Item 1A. Risk Factors
Item
1A. Risk Factors
An
investment in our common shares involves a high degree of risk. You should carefully consider the risks described below together with
all of the other information included in this prospectus before making an investment decision. The risks and uncertainties described
below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we may currently deem immaterial,
may become important factors that harm our business, results of operations and financial condition. If any of the following risks actually
occur, our business, results of operations and financial condition could suffer. In that case, the trading price of our common shares
could decline, and you may lose all or part of your investment.
6
Risks
Related to Our Company
We
have had losses, and we cannot assure future profitability.
We
have reported operating losses for fiscal years 2023 and 2024. Our accumulated deficit was approximately $7.3 million at December 31,
2024. We cannot assure you we will continue to operate profitably, and if we cannot, we may not be able to meet our debt service, working
capital requirements, capital expenditure plans, anticipated production slate or other cash needs. Our inability to meet those needs
could have a material adverse effect on our business, results of operations and financial conditions. As of December 31, 2024, the Company
had negative operating capital.
We
face substantial capital requirements and financial risks.
Our
business requires a substantial investment of capital. The production, acquisition and distribution of motion pictures require a
significant amount of capital. A significant amount of time may elapse between our expenditure of funds and the receipt of commercial
revenues from or government contributions to our motion pictures. This time lapse requires us to fund a significant portion of our capital
requirements from our revolving credit facility and from other sources. Although we intend to continue to reduce the risks of our production
exposure through financial contributions from broadcasters, distributors, tax shelters, government and industry programs and studios,
we cannot assure you that we will continue to implement successfully these arrangements or that we will not be subject to substantial
financial risks relating to the production, acquisition, completion and release of future motion pictures and television programs. If
we increase (through internal growth or acquisition) our production slate or our production budgets, we may be required to increase overhead,
make larger up-front payments to talent and consequently bear greater financial risks. Any of the foregoing could have a material adverse
effect on our business, results of operations or financial condition.
Budget
overruns may adversely affect our business. Our business model requires that we be efficient in production of our motion pictures.
Actual motion picture and television production costs often exceed their budget, sometimes significantly. The production, completion
and distribution of motion pictures and television productions are subject to a number of uncertainties, including delays and increased
expenditures due to creative differences among key cast members and other key creative personnel or other disruptions or events beyond
our control. Risks such as death or disability of star performers, technical complications with special effects or other aspects of production,
shortages of necessary equipment, damage to film negatives, master tapes and recordings or adverse weather conditions may cause cost
overruns and delay or frustrate completion of a production. If a motion picture or television production incurs substantial budget overruns,
we may have to seek additional financing from outside sources to complete production. We cannot make assurances regarding the availability
of such financing on terms acceptable to us, and the lack of such financing could have a material adverse effect on our business, results
of operations and financial condition.
In
addition, if a motion picture production incurs substantial budget overruns, we cannot assure you that we will recoup these costs, which
could have a material adverse effect on our business, results of operations or financial condition. Increased costs incurred with respect
to a particular film may result in any such film not being ready for release at the intended time and the postponement to a potentially
less favorable time, all of which could cause a decline in box office performance, and thus the overall financial success of such film.
Budget overruns could also prevent a picture from being completed or released. Any of the foregoing could have a material adverse effect
on our business, results of operations and financial condition.
Production
costs and marketing costs are rising at a faster rate than increases in either domestic admissions to movie theatres or admission ticket
prices, leaving us more dependent on other media, such as home video, television and foreign markets, and new media. If we cannot successfully
exploit these other media, it could have a material adverse effect on our business, results of operations or financial condition.
7
Our
revenues and results of operations may fluctuate significantly.
Revenues
and results of operations are difficult to predict and depend on a variety of factors. Our revenues and results of operations depend
significantly upon the commercial success of the motion pictures that we distribute, which cannot be predicted with certainty. Accordingly,
our revenues and results of operations may fluctuate significantly from period to period, and the results of any one period may not be
indicative of the results for any future periods. We cannot assure you that we will manage the production, acquisition and distribution
of future motion pictures profitably.
