Canon Trust Film Corporation
$5,000,000 Regulation A Preferred Stock Offering
_______________
Canon Trust Film Corporation, a wholly owned subsidiary of
Canon Securities LLC., a NASD Broker Dealer is offering
regulation A registered preferred stocks in a best effort
underwriting offering.
_______________
Investing in these Preferred Shares involves a high degree
of risk. See "Risk Factors" beginning on page 18.
_______________
Per Note Total
Offering Price $ 5,000,000
$ 5,000,000
Discount and Commission to Underwriters $ 550,000
$ 550,000
Offering Proceeds to Company $ 4,450,000
$ 4,450,000
Neither the Securities and Exchange Commission nor any
state securities commission has approved or disapproved of
these securities or determined if the prospectus is
accurate or complete. Any representation to the contrary is
a criminal offense.
The Preferred Stocks are callable after 36 months and is
subject to redemption, without premium.
Canon Securities LLC delivers certificates upon closing of
each transaction.
Canon Securities LLC
_______________
December 30, 2003
_______________
The preferred stocks are offered on a "Best Effort" basis
through participation members (the "Placement Agent") of
the National Association of Securities Dealers, Inc
("NASD") who will be paid 8% commission for each share
sold.
Net proceeds are calculated before deducting wholesaling
commission and other fees equal to 3% of the gross proceeds
of the offering and other expenses, such as legal,
accounting and printing, mailing, postage, communication.
(See "Sources and Use of Proceeds," "The Offering" and
"Description of Notes").
The minimum investment is (1) one preferred stock ($2,500),
although the Company in its sole discretion may accept
subscription for fractional share.
______________
This prospectus contains what the Company considers to be
fair summaries of certain provisions of the documents that
will govern the Offering and the securities comprising the
preferred shares. Nevertheless, the summaries do not
purport to be complete and are qualified in their entirety
by reference to the texts of the complete documents. Copies
of these documents have been attached to this prospectus as
Exhibits or are available from the Company upon request.
Investors must not rely upon any representations or
information other than as set forth in this prospectus and
in documents furnished by the Company upon request. No
person has been authorized to give any information or make
any representation in connection with this offering other
than as contained in this prospectus. Therefore, a
prospective investor should not rely on information that is
not included herein unless it is specifically provided to
him in writing by the Company in response to the
prospective investor's request for such additional
information.
______________
PROSPECTIVE INVESTORS SHOULD NOT CONSTRUE THE CONTENT OF
THIS MEMORANDUM AS LEGAL, ACCOUNT, BUSINESS TAX OR OTHER
EXPERT ADVICE. EACH PROSPECTIVE INVESTOR SHOULD CONSULT
HIS/HER OWN ATTORNEY, BUSINESS ADVISOR, AND/OR TAX ADVISOR
AS TO LEGAL, BUSINESS, TAX AND RELATED MATTERS CONCERNING
THIS INVESTMENT.
______________
THIS MEMORANDUM DOES NOT CONSTITUE AN OFFER TO SELL TO, OR
A SOLICITATION OF AN OFFER TO BUY FROM, ANYONE IN ANY
STATE, COUNTRY OR OTHER JURISDICTION IN WHICH SUCH AN OFFER
OR SOLICITATION OF THE SECURITIES OFFERED IS NOT
AUTHORIZED. NO ACTION HAS BEEN TAKEN BY THE COMPANY THAT
WOULD, OR IS INTENDED TO, PERMIT A PUBLIC OFFER OF THE
SECURITIES IN ANY COUNTRY OR JURISDICTION. ACCORDINGLY, THE
SECURITIES MAY NOT BE OFFERED OR SOLD, DIRECTLY OR
INDIRECTLY, AND NEITHER THIS MEMORANDUM NOR ANY OTHER
INFORMATION MEMORANDUM, PROSPECTUS, FORM OF APPLICATION,
ADVERTISMENT OR OTHER DOCUMENT OR INFORMATION MAY BE
DISTRIBUTED OR PUBLISHED IN ANY COUNTRY OR JURISDICTION
EXCEPT UNDER CIRCUMSTANCE THAT WILL RESULT IN COMPLIANCE
WITH ANY APPLICABLE LAWS AND REGULATIONS.
______________
THE DELIVERY OF THIS MEMORANDUM AT ANY TIME DOES NOT IMPLY
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
DATE SUBSEQUENT TO THE DATE HEREOF.
______________
THE INFORMATION CONTAINED IN THIS MEMORANDUM IS
CONFIDENTIAL AND PROPRIETARY TO THE COMPANY AND IS BEING
SUBMITTED TO PROSPECTIVE INVESTORS IN THE COMPANY WITH THE
EXPRESS UNDERSTANDING THAT WITHOUT WRITTEN PERMISSION OF
THE COMPANY SUCH PERSONS WILL NOT RELEASE THIS DOCUMENT OR
DISCUSS THE INFORMATION CONTAINED HEREIN OR MAKE
REPRODUCTIONS OR USE IT FOR ANY PURPOSE OTHER THAN
EVALUATING A POTENTIAL INVESTMENT IN THE COMPANY. IF A
PROSPECTIVE INVESTOR ELECTS NOT TO INVEST IN THE OFFERING,
THIS MEMORANDUM MUST BE PROMPTLY RETURNED.
______________
THIS OFFERING IS MADE SUBJECT TO WITHDRAWAL, CANCELLATION
OR MODIFICATION BY THE COMPANY WITHOUT NOTICE, THE COMPANY
RESERVES THE RIGHT, IN ITS SOLE DISCRETION, TO REJECT ANY
SUBSCRIPTION AS A WHOLE OR IN PART. THE COMPANY SHALL HAVE
NO LIABILITY WHATSOEVER TO ANY OFFEREE AND/OR INVESTOR IN
THE EVENT ANY OF THE FOREGOING SHALL OCCUR.
