This Program is brought to you by the Following Sponsors

Financial Sponsors of the TV Show “Out of Darkness” as of March 10, 2006

Village of Bratenahl & Bratenahl Police Department

More supporters of Prelude2Cinema are included within this Annual Report. If you wish to support Prelude2Cinema or become a Business Partner, please contact Film Czar Alex P. Michaels at 216-341-0218 or e-mail alexmichaels@prelude2cinema.com

5

Index This Annual Report will be Available

as an Acrobat PDF File. Use Bookmarks to Navigate the Report. This Program is brought to you by the Following Sponsors

Index Letter to Prelude2Cinema’s Sponsors

Looking to the Future History Prelude2Cinema’s Press Room

Selecting Press Clippings History of the Movies in the Press

The Full Press on Prelude2Cinema Financial History

Balance Sheet March 10, 2006 Financial and In-kind Support

“What Angels Fear” “Blood Kiss” “The M.A.N.”

Knight Studio Branded Entertainment- funds the TV Series

What is Branded Entertainment? Is Branded Entertainment the same thing as Product Placement? Examples of Branded Entertainment in TV

Support for “Out of Darkness” The TV Series

The Velvet Dog and the Dark Wrap Parties Scheduling and Markets The TV Series Yahoo Fan Site The Future The need to build Consumers

Future Revenue Streams will Sustain Prelude2Cinema Internet TV Station DVD distribution of current movies and TV Series Business Partners Prelude2Cinema’s Wiki

Markets and Competition Financial Projections Current Financing Needs Current Financing Needs Chart Projected Income from Expansion Prom Forma Statement Year One Expansion Board & Bios

The Prelude2Cinema Team Studio Chief: Alex P. Michaels Movie and TV Library

Unedited Features Our Place in the Community

Strategic Partners & Support for Prelude2Cinema Prelude2Cinema Internship Program

To Be Continued

Letter to Prelude2Cinema’s Sponsors I was looking up the origin of the word “thanks.” It comes from the same root as the word “think.” And I have to say, I don’t think most people think to say thanks. This Annual Report is my way of thanking the people who have supported Prelude2Cinema by letting them know how far we have come. It is also a way to let them know that there is still a lot more to come. Over the last few years, I have grown and made myself a part of the business community in Northeast Ohio. While there have been bumps and missteps along the way, the vision has always been clear. Prelude2Cinema is a digital movie studio and its focus becomes clearer as technology grows. The final piece of the puzzle has arrived. Distribution. Formerly an independent producer was always at the mercy of Hollywood to distribute its movies. Now, it is possible to create movies and TV shows and place them directly in front of an audience. It is possible to grow a library of movies that have been overlooked and create streams of income. While I plan to touch on that in the Annual Report, I first have to stop and think and take the time to thank those who have put their faith in Prelude2Cinema. I owe it to you to make certain the vision is kept clear and of course to say Thank you. Alex P. Michaels Film Czar Prelude2Cinema March 10, 2006

Looking to the Future This is the First Annual Report for the Company. It will change as we progress. Much thought was put into whether to do a Business Plan, but I decided that a Business Plan is for a company that is starting out. Prelude2Cinema is already here. We have a Studio that is expanding. We are building a library of movies. We have our “flagship” production, our TV Series. Now is not the time to stop. Now is the time to build, to look forward to what is ahead. Our History provides a template for where we have been. It also gives us a glimpse into the future. The interesting thing about movies is their lifespan. It does not matter how many years ago (or sometimes decades ago) that a movie or TV show was produced, there is always someone who has not seen it. There is an audience for everything. The challenge is finding that audience. Still, it is a worthwhile challenge. By being a dedicated movie studio with a clear vision in Northeast Ohio. Prelude2Cinema will help to spur economic development by creating a steady flow of productions. We are proud that we have been featured in the press. We plan to make use of the press to tell our story. We are also proud of our business relationships over the last few years. We are forming new relationships and strategic partners on an almost weekly basis. We are forging new ground by being dedicated to creating the infrastructure of film in northeast Ohio. As the great Bette Davis said, “Fasten your seatbeats, it’s going to be a bumpy night.” But when day breaks, Prelude2Cinema will still be here in Northeast Ohio and so will the film industry So no matter how bumpy it gets, it will definitely be worth it.

History FRANCIS FORD COPPOLA once said there would come a day when some little fat girl from Ohio could borrow her dad's camcorder and become the next Mozart of moviemaking. I remember the first time I saw colour TV. I think I was about 4. The family had went out except for my Dad and when we got back, there was a brand new TV set in the living room. “The Old Man and the Sea” was on. The ocean was so blue, I walked over and tried to put my hand in it. That memory is the same way I felt in 1999 when I had just won my Emmy and I had money from private investors. I had shot in 16mm film before and I was convinced that film was the only medium to shoot in. I picked up a magazine and read that the Sundance Film Festival was accepting digital movies. Canon had introduced the XL1 and indie filmmakers were creating movies with it. I always believed that if you were going to “recreate” Hollywood, you had to do it with the Studio System. Being able to completely control a movie from production to distribution was the only way to truly reach an audience and to be profitable and sustainable. Of course shooting in film was way too costly. It still is. Yet, digital offered the possibility that my vision of creating “Hollywood” in Cleveland was possible.

