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Business and Development Overview
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2017/2018
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Confidentiality!
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The information provided by Franky Films (“Company”) in this business and development overview is unique and is entirely confidential. You agree to treat such information in a confidential manner, not use such information for any purpose other than its intended use, and will not, directly or indirectly, disclose or permit your agents or affiliates to disclose any of such information without the prior written consent of the Films’ producers.! !
The estimates and projections presented in this overview are subject to business, economic, and other uncertainties beyond the control of Franky Films. Although such projections are believed to be realistic, no representations can be made as to their attainability. Please see the Risk Assessment and Management section within this document. ! ! ! ! ! ! !
For additional information or questions, please contact us at the following:! !
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Website: www.franky-films.com! Email: info@franky-films.com! Telephone: 514-802-2932!
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Table of Contents! ! !
Executive Summary………………………………………………………………………………. Page 2! !
Investor’s Overview……………………………………………………….…………………….… Page 3! !
Potential Return…………………………………………………………………………….…...…. Page 4! !
Potential Sales Estimates…………………………………………………………………...…… Page 5! !
Film Comparables……………………………………………………………………………...….. Page 6! ! !
Projects in Development! !
Man Lost World………………………………………………………………………..….. Page 8! !
Woodland Grey………………………………………………………………………...….. Page 10! !
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The Flare……………………………………………………….………………………..…. Page 12! Tax Shelter Terrors………………………………………………….…………………..… Page 13!
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8 Weeks………………………………………………………….…………………..…….
Page 14
The Thousand Legged Terror…………………………………………………….………
Page 15
Le Blink………………………………………………………………………………..…...
Page 16!
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Producer’s Profile…………………………………………………………………………… Page 17! !
Professional Services………………………………………………………………………. Page 18! ! !
Business Overview! !
Marketing Plan……………………………………..………….….……………….……...
Page 19!
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Sample Finance Plan…………..……………………………..……………..……………
Page 20!
Risk Assessment & Management...…………………………….…...………..…………
Page 22!
Film Industry Overview………………………………..………………….………………………
Page 24!
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Distribution …………….………………………………………………………………………...
Page 26!
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Page 1!
Executive Summary! ! Founded in 2012, Franky Films is an independent, fully operational, Montrealbased production house focused on the developing, producing and servicing of original, high quality content for film, television, and digital media platforms. Franky Films is a complete, specialized, service production provider, catering to the needs of Canadian producers as well as the needs of U.S. and foreign productions houses.!
Recent Releases!
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Be it for feature film, short film, documentary, industrial, commercial, corporate or web-based programming, Canadian content productions, service productions or co-productions, Franky Films provides comprehensive turnkey production solutions and support from the development phase, through pre-production, principal photography and into post-production, encompassing all of your projects needs. Being Montreal-based, Franky Films has access to highly qualified production crews, state-of-the-art equipment as well as some of the worlds' most sought after post-production facilities and special effects companies. Furthermore, Franky Films has access to generous federal and provincial tax incentives and has a wide national distributor network for both domestic and international sales.! !
We are a team driven by passion and creativity that strongly believes in applying a detail-oriented approach to filmmaking. As a result, the end product delivered consists of innovative storytelling with a strong emphasis on cinematography that engages the audience’s imagination, high production value and a strategic marketing and distribution plan for both domestic and international sales.! !
Recent productions include, The Flare (2015), a sci-fi drama with a strong older female lead that has garnered a lot of attention in festivals worldwide and the dark comedy The Prince (2014) based on a fable of a selfish son and his dying father. Our films have been selected for several film festivals worldwide including the Cannes Film Festival, Canada Film Festival and Fantasia International Film Festival.! !
Franky Films’ mission is to produce feature length films that excite the imagination of viewing audiences worldwide and build an infrastructure that supports the continued production of high quality, commercially viable filmed content that is distributed across traditional and new media platforms. We are committed to producing films with an average production budget ranging from $250,000 to $3,000,000 allowing for potentially higher rates of return.! !
This business and development overview will provide the details pertaining to the projects Franky Films has in its development slate and how potential investors can get involved in the journey with us.! !
Page 2!
Investor’s Overview! ! !
We are offering a standard 20% premium on investment, as well as pro rata percentage of the 50% of the backend revenue shares. With that being said, there is some flexibility in what we can offer investors, depending on the level of interest and received equity proposals.! !
HYPOTHETICAL, INVESTMENT RETURN FOR A BUDGET OF $250,000 VS. $1,000,000! !
Equity Participant A invests $50,000 vs. $200,000 into the film, granting them the 20% premium on their investment to recoup pari passu alongside all other equity participants. Plus a pro rata percentage of backend participation points, 10% for this example.! !
The first pay out from the film revenues received goes directly to the investors until 120% of investment is recouped. Following 120% recoupment, the net profit (as determined in accordance with generally-accepted accounting principles and with the participation of the engaged distributor and sales agent) is split 50/50 between the investors and the production in perpetuity.! !
Equity Participant A’s investment is a reflection of the percentage of the film he owns. In the example, he has secured 10% percentage points. Once the percentage points are established, they cannot decrease or be further diluted.! ! !
FRANKY FILMS MODEL! !
The budgets we work with are micro budgets between $250,000 to $3,000,000 CAD making investor recoupment and revenue on the backend more than achievable but profitable, while still providing all of the production resources and acumen necessary to make great films. We will also encourage production in Montreal, Quebec where we have access to generous guaranteed tax credits.! !
We can provide complete details for each individual film including scripts, budget breakdowns, tax credit calculations and pitch packages.! !
