PROSPECTUS SUPPLEMENT FILED PURSUANT TO RULE 424(b)(3)
(TO PROSPECTUS DATED DECEMBER 18, 2003) REGISTRATION NO. 333-106291
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 June 16, 2004. 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.
This offering is limited to residents of Canada and Europe.
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 6.
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 December 18, 2003.
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Table Of Contents
Page
Prospectus Summary......................................................... 3
Risk Factors............................................................... 6
Forward-Looking Statements................................................. 10
Use of Proceeds............................................................ 11
Determination of Offering Price............................................ 12
Market For Common Equity and Related Stockholder Matters................... 13
Management's Discussion and Analysis or Plan of Operation.................. 14
Description Of Business.................................................... 17
Description Of Property.................................................... 31
Legal Proceedings.......................................................... 31
Directors, Executive Officers, Promoters And Control Persons............... 31
Executive Compensation..................................................... 32
Certain Relationships And Related Transactions............................. 33
Security Ownership Of Certain Beneficial Owners And Management............. 33
Plan Of Distribution....................................................... 34
Description Of The Securities.............................................. 34
Disclosure Of Commission Position On Indemnification For
Securities Act Liabilities................................................. 35
Legal Matters.............................................................. 35
Experts.................................................................... 35
Available Information...................................................... 35
INDEX TO FINANCIAL STATEMENTS.............................................. F-1
2
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.
If we are successful in selling all of the shares offered hereby, 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, including stories, treatments, plays and teleplays. If we sell
only 75% of the shares we do not intend to spend anything on film development
other than $35,000 for the acquisition of options. If we sell only 50% or 25%
of the shares, then the amount we plan to spend on options will be
respectively reduced to $15,000 or $5,000. If we sell only 10% of the shares
offered hereby, we will use all the proceeds to pay for offering expenses and
none for film development.
Option prices are driven by a multitude of market forces, including the
notoriety of the author, the quality of the literary property, the motivations
of the parties, the length of the option, whether the option is exclusive, the
purchase price of the literary property on exercise of the option, and other
benefits conveyed to the author, either tangible or intangible. Our budget will
be $5,000 per property. The duration of the option, exclusivity and other such
variables are all negotiable.
To date, we have acquired two 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.
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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 for filmed entertainment remains strong. 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 AMP, 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.
4
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 June 16, 2004
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 September 30, 2003, we have not generated any revenue or
earnings from operations. As of September 30, 2003, our financial data is as
follows:
As at or for the period ended
September 30, 2003 (inception to
September 30, 2003)
OPERATIONS DATA
Revenue: $ 0
General and administrative expenses: $ 17,904
Loss for the period: $ 17,904
Loss per share: $ 0.00
BALANCE SHEET DATA
Total assets: $ 52
Total liabilities: $ 22,156
Common stock $ 800
Accumulated (deficit) $ (17,904)
Shareholder's equity: $ (22,104)
Total liabilities and shareholders' equity: $ 52
5
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 earned no
revenue since inception. We had a loss from February 27, 2003 (inception) to
September 30, 2003 of $17,904. We had negative net worth of $22,104 and our
working capital deficit was $5,733 as of September 30, 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, WE MAY BE REQUIRED TO
SUBSTANTIALLY REVISE OUR BUSINESS PLAN OR CEASE OPERATIONS.
Since inception, AMP has earned no revenue, and 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 AMP's
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 we may
substantially revise our business plan or cease operations. We do not
anticipate merging with another company within the next 12 months of
operations.
WE WILL NOT RETURN YOUR INVESTMENT, EVEN IF THIS OFFERING DOES NOT RAISE A
SUFFICIENT AMOUNT OF CAPITAL.
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 that 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 FINANCING FOR THE PRODUCTION OF A MOTION PICTURE WE MAY
BE REQUIRED TO SUBSTANTIALLY REVISE OUR BUSINESS PLAN OR CEASE OPERATIONS.
6
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 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.
IF OUR FILMS ARE NOT COMMERCIALLY SUCCESSFUL, OUR BUSINESS WILL SUFFER.
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.
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For any of these reasons, the films that we produce may be commercially
unsuccessful and our business may suffer.
