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The packaging and production of STILL comes at an opportune time in the marketplace.  With the advent of COVID-19, a large shift to streaming content and distribution has taken place.  A substantially increased home viewership, combined with a freeze in content productions from worldwide lockdowns, have opened several opportunities for STILL, if timed correctly.

 

We are targeting a domestic streaming strategy, along with an international territories sales push.  As a horror/thriller, STILL is positioned to be a commercial success.  By structuring our financing strategy using a combination of film tax incentives on both the federal and state level, pre-sales on a range of territories and private equity, we’ve designed an investment that accounts for a recoupment of about 80% of the original investment before expenditure.  This approach was chosen to maximize the film as a desirable investment opportunity.

PRODUCTION OVERVIEW

Principal Photography Target: September 2021

Principal Locations:  New York State

FINANCING PLAN HIGHLIGHTS

 

  • Federal level tax incentives allow for a 100% deduction of film investment in an applicable year

  • State level tax incentives (NYS) provide a further 25% refundable tax credit on all applicable production and post-production costs

  • A targeted 25%-30% pre-sales goal in foreign territories to further mitigate private equity risk

 

 

Given this, we have adopted the following film financing model to maximize success.

 

SOFT MONEY INCENTIVES

 

Film production is highly tax advantageous.  The US government has designed federal level tax code to incentivize investors for investing in domestic film production,  Furthermore, states incentivize these productions with their own state-level tax credits, with the intent to lure productions to bolster their local economies.  We plan to utilize both, as described below.

 

STATE LEVEL FILM TAX INCENTIVES:

STILL is scheduled to shoot in New York State.  New York State offers incentives to film  producers in the form of a refundable tax credit.  The NYS Film Tax Credit program is designed to attract film and television production and post-production to the State, to support the growth of the film industry in New York.

 

The NYS Tax Credit program enables production companies to recover 25% of qualified production and post-production costs back from the State.  As a refundable credit, the production company can receive a refund that can be allocated toward investor recoupment.  This is highly advantageous when compared to other state incentives that come in the form of a transferable credit, which would incur heavy administrative fees to ultimately reallocate back to investor recoupment.

 

The NYS Tax Credit is applicable to the B-T-L costs of production.  A-T-L costs, which include producer, director, writer and cast, are not included.  A current rough estimation of the credit for STILL is about $500,000.

 

FEDERAL LEVEL FILM TAX INCENTIVES:

On the federal level, film investments are also considered highly advantageous.  Given film production spurs the creation of many jobs, the IRS has code to keep productions domestic and have instituted IRC Section 168 & IRC Section 181 in the federal tax code.  

 

IRC Section 168 states that investment in a motion picture shot in the US is 100% tax deductible for the investor in the year the film is "put into service”.  An investor may deduct the money which is invested in a film or television production from tax payer passive income earned. If the investor is actively involved in the operation of the production, he or she may deduct the amount of investment from active income earned. Investors can be either individuals or businesses.

 

Although IRC Section 168 supersedes IRC Section 181, it is still worth mentioning as Congress has retroactively revived Section 181 multiple times, most recently being 2020.  Under Section 181, Investors may elect to deduct any production costs they paid or incurred, up to $15 million, as a deductible expense for the tax year such costs were paid or incurred in a qualified film or television production (as opposed to Section 168, which allows it on the year of distribution).  Any person that provided the capital to purchase and fund the various expenditures that went into producing the film or television production or any person who purchases the production before its initial release or broadcast, may be eligible for a Section 181 tax deduction.  

 

Tax rebates and incentives for money spent on film or television production within a particular state, combined with the benefits of Section 168 allow an investor to greatly minimize their risk. For example, if a tax payer is in the thirty-seven percent (37%) tax bracket and a qualifying film is shot in New York which has a tax credit up to thirty percent (30%) on qualified expenses, an investor will be eligible to recoup around fifty five percent (55%) of their investment in a qualifying production on tax incentives alone.  This recoupment can be realized when the film is put into service.

 

For reference, an investor who participates at $3M, would get back just over $1.6M from these incentives alone.  This alone reduces the risk on investment already by about 50%.

 

 

PRESALES

 

To further mitigate risk, our plan is to begin early engagement with the proper sales agent for this type of film.  Pre-sales allow financing in exchange for certain distribution rights within a particular foreign territory, usually in the form of minimum guarantees (MGs) or an advance on future royalty income. Senior debt, including bank loans and gap/mezzanine financing are usually used to cash flow these pre-sales.  But by utilizing equity to cash flow these contracts instead, we can forgo the heavy administrative fees of senior debt while allowing these contracts to instead count towards recoupment of initial investment instead.

 

Our target pre-sales amount is to hit around 25%-30% of our production budget.  This allows us to test the market’s desirability for the film with the pre-sales process as well as obtain enough foreign commitments to further reduce the risk of investment for investors to about 80%.  The goal is to keep major territories with the largest possibility for back-end profit open for the finished film, as having the finished product greatly increases the potential for net profit for these territories.

