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 Annual Report on Form 10-K 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.
Risks Related to Our Company
We face substantial capital requirements and financial risks.
We may not be able to continue as a going concern.
Our ability to continue operations depends on our ability to generate sufficient cash flows and/or obtain additional financing. We have incurred losses and may continue to incur losses, and we may be unable to raise additional capital when needed or on acceptable terms. If we are unable to obtain additional financing or otherwise improve liquidity, we may be required to reduce, delay or discontinue aspects of our business plan, including development, packaging, financing and production activities.
A lack of liquidity could also result in defaults under contractual obligations, disputes with counterparties, and an inability to maintain or protect rights in intellectual property and project-related positions. Any of these outcomes could materially and adversely affect our business, results of operations and financial condition, and could result in a cessation of operations.
We have had losses, and we cannot assure future profitability.
We have reported operating losses for fiscal years 2025 and 2024. Our accumulated deficit was approximately $7.8 million at December 31, 2025. 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, 2025, 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 limited series 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 limited series production costs often exceed their budget, sometimes significantly. The production, completion and distribution of motion pictures and limited series 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 or completion of a production. If a motion picture or limited series production incurs substantial budget , 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 of such financing could have a material 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, distribution and marketing costs may rise faster than growth in theatrical revenues and other monetization opportunities, increasing our dependence on revenues from streaming, digital distribution, ad-supported platforms, television, international markets, limited series and other ancillary or emerging distribution channels. If we are unable to secure or successfully exploit these revenue streams on commercially reasonable terms, our business, results of operations and financial condition could be materially adversely affected.
Convertible or equity-linked financings could cause substantial dilution and downward pressure on our stock price.
We have issued, and may in the future issue, convertible or equity-linked instruments, including instruments with variable conversion features and share reservation mechanics. Conversions, settlements, or other issuances under these instruments could result in substantial dilution to existing stockholders. In addition, the potential for significant future issuances may create downward pressure on the trading price of our common stock, increase volatility, and make it more difficult for us to raise capital on favorable terms, or at all.
These instruments may also include beneficial ownership limitations, price lookback provisions, and other terms that can affect the timing and amount of shares issued.
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 project-level lending, recoupment positions and other financing arrangements may not result in repayment or priority returns.
From time to time, we participate in projects through lending arrangements, receivable- or lien-based structures, and recoupment positions that are intended to prioritize return of capital. However, repayment and priority returns depend on numerous factors that are outside our control, including the completion and commercial performance of the applicable project, the accuracy and timeliness of accounting and reporting by third parties, and the willingness and ability of counterparties to perform under applicable agreements.
Our ability to realize value from these positions may be limited by contractual waterfalls and customary senior deductions, including sales fees, distribution expenses, participations, guild obligations, residuals and other charges that may reduce or delay net receipts available for repayment or recoupment. In addition, security interests and “priority” rights are only as effective as the underlying documentation and applicable law; disputes regarding chain-of-title, competing claims, intercreditor arrangements, perfection, priority, or enforceability could reduce or eliminate recoveries and may require costly and time-consuming enforcement efforts.
In addition, certain project rights and enforcement expectations may be affected by third-party bankruptcy proceedings involving prior stakeholders, which could adversely affect the enforceability, priority, timing, or availability of collections for particular titles.
Any failure to collect amounts due, delays in collections, or increased enforcement and dispute costs could materially and adversely affect our business, results of operations and financial condition.
If we were deemed an “investment company” under the Investment Company Act of 1940, we could be subject to significant additional regulatory requirements.
We engage in a mix of development, packaging, production-related activities and, from time to time, project-level financing arrangements. If our activities were characterized in a manner that caused us to be deemed an investment company under the Investment Company Act of 1940, we could become subject to substantial additional regulation, including restrictions on operations, capital structure, transactions with affiliates and reporting requirements.
Compliance with these requirements could impose significant costs, could restrict our ability to execute our business plan, and could require changes to our operations or asset composition. Any such outcome could materially and adversely affect our business, results of operations and financial condition.
