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10-Nov-2009
Quarterly Report
Description of Business
We are a development stage, independent motion picture company organized on March 18, 2005. We develop, produce, market and plan to distribute low-budget feature-length motion pictures captured and edited using high-definition digital video technologies. We plan to distribute our films directly to the international and domestic markets on DVDs sold on the Internet. We have not had any operating revenues from operations. We have only one employee, Avery Pack, who is our sole officer, director and controlling shareholder.
Our principal offices are located at 35 JA Ely Blvd, Suite 110, Dania Beach, Florida 33004. Our telephone number is (305) 600-4449.
Plan of Operation and Recent Developments
In April 2007, we began production on our first feature-length film, Foreign Devils. Principal photography was completed between June 2, 2007 and June 22, 2007. The film has been completed and was accepted as an official selection of the Palm Beach International Film Festival. Foreign Devils had its world premiere at the festival on April 14, 2008. Additionally, Foreign Devils was accepted as an official selection of the Little Rock Film Festival and was presented in May 2008. On September 6, 2008, Foreign Devils was screened, as an official selection, at the Rome (GA) International Film Festival. The film's New York City premiere took place on October 20, 2008, as an official selection of the HD Fest, digital film festival. The screening took place, in New York City, at the Sony Wonder Technology Lab High Definition Theater.
We employ high-definition digital video technologies and an amateur talent pool to create our films. The cost of development of each of our film properties ranges from $75,000 to $100,000. Production of a film property includes the completion of all stages of production: development, pre-production, production, and post-production. We plan to distribute our films to the international and domestic markets on in-house produced DVDs to be sold on the Internet through distinct websites developed for each film. We are investigating additional distribution options for our first completed film, Foreign Devils. We also plan to produce additional film properties.
We plan to develop a website for each film we produce. The website will be for promotion, delivering marketing information for the film, and distribution, offering an opportunity to purchase a copy of the film through e-commerce functionality. We plan to develop the websites so that customers can purchase DVDs of our films directly from the websites.
On January 10, 2008, we formed, as a wholly owned subsidiary, Abbreviated Pictures Corp. This new corporation will focus on the development of short-form films, rather than feature-length films, that are suitable for Internet distribution. A short-form film can be anywhere between 30 seconds and 30 minutes in length.
We have not generated any revenue since our inception.
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. In addition to competing with the major film studios that dominate the motion picture industry, we will also compete with numerous independent motion picture production companies, television networks, and pay television systems. Virtually all of our competitors are significantly larger than we are, have been in business much longer than we have, and have significantly more resources at their disposal. Some of the production and distribution companies we will compete with are Troma Entertainment Inc.; Lions Gate Entertainment Corp.; THINKFilm Company; Newmarket Entertainment Group; and Dimension Films, a division of The Walt Disney Company.
The motion picture industry
The "major" studios dominate the motion picture industry in the United States by controlling the distribution of films that they produce as well as films that are produced by "independent" studios. These major studios include among others: The Walt Disney Company; Sony Pictures Entertainment; Paramount Pictures; Twentieth Century Fox Film Corporation; Universal Studios; and Warner Bros. Entertainment.
Historically, the major studios financed, produced and distributed the vast majority of American-made motion pictures. Today, much of the financing and distribution of major motion pictures remains in the control of these major studios. But as many of the major studios 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 motion pictures.
We believe that two convergent trends in the production and distribution of motion pictures have led to an opportunity for our proposed low-budget independent films to be profitably exploited: the increasing commercial success of independent films and the increasing commercial success of DVDs.
In the last decade, the distribution of independent films, films produced
by independent production companies outside of the major studios, brought
increasing commercial success to the major studios that were distributing them.