Our
revenues and results of operations are vulnerable to currency fluctuations. We report our revenues and results of operations in U.S.
dollars, but a significant portion of our revenues is earned outside of the United States. currencies on revenues and operating margins,
and fluctuations could have a material adverse effect on our business, results of operations or financial condition.
From
time to time we may experience currency exposure on distribution and production revenues and expenses from foreign countries, which could
have a material adverse effect on our business, results of operations and financial condition.
Accounting
practices used in our industry may accentuate fluctuations in operating results. In addition to the cyclical nature of the entertainment
industry, our accounting practices (which are standard for the industry) may accentuate fluctuations in our operating results.
Our
loans and receivables may be uncollectable.
The
Company has provided loans to third party production companies. These loans come with considerable risk and may never be repaid. Failure
to receive repayment of loans may have a material adverse effect on the Company.
Failure
to manage future growth may adversely affect our business.
We
may not be able to obtain additional funding to meet our requirements. Our ability to grow through acquisitions, business combinations
and joint ventures, to maintain and expand our development, production and distribution of motion pictures and to fund our operating
expenses depends upon our ability to obtain funds through equity financing, debt financing (including credit facilities) or the sale
or syndication of some or all of our interests in certain projects or other assets. If we do not have access to such financing arrangements,
and if other funding does not become available on terms acceptable to us, there could be a material adverse effect on our business, results
of operations or financial condition.
We
are subject to risks associated with acquisitions and joint ventures. We have made or entered into, and will continue to pursue,
various acquisitions, business combinations and joint ventures intended to complement or expand our business. Given that discussions
or activities relating to possible acquisitions range from private negotiations to participation in open bid processes, the timing of
any such acquisition is uncertain. Although from time to time we actively engage in discussions and activities with respect to possible
acquisitions and investments, we have no present agreements or understandings to enter into any such material transaction. Any indebtedness
incurred or assumed in any such transaction may or may not increase our leverage relative to our earnings before interest, provisions
for income taxes, amortization, minority interests, gain on dilution of investment in subsidiary and discounted operation, or EBIDTA,
or relative to our equity capitalization, and any equity issued may or may not be at prices dilutive to our then existing shareholders.
We may encounter difficulties in integrating acquired assets with our operations. Furthermore, we may not realize the benefits we anticipated
when we entered into these transactions. In addition, the negotiation of potential acquisitions, business combinations or joint ventures
as well as the integration of an acquired business could require us to incur significant costs and cause diversion of management’s
time and resources. Future acquisitions by us could also result in:
●
Impairment
of goodwill and other intangibles;
●
Development
write-offs; and
●
Other
Acquisition-related expenses.
Any
of the foregoing could have a material adverse effect on our business, results of operations or financial condition.
8
Our
ability to exploit our filmed content library may be limited.
A
significant portion of our filmed content library revenues comes from a small number of titles. We depend on a limited number of
titles for the majority of the revenues generated by our filmed and television content library. In addition, many of the titles in our
library are not presently distributed and generate substantially no revenue. If we cannot acquire new product and rights to popular titles
through production, distribution agreements, acquisitions, mergers, joint ventures or other strategic alliances, it could have a material
adverse effect on our business, results of operations or financial condition.
We
are limited in our ability to exploit a portion of our filmed content library. Our rights to the titles in our filmed content library
vary; in some cases we have only the right to distribute titles in certain media and territories for a limited term. We cannot assure
you that we will be able to renew expiring rights on acceptable terms, and any such failure could have a material adverse effect on business,
results of operations or financial condition.
Our
success depends on external factors in the motion picture industry.
Our
success depends on the commercial success of motion pictures which is unpredictable. Operating in the motion picture and television
industry involves a substantial degree of risk.