Franky Films is also offering investors shares within the company instead of on a project-by-project basis. For more information, please contact the Franky Films team. ! !
Page 3!
Potential Return! Project: WOODLAND GREY – Budget: $250,000 CAD! !
*The timeline for the potential return, on this specific project, is two years! ! ! ! !
Investment:
$
250,000!
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Estimated Sales of the film:
$ 1,020,000 ( See page 5, Potential Sales Estimate – MEDIUM )!
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A RECOUPMENT (120%):
$
300,000!
$
510,000!
Remaining money to be split: $
210,000!
B INVESTOR’S SHARE:
105,000!
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50% to distributors: ! ! ! ! ! ! !
$
Return on Investment (ROI):
408%!
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Total Investor payout (A+B): !
$
405,000!
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Page 4!
Potential Sales Estimates – TV/VOD & Online!
Page 5!
Film Comparables! Box Office Comparison of Successful Films in the Same or Similar Genre as Woodland Grey (Horror)!
Box Office Comparison of Successful Films in the Same or Similar Genre as Man Lost World (Psychological Dramas)!
Page 6!
Projects in Development
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MAN LOST WORLD! !
WOODLAND GREY! !
THE FLARE! !
TAX SHELTER TERRORS! !
8 WEEKS THE THOUSAND LEGGED TERROR! !
LE BLINK!
Page 7!
Man Lost World! ! !
LOGLINE! !
A grieving postman agrees to help a new friend reconnect with his estranged teenage son, but soon believes he would make a better father figure than him. ! !
SYNOPSIS! !
Man Lost World tells the tale of Harvey: a 55-year-old, emotionally distorted introvert working in the dead letter department of the post office. The unexpected death of his mother shocks him out of his mundane routine. It pushes him to take on the mission of helping a new found friend, John, reconnect with his estranged son, Sam. Craving a father-son relationship, having never had one himself, Harvey starts to believe that he would Currently in Development make a better father figure for Sam than John ever could.! ! Obsessed with this, he fails to see the potential wrong in his actions and after years of violating strangers by reading their lost mail, Harvey embarks on a twisted game of falsifying reality. Man Lost World is more than a father-son reconciliation story: it is a film about self-discovery through our circumstances and the people we choose to surround ourselves with, and the role of our past; its influence on the present and the road it paves for the future.! !
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EXECUTIVE SUMMARY! !
Franky Films recently partnered with Goldrush Entertainment to produce Man Lost World, a psychological drama about life, loss and the missed opportunities in father and son dynamics. Goldrush Entertainment has produced award winning films such as Beautiful Boy starring Maria Bello and Michael Sheen, and the action-thriller Standoff starring Laurence Fishburne and Thomas Jane. ! A prestige picture in the vein of American Beauty, the script was written by Quebec’s own Francois Tremblay in 2016. Goldrush is excited to announce the participation of Tannis Vallely (Arrested Development, Fantastic Beasts and Where to Find Them), a top level-casting director, to help us package Man Lost World with one American lead like Bryan Cranston (Breaking Bad) or Paul Giamatti (Sideways). We currently have letters of interest from Quebec star Roy Dupuis (The Rocket) and Italian superstar Claudia Gerini (John Wick 2).! Man Lost World has garnered interest from several international sales companies (Seville, Mongrel Media) interested in acquiring International rights for this project. The estimated budget for Man Lost World is $2.5M with filming projected to take place in Winter of 2018.! !
Page 8!
DIRECTOR’S VISION! ! !
A film is – or should be – more like music than like fiction. It should be a progression of moods and feelings. The theme, what’s behind the emotion, the meaning all that comes later? ! !
Stanley Kubrick !
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I am inspired by films that explore the relationship between the individual and our social institutions. Studying sociology in university, I became intrigued with the ways the moral consciousness of the self functions within these institutions and how societal norms influence our behavior. I wondered what would be the consequences of challenging such norms and institutions. Sam Mendes (American Beauty, Revolutionary Road) and Sydney Lumet (Dog Day Afternoon, Network) have inspired me with their exploration of these themes. Not only did they create captivating images, they consistently made their films thought provoking while staying true to the story. Combining performance, writing and storytelling, they created award-winning films that captivated audiences around the world. !
Man Lost World is the story of diverse and intricate characters coming to terms with their inner demons and of their lives intertwining while doing so. Our characters emulate, with minimal exaggeration, the personal challenges and struggles we encounter in the real world. I want Man Lost World to touch the audience personally and subjectively. As twisted and deranged some of our characters may seem, there is a sense of truth and reality that the audience can recognize and relate to. I believe this universality will create an emotional connection with our audience making for a powerful film. ! ! !
Francesco Giannini ! Director ! !
Page 9!
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Woodland Grey!
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LOGLINE! !
When an older man living alone in the woods saves the life of a young woman, they are forced to coexist. Chaos ensues when the woman makes a terrifying discovery behind the man's cabin unleashing something truly haunting.! !
SYNOPSIS! !
Woodland Grey is a stylized psychological thriller with horror elements throughout about a middle-aged hermit who lives alone in the deep woods. He rescues and eventually befriends a young hiker only to have her release a supernatural force in the form of a feral child from an old shed behind his cabin. They flee the cabin in an attempt to escape the relentless pursuit of the child and their own disturbing inner demons.
Currently in Development !
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Woodland Grey is very much a character-based film that deals with themes of guilt, grief and ! cause strong physical manifestations and affect the regret. The intensity of these emotions can very quality of our lives. Our lead characters demonstrate a desperate yearning to self medicate the darkest times in their lives through isolation. This is something that is so universal and ripe for the medium of film. ! !
