As filed with the Commission on August 22, 2003 File No. 333-106291
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Pre Effective Amendment No. 1 to
Form SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AMP PRODUCTIONS, LTD.
(Name of small business issuer in its charter)
Nevada 7812 98-0400189
(State of Jurisdiction) (Primary Standard Industrial (I.R.S. Employer
Classification Code Number) Identification No.)
2708-939 Homer Street
Vancouver, BC V6B 2W6
604-688-1075
(Address and telephone number of principal executive offices)
Laughlin International
2533 Carson Street
Carson City, Nevada 89706
775-883-8484
(Name, address and telephone number of agent for service)
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after
the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box: [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
===========================================================================================================
Title of Each Class of Securities Proposed Maximum Aggregate Amount of
to be Registered Offering Price (1) Registration Fee
common stock, $0.0001 par $175,000 $14.16
value per share
Total $14.16(2)
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act and based upon
1,750,000 shares of common stock to be sold in this offering.
(2) Fee paid
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a)
may determine.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. We may not sell these securities until the
registration statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities and it is
not soliciting an offer to buy these securities in any state in which the offer
or sale is not permitted.
Prospectus
Subject to completion, dated ___________, 2003
AMP Productions, Ltd.
1,750,000 shares of common stock
Price: $0.10 per share
This prospectus relates to the sale of up to 1,750,000 shares of common stock
that may be sold by us at $0.10 per share. The offering price for our common
stock was arbitrarily determined and may not reflect the market price of our
shares after the offering.
There is no minimum number of shares to be sold in order for us to accept funds.
No escrow account will be used. This offering will expire 90 days from the
effective date and may be extended for an additional 90 days to a date not to
exceed December 31, 2003. We may terminate this offering prior to the expiration
date.
This is our initial public offering. No public market currently exists for our
shares, although we intend to apply for quotation on the Over-the-Counter
Bulletin Board in the future.
The shares will be offered and sold by our officers and directors who will not
receive any commission. We currently have no agreements, arrangements or
understandings with any underwriter.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Investing in our common stock involves substantial risks. See "Risk Factors,"
page 5.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
Price to Public Underwriting Discounts and Proceeds to AMP(1)
Commissions
Per Share.................. $0.10 $0 $0.10
Maximum 1,750,000
shares..................... $175,000 $0 $175,000
(1) Proceeds to AMP Productions, Ltd. are shown before deducting offering
expenses payable by us estimated at $20,000, including legal and accounting fees
and printing costs.
The date of this Prospectus is _________________, 2003.
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Table Of Contents
Page
Prospectus Summary.............................................................3
Risk Factors...................................................................5
Forward-Looking Statements.....................................................9
Use of Proceeds................................................................9
Determination of Offering Price...............................................10
Market For Common Equity and Related Stockholder Matters......................11
Management's Discussion and Analysis or Plan of Operation.....................12
Description Of Business.......................................................15
Description Of Property.......................................................29
Legal Proceedings.............................................................29
Directors, Executive Officers, Promoters And Control Persons..................29
Executive Compensation........................................................30
Certain Relationships And Related Transactions................................30
Security Ownership Of Certain Beneficial Owners And Management................31
Plan Of Distribution..........................................................31
Description Of The Securities.................................................33
Disclosure Of Commission Position On Indemnification For Securities Act
Liabilities.................................................................33
Legal Matters.................................................................33
Experts.......................................................................33
Available Information.........................................................34
Financial Statements.........................................................F-1
As used in this prospectus, the terms "we," "us," "our," and "AMP" mean AMP
Productions, Ltd., a Nevada corporation. The term "common stock" means our
Common Stock, par value $0.0001 per share, and the term "shares" means the
shares of common stock being registered by us through this prospectus.
The information in this prospectus is qualified in its entirety by reference to
the entire prospectus. Consequently, this prospectus, which is contained as part
of this registration statement, must be read in its entirety. This is especially
important in light of material subsequent events disclosed. Information may not
be considered or quoted out of context or without referencing other information
contained in this report necessary to make the information considered, not
misleading.
You should rely only on the information contained in this document or that we
have referred you to. We have not authorized anyone to provide you with
information that is different. This prospectus does not constitute an offer to
sell or the solicitation of an offer to buy any securities covered by this
prospectus in any state or other jurisdiction to any person to whom it is
unlawful to make such offer or solicitation in such state or jurisdiction.
Neither the delivery of this prospectus nor any sales made hereunder shall,
under any circumstances, create an implication that there has been no change in
our affairs since the date hereof.
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Prospectus Summary
The following summary is qualified in its entirety by reference to the detailed
information and consolidated financial statements, including the notes thereto,
appearing elsewhere in this prospectus. Each prospective investor is urged to
read this prospectus in its entirety and particularly the information set forth
in "RISK FACTORS" on page 5.
AMP PRODUCTIONS, LTD.
We were incorporated on February 27, 2003, under the laws of the State of
Nevada. We are a development stage independent motion picture studio with our
principal office located at 2708-939 Homer Street, Vancouver, British Columbia,
Canada, V6B 2W6, (604) 688-1075.
We plan to develop, produce, market, and distribute low-budget feature-length
films to movie theaters and ancillary markets. Since inception, our focus has
been on developing our business plan, and acquiring options to purchase
screenplays that can be produced into commercially salable feature-length motion
pictures at a cost not to exceed $10 million. We will not be able to produce a
feature film on our own with the proceeds of this offering without additional
outside financing and the deferral of certain production costs (see "Financing
Strategy" page 25).
Upon the successful completion of this offering, we plan to spend $75,000 on the
development of motion pictures, including $35,000 for the acquisition of options
to purchase up to eight screenplays or other literary properties. We then plan
to produce and/or co-produce at least one of them into a feature film. To date,
we have acquired two such options to screenplays from our Vice-President. We
continue to review other potential film projects. We plan to acquire further
options on an ongoing basis from earned revenue. On successful completion of
this offering we intend to begin pre-production of one of our motion pictures.
We intend to derive income through the distribution of our films. We plan to
release our films in the United States through existing distribution companies,
primarily independent distributors. We intend to retain the right for ourselves
to market the films on a territory-by-territory basis throughout the rest of the
world and to market television and other uses separately.
We believe that our location in Vancouver, British Columbia, will afford us
economic advantages over similar United States based filmed entertainment
studios. Due to the favorable exchange rate and the financial initiatives
available from government sources, we believe that we can produce high quality
films more cost effectively than would be possible in the United States.
Vancouver is also the nearest Canadian film center to Hollywood.
The demand for motion pictures remains strong. The motion picture industry has
experienced steady growth since its inception. Most recently, with the advent of
network, broadcasting television alliances, cable television and home video, the
market has expanded faster than at any other time. Movies are being bought for
pay-television cable networks as well as for the traditional outlets of theaters
and network television. With the expansion of audience markets, and an increase
in demand for motion pictures, independent producers like our company, have
successfully filled niche markets and targeted specific audiences.
We are dependent upon the raising of capital through placement of our
securities. There can be no assurance that we will be successful in raising the
capital we require through the sale of our securities. If we are unsuccessful in
raising capital with this offering, we may have insufficient funds to continue
our operations.
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THE OFFERING
Securities Offered: Up to 1,750,000 shares of common stock,
par value $0.0001
Offering price: $0.10 per share
Offering period: The shares are being offered for a
period of 90 days, unless we extend the
offer, in our sole discretion, for an
additional 90 days to a date not later
than December 31, 2003
Net proceeds to us: Approximately $155,000, after expenses
of approximately $20,000 assuming sale
of 1,750,000 shares
Use of proceeds: We will use the proceeds to pay for
offering expenses, debt repayment,
options to acquire literary properties,
motion picture development, motion
picture pre-production, equipment,
marketing expenses and working capital.
Number of shares outstanding 8,000,000
before the offering:
Maximum Number of shares outstanding 9,750,000 assuming sale of all 1,750,000
after the offering: shares being offered.
SUMMARY OF SELECTED FINANCIAL DATA
We are a development stage company. From the date of our inception on February
27, 2003, to March 31, 2003, we have not generated any revenue or earnings from
operations. As of March 31, 2003, our financial data is as follows:
As at or for the period ended
March 31, 2003 (inception to
March 31, 2003)
OPERATIONS DATA
Revenue: $0
General and administrative expenses: $8,216
Loss for the period: $8,216
Loss per share: $0.00
BALANCE SHEET DATA
Total assets: $5,785
Total liabilities: $13,201
Common stock $800
Accumulated (deficit) $(8,216)
Shareholder's equity: $(7,416)
Total liabilities and shareholders' equity: $(5,785)
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RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE BUYING OUR COMMON
STOCK IN THIS OFFERING. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR
BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS COULD BE MATERIALLY AND
ADVERSELY AFFECTED, THE TRADING PRICE OF OUR COMMON STOCK COULD DECLINE AND YOU
COULD LOSE ALL OR PART OF YOUR INVESTMENT.
WE ARE A DEVELOPMENT STAGE COMPANY WITH NO OPERATING HISTORY, SO IT WILL BE
DIFFICULT FOR POTENTIAL INVESTORS TO JUDGE OUR PROSPECTS FOR SUCCESS.
We are a newly organized development stage corporation and have a no operating
history from which to evaluate our business and prospects. We have had no
revenue. We had a minimal loss from February 27, 2003 (inception) to March 31,
2003. We had negative net worth of $7,416 and our working capital was $5,785 as
of March 31, 2003. There can be no assurance that our future proposed operations
will be implemented successfully or that we will ever have profits. If we are
unable to sustain our operations, you may lose your entire investment. We face
all the risks inherent in a new business, including the expenses, difficulties,
complications and delays frequently encountered in connection with the formation
and commencement of operations, including operational difficulties and capital
requirements and management's potential underestimation of initial and ongoing
costs. In evaluating our business and prospects, these difficulties should be
considered.
IF WE ARE UNABLE TO CONTINUE AS A GOING CONCERN, YOU MAY LOSE ALL OF YOUR
INVESTMENT.
Since inception, AMP has suffered recurring losses and net cash outflows from
operations. We expect to continue to incur substantial losses to complete the
development of our business. Since its inception, we have funded operations
through common stock issuances and unrelated third party loans in order to meet
our strategic objectives. We have not established any other source of equity or
debt financing. There can be no assurance that we will be able to obtain
sufficient funds to continue the development and pre-production of motion
pictures, or that we will be able to produce and sell our motion pictures. As a
result of the foregoing, our auditors have expressed substantial doubt about our
ability to continue as a going concern. If we cannot continue as a going
concern, then you may lose all of your investment.
IF THIS OFFERING DOES NOT RAISE A SUFFICIENT AMOUNT OF CAPITAL, THEN YOU MAY
LOSE ALL OF YOUR INVESTMENT.
We are depending on the proceeds of this offering in order to develop and expand
our business because our revenue is insufficient to do so. We will have
immediate access to funds raised in this offering. There is no guarantee that we
will be able to sell all, or any, of the offered shares. If we are unable to
sell more than 75% of the offered shares, we may not be able to develop or
expand our business which will harm our ability to earn revenue. If we do not
raise sufficient funds in this offering to develop and expand our business, we
may conduct additional public or private offerings of our stock or make other
funding arrangements such as loans or enter into strategic partnerships. We have
not identified any specific alternative sources of funding other than this
offering. We will not return investors' funds even if we do not raise enough to
fully implement our business plan. Therefore, you should not invest in our
business unless you are in a position to lose your entire investment.
IF WE FAIL TO OBTAIN FUNDING FOR THE PRODUCTION OF A MOTION PICTURE OUR PLAN OF
OPERATIONS MAY HAVE TO BE CHANGED OR YOU MAY LOSE YOUR ENTIRE INVESTMENT.
We believe the proceeds from this offering will satisfy our capital requirements
for the next 12 months, but they will not be sufficient for the production of a
motion picture. We intend to make motion pictures with production budgets of $10
million or less. We will need to raise all the money required to fund the
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production of a motion picture from outside financing. Such financing could take
the form of co-production or joint venture arrangements or limited liability
companies or partnerships in which we act as managing member or general partner,
additional sales of our securities or an operating line of credit. Regardless of
the amount of money we raise in this offering, additional financing will be
needed to produce a motion picture. No assurance can be given that financing
will be available to us, at all, or on favorable terms. Unless such additional
financing is available to us, our production activities may be materially
adversely affected and you may lose your entire investment. We have no financing
commitments.
YOU MAY SUFFER SUBSTANTIAL CONSEQUENCES SUCH AS DILUTION OR A LOSS OF SENIORITY
IN PREFERENCES AND PRIVILEGES AS A RESULT OF A SUBSEQUENT FINANCING.
If, we are required to raise additional financing to fund operations then we may
do so through the issuance of our stock or debt instruments that are convertible
into stock. We do not intend to finance the production of a motion pictures
through the issuance of shares or convertible securities. However, if we need to
raise additional capital through the issuance of additional equity or
convertible debt securities, this will further dilute the percentage ownership
of your investment in this offering.
THE LIMITED MARKET FOR OUR SHARES WILL MAKE OUR PRICE MORE VOLATILE, THEREFORE
YOU MAY HAVE DIFFICULTY SELLING OUR COMMON STOCK.