Each
motion picture is an individual artistic work, and unpredictable audience reactions primarily determine commercial success. Generally,
the popularity of our motion pictures or programs depends on many factors, including the critical acclaim they receive, the format of
their initial release, for example, theatrical or direct-to-video, the actors and other key talent, their genre and their specific subject
matter. The commercial success of our motion pictures also depends upon the quality and acceptance of motion pictures that our competitors
release into the marketplace at or near the same time, critical reviews, the availability of alternative forms of entertainment and leisure
activities, general economic conditions and other tangible and intangible factors, many of which we do not control and all of which may
change. We cannot predict the future effects of these factors with certainty, any of which factors could have a material adverse effect
on our business, results of operations and financial condition.
In
addition, because a motion picture’s performance in ancillary markets, such as home video and pay and free television, is often
directly related to its box office performance or television ratings, poor box office results or poor television ratings may negatively
affect future revenue streams. Our success will depend on the experience and judgment of our management to select and develop new investment
and production opportunities. We cannot make assurances that our motion pictures will obtain favorable reviews or ratings, that our motion
pictures will perform well at the box office or in ancillary markets or that broadcasters will license the rights to broadcast any of
our television programs in development or renew licenses to broadcast programs in our library. The failure to achieve any of the foregoing
could have a material adverse effect on our business, results of operations and financial condition.
Licensed
distributors’ failure to promote our programs may adversely affect our business. Licensed distributors’ decisions regarding
the timing of release and promotional support of our motion pictures and related products are important in determining the success of
these pictures and products. As with most companies engaging in licensed distribution, we do not control the timing and manner in which
our licensed distributors distribute our motion pictures. Any decision by those distributors not to distribute or promote one of our
motion pictures or related products or to promote competitors’ motion pictures, programs or related products to a greater extent
than they promote ours could have a material adverse effect on our business, results of operations or financial condition.
We
could be adversely affected by strikes or other union job actions. The motion picture and television programs produced by us generally
employ actors, writers and directors who are members of the Screen Actors Guild, Writers Guild of America and Directors Guild of America,
respectively, pursuant to industry-wide collective bargaining agreements.
We
face substantial competition in all aspects of our business.
We
are smaller and less diversified than many of our competitors. Although we are an independent distributor and producer, we constantly
compete with major U.S. and international studios. Most of the major U.S. studios are part of large diversified corporate groups with
a variety of other operations, including television networks and cable channels, that can provide both means of distributing their products
and stable sources of earnings that may allow them better to offset fluctuations in the financial performance of their motion picture
and television operations. In addition, the major studios have more resources with which to compete for ideas, storylines and scripts
created by third parties as well as for actors, directors and other personnel required for production. The resources of the major studios
may also give them an advantage in acquiring other businesses or assets, including film libraries, that we might also be interested in
acquiring. The foregoing could have a material adverse effect on our business, results of operations and financial condition.
9
The
motion picture industry is highly competitive and at times may create an oversupply of motion pictures in the market. The number
of motion pictures released by our competitors, particularly the major U.S. studios, may create an oversupply of product in the market,
reduce our share of box office receipts and make it more difficult for our films to succeed commercially. Oversupply may become most
pronounced during peak release times, such as school holidays and national holidays, when theatre attendance is expected to be highest.
For this reason, and because of our more limited production and advertising budgets, we typically do not release our films during peak
release times, which may also reduce our potential revenues for a particular release. Moreover, we cannot guarantee that we can release
all of our films when they are otherwise scheduled. In addition to production or other delays that might cause us to alter our release
schedule, a change in the schedule of a major studio may force us to alter the release date of a film because we cannot always compete
with a major studio’s larger promotion campaign. Any such change could adversely impact a film’s financial performance. In
addition, if we cannot change our schedule after such a change by a major studio because we are too close to the release date, the major
studio’s release and its typically larger promotion budget may adversely impact the financial performance of our film. The foregoing
could have a material adverse effect on our business, results of operations and financial condition.