EXECUTIVE SUMMARY! !
Award winning Montreal director Adam Reider will be at the directing helm of Woodland Grey with production set for the fourth quarter of 2017. Franky Films will be collaborating with both Spectropia Pictures and independent producer John Fallon, creator of one of the most successful horror movie websites in the world “Arrow in the Head”, part of the Joblo Movie Network. We have acquired a letter of interest from B-list cult horror actor, Bill Moseley (Devil’s Rejects, The Night of the Living Dead) and mega YouTube influencer, Nicole Arbour, to star as our leads. Having a Multi-Channel Network (a company that represents YouTube influencers) to target social media platforms and a traditional distributor to target traditional platforms will allow us to exploit all avenues of distribution. With this type of talent attached, Woodland Grey has the potential to raise the company’s profile internationally and help increase the film’s marketability and profit. We will be experimenting with Virtual Reality (VR) technology and storytelling to enhance the audience experience and in developing an innovative promotional strategy that touches on all avenues of new media. !
Page 10!
FILMMAKER’S BIO! !
ADAM REIDER is a Montreal-born award winning filmmaker.! !
His films have played internationally and have garnered him awards and accolades from his peers. He has been voted in the Top 10 Montreal Filmmakers 5 years in a row in CultMTL magazine and has been featured in Nightlife magazine and the Montreal Gazette among others. He is also the owner of Rail City Media and Spectropia Pictures, successful film production companies in Montreal where he has directed numerous music videos, commercials and corporate films. ! !
Outside of film, Adam has an extensive background in recreation and has also worked as a motivational speaker, rock critic, tour manager, circus sideshow performer, booking agent, musician and stand up comic. ! !
DIRECTOR’S STATEMENT! !
I’m so stoked to be able to make a movie like Woodland Grey. ! !
It’s got all the bits I love about movies. It’s a great story with interesting and beautiful imagery, it’s creepy and lovely and it has something to say. It’s important for me to make films that have something to say. After the dust settles, the theatre lights come back up and you take a deep breath, I want my films to be the spark to discussion. ! !
This is why “Woodland Grey” makes sense to me. I know this film will accomplish my goal of entertaining! but also encouraging a conversation. This story will get people talking about guilt, grief or regrets and even start thinking about the weight we all carry with us. Discussions and the sharing of thoughts and ideas can help heal even the most wounded of souls. ! !
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...and what other way to artfully promote such dialogue and healing than in the guise of a thriller/horror film! !
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Adam Reider! Writer & Director ! ! !
Page 11!
The Flare! ! !
LOGLINE! !
In a world brought back to the pre-Industrial Revolution, a reclusive middle-aged woman goes on a quest to uncover her past before being taken to a permanent retirement facility. !
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CREATED BY Francesco Giannini and Johann St-Louis
SYNOPSIS! !
2031. Earth is recovering from a massive solar flare that has destroyed infrastructures, computerized equipment and satellites, and damaged millions of memory cards across continents.!
WHO WILL BE LEFT TO TELL YOUR STORY?
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Currently in Development 4 Seasons Series Arc available !
FORMAT: 7 EPISODES X 1 HOUR / EACH
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Alice has 14 hours to report to authorities before being irrevocably ‘inserted’ into the Providence Program – a state-of-the-art, yet foreboding retirement home.! !
She will embark on a final journey, knowing this is her last chance to piece together her fragmented mind and to find out what happened to her family.! !
EXECUTIVE SUMMARY! !
Franky Films recently partnered with an American production and film finance company, Battery Park Entertainment (BPE), to produce The Flare, a sci-fi drama television series that challenges viewers to question their own relationship to technology. BPE’s present focus is on packaging the series, which includes attaching A-list talent such as Carrie-Anne Moss in the lead of Alice and both a domestic and international distributor. The short won accolades both locally and internationally and is still making a successful run on the festival circuit. ! !
The Flare is looking at a budget of $3M CAD/episode with a series arc of four seasons. We are looking to keep production in Montreal, Quebec, Canada, reinvigorating the film and television industry here using local talent and professional crew. We want to make The Flare as popular and consistent in Montreal, as Orphan Black is in Toronto. ! !
Page 12!
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Tax Shelter Terrors! ! !
LOGLINE! !
This feature documentary explores the rise of the Canadian film industry that made many cult genre films with the tax shelter system from 1974-1982.! !
SYNOPSIS! !
Currently in Development !
Tax Shelter Terrors is the first feature-length documentary that fully explores how the toxic social and political Canadian context after 1968 created some of the most nihilistic and imaginative Canadian cult films of the 1970s, 80s and beyond. This exposé of Canadian cult culture mixes exclusive interview footage with all of the key Canadian and Quebec cult creators and icons from the 1970s with cutting edge commentary from the new wave of directors influenced by these explosive images.!
EXECUTIVE SUMMARY! !
Franky Films and Cine Excess North America have produced a 60 minute proof of concept for Tax Shelter Terrors (TST) that has already been critically-acclaimed worldwide throughout the festival circuit. In the summer of 2016, it won best director at the Australian Film Festival. As of now, Raven Banner will be the distributor for TST’s feature length film and discussions are on going with top end broadcasters. We recently acquired the participation of one of the top Canadian directors/producers from the tax shelter film era, George Mihalka (My Bloody Valentine). ! !
Franky Films and Cine Excess North America’s main focus, in order to finalize this documentary, is to interview A-List directors influenced by and who partook in Canadian cult films. They are in discussions with Quentin Tarantino and David Cronenberg. ! ! ! !
Page 13!
8 Weeks! ! !
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LOGLINE!