We believe that what was once considered an uncharacteristic and uncommon
success, high-grossing independent films such films as The Blair Witch Project
(1999), have become a more consistent trend. And recently, independent films
that appeal to specialized audiences are regularly becoming high-grossing films,
such as My Big Fat Greek Wedding (2002), Open Water (2003), and The Passion
of the Christ (2004). We believe that increasing commercial success of
independent films that cater to specific audiences or specialized tastes is an
indication that consumer tastes have proven broader than what the major studios
can fulfill, and an increasing demand exists for low-budget, independent films
in both the international and domestic markets.
As the demand for a diversity of motion pictures has expanded, so too has audience market with the commercial success of the DVD format. The popular and inexpensive DVD format has expanded the audience market beyond traditional theatrical distribution. The high production, marketing, and distribution costs for films produced for theatrical distribution economically require that theatrically distributed films have the broadest possible audience appeal. However, with the expansion of the audience market to include the vast audience watching motion pictures at home on DVD, we believe less general, more specific audiences can be sought, targeted and profitably exploited with low-budget motion pictures geared toward such audiences.
Although the Writers Guild of America currently defines a low-budget motion picture as one produced for less than $1.2 million, the vast majority of low-budget motion pictures or "B-movies" are produced with considerably smaller budgets. Historically, "B-movie" referred to a film's status as a cheaply produced, second film of a double bill, following the "A-movie," or feature attraction. Today, "B-movies," sometimes referred to as "genre" films, are independent motion pictures, which for budgetary, thematic, and aesthetic reasons, deviate from the accepted cinematic mainstream, conforming to a different standard of production quality. Traditionally, B-movies fall into the realm of the horror, science fiction, action/adventure, urban, or exploitation genres - thus referred to as genre films. However, we use an expanded definition of genre film to include genre niches, meaning any low-budget film that is geared to a specific or specialized audience, such as motion pictures for women, young adults, or even a specific ethnic or religious audience. We do not plan to limit ourselves to the production of genre films within any single genre, but rather to the production of low-budget motion pictures geared to any specialized audience that we believe can be effectively targeted. We plan to concentrate on the production and distribution of these genre films that will range between $75,000 and $100,000 in production costs. We believe that by employing emerging high-definition digital video technologies and an amateur talent pool, we can create unique and viable genre films in this budget range.
The availability of digital video ("DV") has created the possibility for unprecedented low-budget motion picture production, alleviating many technical and financial burdens of filmmaking. DV is video technology that treats video and audio as digital information. With this technology, motion picture image and audio data can be stored, manipulated, and relayed with the ease of any other computer data.
Since its introduction to consumers in 1994, DV has rapidly grown in popularity. And more recently, consumer-priced DV has grown dramatically in capability allowing the capture of images of quality comparable to traditional 35-millimeter film production, which is the standard for major studio theatrical film production.
Generally, DV offers several benefits including:
· extremely portable, inexpensive cameras and media;
· excellent images and color reproduction of appropriate resolution for
broadcast television, DVD, as well as theatrical distribution;
· CD quality digital sound recording;
· the ability to use a high speed connection to transmit video and audio
digitally in and out of a computer or another DV device, avoiding any loss of
quality with transfers and copies;
· and affordable, desktop or laptop computer-based editing systems.
In addition to the direct advantages, we believe DV film production also offers several indirect production advantages over traditional film production. Producing with DV, a filmmaker can view and even edit filmed results immediately as opposed to traditional film production in which processing is required to view "dailies" - the raw, unedited footage that are reviewed each day as a film is being produced. With DV, adjustments can be made immediately, as opposed to only later, upon review of processed film, as is with traditional film production and dailies. Also, the light sensitivity of DV equipment allows for the use of smaller, less expensive and less electrically demanding lighting set-ups. This creates a set or shooting environment that is easier to set up, reconfigure and transport. And additionally, since DV is captured onto inexpensive tapes or directly onto a computer hard drive, the cost of digital "film stock" is practically negligible and, therefore, there is little additional media cost in capturing as many takes, re-takes or set-ups as are required to complete a scene. In traditional film production, each frame of film shot and processed has a measurable and significant cost, which would make a comparably free-form production strategy cost prohibitive. Overall, DV allows for small, direct, and inexpensive productions.