IF WE ARE UNABLE TO SECURE DISTRIBUTION FOR OUR FILMS, OUR BUSINESS WILL SUFFER.
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.
OUR OFFICERS, DIRECTORS AND PRINCIPAL SECURITY HOLDERS OWN A CONTROLLING
PERCENTAGE OF OUR OUTSTANDING SHARES OF COMMON STOCK, WHICH ALLOWS THEM TO MAKE
KEY DECISIONS OR EFFECT TRANSACTIONS WITHOUT FURTHER SHAREHOLDER APPROVAL.
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.
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SINCE OUR OFFICERS AND DIRECTORS ARE NOT LOCATED IN THE UNITED STATES,
INVESTORS WOULD HAVE DIFFICULTY EFFECTING LEGAL SERVICE THEM.
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.
9
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.
10
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% 10%
Offering Sold Offering Sold Offering Sold Offering Sold Offering Sold
------------- ------------- ------------- ------------- -------------
Gross Proceeds $175,000 $131,250 $87,500 $43,750 $17,500
Less offering Expenses $20,000 $20,000 $20,000 $20,000 $20,000
Net Proceeds $155,000 $111,250 $67,500 $23,750 $0
Use of Proceeds
Debt Repayment $10,000 $10,000 $10,000 $10,000 $0
Options to Acquire $35,000 $35,000 $15,000 $5,000 $0
Literary Properties
Motion Picture Development $40,000 $0 $0 $0 $0
Motion Picture $35,000 $35,000 $15,000 $5,000 $0
Pre-production
Equipment $5,000 $5,000 $5,000 $0 $0
Marketing Expenses $10,000 $6,250 $2,500 $0 $0
Working Capital $20,000 $20,000 $20,000 $6,750 $0
Total Use of Proceeds $155,000 $111,250 $67,500 $23,750 $0
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 (including
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stories, treatments, plays and teleplays) 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 first proceeds from this
offering, after paying offering expenses, 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 31).
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
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.
DILUTION
At September 30, 2003, we had a negative book value of $(22,104) or $(0.00)
per share. Negative book value per share is determined by dividing our total
shareholders' deficit at September 30, 2003, by the number of shares of common
stock outstanding. Without taking into account any changes in negative book
value after September 30, 2003, other than to give effect to the sale of the
1,750,000 shares of common stock offered hereby, and after deducting estimated
offering expenses, the pro forma book value at September 30, 2003, would have
been approximately $132,896 or $0.01 per share. This amount represents an
immediate dilution to new investors of $0.09 per share. The following table
illustrates this dilution per share:
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Assumed public offering price per share $0.10
Negative Book value per share at June 30, 2003 $(0.01)
Increase per share attributable to new investors 0.02
Book value per share after offering 0.01
Book value dilution per share to new investors $0.09
Assuming the sale of 75%, 50%, 25% and 10% of the Offering, the pro forma
book value at September 30, 2003, would have been approximately $89,146 or
$0.01 per share, $45,396 or $0.01 per share, $1,646 or $0.00 per share, and
$(22,104) or $(0.00) per share, representing a book value dilution per share
to new investors of $0.09, $0.09, $0.10 and $0.10 per share respectively.
The following table summarizes, as of September 30, 2003, the difference
between existing shareholders and new investors in this offering with respect
to the number of shares held or purchased from us, the total consideration
paid and the average consideration paid per share, assuming all common shares
offered hereby are sold:
Shares Total Average
Purchased Consideration Price per
Number % Amount % Share
Existing Shareholders 8,000,000 82.05 $800 0.46 $ 0.0001
New investors 1,750,000 17.95 $175,000 99.54 $ 0.10
Total 9,750,000 100.00 $175,800 100.00 $ 0.018
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 Holladay Stock Transfer, Inc., located at
2939 North 67th Place, Scottsdale, Arizona, 85251, telephone (480) 481-3940.
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
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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.
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 September 30,
2003, we have earned no revenue and incurred expenses of $17,904 primarily
related to startup expenses.
