Q&A Session

Transcript

Thank you to IQEQ for being here. John and Susanna on the board, and we'll be helping with the administration and the KYC and CDD and all the acronyms of the company. Thank you. Sally from Carrie Olson here as well. Sally just got finished with a 50 page information memorandum while juggling family life and much bigger clients.

Have fun reading it

The format for this is basically just a q and a to answer any common questions or any concerns or just things that we've heard normally and just to provide context and understanding for anyone that's involved in the company or maybe be involved in the company in the future as just a direct window to the underlying deals and kind of how we want to handle things going forward. So with that being said, thank you also to Foundry for coming along.

Delight to be here. Thanks Ben.

So I'll do the introductions because they're far too modest. Tim has worked in the industry since the 1990s. Mick, Mick, Tim Industry in my mind has worked for 20th Century Fox and Walt Disney and from 2002 onwards has focused mainly within TV production and the film financing sector. Tim has helped to make over 70 projects including Wolf Hole, the King's speech, and Georgia's all time favourite film. Shall Girl,

You haven't watched it, you really the best film ever. Oh my God, it's so watch later.

And Mick, who was MD of Film four and feature film company has had more than 30 years of experience within the UK distribution and acquisition side effect release films such as Madness of King George, like Beckham Man on a Wire, and was the executive producer on Escape from Pretoria and the Card Counter.

Well, I can recommend those back from early night.

So Mick I'll move on to you. If you could tell us a little bit about yourself, your background, and also just allude to independent films versus studio films

Well, my background is from very early stage I got into the cinema operation and in a time where there were no tax breaks or investments in films were basically through studios and the independence with people like Hammer films and things like that. It shows you old. But going forward, as it started to evolve as a real business in the UK and tax breaks came in and other incentives, independent distribution and film production became more prominent. And I decided to go from being a gamekeeper, I being a poacher. And I went up to a small independent company and we released films like with now and I was lucky to work on some fantastic independent films and it was joyous. I loved it. Every day was I couldn't wait to wake up really, to be honest. And then as I developed on and I got into bigger companies like Virgin Films that were reluctant to be involved in the film, Richard Branson hated movies.

Interestingly we did. He hated them. He didn't understand the emotional impact. Well, he didn't understand the emotional impact in film really. He knew music and he knew what he did and he was brilliant at doing it. But anyway, it was good grounding for me. And then I went on to run different companies that had mentioned like content own company feed, film company, and then film four, which was another development of my knowledge of film and how it should work because Film four, we weren't Hollywood. We were Hollywood. We did films that they would never make train spotted, stuff like that. I mean big emotional movies, you go and see these pictures and think, well why was that made? But it was made, but it was underneath a mandate of a TV company that had to make films that capture that culture. That's fantastic. But that's in the past.

And as we went forward and I started to realise that all these tax breaks in the UK were anti creativity and anti-business. You're giving people false money in a way and there's no point that you can't create a business on just paying people rewarding failure. So when we all came together just recently, it was a perfect time. I could see in the marketplace that we got all these new delivery systems. All of you are investing in Netflix, Amazon, Hulu, Disney, well that's who we work with. So you've done your due diligence already as the same way we have. So it was an obvious next step using Tim's intelligence network, my own and my other business partners, and the friendship of someone like Benji who was so enthusiastic and encouraging, we decided to come up with something which would a unique model that would bypass all those eccentricities of investment, blind investment into things based on Whimsical Ego.

We had to bypass that because we could build a business based on basic logics of investment, get your money in, get your money out, build a business, see how we go and develop that business. And I see this industry as now being very ripe to go forward on those principles. So I don't see a reversion back to let's give someone a load of money. We think it's a fun thing to be involved in. It is a fun thing to be involved in, but turn it into a business as well. And that's basically where I am in at this moment in time. Does that answer the question

And more we can probably pass up. That's done. Thank you. Tim, tell us a bit about yourself please and also if you could allude to how films are produced as a producer.