______________
TABLE OF CONTENTS
Page
Company.......................... 5
Management's Discussion And Analysis............. 5
2003 Management Outlook................... 6
2003 Release....................... 8
Officers, Directors And Key Advisors...............
9
Sources And Use Of Proceeds.................. 14
The Offering....................... 15
Description Of Preferred Shares.................. 17
Risk Factors........................ 19
Production Company..................... 23
Motion Pictures Listing / Log Lines...............
25
Financials......................... 27
Exhibits......................... 28
THE COMPANY
Canon Films Corporation is an independent film company. Our
unique advantage as boutique independent film company in an
industry dominated by few large studios, is our interest in
the latest empirical research that allows us to take
advantage of any dynamic economic shifts in the motion
picture industry.
Canon Film Corporation, (a California Corporation) manages,
executive produces and distribute full-length motion
pictures with offices in Santa Monica and Irvine
California.
The company has two business divisions, the film production
division and film distribution division.
MANAGEMENT'S DISCUSSION AND ANALYSIS
PRODUCTION DIVISION
The film production division hires the most qualified
production company, director and producer to acquire the
rights to good books or scripts. The production company
under contract pre-sells the potential movie in most major
film markets in the world including American Film Market in
Santa Monica, Marche du Film in Cannes, France and Mifed in
Milan, Italy. The objective of the pre-sales activities to
establish a 45 - 55% minimum pre-sales contract on the film
before we commit fund to production.
In a recent paper titled Film Finance and the Distribution
of Earnings (July 18 2002) Frank W. Rusco of the U.S.
General Accounting Office and W. David Walls of University
of Calgary, concluded that the entire distribution of film
earning seems to be changed for projects filtered by pre-
sales agreement.. These filtered projects, the studies
shows have lower probability of un-profitability compared
to theatrical-contract films.
The current production schedule for 2003 include a sword,
science and sorcery challenge in the tradition of "CONAN"
and the "LORD OF THE RINGS". The film title THONGOR.
The script is based on one of the popular series of books
by Lin Carter. THONGOR - The Wizard of Lemuria. This epic
story cast the forces of good over evil. (see appendix)
The next film on schedule is WALTER'S PURPLE HEART. This is
a supernatural love
story about a young man named Walter, who after being
killed in the Vietnam War, is
reincarnated into the present day body of a 23-year-old
slacker named Michael, and through
Michael, goes on a quest to right the wrong of this
preventable death.(see appendix)
DISTRIBUTION DIVISION
The distribution division partners with distribution
companies to acquire finished and
unfinished film projects. The failure rate for single
purpose corporation formed to make
a specific movie, and whose sole asset is the copyright to
that movie are high. However
this provides excellent opportunities for our distribution
division to acquire the best
uncompleted films or completed films seeking distribution
deals at competitive prices.
We provide capital to finish the projects and release the
films through our distribution
network. This division is scheduled to release 15 films in
2003. (See appendix)
2003 SECONDARY MARKET OUTLOOK
The future of the video marketplace is heading towards "On-
Demand" programming, and is creating more demand for movies
than ever before. With On-Demand programming video stores
may become less relevant to movie consumers. On-Demand
video is like having a hotel movie demand system in every
TV household, where one selects a movie from a list, and
watches it when they choose.
Current changes taking place in the video industry include
a shift from the VHS to DVD format. Soon the industry will
be more equally balanced between both formats. Blockbuster
reported $799 million in DVD rentals in 2001, compared with
$289 million the previous year, a 176% jump. It is
projected by the end of this year 2002, DVD rentals will
represent 40% of Blockbuster's rental.
The Consumer Electronics Association reports a decline in
VCR purchase and DVD penetration of 30% and rising.
Consumers have embraced DVD technology at an unheard of
rates. By the beginning of 2001, DVD players were 20% of
U.S. homes, an acceptance rate twice as fast as VCR's
experienced, said the industry association.
The enhanced quality and reduced production cost of the
digital format will boost profits for secondary market
films.
The Frank Rusco and W. David Walls study compared the
standard theatrical (TH) SAG contract and the small
independent (LB) SAG contract. Of the (LB) films that were
completed, only 20 percent had box-office earnings - the
remaining 80 percent of completed LB contracts did have
secondary market income. Of all films in the sample known
to have release, 44 percent of the released films had box
office earnings and these films earned 97.7 percent of all
income from secondary markets. *
Canon Films Corporation pre-sells a majority of our
productions, acquires completed and uncompleted films best
suited for secondary market release and most importantly
have an ongoing program for United States theatrical
release for selected films. The growth of "On-Demand"
programming will enhance profitability.
* See Table 1: Residual Earning Regressions (page 29)
2003 RELEASE
The company will release a full-length feature film based
on a best-seller book titled WHITE RUSH GREEN FIRE by Mark
McGrrity. White Rush is an action thriller that Mr. James
Ellroy, author of L.A. Confidential wrote "Call McGarrity's
high-octane thriller The Treasure of the Sierra Madre of
the nineties: a brutal exploration of the corrosive effects
of greed. Maybe the best dope-sleaze epic-tabloid timely,
sexy-sweaty, vibrating with vampire venality".
White Rush was screened in MIFED Milan on November 4th - 8th
2002 and is currently scheduled to screen at the 23rd Annual
American Film Market on February 19th. The action packed
film stars Louis Mandylor from last summers biggest
independent box office hit "My Fat Big Greek Wedding" and
Judd Nelson.