Currently, our common stock is not listed or quoted upon any established trading
system. Most of our common stock will be held by a small number of investors
that will further reduce the liquidity of our common stock. Further, the
offering price of our common stock was determined by us, and was based upon the
amount of capital needed to enter into the pre-production phase for one of our
projects, without considering assets, earnings, book value, net worth or other
economic or recognized criteria or future value of our common stock. Market
fluctuations and volatility, as well as general economic, market and political
conditions, could reduce our market price. As a result, this may make it
difficult or impossible for you to sell our common stock or for you to sell our
common stock for more than the offering price even if our operating results are
positive.
OUR FILM MAY NOT BE COMMERCIALLY SUCCESSFUL.
Producing feature length films involves substantial risks, because it requires
that we spend significant funds based entirely on our preliminary evaluation of
the screenplay's commercial potential as a film. It is impossible to predict the
success of any film before the production starts. The ability of a motion
picture to generate revenues will depend upon a variety of unpredictable
factors, including:
- public taste, which is always subject to change;
- the quantity and popularity of other films and leisure activities
available to the public at the time of our release;
- the competition for exhibition at movie theatres, through video
retailers, on cable television and through other forms of
distribution; and
- the fact that not all films are distributed in all media.
For any of these reasons, the films that we produce may be commercially
unsuccessful and our business may suffer.
WE MAY BE UNABLE TO FIND SUFFICIENT DISTRIBUTION FOR OUR FILMS.
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Because we lack the resources to distribute our films ourselves, we plan to
enter into distribution agreements with established distribution companies. As a
result, we may be unable to secure distribution agreements or revenue guarantees
before funds are spent on production. In addition, if we are unable to obtain
theatrical distribution on acceptable terms, we may evaluate other alternatives
such as retaining a distributor as an independent contractor or bypassing
theatrical distribution altogether. If we retain a distributor as an independent
contractor we may need to seek additional financing to cover this cost, which we
anticipate will be $50,000 to $100,000 per film. If we bypass theatrical
distribution and attempt to release our films directly to pay cable or home
video, we will probably not generate enough revenues to become profitable. If we
are unable to obtain adequate distribution, we may not have the ability to
generate revenues.
IF WE LOSE THE SERVICES OF KEY PERSONNEL, IT MAY SUBSTANTIALLY HARM OUR ABILITY
TO OPERATE AND EARN REVENUE.
Our success is highly dependent upon the continued services of key members of
our management, including our President, Treasurer and director, Thomas E. Mills
and our Vice-President and director, Fidel Thomas. Virtually all decisions
concerning the conduct of our business, including the properties and rights to
be acquired by AMP and the arrangements to be made for such distribution, are
made by or controlled by Messrs. Mills and Thomas. The loss of either Thomas E.
Mills or Fidel Thomas could have a material adverse effect on us. We have not
entered into any agreement with Messrs. Mills and Thomas that would prevent them
from leaving us, nor have we obtained any key man life insurance. If we lose
either of their services, we may not be able to hire and retain other officers
with comparable experience or contacts. As a result, the loss of either Mr.
Mills' or Mr. Thomas' services could substantially harm our ability to operate
and earn revenue.
SINCE OUR OFFICERS AND DIRECTORS DO NOT DEVOTE THEIR FULL BUSINESS TIME TO OUR
BUSINESS, WE MAY NOT BE ABLE TO IMPLEMENT OUR BUSINESS PLAN AND OUR BUSINESS MAY
FAIL.
The persons serving as our officers and directors have existing responsibilities
and may have additional responsibilities to provide management and services to
other entities. Specifically, Thomas E. Mills, our President, Treasurer and one
of our directors is the Chief Executive Officer, President and a director of
Scarab Systems, Inc., a Colorado company having its shares quoted on the OTCBB
under the trading symbol of IRVV. Fidel Thomas is the President and a director
of Inner Visions Entertainment Ltd., a privately held British Columbia
corporation. Each anticipates that he will devote significantly more hours if we
begin generating significant revenue. We cannot guaranty that any of our
officers or directors will be able to devote sufficient amounts of their
business time to enable us to implement our business plan. If any or all of our
officers or directors do not devote a sufficient amount of their business time
to the management of our business, then our business may fail.
SUBSEQUENT TO COMPLETION OF THIS OFFERING, CONTROL OF THE COMPANY WILL REMAIN
WITH OUR OFFICERS AND DIRECTORS.
If we sell all 1,750,000 shares of common stock in this offering, our officers
and directors will own at least 8,000,000 shares (82.05% of our issued common
stock) and will control us. Following completion of this offering, our officers
and directors will be able to elect all of our directors and inhibit your
ability to cause a change in the course of our operations. Further, our officers
and directors may effect a major transaction such as a merger without further
shareholder approval. Our articles of incorporation do not provide for
cumulative voting.
SINCE OUR OFFICERS AND DIRECTORS ARE NOT LOCATED IN THE UNITED STATES, INVESTORS
WOULD HAVE DIFFICULTY EFFECTING LEGAL SERVICE THEM.
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Although we are incorporated in the State of Nevada and maintain a registered
office in Carson City, Nevada, our officers and directors are residents of
Canada. It may be difficult for a resident of a country other than Canada to
serve Messrs. Mills and Thomas with legal process or other documentation.
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FORWARD-LOOKING STATEMENTS
INFORMATION IN THIS PROSPECTUS CONTAINS "FORWARD LOOKING STATEMENTS" WHICH CAN
BE IDENTIFIED BY THE USE OF FORWARD-LOOKING WORDS SUCH AS "BELIEVES",
"ESTIMATES", "COULD", "POSSIBLY", "PROBABLY", "ANTICIPATES", "ESTIMATES",
"PROJECTS", "EXPECTS", "MAY", OR "SHOULD" OR OTHER VARIATIONS OR SIMILAR WORDS.
NO ASSURANCES CAN BE GIVEN THAT THE FUTURE RESULTS ANTICIPATED BY THE
FORWARD-LOOKING STATEMENTS WILL BE ACHIEVED. THE FOLLOWING MATTERS CONSTITUTE
CAUTIONARY STATEMENTS IDENTIFYING IMPORTANT FACTORS WITH RESPECT TO THOSE
FORWARD-LOOKING STATEMENTS, INCLUDING CERTAIN RISKS AND UNCERTAINTIES THAT COULD
CAUSE ACTUAL RESULTS TO VARY MATERIALLY FROM THE FUTURE RESULTS ANTICIPATED BY
THOSE FORWARD-LOOKING STATEMENTS. AMONG THE KEY FACTORS THAT HAVE A DIRECT
BEARING ON OUR RESULTS OF OPERATIONS ARE THE EFFECTS OF VARIOUS GOVERNMENTAL
REGULATIONS, THE FLUCTUATION OF OUR DIRECT COSTS AND THE COSTS AND EFFECTIVENESS
OF OUR OPERATING STRATEGY. OTHER FACTORS COULD ALSO CAUSE ACTUAL RESULTS TO VARY
MATERIALLY FROM THE FUTURE RESULTS ANTICIPATED BY THOSE FORWARD-LOOKING
STATEMENTS.
USE OF PROCEEDS
Certain of our officers and directors will be offering the common stock. There
is no assurance that we will raise any proceeds, or if any proceeds are raised,
that it will be sufficient to implement our business plan. The following table
sets forth management's current estimate of the allocation of net proceeds
anticipated to be received from this offering if all or part of this offering is
sold. Actual expenditures may vary from these estimates. Pending such uses, we
will invest the net proceeds in investment-grade, short-term, interest bearing
securities.
100% 75% 50% 25%
Offering Sold Offering Sold Offering Sold Offering Sold
------------- ------------- ------------- -------------
Gross Proceeds $175,000 $131,250 $87,500 $43,750
Less offering Expenses $20,000 $20,000 $20,000 $20,000
Net Proceeds $155,000 $111,250 $67,500 $23,750
Use of Proceeds
Debt Repayment $10,000 $10,000 $10,000 $10,000
Options to Acquire $35,000 $35,000 $15,000 $5,000
Literary Properties
Motion Picture Development $40,000
Motion Picture $35,000 $35,000 $15,000 $5,000
Pre-production
Equipment $5,000 $5,000 $5,000 $0
Marketing Expenses $10,000 $6,250 $2,500 $0
Working Capital $20,000 $20,000 $20,000 $6,750
Total Use of Proceeds $155,000 $111,250 $67,500 $23,750
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DEBT REPAYMENT. Debt repayment refers to repayment of a promissory note issued
to 396147 B.C. Ltd. on March 3, 2003. Under the terms of the Note, which is
unsecured, we promised to repay 396147 B.C. Ltd. the sum of $10,000 on March 3,
2005, with interest accruing at an annual interest rate of 5%. Proceeds of the
loan from 396147 B.C. Ltd. were used to pay for legal fees, accounting fees, and
miscellaneous expenses.
OPTIONS TO ACQUIRE LITERARY PROPERTIES. An option to acquire a literary property
means the cost of purchasing the exclusive right for a negotiated period of time
to acquire a screenplay or other literary property that can be produced into a
commercially salable motion picture. During the term of the option, the owner of
the screenplay or other literary property cannot sell it to any other party.
Upon expiration of the option, we will forfeit the right to purchase the
screenplay at the negotiated price. On March 2, 2003, we acquired two options
from Mr. Fidel Thomas, to acquire two screenplays titled "Pelicula" and "Code
Blue." Mr. Thomas became the Vice-President of AMP on March 3, 2003, and he
later became a director of AMP on March 15, 2003. The price agreed upon for the
options from Mr. Thomas was $2,500 per option, and was determined to be fair by
our President, Thomas E. Mills, without the benefit of third party advice or
consultation. We will be using the proceeds from this offering to pay Mr. Thomas
$5,000 for the options to Pelicula and Code Blue. We intend to purchase all
future options to literary properties from writers and producers who are
unrelated to AMP.
MOTION PICTURE DEVELOPMENT. Motion picture development includes the engagement
of writers to write a screenplay.
MOTION PICTURE PRE-PRODUCTION. Motion picture pre-production costs include legal
fees, screenplay revisions and consulting fees resulting from the creation of
business plans, budgets and shooting schedules.
EQUIPMENT. Equipment includes computers, telecommunications and furniture.
MARKETING EXPENSES. Marketing expenses include film representation, travel and
entertainment expenses.
WORKING CAPITAL. Working capital includes leased office premises, office
expenses and supplies, and other general expenses. Upon successful completion of
this offering, we plan to lease approximately 500-1,000 square feet of office
space in downtown Vancouver to use as our corporate head office at a rental rate
of between $6,000 and $18,000 per year (See "Description of Property" page 30).
Aside from the $5,000 we will be paying out of the proceeds of this offering to
our Vice-President, Fidel Thomas, none of the remainder of the proceeds will be
paid to insiders of AMP.
If we do not raise sufficient capital to pay for the offering expenses, we plan
to seek loans from our current shareholders.
DETERMINATION OF OFFERING PRICE
As no underwriter has been retained to offer our common stock, the offering
price of our common stock was not determined by negotiation with an underwriter
as is customary in underwritten public offerings. Rather, we determined the
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offering price based on the amount of capital needed to enter into the
pre-production phase of one of our projects, without considering our assets,
earnings, book value, net worth or other economic or recognized criteria or
future value of our common stock.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
At present, our common stock is not traded publicly. After the close of the
offering, we intend to apply to the OTC Bulletin Board to seek quotation of our
common stock. There is no assurance that a trading market will develop, or, if
developed, that it will be sustained. Consequently, a purchaser of our common
stock may find it difficult to resell the securities offered herein should the
purchaser desire to do so when eligible for public resale. Furthermore, the
shares are not marginable and it is not likely that a lending institution would
accept our common stock as collateral for a loan.
Pursuant to this registration statement, we propose to publicly offer up to a
total of 1,750,000 shares of common stock on a best efforts, no minimum basis.
To date, we have no outstanding options, warrants or convertible securities. We
have no agreements to register shares of common stock held by existing security
holders for resale. There are no contractual restrictions on the resale of the
outstanding common stock. Prior to this offering, we have two shareholders that
own in the aggregate of 8,000,000 shares of restricted common stock.
Our transfer agent and registrar is Pacific Stock Transfer Company located at
5844 South Pecos Road, Suite D, Las Vegas, Nevada, 89120, telephone (702)
361-3033.
There are currently 8,000,000 shares of our common stock that are restricted
from resale under Rule 144 promulgated under the U.S. Securities Act of 1933.
Under U.S. federal securities laws and in accordance with Rule 144, 6,000,000
shares may be sold beginning on March 23, 2004 and 2,000,000 shares may be sold
beginning on March 26, 2004.
In general, Rule 144 under the Securities Act provides that securities may be
sold if there is current public information available regarding the issuer and
the securities have been held at least one year. Rule 144 also includes
restrictions on the amount of securities sold, the manner of sale and requires
notice to be filed with the SEC. Under Rule 144 a minimum of one year must
elapse between the later of the date of the acquisition of the securities from
the issuer or from an affiliate of the issuer, and any resale under the Rule. If
a one-year period has elapsed since the date the securities were acquired, the
amount of restricted securities that may be sold for the account of any person
within any three-month period, including a person who is an affiliate of the
issuer, may not exceed 1% of the then outstanding shares of our common stock. If
a two-year period has elapsed since the date the securities were acquired from
the issuer or from an affiliate of the issuer, a seller who is not an affiliate
of the issuer at any time during the three months preceding a sale is entitled
to sell the shares without regard to volume limitations, manner of sale
provisions or notice requirements. Affiliates of the issuer are subject to an
ongoing volume restriction pursuant to Rule 144 on re-sales of shares held by
them.