Okay. Well you talked about stuff I'd done in the past, but fundamentally I worked within the distribution sector and a lot of it dealing with marketing with Fox and then with Disney I built up a marketing agency, then sold marketing agency, which gave me enough money to stop financing, stroke producing independent film. And that's kind of what I've done since. And I endorsed a lot of stuff Mick said about what we do. I mean I think what we're doing in a nutshell with Foundry, it's applying everything that the six of us who own Foundry have learned over the last 20 years in a incredibly rapidly changing content market, which is kind of what we call it now to ensure that we can make money and never lose money out of film financing. And that's about doing it in the way that the banks do it. It's about taking security on everything.

It's about working with the right producers. It's about having the right models in terms of how do you produce a film. There's two ways you produce a film. If you work in a studio, you just write a check and somebody goes and does it. If you work with an independent film, which is where the real fun is, the real creativity is, it's a complete and utter rollercoaster. I mean it's only the only business where a producer, which is one of the reasons we're now financiers, where a producer starts to make something without being certain that anything is ever going to happen. And they will effectively develop a script, they'll work with talent agencies to get a cast lined up. They'll promise to pay the cast. So the cast will get attached to the film and then they'll come to us and say, we need 10 million.

And we will go through the process of saying, okay, what's your security? What have you got in pre-sales? What are the tax credit values? Okay, you've got 6 million of that 10 million secured, we'll lend you 6 million. Go and find the other 4 million from BBC, from BFI, whatever it is. And we then lend knowing with absolute certainty that we're going to get that money back as soon as the film is finished and delivered. But the producer needs that money to physically make the film. And most independent films also end up with something called insurance bonds, which occasionally we won't take because we know that there's no need. But with a lot of films you take out an insurance bond that guarantees an external insurance company guarantees that the film is going to be finished and delivered and most of the payments get triggered back when the film is delivered. So that's the other part of the equation. Does that make any sense?

And you've answered most of the question there, but where does Bridge lending fit in the lifecycle of a producer? We went to can recently we saw producers that have spent five years up until that point without getting financing or whatever. Where is it that you get attached and we bridge a film in its lifecycle and when do we get out?

Bridging is fascinating. Conceptually people think bridging is high risk and it actually delivers far higher returns than any other area of film financing. But I mean I think over the last 20 years there's only two or three occasions where we've bridged something and we've had to find a different exit from that actual bridge deal. So if you do it properly, you have a lower level of risk than certainly putting equity into a fill. And conceptually what we do is we're lending against the closing process on a fill. So we make sure that we have an agreed finance plan with parties who are obligated to advance the money to that fill on legal financial close, and we will then lend the producer the money to get from whatever point they're at to the financial close of the film. So the only risk, there's no creative risk, there's no commercial risk except for knowing that that film's going to get closed.

And typically it'll run for as short as two weeks, sometimes as long as 12 weeks and it's a great return. Producers need it. And it goes back to what I was saying earlier in terms of things like casting. So if you're going to make a film, you've got to commit to cast in a certain window, which means you have to start shooting on September the first. If you don't start shooting on September the first, you're going to lose the cast and you might not be ready to get everything closed until September the 30th. So you need the money to make the production happen until you're ready to close. And so a lot of films wouldn't get made without bridging. A lot of the films where we lend senior to, we also get asked to do the bridging because that's the only way the form's going to get made.

Perfect. So obviously you've both came together for Foundry for a reason and it's in response as well to a massive market demand that you see growing. You've talked about what the market was previously, what's the market look like now and into the future in terms of with response to this new tax credit.

Covid pretty much destroyed some miles, didn't it? You couldn't go out because you couldn't go out. So everyone was at home drinking Coke Amount wine and they were and tackling the Netflix and all these other delivery systems. This gave them a huge bonus for these new delivery systems and it encouraged new delivery systems. And it's been a long period of time I would say, for people to get back into the habit of going out to cinemas. Certainly in Jersey, I mean you are very lucky you've got the Sydney world during the corner, joking aside.

