|1||Tom and his team have worked on films that have grossed over $3B total worldwide.|
|2||Global animation is a $259B+ market opportunity.|
|3||Advisor Steve McBeth, a Fortune 100 Executive & Founding President at Disney Interactive Worldwide.|
|4||CEO, a Disney Alumni, has 225K+ Instagram followers.|
An animation studio is only as good as its people. I'm excited about Pencilish because of the talent they've been able to put together from WB, Disney, and Pixar. This is an all-star group of individuals that know what they are doing in one of my favorite storytelling mediums: Animation. Though it's a powerful way to tell stories, animating something is a path fraught with roadblocks for creators. Pencilish is a next gen animation studio that smashes these barriers by leveraging social media, the distributed workforce, accessible tools, and the online marketplace to bring exciting new worlds and stories into animation. Can't wait to see what kind of magic they will make!
A handful of large, multi-billion-dollar companies holds all the ownership to the most beloved characters in the world. Though each of those properties was created by an artist or a small team of artists, it is the huge conglomerates that reap the benefits of the huge, worldwide publishing, merchandising, toy, and commercial licensing deals that come from those animated characters. This has been THE PATH that every brilliant TV series, feature film, and character creator has had to take — until now.
With the advent of direct distribution systems (i.e. the phone in your hand), the world has turned upside down and many industries have discovered that they no longer are tied to the “gatekeepers” that want their large “piece of the pie”. Film and animated content are just starting to go down this road, but Pencilish Animation Studios will go one step further — enabling investors to be a part of creating fun, animated series and characters that they can OWN a piece of!
It is our intention to create world class IP & animation that we can produce in house or license to other great producers. Then, together, we'll deliver this content to wherever people are, YouTube, mobile phones, social media, everywhere that people consume media today. We have access to projects that are just waiting to be developed and with our key ingredient, YOU, together we can create lifelong content and characters that can entertain people for generations to come.
Note how much of the profits come from merchandising (yellow).
Our team has created characters, feature films, TV series, and intellectual properties that have gone on to make MANY BILLIONS of dollars in worldwide gross box office, merchandising, and licensing for Disney and others. Our advisors include Animation Directors and executives from Disney and Fortune 500 companies.
Why create animated kids' content? 3 reasons... merchandising, cross demographic appeal, and long product lifespan. Merchandising often represents a much more lucrative revenue stream than even the content production itself. Moreover, animation appeals across genres and age groups. Kids, young adults, and adults all consume animated content. Lastly, animated films and TV series last decades and are watched over and over again by kids, and later, they share their favorites with their kids.
*These projections are not guaranteed.
Potential to make money, see the animation development process, own up and coming intellectual property and have a say in the process! You may not have had the opportunity to invest in Disney in 1923, but you do have the opportunity to invest in Pencilish NOW! (*disclaimer* obviously we're not a billion dollar company like Disney and we may never reach their level of success, but in 1923 Disney was not a billion dollar company either)
We're looking forward to our first project with YOU and we're shooting for Q3 of 2021 to launch our first short form animated projects that we hope will turn into animated series and movies!
Additionally, Tom is currently producing a feature documentary called Pencil Test. And while this project is not owned or affiliated with Pencilish Studios, it does show our CEO's popularity and current projects that he is working on. This feature film documentary focuses on the industries' best and most inspirational animators, primarily spotlighting their work in the 90s and early 2000s. This fascinating look into the lives of these animators will not only bring back your childhood memories, but will also make you fall in love with 2D animation all over again. Narrated and voiced by actress Ming-Na Wen (Joy Luck Club, Agents of Shield, Voice of "Mulan"), Tom is also animating a version of her for the documentary to be released in 2021.
Join us to create high quality animated projects that connect with audiences of all ages. You don't have to think very hard about your childhood to remember some of your favorite characters growing up, and we now have this opportunity with a new, young and connected generation. Invest today!