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When her fellow tenants start to vanish without a trace, the paranoid Maggie suspects that her influential neighbors are in on an intricate conspiracy to end the world, as we know it. ! !
SYNOPSIS! !
When Maggie and her husband relocate from the sunshine state to the cold, dreary winters of Montreal, she is given only eight weeks to complete her new work assignment. They move into an upscale apartment building that caters to the very wealthy of the city’s elite and meet a slew of strange and interesting neighbors. One character in particular is the genius neurologist, Dr. Morrell, who claims to have discovered the cure for mortality.!
Currently in Development !
When Maggie’s neighbors seem to vanish for weeks at a time and reappear out of thin air slightly different, she suspects Dr. Morrell. As the crisis deepens, a delusional tenant tells Maggie that she believes that Dr. Morrell and his clients are behind the world crisis. Maggie then starts to suspect that a wealthy neighbor who recently died might have replaced her husband. But without tangible proof, Maggie cannot decide what to do or whom to trust. In this suspenseful, action-packed sci-fi mystery, Maggie fights furiously to unveil Dr. Morrell’s conspiracy. ! !
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EXECUTIVE SUMMARY! !
Franky Films optioned sci-fi thriller 8 Weeks, written by David Gegia, in the winter of 2017 and has continued to develop the script. Franky Films’ focus is packaging the film with one A-list star and because of its genre, as well as the strength and quality of the script, 8 Weeks has been garnering attention from international distributors like Shoreline and eOne. ! !
Page 14!
The Thousand Legged Terror LOGLINE On a lonely stretch of road, an unscheduled pit stop is suddenly interrupted at gunpoint by a mysterious hunter, claiming he is being hunted by the Thousand Legged Terror; a horrifying creature said to stalk the countryside.
SYNOPSIS Sophie, who has been tasked with caring for her young nephew Peter, finds herself on a deserted country road late at night. An unscheduled pit stop is suddenly interrupted by Walter, a hunter who has become the hunted. He hitches a ride with Sophie at gunpoint and tells his tale of the Thousand Legged Terror.
Currently in Development !
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Can Sophie trust Walter’s tall tale? Can she keep Peter from the monster and the man with the gun? Which should she fear more? Or is Sophie the most ruthless of them all?
EXECUTIVE SUMMARY Franky Films optioned the script to The Thousand Legged Terror, a fantastic short film that pays homage to 50s monster flicks. We are looking to develop the short into a feature length film and will be shooting the proof of concept in the fourth quarter of 2017. We currently acquired a letter of interest from renowned horror icon, Brad Dourif (The Lord of the Rings: The Two Towers, Child's Play) to play the lead role in the feature and Art Hindle, Canadian horror legend, (Black Christmas, The Void) to play in the proof of concept. Numerous short films distributors have expressed interest in distributing the film domestically and internationally. This project will be the first of its kind in Montreal; a horror thriller with monsters utilizing Montreal's world renowned VFX and practical effects studios.
Page 15
Le Blink (French version)! ! !
LOGLINE! !
Family Man, Construction Worker, Prisoner… Who is Jocelyn Dupuis?!
Union
Rep.,
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SYNOPSIS! !
Le Blink is the story of a man who started off as a construction worker and rose to the head of the biggest construction union in Quebec, Canada to then have it all taken away due to a political war. Jocelyn Dupuis is a man of the people who has always put the workers rights in front of his own well-being, which is why his imprisonment has shaken him to the core.
LE BLINK L’Histoire de Jocelyn Dupuis
Through this 6-episode mini-series, we will explore his great courage, his fight for justice as well as the pain and hardship of his downfall.!
Currently in Development !
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EXECUTIVE SUMMARY! !
The project has the full support and! participation of Jocelyn Dupuis, from! whom Franky Films has been able to !secure life rights (which includes the rights to use: Jocelyn Dupuis’ voice, likeness and image) as well as the rights to the book Syndicaliste ou Voyous?! !
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Franky Films’ focus is attaching a daring and accomplished Quebec writer to the project. We have world-renowned distributor, Séville (eOne), interested in providing international distribution. We are garnering attention from multiple Quebec production houses interested in co-producing this very sought after socio-political scandal.! !
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Producer’s Profile! ! !
Francesco Giannini’s talent for storytelling became apparent during his childhood, when he would re-enact scenes from Lord of the Rings with his brother in their basement. He began his career in the film industry as an actor, playing small roles in films such as X-Men and 300. Acting helped him pay for school where he obtained a bachelor’s degree in Sociology and Film Studies and a certificate in Communications. With his knowledge of the human condition and a passion for film, Giannini possesses the qualities of a great storyteller. ! !
Eventually, he made the transition from acting in front of the camera to directing behind it. In addition to acting and directing, he has also worked as a producer, cinematographer and editor. Having had the opportunity to work in a variety of film positions, Giannini has acquired a well-rounded knowledge of the production process and has developed a keen eye for detail.! !
During his time spent directing both commissioned and personal projects, Giannini has found an optimal balance between the creative and business aspects of filmmaking. His ability to produce films of high production value in a cost-effective manner has earned him a shining reputation in the Montreal and Toronto film industries. His first short film The Race of Life, screened at the Cannes Film Festival in 2012. His following short film, The Prince, based on an Italian fable, screened at the Milano International Film Festival and was runner-up in the ACTRA Shorts category. In 2012, he started his own production company, Franky Films.! !
Giannini continues to expand his network of contacts and to build relationships with fellow filmmakers in order to open doors to new opportunities. In addition to producing in collaboration with other companies, he is currently developing several personal projects through Franky Films in a variety of genres for both television and the big screen.! !