But the point is it's becoming quite difficult too to get those audiences back, but they're still at home, they're still spending money on their entertainment centres at home and that means that these new delivery systems need more and more product. They've got slots, new TV shows, new films, and obviously that leap in requirement. It means more producers get employed to make shows under the same deal terms and restrictions before they don't get paid upfront. If they do, then they don't need people like us. Clearly they don't, but they don't, don't get paid upfront. They have to deliver their shows and they're on terms issues. So that's where some companies such as Foundry fits into the model. We are there for them. We should be on their speed dial that they can ring us up and say, we've had 20% off upfront from Amazon, but we've got an 80% contract to deliver it, but we haven't got any money, we've got a tax credit coming up. So it's those kind of areas that we fit into. So I think that summarising, we're not chasing ambulances, we're chasing Rolls and Royces here it's like it's different. You've got big, big companies giving legal papers to producers. Those producers have got to turn those papers into cash and that's our function.

We take ownership of those legal contracts.

I think I'd emphasise as well that never has the demand for content being as strong as it is today. And the cinema is slowly coming back in a different form. You see chains like Picture House and every month, which are the shape of how cinema MA is going to be for the next 10, 20 years and no one, we will never lose the love as a society of being able to sit in a dark room with a whole load of strangers lost in a film, especially if you're a teenager.

Nice. Yeah, perfect. And it's safe to say the tax credit recently announced,
which is great, it's percent now you can get out of the uk, but it works really well from independent film because the ceiling is a 15 million budget and we rarely do a film more than 15 million. So not only does that encourage independent film in the uk, it makes it easier to make it. And obviously the 40% tax credit is great. We love to lend against that because it's secure. Remarkably we still trust the British Government.

Great. So massive wave of productions coming. We went recently to a market and there's hundreds and hundreds of them. What do Foundry look for specifically when you are bridging a film? What criteria does it have to meet in order to qualify to come in and be financed by you guys?

Well the film have to meet our criteria. I mean we're not chasing anything said. We're not chasing anyone around. We will only work with producers that we believe are sort of past the post. And people that can do it historically can prove that. And also they've got to have their documents in place. So it is pointing to us going out there and saying, oh, we really want this film to be marked so we are going to go out and lead and try to get it financed. We're not there to finance the films, they're there to get everything in place. We are there to facilitate that project when it's got that stuff done. Can we adjust on elements of the industry that we are very knowledgeable? Yeah, we can. We definitely can and we will. It's in our best interest. We don't want them to make a dog. But even if they made a dog, if they've got Amazon who paying 8 million on 10 million pound budget, theoretically we are still made good.

I think if we're talking specifically bridging, it's actually all we really care about. Yes, it's great to have a good film with a good cast and all the rest of it. And by default most of them are like that. It's about knowing that the financing and all the legals will close on that film so that the film gets fully funded because that's when we get repaid. And secondly, to ensure that we have at least one cornerstone investor on every film. So if you look at the three that we've done, one of them, Warner's Discovery was the Cornerstone investor on the current one we're filming, it's BBC and BFI. And the one before that it was Sky. So you know that there's somebody involved in the closing process who is going to make it happen.

Perfect.

A bit more lighthearted. Mick, why don't you tell us about your favourite upcoming film. Can you share

Or maybe not upcoming film. What are you passionate about right now?

Do you know something that we've got cut into two things here, right? It is what I love and what I do for a living. It's like all of us in this room, you have your own enthusiasm as in might be theatre or music or film or something else, but you have your enthusiasm and there's what you do for a living and we've got to be able to delineate between the two because unless we do that, we become vulnerable to the very thing we've talked about tonight. Do you go forward blindly trying to pursue a dream when it's just that it's your ego at stake and that's nothing to do with us? We are not involved in that. But I mean most of my favourite films are Historical Godfather too. I'd love to have funded that.