Pencilish Animation Studios has financial statements ending October 8 2020. Our cash in hand is $13,050, as of November 2020. Over the three months prior, revenues averaged $0/month, cost of goods sold has averaged $0/month, and operational expenses have averaged $2,675/month.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes and other financial information included elsewhere in this offering. Some of the information contained in this discussion and analysis, including information regarding the strategy and plans for our business, includes forward-looking statements that involve risks and uncertainties. You should review the "Risk Factors" section for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Pencilish Animation Studios intends to create high quality animation, intellectual property, films and television that can be distributed and monetized through licensing, merchandise, and other revenue streams.
With the team that we have assembled, in 5 years we hope to be the number 1 boutique animation studio in the world. These projections are not guaranteed.
Given the Company’s limited operating history, the Company cannot reliably estimate how much revenue it will receive in the future, if any.
Pencilish Animation Studios Inc. was incorporated in the State of Delaware in October 2020.
Since then, we have:
Historical Results of Operations
Our company was organized in October 2020 and has limited operations upon which prospective investors may base an evaluation of its performance.
Related Party Transaction
Refer to Question 26 of this Form C for disclosure of all related party transactions.
Liquidity & Capital Resources
To-date, the company has been financed with $30,000 in debt.
After the conclusion of this Offering, should we hit our minimum funding target, our projected runway is 6 months before we need to raise further capital.
We plan to use the proceeds as set forth in this Form C under "Use of Funds". We don’t have any other sources of capital in the immediate future.
We will likely require additional financing in excess of the proceeds from the Offering in order to perform operations over the lifetime of the Company. We plan to raise capital in 13 months. Except as otherwise described in this Form C, we do not have additional sources of capital other than the proceeds from the offering. Because of the complexities and uncertainties in establishing a new business strategy, it is not possible to adequately project whether the proceeds of this offering will be sufficient to enable us to implement our strategy. This complexity and uncertainty will be increased if less than the maximum amount of securities offered in this offering is sold. The Company intends to raise additional capital in the future from investors. Although capital may be available for early-stage companies, there is no guarantee that the Company will receive any investments from investors.
Runway & Short/Mid Term Expenses
Pencilish Animation Studios Inc. cash in hand is $13,050, as of November 2020. Over the last three months, revenues have averaged $0/month, cost of goods sold has averaged $0/month, and operational expenses have averaged $2,675/month, for an average burn rate of $2,675 per month. Our intent is to be profitable in 36 months.
Since Oct. 8, 2020, we incurred some offering-related costs to set up and open our Regulation CF raise. We secured $30K in debt financing to seed and start the company.
In 3 to 6 months, we do not anticipate generating any meaningful revenue. There is a possibility that we could generate small amounts of revenue from ancillary revenue streams such as company merchandise. We hope to be generating significant revenues in 18 to 24 months, at which point we hope to be generating approximately $1M in annual revenue with annual expenses of around $500K to $750K. This largely depends on the deal structure and amount of animation required. Our intent is to produce the TV shows / films that best align with our business and potentially license the IP of the remaining media to other studios.
In addition to the Wefunder raise, one of our stake holders and current creditor has indicated that they are willing to inject additional capital. Terms are to be determined.
We are a relatively-new company.
Pencilish Animation Studios, Inc was incorporated in October 2020. It is a relatively new company, with no history upon which an evaluation of its past performance and future prospects can be made. As of October 8, 2020, the date of our last reviewed financial statements, we had not yet generated profits. The Company’s ability to continue in the next twelve months is dependent upon its ability to obtain capital financing from investors sufficient to meet current and future obligations and deploy such capital to produce profitable operating results.
We depend on a small management team, creative team, and will need to hire more people to be successful. Our success also depends on being able to retain and continue to recruit key performers, illustrators, and animators, if not the quality and popularity of our brand, product, and intellectual property could decline, which could adversely affect our operating results.
Our success will greatly depend on the skills, connections and experiences of our founders, Tom Bancroft & Ash Greyson. We are also dependent on the relationships of our Advisory Board Members. We will also need to hire additional creative talent and individuals with a track record of success and with the skills necessary to ensure that we create and sell premium original and licensed content. There is no assurance that we will be able to identify, hire and retain the right people for the various key positions. Our success depends, in large part, upon our ability to find, license and create successful intellectual property which may be difficult in our field. Any of the foregoing issues could adversely affect our operating results.