A recent advancement in DV has been the introduction of low-cost high-definition digital video ("HD") cameras. Major studios are using HD digital video more frequently in the production of theatrical motion pictures. Until recently, HD equipment and production has been comparable in cost and complexity to traditional 35-millimeter production, though offering the production and post-production advantages of the digital production workflow. In the last year, though, this equipment has become available at the prices of standard definition ("SD") digital video, the affordable digital video technology previously and currently available to consumers and filmmakers. HD digital video has six times more lines of resolution than SD digital video and, therefore, offers a much sharper picture. The increased resolution makes HD an appropriate medium for films intended to be projected in theatres, as a high resolution source is required in order to create a detailed large projection.
Although the resolution limitations of standard television and DVD are below that of the capabilities of HD, so when producing a low budget motion picture that is ultimately destined for DVD only distribution SD technology may be sufficient, we believe that the advantages of capturing in HD, as opposed to SD, will offer more options for our productions as they could be released on a HD DVD format, have theatrical distribution as a digital projection or be delivered electronically in HD format. HD resolution televisions are currently available and being adopted by consumers, though currently not as ubiquitous as SD televisions. And though the current DVD format is not HD, the latest DVD formats are. Therefore, we believe producing motion pictures in HD digital video is prudent practice to insure future marketability and compatibility of our motion pictures without significantly increasing the budgets of our productions as they can be distributed on current and near-future DVD or electronic distribution technologies.
Overall, we believe that digital and video technology advances are allowing cinema-quality productions to be made for under $100,000. Recent breakthroughs in technology have made it possible to capture movies using digital video cameras with fidelity akin to that of 35-millimeter film for distribution on DVDs, television or even to project them digitally in theaters with no loss of image quality.
Motion picture development and production
Motion picture production consists of four steps: development, pre-production, production and post-production.
Development begins when we commission, acquire, or develop a screenplay. Once in possession of the screenplay, we seek commitments from a director, the principal cast members and other creative personnel. Also, a tentative production schedule and budget is prepared.
Pre-production begins when the screenplay is completed and the commitments have been arranged. During pre-production, we engage creative personnel to the extent not previously committed; finalize the filming schedule and production budget; obtain insurance; establish filming locations; secure whatever studio facilities are required; and, if necessary, secure completion guarantees.
Production begins when principal photography begins and ends when principal photography ends. We limit production to less than one month in order to control costs and limit obligations on amateur and voluntary creative personnel.
Post-production begins upon completion of principal photography. During post-production, we edit the motion picture, add audio effects, create computer-generated effects, titling, etc., which completes the motion picture and prepares it for DVD production.
From development to post-production, we use various strategies, in addition to the use of digital technologies, so that the budgets of our motion pictures remain within the range of $75,000 to $100,000.
Foremost, we are selective with the underlying stories of our motion pictures. The stories must have practical limitations on the number of characters, locations, and action in order to be successfully executed within our proposed budget.
We use a combination of paid and voluntary, amateur talent for all aspects of production: actors and stunt men, production staff including camera and sound crews and set workers, as well as wardrobe, makeup, and special effects personnel. We create our productions with the use of creative and technical personnel that are willing to contribute their talents, for less than standard industry compensation, out of an enthusiasm to participate in the productions, the opportunity to gain experience in various aspects of motion picture and digital video production, or to promote their particular skill, such as wardrobe design, special effects, or makeup, in one of our motion pictures. Our productions are an informal and collaborative working environment, in which all personnel will have the potential to offer significant contributions to the productions. We promote our productions as a venue for emerging creative talent, or those seeking a production environment receptive to experimental ideas. We advertise position openings and solicitations for talent on our websites, industry websites, trade publications as well as local publications, schools, and universities in areas in which we will shoot on location. There is no assurance that we will be able to attract talented personnel to contribute to our productions, especially for less than standard industry compensation.