I don't think I'll ever get the chance with Now an Eye. It was a fantastic experience for me working on something which has become so what's a cult, isn't it? It's an absolute cult. Everyone saw it back in the day and it resonates with so many people. It's a wonderful life. I did the reissue on that. That for me was euphoric. I loved working on that, introducing that to a new young audience. A film was 50 years old, going back to negative, introducing the son of Frank Capra into a new audience and things and the film going out and do another a million quid, it's a black and white movie. Those things really trigger me. I love the industry. That's why I'm in there. That's really the question you asked me. Why am I doing this? Because I love the instrument. I absolutely love it. I adore it and it makes me enthusiastic as I say, to get up in the morning to do this thing. But I do understand that I've got to turn it into a business as well. So I've got to measure my enthusiasm, my blind enthusiasm with a business acumen. And that's where Tim comes in because he reminds me of it every day.

Can you tell us the storyline, either of a film unreleased or probably may never be released that you are very passionate about that?

Okay, I'll give you a funny little anecdote because it doesn't really mean things you won't know to film, but I bought a movie years ago and I didn't do it as a vanity project. I saw a movie about El Salvador. Its about boys, soldiers, little kids that when they were 11 years old that were taken away from their families and they had to join either the military or they joined the terrorist organisation. And I saw this film and it broke me in pieces. I just thought that could have been me if I'd been living there and everything. It was just the most magnificent film and I still love it to this day. And my misses, I showed it to her, she still talks about it and how important it was. And it's not a commercial movie, but I brought it back and I used to have an output deal with Universal Pictures.

I stood Flo 'em along the movies a year. I put me into cinemas and they put me home entertainment and they made money out of the university of course. And I showed it to them and they were all crying at the end of it and everything. I thought, good I'll getting the money. And they gave me the money to buy it and they released a film theatrically. And it is probably the only time I thought of film. I thought I've done something, I've done something really important here that's such an important movie and the film still shows around the world and it has become a bit of a cult. It's not down to me, but it's my enthusiasm is what I love. So that I would say for me, every time I see that movie, it cracks me, it breaks me up. I love it.

It is what I was in the industry to do, try and do something quite important in a weird kind of way. And it's also quite commercial. They've got universal amount of money before it. They didn't know that either because just as the last word on this, with the big studios, if you sell to a big studio, they have output arrangements with all the big TV channels and some of the small ones as well, Netflix and things like that. So they can justify their capital expenditure by putting these into slots, even if they're third party acquisitions and they get their money back. So that's it. So I don't feel I've done Mr. Universal hardship.

What was the name of the Bell? Innocent Voices. It's magnificent. And you've got children, show it to them because it's a life lesson. Perfect.

Perfect. Tim, we've heard of the security and the arrangements and obviously very important in the underlying loans, but can you tell us any war stories? What's gone on, what's gone wrong in bridging previously?

So you nearly always, in fact, you always find an exit on a bridging deal if something goes wrong, whether it's replacing a financier or effectively just holding a nerve and waiting for it to close. I think probably the most dramatic was a film called Sin City Two, not the Sin City one, sin two, which was shooting in Mexico and it was 50 million budget and effectively production had ground to a halt because the director was in full blown dispute with the finances and they couldn't finish it. So there was like 40 odd million had been spent and they couldn't finish the film. So the producers came to us and said, if we can borrow 6 million, we can get this film closed in four weeks. So we looked at, okay, security, fantastic. We've got a almost finished film worth nearly 50 million. So we lent them 6 million, six months later it closed, which created an interest level of almost a hundred percent during that period.

So to close it, they would've had to pay us not only the 6 million back, but another 6 million in interest, which our investors were very happy about. But it was never going to happen because they just could not get that level of money and still close the film. So we talked with all the investors and everybody sweated on it and in the end we got everyone to agree to accept 40% of the total 6 million upside, which was still a fantastic return for six months. So we got out, we got repaid, investors were happy, but it was really, it was probably one of the tensest increasingly tense six months that we had because it's a lot of money. 6 million.

Perfect. And it kind of speaks for itself and it's hard to say what you do differently, but have there been specific lessons that you've adapted to previously that you've brought to foresight now from things that have gone wrong or things that you watch out for that may be specific to your industry knowledge that an amateur financial wouldn't hurt?