Full Cast and Crew for "White Rush"
Louis Mandylor Bill "Chick" Cicciolino
Judd Nelson Brain Nathanson
Deborah Zoe Arlene
Director
Mark Lester
Executive Producer
Art Kingsley Okun
Martin Barab
Producer
Dana Dubovsky
Cinematography
Ken Blakey
Second Unit Director
Assistant Director
Rachel Dickson
Mitch Kelleher
Anthone Kountz
Film Editing
Don Aaron
Production Design
Oliver French
Special Effects
Josh Hakian
Visit www.whiterush.net To View A Free Trailer
OFFICERS, DIRECTORS AND KEY ADVISORS
The table below sets forth certain information concerning
each executive officer and director of the Company
Canon Trust Film Corp.
Name Age Position
Mr. Art Okun (1) (2) (3) 46
President/CEO/CFO
Ms. Amy Layton (2) 44 Secretary Treasurer
Mr. Ric Gallaher(2) 47 Vice President
Operations
(1) Member of audit committee
(2) Member of management committee
(3) Member Board of Director
Mr. Art Okun
Art Okun is the President and Principal of Canon Securities
LLC. He has been a registered representative since 1992
with N. Y. Life Securities and has had principal experience
since 1993 in Fixed Income, Private Placement offerings and
Equities. Mr. Okun is a 1984 graduate from Augsburg College
in Minneapolis, Minnesota with a degree in Economics and
Finance. Mr. Okun holds a Principal's Supervisory Series 24
license, General Securities Series 7, Financial and
Operations Principal Series 27, Series 63, California
Insurance Agent License, and he is a Chartered Financial
Analyst Candidate. (CFA)
Mr. Okun is affiliated with Canon Securities Trust and a
fiduciary for both the Broker Dealer and issuer. He has
successfully participated in the funding of many fixed
income bonds and (9) private placement offerings raising
over $25 million.
Mr. Ric Gallaher
Ric Gallaher acts as a liaison between the Movie and the
investors. During his college years he worked in a local TV
station as a cameraman before moving to California in 1974
to pursue a music career. The 70's found Ric Performing in
venues that included the famous Cow Palace, Bill Graham's
Winterland, and Golden Gate Park where he served as a
singer, songwriter and guitarist for some of the most
talented musicians in the world. Mr. Gallaher was a
contracted staff composer for Columbia Pictures for two
years and has numerous films to his credit; including "King
of the Gypsies" (Dino DeLaurentis 1977), "Punchline" (Tom
Hanks) and "Celloso" (2000 South American).
Mr. Gallaher has composed songs for the Pointer Sisters,
wrote the Title Cut for Timmy T's 2nd worldwide album, and
has written, performed and produced music for TV and major
motion pictures for over 25 years.
Mr. Gallaher also holds a securities Principal's
Supervisory Series 39 license along with Series 22 and 63
licenses. With his music background and securities
background Ric provides a clear bridge between Show and
Business. (*MC-400 Rep)
ADVISORY BOARD
TECHNICAL ADVISORY BOARD
Mr. Anthony Cannella
Mr. Cannella has been involved with over 100 motion
pictures in his career covering 25 years. He has directed
two feature films (Sierra Quest, for PM Entertainment, and
Rule No. 3 for Arrow Entertainment) and been Assistant
Director, Co-writer or Producer on 24 other films. As a
film mixer and post-production supervisor, Mr. Cannella has
133 films to his credit.
Born in Pittsburgh, Pa., Anthony moved to Las Vegas out of
high school in 1974 and began a career as a recording
engineer in commercial advertising and music. He moved to
Los Angeles in 1980 to expand his interest into films and
post-production work. Mr. Cannella has 14 gold records to
his credit as a music-recording engineer for Epic and
Capital Records and worked with Michael Jackson as his
personal engineer for 2 years. Mr. Cannella is currently
producing and Co-directing a series for Showtime call "The
Voyeur". This series will air 27 episodes in the United
States.
Mr. Richard McHugh
Mr. Richard (Rich) McHugh grew up in New York City and has
seized every opportunity to expand his creative and
business horizons as an accomplished musician of both
individual songs and production soundtracks. In his
prosperous career, Rich's talents have effortlessly spanned
the fields of TV Commercial Productions, including
McDonald's, Burger King, Chevrolet, Bordens, Schafer Beer;
Hit Broadway Show Productions, including "A Chorus Line";
Video Productions, including the highly successful workout
video series "Crunch" (5 years, 130 episodes), "Yoga Zone"
(60 shows), "Playboy" (many productions); major Network TV
Productions, including "Brooklyn Bridge" (CBS), "A Year in
a Life", "Sisters", and "Hollywood Safari" (14 episodes);
and Feature Film Productions, including "Moscow on the
Hudson" (Robin Williams), "Three Fugitives" (Nick
Nolte/Martin Short), "Mystic Pizza" (Julia Roberts), "Dream
Team" (Michael Keaton). His most recent films include
"Escape Under Pressure", starring Rob Lowe, "Shark in a
Bottle", starring Ben Gazarra and Danny Knucci from
"Titanic". Rich recently completed an action Sci-Fi film
titled "Epoch", starring Ryan O Neal and Brian Keith.
In addition to his business talents, Rich is deeply
committed to community service, working with 15 children
weekly. His valuable and extraordinarily diversified
background, coupled with an uncompromising sense of
integrity, and a charismatic personality bring a positive,
vibrant and essential creative element to Canon Trust Film
Corp.
David L. Kilmer
Mr. Kilmer's extensive experience in advertising,
investment banking and film financing brings a wealth of
resources to the CTFC's Advisory Board.
Dave has enjoyed a prosperous career in the art community
as both an independent and commercial artist. He was the
head illustrator for the prestigious ad agency Grant
Jacoby, Inc. for 14 years. In 1977, Dave's work was
included in the hard cover edition of "The Top 100 Artists
Of The Century", published by the Society of Illustrators,
New York. As the youngest artist ever recognized by the
Society, millions of art aficionados saw his work during a
worldwide tour featuring the works of, among others, James
Lovell and Norman Rockwell.