Our Founder, CEO and Sole Director controls the Company and will continue to do so after this offering. We currently have no independent directors.
Tom Bancroft, our Founder, Chief Executive Officer and Sole Director, is currently also our controlling shareholder. As the majority holder of Class B Voting Common Stock, which gives him 10 votes per share, as opposed to one vote per share for holders of Class A Voting Common Stock like you, he will continue to hold a majority of the voting power of all our equity stock at the conclusion of this offering, and therefore control the board. This could lead to unintentional subjectivity in matters of corporate governance, especially in matters of compensation and related party transactions. Tom’s voting power through his ownership of our Class B Voting Common Stock could discourage or preclude others from initiating potential mergers, takeovers or other change of control transactions. We also do not benefit from the advantages of having any independent directors, including bringing an outside perspective on strategy and control, adding new skills and knowledge that may not be available within Pencilish Animation Studios, having extra checks and balances to prevent fraud and produce reliable financial reports.
We are offering voting common stock which has one vote per share. We can issue preferred stock without stockholder approval, which could materially adversely affect the rights of common stockholders.
We are offering Class A Voting Common Stock, which means you will have a diminished say in the direction of the Company as our Founder, CEO and Sole Director controls the Company and will continue to do so after this offering, including any material corporate decisions, such as mergers, acquisitions, dissolution or winding up of the company. Our Board may make a decision you disagree with and you will not have a mechanism to change or disapprove of this. Our certificate of incorporation authorizes us to issue “blank check” preferred stock, the designation, number, voting powers, preferences and rights of which may be fixed or altered from time to time by the board of directors. Accordingly, the board of directors has the authority, without stockholder approval, to issue preferred stock with rights that could materially adversely affect the rights of the common stockholders. New equity investors or lenders could have greater rights to our financial resources (such as liens over our assets) compared to existing shareholders. Additional financings could also dilute your ownership stake, potentially drastically.
The offering price has been arbitrarily set by Pencilish Animation Studios, Inc.
Pencilish Animation Studios, Inc. set the price of its Class A Voting Common Stock. Valuations for companies at our early stage of development are purely speculative. We have not generated any significant revenue, nor do we have deals in place yet to do so. Our valuation has not been validated by any independent third party, and may fall precipitously. It is a question of whether you, the investor, are willing to pay this price for a percentage ownership of a start-up company. You should not invest if you disagree with this valuation.
There is no current market for Pencilish Animation Studios, Inc's shares.
There is no formal marketplace for the resale of our securities. Shares of our Class A Voting Common Stock may be traded to the extent any demand and/or trading platform(s) exists. However, there is no guarantee there will be demand for the shares, or a trading platform that allows you to sell them. We do not have plans to apply for or otherwise seek trading or quotation of our Class A Voting Common Stock on an over-the-counter market. It is also hard to predict if we will ever be acquired by a bigger company. Investors should assume that they may not be able to liquidate their investment or pledge their shares as collateral for some time.
The entertainment market in which we operate is intensely competitive, rapidly changing and increasingly fragmented, and we may not be able to compete effectively, especially against competitors with greater financial resources or marketplace presence, which could adversely affect our operating results.
We face competition for our audiences from a multitude of entertainment choices including, but not limited to, social media, streaming platforms, as well as from other forms of live events, as well as televised, streamed and filmed entertainment and other leisure activities, in a rapidly changing and increasingly fragmented marketplace. Many of the companies with whom we compete have substantially greater financial resources than we do, such as Disney and Pixar. Even among fans of animated content, we compete with televised, streamed and filmed entertainment from U.S. and International companies. For the sale of our merchandise, we compete with entertainment companies, professional animation companies, and other makers of branded apparel and merchandise. Our competitors may engage in more extensive development efforts, undertake more far-reaching marketing campaigns, adopt more aggressive pricing policies and make more attractive offers to existing and potential performers. Our failure to compete effectively could result in a significant disadvantage or financial losses, any of which could adversely affect our operating results.
If we are unable to build and maintain our brand of animation and animated intellectual property, our operating results may be adversely affected. We are at the mercy of public perception.
