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campaigns associated with these projects. In all, he hasplayed a significant hand in the production of over 50 majorstudio and independent production features, several ofwhich have garnered Academy Award nominations andsubsequent Oscars.His entertainment industry successes include: Constructed a five-year operating plan for The Walt Disney Company, garnering record revenue generationsix years in a row.Choreographed Bob Iger’s appointment as The WaltDisney Company’s longtime CEO and masterminded theacquisition of ABC Television, Pixar, MarvelEntertainment, and Lucasfilm Ltd. under Disney’sumbrella.Led the creative development teams that produced TheLion King, Aladdin, ER, The West Wing, Star Trek: DeepSpace Nine, Battlestar Galactica, Boston Legal, Shrek,Pirates of the Caribbean, Ratatouille, Breaking Bad, andGame of ThronesSpearheaded the creation of Disney , which amassed28.6 million subscribers in the first three months alone,far surpassing the 20 million estimated subscribersanalysts predicted it would generate in a yearDustin will capitalize on his solid rapport with distributors,filmmakers, writers, acting and crew talent, and otherentertainment specialists who have worked with him andknow him from past projects. Mr. Lee will establish theproduction slate, manage the production company,

negotiate with third parties, double as Executive Producer,Writer, and/or Director during production, and spearheadthe development and implementation of future businessstrategies.Mr. Michael Hanly, Vice President and Manager, PostProductionMr. Hanly provides exceptional local and regionalknowledge of the independent film community includingrental houses, soundstage facilities, and talent/crewcontracts. He has worked closely with various levels ofgovernment in the pursuit of film permits for locationshoots. He has also served as liaison between productioncompanies and the Screen Actors’ Guild, among other filmUnions, to facilitate production contracts and agreements.As an editor and Post-Production Manager for film, cable,television, and commercial projects, Mr. Hanly conveys overten years of experience with various editing platforms, andhas managed all post-production routines from theprocessing of film to a final print for theatrical, television,and/or digital exhibition.Michael Hanly delivers expert analysis of emerging filmproduction technologies, motion picture cameras, sound,and editing equipment and will work to ensure budgetaryresources are exploited to the fullest extent. He willsupervise the entire post-production process and serve asEditor on all projects. He will work closely with ourdistribution networks to ensure they receive a quality finalprint for exhibition in both film and video arenas.

Ms. Aida Hernandez, VP of ProductionMs. Hernandez will oversee the look of each film,commandeering production design, wardrobe, and picturecolor profiles, utilizing her expert experience in designaesthetics and film production management. She will hirecrew and manage the camera, sound, hair, makeup, anddesign departments during production.Support StaffOne to two support staff members will comprise the rest ofthe Company’s full-time work force. All other personnel willbe hired under contract for a specific project on an asneeded basis.

CHAPTER 3THE INDUSTRYOutlookMajor studios began downsizing at the end of the 1990’s.While in the past they maintained massive productionfacilities, staff, and significant overhead expenses, theimpact of unions, guilds, and runaway production budgetsforced studios to follow new business models. Today,studios are releasing fewer films but expect larger grossesper film. As a consequence, smaller production entities, theIndependents, arrived. Despite their limited financialresources, independents are more capable of capturinglarger revenues in relation to their expenses.Falling salaries, rising subsidies, and a thinning of thecompetition have weighted the financial equation evenmore in favor of lower budget filmmaking investment. Inaddition, revolutionary changes regarding how motionpictures are produced and distributed are sweeping theindustry and these changes happen to be especiallybeneficial for independents.At CinemaCon 2016, the CEO of The Motion PictureAssociation of America (MPAA), Christopher Dodd, and theCEO of the National Association of Theater Owners, JohnFithian, cited more diverse audiences and the preservationof theatrical windows as key reasons for growth. “I amproud to say that the state of our industry has never been

stronger,“ Dodd told the crowd. He also pointed out thatthree quarters of frequent moviegoers own at least fourdifferent types of technology products such as smartphones, tablets, and video game systems, and this helpeddrive box office receipts. “Word of mouth no longer exists,“he said. “It’s now word of text.“Additionally, the success of independent films has beenhelped by the number of specialized content distributorsemerging in the marketplace.Motion Picture ProductionThe structure of the US motion picture business has beenchanging over the past three decades, as studios andindependent companies spawn new methods of financing.Although some production companies historically fundedmovies completely from their own arrangements withbanks, they now look to partner with other companies, bothin the US and abroad, that can assist in the overall financingof projects. The deals often take the form of domesticcompanies retaining the rights for distribution in all USmedia, including theatrical, home video, television, cable,and other ancillary markets.Major studios, the largest companies in this business,include NBC Universal, Warner Brothers, 20th Century Fox,Paramount Pictures, Sony Pictures Entertainment, and TheWalt Disney Company. MGM, one of the original majors,went private in 2010 and now functions as an independentthat both partners with other studios and finances its ownmovies. In most cases, the “Majors” own their own