Technological
advances may reduce our ability to exploit our motion pictures. The entertainment industry in general and the motion picture industry
in particular continue to undergo significant technological developments, including video-on-demand. This rapid growth of technology
combined with shifting consumer tastes could change how consumers view our motion pictures and television programs. For example, an increase
in video-on-demand could decrease home video rentals. Other larger entertainment distribution companies will have larger budgets to exploit
these growing trends. We cannot predict how we will financially participate in the exploitation of our motion pictures and television
programs through these emerging technologies or whether we have the right to do so for certain of our library titles. If we cannot successfully
exploit these and other emerging technologies, it could have a material adverse effect on our business, results of operations or financial
condition.
The
loss of key personnel could adversely affect our business.
Our
success depends to a significant degree upon the efforts, contributions and abilities of our senior management. We cannot assure you
that the services of our key personnel will continue to be available to us or that we will be able to successfully renegotiate such employment
agreements. The loss of services of any key employees could have a material adverse effect on our business, results of operations or
financial condition.
We
face risks from doing business internationally.
We
distribute motion picture outside the United States through third party licensees and derive revenues from these sources. As a result,
our business is subject to certain risks inherent in international business, many of which are beyond our control. These risks include:
●
Changes
in local regulatory requirements, including restrictions on content;
●
Changes
in the laws and policies affecting trade, investment and taxes (including laws and policies relating to the repatriation of funds
and to withholding taxes);
●
Differing
degrees of protection for intellectual property;
●
Instability
of foreign economies and governments;
●
Cultural
barriers;
●
Wars
and acts of terrorism; and
●
The
spread of diseases such as COVID or SARS.
Any
of these factors could have a material adverse effect on our business, results of operations or financial condition.
10
Protecting
and defending against intellectual property claims, including those against copyright infringement, may have a material adverse effect
on our business.
Our
ability to compete depends, in part, upon successful protection of our intellectual property. We do not have the financial resources
to protect our rights to the same extent as major studios. We attempt to protect proprietary and intellectual property rights to our
productions through available copyright and trademark laws and licensing and distribution arrangements with reputable international companies
in specific territories and media for limited durations. Despite these precautions, existing copyright and trademark laws afford only
limited practical protection in certain countries. We also distribute our products in other countries in which there is no copyright
and trademark protection. As a result, it may be possible for unauthorized third parties to copy and distribute our productions or certain
portions or applications of our intended productions, which could have a material adverse effect on our business, results of operations
or financial condition.
Litigation
may also be necessary in the future to enforce our intellectual property rights, to protect our trade secrets, or to determine the validity
and scope of the proprietary rights of others or to defend against claims of infringement or invalidity. Any such litigation could result
in substantial costs and the diversion of resources and could have a material adverse effect on our business, results of operations or
financial condition. We cannot assure you that infringement or invalidity claims will not materially adversely affect our business, results
of operations or financial condition. Regardless of the validity or the success of the assertion of these claims, we could incur significant
costs and diversion of resources in enforcing our intellectual property rights or in defending against such claims, which could have
a material adverse effect on our business, results of operations or financial condition.
Piracy
of motion pictures, including digital and internet piracy, may reduce the gross receipts from the exploitation of our films.
Motion
picture piracy is extensive in many parts of the world, including South America, Asia, the countries of the former Soviet Union and other
former Eastern bloc countries. Additionally, as motion pictures begin to be digitally distributed using emerging technologies such as
the internet and online services, piracy could become more prevalent, including in the U.S., because digital formats are easier to copy.
As a result, users can download and distribute unauthorized copies of copyrighted motion pictures over the internet. In addition, there
could be increased use of devices capable of making unauthorized copies of motion pictures. As long as pirated content is available to
download digitally, many consumers may choose to download such pirated motion pictures rather than pay for motion pictures. Piracy of
our films may adversely impact the gross receipts received from the exploitation of these films, which could have a material adverse
effect on our business, results of operations or financial condition.
We
face other risks in obtaining production financing from private and other international sources. For some productions, we finance
a portion of our production budgets from incentive programs as well as international sources in the case of our international treaty
co-productions. The foregoing could have a material adverse effect on our business, results of operations or financial condition.
Risks
Related to the Company’s Common Shares
An
active, liquid and orderly market for the Company’s Common Shares may not develop, and you may not be able to resell your Common
Shares at or above the purchase price.
