Contents of a Film Private Placement Memorandum

Below is Part 2 of 4 in my PPM series on FilmProposals.com:

Now that you know what a Private Placement Memorandum is, and how it can help you raise money from Film Investors, let’s look at the contents of a Film PPM. There are 10 sections that make up your independent film PPM. The first section of the document, Summary of the Offering, is the most comprehensive and will be the first impression you make with film investors. It is where you first outline your Company, Film and Financial details.

The following represents a list of all of the details that make up your Summary of the Offering:

Company Details

Name of offering entity (LP, LLC or corporation)

Contact Information
Address
Phone Number and Fax Number
Email Address

State in which entity is formed (or to be formed)

If already formed, date of formation
If not formed, will it be formed before or after start of offering

Purpose of Offering Entity
For most of you, the production of a feature film

Film Details

Name of Film
If this is a working title, you should specify this

Screenplay Writer(s)

Director

Producer(s)
This includes Executive Producers as well

Any Cast attached

Financial Details

Size of Unit
($ per unit, interest or share)

Number of units to be sold

Size of total offering
Size of minimum investment

Payback %’s to investors (if applicable)

Any interest payable to investors (if applicable)

Is the offer available to non-accredited investors?

Impound or non-impound
(money escrowed until certain level of investment reached)

Commissions and/or Fees (due diligence fees and finders fees)

A list of any selling brokers

Is there a selling agreement with a broker?

States, Countries where Units are offered

Name of Manager(s) and position(s)

If Manager is an entity, the Owner and operator of Manager

Are resumes available for people mentioned above

If this is an existing entity, divulge any info on prior projects (that are related to the offering)

Businesses, financial data, copy of all governing documents

Identity of any predecessor entities and some summary info regarding how much money raised and what proceeds used for.

If the offering entity already exists, do they have any financial statements?

If the manager of the offering entity is an entity itself, are there any financial statements for it?


Conclusion

Although this is just the first section of the PPM, if you can answer the majority of these questions, then chances are, you are ready to put together a meaningful business proposal for your film. If you aren’t sure about these questions, or are on the fence about certain answers, then you are NOT ready to approach investors about your film. You may have a screenplay you believe in, but you do not yet have a clear financial plan. Nor will you be able to respond to a savvy investor who will ask you these questions.

Do not despair, answers to your questions are out there. Or, if you know the answer and just happen to be on the fence about one of the questions – there are people out there willing to share their experiences and knowledge with you.  However, they are not lining up to come to you. If you are making an independent film, it is time to get in that mindset – which means YOU need to make it happen. Seek these answers and experienced producers out.  And never get discouraged by a cold shoulder or a negative response. All it takes is one positive response.

Lunatic Has Been Approved!

It came over a month later than everyone expected, but my next feature film, LUNATIC, has finally received approval for the UK tax incentive.  Apparently they wanted a lot more documentation than previous years and it slowed things down a bit.  But we are now approved and can take final steps towards locking in financing and legal.

I am keeping myself on an even keel until that process is finalized because anything can happen between now and then.  However, the shoot date has been set in June and the powers that be are all gunning to make that happen.  I continue to do as much as I can and am way ahead of the curve in terms of where I need to be.

Lunatic-Werewolf Test

What is a PPM (and how does it affect your film)?

Since my surgery I’ve been on the shelf for a while.  I’m starting to come around and I have recently been consulting with FilmProposals.com – writing articles, revising some of their data, reviewing business proposals for films, etc…

Below is the first of four in my series on Private Placement Memorandum’s for feature films:

If you are looking to raise money for your independent film, you have likely heard the term Private Placement Memorandum (PPM) and are wondering if you need one? Unless you are getting private equity from family and friends, you should have a Film Private Placement Memorandum (PPM) drawn up for your fund raising.  In fact, you should have a PPM even if that is the case.

What is a PPM?

PPM stands for Private Placement Memorandum. Issuing a PPM lets your company sell shares to “passive investors” (those who invest but take no active role in the production) in order to raise the money needed for the film project.

This document commonly provides investors with material information, such as a description of the company’s business, financial statements, biographies of officers and directors, detailed information about their compensation, any litigation that is taking place, a list of material properties and any other material information.

How does a PPM affect your independent film?

Having a PPM is just as much for your protection as it is for your investors. The primary purpose of a PPM is to give producers the opportunity to present all potential risks to potential investors (such as the inability to find distribution or that it may never achieve financial success), thus making it difficult for investors to claim that they were not adequately warned. For this reason, it is vital the contents of the PPM be accurate and complete and meet the highest standards of full disclosure (under securities laws) to potential investors.

In drawing up a PPM, be aware of the type of film you are making. This honesty will protect you later on.  Do not oversell your film.  If you are making a low budget independent film that will more than likely be taken to a sales market or film festival, your PPM should not focus on theatrical releases (their numbers and risk factors). When using comparable films or revenue projections be as conservative as possible. For example, your found footage film should not reference Blair Witch Project and/or Paranormal Activity.  Also, don’t use sequels or franchises when putting numbers together because they will obviously skew your numbers.

Where can I get a PPM done?

Most of us don’t have access to investment banks, so entertainment law firms are a good place to start.  These are in the $10,000 range, but could run you as much as $20,000. This could very well be an astronomical number, and would defeat the purpose of trying to raise this money. Don’t despair, there are firms that specialize in PPM’s online for a fraction of the price. However, before doing business with them, make sure that they have adequate experience in films.

The PPM does not have to be written by an attorney, but must be reviewed by a qualified attorney to assure it complies with all national and state regulations.

Stay tuned for the next article in our 4 Part Series: What Goes Into a PPM?