Page 17!
Professional Services! ! !
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Entertainment Canadian Counsel Byron Pascoe Edwards Professional Corporation and Creative Law Tel: (613) 722-2613 411 Roosevelt Ave #204 Ottawa, ON K2A 3X9
Producer! Christina Saliba! Franky Films! Tel: (514) 965-4908! 5656, rue Saint-Urbain! Montreal, QC! H2T 2X3!
Entertainment U.S Counsel Roger J. Kaplan Professional Corporation Tel: (310) 359-1424 10250 Constellation Boulevard, suite 2320 Los Angeles, CA 90067
Administrator! Tamara Dupuis! Franky Films! Tel: (514) 518-6991! 5656, rue Saint-Urbain! Montreal, QC! H2T 2X3!
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Accounting Joseph Russo Tel: (514) 695-2289 204-290 Ch. du Bord-du-Lac Lakeshore Pointe-Claire, QC H9S 4L3
Line Production Services! Paul Legault! Tel: (438) 390-5199! legaultpaul35@gmail.com! 519, de Gaspe, suite 306! Nun’s Island, QC! H3E 1E9!
Social Media and Public Relations! Patrizio Sanzari! Tel: (514) 663-1529! 7992, Louis-Vanier! Montreal, QC! H1P 2K8! !
Page 18!
Marketing Plan ! !
Franky Films is committed to building an infrastructure, which supports the continued production of high quality films that will be distributed across traditional and new media platforms. We plan on seeking out key production, programming and acquisition executives as well as top tier international and North American sales agents and distributors.! !
To further solidify Franky Films’ image in the distribution marketplace and raise awareness about its production capabilities, Franky Films’ executives plan to attend some or all of the major feature film and television markets including:! !
• • • • • • • !
American Film Market! Cannes Film Festival! Sundance Film Festival! Toronto International Film Festival! Berlin Film Festival! Hong Kong Filmart! Mipcom!
In addition to traditional forms of marketing and promotion, Franky Films intends to bolster their reach, engagement and buzz around specific genre films by enlisting the help of top YouTube influencers. This is the new wave of the future as more and more brands give precedence to creating branded or sponsored content on digital platforms like YouTube, Vimeo, Vines and Instagram. We will seek out YouTube stars for creative collaboration and social media distribution channels thereby eliciting large sales numbers from their massive subscriber fan base. Short form web series on platforms like YouTube Red and Blackpills are exploding and YouTube influencer centered films are increasing in popularity. This is an avenue that Franky Films is looking to exploit for some of the films on its slate in development.! !
A key element of our marketing campaign is to keep up to speed with the latest technological advancements like Virtual Reality (VR), which is reinvigorating the cinematic experience. It is transforming the relationship audiences have with film allowing them to look freely around a 360degree environment and become fully immersed in the storylines. This technology is popping up at prominent film festivals like Sundance, Cannes and Tribeca and world renowned directors like Michael Bay, Ridley Scott and Steven Spielberg are working on integrating the technology into their upcoming projects. Incorporating VR into our slate of films, whether it be for a trailer or marketing campaign, will allow us to reach a larger demographic, garner more publicity and increase the collaborations between VR production houses and other filmmakers. ! !
Page 19!
Sample Finance Plan ! !
Project: MAN LOST WORLD – Budget: $2,500,000 CAD! !
Financing of the film will come from a combination of refundable tax credits, industry funding and advances against revenue. Of the $2,500,000 CAD an amount of $575,915 will come from Canadian federal and Quebec provincial tax credits; SODEC will provide an equity investment of $500,000; Telefilm will provide a recoupable advance of $500,000; and a distributor will provide a minimum guarantee of $624,524 (the “MG”) (25% of total budget). The financing we are seeking from investors, the “Private Equity”, is in the amount of $290,601.! !
*Please note that these numbers may be adjusted to facilitate production.! !
*** Finance structure and budget may vary! !
INVESTMENT SOURCE AMOUNT IN CAD %! !
- MG: $624,524! - PRIVATE EQUITY: $297,657! - FEDERAL TAX CREDIT: $147,083! - PROVINCIAL TAX CREDIT: $428,832! - SODEC: $500,000! - TELEFILM: $500,000! !
TOTAL: $2,498,096 CAD 100%! !
Franky Films is currently looking to capitalize the budget of the Picture through a mix of various investment types:! !
MG (Participating financing) - $624,524. The distributor will provide a $624,524 minimum guarantee (MG) to the production company. The distributor will recoup the MG and a 50% distribution fee from the backend revenue shares (as defined hereafter) generated from the sale and/or licensing of the film in the world excluding Canada.! !
PRIVATE EQUITY - $297,657. Franky Films is seeking equity in the amount of $297,657 in order to bridge the financing gap. Investors will receive a 120% ROI and will split all of Franky Films’ net profit, which will consist of 50% of the producer’s net profit to be distributed pro rata. For the purposes hereof, producer’s net profit is defined as revenue shares resulting from the exploitation of the Picture in the world excluding Canada, less (i) the collection agent’s fees and charges, if any; (ii) the Picture’s sub-distributors’ sales commissions and expenses; (iii) Deferrals, if any; (iv) residuals owing to cast and crew in accordance with their respective guilds agreements; and less (v) Franky Films’ out-of-pocket accounting and reporting costs.! ! ! !
Page 20!
Sample Finance Plan (con’t) ! !
3. QC/Canada Tax Credit - $575,915. Quebec offers Quebec producers access to film production tax credits, as does the Canadian federal government; these programs are based on eligible labour expenses.! !