DIVIDENDS POLICY
We have not paid dividends on our common stock since our inception. Dividends on
common stock are within the discretion of the Board of Directors and are payable
from profits or capital legally available for that purpose. It is our current
policy to retain any future earnings to finance the operations and growth of our
business. Accordingly, we do not anticipate paying any dividends on common stock
in the foreseeable future.
11
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
THE FOLLOWING DISCUSSION AND ANALYSIS OF OUR PLAN OF OPERATION SHOULD BE READ IN
CONJUNCTION WITH THE FINANCIAL STATEMENTS AND THE RELATED NOTES. THIS DISCUSSION
CONTAINS FORWARD-LOOKING STATEMENTS BASED UPON CURRENT EXPECTATIONS THAT INVOLVE
RISKS AND UNCERTAINTIES, SUCH AS OUR PLANS, OBJECTIVES, EXPECTATIONS AND
INTENTIONS. OUR ACTUAL RESULTS AND THE TIMING OF CERTAIN EVENTS COULD DIFFER
MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A
RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET FORTH UNDER "RISK FACTORS,"
"DESCRIPTION OF BUSINESS" AND ELSEWHERE IN THIS PROSPECTUS. SEE "RISK FACTORS"
AND "DESCRIPTION OF BUSINESS".
We began operations on February 27, 2003. From inception to March 31, 2003, we
had no revenue and incurred expenses of $8,216 primarily related to startup
expenses.
As of March 31, 2003, we had working capital of $5,785. Except for the options
to the two screenplays, we have no assets as of March 31, 2003. We are
considered to be a development stage company, and are dependent upon the raising
of capital through placement of our securities. There can be no assurance that
we will be successful in raising the capital we require through the sale of our
securities.
The proceeds from this offering will enable us to complete the development of
several motion picture projects. If this offering is successful, we plan to
spend $35,000 to acquire options to purchase screenplays and a further $40,000
to engage writers to write screenplays. Within 12 months of the completion of
this offering, we intend to have at least eight screenplays developed and ready
for pre-production. Each of these screenplays will meet our requirement that
they be commercially salable and can be produced for $10 million or less. To
date, we have secured two such options to acquire screenplays titled "Code Blue"
and "Pelicula". Code Blue is a suspense thriller set against the backdrop of
Vancouver, British Columbia. It centers around international agents racing to
stop a shipment of missiles to a terrorist government while confronting internal
corruption. Pelicula is an action comedy set in Costa Rica. It is a fictional
story about a retired crime lord who plays matchmaker for his daughter, and must
come to grips with her independence. Both of these options will expire on March
2, 2004, but are renewable if we choose to do so. We continue to review other
potential film projects. We have not, however, acquired any options or entered
into any agreements regarding any other projects. We intend to acquire further
options on an ongoing basis from earned revenue.
We will not be able to produce a feature film with the proceeds of this
offering, regardless of the amount raised, without additional outside financing
and cost deferral. We intend to finance production of our motion pictures
through a variety of sources. We will apply for funding through the Canadian and
British Columbia governments, and for production services tax credits. We will
attempt to obtain favorable pre-release sales or pre-licensing commitments from
independent U.S. distributors, foreign distributors, cable networks, and video
distributors. We will request that providers of goods and services accept
deferred payment arrangements. We also may assign a portion of our film rights
to a joint venture or a co-producer. In addition, we will consider the formation
of a limited liability company or partnership for which we will act as managing
member or general partner and privately offer membership or partnership
interests to film venture capitalists. Although we have had some preliminary
discussions, we do not have any present plans, proposals, arrangements or
understandings with any parties that will provide additional financing. If we
are unable to receive the additional funds, then we will likely conduct another
offering to the public for the purpose of raising capital to invest in further
screenplay properties.
In order to secure financing for any particular film project, we will need to
prepare a business plan for each such film to present to prospective investors
and financiers. Upon completing development of our screenplays, we will select
one or two for pre-production. Our choice of screenplays for pre-production will
12
be dependent upon various factors including the cost, location, marketability
and producer availability.
During the pre-production stage we will obtain the commitment of a recognizable
actor or director, prepare the business plan for the film, secure the services
of a co-producer, finalize the screenplay, and prepare a budget, preliminary
shooting schedule and production board. The business plan, together with the
screenplay, budget, shooting schedule, production board and the talent
commitment will then be presented to prospective investors and financiers by
AMP's officers. We estimate that it will take 16 weeks to complete the
pre-production of one or two films to the point that a business plan can be
presented, and cost approximately $35,000.
If we are successful in raising sufficient financing for production of a motion
picture, then we will complete pre-production of the picture, including the
hiring of a production team; hiring a casting director to submit the screenplay
to appropriate actors as recommended by their agents or as deemed appropriate by
us; developing relationships with foreign sales companies to pre-sell foreign
film distribution rights; and finalizing shooting location arrangements. We
anticipate that it will take a further 12 weeks to complete pre-production of
the motion picture once we have obtained our financing.
Having completed the pre-production of a motion picture, we will commence
production. The duration of principal photography is established by the shooting
schedule during pre-production, with allowances for delays caused by such things
as inclement weather, illness, injury, location unavailability. We intend to
limit principal photography of any of our motion pictures to a total of 12
weeks. We estimate that it will that post-production will take 16 weeks to
complete. This includes editing, sound, mixing and the final print. We do not
intend to make any films that cost more than $10 million for production and
post-production.
We will not earn revenue from the production of a motion picture unless we sell
or license our film to a distributor. As such, effective distribution agreements
will be critical to our economic success. We have not as yet negotiated
agreements for the distribution of our films. We will attempt to pre-sell
distribution rights during the pre-production stage in order to obtain financing
for our motion pictures. If we are unsuccessful in pre-selling distribution
rights, we will be required to obtain a distribution deal after post-production.
We intend to market our film through personal contacts of our officers, and
through a film representation company. We expect that the cost of retaining a
film representation company will be $2,500 per film. We also intend to enter our
film into a variety of film festivals, including those held at Cannes, Sundance,
Toronto and Vancouver.
We intend to release our films in the United States through existing
distribution companies, primarily independent distributors. We will retain the
right for ourselves to market the films on a territory-by-territory basis
throughout the rest of the world and to market television and other uses
separately. In many instances, depending upon the nature of distribution terms
available, it may be advantageous or necessary for us to license all, or
substantially all, distribution rights through one major distributor. It is not
possible to predict, with certainty, the nature of the distribution
arrangements, if any, which we may secure for our motion pictures.
To the extent that we engage in foreign distribution of our films, we will be
subject to all of the additional risks of doing business abroad including, but
not limited to, government censorship, currency fluctuations, exchange controls,
greater risk of "piracy" copying, and licensing or qualification fees.
If we are unable to obtain theatrical distribution on acceptable terms, we may
evaluate other alternatives such as retaining a distributor as an independent
contractor or bypassing theatrical distribution altogether. If we retain a
distributor as an independent contractor we may need to seek additional
financing to cover this cost, which we anticipate will be $50,000 to $100,000
13
per film. If we bypass theatrical distribution and attempt to release our films
directly to pay cable or home video, we will probably not generate enough
revenues to become profitable. If we are unable to obtain adequate distribution,
we may not have the ability to generate revenues.
No assurance can be given that our feature films, if produced, will be
distributed and, if distributed, will return our initial investment or make a
profit.
We expect to make nominal purchases of equipment, including computers,
telecommunications equipment and furniture. We do not expect to hire any
employees in the next 12 months, as we will utilize independent contractors,
consultants, and other non-employee creative personnel to assist in
pre-production of our motion pictures.
We presently do not have enough cash to satisfy any future cash requirements. We
estimate that we will need to sell a minimum of 75% of this offering to satisfy
our cash requirements for the next 12 months. With this capital, we intend to
complete development of several motion pictures and to enter into the
pre-production stage for at least one them. If we only raise a nominal amount,
for example, $17,500 or 10% of the offering, we will use all proceeds for
working capital, and it will be necessary for us to seek additional financing.
14
DESCRIPTION OF BUSINESS
OVERVIEW
We are a development stage, independent motion picture studio that plans to
develop, produce, market, and distribute low-budget feature-length films to
movie theaters and ancillary markets.
OUR COMPANY
We were incorporated under the laws of the State of Nevada on February 27, 2003,
and maintain our head office and operations in Vancouver, British Columbia.
We are presently using office space provided at no charge by our President,
Thomas E. Mills. When we have sufficient capital we intend to lease
approximately 500 to 1,000 square feet of office space in downtown Vancouver to
use as our corporate head office.
We currently have no employees. Our officers will assume employee status upon
implementation of this plan. We may utilize independent contractors and
consultants from time to time to assist in developing, producing and promoting
our motion pictures. Independent contractors are generally paid on a commission,
hourly or job-related basis, depending on the services being performed.
THE MOTION PICTURE INDUSTRY
General
The motion picture industry has experienced steady growth since the first silent
movie. In its most recent release, issued in 2003, for the year 2002, the Motion
Picture Association of America or MPAA, which only issues U.S. statistics,
reported that box office receipts in the United States grew over 95% since
1992's $4.87 billion to $9.52 billion in 2002. This represents an increase of
over 13% from $8.41 billion in 2001. The number of admissions to movie theaters
in the United States was approximately 1.64 billion in 2002, up approximately
40% from 1.73 billion in 1992 and 10% from 1.49 billion in 2001.
The motion picture industry in the United States has changed substantially over
the last 30 years and continues to evolve rapidly. With the advent of network,
broadcasting television alliances, cable television and home video, the market
has expanded faster than at any other time. Movies are being bought for
pay-television cable networks as well as for the traditional outlets of theaters
and network television. With the expansion of audience markets, distribution is
no longer limited to the major distributors and the broadest possible audience
appeal. With this media expansion, less general, more specific audiences can be
sought and profitably exploited such as for science fiction or horror films or
films geared to children or to women.
Historically, the major studios financed, produced and distributed the vast
majority of American-made motion pictures. Today, much of the financing and
distribution of significant motion pictures remains in the control of the major
studios. But as many of the major Hollywood film production companies have
become part of large conglomerate business operations, or diversified their
operations, they have adopted a policy of producing only a relatively small
number of films each year. As demand for filmed entertainment has increased,
many smaller, independent film production companies have been successfully
established to fill the excess demand for product.
Our business will involve the development and production of motion pictures. The
procedures and practices described in the following generalized discussion
relating to the motion picture industry are intended only to provide a
background against which the business of our company may be evaluated. There can
15
be no assurance that the procedures and practices described in the following
generalized discussion will apply in any particular instance to our business.
Production of Motion Pictures
During the film making process, which takes approximately 12 to 24 months from
the start of the development phase to theatrical release, a film progresses
through several phases. The four stages of motion picture production are
development, pre-production, production and post-production. After the movie
producer completes that process, the film is distributed and marketed. The
following is a brief summary of each stage of production:
DEVELOPMENT. In the development stage of a motion picture project, literary
material for the project is acquired, either through an option to acquire such
rights, or by engaging the writer to create original literary material. If the
literary material is not in screenplay form, a writer must be engaged to create
a screenplay. The screenplay 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.
Only a small percentage of projects in development will become completed motion
pictures.
PRE-PRODUCTION. During the pre-production stage, the production company hires
creative personnel including the principal cast members. It also uses this time
to establish shooting locations and schedules. The production company also
prepares the budget and secures the necessary financing. Pre-production
activities are usually more expensive than the development process. In cases
involving unique or desired talent, commitments must be made to keep performers
available for the picture.
PRODUCTION. The production stage involves the process of principal photography -
the actual filming of a motion picture. During principal photography, almost all
of the film footage is shot, although additional scenes may be added during
post-production. This part of the making of a movie together with creating
special effects is the most costly stage of producing a motion picture.
Principal photography generally takes from eight to twelve weeks to complete.
Bad weather at locations, the illness of a cast or crew member, disputes with
local authorities or labor unions, a director's or producer's decision to shoot
scenes for artistic reasons, and other, often unpredictable, events can
seriously delay the scheduled completion of principal photography and
substantially increase its costs. If a motion picture reaches the production
stage, it usually will be completed.
POST-PRODUCTION. Following principal photography is the post-production stage.
During post-production, the motion picture film is edited to its final form.
Music is added, as is dialogue and special effects. Music and film action are
synchronized during this stage as the film is brought to its completed form. The
picture negative is then readied for the production of release prints. While the
post-production stage may extend for any period, depending upon editing
difficulties or the addition of new material, on the average, post-production
may take from approximately two to four months. Most motion pictures that reach
the post-production stage are eventually completed and distributed.
DISTRIBUTION OF MOTION PICTURES
One of the most important aspects of the motion picture industry is
distribution. Once a film is produced, it must be distributed. Distribution
consists of selling domestic and international licenses that entitle a third
party to exploit a motion picture and its underlying intellectual property in
various markets and media.
Whether a major studio or an independent production company produces a motion
picture, arrangements with various distributors must be developed. The only
16
distinction between the distribution of major studio films and independent
productions is that studios have close and long-standing distribution
arrangements with various distributors in numerous distribution channels,
whereas independent production companies must develop distribution arrangements
on a film-by-film basis.
Generally, the local distributor will acquire distribution rights for a motion
picture in one or more distribution channels from an independent producer. The
local distributor will agree to advance the producer a non-refundable minimum
guarantee. The local distributor will then generally receive a distribution fee
of between 20% and 35% of receipts, while the producer will receive a portion of
gross receipts in excess of the distribution fees, distribution expenses and
moneys retained by exhibitors. The local distributor and theatrical exhibitor
generally will enter into an arrangement providing for the exhibitor's payment
to the distributor of a percentage (generally 40% to 50%) of the box-office
receipts for the exhibition period, depending upon the success of the motion
picture.
