New York-based production and distribution company The Shooting Gallery (TSG), producer of such films as Sling Blade and You Can Count On Me and domestic distributor of Croupier, is close to insolvency and may shut its doors. Less than two months after being purchased by Toronto-based new media incubator itemus inc., TSG has run out of money, a victim of the depressed technology sector.
According to an itemus press release issued June 19, the financial situation at TSG has deteriorated because of "deferrals of expected revenue-generating contracts." Itemus said it may be liable for up to $10m in Shooting Gallery debt thus putting its own financial health in question. At time of going to press, itemus was trading at under 6 cents on the Toronto stock exchange.
Itemus first announced plans to acquire TSG in October 2000. Initially, the acquisition involved TSG's new media operation in a stock swap valued at $56m; the production and distribution division, was to be spun off by TSG founder Larry Meistrich and his partners. But in May 2001, itemus announced that it would be buying the entire business in a $23m deal: 71m shares of itemus stock, then worth about $20m, and approximately $3m in working capital and debt assumption. Those 71m shares are now worth about $4.3m.
Contacted at his office, TSG CEO Larry Meistrich declined to comment. However, a spokesman for Itemus said TSG had "a pretty dramatic burn rate." The company's financial structure relied heavily on revenue from its internet development business, a rickety prop given the state of the technology market and the cool attitude of investors.
"If you look at [TSG] over the last 18 months they were running ahead of themselves. It still has contracts but many of those are being deferred. People in the same business have seen their month-to-month revenue drop off dramatically. The bread and butter comes come from advertising and online development contracts. And when you're not making your bread and butter, the longer-term projects like film are going to suffer."
As for itemus, said the spokesman, "It wasn't their intention to be in the film business. The plan was to parcel up [TSG's] film business and sell it on."