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4. SODEC/TELEFILM – $1,000,000. SODEC offers an equity investment of 49% of the Quebec labour expenditures estimate without exceeding $2,000,000. Telefilm provides either an equity investment or a recoupable advance of up to 49% of the eligible Canadian production costs to a maximum cap at $ 4,000,000.! TOTAL: $2,498,096! ! ! !
Source of Financing! !
SODEC! !
Established in 1995, under the Cultural Enterprise Development Corporation Act, SODEC has a specific mandate to promote and support the establishment and development of cultural businesses in all regions of Québec. SODEC develops programs, administers public financial aid for businesses in the culture and communications industries in Québec, provides funding, manages tax measures and advises the government on the preferred directions in its fields of competence. SODEC receives applications for financial support for film and television production projects for short, medium and feature films. ! !
SODEC provides financial assistance in the form of an investment in the production. The terms and timing of the investment payments are negotiated with the company at the time the contract is drawn up. SODEC's cumulative investment in a feature film with a total cost of $3,000,000 or more can reach a maximum of 49% of the Quebec labor expenditures estimate without exceeding $2,000,000.! !
TELEFILM! !
Telefilm is a crown corporation reporting to Canada’s federal government that fosters and promotes the development of the audio-visual industry in Canada. Telefilm’s overall objective is to propel the Canadian audio-visual industry to new levels of success through effective and efficient financing and active promotion of Canadian content and talent, at home and abroad. Telefilm’s financial support will be provided in one of two ways: an equity investment or a recoupable advance of up to 49% of the eligible Canadian production costs to a maximum of the cap at $4,000,000. In the former case, Telefilm will acquire a proportionate share of the copyright in the production. The producer’s choice of the method of financing may affect the amount of federal or provincial tax credits that the producer is eligible to receive in connection with the production. ! ! !
Page 21!
Risk Assessment
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Substantially all of Franky Films’ revenues are anticipated to be derived from the financing, production and distribution of its motion pictures. The motion picture industry is highly speculative, aggressively competitive and involves numerous inherent risks, which may adversely impact the Company’s success. The economic success of an entity, which is involved in the creation and exploitation of motion pictures, is greatly dependent upon the public acceptance of each motion picture, compared with the cost of the motion picture’s development, production and distribution. Audience appeal depends upon the factors which cannot be ascertained with certainty in advance and over which the Company may have no control, including, among other things, release patterns, current events, positioning in the various markets and changing public taste. Many motion pictures fail to generate sufficient revenues to recover their costs of promotion, production and/or distribution. Furthermore, films often have an unexpected poor financial performance despite wellknown talent, high production values and/or a large promotional and advertising budget. No assurances can be given that the Company’s motion pictures will be profitable.! ! !
The risks of motion picture exploitations can be increased when audience appeal and other intangible factors must be predicted for multiple territories (domestic and foreign). Other factors to take into consideration are the varying audience tastes and distribution practices associated with each territory. In terms of distribution, international pre-sales have become increasingly difficult to obtain resulting in fewer pre-sales with lower minimum guarantees that may continue for the indefinite future. ! ! !
Although Franky Films will attempt to manage such risks, nonetheless the commercial potential of any motion picture cannot be accurately predicted, and as such there can be no assurance that the distribution decisions of the Company as to any film will result in profits or that the Company will not experience significant losses. Only persons who are financially able to bear the potential loss of their entire investment and who have no need for liquidity should undertake investing in motion pictures. Prospective investors should carefully consider the following risk factors and should consult with their own legal, tax, and financial advisors with respect to these matters.! !
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Risk Management Details! ! !
Franky Films will attempt to minimize some of the financial risks normally associated with motion picture production by obtaining, at various stages prior to release of its films, advances and guarantees from distributors in exchange for distribution rights to such pictures. Advances and guarantees paid by the distributor for distribution rights to a film generally represent a minimum purchase price for such rights.! !
Franky Films will also take advantage of the generous tax incentives that both federal and provincial governments offer to motion picture production companies. Quebec offers some of the most advantageous cash rebates available in North America:! !
- 20% provincial all-spend tax credit on all production expenses !
- 16% bonus all-spend tax credit for all VFX and green screen work expenses! - No minimum spend, no yearly caps! !
At the federal level, an additional tax incentive of 16% of eligible labor expenditures within Canada, net of any assistance, is given. ! !
Here is a breakdown of how the risk of investing $250,000 is managed:! !
Project: WOODLAND GREY – Budget: $250,000 CAD! !
At the end of a one-year period, if there is no profit, the following money is projected to be returned to the investor, even before domestic sales*:! !
TOTAL PROVINCIAL TAX CREDIT: $43,236.00 ! TOTAL FEDERAL TAX CREDIT: $15,061.10! TOTAL: $58,297.10! !
Quebec: 20% cash-back on all expenses! BONUS: 16% Quebec tax credit on VFX made in Quebec ! BONUS: 10% Quebec tax credit for films that do not receive public assistance ! Federal: Additional tax incentive of 16% of eligible labor expenditures !
RISK: $.10/$1.00! !
*Note: This is the worst-case scenario with the minimum numbers. If the film makes more than ten cents on the dollar on a domestic sale it will be profitable. ! !
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Film Industry Overview! ! !
The entertainment industry is one of the last businesses based in the United States that still occupies a dominant position In the world market. Every year consumers around the globe spend billions of dollars on movie tickets and related entertainment products such as Blu-Rays, DVDs, online access like Netflix and purchase and rental of films via iTunes, Amazon and other alternative distribution channels. Underscoring the insatiable appetite for all things entertainment is the acknowledgement that media consumption is on the rise, with individuals viewing approximately 1,937 hours of filmed entertainment each year.! !