I mean I think the criteria we place, not just on bridging but on senior is a reflection of all of those deals. And I think part of it is when we will always walk away from a deal, if we have any discomfort with it, probably at least 60 to 70% of the deals that we look at we walk away from because we're not satisfied, it meets our criteria or we're not satisfied that the producers are people that we have confidence working with. And then it goes back to our criteria. Always have a cornerstone investor in the film because you know that the momentum to get it closed and to make it happen exists there where it's senior lending work with really good counterparts and make sure it's people you trust. Most of the producers and distributors and sales agents we know and work with are people who we've known for a long time and we know we can trust them and they understand us and that ensures that we effectively deliver on what we set up to do.

Perfect, perfect. I think lastly, before we open up for any questions that anyone has, obviously it's a fantastic company and opportunity that you guys have developed for the understanding why Copia, why have I been invited to invest? Why is the opportunity available?

We like you.

I mean I think Langa might have said this to you at some point in camp, there's probably 250 people in the world who understand how to do independent film financing and it's a very finite market. There is only so much in bridging available every year because there's only so many independent films, films made. So for me anyway, it's always been about finding people who are enthusiastic about the business and take the time to understand what we're doing and how we're doing it and that we feel really comfortable to work with. And Benji is absolutely one of those people. So it is great to be working with him and through him hopefully to be working with some of you guys in the future.

Thank you. Yeah, perfect. Awesome. Thanks guys. We like him as well.

You have to say that you're on camera. Cool. Well hopefully that's spurd some thoughts or conversational topics. If you don't have any now, obviously welcome to talk to these guys downstairs, but is there any points, I guess why I sat here that anyone wants to raise or that anyone has in the investment

Except for lawyers?

Lawyers have question. Just out of interest, how many Copia's do you have in terms of people you reach out to for joining in on these plans?

So I mean we probably have seven or eight core investor sources at the moment, and I think to a certain level we will continue to open that up. But it will be more a case of replacing anyone who's dropped out because again, there's a finance amount of deals to do. We're geared up to probably lend no more than 50 million a year and we are getting close to being able to do that from our existing board

Investors. Perfect. Good question. Anyone else? Anyone?

Congratulations guys. First of all, I've had the privilege to work with Mick now for five plus years, and I was a kind of fuzzy, kind of ego focused, creative in the early days and he said, Ben, you've got to sell it before you make it. So I'm all right in thinking that the deals, the bridge deals, they're all collateralised, they're all pre-sales, they're all pre-sold. So if you're an investor within that last kind of stage, regardless if the film's a success or not, it's still a win from the investment

Perspective. It really is. We're not dependent on someone going to a box office and letting something quit at the local. We not way further forward in and out previous. Absolutely. So I have been in that situation in my career, we're releasing films and it's all about box officer. That is a white knuckle ride. The upsides are fantastic, the downsides are not very pleasant, but that's why we've come up with this system, this business plan, navigate that because otherwise it's not fair on investors to be taking that kind of pump. I mean, you can't sell a pump, I don't think you might as well tell people to go down a racetrack and have a cover quid on the hundred, the one, the Hawkes. It's not, doesn't work that way. So that's how we rationalise this for

It's a good point. There's no performance risk, there's no input. You can't go in and say, I'd like this film to be made this way because I have a passion in it, but there's no risk in its performance.

But in due time, will you guys be exploring?

We'll, collateralise, we will explore everything in performance time with the opportunity as long as we remember one thing. We are building relationships here. Our little black book is going to have Sky, BB, C, B, FI, Amazon, we are creating relationships. Who knows where that's going to take us, but at the moment it's doing what we do, sticking to our Ty and then we'll take a view as we go forward with the new relationships we're building.

I mean, I think Ben, we wouldn't change the model significantly though, because what we're applying is a model that gives good returns and doesn't lose money. And that that's the whole rationale,

Which is kind of unicorn territory in the film finance world. So it's a great opportunity.

It's kind of what the banks do.

It is what banks do.

You are more agile than Banks. Yeah, absolutely. And one more expensive, according,

I don't even know. That's a compliment

Obviously, because the producers are locked in and they need the cash quick. So if you are faster than a bank that's

Got, they've done the work already, we facilitating their work basically.