Dave also possesses a well-developed understanding of the
film finance industry, having served as both Executive
Producer on two feature length motion pictures and as a
securities broker since 1995. Mr. Kilmer holds a Series 39
Supervisory license, along with Series 22 and 63 Brokerage
licenses.
SCIENTIFIC ADVISORY BOARD
Arthur De Vany is Professor in the Department of Economics
and the Institute for Mathematical Behavioral Sciences at
the University of California, Irvine where he teaches a
course called The Movie Business. He is author of more
than 100 scientific articles and books in economics and the
dynamics of social learning. His research on the movie
business
is widely reported in The Wall Street Journal, The New
Yorker, The Los Angeles Times, La Stampa, and many other
publications and considered to be the leading research on
this complex and poorly understood industry. He is the
winner of the Mallen Prize for Distinguished Research in
motion pictures and is the author of the movie chapter in
the forthcoming Handbook of the Economics of Art and
Culture.
Dr. Arthur De Vany
Professor
Economics and Institute for Mathematical Behavioral
Sciences
University of California Irvine
BOARD OF DIRECTORS
The member includes two or more members selected by the
chairman and or president.
BOARD COMMITTEES
The Board of Directors has a standing Audit Committee. The
Audit Committee oversees each motion picture budget and
accounting process, and recommends to the Executive members
the appointment of an independent public accountant for
each movie project. The committee reviews the scope and
fees of each motion picture audit and reviews the results
with the auditors. Further, it reviews accounting practices
and policies of each project with the auditor and the
adequacy of the accounting and financial controls of the
project(s) and submits recommendations to the Executive
members regarding any oversight and compliance with
accounting principles and legal requirements.
INDEPENDENT ACCOUNTING FIRM/POLICIES
Canon Trust Film Corp. engages the services of an
independent accounting and auditing firm. The objective of
the audit is to lead to the expression of an opinion with
respect to the financial statements. At least annually, the
accounting firm will give an auditor's opinion of each
trust account accompanied by financial statements.
Canon Trust Film Corp maintains the right to co-mingle net
proceeds from the offering and replace scripts or projects
when deemed financially advantageous towards profit
maximization.
George Brenner, CPA (A
Professional Corporation)
10680 West Pico Boulevard, Suite
260
Los Angeles, California 90064.
(310) 202-6445
KEYMAN INSURANCE
To assure business continuity and the stated management's
discussion and analysis objectives, CSL and CTFC has a
$2,500,000 (two and half million dollar) key-man insurance
policy.
MANAGEMENT COMMITTEE
The Board of Directors has a standing Management Committee.
The Management Committee oversees each motion picture
filming, production, post-production and distribution
process. The management committee members in association
with the production companies select projects included in
our offering. The cardinal yardstick for selecting any film
project is the commercial viability to mass audiences
around the world.
FIDUCIARY RESPONSIBILITY
The subscription agreement makes management accountable to
the investors as a fiduciary. Therefore, we must always act
with integrity and good faith, and exercise due diligence
in conducting the business of the trust and in resolving
conflict of interest, subject to certain limitation set
forth in the offering memorandum and subscription
agreement. Fiduciary responsibility to investors, includes
a duty of loyalty as well as reasonable standard of care.
The Employee Retirement Income Security Act of 1974
specifically imposes and defines fiduciary duties. This
normally means that the management cannot engage in
activities which might create an interest for itself that
is adverse to that of the trust or investors.
COMPETITIVE ADVANTAGE
The management group and our hired production companies are
experienced in the major areas of the motion picture
industry: Production, Distribution and Finance. Currently
management has the services of a motion pictures director
and producer with over 30 years experience, distribution
division of a 10-year-old company, and 20 years financial
experience from Canon Securities LLC management.
CONFLICT OF INTEREST
Members of either the selling group and or Canon Trust Film
Corp executive board might be members or become members of
the Screen Actors Guild (SAG). These SAG members may
perform duties and receive compensation in accordance to
union scales. The managing members of the selling group as
part of their fiduciary obligation to their clients and
Canon Securities LLC, shall oversee and monitor Canon Trust
Film Corp's Chief Financial Officer's responsibilities.
EXECUTIVE COMPENSATION
At the present time, all of the Company's officers and
directors serve without compensation. Once the company
grows past its current mezzanine stage company, the
officers and directors may be paid commensurate with their
activities, experience and ability.
LEGAL MATTERS
Certain legal matters, including the validity of the
securities being issued, will be passed upon by Snell &
Wilmer LLP. As of the date hereof, the Company has no
pending litigation.
William Tolin Gay
Snell & Wilmer LLP
Irvine, California 92614 - 7060
(949) 253 - 2700
email: wtgay@swlaw.com
PRINCIPAL SHAREHOLDERS
The following table sets forth the numbers or percentage of
outstanding interest ownership owned by each of the
Company's officers, directors and advisor affiliates. The
persons listed below have sole or shared, direct or
indirect, voting and/or investment power with respect to
the shares indicated.
NAMES
INTEREST OWNED
VOTING CONTROL
Art Kingsley Okun
61%
61%
Ric Gallaher
10%
10%
Canon Securities LLC
15%
15%
Others
14%
14%
SOURCES AND USE OF PROCEEDS
The principal use of the net proceeds from this Offering
will be to: (i) the acquisition of completed and
uncompleted movies; (ii) Additional photography; (iii)
Distribution and marketing; (iv) administrative expenses.
The net proceeds to the Company from the sales of the
preferred shares, after all related expenses are estimated
to be approximately
$4,450,000.