PRIVATE EQUITY

 

Our strategy includes a combination of the above mentioned financing vehicles, along with private equity.  Our intent isn’t to just raise the private equity to finance and green light the film, but rather have it to maximize our leverage in negotiating the above financing vehicles, before deciding to spend any private equity.  So our target is utilizing a matrix of pre-sales, soft money incentives and equity.  To mitigate risk and maximize value, we are targeting the following approach, with the assumption that we have 100% of the production budget as private equity:

 

  • 50% soft money tax incentives (NYS film tax credit refund & federal level deductions)

  • 30% pre-sales (keeping high level territories open, like domestic)

  • 20% private equity spend (80% initial investment recouped with above)

 

The ideal situation is for us to actually have 100% of equity in place and utilize the pre-sales and soft money tax incentives as recoupment vehicles towards all equity players.  Relying on a matrix of tax incentives and pre-sales would normally require them being collateralized via senior debt.  Having 100% equity would allow us to forgo incurring a wide range of fees that are associated with using senior debt to cover the targeted 50% in pre-sales and refundable tax credits, until they materialize.

 

There are also challenges in acquiring 100% financing as equity, so utilizing a 50% equity/50% senior debt matrix is an alternate option.  The refundable tax credit, along with all pre-sale commitments would be collateralized and ultimately go towards paying down the senior loan.  In addition, we would raise the overall budget to accommodate all the additional fees associated with closing on the senior loan, including any other required elements for this, such as a completion bond.

 

Inherently, there is more strength in having a finished film in the marketplace to sell.  The potential upside in profit greatly increases with being able to take a finished product to the marketplace, as opposed to pre-selling based off the idea/concept and overall packaging.  By targeting the above matrix of financing, we can maximize mitigating risk by pre-selling certain territories, while trying to keep others, such as domestic, open for the finished product.

 

We’ll coordinate and make decisions with our private equity financiers through each possibility in the capital financing process, to determine the best matrix for everyone involved.

 

 

DISTRIBUTION STRATEGY

 

Given today’s environment and the impact COVID-19 has had on the industry, the demand for premium content is at an all-time high, but the methods of consuming that have shifted.

 

Therefore, our primary target with STILL is OTT/VOD, and its derivatives, in the domestic market.  This includes SVOD (subscription video on demand), TVOD (transactional) and AVOD (add-sponsored).

 

Ancillary distribution vehicles, including broadcast & cable tv, and licensing to non-theatrical platforms such as airlines are further forms of distribution that would be a part of the domestic distributor’s portfolio.

 

Foreign markets that haven’t been accounted for via pre-sales, become additional markets for profit.  Usually the distributors will ask for all-rights within their respective territory.

 

Our production budget has been designed to minimize costs, but allocate what is necessary to maximize the value of the film to the marketplace via properly packaged elements, primarily including bankable talent and focusing on a story in a high-impact genre that has appeal across several territories.

 

We will work with the best sales agent attainable for this production.  In-tandem with our capital raise, we will work with the agent to identify the best elements needed to maximize obtaining pre-sales for the film.  Attaching a bankable star will maximize our ability to engage in pre-sales and obtaining MGs from various distributors.

 

STILL MOVIE LLC has the development financing in place to move ahead with these processes.  By now retaining private equity in holding, we can maximize our leverage in our conversations with distributors, when it comes to negotiating deals to cover our pre-sales goals.  This approach includes:

  • Obtaining and working with the proper sales agent for this type of film

  • The sales agent begins by properly assessing all markets and engages with different distributors throughout all territories by bringing our proposed film to determine what on-screen talent would maximize their interests and offers

  • Concurrently, we will work with the agent to utilize this data in determining what bankable talent would best fit for the film, both financially but more importantly, creatively

  • Once determined, we will make every effort with our casting director to attract the desired talent for the project and get their commitment to the film

  • Using these commitments, we will close on any pre-sales contracts that are desirable to us to achieve to the 30% pre-sales ratio we have set as our goal

 

With our pre-sales, pre-approved state tax credits and equity in place, we would proceed to produce the film.  Once completed, the following would take place:

 

  • We would deliver to each pre-sold territory, as per each contracts’ requirements, to fulfill and collect on our MGs

  • Work with our sales agent to now take the finished film to all other remaining territories and maximize getting further MGs, based on the final finished film

 

RECOUPMENT WATERFALL

 

EQUITY INVESTMENT RECOUPMENT OVERVIEW

  • Equity Investors recoup on a pro rata pari passu basis 100% of their initial investment.  This will include about a 50% recoupment from the refundable stat tax credit and the collection of pre-sales upon delivering the film.

  • An additional 20% premium on a pro rata pari passu basis

  • Net profit participation, in accordance with the investor’s respective ownership of net back-end profits

DISCLAIMER

  1. This presentation represents forward-looking statements: These statements involve known and unknown risks, uncertainties, assumptions and other factors that may cause the Picture’s actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. 
     

  2. Risk Factors: Despite the potential for high returns, film investments are a big risk. There’s the potential to lose all your investment if the film doesn’t get made or doesn’t find distribution. No matter how good the script and execution, we’re exposed to risks, even at the distribution level, some of which developments arise from a threat due to piracy and competition. 
     

  3. No offer to sell securities: The presentation does not constitute an offer to sell or the solicitation of an offer to buy any securities. This business plan is a guide to investors, other third parties as well as the management team.