APHP’s
common shares are quoted on the OTC:QB. An active trading market for the Company’s Common Shares has not developed and may never
develop or be sustained. The lack of an active market may impair an investor’s ability to sell its shares at the time it wishes
to sell them or at a price that it considers reasonable. An inactive market may also impair the Company’s ability to raise capital
by selling shares and may impair the Company’s ability to acquire other businesses or technologies using the Company’s shares
as consideration, which, in turn, could materially adversely affect the Company’s business.
11
Our
common shareholders face the risk of substantial potential dilution of their equity and voting rights from holders of our Series A preferred
shares.
All
common shares are entitled to one vote per share, and participate in any distributions or dividends that may be declared by the Board
of Directors. As of April 7, 2025, the Company has 1,000,000,000 common shares authorized of which 112,399,325 shares are issued and
outstanding. As of April 7, 2025, the Company had 1,000,000 preferred shares authorized, of which 100,000 preferred shares have been
designated as Series A Convertible Preferred Stock (“Series A preferred shares” herein). At present, 3,829 Series A preferred
shares are issued and outstanding, and no other preferred shares have been designated or issued. The Series A preferred shares do not
have any rights to dividends; however, each share of Series A preferred shares carries a superior voting right to the Company’s
common shares: each Series A preferred share shall be counted as 1,000,000 votes in any Company vote. Further, each Series A preferred
share is convertible at a ratio of 1 to 100,000 so that each one share of Series A preferred shares may be exchanged for 100,000 common
shares. Series A preferred shares also hold a first position lien against all of the Company’s assets including but not limited
to the Company’s intellectual property. The Preferred shares do not have any specific redemption rights or sinking fund provisions.
Hence, the current holder (our Chief Executive Officer and Chairman of the Board of Directors, Bannor Michael MacGregor) of the 3,829
Series A preferred shares that are currently issued and outstanding, has the ability to control the election of Board members and other
Company matters that require shareholder votes. Further, Mr. MacGregor has the ability to convert his 3,829 Series A preferred shares
into 382,900,000 common shares, thereby retaining control of the Company for the foreseeable future even without owning the Series A
preferred shares.
Our
Chief Executive Officer and Chairman of the Board of Directors holds a significant percentage of our outstanding voting securities, which
could reduce the ability of minority shareholders to effect certain corporate actions.
Our
Chief Executive Officer and Chairman of the board of Directors, Bannor Michael MacGregor, is the beneficial owner of 23,654,603 shares
of common stock, which controls 21.05% of the outstanding common voting shares. Mr. MacGregor is the owner of 100% of the Company’s
3,829 shares of issued and outstanding Series A preferred stock. The Company’s Series A preferred shares have voting rights equal
to 1,000,000 votes per each one share. As such, Mr. MacGregor has voting rights equal to 3,852,654,603 shares of common stock, representing
97.75% of voting rights, and thus control of any item brought before shareholders requiring a vote. As a result of this ownership, Mr.
MacGregor possesses and can continue to possess significant influence and can elect and can continue to elect a majority of our Board
of Directors and authorize or prevent proposed significant corporate transactions. Mr. MacGregor’s ownership and control may also
have the effect of delaying or preventing a future change in control, impeding a merger, consolidation, takeover or other business combination
or discourage a potential acquirer from making a tender offer.
There
exists the potential risk and conflict of interest presented by the ability of Mr. MacGregor to retain majority control of the Company’s
voting power while reducing, potentially significantly, his economic interest in the Company’s shares. Although Mr. MacGregor may
be able to sell his entire economic interest in the Company’s common stock, Mr. MacGregor would retain control over the company
by maintaining his Series A preferred shares.
The
trading price of the shares of the Company’s Common Shares could be highly volatile, and purchasers of the Company’s Common
Shares could incur substantial losses.