The following table sets forth the anticipated application
of the estimated net proceeds from this Offering. Many of
the figures set forth are estimated and based on certain
assumptions and cannot be precisely calculated at this
time.
Maximum Proceeds
Assuming 1780
Shares
Sources:
Gross Offering Proceeds
$5,000,000
Offering Expenses:
Placement Agent Commission(1)
400,000
Administrative Expenses and Working Capital (2)
150,000
Total Sources (Net Offering Proceeds)
$4,450,000
(1) The shares are being offered on a "Best Effort"
basis through participation members (the Placement
Agent") of the National Association of Securities
Dealers, Inc ("NASD") who will be paid a 8%
commission on each share sold by such Placement Agent.
(2) The Placement Agent will also receive a non-
accountable expense allowance equal to 3% of the
purchased price of each share sold by such Placement
Agent. (Non-accountable expense allowance and
wholesaling commission includes other expenses, such
as legal, accounting and printing, mailing, postage,
communication)
THE OFFERING
Securities Offered Preferred Shares.
Number of Shares Offered The total number of
shares issued is
1780.
Price Per Share $2,500.
Minimum Subscription Per Investor $2,500 (1
share), additional
investments can be made
in increments of $2,500.
Maximum Subscription Per New Investor 4 Shares.
Closing Final closing
expected to occur no
later than December 30,
2003.
At the discretion of the
company the offering may
be extended to no later
than December 30, 2004.
Use of Proceeds The principal use
of the net proceeds
from the offering
(approximately
$4,500,000) will be for
(i) the acquisition of
completed and
uncompleted movies; (ii)
Additional photography;
(iii) Distribution and
marketing; (iv)
administrative expenses
(see source and use of
proceeds).
Subscriptions by IRA's and Other Plans: In the case of IRA's or
Keogh Plans, before investing in the preferred shares, Canon
Trust management and other fiduciaries of IRA's, Keogh Plans and
qualified retirement plans should carefully consider whether such
an investment is consistent with their fiduciary
responsibilities. Canon Trust Management and other fiduciaries
of IRA's that are set up as part of a plan sponsored and
maintained by an employer, as well as Trustees and fiduciaries of
Keogh Plans under which employees, in addition to self-employed
individuals, are participants, are governed by the fiduciary
responsibility provisions of the Employment Retirement Income
Security Act of 1974 ("ERISA"). An investment in a plan covered
by ERISA must be made in accordance with the general obligation
of fiduciaries under ERISA to discharge their duties (i) for the
exclusive purpose of providing benefits to participants and their
beneficiaries, (ii) with the same standard of care that would be
exercised by a prudent man acting under similar circumstances,
(iii) in such a manner as to diversify the investments of the
plan, unless it is clearly prudent not to do so, and (iv) in
accordance with documents establishing the plan.
Depending on the particular circumstances involved, a fiduciary's
decision to cause a plan covered by ERISA to invest in the
preferred shares could be viewed as inconsistent with one or more
of these criteria, and therefore a violation of the fiduciary's
duty. However, in the case of a plan which provides for
individual accounts (for example, an IRA or self-directed Keogh
Plan) and which permits a participant or beneficiary to exercise
independent control over the assets in its individual account,
the plan's fiduciaries will not be liable for any investment loss
or for any breach that results from such exercise of control by
the participant or beneficiary. Beyond their duty to comply with
the general fiduciary obligations set out above, Canon Trust
Management and other fiduciaries should be aware that an
investment in the preferred shares may raise special fiduciary
problems under ERISA.
(This space intentionally left blank)
DESCRIPTION OF PREFERRED SHARES
Issue The Certificates of
Designation of preferred
shares, which set forth
all rights, preference
and privileges within.
Maturity Each share matures on
January 31st
2008.
Interest Payment Cash interest of 6.25%
annually, Interest
payment is due June 30th
and December 30th of each
year.
Assets-backed Interest Payment An escrow
account is established at
First Trust Bank to pay
the interest payments
every six months. The
account is funded on the
last business week of
May and November
respectively each year
for the value of all
outstanding preferred
shares interest payment.
The company might also
designate portions of
its current U. S.
government bonds as
assets to back the
interest payments of all
outstanding preferred
shares annually.
Call Date All preferred shares are
callable
after January 31st, 2006.
Due Diligence Each prospective
investor will have
the opportunity to ask
questions of, or request
any additional
information including
marketing, distribution
strategies and
distribution agreements,
from the Company prior
to subscribing.
Plan of Distribution The Preferred
shares are offered on
a "Best Effort" basis by
Canon Securities, LLC,
member of the NASD.
Subscription Documents The investment may
only be made
Pursuant to a
Subscription Agreement
and Customer Account
Agreement that contains,
among other matters,
certain representations
and warranties by the
Company and certain
representation and
warranties by each
investor. Copies of the
Subscription Agreement
and Customer
Subscription Agreement,
and federal tax forms W-
8 and W-9 are included
in this Prospectus. This
investment is IRA
qualified.
Subscription All subscription
checks should be
made payable to: Canon
Trust Film Corporation.
C/o First Bank - Newport
Beach, CA.
Restricted Transferability The
transferability of the share is
restricted. See "Risk
Factors" - Restriction
on Transfer and
Liquidity; No Public
Market exists for these
shares.
Voting The preferred shares
holder has no
Voting Rights, except as
otherwise provided by
California General
Corporation Law.
Forward-Looking Statement
All statements other than statement of historical fact
included in this prospectus, including, without limitation,
statement under "Risk Factors," Management's Discussion and
Analysis of Financial Condition and Results of Operation"
and "Business" regarding the company's anticipated
financial position, business strategy and plans and
objectives of management of the company for future
operations, are forward-looking statements. When used in
this prospectus, words such as "anticipated," "believe,"
estimate," "expect," "intend" and similar expressions, as
they relate to the Company or its management, identify
forward-looking statements. Such forward-looking statements
are based on the beliefs of the company's management.