Most of the revenue produced by a film is usually generated during the first
five years after the film's initial domestic theatrical release. Movies that are
commercially successful may continue to generate revenue beyond five years from
the re-licensing of distribution rights in certain media, including television
and home video, and from the licensing of distribution rights with respect to
new media and technologies. The timing of revenue received from the various
sources varies from film to film. The markets for film product have been
undergoing rapid changes due to technical and other innovations. As a
consequence, the sources of revenue available have been changing rapidly and the
relative importance of the various markets as well as the timing of such revenue
have also changed and can be expected to continue to change.
Although there are no definitive statistics to determine the number of
productions that are initiated with the intention of theatrical distribution,
according to the Internet Movie Database, an Amazon.com company maintaining a
catalog of over 250,000 films made since the beginning of the motion picture
industry, over 5,000 movies were completed in the year ending December 31, 2002.
Of those films, according to the MPAA, only 467 were released in theaters. Of
those released in theaters, 281 films were not distributed by the major studios
(Walt Disney Company, Sony Pictures Entertainment, Inc., Metro-Goldwyn-Mayer
Inc., Paramount Pictures Corporation, Twentieth Century Fox Film Corp.,
Universal Studios, Inc., Warner Bros.) and their affiliates. Furthermore, of
those 281 films, only a small number remained in theaters a period of time
comparable to that of the major studio releases.
The following is a brief summary of each of the sources of revenue from motion
pictures and the distinct distribution process associated with each. We expect
our movies to generate revenue from all of these sources.
THEATRICAL DISTRIBUTION
The distributor and theatrical exhibitor generally enter into license agreements
providing for the payment by the exhibitor to the distributor of a percentage of
box office receipts after deducting the exhibitor's overhead or a flat amount.
The percentage generally ranges from 35% to 60% and may change for each week the
film plays in a specific theater, depending on the motion picture's success at
the box office. The balance, known as the gross film rental, is remitted to the
distributor. The distributor then retains a distribution fee from the gross film
rental and recovers the costs of distributing the film, consisting primarily of
advertising, marketing, and production cost, and the cost of manufacturing
release prints. The balance, if any, after recouping any advance or minimum
guarantee previously paid is then paid to the producer based on a predetermined
split between the producer and distributor.
THEATRICAL DISTRIBUTION-UNITED STATES
17
Recently, United States theatrical exhibition has generated a declining
percentage of the total income earned by most pictures largely because of the
increasing importance of cable and pay television, home video and other
ancillary markets. Nevertheless, the total revenue generated in the United
States theatrical market is still increasing and is still likely to account for
a large percentage of revenue for a particular film. In addition, performance in
the United States theatrical market generally has a profound effect on the value
of the picture in other media and other markets. For a picture's initial
theatrical release, the United States theater exhibitor will usually pay to a
distributor a percentage of the box office receipts that is negotiated based
upon the expected appeal of the motion picture. The percentage of box office
receipts remitted to the distributor is known as film rentals and customarily
diminishes during the course of the picture's theatrical run. Typically, the
distributor's share of total box office receipts over the entire initial
theatrical release period will average between 35% to 60%; the exhibitor will
retain the remaining 40% to 65%. The exhibitor will also retain all receipts
from the sale of food and drinks at the theater. Occasionally, an exhibitor will
pay to the distributor a flat fee or percentage of the box office receipts
against a guaranteed amount.
THEATRICAL DISTRIBUTION-FOREIGN
While the value of the foreign theater market varies due to currency exchange
rate fluctuations and the political conditions in the world or specific
territories, it continues to provide a significant source of revenue for
theatrical distribution. Because this market is comprised of a multiplicity of
countries and, in some cases, requires the making of foreign language versions,
the distribution pattern stretches over a longer period of time than does the
United States theatrical market. Major studios usually distribute motion
pictures in foreign countries through local entities. Distribution fees to these
firms usually vary between 35% and 40% depending upon the territory or financial
arrangements. These local entities generally will be either wholly owned by the
distributor, a joint venture between the distributor and another motion picture
company, or an independent agent or sub-distributor. These local entities may
also distribute motion pictures of other producers, including some major
studios. Film rental agreements with foreign exhibitors take a number of
different forms, but typically provide for payment to a distributor for a fixed
percentage of box office receipts or a flat amount. Risks associated with
foreign distribution include fluctuations in currency values and government
restrictions or quotas on the percentage of receipts that may be paid to the
distributor, the remittance of funds to the United States and the importance of
motion pictures to a foreign country.
HOME VIDEO
A motion picture typically becomes available for videocassette and digital
videodisk or DVD distribution within four to six months after its initial
domestic theatrical release. Home video distribution consists of the promotion
and sale of videocassettes and DVD to local, regional and national video
retailers who rent or sell cassettes and disks to consumers primarily for home
viewing. Most films are sold at a wholesale price to video rental stores, which
rent the cassettes and DVD to consumers. Owners of films generally do not share
in rental income. Following the initial marketing period, selected films are
re-marketed at a wholesale price for sale in cassette or DVD form to consumers.
These "sell-through" arrangements are used most often with films that will
appeal to a broad marketplace or to children. Some films are initially offered
at a price designed for sell-through rather than rental when it is believed that
the ownership demand by consumers will result in a sufficient level of sales to
justify the reduced margin on each cassette or DVD sold.
The home video market in the Unites States and abroad has experienced
substantial growth in the past several years and film industry analysts predict
a period of continued growth. There are indications, however, that accessing
movies "on demand" on a pay-per-view basis may be a viable alternative to video
rental as new technology is developed in the future. This development may impact
18
video rentals but would likely be offset by comparable increases in pay-per-view
usage and profit margins due to lower distribution costs and lower prices for
viewers plus the convenience of faster selection and at-home selection.
Certain foreign territories in particular have seen increased utilization of
home video units due to the relative lack of diversified television programming.
Sales of videocassettes have increased in such markets in recent years. Although
growth in this area may slow because of an increase in television programming in
such foreign territories, receipts from home video in these markets can be
expected to continue to be significant. Home video arrangements in international
territories are similar to those in domestic territories except that the
wholesale prices may differ.
TELEVISION
Television rights are generally licensed first to pay-per-view for an exhibition
period within six to nine months following initial U.S. theatrical release.
Within twelve to fifteen months after the initial domestic release, the rights
are then licensed to pay television, then in certain cases to free television
for an exhibition period, and then to pay television again. These films are then
syndicated to either independent stations or basic cable outlets.
CABLE AND PAY TELEVISION
Pay television rights include rights granted the cable, direct broadcast
satellite, pay-per-view and other services paid for by subscribers. Pay
television companies have entered into output contracts with one or more major
motion picture production companies on an exclusive or non-exclusive basis to
insure themselves a continuous supply of motion picture programming. Some pay
television services have required exclusivity as a precondition for such
contracts. Pay-per-view television allows subscribers to pay for individual
programs, including recently released movies, on a per use basis. Pay television
allows cable television subscribers to view such channels as HBO, Showtime, The
Movie Channel, Lifetime, and A&E, which are offered by their cable system
operators for a monthly subscription fee. Since groups of motion pictures are
typically packaged and licensed for exhibition on television over a period of
time, revenue from these television licensing "packages" may be received over a
period that extends beyond five years from the initial domestic theatrical
release of a particular film. Motion pictures are also packaged and licensed for
television broadcast in international markets.
The pay television market is characterized by a large number of sellers and few
buyers. However, the number of motion pictures utilized by these buyers is
extremely large and a great majority of motion pictures that receive theatrical
exhibition in the United States are shown on pay television.
NETWORK TELEVISION
In the United States, broadcast network rights are granted to ABC, CBS, Fox, NBC
or other entities formed to distribute programming to a large group of stations.
The commercial television networks in the United States license motion pictures
for a limited number of exhibitions during a period that usually commences two
to three years after a motion picture's initial theatrical release. During
recent years, only a small percentage of motion pictures have been licensed to
network television, and the fees paid for such motion pictures have declined.
This decline is generally attributed to the growth of the pay television and
home video markets, and the ability of commercial television networks to produce
or acquire made-for-television motion pictures at a lower cost than license fees
previously paid for theatrical motion pictures.
TELEVISION SYNDICATION
Distributors also license the right to broadcast a motion picture on local,
commercial television stations in the United States, usually for a period
19
commencing five years after initial theatrical release of the motion picture,
but earlier if the producer has not entered into a commercial television network
license. This activity, known as syndication, has become an important source of
revenue as the number of, and competition for programming among, local
television stations has increased.
FOREIGN TELEVISION SYNDICATION
Motion pictures are now being licensed in the foreign television market in a
manner similar to that in the United States. The number of foreign television
stations as well as the modes of transmission has been expanding rapidly, and
the value of such markets has been likewise increasing and should continue to
increase.
Producers may license motion pictures to foreign television stations during the
same period they license such motion pictures to television in the Unites
States. Governmental restrictions and the timing of the initial foreign
theatrical release of the motion pictures in a particular country may delay the
exhibition of a motion picture in that country.
INTERNATIONAL MARKETS GROWTH AND TASTES
Motion picture distributors and producers derive revenue from international
markets in the same media as domestic markets. The growth of foreign revenue has
been dramatic, and now accounts for more than half of the total revenue of many
films. The increase in revenue is currently being driven primarily from the
growth of television abroad. The increase in foreign television viewers and
foreign revenue is likely to continue. Although the increased level of foreign
viewers affects the revenue of most films, the effect is not uniform. Action
films and films with major stars benefit most from foreign revenue as compared
to films with uniquely American themes with unknown actors.
NON-THEATRICAL AND OTHER RIGHTS
Films may be licensed for use by airlines, schools, public libraries, community
groups, the military, correctional facilities, cruise ships and others. In
addition, rights may be licensed to merchandisers for the manufacture of
products related to a film, such as video games, toys, posters, apparel and
other merchandise. Rights may also be licensed for sequels to a film, for
television programming based on a film or for related book publications.
INDEPENDENT FILM PRODUCTION AND DISTRIBUTION
The film production process, including development, pre-production, and
production, for independent production companies not backed by major studios,
such as ours, and the major studios is essentially the same. However,
independent producers typically create motion pictures at substantially lower
average production costs than major studios. According to the MPAA, major
studios typically release films with direct production costs ranging from $25
million to in excess of $100 million, and from 1990 to 2000, the major studios'
average production costs, including overhead and capitalized interest, commonly
referred to as "negative cost," have increased from $26.8 million to $54.8
million. According to industry studies by Paul Kagan Associates, the trend on
the part of major studios toward wider-release blockbusters over the past ten
years has led to a decline in profitability, while the efficiency, which is
measured by Paul Kagan Associates as the ratio of a film's estimated revenue
against negative and releasing costs, and quality of smaller production films
have been on the rise.
Generally, independent production companies do not have access to the extensive
capital required to make big budget motion pictures, such as the "blockbuster"
product produced by the major studios. They also do not have the capital
necessary to maintain the substantial overhead that is typical of such studios'
operations. Independent producers target their product at specialized markets
20
and usually produce motion pictures with budgets of less than $25 million.
Generally, independent producers do not maintain significant infrastructure.
They instead hire only creative and other production personnel and retain the
other elements required for development, pre- production, principal photography
and post-production activities on a project-by-project basis. Also, independent
production companies typically finance their production activities from bank
loans, pre-sales, equity offerings, co-productions and joint ventures rather
than out of operating cash flow. They generally complete financing of an
independent motion picture prior to commencement of principal photography to
minimize risk of loss.
CANADA'S ROLE IN THE MOTION PICTURE INDUSTRY
Canada
Over the past several years, the Canadian film industry has grown and matured,
and at present, it represents approximately a CDN$3 billion annual business
(source: PriceWaterhouseCoopers, L.L.P., The Film & Television Production
Industry: A Study For The District of North Vancouver, May 2000). At the same
time as the Canadian domestic industry has matured, Canada has become a leading
location for internationally originated productions. Over the past few years,
U.S. studios, television networks and cable services have increasingly produced
in Canada, attracted by the low Canadian dollar, first-class Canadian casts,
crews, locations and facilities and government support for the industry. U.S.
companies with a strong presence in Canada include major U.S. studios, such as
Paramount, The Walt Disney Company, Universal Pictures and Columbia Tri-Star;
U.S. networks, such as ABC, NBC, CBS, Fox and PAXTV; cable services, such as
Showtime, TNT, Disney Channel and HBO; and film companies, such as The Hearst
Corporation and Saban Entertainment, Inc.
European and Asian film companies have also found Canada to be an attractive
location and have often been able to access Canada's numerous international film
and television co-production treaties. Of Canada's ten provinces and three
territories, the provinces of British Columbia, Ontario and Quebec are most
actively involved in the television and motion picture production industries,
and many other provinces are actively soliciting this business.
The Province of British Columbia
The Province of British Columbia is the third largest film production center in
North America - behind Los Angeles and New York. According to the British
Columbia Film Commission, more than 200 productions were filmed in British
Columbia in 2001, 40 of them being feature films having an aggregate production
budget of more than CDN$750 million. British Columbia has more than 70
post-production facilities, 50 shooting stages and two water tank facilities.
Lions Gate Studios and Vancouver Film Studios are two of the largest film and
television studio facilities in Canada. The Bridge Studios, located in Burnaby,
has one of the largest special effects stages in North America.
