No Guarantee of Return on Investment. There is no assurance that a Financier will realize a return on investment or that it will not lose its entire investment. Financiers should consult with their own attorney and business advisor prior to making any investment decision.
A High Risk Investment. Investing in a movie entails a high degree of risk and is suitable for purchase only by those who can afford a total loss of their investment. The film industry is highly competitive and the production and/or distribution of a film is subject to several risks and delays beyond the control of the Producer. While we have made effort to disclose all of the possible risks that we can anticipate, there is always a chance that something unexpected may occur during any stage of the film production process and/or marketing stage that will have a negative impact on the Producer’s ability to complete the film and/or obtain distribution. While it is likely that if funded that the Producer will complete the film, it is possible that it will not be completed on time and/or on budget. The Producer will not have the sufficient funds to complete the Picture if the production costs exceed the amount raised. The Picture’s sole revenues, if any, will be the revenues generated by distribution and other exploitation of the Picture in various markets and media, the acceptance by the distributors and then by the public, which cannot be predicted and does not necessarily bear a direct correlation to the production costs incurred. Commercial success will depend on the above factors and thus, the revenues are and will continue to be extremely difficult to forecast
Limited Revenue Sharing to a Single Film. The revenue participation rights only provide a right to share in the revenues of the feature film tentatively titled “The Family Way”. Financiers should be aware that their investment is not diversified and is completely dependent upon the success of this single film. If for any reason the Picture fails to profit or is never produced, Financiers will not receive any return on their investment and will lose all of their investment amount. Furthermore, Financiers are not entitled to revenue participation rights to any sequential and/or other films and/or media projects that the Producer may create or produce, nor is the Producer obligated to offer future investment opportunities to the Financie
Risk of Cash Loss. Financiers will bear substantially all of the risk of the investment in the Picture. All organizational, professional and other expenses associated with the Picture will be financed entirely through funds raised from Financiers. This means that if the Picture is unsuccessful and unable to generate revenues, Financiers will bear substantially all of the economic risk
New Business. To date, the Producer has not generated revenue, does not foresee generating any revenue in the near future and therefore rely on external financing. The Producer has no history upon which an evaluation of our prospects and future performance can be made. Our proposed operations are subject to all business risks associated with new enterprises.
Public Appeal. Recouping the investors' capital and attaining profitability are largely functions of the Picture's cost of production and distribution in relation to its public appeal. The extent to which a motion picture will appeal to the public is dependent on unpredictable critical reviews and public taste. Declines in economic or political conditions in the USA or in other countries in which the Picture will be shown may also have a negative impact on financial results
Failure to Obtain Distribution. The Picture’s activities are subject to all the risks associated with the motion picture industry. It is estimated that over 20% of all feature films do not obtain distribution and therefore do not have the opportunity to recoup their production budgets. Decisions regarding the timing of release and promotional support of feature films are important in determining the success of a particular film. As with most film production companies which rely on others to distribute feature films, the Producer (or others responsible for producing the Picture) do not solely control the timing and manner in which distributors of the Picture will distribute it. Although any distributor may have a financial interest in the success of the Picture, any decision by such distributors not to distribute or promote the Picture or to promote a competitor’s films to a greater extent than it promotes the Picture could have a material adverse effect on the Financiers.
Limited Distribution Experience. The Producer has no experience in securing external distribution and limited experience in self-distribution. While we plan to hire the services of individuals or companies that do have experience in securing distribution and negotiating distribution agreements, it is possible that members of our management team may make decisions detrimental to our business which will have a negative effect on our results of operations. New Distribution Platforms. While we plan to utilize equipment that will produce a film that is suitable for high definition viewing for Video-on-Demand (VOD), DVD, and BluRay platforms, we may not be able to adapt the Picture to any new content distribution platforms. This may have a negative impact on the Picture’s performance if consumer behavior changes as a result of new technologies becoming available.
Technological Advances. Technological advances may reduce demand for films. The entertainment industry in general, and the film industry in particular, are continuing to undergo significant changes, primarily due to technological developments. Because of this rapid growth of technology, shifting consumer tastes and the popularity and availability of other forms of entertainment, it is impossible to predict the overall effect these factors will have on the potential revenue from and profitability of the Picture.
Piracy. Piracy is a growing problem within the entertainment and media industry and if the Picture is pirated it may have a negative impact on the distribution and sales. While the Producer will take measures to protect its content, products, and intellectual property, we cannot assure that the Producer’s efforts to enforce its rights and to prevent and/or combat piracy will be successful
Changes in Cast and/or Crew. Securing commitments from cast and crew before a film has at least secured minimal funding is rare for a low-budget independent film. The Producer currently has nonbinding agreements with all cast and crew members until minimal funding is secured and the Picture enters its pre-production stage. It is possible that one or more cast and/or crew members listed here may become unavailable before then. If this happens, the vacated role/crew position may not be filled until financing is secured for the film.
Loss of Producer, Director, Principle Cast, and/or Key Crew Members. The Picture will be dependent on the Producer and the people hired to produce the Picture on time and on budget. The loss of the Producer or any of the directors, principle actors, and/or key crew members could harm the Picture’s business, financial condition, cash flow, and results of operations. The Producer has not purchased life insurance or other similar types of policies on anyone associated with the production of the Picture. In the event of death or disability of any such individuals, the Producer will not receive any compensation to assist with their absence and the loss of such person could negatively affect the Picture and its operations.