The
Company’s shares price is likely to be volatile. The shares market in general has experienced extreme volatility that has often
been unrelated to the operating performance of particular companies. As a result of this volatility, investors may not be able to sell
their Common Shares at or above their purchase price. The market price for the Company’s Common Shares may be influenced by those
factors discussed in this “Risk Factors” section and many others, including:
●
The
success or failure of the Company’s efforts to acquire, license or develop additional products;
●
Innovations
or new products developed by the Company or its competitors;
●
Announcements
by the Company or its competitors of significant acquisitions, strategic
●
partnerships,
joint ventures or capital commitments;
●
Manufacturing,
supply or distribution delays or shortages;
●
Any
changes to the Company’s relationship with any manufacturers, suppliers, licensors,
●
future
collaborators or other strategic partners;
●
Achievement
of expected product sales and profitability;
12
●
Variations
in the Company’s financial results or those of companies that are perceived to be similar to the Company;
●
Trading
volume of the Company’s Common Shares;
●
An
inability to obtain additional funding;
●
Sales
of the Company’s shares by insiders and shareholders;
●
General
economic, industry and market conditions other events or factors, many of which
●
are
beyond the Company’s control;
●
Additions
or departures of key personnel; and
●
Intellectual
property, product liability or other litigation against the Company.
APHP
does not currently intend to pay dividends on its Common Shares, and, consequently, investors’ ability to achieve a return on their
investment will depend on appreciation, if any, in the price of the Company’s Common Shares.
American
Picture House has never declared or paid any cash dividend on its Common Shares. APHP currently anticipates that it will retain future
earnings for the development, operation and expansion of the Company’s business and does not anticipate declaring or paying any
cash dividends for the foreseeable future. Any return to shareholders will therefore be limited to the appreciation of their shares.
There is no guarantee that the Company’s Common Shares will appreciate in value or even maintain the price at which shareholders
have purchased their shares.
Sales
of a substantial number of shares of the Company’s Common Shares by the Company’s shareholders in the public market could
cause the Company’s shares price to fall.
Sales
of a substantial number of the Company’s Common Shares in the public market or the perception that these sales might occur could
significantly reduce the market price of the Company’s Common Shares and impair the Company’s ability to raise adequate capital
through the sale of additional equity securities.
If
the Company fails to maintain proper and effective internal control over financial reporting, the Company’s ability to produce
accurate and timely financial statements could be impaired, investors may lose confidence in the Company’s financial reporting
and the trading price of the Company’s Common Shares may decline.
Pursuant
to Section 404 of Sarbanes-Oxley, the Company’s management is required to report upon the effectiveness of the Company’s
internal control over financial reporting. Additionally, if the Company reaches an accelerated filer threshold, the Company’s independent
registered public accounting firm will be required to attest to the effectiveness of the Company’s internal control over financial
reporting. The rules governing the standards that must be met for management to assess the Company’s internal control over financial
reporting are complex and require significant documentation, testing and possible remediation. To comply with the requirements of being
a reporting company under the Exchange Act, the Company will need to upgrade its information technology systems; implement additional
financial and management controls, reporting systems and procedures; and hire additional accounting and finance staff. If the Company
or, if required, its auditors are unable to conclude that the Company’s internal control over financial reporting is effective,
investors may lose confidence in the Company’s financial reporting and the trading price of the Company’s Common Shares may
decline.
The
Company cannot assure its investors that there will not be material weaknesses or significant deficiencies in the Company’s internal
control over financial reporting in the future. Any failure to maintain internal control over financial reporting could severely inhibit
the Company’s ability that its internal control over financial reporting is effective, or if the Company’s independent registered
public accounting firm determines the Company has a material weakness or significant deficiency in the Company’s internal control
over financial reporting once that firm begin its Section 404 reviews, investors may lose confidence in the accuracy and completeness
of the Company’s financial reports, the market price of the Company’s Common Shares could decline, and the Company could
be subject to sanctions or investigations by the SEC or other regulatory authorities. Failure to remedy any material weakness in the
Company’s internal control over financial reporting, or to implement or maintain other effective control systems required of public
companies, could also restrict the Company’s future access to the capital markets to accurately report its financial condition,
results of operations or cash flows. The Company intends to hire additional personnel to improve internal controls.
