Securities and security exemptions

A Film Participation Agreement is a contract between an investor (the lender) and a company (the borrower) to lend money (the “Debt Amount”) to be used by the company to finance a film in return for an interest payment (“Interest Amount”). Unlike a Convertible Note or a SAFE, there is no potential for conversion to equity. Film Participation Agreements are typically unsecured debt instruments with unique characteristics.  Common terms of a Film Participation Agreement include: 

• Principal or Debt Amount: The actual amount an investor invests in the instrument.  

• Interest: The interest rate could be simple or compound, and it could be variable based on the maturity date.  

• Repayment or Maturity Date: The date the instrument matures or becomes due.  The maturity date could be variable, and there may be an extension provision enabling the company to extend the maturity date.   

Additionally, Film Participation Agreements may also be tokenized and/or securitized, and repayment of principal and payment of interest can ultimately be in the form of a U.S. dollar-pegged stablecoin generally accepted in the blockchain industry as having sound risk and compliance procedures (such as USDC).

There are material risks associated with Film Participation Agreements, especially those that have been tokenized and/or securitized.  Investors should be aware of the specific risks associated with Film Participation Agreements, including without limitation: 

• Investment Returns are capped and not directly correlated to the sale or success of the Film.
• This is not a convertible debt instrument.  
• Investors will not become equity holders in the Company and will not have voting rights.
• There is no assurance that the Film will be completed.
• The Film may not sell.
• The debt is unsecured.  
• The Company’s assets are nominal, and there may not be sufficient assets to recover in a default event.
• Investors do not own the rights, title, or interest in the Film.
• There may be "recoupment” or “payments” associated with the Film, which take priority over investors’ repayment or payment.
• Sentiment surrounding blockchain technology and cryptocurrency may impact the success of the Film and its sale thereof. 
• The producer may have no obligation to produce, complete, release, distribute, or otherwise exploit the project. 
• There are risks associated with cryptocurrencies, blockchain, and the Avalanche protocol.