Some of the major motion pictures filmed in British Columbia in recent years
include: Along Came A Spider, Antitrust, Ecks vs. Sever, Dreamcatcher, Get
Carter, Insomnia, I Spy, Legends of the Fall, Mission to Mars, The Pledge,
Reindeer Games, Romeo Must Die, Rumble in the Bronx, Saving Silverman, The Sweet
Hereafter, 13th Warrior, 3000 Miles to Graceland, and X-Men 2.
Government Financing Initiatives
CANADIAN GOVERNMENT FINANCIAL SUPPORT
The Canadian Film Development Corporation, also known as Telefilm Canada,
provides financial assistance in the form of equity investments, interest free
and low interest loans, development and interim financing. Canadian film and
television productions that have significant Canadian creative, artistic and
21
technical content and that meet certain published criteria qualify for financial
assistance. Telefilm Canada's provincial counterparts in Quebec, Ontario,
Manitoba, Saskatchewan, British Columbia, New Brunswick and Nova Scotia also
provide financial support to qualifying Canadian content productions. In 1996,
the Canadian federal government established the Canada Television and Cable
Production Fund (now operating as the CTF), a government-cable industry
partnership that combined the former Cable Production Fund, Telefilm Canada's
Canadian Broadcast Program Development Fund and a CDN$100 million contribution
from the Department of Canadian Heritage to form an approximately CDN$200
million per year television funding initiative.
BRITISH COLUMBIA GOVERNMENT FINANCIAL SUPPORT
The Province of British Columbia provides two financing initiatives for the
development and production of motion pictures through British Columbia Film. The
first initiative, the Development Fund provides development funding to feature
films, dramatic or animated television projects or documentaries that have
secured recent development commitments from a broadcaster or distributor. A
non-recoupable advance, matching a percentage of the broadcast or distribution
commitment, to a maximum of CDN$30,000 for each project is available. The second
financing initiative, the Feature Film Production Fund, provides up to
CDN$250,000 for the production of each selected fictional, animated or
documentary feature-length film projects.
Tax Credits.
The Canadian federal government provides a refundable tax credit for eligible
Canadian-content film or video productions produced by qualified corporations
having a permanent establishment in Canada. The Canadian federal tax credit is
for a maximum amount of 25% of eligible production costs. In addition to the
federal Canadian-content tax credits, most provinces provide additional tax
credit programs, ranging from 9.6% to 22.5%. In British Columbia, the tax credit
is 20% to 35.5%, depending on location and training provided.
The Canadian federal government "production services" tax credit for eligible
film and television productions produced in Canada, but which do not otherwise
qualify as Canadian content is equal to 16% of qualifying Canadian labor
expenditures. Assuming that Canadian labor expenditures generally represent
approximately 50% of the total production budget, the Canadian federal
production services tax credit will net applicants approximately 8% of total
production costs. Most provincial governments have also introduced refundable
production services tax credit programs at a rate ranging from 5.5% to 17.5% of
eligible production costs. In British Columbia, the tax credit is 11% to 17%
depending on location.
Co-Production Treaties.
Canada is a party to film and/or television co-production treaties with over 50
countries, which enables co-productions to qualify as local content and thus be
eligible for government assistance and financing in more than one country, which
reduces the cost of production. The most active relationship has traditionally
been with France, but recently the United Kingdom has become a close second in
volume of production.
OUR BUSINESS
We are committed to the development and production of commercially salable
feature-length motion pictures that can be produced for up to $10 million, but
which have enduring value in all media. We anticipate not only acquiring rights
and producing motion pictures but also capitalizing on other marketing
opportunities associated with these properties. We intend to exploit all
available rights in each film, including the publishing and promotion of music,
22
the incorporation of original songs on the sound track for subsequent use in
promotion, sound track albums and story-telling records and the licensing of
merchandising rights.
We do not have sufficient capital to independently finance our own productions.
Accordingly, most of our financial resources will be devoted to financing
development activities, which include the acquisition of screenplays, and
underlying literary works (such as books and plays). The ability to create or
identify and develop commercially viable properties that can be produced by our
company will be important for the success of our company. In that regard, we
believe that a key element to our success will be the reputations of Messrs.
Mills and Thomas in the Vancouver film community and their access to and
relationships with creative talent including actors, writers and directors.
We plan to employ a flexible strategy in developing and producing our motion
picture and film properties. We will use our own capital and financial resources
to develop a project to the point where it is ready to go into production. For
each motion picture, we will assemble a business plan for presentation to
prospective investors and financiers, consisting of the screenplay, a budget,
shooting schedule, production board and the commitment by a recognizable actor
or director.
We believe that we should be able to secure recognizable talent based on the
attractiveness of the screenplay but we may also offer, as an added incentive,
grants of our stock or options to acquire our stock. We will then secure the
financing to produce the movie and make it available for distribution. The
financing may come from, for example, the Canadian and British Columbia
governments, financial institutions, lenders with profit participation, advances
from distribution companies, accredited investors or a combination of sources.
The benefit of developing a project to this advanced stage is that we will have
maximum leverage in negotiating production and financing arrangements.
Nevertheless, there may be situations when we may benefit from financial
assistance at an earlier stage. These occasions may be necessary as a result of
lengthy development of a screenplay, the desirability of commissioning a
screenplay by a highly paid writer, the acquisition of an expensive underlying
work, or a significant financial commitment to a director or star.
It is common for motion picture producers to grant contractual rights to actors,
directors, screenwriters, and other creative and financial contributors to share
in revenue or net profits from the motion picture. Except for the most
sought-after talent, these third-party participants are generally paid after all
distribution fees, marketing expenses, direct production costs and financing
costs are recouped in full. We plan to be flexible in compensating talent. We
are not averse to entering into profit sharing arrangements. We will also
consider the use of our securities to reward the actors and other participants
in a successful motion picture.
Motion picture revenue is derived from the worldwide licensing of a motion
picture to several distinct markets, each having its own distribution network
and potential for profit. The selection of the distributor for each of our
feature films will depend upon a number of factors. Our most basic criterion is
whether the distributor has the ability to secure bookings for the exhibition of
the film on satisfactory terms. We will consider whether, when and in what
amount the distributor will make advances to us. We will also consider the
amount and manner of computing distribution fees and the extent to which the
distributor will guarantee certain print, advertising and promotional
expenditures. We will not attempt to obtain financing for the production of a
particular film unless we believe that adequate distribution arrangements for
the film can be made.
No assurance can be given that our feature films, if produced, will be
distributed and, if distributed, will return our initial investment or make a
profit. To achieve the goal of producing profitable feature films, we plan to be
extremely selective in our choice of literary properties and exercise a high
23
degree of control over the cost of production. Although we plan to produce films
that will generate substantial box office receipts, we will produce our films in
a fiscally conservative manner. We believe that it is possible for a feature
film to return the initial investment and show a profit based on an average box
office run, with residuals from the sale of ancillary rights adding to cash flow
in future years. By keeping strict control of our costs, we will strive for
consistent and profitable returns on our investment.
Feature Film Production
Feature film production does not require the ownership of expensive equipment.
All the necessary equipment needed to engage in every aspect of the film
production process can be rented or borrowed for the period in which it is
needed. This is standard operating procedure for all production companies within
the industry and we plan to follow this procedure in our productions. Such
rentals and temporary equipment are accounted for in the budget of each film in
what are called the "below the line" costs that are directly charged to the
production or the cost of "manufacturing" the film. We plan to rent whatever
equipment is needed for the shortest period of time and to coordinate its use to
avoid idle time.
Essential to our success will be the production of high quality films with
budgets up to $10 million that have the potential to be profitable. We will not
engage in the production of X-rated material. We plan to make motion pictures
that appeal to the tastes of the vast majority of the movie-going public. Our
films will be cast into a wide range of genres. All movies that may be produced
will be suitable for domestic and international theatrical exhibition, pay
cable, network and syndicated television, as well as all other ancillary
markets.
The low budgets, within which we intend to operate, will serve the dual purpose
of being low enough to limit our downside exposure and high enough to pay for a
feature film with accomplished actors or directors that appeal to the major
markets. The market pull of the talent to be used must justify their fees by
helping to attract advances. Our budgets must remain small enough so that a
large percentage of our capital is not put at risk. We intend to produce
projects with built-in break-even levels that can be reached with ancillary and
foreign distribution revenue. If the movie crosses-over into a wide national
distribution release, we can potentially generate a large profit because our
share is not limited as with ancillary and foreign revenue.
In order to produce quality motion pictures for relatively modest budgets, we
will seek to avoid the high operating expenses that are typical of major U.S.
studio productions. We do not plan on having high overhead caused by large
staffs, interest charges, substantial fixed assets, and the investment in a
large number of projects never produced. Central to our plan for reducing costs
will be the production of our motion pictures in Vancouver, British Columbia,
Canada. Vancouver provides an ample talent base, a wide range of auxiliary
services such as post production facilities, sound stages and animation studios,
and an extremely diverse selection of filming locations. This, in conjunction
with an extremely favorable exchange rate and competitive wage rates, will
enable us to produce motion pictures for far lower production costs than a
similar quality production in the United States. Additionally, we believe that
by maintaining a smaller, more flexible staff with fewer established
organizational restrictions we can further reduce costs through better time
management than is possible in a major studio production.
We also plan to enter into co-productions with experienced and qualified
production companies in order to become a consistent supplier of motion pictures
to distributors in the world markets. With dependable and consistent delivery of
product to these markets, we believe that distribution arrangements can be
structured which will be equivalent to the arrangements made by major studios.
If we enter into a co-production we do not want to relinquish control of the
project, so we intend to provide up to 50% of the funds required by the
production. We may obtain our portion of the production costs from third parties
in the form of debt financing, profit participation or government financing. We
can give no assurance that we will be able to secure such financing, and as
24
such, we may be required to relinquish control of the project. If we lose
control of the project then we will likely be unable to influence the
production, sale, distribution or licensing of the film.
Primary responsibility for the overall planning, financing and production of
each motion picture will rest with our officers. For each motion picture we will
employ an independent film director who will be responsible for, or involved
with, many of the creative elements, such as direction, photography, and
editing. All decisions will be subject to budgetary restrictions and our
business control, although we will permit an independent director to retain
reasonable artistic control of the project, consistent with its completion
within strict budget guidelines and the commercial requirements of the picture.
Financing Strategy
We will not be able to produce a feature film on our own with the proceeds of
this offering without additional outside financing and the deferral of certain
production costs. Wherever possible we will attempt to make arrangements with
providers of goods and services to defer payment until a later stage in the
production and financing cycle. Once a film package has been assembled, there
are various methods to obtain the funds needed to complete the production of a
movie. Examples of financing alternatives include the assignment of our rights
in a film to a joint venture or a co-producer. Also, we may form a limited
liability company or partnership where we will be the managing member or the
general partner. In addition we may obtain favorable pre-release sales or
pre-licensing commitments from various end-users such as independent domestic
distributors, foreign distributors, cable networks, and video distributors.
These various techniques, which are commonly used in the industry, can be
combined to finance a project without a major studio financial commitment.
By virtue of our location in British Columbia, Canada, we may be able to obtain
financial support from Telefilm Canada and British Columbia Film. By operating
in British Columbia and maintaining a permanent establishment in Vancouver, we
expect to be able to borrow against tax credits obtained through Canadian
federal and provincial production services tax credits. These tax credits will
enable to us to recover 27% to 33% of eligible labor costs, or approximately
13.5% to 16.5% of our total production budget. Canadian banks commonly allow
producers to borrow against such tax credits in producing motion pictures. Our
location in Canada may also allow us to access foreign government financing
through international co-productions with treaty countries.
We may use any one or a combination of these or other techniques to finance our
films. We anticipate that any financing method will permit us to maintain
control over the production. There can be no assurance that we will be able to
successfully arrange for such additional financing and to the extent we are
unsuccessful, our production activities may be adversely affected.
As part of our financing strategy, we may use some of the proceeds of this
offering that is allocated to movie production to be used as an advance payment
to secure the services of a star actor. This will assure the actor's services
and will assist us in obtaining financing to produce the movie.
Distribution Arrangements
Effective distribution is critical to the economic success of a feature film,
particularly when made by an independent production company. We have not as yet
negotiated agreements for the distribution of our films.
We intend to release our films in the United States through existing
distribution companies, primarily independent distributors. We will retain the
right for ourselves to market the films on a territory-by-territory basis
25
throughout the rest of the world and to market television and other uses
separately. In many instances, depending upon the nature of distribution terms
available, it may be advantageous or necessary for us to license all, or
substantially all, distribution rights through one major distributor.
It is not possible to predict, with certainty, the nature of the distribution
arrangements, if any, which we may secure for our motion pictures.
To the extent that we engage in foreign distribution of our films, we will be
subject to all of the additional risks of doing business abroad including, but
not limited to, government censorship, currency fluctuations, exchange controls,
greater risk of "piracy" copying, and licensing or qualification fees.
Competition
The motion picture industry is intensely competitive. Competition comes from
companies within the same business and companies in other entertainment media
that create alternative forms of leisure entertainment. The industry is
currently evolving such that certain multinational multimedia firms will be able
to dominate because of their control over key film, magazine, and television
content, as well as key network and cable outlets. These organizations have
numerous competitive advantages, such as the ability to acquire financing for
their projects and to make favorable arrangements for the distribution of
completed films.
