IndieGoGo Blog: Securities Offering Disclosure Checklist & Fee Schedule (John Cones Series: Part 5 of 6)

I had the pleasure of sharing a panel at the Hollywood Black Film Festival with John Cones - entertainment attorney who's worked extensively with independent producers and filmmakers. While I emphasized the importance of audience-building and the role of fans as a contribution-based funding source, John focused on the role of passive and active investors as an equity-based funding source. Together, both are complementary sources.

Filmmakers rarely raise money from one source. Debt, equity, grants, fan funding, tax credits, rebates, and more are all sources filmmakers can tap at once. Check out the "Show Me The Money Forum" to discuss the hybrid approach with IndieGoGo members.

What follows is Part 5 of a Special 6-Part Weekly Series in the DIWO Download on equity-based film finance sources from John Cones.

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Part 5: Securities Offering Disclosure Checklist & Fee Schedule

By John W. Cones, Attorney

Most of this abbreviated list of disclosures need to be furnished by the producer for use in the preparation of the first draft of the disclosure document (discuss with attorney):

Title of screenplay/film
Date of script registration with WGA
Registration #
Screenwriter name and biography
Descriptive phrase re film's genre & anticipated MPAA rating
Screenplay synopsis
Production schedule
Planned shooting locations
Box office comparables (for films of similar genre and/or budget)
Choice of entity (LLC, LP or corporation)
Name of investment vehicle (entity–e.g., XYZ Film Production, LLC)
Name of management entity or individual(s)
Address and phone
Narrative biographies of key people committed to project
Total amount of offering (including offering expenses)
Number of investment units and price of each unit
Revenue sharing ratio as between producer/management group and investors
Budget topsheet or estimated use of proceeds (minimum & maximum, including offering expenses)
States in which sales are anticipated

Missing or additional required disclosures can be added between the first and second drafts.
The following up front and deferred legal fees apply to feature film limited partnership, limited liability company and corporate stock private placement securities offerings

Median Offering Proceeds* Up Front Fees Fees Paid Out of Offering Proceeds**

$1,000,000 & above                 $6,000                $6,500
$800,000 & above                    $5,500                $6,000
$600,000 & above                    $5,000                $5,500
$400,000 & above                    $4,500                $5,000
$250,000 & above                    $4,000                $4,500
$250,000 & below                    $3,500                $4,000

* Half way between the minimum and maximum offering proceeds.

** When minimum proceeds raised.

These flat fees (effective as of July 1, 2008) do not include work (other than consulting) relating to state and federal notice filings or to the preparation of financial projections.

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About John Cones

John Cones is a securities/entertainment attorney who has practiced in Los Angeles and area for nineteen years advising independent feature film producers and others on matters relating to investor financing of feature film and other entertainment projects. He has prepared or participated in the preparation of business plans and/or the required securities disclosure documents, along with Blue Sky compliance for more than 250 such offerings during this period, including public and private production¬money offerings for feature films, television pilots, documentaries, music projects, infomercials, live stage plays and Internet companies. Some 50 feature and documentary films have been produced by his clients with securities offering materials he has prepared. Other such offerings have been conducted for development, packaging, completion and distribution funding. In a broader sense, Mr. Cones also works with entrepreneurs on investor financing of business startups.

Mr. Cones has lectured more than 300 times to an aggregate audience of approximately 5,400 on topics relating to film finance and distribution for the American Film Institute, the UCLA graduate level Independent Producers Program, UCLA Extension, The USC Cinema/TV School, the USC Cinema/TV Alumni Association, IFP/West, American University (Washington, D.C.), the Nashville Bar Association, Cal Western School of Law, The University of Texas Entertainment Law Institute, North Carolina School of the Arts, California Lawyers for the Arts and other film industry organizations. He has also published several books and articles on those same topics including Film Finance and Distribution¬¬A Dictionary of Terms, Film Industry Contracts, 43 Ways to Finance Your Film, The Feature Film Distribution Deal and How the Movie Wars Were Won. He also hosts a Q&A Internet site about investor financing of entertainment projects at http://www/mecfilms.com/guide4.htm and maintains a web site at http://www.mecfilms.com/coneslaw.

John is a member of the California and Texas bar associations and the Independent Feature Project/West. He can be reached at jwc6774 at roadrunner dot com.

August 19, 2009

Securities Offering Disclosure Checklist & Fee Schedule (John Cones Series: Part 5 of 6)

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