Actual results could differ materially from those
contemplated by the forward-looking statements as a result
of certain factors, such as those disclosed under "Risk
Factors" including, but not limited to, changes in
operation performance, project schedules, demand for
feature length movies, and other technical and economic
factors. Such statements reflect the current views of the
company with respect to future events and are subject to
these and other risk, uncertainties and assumptions
relating to the operations, results of operations, growth
strategy and liquidity of the Company. All subsequent
written and oral forward-looking statement attributable to
the Company or person acting on its behalf are expressly
qualified in their entirety by this paragraph.
RISK FACTORS
Before you invest in the preferred share, you should be
aware of the various risks associated with an investment in
the share, including those described below. You should
consider carefully these risk factors together with all of
the other information included in this prospectus before
you decide to purchase the share.
This prospectus contains forward-looking statements within
the meaning of section 27A of the Securities Act of 1933,
as amended and Section 21E of the Securities Exchange Act
of 1934, as amended. The outcome of the events described in
these forward-looking statements is subject to risk and
accrual outcome could differ materially. The section
entitled "Risk Factors," "Management's Discussion And
Analysis," and "Officers, Director And Key Advisors" as
well as those discussed elsewhere in this prospectus
contains a discussion of some of the factors that could
contribute to these differences.
Competition
The motion picture industry involves a substantial degree
of risk. Each motion picture is an individual artistic
work, and its commercial success is primarily determined by
audience reaction, which is unpredictable. Accordingly,
there can be no assurance as to the financial success of
these refurbished films. The motion picture industry is
extremely competitive. The films will vie for audience
attention with many other motion pictures, many of which
will be released by companies having financial resources
that are substantially greater than those of the Company.
Competition for attractive projects and for experienced and
competent directors, producers, script writers and other
vendors whose service are essential to the success of the
development of the project is significant among companies
having objectives similar to those of the Company, many of
which have greater financial and other resources than the
Company. Motion picture companies continue to increase the
number of films they release each year, and this could also
adversely affect the performance of the films.
Nature of the Motion Picture Industry
The acquisition of movie scripts, development, casting,
production and post-production is an inexact science and
involves a high degree of risk. Studies show that log
openings is the best determinate of high grossing movies.
The Company's will acquire, refurbished and distribute
movies and search for films that produce extreme revenue
events.
Film Distribution
The Company currently has alliances with third party
distribution entities and may license certain distribution
rights in foreign territories through output arrangements
or on a film-by-film basis. The competition for screens in
the U.S. and internationally is often great, as the major
motion picture firms are able to commit far greater
resources towards the distribution of their films and tie
up numerous screens for their premium pictures. The Company
must commit to spending a significant amount on the P&A
costs associated with its films. The Company recognizes
that such amount is far below the industry average for
typical P&A cost and therefore such budget may not be
enough to sustain a marketing campaign for any given film
(see: "Source and Use of Proceeds" "Officers, Directors
and Key Advisors" "Production companies).
History of Marginal Profitability
The Company has a history of limited working capital. The
Company in the future may seek or secure debt, debentures
and or equity from other sources in order to service this
debt. There is no assurance that any other such financings
will be available, or that they will be available on terms
favorable to the Company.
Risk of Production and Distribution of Films
The cost of producing and distributing motion pictures has
generally increased in recent years and may continue to
increase in the future. The Company may use the monies from
all offering to produce and distribute full-length fixed
budget pictures, that have production and distribution
budgets that are significantly less than the major industry
average. There are numerous risks involved in producing and
distributing films and, even if a film is produced, it may
not be done on a timely or cost-effective basis and once
distributed there is no guarantee that an audience will
accept the film. A significant time may elapse (10 - 15
months) between the expenditure of funds by the Company and
the receipt of corresponding revenues. Although management
has identified previously used distribution channels (see
production companies), there can be no assurance that the
Company will recover its investment in the film.
Mezzanine Stage Company
The company is a rapidly growing mezzanine stage film firm
and each project should be considered as a development
stage project. Accordingly, the Company has limited
operating history upon which an evaluation of its prospects
can be based. Such prospect must be considered in light of
the risk, expenses and difficulties frequently encountered
in the establishment of a new business as well as the risk,
expenses and difficulties encountered in the shift to a
company with operating revenues. The operations/projects
will be subject to all risks inherent in the establishment
of a new business enterprise.
International Operations
A substantial portion of the films revenue will be derived
from the international distribution of motion pictures.
These operations are subject to all risks attendant to
international operation, including changes in foreign
governments, international political and economic
conditions, exchange control laws, imposition of quotas,
and other factors beyond the Company's control. Some
foreign governments impose significant restrictions on the
content of motion pictures which may wholly or partially
restrict distribution of certain programs in various media
or in a particular territory. The Republic of France has
recently set standards limiting the amount of foreign
entertainment that is broadcast in French theaters and on
French television.
Labor Considerations
Most actors in the film industry who will be involved with
the film are members of the Screen Actors Guild, which
bargains collectively with producers on an industry-wide
basis from time to time. There is no assurance that labor
difficulties will not adversely affect the production of
the film.
Technological Developments
New technological developments will undoubtedly occur which
will change the way films are made, distributed or
exhibited. It is not possible to accurately forecast the
effect that recent and future technological development
will have on the value of the films.
No Public Market/Limitation on Transferability
There is no public trading market for the share of the
Company. There is no intention of the Company to seek to
provide a public market for the Company's shares in the
future.