We rely on third parties for the collection, reporting and remittance of project receipts, which may be delayed, disputed or incomplete.
In many cases, project revenues (and therefore amounts available for repayment, recoupment or participation) are collected, administered, reported and remitted by third parties, such as distributors, sales agents, collection account managers and other intermediaries. These third parties may apply reserves, set-offs, chargebacks or expense allocations, may be subject to their own operational constraints or insolvency risks, and may not provide information at the level of detail or frequency we expect.
We may have limited practical ability to verify reported receipts in real time or to promptly enforce audit and reporting rights, particularly where counterparties are located outside the United States or where project documentation includes dispute resolution procedures that can be costly or slow. Delays, disputes, withheld remittances, or incomplete reporting could materially reduce or defer amounts otherwise available to us.
Our financing and production plans may depend on production incentives and tax credits, which may be unavailable, reduced, delayed, audited or recaptured.
We may evaluate or structure projects based on the availability of production incentives, rebates, grants or tax credits offered by governmental authorities. These programs may be modified, reduced, suspended or eliminated, and eligibility often depends on strict compliance with program requirements, including timing, budget, documentation and local spending thresholds.
Even where incentives are expected, payments may be delayed due to administrative backlogs or disputes, and incentives may be subject to audit or recapture. If incentives are not realized at the expected amounts or on the expected timeline, projected project economics may be adversely affected, and our ability to recover invested amounts or achieve anticipated returns could be materially impaired.
If projects are not completed and delivered on time and in accordance with delivery requirements, revenues and recoupment may be delayed or not realized.
The timing and amount of revenues and other receipts associated with film and limited series projects may depend on timely completion, delivery and acceptance under distribution, licensing and other agreements. Projects can be delayed or disrupted by numerous factors, including scheduling issues, availability of talent and crew, post-production complexity, unexpected costs, disputes, force majeure events, and changes in distribution or marketing plans.
If a project is not delivered on time, does not meet technical or contractual delivery requirements, or is not accepted by the applicable counterparty, associated receipts may be delayed, reduced, or not received, which could adversely affect our liquidity and our ability to recover invested amounts.
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.
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 limited series 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 limited series 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 streaming, digital distribution, television licensing and international distribution, is often directly related to its box office performance, and because a limited series program’s performance is often directly related to ratings, audience engagement and platform demand, poor box office results, poor ratings or weak audience engagement may negatively affect future revenue streams. Our success depends on the experience and judgment of our management in selecting and developing new investment and production opportunities. We cannot assure you that our motion pictures will obtain favorable reviews, perform well at the box office or across ancillary markets, or that broadcasters, streaming platforms or other distributors will license rights to distribute any of our limited series programs in development or renew licenses for programs in our library. If we fail to achieve any of the foregoing, our business, results of operations and financial condition could be materially affected.
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 limited series 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 limited series 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 limited series 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.
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 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 impact the financial performance of our film. The foregoing could have a material effect on our business, results of operations and financial condition.
Technological advances may reduce our ability to exploit our motion pictures. Technological changes and evolving consumer viewing habits may reduce our ability to exploit our motion pictures and other content.
The entertainment industry continues to undergo significant technological and commercial change. Consumer viewing has shifted toward subscription streaming, ad-supported streaming, FAST channels, mobile and connected-TV viewing, and other digital platforms, while release windows, licensing practices, advertising models and platform economics continue to evolve. These developments may reduce the value of certain distribution channels, make audience discovery more difficult, and adversely affect the revenues we are able to generate from our titles.
In addition, larger studios, streamers, distributors and media companies generally have greater financial, marketing, data, technology and distribution resources than we do, which may limit our ability to obtain favorable distribution arrangements, platform placement, marketing support or licensing terms. We also may face uncertainty regarding whether we possess all rights necessary to exploit certain titles across new and emerging technologies, platforms and business models.
If we are unable to adapt to technological change, changing consumer preferences and evolving distribution models, or if we are unable to secure, enforce or exploit the rights necessary to monetize our content across those channels, our business, results of operations and financial condition could be materially adversely affected.