As of September 30, 2003, we had working capital deficit of $5,733. Except
for the options to the two screenplays, we have no assets as of September 30,
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
14
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 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. The entrance
15
requirements for each of the named festivals are as follows:
Festival Requirements for Film Submission
Festival de Cannes - produced during the 12 months
preceding the Festival;
- exhibition has been limited
only to country of origin
- not previously exhibited on
the Internet
Sundance Film Festival - not previously broadcast or
shown on the Internet
- cannot have played in more
than two international
festivals
Toronto International Film - Canadian productions
Festival (Canadian Submissions) - completed after in the
preceding year
- not previously screened
commercially in Canada,
publicly telecast or available
on the Internet
Vancouver International Film - Canadian productions or
Festival (Canadian Images coproductions
category) - not previously broadcast
(television or internet) or
screened commercially in
British Columbia
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
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.
16
We presently do not have enough cash to satisfy any future cash requirements.
We estimate that we will need to sell a minimum of $131,250 or 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 to pay for offering expenses, and it will be necessary for us to seek
additional financing.
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.
AMP Productions, Ltd.
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
17
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 AMP may be evaluated. There can 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.
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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
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
19
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
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.
20
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 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
21
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
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
22
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 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
23
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
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.
24
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, 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 us
will be important for our success. 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
25
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 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.
26
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 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.
27
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
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
28
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 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,
29
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 us, 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.
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
30
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,
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
31
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., 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.
32
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 AMP Productions 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 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)
33
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 AMP.
Plan Of Distribution
Currently, we plan to sell our common stock through Fidel Thomas, who is our
Vice-President and Secretary. 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;
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 will not
participate in selling or offering securities for any issuer more than once
every twelve months.
This offering is limited only to residents of Canada and Europe.
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.
34
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.
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
35
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.
36
INDEX TO FINANCIAL STATEMENTS
AMP PRODUCTIONS, LTD.
Pages
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS FOR THE THREE MONTH PERIOD ENDED
SEPTEMBER 30, 2003 (UNAUDITED)
Balance Sheet for period ended September 30, 2003............................F-2
Statement of Operations and Deficit for period ended September 30, 2003......F-3
Statement of Cash Flows for period ended September 30, 2003..................F-4
Statement of Stockholders Equity for period ended September 30, 2003.........F-5
Notes to Financial Statements for period ended September 30, 2003...F-6 thru F-9
FINANCIAL STATEMENTS AS OF MARCH 31, 2003
Report of Independent Auditors..............................................F-10
Balance Sheet for year ended March 31, 2003.................................F-11
Statement of Operations and Deficit for year ended March 31, 2003...........F-12
Statement of Cash Flows for year ended March 31, 2003.......................F-13
Statement of Stockholders Equity for year ended Mach 31, 2003...............F-14
Notes to Financial Statements for year ended March 31, 2003.......F-15 thru F-19
F-1
AMP PRODUCTIONS, LTD.
(A development stage company)
Balance Sheet
September 30, 2003
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars)
- --------------------------------------------------------------------------------
September 30 March 31
2003 2003
- --------------------------------------------------------------------------------
ASSETS
Current
Cash and cash equivalents $ 52 $ 5,785
Screenplays - -
- --------------------------------------------------------------------------------
Total assets $ 52 $ 5,785
================================================================================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Liabilities
Current
Accounts payable and accrued liabilities $11,981 $ 8,177
Promissory note and accrued interest 10,175 10,024
- --------------------------------------------------------------------------------
22,156 18,201
- --------------------------------------------------------------------------------
Stockholders' Deficiency
Share capital
Authorized:
100,000,000 common shares with a par value of $0.0001
per share
Issued and outstanding: 8,000,000 800 800
common shares
Additional paid-in capital (5,000) (5,000)
(Deficit) accumulated during the (17,904) (8,216)
development stage
- --------------------------------------------------------------------------------
Total stockholders' equity deficiency (22,104) (12,416)
- --------------------------------------------------------------------------------
Total liabilities and stockholders' $ 52 $ 5,785
deficiency
================================================================================
The accompanying notes are an integral part of these financial statements.
F-2
AMP PRODUCTIONS, LTD.