No Guarantee of Returns
Investing in films is a high-risk business. No assurance
can be made or given that any purchaser of the share will
realize any return on investment or that he, she or it will
not lose his, her or its entire investment. For this
reason, each prospective investor should read this Offering
Memorandum, including the risk factors discussed herein,
and all exhibits carefully and should consult with his, her
or its own attorney, accountant or business advisor prior
to making an investment decision.
Interest and Principal Payments
Purchasers of the shares offered hereby are entitled to
receive 6.25% interest plus principal re-payments. The
Company reserves the right to change its distribution
schedule at its sole discretion. The shares are callable
after 36 months (January 31st 2006). The company will setup
an escrow account or designate portions of its current U.S.
government bonds as assets to back the interest cost of
these preferred shares. However, due to the business stage
of the Company and the uncertainties associated with its
operations during that period of time, there can be no
assurance that the Company will make those interest and/or
principal payments on time, fund the escrow account
intended to pay interest on these preferred shares or, in
the event of sustaining significant losses from its
operations, at any time in the future. Investors who
anticipate the need for interest from their investment in
the Company should not purchase these preferred shares
offered hereby.
Financial Projections
The financial projections set forth in the materials
accompanying this offering memorandum have been developed
by the Company based wholly upon assumptions about
potential revenues and expenses, and such assumptions may
prove to be in part or wholly materially incorrect.
Investors should understand that such financial projections
are estimates only, subject to all the uncertainties of
projections for start-up enterprises, and that the actual
results of operations may be materially different from the
results shown or implied by such projections. Accordingly,
the Company may and reserves the right, without the
obligation to notify prior recipients of this memorandum,
to add, delete and amend the information contained herein
to reflect changes in the economy, industry, business
conditions and its operations.
Best Effort Offering
No assurance can be given that these preferred shares being
offered hereby will be sold.
(This space intentionally left blank)
PRODUCTION COMPANY
AMERICAN WORLD PICTURES - Woodland Hills, CA*
Mark L. Lester - President
As writer, producer and director Mark L. Lester has worked
on many high-action films, including some of the world's
biggest box office draws.
His directorial expertise has garnered praise for such
films as Arnold Schwarzenegger's box office mega hit
Commando with Alyssa Milano who also stars in Public Enemy
# 1; Showdown In Little Tokyo, starring Dolph Lundgren and
the late Brandon Lee in his first major role and Stephen
King's supernatural thriller Firestarter. The prestigious
cast of Firestarter includes George C. Scott, Louise
Fletcher, Art Carney, David Keith, Drew Barrymore and
Martin Sheen.
Having amassed credits on more than 30 films, Lester
founded and became President of American World Pictures in
1992, devoting himself to developing and producing films in
the same genre he helped to popularize. Since the company's
formation, Lester has created an impressive body of work in
a relatively short period of time. He has produced and
directed the action/thriller Night of the Running Man,
starring Scott Glenn and Andrew McCarthy; Extreme Justice,
a suspense drama also starring Glenn and Lou Diamond
Phillips; Public Enemy # 1, the HBO feature with Eric
Roberts and featuring Theresa Russell as the notorious Ma
Barker; The Ex ; with Nick Mancuso and Yancy Butler, about
a woman terrorizing her ex-husband's family; Double Take, a
suspense thriller starring Craig Sheffer and Costas
Mandylor; Misbegotten, a suspense thriller starring Kevin
Dillion and Lysette Anthony; The Base, a military action
picture starring Mark Dacascos, action picture Hitman's Run
starring Eric Roberts, a suspense thriller Blowback
starring Mario Van Peebles, James Remar, suspense thriller
Sacrifice starring Michael Madsen and the recently
completed the sequel The Base II - Guilty As Charged
starring Antonio Sabato Jr.
Lester's career as a director was lunched when his first
feature project, the highly acclaimed Twighlight of the
Mayas, won top honors at the Venice Film Festival. His
first breakout film was Roller Boogie, starring Linda Blair
in a story about the disco era. Included in his earlier
credits are such non-stop action films as Steel Arena,
about the demolition deby, Truck Stop Women, Bobbie Jo and
the Outlaws and Stunts.
Among Lester's other directing and producing credits are
Armed and Dangerous, starring John Candy and Meg Ryan; and
two frighteningly prophetic films about the state of
society - Class of 1984, which starring Perry King, Roddy
McDowel and Michael J Fox in his first role, and the sequel
Class of 1999, with Malcom McDowell and Stacy Keach.
In Addition to earning international critical acclaim,
Class of 1984 was an excellent U.S. box office draw and
became the top grossing film in many major markets around
the world. Commando was also an international success
story, grossing over 120 million dollars.