Animation and Animated Content has an intense core fan base, but it is very expensive and competitive. The lack of awareness of our brand and projects, among fans who have a large number of entertainment choices, may adversely affect our operating results. We must build and maintain a strong brand identity to attract and retain a broad fan base for our projects. The creation, marketing and distribution of animated content and digital programming that our fans value and enjoy is at the core of our business and is critical to our ability to generate revenues. Also important are effective consumer communications, such as marketing, customer service and public relations. The role of social media by fans and by us is an increasingly important factor in our brand perception. If our efforts to create compelling content, goods, merchandise and/or otherwise promote and maintain our brand or projects, services and merchandise are not successful, our ability to attract and retain fans may be adversely affected. Such a result would likely lead to a decline in demand and viewership of our content and the sale of our merchandise, and in the future, impact our projects, animated series, television and/or film viewership, which would adversely affect our operating results. We may be associated with actors, voice over artists, and writers who are subject to changing public perceptions. The public perception of the persona depends on the social and political climate of the day, of which we have no control over, and personas that have previously been objects of derision may take on social significance that was never intended. Social media enables perceptions to spread quickly, whether accurate or not. This could impact our reputation and, depending on the severity, could adversely affect event ticket sales and our operating results.
We may not be able to protect all our intellectual property. We may be subject to claims against us for violation of third party intellectual property rights.
Our profitability may depend in part on our ability to effectively protect our intellectual property, including our trademark and logo, original entertainment content in our projects, and our ability to operate without inadvertently infringing on the proprietary rights of others. Theft of our original entertainment content prior to release could adversely affect our revenue. Policing and protecting our intellectual property against piracy and unauthorized use by third parties may become time-consuming and expensive. Any litigation for both protecting our intellectual property and defending our original content could have a material adverse effect on our business, operating results and financial condition, regardless of the outcome of such litigation. While we generally own the intellectual property in our content or have the rights or license to other content, we may be subject to third parties alleging that we have violated their intellectual property rights. If we are unable to obtain sufficient rights, successfully defend our use, develop non-infringing technology or otherwise alter our business practices in a timely manner in response to claims against us for infringement, misappropriation, misuse or other violation of third-party intellectual property rights, our business and competitive position may be adversely affected. As a result of this type of dispute, we could also be required to develop non-infringing technology, make royalty or damage payments, enter into licensing agreements, adjust our merchandising or marketing activities or take other actions to resolve the claims, any of which could be costly or unavailable on acceptable terms.
Costs associated with, and our ability to obtain, adequate insurance could adversely affect our profitability and financial condition.
We currently secure insurance programs to address our various risks with terms, conditions and costs that are appropriate for our business. However, heightened concerns and challenges regarding property, casualty, liability, business interruption, animated content, Covid-19, Pandemic related issues, and other insurance coverage have resulted from terrorist and related security incidents along with varying weather-related conditions and incidents. As a result, we may experience increased difficulty obtaining high policy limits of coverage at a reasonable cost, including coverage for acts of terrorism, cyber attacks, weather-related damage, pandemics, Covid-19 and other perils associated with our operations.
Natural disasters, such as Covid-19, and other events beyond our control could materially adversely affect us.
Natural disasters or other catastrophic events may cause damage or disruption to our operations, international commerce and the global economy, and thus could have a negative effect on us. Our business operations are subject to interruption by natural disasters, fire, power shortages, pandemics and other events beyond our control. Such events could make it difficult or impossible for us to deliver our products or services to our customers or could decrease the demand for our products and content. They could also result in us not being able to continue with our various projects or in making it difficult or impossible for us to create new products or content to be monetized or to provide new services. In December 2019, a novel strain of coronavirus, COVID-19, was reported in Wuhan, China. The World Health Organization has since declared the outbreak to constitute a pandemic and as of October 8, 2020 we are still feeling the adverse effects of the Covid 19 outbreak across the global economy. The full extent of the impact of COVID-19 on our operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, which could last for many years to come, the impact on our customers and our sales cycles, the impact on customer, employee or industry events, and the effect it will have on our vendors and industry, all of which are uncertain and cannot be predicted. The exact impact of COVID-19 disruptions on our overall and future financial condition and results of operations is difficult to predict. The overall impact of this cannot be predicted or foreseen, but it is highly probable that this could have a negative effect on our industry as a whole, and therefore our company specifically, for years to come. The overall unpredictability of public sentiment, fear of gathering in large groups, employment and future disposable income for our intended audiences, the financial health of other companies such as theater chain owners in our industry, and other unforeseen variables all make it very difficult to predict when, or if, our industry will recover from the COVID-19 pandemic. There is also a risk that in the future something similar could happen again with these, and other unintended, consequences.