I mean on occasions we've on permanent financing takes longer, but on bridging, we've turned the bridge around within five, six days from a producer calling and saying, I desperately need 2 million by next Friday. So a bank couldn't even take a call.

Which is also the reason for Gopi because going to a syndicate of investors with a short amount of timeframe, like 24 hours to sign contracts and get money in despite banking delays, foreign exchange, everything else is virtually impossible. So we're glad to commoditize that offering in a way to something that's palatable for investors over the long term, but also provide you guys with a liquidity to deploy as quickly as you need and through a preset agreement where we're kind of handcuffed to as an SPV to these secure loans. And everyone has agreed to that in advance.

Totally. I mean, I would also say about working with Benji, I don't actually, and I've worked with lots of people over the years, but I've never worked with anyone who has so quickly grasped how the whole financing model works and has asked all the right questions and have learned it and applied it. I'm not embarrassing you. That's absolutely true.

Ate, thanks. Cool. I'll

Carry on. No, you go first. You go.

I'm just going to say we spoke about can because you guys have been there recently, what would you say looking forward is the landscape for independent foreign environments? So you talked very positively about can you said there was new energy and how does that look in terms of terms?

Actually, I can just give you a working example. I rather cruelly took Benji to the pal where all the different companies that are not the major film companies, the Hungarian film, what are they called? That they make a lot of movies and they fund them and they put them out into the market and they have civil servants, their version who tried to sell these movies. And obviously they have very little international value. I mean, they're not good movies, it's just they're not commercial movies in the wider aspect. And I showed Benji that and I thought, I'm taking a risk here because you might tell, say kidding, you've got 500 cup people selling a load of movies that no one wants. But that's what I, showing that side of business, that doesn't work. That's not what we're involved in. What we are involved in is the booming area of it.

And I say booming because there's so many new delivery platforms and there's more and more shows. We've got to go back to Netflix and there'll be three new shows this week, 13 episodes and what have you. So we do know that to be, it's a fact. So someone has to service that in a financial sense because Netflix do not pull the money up front. We tell that a fact. So all I can say is looking at it instinctively, the independent sector is booming and it will continue to boom because there seems to be a thirst and a need for these new shows and people having even more channels available on their big screens at home. So that would be my answer to that.

Yeah. My question I guess was to you Benji, and obviously you've got access to specific funds elsewhere. My personal interest has always been like, why have you reached out to people who you know and invited us to be investors and why have you done it yourself? Because clearly could just borrow from the bank and do it that way.

Yeah, that's a good point. It's been a lot of fun. Mainly, yeah, mainly it's been a lot of fun. It's unique as well, which lends itself to personal lending makes it quite boring and don't quite understand or graphs the concept. But it's not to say it's impossible. We could definitely go and get commercial and institutional lending and probably for a much lower interest rate. And I could take the cream, but it's a lot of fun investing in films. And we've had six, I think, or maybe seven this year already of films. And I've really, really enjoyed co-investing with some friends. So I think what I want to create here is a company that is also part of a community where we can share in the outside and talk about new films. And a really good example is I've got a friend in S who has co-invested with me and he sold his business and he's travelling around Australia with his kids and family.

And his favourite thing to talk about is how he's making films. He just tells everyone he's making films out in the outback of Australia. He is a wealthy guy and it's just the only thing he talks about and it's so much fun for him. And he calls up all the time for updates on what films are going or how they're doing or what's coming up or who's in them and gets to brag about that. And there's a lot of ancillary benefits that I guess you guys, Aren are quite used to now that are just really novel and really fun to be part of and to share. Obviously cans are a big one that I went to and hope to go to again in the future and celebrate all of our successes to come in within the next year. But I think the answer to that is it's just more fun and I feel comfortable going to friends and family with this one, with the level of security that we have in place. I typically wouldn't do this model like this in other scenarios where I don't feel comfortable going to friends and family, letting them risk their capital. But for this one I totally do. So I think it's a show of confidence and a bit of fun.

Cool. Well if there's any other questions you can ask these guys downstairs