Furthermore, the production of the Picture will require many other skilled creative and production personnel, including cinematographers, editors, costume designers, set designers, sound technicians, lighting technicians and actors. Although the Producer expects that high-quality candidates will fill such positions, such candidates may be unwilling to work under acceptable terms. This could delay production or reduce the quality of the Picture which would delay the Financier’s receipt of any revenue. Also, many of these positions could require that members of unions or guilds be hired. As a result, the ability to terminate unsatisfactory or non-performing workers could be adversely affected by existing union or guild contracts and regulations. This could also delay production of the Picture and significantly increase costs.
Dependence on External Factors. The Picture’s success depends on external factors in the film industry. Operating in the film industry involves a substantial degree of risk. Each feature film is an individual artistic work, and unpredictable audience reactions primarily determine commercial success. The commercial success of a film also depends upon the quality and acceptance of other competing films released into the marketplace at or near the same time, critical reviews, the availability of alternative forms of entertainment and leisure activities, general economic conditions and other tangible and intangible factors, all of which are subject to change and cannot be predicted with certainty. There can be no assurance that even if the Picture does reach the marketplace that it will obtain favorable ratings or reviews once it does.
Budget Overruns. Actual production cost may exceed the budget, sometimes significantly. Risks, such as labor disputes, death or disability of star performers, rapid high technology changes relating to special effects, or other aspects of production, shortages of necessary equipment, damage to film negatives, master tapes and recordings, or adverse weather conditions may cause cost overruns and delay or frustrate completion of a production. If the Picture incurs substantial budget overruns, the Producer may have to seek additional financing to complete production of the Picture rather than having a completion bond company take over production of the film. No assurance can be given as to the availability of such financing on terms acceptable to Financiers. In addition, if the Picture incurs substantial budget overruns, there can be no assurance that such costs will be recouped, which could have a significant adverse impact on the Financiers.
Changes in Union Rules or Employment Laws. Any changes in union rules and practices, employment laws, or employment regulation could harm our performance. These laws may include but aren’t limited to minimum wage requirements, overtime pay, workers’ compensation rates, citizenship requirements, and union membership. A number of factors could adversely affect our operating results, including but not limited to additional government-imposed increases in minimum wages, overtime pay, mandated health benefits, increased tax reporting and tax payment, and changing regulations from the Screen Actor’s Guild and/or other film industry unions.
Changes in legislation and/or regulation. The entertainment industry is subject to extensive legislation and regulation at the federal and local levels. The Picture is also subject to regulation, and any additional regulation under consideration. Any changes in government regulation could have a negative impact on our business.
Delays. Substantial delays during the production of the Picture may cause the Picture’s expenses to be increased and therefore, may result in delays generating revenue for Financiers. The Producers cannot be certain when production of the Picture will begin. The Producer and others, including any actor playing a leading role will need to complete, delay or abandon other potential obligations before production on the Picture begins. While the Producer intends to begin production as soon as practical,
the Producer has no way of predicting exactly when there will be sufficient funds to begin production. Therefore, the Producer has no way to predict the availability of the principal cast and creative staff of the Picture. In addition, other considerations such as the weather conditions of the location of the Picture, means the timing of the commencement of the production is difficult to predict. Further, the production of the Picture may be delayed or abandoned due to any number of unforeseeable events including but not limited to: poor weather conditions, breach of contract with individuals and/or other production service providers, equipment or power failure, legal issues, accidents, travel delays, fire and/or other property-damaging events, and natural or man-made disasters affecting the shooting locations or post-production facilities.
Competition. There are numerous other film companies that develop and produce films. Most of the major U.S. film studios are part of large diversified corporate groups with a variety of other operations, including television networks and cable channels, which can provide means of distributing their products. The number of films released by the Picture’s competitors in any given period may create an oversupply of product in the market, and that may make it more difficult for the Picture to be successful.
The Producers will be competing with numerous independent film production companies, television networks and pay television systems, for the services of performing artists, producers, and other creative and technical personnel, as well as for production financing. Many of the companies that the Producers will compete with are organizations of substantially larger size and capacity, with far greater financial and personnel resources and longer operating histories, and may be better able to acquire properties, personnel and financing, and enter into more favorable distribution agreements. In addition, the Picture will compete for audience acceptance with films produced and distributed by other companies. The Picture’s success will depend on public taste, which is both unpredictable and susceptible to rapid change.
Limited Protection of Intellectual Property and Proprietary Rights. Existing intellectual property rights, if any, with respect to the Picture have been secured. However, there can be no assurance that such measures will protect such proprietary information, or that competitors will not develop screenplays for feature films otherwise similar to the Picture, or that the Producers will be able to prevent competitors from developing similar screenplays for films. The Producers expect that the proprietary rights of the Picture will not infringe on the proprietary rights of third parties. However, there can be no assurance that third parties will not assert infringement claims against the Producers, the Picture or persons associated with them in the future. Such assertion may require that substantial legal fees and costs be incurred in order to protect such rights, or arrangements be entered in order to settle claims. To the extent that the intellectual property rights of the Picture are inadequately protected, or if the financial burden of enforcing such rights becomes too cost-prohibitive, it would have a material adverse effect on the Financiers.