Our future success depends on the efforts of a small management team. The loss of services of the members of the management team may have an adverse effect on the company. There can be no assurance that we will be successful in attracting and retaining other personnel we require to successfully grow our business.
Investors will have to subscribe to multiple agreements in order to invest in this offering.
In order to invest in this offering, investors agree to become a party to the Subscription Agreement with the company, and the Custodian and Voting Agreement with XX Investments, LLC available here https://wefunder.com/legal/custodian (the “Custodian and Voting Agreement”), under which XX Investments, LLC (the “Custodian”) will hold title of the securities for the benefit of the investor. The company has chosen to participate in this program offered by Wefunder as a means of simplifying communications with investors and to help facilitate future liquidity. Further, transferees will be required to become parties to the Custodian and Voting Agreement.
As part of the Custodian and Voting Agreement, Investors will grant the Custodian the right to vote their shares purchased in this offering.
The Custodian will vote the shares as directed by a “Lead Investor” appointed by the company who is supposed to represent the interests of investors. This means that investors in this offering will not have the right to vote for the things like the election of directors or amendments to the company’s Articles of Incorporation. Instead, that right will be granted to the Custodian, and its affiliate, XX Team LLC.
You will not hold title to the purchased securities, instead, title will be held by the Custodian.
Under the terms of the Custodian and Voting Agreement, title to the shares in this offering will be held by the Custodian for your benefit. By holding custody of the title to the shares it means that the Custodian will be required to engage in business practices that protect your interests as the beneficial owner of the shares. The shares are not protected by insurance, and it is unclear what protections are available if the Custodian enters into bankruptcy proceedings in which creditors assert rights to shares for which you are the beneficial owner.
No regulator has given their approval of the form of the arrangement with the Custodian.
The company has relied on representations by Wefunder regarding the legality of the arrangement with the Custodian. If during this offering, or in subsequent securities offerings by the company for which require regulatory review, the arrangement with the Custodian is challenged, the company may incur costs to unwind the arrangement by either transferring title to the securities from the Custodian to investors, or by engaging a different custodian.
We are not subject to Sarbanes-Oxley regulations and lack the financial controls and safeguards required of large public companies.
We do not have the internal infrastructure necessary, and are not required, to complete an attestation about our financial controls that would be required under Section 404 of the Sarbanes-Oxley Act of 2002. There can be no assurances that there are no significant deficiencies or material weaknesses in the quality of our financial controls. We expect that if and when it becomes necessary to perform the system and process evaluation, testing and remediation required in order to comply with the management certification and auditor attestation requirements, we will incur additional expenses and diversion of management's time.
We have a financial obligation to repay debt within one year.
We currently have debt financing in place. We potentially will continue to rely on debt financing, which may require pledging all of our assets as collateral. Our current debt is due within 12 months and this may make it difficult to cover all of our operational costs and execute our strategy and plan if we are not able to raise the required capital. In addition to equity financing, we may pursue debt financing and lines of credit that allow us to manage our cash flow and undertake our business plan. With debt financing, we will likely be required to pledge all of the assets of the company as collateral on any loan. By doing so, we risk the lender seizing assets if we default on those loans.
We have related party transactions.
We currently have debt to a creditor that is also an equity holder in our company through that debt agreement. This could cause a conflict of interest and may give this creditor influence over our operations and financial stability if we are not able to repay the debt.
Already have a Wefunder account? Login
Don't have a Wefunder account? Signup