13
Our
Chief Executive Officer and Chairman of the Board of Directors holds a significant percentage of our outstanding voting securities, which
could reduce the ability of minority shareholders to effect certain corporate actions.
Our
Chief Executive Officer and Chairman of the board of Directors, Bannor Michael MacGregor, is the beneficial owner of 23,654,603
shares of common stock, which controls 21.05% of the outstanding common voting shares. Mr. MacGregor is the owner of 100% of the
Company’s 3,829 shares of issued and outstanding Series A preferred stock. The Company’s Series A preferred shares have
voting rights equal to 1,000,000 votes per each one share. As such, Mr. MacGregor has voting rights equal to 3,852,654,603 shares of
common stock and thus control of any item brought before shareholders requiring a vote. As a result of this ownership, Mr. MacGregor
possesses and can continue to possess significant influence and can elect and can continue to elect a majority of our Board of
Directors and authorize or prevent proposed significant corporate transactions. Mr. MacGregor’s ownership and control may also
have the effect of delaying or preventing a future change in control, impeding a merger, consolidation, takeover or other business
combination or discourage a potential acquirer from making a tender offer.
There
exists the potential risk and conflict of interest presented by the ability of Mr. MacGregor to retain majority control of the Company’s
voting power while reducing, potentially significantly, his economic interest in the Company’s shares. Although Mr. MacGregor may
be able to sell his entire economic interest in the Company’s common stock, Mr. MacGregor would retain control over the company
by maintaining his Series A preferred shares.
Risks
Related to our Management and Control Persons
Our
largest shareholder, officer, and director, Bannor Michael MacGregor, holds substantial control over the Company and is able to influence
all corporate matters, which could be deemed by shareholders as not always being in their best interests.
Bannor
Michael MacGregor, Chairman and CEO, holds substantial control over the Company. As a result, Mr. MacGregor, could have significant influence
over most matters that require approval by our stockholders, including the election of directors and approval of significant corporate
transactions, even if other stockholders oppose them. This concentration of ownership might also have the effect of delaying or preventing
a change of control of our company that other stockholders may view as beneficial. Mr. MacGregor controls 21.05% of the Company’s
common shares. Additionally, Mr. MacGregor owns 3,829 Series A Preferred Shares that have voting rights equivalent to 3,829,000,000 common
shares.
We
are dependent on the continued services of our Chairman and CEO, and our President, and if we fail to keep them or fail to attract and
retain qualified senior executives and key technical personnel, our business may not be able to expand.
We
are dependent on the continued services of Chairman/CEO, Bannor Michael MacGregor and President, Jonathan Sanger, and the availability
of new executives to implement our business plans. The market for skilled employees is highly competitive, especially for employees in
our industry. Although we expect that our planned compensation programs will be intended to attract and retain the employees required
for us to be successful, there can be no assurance that we will be able to retain all our key employees or a sufficient number to execute
our plans, nor can there be any assurance we will be able to continue to attract new employees as required.
Our
lack of adequate D&O insurance may also make it difficult for us to retain and attract talented and skilled directors and officers.
In
the future we may be subject to litigation, including potential class action and shareholder derivative actions. Risks associated with
legal liability are difficult to assess and quantify, and their existence and magnitude can remain unknown for significant periods of
time. While we do have D&O insurance it may not be sufficient in the case of litigation.
Our
Officers and Key Personnel may voluntarily terminate their relationship with us at any time, and competition for qualified personnel
is lengthy, costly, and disruptive.
If
we lose the services of our officers and key personnel and fail to replace them if they depart, we could experience a negative effect
on our financial results and share price. The loss and our failure to attract, integrate, motivate, and retain additional key employees
could have a material adverse effect on our business, operating and financial results and share price.
14
Risks
Relating to Our Company and Industry
The
success of our business depends on our ability to maintain and enhance our reputation and brand.