production facilities and enjoy a worldwide distributionorganization. With a large corporate hierarchy makingproduction decisions and a large amount of corporate debtto service, the studios must aim most of their films at massaudiences.Producers that can finance films independently by anysource other than a major US studio have more flexibility intheir creative decisions, with the ability to hire productionpersonnel and secure other elements required for preproduction, principal photography, and post production ona project-by-project basis. Carrying substantially lessoverhead expense than a studio, Independents are able tobe more cost effective in the filmmaking process. Theirfilms can be directed at both mass or niche audiences, withthe target markets for each film dictating the size of thebudget.How It WorksThere are four steps in the production of a motion picture:development, preproduction, production, and postproduction.At a studio, a film begins in one of two ways. Someoneinside the company might develop a “concept” (one or twolines of an idea), or a well-known writer might make a “5minute pitch” and secure a deal. On the other hand, anagent might bring a script written by a new writer to theattention of the studio. Once the studio “green-lights” aconcept, scriptwriters are hired, lead actors sought,

budgets approved, and directors and producers assigned.This process is called development.The next step is pre-production; the period before principalphotography when budgets are finalized, crew are hired,locations are selected, and contracts are signed. Typically,an independent producer’s goal here is to acquire fundsfrom equity partner(s), completing all financing of a filmbefore commencement of principal photography.The filming of a motion picture is called principalphotography and comprises the production stage. Itgenerally takes from 8 to 12 weeks, although most castmembers are not required for the entire period.During the post-production phase, which follows principalphotography, the film is edited and synchronized withmusic and dialog. In certain cases, special effects areadded. The post-production period used to require six tonine months. With recent technological developments,however, this time has been cut drastically for most films.The expenses associated with this four-step process forproducing and finishing a film are referred to as “negativecosts.”A master print is then manufactured for duplicating releaseprints for theatrical exhibition but expenses for furtherprints and advertising for the film are categorized as“P&A“ (prints and advertising) and are not part of thenegative costs of production.

Domestic Theatrical ExhibitionAn exhibitor pays a percentage of a film’s box office receipts(called “rentals”) to the studio or distributor. The size of thepercentage depends on the distributor’s strength and theexhibitor’s desire to show the film. A major studio releaseusually garners a 50/50 split, while independent filmsaverage a 49/51 split of box office receipts.The U.S. release of a film usually ends within the first year ofthe rental period. Major studio films may go out to as manyas 4,000 screens in the first few weeks. Independent filmsstart more slowly and build on their success. Although theamount of rentals will decline toward the end of the film’srun, it may very well increase in the first few months. It isnot unusual for a smaller film to gain theaters as it becomesmore popular.Because revenues from all other sources are driven by thesuccess of theatrical distribution, a film’s staying power ontheater screens is important. Coupled with this is theexhibitor’s basic desire to see people sitting in their theaterseats. Although the studio has some power to keep amediocre film on the screen with its greater resources inmarketing and promotion, good independent films findtheir place in theaters more from the quality and interestgenerated by the story.Exhibitors have maintained they will show any film theybelieve their customers will pay to see. Depending on thelocation of the individual theater or the chain, local

pressures may play a part in deciding which films areshown. Not all pictures are appropriate for all theaters.There were 43,661 theater screens (including drive-ins) inNorth America in 2015, per the most recent TheatricalMarket Statistics report released by the MPAA. Theatricalrevenues, (“box office“ receipts) are often considered anengine to drive sales in all other categories. Thus, the muchstronger than expected domestic theatrical box office oflate has continued to stimulate ancillary sales, such ashome video and digital sales, and has raised the value offilms in foreign markets.Broadcast Television & CableTelevision exhibition includes over-the-air reception forviewers either through a fee system (cable) or “freetelevision” (national and independent broadcast stations).The proliferation of new cable channels since the early1990’s has made cable (both basic and premium stations)one of the key revenue streams for feature films, surpassingbroadcast network television over the last 20 years as thedominant “second screen“ outlet for movies. “Basic“ cablechannels carry a broad range of programming, includinglicensed feature films and original and syndicatedproductions. “Premium“ cable networks, such as HBO,Showtime, and STARZ require an additional subscription feein exchange for commercial-free programming thatincludes licensed theatrical features, documentaries, andoriginal series. Competing with cable companies are directbroadcast satellite services, including DIRECTV and Dish,

which allow subscribers to watch programming viaindividual satellite dishes installed at their homes.Another group of providers are telecommunicationscompanies, including Verizon’s FiOS and AT&T’s U-verse,that use Internet protocol (IP) technology to beam cablechannels into homes. All these systems acquire their filmprogramming by purchasing the distribution rights frommotion picture distributors. Pay-per-view (PPV) allows cable,satellite, or telecom subscribers to purchase individual filmsor special events, adding to the revenue stream for features.Home EntertainmentIn 2015, overall consumer spending on home video totaled 18 billion, up almost 1% compared to 17.8 billion in 2014,according to the Digital Entertainment Group (DEG). Thisreverses a downward trend over the last three years.Although total disc sales fell 12% during 2015 to come in at 6.1 billion, Blu-ray disc sales were up 8% in the three monthperiod between October 1 and December 31, 2015. Amongother highlights for 2015 are: Electronic sell-through generated 1.9 billion inconsumer spending, up 18.1% from 1.6 billion in 2014. Total consumer spending on digital - streaming, sales,and video on demand (VOD) - came in at an estimated 8.9 billion, a 16.4% increase from 2014. This number isdriven by Netflix and SVOD, which some analysts feelshould be considered separately.

