Investor Q&A


QUESTION

A portion of the currently available knowledge-base is in the minds of retired or soon-to-retire personnel. As this is highly specialized knowledge, you won’t be able to hire direct replacements from the general jobs market, but must locate and spend the time necessary to train new staff. Are these costs factored into your plans? How will you avoid a lethal brain-drain?

ANSWER

The short answer is that this will be a bigger issue 20 years into the future than it is for the next 10 years.

Our current staff have many good years before retirement, and among the former Ferrania-3M staff available to us, many are not of retirement age, and have been living on government support in anticipation of returning to work.

A small amount of recruitment and training of new staff has been factored into costs in our 5-year forecast. These new people will come mainly through cooperation with local universities and high-schools following the tradition of the original Ferrania company.


QUESTION

When the current old-stock of chemicals and base foils runs out, you will have to re-engineer your products based on new products. In addition, you will need to source these replacement goods. Have these costs been taken into consideration when calculating potential revenues?

ANSWER

The fact is that most of the components we have been using to produce our FERRANIA P30 ALPHA film are new - synthesised in-house by ourselves (i.e. sensitisers) or bought in from suppliers of the old Ferrania company (i.e. base), or through new sources. This means that in the case of P30 (and for all black and white products) we’ll not use old stock components.

In the case of our old-stock components for colour film - many are stable for long-term storage, and in some cases, we have enough to last 10 years or more at our maximum production capacity. Unfortunately we don’t have the “full set” and due to the fact no external supplier is able to make for us anymore, we have to setup an internal organic chemical synthesis lab with full time staff whose costs is already counted in our employees plan.


QUESTION

In the deck, you say the goal is to capture 4% market share in the 5-year plan, but you claim sales will be €8,2M while the market remains at 100M total (8.2% market share). Is something wrong with the math?

ANSWER

The 100M estimate is based almost exclusively on so-called “consumer” films - from Kodak, Fuji and Ilford only - and this number is calculated based on a $5/roll average distributor price, since these companies do not sell direct-to-consumer or even direct-to-retail. This is detailed in the footnotes in the deck.

Capturing 4% of that 100M estimate remains the goal, and this was the traditional market share held by the old Ferrania company. But what is not included in that estimate is important.

Not included in that estimate are cinema sales and B2B sales. We also know from Kodak and Fuji that so-called “professional” films are under-reported since they are not sold in the big-box and regional chain stores that make up the majority of traditional sales reporting.

Dividing film products into many categories, as well as selling only through distributors, made perfect sense in the 20th century - but no longer. These arbitrary and antiquated categories result in the entire sales volume across the industry being under-reported.

Our revenue projections account for all of our product sales - whether the end customer is an individual person, a shop, or another film brand.


QUESTION

What is the current ownership structure of the company?

ANSWER

On your private web page we have added the most recent “visura” (business profile) of FILM Ferrania Srl from the Italian chamber of commerce. The Herozero Ltd company is owned fifty/fifty by Nicola Baldini and Marco Pagni and is the company who initially acquired some assets from Ferrania before FILM Ferrania was established (see FILM Ferrania history).

In addition, you can see the breakdown of current ownership in the Long Form Business Plan posted to your private page.


QUESTION

What are the details of the company valuation (including capital)?

ANSWER

The capital of the company (from the “visura”) is €1.306.800,00. To this we need to add the value of chemical stocks acquired from Ferrania, but still usable (~€900K), and all immaterial assets like the know-how, patents, etc (~€800K). We think that the valuation is conservative respecting the potential of the company in terms of sales not exploited yet.


QUESTION

Do you have any concept regarding a future capital increase apart from the €1M mentioned in the documents?

ANSWER

For our near-term plans, we feel that a €1M investment is sufficient to enter profitability and to “close the loop” to make us nearly self-contained. Many smaller projects that optimize operations can be completed once we are profitable - and each will be discussed with shareholders prior to moving forward with those activities.

Because we already own millions of euros worth of actual equipment, here are the primary uses of the €1M we will raise:

click to enlarge

Based on this allocation of investment, we do not foresee another major raise of capital in our current 5-year window.


QUESTION

What does “co-financed by the local government” in this graph mean?