Whenever practical, we shoot our productions on location, at an existing site, eliminating the cost of renting or leasing studio space for the construction of sets or artificial environments. When shooting on location, we employ local talent for various positions so that we are not entirely responsible for travel and living expenses of personnel. The mobility and flexibility of the digital technologies allow for easy set-ups under a wide variety of conditions and lessen the general need for controlled environments.
DVD is a form of optical disc storage technology. Essentially, DVDs can be considered bigger, faster CDs that can hold cinema-like video and audio that is better than CD-quality, as well as computer data. DVD has widespread support from all major electronics companies, all major computer hardware companies, and all major music and movie studios.
According to figures compiled by the Digital Entertainment Group (DEG), based on data from retailers and manufacturers, 33 million DVD players were sold to U.S. consumers in 2007. More than 12 million DVD players were sold in the fourth quarter alone. The DEG is a Los Angeles-based, industry-funded nonprofit corporation that advocates and promotes the benefits of the DVD format while providing updated information to the media and the retail trade.
Since the launch of the DVD format, hardware and media to consumers, more than 230 million DVD players (including set-top and portable DVD players, home-theater-in-a-box systems, TV/DVD and DVD/VCR combination players) have been sold, bringing the number of DVD households to 90 million (adjusting for households with more than one player). Approximately 60 percent of these owners now have more than one player. Further, the DEG estimated that more than 80 percent of households in the United States alone had at least one DVD player at year-end 2007.
As far as media spending according to the DEG, U.S. consumers spent $23.4 billion renting and buying DVDs in 2007.
Some features of DVDs include:
· over two hours of high-quality digital video;
· support for wide screen movies on standard or wide screen TVs;
· up to eight tracks of digital audio, each with as many as eight
channels which can be used to encode multiple languages, voice-overs, etc;
· automatic branching of video for multiple story lines or ratings on
one disc;
· up to nine camera angles, which allow for different viewpoints to be
selected during playback;
· menus and simple interactive features;
· instant rewind and fast-forward;
· instant search to title, chapter, music track, and time code;
· durable media that does not wear from playing, only from physical
damage;
· compact size that is easy to handle, store, and ship;
· and replication that is cheaper than tapes.
DVD production has two basic phases: development and replication.
Development - DVD video development has three basic parts: encoding; authoring, which includes design, layout, and testing; and pre-mastering. The entire development process is sometimes referred to as authoring. Many service bureaus provide development facilities. However, with the availability of consumer priced technologies, we intend to set up in-house authoring facilities.
Since we plan to create our motion pictures using exclusively a digital production environment, our motion pictures will be in a format immediately suitable for DVD authoring without any additional preparation.
We plan to author our DVDs by employing desktop computers. Prices for software and hardware have dropped very rapidly and continue to drop, to where DVDs can be authored on a desktop computer system that costs less than $1,000.
Replication and Duplication - Replication is usually a separate job done by large plants. Large production run DVD replication equipment typically costs millions of dollars. A variety of machines are used to create a glass master, create metal stamping masters, stamp disc layers in hydraulic molds, apply reflective layers, bond layers together, print labels, and insert discs in packages.
For smaller production runs, it is considerably cheaper to use DVD duplication technology. We anticipate that we will be able to meet our customer demand by setting up our own DVD duplication facility. By employing this method, we will be able to maintain a catalog of films and be able to print titles on demand. For very popular titles, we may be required to employ a service bureau for replication.
The Internet industry
Our Internet sites will offer our motion pictures for sale to the Internet
consumer on DVD. We believe that by selling the DVDs of our films on the
Internet, we can circumnavigate the traditional methods of film distribution:
theatrical release, video rental, and television. We believe that with a proper
marketing campaign, our Internet sites can develop into an effective means to
distribute our motion pictures.