We will be competing with the major film studios that dominate the motion
picture industry. Some of these firms we compete with include: News
Corporation's Twentieth Century Fox; AOL Time Warner's Warner Bros. including
Turner, New Line Cinema and Castle Rock Entertainment; Viacom's Paramount
Pictures; Vivendi Universal's Universal Studios; Sony Corp.'s Sony Pictures
including Columbia and TriStar; Walt Disney Company's Buena Vista, Touchstone
and Miramax and Metro-Goldwyn-Mayer including MGM Pictures, UA Pictures, Orion
and Goldwyn. We will also compete with numerous independent motion picture
production companies, television networks, and pay television systems, for the
acquisition of literary properties, the services of performing artists,
directors, producers, and other creative and technical personnel, and production
financing. Nearly all of the firms we 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, our films will compete for audience acceptance with
motion pictures produced and distributed by other companies. Our success will be
dependent on public taste, which is both unpredictable and susceptible to rapid
change.
As an independent film production company, we most likely will not have the
backing of a major studio for production and distribution support; and
consequently, we may not be able to complete a motion picture, and if we do, we
may not be able to make arrangements for exhibition in theaters. Our success in
theaters may determine our success in other media markets.
In order to be competitive, we intend to create independent motion pictures of
aesthetic and narrative quality comparable to the major film studios that appeal
to a wide range of public taste both in the United States and abroad. By
producing our films in Canada we believe that we will be able to significantly
reduce production costs, and thereby offer our films to distributors at
extremely competitive pricing. We plan to be very selective when choosing
literary properties to develop. We plan to produce our motion pictures
efficiently, by employing talented and established professionals with experience
in the industry. Also, we plan on exploiting all methods of distribution
available to motion pictures.
Intellectual Property Rights
Rights to motion pictures are granted legal protection under the copyright laws
of the United States and most foreign countries, including Canada. These laws
26
provide substantial civil and criminal penalties for unauthorized duplication
and exhibition of motion pictures. Motion pictures, musical works, sound
recordings, artwork, and still photography are separately subject to copyright
under most copyright laws. We plan to take appropriate and reasonable measures
to secure, protect, and maintain copyright protection for all of our pictures
under the laws of the applicable jurisdictions. Motion picture piracy is an
industry-wide problem. Our industry trade association provides a piracy hotline
and investigates all piracy reports. The results of such investigations may
warrant legal action, by the owner of the rights, and, depending on the scope of
the piracy, investigation by the Federal Bureau of Investigation and/or the
Royal Canadian Mounted Police with the possibility of criminal prosecution.
Under the copyright laws of Canada and the United States, copyright in a motion
picture is automatically secured when the work is created and "fixed" in a copy.
We intend to register our films for copyright with both the Canadian Copyright
Office and the United States Copyright Office. Both offices will register claims
to copyright and issue certificates of registration but neither will "grant" or
"issue" copyrights. Only the expression (camera work, dialogue, sounds, etc.)
fixed in a motion picture can be protected under copyright. Copyright in both
Canada and the United States does not cover the idea or concept behind the work
or any characters portrayed in the work. Registration with the appropriate
office establishes a public record of the copyright claim.
To register a motion picture with the Canadian Copyright Office or the United
States Copyright Office, a signed application; a complete copy of the motion
picture being registered; a written description of the contents of the motion
picture; and a filing fee must be sent to each respective office. A copyright
registration is effective on the date the office receives all the required
elements in acceptable form.
Ordinarily, a number of individuals contribute authorship to a motion picture,
including the writer, director, producer, camera operator, editor, and others.
Under the laws of both Canada and the United States, these individuals are not
always considered the "authors," however, because a motion picture is frequently
a "work made for hire." In the case of a work made for hire, the employer, not
the individuals who actually created the work, is considered the author for
copyright purposes. We intend all of our films to be works made for hire in
which we will be the authors and thereby own the copyright to our films.
Canada's copyright law is distinguished from that of the United States by
recognizing the moral rights of authors. Moral rights refer to the rights of
authors to have their names associated with their work, and the right to not
have their work distorted, mutilated or otherwise modified, or used in
association with a product, service, cause or institution in a way that is
prejudicial to their honor or reputation. Moral rights cannot be sold or
transferred, but they can be waived. We intend that all individuals who
contribute to the creation of any of our motion pictures will be required to
waive any such moral rights that they may have in the motion picture.
For copyright purposes, publication of a motion picture takes place when one or
more copies are distributed to the public by sale, rental, lease or lending, or
when an offering is made to distribute copies to a group of persons
(wholesalers, retailers, broadcasters, motion picture distributors, and the
like) for purposes of further distribution or public performance. A work that is
created (fixed in tangible form for the first time) on or after January 1, 1978,
is automatically protected from the moment of its creation and is ordinarily
given a term enduring for the author's life plus an additional 70 years after
the author's death. For works made for hire, the duration of copyright will be
95 years from publication or 120 years from creation, whichever is shorter.
Although we plan to copyright all of our film properties and projects, there is
no practical protection from films being copied by others without payment to our
company, especially overseas. We may lose an indeterminate amount of revenue as
a result of motion picture piracy. Being a small company, with limited
resources, it will be difficult, if not impossible, to pursue our various
remedies.
27
Motion picture piracy is an international as well as a domestic problem. It is
extensive in many parts of the world. In addition to the Motion Picture
Association of America, the Motion Picture Export Association, the American Film
Marketing Association, and the American Film Export Association monitor the
progress and efforts made by various countries to limit or prevent piracy. In
the past, these various trade associations have enacted voluntary embargoes of
motion picture exports to certain countries in order to pressure the governments
of those countries to become more aggressive in preventing motion picture
piracy. The United States government has publicly considered trade sanctions
against specific countries that do not prevent copyright infringement of
American motion pictures. There can be no assurance that voluntary industry
embargoes or United States government trade sanctions will be enacted. If
enacted, such actions may impact the revenue that we realize from the
international exploitation of our motion pictures. If not enacted or if other
measures are not taken, the motion picture industry, including us, may lose an
indeterminate amount of revenue as a result of motion picture piracy.
Censorship
An industry trade association, the Motion Picture Association of America,
assigns ratings for age group suitability for domestic theatrical distribution
of motion pictures under the auspices of its Code and Rating Administration. The
film distributor generally submits its film to the Code and Rating
Administration for a rating. We plan to follow the practice of submitting our
pictures for ratings.
Television networks and stations in the United States as well as some foreign
governments may impose additional restrictions on the content of a motion
picture that may wholly or partially restrict exhibition on television or in a
particular territory.
We will not engage in the production of X-rated material. We plan to make motion
pictures that appeal to the tastes of the vast majority of the movie-going
public. We plan to produce our motion pictures so there will be no material
restrictions on exhibition in any major market or media. This policy may require
production of "cover" shots or different photography and recording of certain
scenes for insertion in versions of a motion picture exhibited on television or
theatrically in certain territories.
There can be no assurance that current and future restrictions on the content of
our films may not limit or affect our ability to exhibit our pictures in certain
territories and media.
Theatrical distribution of motion pictures, in a number of states and certain
jurisdictions, is subject to provisions of trade practice laws passed in those
jurisdictions. These laws generally seek to eliminate the practice known as
"blind bidding" and prohibit the licensing of films unless theater owners are
invited to attend screenings of the film first. In certain instances, these laws
also prohibit payment of advances and guarantees to film distributors by
exhibitors.
Labor Laws
We are aware that the cost of producing and distributing filmed entertainment
has increased substantially in recent years. This is due, among other things, to
the increasing demands of creative talent as well as industry-wide collective
bargaining agreements. Many of the screenplay writers, performers, directors and
technical personnel in the entertainment industry who will be involved in our
productions are members are guilds or unions that bargain collectively on an
industry-wide basis. We have found that actions by these guilds or unions can
result in increased costs of production and can occasionally disrupt production
operations. If we are unable to operate or produce a motion picture, it may
substantially harm our ability to earn revenue.
We will use non-unionized talent whenever possible to reduce our costs of
production. Notwithstanding, many individuals associated with our productions,
28
including actors, writers and directors, will be members of guilds or unions,
which bargain collectively with producers on an industry-wide basis from time to
time. Our operations will be dependent upon our compliance with the provisions
of collective bargaining agreements governing relationships with these guilds
and unions. Strikes or other work stoppages by members of these unions could
delay or disrupt our activities. The extent to which the existence of collective
bargaining agreements may affect us in the future is not currently determinable.
DESCRIPTION OF PROPERTY
We are presently using office space provided at no charge by our President,
Thomas E. Mills. We will need to lease approximately 500-1,000 square feet of
office space at another location in downtown Vancouver to use as the corporate
head office at a rental rate of approximately $6,000 to $18,000 per year.
LEGAL PROCEEDINGS
Neither AMP Productions, Ltd., nor any of its officers or directors is a party
to any material legal proceeding or litigation and such persons know of no
material legal proceeding or contemplated or threatened litigation. There are no
judgments against AMP Productions, Ltd. or its officers or directors. None of
the our officers or directors have been convicted of a felony or misdemeanor
relating to securities or performance in corporate office.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following sets forth our directors, executive officers, promoters and
control persons, their ages, and all offices and positions held. Directors are
elected for a period of one year and thereafter serve until their successor is
duly elected by the shareholders. Officers and other employees serve at the will
of the Board of Directors.
Term Period Served as
Name Position Age Director/Officer
---- -------- --- ----------------
Thomas E. Mills President, Treasurer, 35 03/03/03 to present
Director
Fidel Thomas Vice-President, Secretary, 40 03/03/03 to present
Director
Thomas E. Mills serves as our President and Treasurer. Mr. Mills is a lawyer,
practicing in British Columbia, Canada, who has a wide range of experience in
the fields of entertainment law, securities, commercial transactions and
e-commerce. After being called to the Bar of British Columbia in 1997, Mr. Mills
began practicing as an associate with Danks & Company, a law firm with a
practice limited to the entertainment industry. His experience while with Danks
& Company was primarily in the areas of film production, finance and
intellectual property. In 1998, Mr. Mills moved to the law firm of McRae, Holmes
& King to practice in the area of commercial litigation, as an associate. Mr.
Mills left McRae, Holmes & King in 2000, to take a position as in-house counsel
for Healthnet International, Inc., a Colorado corporation with a head office in
Vancouver, British Columbia having its shares quoted on the NASD OTC:BB (trading
symbol HLNT). Healthnet was in the business of providing turn-key e-commerce
solutions primarily to the health and nutraceutical industry. While working for
Healthnet, Mr. Mills was responsible for commercial agreements, corporate
governance, and compliance with securities regulations. In 2001, Mr. Mills took
the position of President of Scarab Systems, Inc., a privately held Nevada
corporation in the business of providing electronic payment solutions to the
e-commerce sector. In July 2002, Scarab Systems, Inc. was acquired by iRV, Inc.,
29
a Colorado corporation having its shares quoted on the NASD OTC:BB (trading
symbol: IRVV), in a reverse takeover. Under the terms of the acquisition, Mr.
Mills became and remains President and chief executive officer of iRV, Inc. On
March 24, 2003, iRV, Inc. changed its name to Scarab Systems, Inc. Mr. Mills
presently devotes 10 hours a week to Scarab System, Inc. He has maintained a
part-time legal practice since 2000, to which he devotes not more than 25 hours
per week. Mr. Mills received his Bachelor of Laws degree from the University of
British Columbia in 1996, and holds a Bachelor of Arts degree obtained from the
University of Waterloo, Waterloo, Ontario in 1992.
Fidel Thomas serves as our Vice-President and Secretary. Mr. Thomas has been
involved in the film business for more than twelve years. His career started in
the United Kingdom with an independent film company, Time and Vision. There he
served as head of development and was involved in all areas of the creative
process in independent film production. In 1994, Mr. Thomas was offered a
position at Johnson Family Films, where he took on a producers role. In 1996, he
was an integral part of the critically acclaimed feature "The Mexican Stand
Off," which was sold to six territories in Europe. In 1998 Mr. Thomas formed
Inner Vision Images Motion Picture Corp., a consulting group that advises the
independent film community on film production, finance and distribution. Mr.
Thomas has been the President, Chief Executive Officer and a director of Inner
Vision Images Motion Picture Corp. since 1998. Mr. Thomas obtained a degree in
sociology at the University of East London, U.K., a degree in fine art at
Kingsway University Central London, and a diploma in media practice/advanced
screen writing at the Birkbeck College for extramural studies U.K.
EXECUTIVE COMPENSATION
To date we have no employees other than our officers. No compensation has been
awarded, earned or paid to our officers. We have no employment agreements with
any of our officers. We do not contemplate entering into any employment
agreements until such time as we earn revenue.
There is no arrangement pursuant to which any director of AMP has been or is
compensated for services provided as a director of AMP.
There are no stock option plans, retirement, pension, or profit sharing plans
for the benefit of our officers or directors. We do not have any long-term
incentive plans that provide compensation intended to serve as incentive for
performance.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We have issued common stock to the following officers, directors, promoters and
beneficial owners of more than 5% of our outstanding securities.