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 or consulting agreements. The loss of services of any key employees or consultants 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.
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 , we could incur significant costs and of resources in enforcing our intellectual property rights or in such , which could have a material effect on our business, results of operations or financial condition.
We may become involved in disputes regarding contractual credit rights, which could harm our reputation and business relationships.
In connection with certain projects, we may have contractual rights to specified credits and/or may support arrangements under which our officers or other participants receive credit. Credit determinations are often subject to customary industry practices, approvals by multiple parties, guild considerations, and contractual interpretation. Disputes may arise regarding whether credits are provided in the manner contemplated by applicable agreements.
Credit-related disputes can be costly, can divert management time, and may negatively affect our relationships with producers, financiers, distributors and other counterparties. Any reputational harm could reduce future deal flow or impair our ability to participate in projects on favorable terms.
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.
Our common shareholders face the risk of substantial potential dilution of their equity and voting rights from holders of our Series A preferred shares.
Our common shareholders face the risk of substantial dilution of their voting rights and reduced influence over corporate matters as a result of the Company’s Series A preferred shares and the concentration of voting control in our Chief Executive Officer and Chairperson of the Board of Directors, Bannor Michael MacGregor. As of March 25, 2026, the Company had 113,599,325 shares of common stock outstanding and 3,839 shares of Series A preferred stock outstanding. Each share of Series A preferred stock is entitled to 1,000,000 votes and is convertible into 100,000 shares of common stock. Mr. MacGregor beneficially owns 21,231,503 shares of common stock and 100% of the Company’s issued and outstanding Series A preferred stock. As a result, Mr. MacGregor controls a substantial majority of the Company’s voting power and has the ability to control the election of directors and the outcome of substantially all matters submitted to a vote of shareholders, including the approval of significant corporate transactions. This concentration of voting control may delay, deter or prevent a change in control, merger, consolidation, tender offer or other business combination that other shareholders may believe is in their best interests. In addition, because the Series A preferred shares are convertible into common stock, the exercise or conversion of such securities could substantially dilute the equity and voting interests of holders of our common stock. Further, because Mr. MacGregor may retain voting control through ownership of the Series A preferred shares even if he reduces his economic ownership of the Company’s common stock, the interests of Mr. MacGregor may not always align with the interests of other shareholders.
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;
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 in the Company’s internal control over financial reporting, or to implement or maintain other 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 internal controls.
Our Chief Executive Officer and Chairperson 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 Chairperson of the Board of Directors, Bannor Michael MacGregor, is the beneficial owner of 21,231,503 shares of common stock, which controls 18.69% of the outstanding common voting shares. Mr. MacGregor is the beneficial owner of 100% of the Company’s 3,839 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 3,860,231,503 shares of common stock and thus 97.66% 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, Chairperson 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 18.69% of the Company’s common shares. Additionally, Mr. MacGregor controls 3,839 Series A Preferred Shares that have voting rights equivalent to 3,839,000,000 common shares.
We are dependent on the continued services of our Chairperson and CEO, 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 Chairperson/CEO, Bannor Michael MacGregor 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.
Conflicts/Related Party . Our controlling stockholder and officers may enter into related-party arrangements, including with respect to advances, repayment priorities, or assignments of Company obligations, and these arrangements may create conflicts of interest and may not be negotiated on terms that are as favorable as could be obtained from unaffiliated third parties
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 expenses in our efforts to do so, our business, financial conditions and results of operations could be 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.
We have no employees and rely on consultants and third parties, which may limit our ability to execute our strategy and maintain effective controls.
We currently rely on consultants, independent contractors and other third parties for corporate operations and, where applicable, project development, packaging and financing activities. This reliance may limit our ability to scale operations, retain institutional knowledge, and implement and maintain consistent processes, including financial reporting and disclosure controls.
If we are unable to attract, retain and effectively manage qualified consultants and other service providers, or if key relationships are disrupted, we may experience delays in execution, increased costs, operational inefficiencies, and increased risk of control deficiencies. Any of these outcomes could materially and adversely affect our business, results of operations and financial condition.
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.