According to The Motion Picture Association of America Inc. (MPAA), global box office receipts for all films released around the world reached $34.7 billion in 2012, an increase of 6% over the previous year. In the U.S. and Canada, box office was up 6% over 2011 to $10.8 billion, due to a 6% increase in admissions to $1.36 billion. (Source: MPAA, Theatrical Market Statistics Report for 2012.)! !
With the continually increasing growth of the cable and satellite television markets, combined with the Internet as an explosive and popular source of movie industry information, there are more outlets than ever for producers of filmed entertainment products. Thus, the opportunity to create more products for this growing list of outlets continues to expand. Franky Films believes that it is likely that other filmmakers and distributors, both studio and “indies� (independent producers) will follow suit. Deregulation in the foreign marketplace and the strong development of pay and cable television in a growing list of countries worldwide represent other encouraging industry trends. In many emerging markets, such systems have begun to bring to foreign viewers their first experience of television that is not controlled by government broadcasters. Foreign revenues from American movies continue to increase. ! !
The following description is a simplified overview of the complex process of producing and distributing motion pictures and is intended to be an aid to prospective investors in understanding the motion picture business. This overview does not describe what will necessarily occur in the case of any particular motion picture financed or co-produced by Franky Films, or otherwise.! ! !
PRODUCTION OF MOTION PICTURES !
The filmmaking process may take on average approximately 12 to 24 months from the start of the development phase to theatrical release. The four general stages of motion picture production are development, pre-production, principal photography and post-production. Here are brief summaries of each of the four general movie production stages.! !
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Film Industry Overview (con’t)
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STAGE ONE: DEVELOPMENT! !
In the development phase, underlying literary material for a motion picture project is acquired, either outright, through an option to acquire such rights, or by engaging a writer to create original literary material. If the literary material is not in script form, a writer must be engaged to create a script. The script must be sufficiently detailed to provide the production company and others participating in the financing of a motion picture with enough information to estimate the cost of producing the motion picture. Projects in development do not always become completed motion pictures for a wide variety of reasons.! !
STAGE TWO: PRE-PRODUCTION! !
During the pre-production stage, the production company usually selects a director, actors, actresses, other key creative & technical personnel, prepares a budget and secures the necessary financing. In cases involving unique or desired talent, commitments (sometimes known as “pay or play” commitments, under which talent must be paid certain fixed compensation, whether or not a picture is actually produced) must be made to keep performers available for the picture. Some preproduction activities may occur during development.! !
STAGE THREE: PRINCIPAL PHOTOGRAPHY! !
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Principal photography is the process of filming a motion picture and is the most costly stage of the production of a motion picture. For some projects, principal photography may take up to 12 weeks to complete (there are situations where this time frame could be longer). Bad weather, illness, disputes with local authorities or labor unions, a director or producer’s decision to re-shoot scenes for artistic reasons and several others often unpredictable events can materially delay the scheduled completion of principal photography and substantially increase its costs. The cost of assuring its completion can sometimes be insured by means of a bonding instrument commonly known as a completion bond.! STAGE FOUR: POST-PRODUCTION! !
During the post-production stage, the editing of the raw footage and the scoring and mixing of spoken-word dialogue, music and sound effects tracks take place and negative and positive master printing elements are prepared. ! ! !
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Distribution ! !
Distributing and exploiting films in various markets throughout the world pursuant to customary release patterns or “windows” generates revenue for films. These windows include domestic and international theatrical exhibition, non-theatrical venues (which include airlines, military installations, hospitals and hotels) Canadian and U.S. television (including pay-per-view as well as network, syndication and basic cable) and other ancillary sources such as consumer products, themed entertainment and publishing, DVD/Blu-Ray, Internet, other “new media” and music soundtrack sales. !
While the timing of revenue received varies for each film, a substantial part of the revenue generated by a film is usually received within the first three years of a film’s life, with the majority of such revenue being received within the first 18 months of a film’s initial distribution cycle. ! PRODUCER’S NET PROFIT !
Gross receipts include all proceeds from distribution and exploitation of the film in any existing and future medium. From these gross receipts the sales and marketing agent’s fees and expenses are deducted. Next, the providers of finance and investors in the film are entitled to recoup the amount of their investment plus preferential return and other agreed financing costs. Further payments may be made to completion guarantors if there has been a production process that has agreed to accept deferred payments. Payments accruing to the Producer, following the deduction of the above sums and any other deductions, are termed “Producer’s Net Profits.” This is the level at which the investors may participate in the profits of a film, although the amount of, and definition of, “Producer’s Net Profits” will vary on a film-by-film basis. ! SOURCE OF REVENUE !
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Gross box office receipts are shared between the territorial distributor and theatre owners. The distributor's share of box office receipts is referred to as “theatrical rentals”. Box office splits are determined on a film-by-film basis with each exhibitor and are often negotiated based on the box office performance of the producer’s prior releases. Although these shares vary widely, on average the split between exhibitor and distributor is 50/50 over the length of the theatrical run. !The principal expenses related to theatrical release are print and advertising (P&A) costs. Print costs are incurred for duplicating the negative into print that will be sent to theatres for actual exhibition. The processing and distribution of prints depends on the number of screens on which it is initially exhibited. A certain amount of advertising costs are incurred during the two months preceding the theatrical release of a new film, with the majority of advertising costs being incurred just prior to, or on, release of the film. Advertising costs include the production and placement of print advertisement in magazines and trade publications, television, radio, billboards and the production costs of fifteen-second to two-minute trailers, as well as various publicity and promotional campaigns. Advertising costs to “open” a film (i.e., expenditures incurred to drive awareness of a new film release) are significant and, for a widely released film, may be more than half of the total P&A budget. Although theatrical rentals alone may not justify such expenditures, creating brand identity and awareness for a particular film fosters sales in subsequent release windows, particular DVD/Blu-Ray and television. !