Position with
Name Company Shares Consideration Date
---- ------- ------ ------------- ----
Thomas E. Mills President, 6,000,000 $600 March 23, 2003
Treasurer
Fidel Thomas Vice-President, 2,000,000 $200 March 26, 2003
Secretary
On March 2, 2003, we acquired options from Mr. Thomas, our Vice-President,
Secretary and director, to two screenplays titled "Code Blue" and "Pelicula" for
$2,500 each. Mr. Thomas became the Vice-President of AMP on March 3, 2003, and
he later became a director of AMP on March 15, 2003. The price agreed upon for
the options from Mr. Thomas was determined to be fair by our President, Thomas
30
E. Mills, without the benefit of third party advice or consultation. The options
grant us the right, for a period of one year, to acquire all right, title and
interest to the two screenplays for $10,000 and $20,000 respectively, plus
contingent payments based on the following milestones for each screenplay that
we make into a motion picture:
(i) If we make a motion picture based on the screenplay, and the budget for that
motion picture exceeds CAD$1,500,000 then we shall pay Mr. Thomas additional
compensation to make the price paid for the screenplay equal to the screenplay
fee payable to a writer pursuant to the most current Independent Production
Agreement of the Writer's Guild of Canada. According to the Writer's Guild of
Canada, the screenplay fee for 2003 is $45,450.
(ii) If we make a motion picture based on the screenplay, we will pay to Mr.
Thomas 3% of our net profits from the motion picture, or any television series,
pilot or movie-of-the-week derived from the screenplay.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of March 31, 2003, the following table sets forth information known by our
management regarding beneficial ownership of our common stock at the date of
this prospectus by: each person known by us to own, directly or beneficially,
more than 5% of our common stock; each of our executive officers and directors;
and, all of our officers and directors as a group.
Except as otherwise indicated, our management believes that the beneficial
owners of the common stock listed below, based on information furnished by the
owners, own the shares directly and have sole investment and voting power over
the shares.
Name Number of Shares %
---- ---------------- -
Thomas E. Mills 6,000,000 75%
Fidel Thomas 2,000,000 25%
Directors and officers as a group 8,000,000 100%
(two persons)
The address for all officers and directors is 2708-939 Homer Street, Vancouver,
British Columbia, Canada, V6B 2W6.
Messrs. Mills and Thomas are promoters of the company.
PLAN OF DISTRIBUTION
Currently, we plan to sell our common stock through Fidel Thomas, who is our
Vice-President and Secretary. We plan to sell our shares of common stock outside
the United States to residents of Canada and Europe. Mr. Thomas will not receive
any commission from the sale of any common stock. Mr. Thomas will not register
as a broker/dealer under Section 15 of the Securities Exchange Act of 1934 (the
"Exchange Act") in reliance upon Rule 3a4-1. Rule 3a4-1 sets forth those
conditions under which a person associated with an issuer may participate in the
offering of the issuer's securities and not be deemed to be a broker-dealer.
These conditions are as follows:
1. The person is not subject to a statutory disqualification, as that term is
defined in Section 3(a)(39) of the Exchange Act, at the time of his
participation;
31
2. The person is not compensated in connection with his participation by the
payment of commissions or other remuneration based either directly or indirectly
on transactions in securities;
3. The person is not, at the time of their participation, an associated person
of a broker-dealer; and
4. The person meets the conditions of paragraph (a)(4)(ii) of Rule 3a4-1 of the
Exchange Act in that she (a) primarily performs, or is intended to primarily
perform at the end of the offering, substantial duties for or on behalf of the
Issuer otherwise than in connection with transactions in securities; and (b) is
not a broker-dealer, or an associated person of a broker-dealer, within the
preceding twelve (12) months; and (c) does not participate in selling and
offering of securities for any Issuer more than once every twelve (12) months
other than in reliance on paragraphs (a)(4)(i) or (a) (4) (iii) of the Exchange
Act.
Mr. Thomas is not subject to disqualification, is not being compensated,
and is not associated with a broker-dealer. Mr. Thomas is and will continue to
be one of our officers and directors at the end of the offering and, during the
last twelve months, he has not been and is not currently a broker-dealer nor
associated with a broker-dealer. Mr. Thomas has not, during the last twelve
months, and will not, during the next twelve months, offer or sell securities
for another issuer other than in reliance on paragraphs (a)(4)(i) or (a) (4)
(iii) of the Exchange Act.
It is anticipated that we will be conducting our offering of common stock to
residents of Canada and Europe.
32
DESCRIPTION OF THE SECURITIES
We are currently authorized to issue 100,000,000 shares of $0.0001 par value
common stock. All shares are equal to each other with respect to liquidation and
dividend rights. Holders of voting shares are entitled to one vote for each
share that they own at any shareholders' meeting. Holders of our shares of
common stock do not have cumulative voting rights.
Holders of shares of common stock are entitled to receive such dividends as may
be declared by the Board of Directors out of funds legally available. Upon
liquidation, holders of shares of common stock are entitled to participate
pro-rata in a distribution of assets available for such distribution to
shareholders. There are no conversion, preemptive or other subscription rights
or privileges with respect to any shares.
Our Articles of Incorporation do not provide for the issuance of any other
securities.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES
Article Twelfth of our Articles of Incorporation provides, among other things,
that no director or officer of the Corporation shall be personally liable to the
Corporation or any of its stockholders for damages for breach of fiduciary duty
as a director or officer involving any act or omission of any such director or
officer; provided, however, that the foregoing provision shall not eliminate or
limit the liability of a director or officer (i) for acts or omissions which
involve intentional misconduct, fraud or a knowing violation of law, or (ii) the
payment of dividends in violation of Section 78.300 of the Nevada Revised
Statutes. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the foregoing
provisions, or otherwise, the small business issuer has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that any claim for indemnification against such liabilities (other
than the payment by the small business issuer of expenses incurred or paid by a
director, officer or controlling person of the small business issuer in the
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
small business issuer will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
LEGAL MATTERS
The validity of the shares of common stock offered by us will be passed upon by
the law firm of Bartel Eng & Schroder, Sacramento, California.
EXPERTS
Our balance sheet as of March 31, 2003, and the related statements of operations
and deficit accumulated during the development stage, cash flows and
stockholders' equity for the period February 27, 2002 (date of inception) to
March 31, 2003, have been included herein in reliance on the report of Moore
Stephens Ellis Foster Ltd., Chartered Accountants, given on the authority of
that firm as experts in accounting and auditing.
33
AVAILABLE INFORMATION
We are not required to deliver an annual report to our security holders and we
do not intend to do so. We are required to file annual, quarterly and current
reports, proxy statements and other information with the Securities and Exchange
Commission. Our Securities and Exchange Commission filings are available to the
public over the Internet at the SEC's website at http://www.sec.gov.
You may also read and copy any materials we file with the Securities and
Exchange Commission at the SEC's public reference room at 450 Fifth Street N.W.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of the public reference rooms.
We have filed with the Securities and Exchange Commission a registration
statement on Form SB-2, under the Securities Act with respect to the securities
offered under this prospectus. This prospectus, which forms a part of that
registration statement, does not contain all information included in the
registration statement. Certain information is omitted and you should refer to
the registration statement and its exhibits. With respect to references made in
this prospectus to any contract or other document of AMP, the references are not
necessarily complete and you should refer to the exhibits attached to the
registration statement for copies of the actual contract or document. You may
review a copy of the registration statement at the SEC's public reference room.
Please call the SEC at 1-800-SEC-0330 for further information on the operation
of the public reference rooms. Our filings and the registration statement can
also be reviewed by accessing the SEC's website at http://www.sec.gov.
34
AMP PRODUCTIONS, LTD.
(A Development Stage Company)
Financial Statements
March 31, 2003
F-1
MOORE STEPHENS ELLIS FOSTER LTD.
CHARTERED ACCOUNTANTS
1650 West 1st Avenue
Vancouver, BC Canada V6J 1G1
Telephone: (604) 734-1112 Facsimile: (604) 714-5916
E-Mail: generaldelivery@ellisfoster.com
Website: www.ellisfoster.com
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
AMP PRODUCTIONS, LTD.
(A development stage company)
We have audited the balance sheet of AMP Productions, Ltd. ("the Company") (A
development stage company) as at March 31, 2003, the related statements of
stockholders' deficiency, operations and cash flows from February 27, 2003
(inception) to March 31, 2003. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform an audit to obtain reasonable assurance whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provide a reasonable basis for
our opinion.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at March 31, 2003 and the
results of its operations and cash flows for the period from February 27, 2003
(inception) to March 31, 2003 in conformity with generally accepted accounting
principles in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered losses from operations that raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Vancouver, Canada "MOORE STEPHENS ELLIS FOSTER LTD."
April 10, 2003 Chartered Accountants
F-2
AMP PRODUCTIONS, LTD.
(A development stage company)
Balance Sheet
March 31, 2003
(Expressed in U.S. Dollars)
- --------------------------------------------------------------------------------
2003
- --------------------------------------------------------------------------------
ASSETS
Current
Cash and cash equivalents $ 5,785
- --------------------------------------------------------------------------------
Total assets $ 5,785
================================================================================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Liabilities
Current
Accounts payable and accrued liabilities $ 3,177
Promissory note and accrued interest 10,024
- --------------------------------------------------------------------------------
13,201
- --------------------------------------------------------------------------------
Stockholders' Deficiency
Share capital
Authorized:
100,000,000 common shares with a par value of $0.0001 per share
Issued and outstanding: 8,000,000 common shares 800
(Deficit) accumulated during the development stage (8,216)
- --------------------------------------------------------------------------------
Total stockholders' equity deficiency (7,416)
- --------------------------------------------------------------------------------
Total liabilities and stockholders' deficiency $ 5,785
================================================================================
The accompanying notes are an integral part of these financial statements.
F-3
AMP PRODUCTIONS, LTD.
(A development stage company)
Statement of Stockholders' Deficiency
For the period from February 27, 2003 (inception) to March 31, 2003
(Expressed in U.S. Dollars)
- -------------------------------------------------------------------------------------------------------------------------------
Deficit
accumulated
Common stock during Total
----------------------------- development stockholders'
Shares Amount stage deficiency
- -------------------------------------------------------------------------------------------------------------------------------
Issuance of common stock for cash
March 3, 2003, $0.0001 per share 8,000,000 $ 800 $ - $ 800
Comprehensive income (loss)
Loss for the period - - (8,216) (8,216)
- -------------------------------------------------------------------------------------------------------------------------------
Balance, March 31, 2003 8,000,000 $ 800 $ (8,216) $ (7,416)
===============================================================================================================================
The accompanying notes are an integral part of these financial statements.
F-4
AMP PRODUCTIONS, LTD.
(A development stage company)
Statement of Operations
(Expressed in U.S. Dollars)
- --------------------------------------------------------------------------------
February 27
2003 (inception)
to
March 31
2003
- --------------------------------------------------------------------------------
General and administrative expenses
Accounting $ 1,650
Consulting 5,427
Interest 24
Legal 957
Office 158
- --------------------------------------------------------------------------------
8,216
- --------------------------------------------------------------------------------
Loss for the period $ 8,216
================================================================================
Loss per share
- basic and diluted $ 0.00
================================================================================
Weighted average number of
common shares outstanding
- basic and diluted 8,000,000
================================================================================
The accompanying notes are an integral part of these financial statements.
F-5
AMP PRODUCTIONS, LTD.
(A development stage company)
Statement of Cash Flows
(Expressed in U.S. Dollars)
- --------------------------------------------------------------------------------
February 27
2003 (inception)
to
March 31
2003
- --------------------------------------------------------------------------------
Cash flows from (used in) operating activities
Loss for the period $ (8,216)
Changes in assets and liabilities:
- increase in accounts payable and accrued liabilities 3,177
- --------------------------------------------------------------------------------
(5,039)
- --------------------------------------------------------------------------------
Cash flows from financing activities
Promissory note 10,024
Proceeds from issuance of common stock 800
- --------------------------------------------------------------------------------
10,824
- --------------------------------------------------------------------------------
Increase in cash and cash equivalents 5,785
Cash and cash equivalents, beginning of period -
- --------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 5,785
================================================================================
The accompanying notes are an integral part of these financial statements.
F-6
AMP PRODUCTIONS, LTD.
(A development stage company)
Notes to Financial Statements
March 31, 2003
(Expressed in U.S. Dollars)
- --------------------------------------------------------------------------------
1. Incorporation and Continuance of Operations
The Company was formed on February 27, 2003 under the laws of the State of
Nevada. The Company has not commenced planned principal operations,
producing filmed entertainment. The company is considered a development
stage company as defined in SFAS No. 7. The Company has an office in
Vancouver, Canada.
These financial statements have been prepared in accordance with generally
accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and the satisfaction of liabilities
and commitments in the normal course of business. The Company has incurred
operating losses and requires additional funds to maintain its operations.
Management's plans in this regard are to raise equity financing as
required.
These conditions raise substantial doubt about the Company's ability to
continue as a going concern. These financial statements do not include any
adjustments that might result from this uncertainty.
The Company has not generated any operating revenues to date.
2. Significant Accounting Policies
(a) Cash and Cash Equivalents
Cash equivalents comprise certain highly liquid instruments with a
maturity of three months or less when purchased.
(b) Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates and assumptions.
(c) Advertising Expenses
The Company expenses advertising costs as incurred. There was no
advertising expenses incurred by the Company for the period ended
March 31, 2003.
(d) Option Payments
The Company capitalizes option payments as part of the cost of the
assets under option. The option payments will be expensed if the
option is not exercised.
F-7
AMP PRODUCTIONS, LTD.
(A development stage company)
Notes to Financial Statements
March 31, 2003
(Expressed in U.S. Dollars)
- --------------------------------------------------------------------------------
2. Significant Accounting Policies (continued)
(e) Loss Per Share
Loss per share is computed using the weighted average number of shares
outstanding during the period. The Company has adopted SFAS No. 128,
"Earnings Per Share". Diluted loss per share is equivalent to basic
loss per share.