ANSWER

Cairo Montenotte has been defined as "crisis area" by the Italian government and €20M in funding has recently been approved to sustain development in the area. FILM Ferrania, as one of the most promising innovative companies in the area, is qualified for this funding and has already presented a couple of projects to get co-financing regarding green energy and thin film casting like (but not only) triacetate.


QUESTION

click to enlarge

Credit: By European Economic Area.svg: Kolja21, Fry1989derivative work: Danlaycock - European Economic Area.svg, CC BY-SA 2.5, https://commons.wikimedia.org/w/index.php?curid=32132627

Can you further explain the 20% subsidy that is mentioned in the Executive Summary?

ANSWER

FILM Ferrania has been designated as an innovative start-up by the German government. Any investor residing in EU/Iceland/Norway (blue and green countries in the map at right) can apply for a 20% subsidy on their personal investment. The program starts with 10000 EUR. In this example, you could get a grant of 2000 EUR so the total investment would be 12000 EUR and your share in FILM Ferrania would increase as well. For sure we cannot give any guarantees, but we will help you in through the application process.


QUESTION

Are the shares offered as 1 share per Euro invested?

ANSWER

"Shares" and "shareholders" are convenient terms that we use somewhat liberally - but these words are not the correct terms to describe this investment round. FILM Ferrania is not issuing shares as public companies do. Investments will take the form of proportional ownership of the company. Yes, in some ways, this is a "share" of the company, and it is the most convenient way to refer to this proportional ownership - but it is only semantics.

This proportion of ownership will be based on the "pre-money" value of the company as outlined in the investment contract that will be posted to your private page very soon.

So again, it is convenient to think of this as a “share” and you as a “shareholder” - but the reality is that you will be an owner, based on the size of your investment compared to all others.


QUESTION

Is there a voting right for small investors? Or at least a way to participate and make suggestions?

ANSWER

All investors will have a vote that is equal to the proportion of the investment. According to Italian law, you must be physically present at meetings in order to vote, or you can appoint a representative. This is something we will discuss with each shareholder individually to find a solution that works. 

Perhaps even more critical than the minutiae of these shareholder meetings, we very much hope that those who choose to invest will share their expertise with us, offer us their ideas and council, and generally serve FILM Ferrania as Subject Matter Experts (SME’s).

Those who have stepped forward to express interest in this first investment round are people who are passionate about film, and who come from a wide variety of personal and professional experiences. These experiences can be incredibly valuable as we move into new territories and expand on our marketing, logistics, sales and educational initiatives.

Internally, we have been discussing various ways to enable communication with all stakeholders. We believe this channel will be critical to keep everyone informed and educated about FILM Ferrania’s status and plans, and also to elicit commentary, debate, and expertise from SME’s. When we have some solid ideas about the appropriate software to open this channel, we will put it to a vote!


QUESTION

Can you please explain the options for exits?

ANSWER

It is our primary desire to find investors who simply collect dividends based on profits and leave their original investment in place for the long-term to accrue value. We are committed to growing the value of FILM Ferrania. If you take a good look at our detailed projections, the wisdom in this should be evident. The same reasons that have brought you to the point of considering an investment - the product, the market, our team, etc. - will be sustained with your investment in place. We are fully committed to adding more reasons (value) in the future.

While we hope all investors stay to collect dividends, a possible exit strategy is a “buyback option” that will be provided by FILM Ferrania after a certain period of time. In this option, each shareholder can privately sell their shares at any time after prior notification to the company. The existing shareholders then have the option of buying the shares themselves. Details of this option will be presented in the investment contract and this can be personalized on case by case basis.


QUESTION

What happens if the €300K target is not reached within the window for investment? Are there contingency plans for investments of €100-150K, and can the company continue without the complete investment of €300K.

ANSWER

We do, of course, have many levels of contingency plans, as we have from the beginning of this company. Nicola Baldini has provided excellent leadership by always having many parallel or overlapping plans based on the day-to-day realities within the factory - and always considering how to optimize our very limited financial resources.

The goal will be to raise €1M total, and this will be necessary to achieve our vision. However, for the short term, if we were to raise only part of our goal of €300K, we already have plans in place to optimize funding so that sales can begin in earnest, and continue without major interruption. And with continuous sales, we can build a stronger business case to go after the full €1M needed to be self-contained.

With that said, it’s worth noting again that the targets and milestones in the Investor Presentation materials are all based on raising €300K.  As such, it's best for all potential investors to commit sooner rather than later in the investment window.