* AWP is currently under contract to produce and distribute
our title - WHITE RUSH--GREEN FIRE
Mark Lester - Filmography
TITLES
PRODUCER/DIRECT
OR
STARRING
THE BASE II
Producer/
Director
Antonio Sabato Jr./
James Remar
SACRIFICE
Producer/
Director
Michael
Madsen/Jamiew
Luner/Bokeem
Woodbine/Joshua
Leonard
BLOWBACK
Producer/
Director
Mario Van Peebles/
James Remar
HITMAN'S RUN
Producer/
Director
Eric Roberts
THE BASE *
Producer/
Director
Mark Dacascos/Paula
Trickey
MISBEGOTTEN
Producer/
Director
Kevin Dillion/
Lysette Anthony
DOUBLE TAKE
Producer/
Director
Craig Sheffer/
Costas Mandylor
THE EX
Producer/
Director
Mick Mancuso/Yancy
Butler
PUBLIC ENEMY #
1
Producer/
Director
Theresa Russell/Eric
Roberts
NIGHT OF THE
RUNNING MAN
Producer/
Director
Scott Glenn/
Andrew McCarthy
EXTREME
JUSTICE
Director
Lou Diamond Philips/
Scott GLenn
SHOWDOWN IN
LITTLE TOKYO
Producer/
Director
Dolph
Lundgren/Brandon
Lee/Tia Carrera
CLASS OF 1999
Producer/
Director
Malcom McDowall/
Stacy Keach
ARMED AND
DANGEROUS
Director
John Candy/Meg Ryan
COMMANDO *
Director
Arnold
Schwartzenegger/
Bill Paxton
FIRESTARTER *
Director
George C. Scott/
Martin Sheen/
Drew Berrymore
CLASS OF 1984
*
Writer/Producer
/ Director
Michael J Fox/Perry
King/
Roddy McDowall
THE FUNHOUSE
Executive
Producer
Kevin Conway/
Elizabeth Berrodge
ROLLER BOOGIE
Director
Linda Blair
GOLD OF THE
AMAZON WOMEN
Director
Anita Ekberg/Bo
Swenson
STUNTS
Director
Robert
Forster/Joanna
Cassidy
BOBBI JO AND
THE OUTLAW
Producer/
Director
Linda Carter
WHITE HOUSE
MADNESS
Producer/
Director
TRUCK STOP
WOMEN
Producer/
Director
STEEL ARENA
Writer/Producer
/ Director
TWILIGHT OF
THE MAYAS
Producer
Canon Trust Film Corporation
2003 Release
Project: WHITE RUSH Budget: $1.6
MILLION
Type: Film Genre:
Action /Thriller
Novel: Mark McGarrity Screenplay:
C. Courtney Joyner
Producer: Dana Dubovsky, Peter Klauser Exec. Producer
Peter Klauser,
Art Okun
Director: Mark Lester Cast: TBC
Start Date: September 2002 Delivery Date:
Status: In Production
Publisher: William Morrow &
Company
Production
Company: American World Pictures
21700 Oxnard Street
Suite 660
Woodland Hills CA 91367
Log Line: A group of young tourist couples come across a
drug deal gone bad while on vacation. One of them
is a cop. He convinces them to keep the money and
he'll add to it with plans to fence the coke in
the ghetto. But when they return to the city,
they find out in the worst way, someone wants the
cash and stash back. The drug Lord has hired a
cold blooded but beautiful assassin to retrieve
the cash and the dope and she enjoys her work.
Canon Trust Film Corporation
Motion Pictures Project Listing
Project: THONGOR Budget: $1.8
MILLION
Type: Film Genre:
Sword & Sorcery
Novel & Comics: Lin Carter Screenplay:
C. Courtney Joyner
Producer: Dana Dubovsky Exec. Producer : Mark
Lester
Director: TBC Cast: TBC
Start Date: April 2003 Delivery Date:
Status: Pre-Production
Publisher:
Production
Company: American World Pictures
21700 Oxnard Street
Suite 660
Woodland Hills CA 91367
Log Line: A rousing adventure of sword & sorcery of
Thongor, the mightiest warrior of the ancient
continent of Lemuria. The ancient dragon kings
have deemed that the hour is right to regain
their dominance over earth and only Thongor and
his companions, aided by the science and magic of
the wizard Sharajsha, stand between mankind and
the night of doom!
Canon Trust Film Corporation
Motion Pictures Project Listing
Project: WALTER'S PURPLE HEART Budget: $1.8
MILLION
Type: Film Genre:
Drama
Novel: Catherine R. Hyde Screenplay:
Catherine R. Hyde
Producer: Mark Lester Exec. Producer
Mark Lester
Director: TBC Cast: TBC
Start Date: September 2003 Delivery Date:
Release Date: Publisher: Simon &
Schuster
Production
Company: American World Pictures
21700 Oxnard Street
Suite 660
Woodland Hills CA 91367
Log Line: A supernatural love story about a young man named
Walter, who after being killed in the Vietnam
War, is reincarnated into the present day body of
a 23-year-old slacker named Michael, and through
Michael, goes on a quest to right the wrong of
this preventable death.
FINANCIAL STATEMENT
Audited financial statement is available upon request. You
may request our most recent
financials by sending a letter of request to our corporate
headquarters located at:
Attn: Corporate Accountant
Canon Film Trust Corporation
2951 28th Street
Suite 2015
Santa Monica, California 90405
Please allow four to six weeks to receive audited
financials in the mails. All request are
processed through our independent accounting firm office
located in Los Angeles.
George Brenner, CPA (A
Professional Corporation)
10680 West Pico Boulevard, Suite
260
Los Angeles, California 90064.
EXHIBITS
Residual Earnings Regressions
Estimator
Variables
OLS
MAD
Constant
6.097
4.409
(0.359)
(0.143)
[0.451]
[0.378]
LB Contract Dummy
2.542
4.597
(0.638)
(0.249)
[0.749]
[0.997]
Log Box Office
0.415
0.529
(0.022)
(0.008)
[0.027]
[0.022]
Log Box Office * LB
Contract Dummy
- -0.327
- -0.462
(0.051)
(0.019)
[0.064]
[0.079]
R2
0.528
0.468
Notes: The LB contract dummy variable takes on a
value of unity for films
produced under the Screen Actors Guild low-budget
contract, and zero for
films produced under the Screen Actors Guild
theatrical contract. Estimated standard errors
are in brackets. For least squares, the robust
standard error are White's (White, 1980). For
quartile regressions, the robust standard errors
were obtained from bootstrapping with 500
replication. The pseudo-R2 is reported for the
quartile regression.
Source:
Film Finance and The Distribution of Earnings
Frank W Rusco
U. S. General Accounting Office
Washington, DC 20548
W. David Walls
Department of Economics
University of Calgary
Calgary, Alberta T2N 1N4
2