(A development stage
company)
Statement of Stockholders' Deficiency
For the period from February 27, 2003 (inception) to September 30, 2003
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars)
- -------------------------------------------------------------------------------------------------------------------------------
Deficit
accumulated
Common stock Additional during Total
----------------------------- paid-in development stockholders'
Shares Amount capital stage deficiency
- -------------------------------------------------------------------------------------------------------------------------------
Issuance of common stock for cash
March 3, 2003, $0.0001 per share 8,000,000 $ 800 $ - $ - $ 800
Screenplays transferred - - (5,000) - (5,000)
from a shareholder
Net Loss for the period - - - (8,216) (8,216)
- -------------------------------------------------------------------------------------------------------------------------------
Balance, March 31, 2003 8,000,000 $ 800 $ (5,000) $ (8,216) $ (12,416)
Net Loss for the period - - - (9,688) (9,688)
- -------------------------------------------------------------------------------------------------------------------------------
Balance, September 30, 2003 8,000,000 $ 800 $ (5,000) $ (17,904) $ (22,104)
===============================================================================================================================
The accompanying notes are an integral part of these financial statements.
F-3
AMP PRODUCTIONS, LTD.
(A development stage
company)
Statement of Operations
(Unaudited - Prepared by
Management)
(Expressed in U.S. Dollars)
- --------------------------------------------------------------------------------
Cumulative
Amounts
Since
February 27 February 27
2003 Six 2003
(inception) Months (inception)
to Ended to
September 30 September 30 March 31
2003 2002 2003
- --------------------------------------------------------------------------------
General and administrative
expenses
Accounting $ 5,477 $ 3,827 $ 1,650
Consulting 5,427 - 5,427
Interest 175 151 24
Legal 6,590 5,633 957
Office 235 77 158
- --------------------------------------------------------------------------------
17,904 9,688 8,216
- --------------------------------------------------------------------------------
Loss for the period $ 17,904 $ 9,688 $ 8,216
================================================================================
Loss per share
- basic and diluted $ 0.00 $ 0.00
================================================================================
Weighted average number of
common shares outstanding
- basic and diluted 8,000,000 8,000,000
================================================================================
The accompanying notes are an integral part of these financial statements.
F-4
AMP PRODUCTIONS, LTD.
(A development stage company)
Statement of Cash Flows
(Unaudited - Prepare by
Management)
(Expressed in U.S. Dollars)
- --------------------------------------------------------------------------------
Accumulative
Amounts
Since
February 27 February 27
2003 Three 2003
(inception) Months (inception)
to Ended to
September 30 September 30 March 31
2003 2003 2003
- --------------------------------------------------------------------------------
Cash flows from (used in)
operating activities
Loss for the period $ (17,904) $(9,688) $ (8,216)
Changes in assets and
liabilities:
Increase (decrease) in accounts
payable and 6,981 3,804 3,177
accrued liabilities
- --------------------------------------------------------------------------------
(10,923) (5,884) (5,039)
- --------------------------------------------------------------------------------
Cash flows from financing
activities
Promissory note 10,175 151 10,024
Proceeds from issuance of 800 - 800
common stock
- --------------------------------------------------------------------------------
10,975 151 10,824
- --------------------------------------------------------------------------------
Increase (decrease) in cash and
cash equivalents 52 (5,733) 5,785
Cash and cash equivalents, - 5,785 -
beginning of period
- --------------------------------------------------------------------------------
Cash and cash equivalents, end $ 52 $ 52 $ 5,785
of period
================================================================================
Supplemental information:
Non-cash investing $ (5,000) $ - $(5,000)
activities: Screenplays
================================================================================
The accompanying notes are an integral part of these financial statements.
F-5
AMP PRODUCTIONS, LTD.
(A development stage company)
Notes to Financial Statements
September 30, 2003
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars)
- --------------------------------------------------------------------------------
1. Basis of Presentation
The accompanying financial statements of the Company are
unaudited and include, in the opinion of management, all normal
recurring adjustments necessary to present fairly the balance
sheet as of September 30, 2003, and the related statements of
operations and deficit and cash flows for the periods presented.
These financial statements should be read in conjunction with
AMP Productions' March 31, 2003, audited financial statements
and the related notes thereto.