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Distribution (con’t) ! !
ANCILLARY RIGHTS ! Music from the film may be licensed for soundtrack release, public performance or even sheet music publication. Rights may also be licensed to merchandisers for the manufacture of products such as video games, toys, T-shirts, posters and other merchandise. Rights may also be licensed for novelizing the screenplay and other related book publications or instructional videos. ! ! NON-THEATRICAL RIGHTS ! Late in the domestic theatrical run, a distributor may license the film for non-theatrical exhibition to distributors who make the film available to airline, ships, military installations and other governmental institutions. !! ! DVD/BLU-RAY ! A film may be distributed to the home video market utilizing a rental or sell-through strategy. Most of the films are distributed using a rental strategy whereby DVDs and Blu-Ray discs are primarily sold to video retailers for rentals to members of the public, with the manufacturing of DVDs and Blu-Ray discs and trade marketing as the principal costs incurred by the distributor. ! A sell-through strategy is chosen based on genre and a film’s theatrical performance when a producer believes that the number of DVDs and Blu-Ray’s sold directly to consumers (either in addition to, or in place of, those sold to video retailers for rental) will create an opportunity to generate profits that will exceed those generated under a rental strategy. ! ! PAY-PER-VIEW, VIDEO-ON-DEMAND & FREE TV ! Television rights to films are generally licensed first to pay-per-view (PPV) and video-on- demand (VOD) in Canada, then the United States (the UK, Australian, German, French and other countries’ Pay-Per-View and Video-On-Demand markets are only now starting with the recent launch of digital television but are growing rapidly to adapt to the North American market) following or concurrent with digital and home video release, then to pay television channels (i.e.: TMN, Mpix, Movie Central, etc.) followed by network broadcast television and finally to local broadcast stations or basic cable networks. Producers license their films to pay television networks for a fee based primarily on the film’s theatrical performance or to Pay-Per-View and Video-On-Demand networks for a fee based on the number of consumers who elect to view the film. Free television means the license of the film to terrestrial television (i.e.: CTV, CBC, CBS, NBC, FOX, etc.), which is available to the public without payment of a fee or subscription. !
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Distribution (con’t) ! !
REVENUE AND COST TRENDS !
The film industry has diversified its revenue and grown substantially as a whole in the past two decades, primarily due to technological developments and the growth of the international market. Technological developments have resulted in the availability of alternative distribution media for film entertainment, including expanded pay and cable television, pay-per-view, video-on-demand, DVD/Blu-Ray and the Internet. !
Internationally, box office generally represents less than 25% of the total revenue from film distribution. The “rule of thumb” for distribution revenues is that box office accounts for approximately 22.5% of total receipt, DVD/Blu-Ray for 55% and broadcast, pay, cable, syndication, satellite and all other rights for the remaining 22.5%. ! !
TELEVISION; THE FUTURE: BOX OFFICE !
Television markets have enormous potential for potential growth, especially in developing national markets. Free to air channels have been joined by cable and satellite subscription channels that have significant scope for market penetration. Digital television technology means that the home theatre dream is an imminent reality. This market will become increasingly important as digital receivers become less expensive over the next several years. These sets will double as computers screens and provide a complete entertainment, information and educational experience. ! !
HOME VIDEO: DVD & BLU-RAY !
The penetration of DVD and Blu-Ray players into homes throughout the world continue at a spectacular rate: the home viewers can now build “home entertainment centres” with highdefinition (Hi-Def.) and 3D televisions, 5.1 Dolby surround sound and 3D glasses! ! ! !
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Distribution (con’t) ! !
DIGITAL DOWNLOADS & THE INTERNET !
The DVD/Blu Ray and Internet markets are becoming increasingly important as digital televisions, receivers and players will become less expensive over the next several years. ! !
Since 2001, the iTunes store has sold more than 2 million full-length movies and more than 200 million television episodes. The quality and accessibility of these videos, as well as all the other download/online movie purchasing sites (Amazon, Iwatchfilms, Onlinemovie4u, etc.) !
These new digital technologies are set to alter the release pattern windows for films. Until recently, a film would appear in the home video market within 6 months of its theatrical release; 6 months later it might have appeared on the premium paid television networks and twelve months later it might have hit the free to air television screens. !
Recently, the release pattern window exclusively devoted to home video has been expanding. This trend is expecting to continue with the growing popularity of DVDs, Blu-Rays and online downloads. 20th Century Fox released Titanic on DVD shortly after its theatrical run. The other major studios are now doing the same; an example of this might be Disney’s huge success with Pirates of the Caribbean. ! !
DISTRIBUTION HIGHLIGHTS !
Film industry analysts are predicting a period of solid growth in the film market. This growth will be driven by different factors in different areas of the market. Theatrical revenues are expected to continue their upward trend on the back of: !
- Population growth; !! - Increasing levels of attendance; !! - Graduated price increase; !! - Multiplexing catering to an “entertainment experience”; !! - Imax, 3D and Imax 3D. !DVD/Blu-Ray and cable revenues are expected to continue to add growth ! ! !
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5656, Saint-Urbain! Montreal (Quebec) H2T 2X3! !
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www.franky-films.com! info@franky-films.com! 514-802-2932!