004.

(8)           Schedules are incorporated by reference fromAmendment No. 2 to the Company’s Form SB-2, as filed June 29,2004.

(9)           Incorporated by reference from Amendment No. 3to the Company’s Form SB-2, as filed September 1, 2004.

(10)         Incorporated by reference from the Company’squarterly report on Form 10-QSB for the period ended August 31,2004, as filed on October 15, 2004.

(11)         Incorporated by reference from Amendment No. 5to the Company’s Form SB-2, as filed January 4, 2005.

 

*(b) **Reports on Form 8-K***

 

The Company did not file any reports on Form 8-Kfor the last quarter of the year ended February 28, 2005.

 

**ITEM 14.****              ****PRINCIPAL ACCOUNTANT FEES AND SERVICES**

 

**Audit Fees**

 

The Company paid an aggregate of $22,452 and$12,452, respectively, to its principal accountant for the audit of its annualfinancial statements and review of its financial statements included in its Form 10-QSBand for services normally provided in connection with the statutory andregulatory filings or engagements for the fiscal years ended February 28,2005 and February 29, 2004.

 

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**Audit-Related Fees**

 

The Company paid an aggregate of $0 to its principalaccountant for assurance and related services by its principal accountant thatwere reasonably related to the performance of the audit of review of itsfinancial statements (and were not reported herein) for the fiscal years ended February 28,2005 and February 29, 2004.

 

**Tax Fees**

 

The Company paid an aggregate of $3500 and $1350,respectively, to its principal accountant for services related to taxcompliance, tax advice and tax planning for the fiscal year ended February 28,2005 and February 29, 2004.  Such services comprised the following:preparation of federal and state corporate tax returns.

 

**All Other Fees**

 

The Company paid no other fees to its principalaccountant for products and services provided, other than those previouslydescribed, for the fiscal years ended February 28, 2005 and February 29,2004.

 

**Audit Committee Pre-Approval Policies**

 

The Company is in the process of establishing aformal audit committee, and will formalize its pre-approval policies andprocedures once the audit committee has been formally established.  TheBoard of Directors has approved all of the fees paid and identified herein.

 

**SIGNATURES**

 

In accordance with Section 13 or 15(d) ofthe Exchange Act, the registrant caused this report to be signed on its behalfby the undersigned, thereunto duly authorized.

 
|                          | **Public Media Works, Inc.** |
|-------------------------------|-----------------------------------|
|                          | (Registrant)                      |
|                          |                              |   |
|                          |                              |   |
| Date: June 14, 2005 | /s/ Thomas A. Szabo               |
|                          | By:                               | Thomas A. Szabo |
|                          | Title:                            | Chief Executive Officer and Chairman |

 

In accordance with the Exchange Act, this report hasbeen signed below by the following persons on behalf of the registrant and inthe capacities an on the dates indicated.

 
| /s/ Thomas A. Szabo     |   |                        |   |                |
|-------------------------|--------|-----------------------------|--------|---------------------|
| Thomas A. Szabo         |   | Chief Executive Officer and |   | June  14, 2005 |
|                    |   | Chairman                    |   |                |
|                    |   |                        |   |                |
| /s/ Corbin Bernsen      |   |                        |   |                |
| Corbin Bernsen          |   | President and Director      |   | June  14, 2005 |
|                    |   |                        |   |                |
|                    |   |                        |   |                |
| /s/ Shaun D.C. Edwardes |   |                        |   |                |

 

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| Shaun D.C. Edwardes |   | Executive Vice President,      |   | June  14, 2005 |
|---------------------|--------|--------------------------------|--------|---------------------|
|                |   | Acting Chief Financial Officer |   |                |
|                |   | and Director                   |   |                |

 

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