2. 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.
3. 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
six months ended September 30, 2003.
F-6
3. Significant Accounting Policies (continued)
(d) 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.
(e) Concentration of Credit Risk
The Company places its cash and cash equivalents with high
credit quality financial institutions. As of September 30,
2003, the Company had no balance in a bank beyond insured
limits.
(f) 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.
(g) 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.
(h) 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.
F-7
3. Significant Accounting Policies (continued)
(i) 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 six
months ended September 30, 2003.
(j) 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 six months ended
September 30, 2003.
(k) 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 September 30,
2003. The implementation of SFAS No. 49 does not have any
impact on the Company's financial statements.
In May 2003, the Financial Accounting Standard Board
approved SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and
Equity. SFAS No. 150 establishes standards for how to
classify and measure financial instruments with
characteristics of both liabilities and equity. It
requires financial instruments that fall within its scope
to be classified as liabilities after May 31, 2003 and, for
pre-existing financial instruments, as of July 31, 2003.
The Company does not have any financial instruments that
fall under the guidance of SFAS No. 150 and, therefore, the
adoption dose not have any effect on its financial
statements.
F-8
4. Promissory Note and Accrued Interest, due February 25, 2005
------------------------------------------------------------------------
Principal, unsecured and bearing interest at 3% per annum $ 10,000
Accrued interest 175
------------------------------------------------------------------------
$ 10,175
========================================================================
F-9
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-10
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
Screenplays (Note 5) -
- --------------------------------------------------------------------------------
Total assets $ 5,785
================================================================================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Liabilities
Current
Accounts payable and accrued liabilities $ 8,177
Promissory note and accrued interest 10,024
- --------------------------------------------------------------------------------
18,201
- --------------------------------------------------------------------------------
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
Additional Paid-in capital (5,000)
(Deficit) accumulated during the development stage (8,216)
- --------------------------------------------------------------------------------
Total stockholders' equity deficiency (12,416)
- --------------------------------------------------------------------------------
Total liabilities and stockholders' deficiency $ 5,785
================================================================================
The accompanying notes are an integral part of these financial statements.
F-11
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 Additional during Total
----------------------------- paid-in development stockholders'
Shares Amount capital stage deficiency
- -------------------------------------------------------------------------------------------------------------------------------
Issuance of common stock for cash
March 3, 2003, $0.0001 per share 8,000,000 $ 800 $ - $ - $ 800
Screenplays transferred from a shareholder - - (5,000) - (5,000)
Comprehensive income (loss)
Loss for the period - - - (8,216) (8,216)
- -------------------------------------------------------------------------------------------------------------------------------
Balance, March 31, 2003 8,000,000 $ 800 $(5,000) (8,216) $ (12,416)
===============================================================================================================================
The accompanying notes are an integral part of these financial statements.
F-12
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-13
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
================================================================================
Supplemental Information:
Non-cash investing activities: Screenplays $ (5,000)
================================================================================
The accompanying notes are an integral part of these financial statements.
F-14
AMP PRODUCTIONS, LTD.
(A development stage company)
Statement of Cash Flows
(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.
F-15
2. Significant Accounting Policies (continued)
(d) 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.
(e) 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.
(f) 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.
(g) 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-16
2. Significant Accounting Policies (continued)
(h) 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.
(i) 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.
(j) 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.
(a)
F-17
2. Significant Accounting Policies (continued)
(k) 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 September 30, 2003. The implementation
of SFAS No. 49 does not have any impact on the
Company's 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-18
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 an option, for a period of one year, to acquire all
rights, titles and interests for the above two screenplays.
The consideration for the option of acquisition is $2,500,
with the total consideration for both options being $5,000.
As at March 31, 2003, this amount remained unpaid and is
included in accounts payable and stockholders' equity. In
accordance with SEC Staff Accounting Bulletin 5G: Transfers
of Non-monetary Assets by Promoters or Shareholders, the
asset value of the screenplays is recorded at nil, as it is
the transferor's historical cost.
The purchase prices for the two screenplays will be $10,000
and $20,000, respectively, plus the following contingent
compensations 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-19
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 March 17, 2004, 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.