We plan to create individual Internet sites for each film that we produce. These marketing and e-commerce sites will contain promotional information for each film, including story synopses, still images from the motion picture and behind-the-scenes production stills, short streaming video clips from the films; as well as offer visitors the opportunity to purchase a copy of the film on DVD directly from the website from an online store. If we have produced more than one film, the online store will make available for sale all films that we have produced. Additionally, if we have produced more than one film, each film marketing site will be interconnected to other film marketing sites in order to promote multiple film properties to a single visitor.
To draw visitors to our Internet sites, we plan to implement a targeted online marketing campaign that will attempt to achieve visibility in places where our prospective audience is likely to be browsing. Since our motion pictures will be targeted to specific audiences, our online campaign will be tailored to target sites that we believe generate traffic from Internet users who would be interested in our motion pictures.
We intend to promote our website on search engines and directories such as Google, (www.google.com), Yahoo (www.yahoo.com) and those powered by the Open Directory Project (www.dmoz.org). As a result, when a potential visitor types in key words related to B-movies, genre films, DVDs, or the thematic or narrative content of one of our films, we will try to have our Internet site for our films listed as a search result. There is no assurance that we can obtain such status.
Patents
We hold no patents. We are the registered owner of the Internet domain name www.amalgapix.com.
Government and Other Regulation
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. At this time, we do not plan to follow the practice of submitting our pictures for ratings.
There is 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.
Labor Laws
At the present time, we do not expect to employ members of guilds or unions. Many individuals associated with motion picture productions, including actors, writers and directors, are members of guilds or unions, which bargain collectively with producers on an industry-wide basis from time to time. Our operations will not be dependent upon our compliance with the provisions of collective bargaining agreements governing relationships with these guilds and unions. However, in the future, we may change our operations to employ members of guilds or unions, and the extent to which the existence of collective bargaining agreements may affect us in the future is not currently determinable.
Employees
We currently have one employee, our president and chief executive officer, Mr. Avery Pack. We utilize independent contractors, consultants, and other creative personnel from time to time to assist in developing, producing and promoting our motion pictures and Internet properties. Independent contractors are generally paid on a commission, hourly or job-related basis, depending on the services being performed.
The following critical accounting policies are important to the portrayal of our company's financial condition and results.
Revenue is recognized when earned rather than when received. Sales are recognized when a product is delivered or shipped to the customer and all material conditions relating to the sale have been substantially performed. Expenses are charged to operations as incurred.
Under certain circumstances, the Company recognizes revenue in accordance with the provisions of Statement of Financial Accounting Standards No. 139 and American Institute of Certified Public Accountants Statement of Position 00-2 (collectively referred to as "SOP 00-2").
Capitalized film costs consist of investments in films which include the unamortized costs of completed films which we have produced. Capitalized costs include all direct production and financing costs, and production overhead. Costs of acquiring and producing films are amortized using the individual-film-forecast method, whereby these costs are amortized and participation and residual costs are accrued in the proportion that current year's revenue bears to management's estimate of ultimate revenue at the beginning of the current year expected to be recognized from the exploitation, exhibition or sale of the films.
Ultimate revenue includes estimates over a period not to exceed ten years following the date of initial release. Capitalized film costs are stated at the lower of amortized cost or estimated fair value on an individual film basis. The valuation of investment in films is reviewed on a title-by-title basis, when an event or changes in circumstances indicate that the fair value of a film is less than its unamortized cost. The fair value of the film is determined using management's future revenue and cost estimates. Additional amortization is recorded in the amount by which the unamortized costs exceed the estimated fair value of the film. Estimates of future revenue involve measurement uncertainty and it is therefore possible that reductions in the carrying value of investment in films may be required as a consequence of changes in management's future revenue estimates.
Results of Operations
The following discussion and analysis provides information our management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read in conjunction with the financial statements and footnotes that appear elsewhere in this report.
The following discussion and analysis provides information our management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read in conjunction with the financial statements and footnotes that appear elsewhere in this report.
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