(f) Concentration of Credit Risk
The Company places its cash and cash equivalents with high credit
quality financial institutions. As of March 31, 2003, the Company had
no balance in a bank beyond insured limits.
(g) Foreign Currency Transactions
The Company is located and operating outside of the United States of
America. It maintains its accounting records in U.S. Dollars, as
follows:
At the transaction date, each asset, liability, revenue and expense is
translated into U.S. dollars by the use of the exchange rate in effect
at that date. At the period end, monetary assets and liabilities are
remeasured by using the exchange rate in effect at that date. The
resulting foreign exchange gains and losses are included in
operations.
(h) Fair Value of Financial Instruments
The respective carrying value of certain on-balance-sheet financial
instruments approximated their fair value. These financial instruments
include cash and cash equivalents, accounts payable and accrued
liabilities and promissory note and accrued interest. Fair values were
assumed to approximate carrying values for these financial
instruments, except where noted, since they are short term in nature
and their carrying amounts approximate fair values or they are
receivable or payable on demand. Management is of the opinion that the
Company is not exposed to significant interest or credit risks arising
from these financial instruments. The Company is operating outside the
United States of America and has significant exposure to foreign
currency risk due to the fluctuation of currency in which the Company
operates and U.S. dollar.
F-8
AMP PRODUCTIONS, LTD.
(A development stage company)
Notes to Financial Statements
March 31, 2003
(Expressed in U.S. Dollars)
- --------------------------------------------------------------------------------
2. Significant Accounting Policies (continued)
(i) Income Taxes
The Company has adopted Statement of Financial Accounting
Standards No. 109 (SFAS 109), Accounting for Income Taxes, which
requires the Company to recognize deferred tax liabilities and
assets for the expected future tax consequences of events that
have been recognized in the Company's financial statements or tax
returns using the liability method. Under this method, deferred
tax liabilities and assets are determined based on the temporary
differences between the financial statement and tax bases of
assets and liabilities using enacted tax rates in effect in the
years in which the differences are expected to reverse.
(j) Stock-Based Compensation
The Company has adopted the disclosure-only provisions of
Statement of Financial Accounting Standards No. 123 (SFAS 123),
Accounting for Stock-based Compensation. SFAS 123 encourages, but
does not require, companies to adopt a fair value based method
for determining expense related to stock-based compensation. The
Company accounts for stock-based compensation issued to employees
and directors using the intrinsic value method as prescribed
under Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees and related interpretations.
The Company did not grant any stock options during the period.
(k) Comprehensive Income
The Company adopted Statement of Financial Accounting Standards
No. 130 (SFAS 130), Reporting Comprehensive Income, which
establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. The Company is
disclosing this information on its Statement of Stockholders'
Equity (Deficiency). Comprehensive income comprises equity except
those resulting from investments by owners and distributions to
owners. The Company has no elements of "other comprehensive
income" for the period ended March 31, 2003.
F-9
AMP PRODUCTIONS, LTD.
(A development stage company)
Notes to Financial Statements
March 31, 2003
(Expressed in U.S. Dollars)
- --------------------------------------------------------------------------------
2. Significant Accounting Policies (continued)
(l) New Accounting Pronouncements
In April 2003, the Financial Accounting Standard Board issued Statement of
Financial Accounting Standard No. 149 (SFAS 149), Amendment of Statement
133 on Derivative Instruments and Hedging Activities. This Statement amends
and clarifies financial accounting and reporting for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives) and for hedging
activities under SFAS No. 133, Accounting for Derivative Instruments and
hedging Activities. This Statement is effective for contracts entered into
or modified after June 30, 2003. We do not expect the implementation of
SFAS No. 49 to have a material impact on our consolidated financial
statements.
3. Promissory Note and Accrued Interest, due February 25, 2005
------------------------------------------------------------------------
Principal, unsecured and bearing interest at 3% per annum $ 10,000
Accrued interest 24
------------------------------------------------------------------------
$ 10,024
========================================================================
4. Income Taxes
As at March 31, 2003, the Company has estimated net operating losses
carryforward for tax purposes of $13,000. This amount may be applied
against future federal taxable income. The Company evaluates its valuation
allowance requirements on an annual basis based on projected future
operations. When circumstances change and this causes a change in
management's judgement about the realizability of deferred tax assets, the
impact of the change on the valuation allowance is generally reflected in
current income.
The tax effects of temporary differences that give rise to the Company's
deferred tax asset (liability) are as follows:
------------------------------------------------------------------------
Tax loss carry forwards $ 4,550
Valuation allowance (4,550)
------------------------------------------------------------------------
$ -
========================================================================
F-10
AMP PRODUCTIONS, LTD.
(A development stage company)
Notes to Financial Statements
March 31, 2003
(Expressed in U.S. Dollars)
- --------------------------------------------------------------------------------
5. Related Party Transactions and Commitments
On March 2, 2003, the Company entered into two purchase agreements with a
director of the Company to acquire two screenplays. Pursuant to the
agreements, the Company is granted two options, each commencing on March 2,
2003 and continuing for a period of one year, to purchase all right, title
and interest in and to the above two screenplays. The consideration for
each option to purchase a screenplay is $2,500, with the total
consideration for both options being $5,000. As at March 31, 2003, the
consideration for both option remains unpaid and is included in accounts
payable.
The purchase price for each of the two screenplays will be $10,000 and
$20,000, respectively, plus the following contingent compensation for each
of the screenplays:
(a) In the event that a theatrical or televisions motion picture is
produced by the Company or its assigns, based on the Property (the
"Picture") and the budget of the Picture as of the first day of
principal photography and as allowed by all entities financing or
guaranteeing completion of the Picture, is not less than $1,500,000,
the vendor shall receive additional compensation to make the Purchase
Price equivalent to the Script Fee payable to a writer pursuant to the
most current Independent Production Agreement of the Writer's Guild of
Canada.
(b) In addition to the amounts set out above, the Company shall pay to the
vendor 3% of 100% of the Company's "Net Profits" of the Picture, or
any television series, pilot or movie-of-the-week (as that term is
used in the entertainment industry) that derives directly from the
Property. "Net Profits" will be defined, computed, accounted for and
paid in accordance with the Company's standard Net Profits definition
based on the Company's "break even" negative cost position after
payment of all reasonable production expenses and receipt by the
Company of all distribution advances and gross receipt from
exploitation of the Picture and the Property.
F-11
1,750,000 Shares
AMP Productions Ltd.
Common Stock
------------
PROSPECTUS
------------
We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or a
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus nor any
sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or the affairs of the Issuer
have not changed since the date hereof.
Until _________, 2003, 90 days after the date of this prospectus, all dealers
that buy, sell or trade in our securities, whether or not participating in this
offering, may be required to deliver a prospectus. This requirement is in
addition to the dealers' obligation to deliver a prospectus when acting as an
underwriter with respect to its unsold allotment or subscription.
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The statutes, charter provisions, bylaws, contracts or other arrangements
under which controlling persons, directors or officers of the registrant are
insured or indemnified in any manner against any liability which they may incur
in such capacity are as follows:
(a) Section 78.751 of the Nevada Business Corporation Act provides that
each corporation shall have the following powers:
1. A corporation may indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, except an
action by or in the right of the corporation, by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses, including attorneys' fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with the action, suit or proceeding if he acted in good faith and in a manner
which he reasonably believed to be in or not opposed to the best interest of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of no lo contendere or its equivalent, does not, of itself create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and that, with respect to any criminal action or proceeding, he had
reasonable cause to believe that his conduct was unlawful.
2. A corporation may indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit by or
in the right of the corporation to procure a judgment in its favor by reason of
the fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including amounts paid in
settlement and attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit if he acted in
good faith and in a manner which he reasonably believed to be in or not opposed
to the best interests of the corporation. Indemnification may not be made for
any claim, issue or matter as to which such a person has been adjudged by a
court of competent jurisdiction, after exhaustion of all appeals therefrom, to
be liable to the corporation or for amounts paid in settlement to the
corporation, unless and only to the extent that the court in which the action or
suit was brought or other court of competent jurisdiction, determines upon
application that in view of all the circumstances of the case, the person is
fairly and reasonably entitled to indemnity for such expenses as the court deems
proper.
3. To the extent that a director, officer, employee or agent of a corporation
has been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subsections 1 and 2, or in defense of any claim, issue
or matter therein, he must be indemnified by the corporation against expenses,
including attorneys' fees, actually and reasonably incurred by him in connection
with the defense.
4. Any indemnification under subsections 1 and 2, unless ordered by a court or
advanced pursuant to subsection 5, must be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances. The
determination must be made:
II-1
(a) By the stockholders;
(b) By the board of directors by majority vote of a quorum consisting of
directors who were not parties to the act, suit or proceeding;
(c) If a majority vote of a quorum consisting of directors who were not
parties to the act, suit or proceeding so orders, by independent legal counsel,
in a written opinion; or
(d) If a quorum consisting of directors who were not parties to the act,
suit or proceeding cannot be obtained, by independent legal counsel in a written
opinion.
5. The certificate or articles of incorporation, the bylaws or an agreement made
by the corporation may provide that the expenses of officers and directors
incurred in defending a civil or criminal action, suit or proceeding must be
paid by the corporation as they are incurred and in advance of the final
disposition of the action, suit or proceeding, upon receipt of an undertaking by
or on behalf of the director or officer to repay the amount if it is ultimately
determined by a court of competent jurisdiction that he is not entitled to be
indemnified by the corporation. The provisions of this subsection do not affect
any rights to advancement of expenses to which corporate personnel other than
directors or officers may be entitled under any contract or otherwise by law.
6. The indemnification and advancement of expenses authorized in or ordered by a
court pursuant to this section:
(a) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under the certificate
or articles of incorporation or any bylaw, agreement, vote of stockholders of
disinterested directors or otherwise, for either an action in his official
capacity or an action in his official capacity or an action in another capacity
while holding his office, except that indemnification, unless ordered by a court
pursuant to subsection 2 or for the advancement of expenses made pursuant to
subsection 5, may not be made to or on behalf of any director or officer if a
final adjudication establishes that his acts or omissions involved intentional
misconduct, fraud or a knowing violation of the law and was material to the
cause of action.
(b) Continues for a person who has ceased to be a director, officer,
employee or agent and inures to the benefit of the heirs, executors and
administrators of such a person.
7. Our Articles of Incorporation limit liability of our officers and directors
to the full extent permitted by the Nevada Business Corporation Act.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated costs and expenses we will pay in
connection with the offering described in this registration statement:
Amount (1)
----------
SEC Registration fee $ 15.00
Blue Sky fees and expenses $ 2,500.00
Printing and shipping expenses $ 1,000.00
Accounting fees and expenses $ 3,000.00
Legal fees $ 10,000.00
Transfer and Miscellaneous expenses $ 3,485.00
-----------
Total (1) $ 20,000.00
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(1) All expenses, except SEC registration fees, are estimated.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
On March 23, 2003, 6,000,000 restricted common shares were issued to our
President, Treasurer and director, Thomas E. Mills, in exchange for a cash
payment on behalf of AMP of $600. The shares were issued without registration
under the Securities Act of 1933 in reliance on an exemption from registration
provided by Section 4(2) of the Securities Act. No general solicitation was made
in connection with the offer or sale of these securities.
On March 26, 2003, 2,000,000 restricted common shares were issued to our
Vice-President, Secretary and Director, Fidel Thomas, in exchange for a cash
payment on behalf of AMP of $200. The shares were issued without registration
under the Securities Act of 1933 in reliance on an exemption from registration
provided by Section 4(2) of the Securities Act. No general solicitation was made
in connection with the offer or sale of these securities.
ITEM 27. EXHIBITS
Exhibit No. Document
3.1 Articles of Incorporation*
3.2 Bylaws*
5.1 Legal opinion
10.1 Promissory Note*
10.2 Option to Purchase Agreement "Pelicula"*
10.3 Option to Purchase Agreement "Code Blue"*
23.1 Consent of Accountant
23.2 Consent of Counsel (contained in Exhibit 5.1)
99.1 Specimen Subscription Agreement
* Previously filed with AMP's initial registration statement on Form SB-2, filed
with the SEC on June 19, 2003.
ITEM 28. UNDERTAKINGS.
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned Registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents, and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter duly adopted pursuant to authority conferred
to that section.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to its Articles of Incorporation or provisions of the Nevada
Business Corporations Act, or otherwise, we have been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, we will,
unless in the opinion of counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question, whether
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or not such indemnification by us is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
We hereby undertake to:
(1) File, during any period in which we offer or sell securities, a
post-effective amendment to this registration statement to:
(a) Include any prospectus required by section 10(a)(3) of the Securities
Act;
(b) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement; and
(c) Include any additional or changed material information on the plan of
distribution.
(2) For determining liability under the Securities Act treat each post-effective
amendment as a new registration statement of the securities offered and the
offering of the securities at that time to be the initial bona fide offering.
(3) File a post effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
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Signatures
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 Registration Statement and authorized
this registration to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Vancouver, Province of British Columbia, Canada, on
August 13, 2003.
AMP PRODUCTIONS, LTD.
/s/Thomas E. Mills
-----------------------
By: Thomas E. Mills, President
and Treasurer
In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following person in the capacities
and on the dates stated:
Date: August 13, 2003 /s/ Thomas E. Mills
-------------------
By: Thomas E. Mills, President and
Treasurer, Director
(Principal Executive, Financial
and Accounting Officer)
Date: August 13, 2003 /s/ Fidel Thomas
----------------
By: Fidel Thomas, Vice-President,
Secretary, Director