We
believe that our reputation in our industry is of significant importance to the success of our business. A well-recognized brand is critical
to increasing our customer base and, in turn, increasing our revenue. Since the industry is highly competitive, our ability to remain
competitive depends to a large extent on our ability to maintain and enhance our reputation and brand, which could be difficult and expensive.
To maintain and enhance our reputation and brand, we need to successfully manage many aspects of our business, such as cost-effective
marketing campaigns to increase brand recognition and awareness in a highly competitive market. We cannot assure you, however, that these
activities will be successful and achieve the brand promotion goals we expect. If we fail to maintain and enhance our reputation and
brand, or if we incur excessive expenses in our efforts to do so, our business, financial conditions and results of operations could
be adversely affected.
In
the event that we are unable to successfully compete in our industry, we may not see lower profit margins.
We
face substantial competition in our industry. Due to our smaller size, it can be assumed that some of our competitors have greater financial
and other competitive resources. We will attempt to compete against these competitors by developing film content that exceed what is
offered by our competitors. However, we cannot assure you that our intellectual properties will outperform competing films. Increased
competition could result in:
●
Lower
than projected revenues;
●
Lower
profit margins
Any
one of these results could adversely affect our business, financial condition, and results of operations. In addition, our competitors
may develop competing products that achieve greater market acceptance. It is also possible that new competitors may emerge and acquire
significant market share. Our inability to achieve sales and revenue due to competition will have an adverse effect on our business,
financial condition, and results of operations.
If
we are unable to successfully manage growth, our operations could be adversely affected.
Our
progress is expected to require the full utilization of our management, financial and other resources. Our ability to manage growth effectively
will depend on our ability to improve and expand operations, including our financial and management information systems, and to recruit,
train and manage personnel. There can be no absolute assurance that management will be able to manage growth effectively.
If
we do not properly manage the growth of our business, we may experience significant strains on our management and operations and disruptions
in our business. Various risks arise when companies and industries grow quickly. If our business or industry grows too quickly, our ability
to meet customer demand in a timely and efficient manner could be challenged. We may also experience development delays as we seek to
meet increased demand for our services and platform. Our failure to properly manage the growth that we or our industry might experience
could negatively impact our ability to execute on our operating plan and, accordingly, could have an adverse impact on our business,
our cash flow and results of operations, and our reputation with our current or potential customers.
15
We
may fail to successfully integrate acquisitions or otherwise be unable to benefit from pursuing acquisitions .
We
believe there are meaningful opportunities to grow through acquisitions and joint ventures across all service categories and we expect
to continue a strategy of selectively identifying and acquiring intellectual properties. We may be unable to identify, negotiate, and
complete suitable acquisition opportunities on reasonable terms. There can be no assurance that any business acquired by us will be successfully
integrated with our operations or prove to be profitable to us. We may incur future liabilities related to acquisitions. Should any of
the following problems, or others, occur as a result of our acquisition strategy, the impact could be material:
●
Difficulties
integrating personnel from acquired entities and other corporate cultures into our business; difficulties integrating information
systems;
●
The
potential loss of key employees of acquired companies;
●
The
assumption of liabilities and exposure to undisclosed or unknown liabilities of acquired companies; or the diversion of management
attention from existing operations.
The
elimination of monetary liability against our directors, officers and employees under our Articles of Incorporation and the existence
of indemnification rights to our directors, officers and employees may result in substantial expenditures by our Company and may discourage
lawsuits against our directors, officers, and employees.
Our
Articles of Incorporation contain provisions that mitigate the liability of our directors for monetary damages to our Company and shareholders.
Our Bylaws also require us to indemnify our officers and directors. We may also have contractual indemnification obligations under our
agreements with our directors, officers, and employees. The foregoing indemnification obligations could result in our Company incurring
substantial expenditures to cover the cost of settlement or damage awards against directors, officers, and employees that we may be unable
to recoup. These provisions and resulting costs may also discourage our Company from bringing a lawsuit against directors, officers,
and employees for breaches of their fiduciary duties, and may similarly discourage the filing of derivative litigation by our shareholders
against our directors, officers, and employees even though such actions, if successful, might otherwise benefit our Company and shareholders.