Subscription streaming of movies and TV showsgenerated consumer spending of more than 5 billion, a25% gain from 2014. Home Media Magazine adds that, inaddition to playing high definition discs, Blu-ray discplayers double as some of the best streaming devices. Consumer sales of 4K Ultra HDTV’s increased a dramatic287% in the fourth quarter of 2015. As of 2018, 31% of UShouseholds utilize at least one, 4K Television.International Theatrical ExhibitionMuch of the projected growth in the global film businesscomes from foreign markets, as distributors and exhibitorsfind new ways to increase the box office revenue pool. Morescreens in Asia, Latin America, and Africa have followed theincrease in multiplexes in Europe, although this growth hasslowed. The world screen count is predicted to remainstable over the next eight years. Other factors include theprivatization of television stations overseas, the introductionof digital broadcast services, and increased cablepenetration. The synergy between international and localproduct in European and Asian markets is expected to leadto future screen growth there and, thus, more box officerevenue.Future TrendsRevolutionary changes in the manner by which motionpictures are produced and distributed are now sweepingthe industry, especially for independent films. Web-basedcompanies like Google Play, Amazon’s Video on Demand,Apple’s iTunes Store, Vudu, and CinemaNow are renting and

selling films and other entertainment programming fordownload on the Internet and through their apps.Subscription websites and apps such as HBO GO, ShowtimeAnytime, Netflix, Disney , and Hulu Plus stream filmedentertainment to home viewers. Streaming platform Vimeolaunched it’s on-demand service in 2013, and now has agrowing number of titles available for rent or purchase viaInternet or mobile app. Streaming media players, such asthose made by Google, Roku, Amazon, Apple TV, and Sony,as well as the streaming capabilities of Xbox (360 and XboxOne) and Wii allow even those who are not tech savvy tostream content from these and similar websites directly totheir HDTV screen, creating a home theater experience.Multi-use, portable devices that can provide personalviewing of films (including video iPod, smart phones, andtablets) are flooding the market place, expanding thepotential revenues from home video and other forms ofentertainment viewing. These new technologies, and othersnot yet devised, will grow in influence in the next five yearsand beyond.

CHAPTER 4THE MARKETOverviewAn independent film goes through the same process as astudio film with regard to its journey from development andpre-production to production and post-production. In thecase of an independent project, however, development andpre-production may involve only one or two people. Inaddition, the independent usually maintains control overthe final project.An independent company is one that finds its productionfinancing outside the studio system. Sometimes, anindependent feature is purchased and distributed by amajor studio, but the negative costs to produce the filmwere found from other sources. Many smaller productioncompanies started with the success of a single film. Forexample, Carolco was built on the success of Rambo III andTerminator II and New Line achieved prominence and cloutwith the Nightmare on Elm Street series.The smaller production company focuses on just a handfulof projects in different phases of development. Manyindependents are owned or controlled by a creative person,such as a writer/director or writer/producer, in combinationwith a financial partner or group.

Since the beginning of the 1990’s, independent film haswitnessed an “up” cycle. The market for specialty films hasalso grown. All across the United States, independentlyoperated theaters have maintained a loyal following. Often,a film made for 500,000, or less, recoups its negative costfrom these independent theaters alone. Althoughindependent theaters were once thought to be home of anoffbeat and obscure minority, larger audiences have foundfavor in the fresh, thought-provoking qualities of filmsexhibited there.Firefly Film Factory will build upon the success of storylinesthat normally start out in art house theaters and make theirway to mainstream cinema much like Crouching Tiger,Hidden Dragon. Because of the lower budgets the Companywill work with, exhibitors may wait for the film to prove itselfbefore providing access to screens in larger movie houses.Smaller houses will give us a chance to expand the film on amore controlled timetable, building awareness with thepublic. As word of mouth increases, both the distributorand owners of big theater chains will want Firefly FilmFactory’s movies in their mall theaters and multiplexes.Firefly Film Factory will also gain exposure through the filmfestival circuit. Festivals and limited runs in specialtytheaters within target areas will create an awareness of notonly the finished film but the existence of the Company as aunique, independent production studio.Lindsay Law, Producer and President of Fox Searchlight(Stand and Deliver, The Thin Blue Line), discloses that the

company’s projects fair much better with budgetssomewhere in the 500,000 to 5 million range. She alsonotes projects made within this margin have an amplechance to break even with only a moderate level of sales toforeign markets, video outlets, and television.While Hollywood continues to tighten its control andinfluence over big-budget markets, there are a plethora ofcommercially viable scripts that desperate writers wouldgladly sell for minimum compensation just to get their footin the door. With a solid script and savvy negotiation skills,above-the

Videotape, a 1.4 million film earning 24.7 million in its theatrical release alone have demonstrated that little money can go a long way in the business of making movies. By definition, an independent film is one that is financed by any source other than a major U.S. studio. Independent fi