Prelude2Cinema’s Press Room

Selecting Press Clippings It was a hard decision to make concerning what press articles to place in here. This is really just the tip of the iceberg when it comes to press. Like any Movie Studio, Prelude2Cinema works diligently to promote itself. At the recent party for the TV Show, we had Jay Rossi interviewing the cast and a reporter from the City News talking to the cast as well. The company looks forward to continuing its relationship with the press as it promotes the Studio, the TV Series, its library of movies and other productions.

History of the Movies in the Press “Blood Kiss” was the first digital feature from Prelude2Cinema. It had its world premiere at the first York Film Festival in the United Kingdom. The U.S. Premiere was at the Ohio Independent Film Festival. This feature was followed by a short movie named “The IT girl.” Both movies are listed on the Internet Movie Database. http://www.imdb.com/title/tt0353247/ http://www.imdb.com/title/tt0362772/ “It girl” has screened in London at the World’s Smallest Film Festival New York City, Clermont France, and other places. The movie is part of compilation of movies and received

3 ½ stars out of five from Film Threat. After “Blood Kiss,” two movies were shot back to back, but not edited due to a lack of funds. It was then that Prelude2Cinema decided to reorganize and structure a new production built on a business model that would allow itself to be self sustaining. That production turned out to be the television series “Out of Darkness.”

From Crain’s Cleveland Business News Prelude2Cinema’s phone number is now 216-341-0218 The new e-mail is alexmichaels@prelude2cinema.com

The Full Press on Prelude2Cinema This Annual Report would be over a hundred pages, if we included the every single press article on Prelude2Cinema. Throughout the Annual Report, we will include more press pieces related to our productions.

For any full copy of the Press Articles here, please contact Prelude2Cinema at alexmichaels@prelude2cinema.com or at 216-341-0218

Financial History

Balance Sheet March 10, 2006 Assets Current Assets Cash And Cash Equivalents 100 Short Term Investments 0 Net Receivables 0 Inventory (Movies, TV Series & Scripts) 25,000 Other Current Assets

Total Current Assets $25,100Long Term Investments 0Studio 30,000Equipment 15,000Goodwill 10,000Intangible Assets 0 Total Assets $80,100 Liabilities Current Liabilities Accounts Payable (Speaker Fees) 200 Short/Current Long Term Debt 0 Other Current Liabilities 0

Total Current Liabilities 200Debt (Dish Network and TV Cast) 2,500Other Liabilities 0

Deferred Long Term Liability Charges 0 Total Liabilities $2,500 Net Assets 77,600

Financial and In-kind Support Since the website Prelude2Cinema premiered in 1999 and it created its first digital feature, the company has received financial and a wealth of in-kind support. The best way to list this is to break it down by the productions.

“What Angels Fear” • Received $1,000 as the winner of the Dreambuilder’s Celebration award. The script for “What Angels Fear” • Loan from private investors for $4,200 for Canon XL1 digital camera. Repaid loan one year later. • In January 2005, the TV Series aired nationally on PAX TV and Prelude2Cinema received royalties of $100.

The attention Prelude2Cinema has received from “What Angels Fear” and the Emmy win is still part of the company today.

“Blood Kiss”

The first digital feature received a lot of in-kind support which made its production possible. All the cast and crew donated their time for a percentage of future profits. As a group, the cast and crew retain 40% interest in the movie. A total of 7 crew members worked over 18 days with a cast of approx. 50 persons to create the movie. Locations were provided for gratis as well. During the production, Prelude2Cinema purchased its nonlinear computer editing system. It also attained the necessary software to edit the movie and add special effects. Prelude2Cinema also established a Studio Store at Café Press for all its movies. It plans later to work with a third party on merchandise for each production.

“The M.A.N.” Cleveland Public Theater chose Alex P. Michaels to be part of their Big Box Series.

• Prelude2Cinema received $300 for the production (which was spent on actors and promotion) • Prelude2Cinema also received 50% of the Box Office ($250)

Knight Studio In 2002, Alex P. Michaels’ family brought a house for his Father to stay in after heart surgery. Alex stays in the house to watch over him and makes use of the 5 bedroom house for Prelude2Cinema. Upstairs are 4 bedrooms. One bedroom is where the Internet and editing computers are stored. Currently there are 4 computers used for various productions. The Editor for the TV Series, Tim Franke works on a laptop and uses external hard drives for the video footage.

Behind the house is a converted garage that is over 600 square feet. It is used for green screen footage. Here it is below doubling as the set for the presentation of “The M.A.N.” at CPT. Two other bedrooms in the house are used for the bedroom of the lead cop Angie and Prosecutor Raft in the TV Series “Out of Darkness”. While Prelude2Cinema intends to continue to utilize Knight Studio, it is seeking to expand the Studio for continued production of the TV Series and other movie productions. The company plans to secure a larger studio sometime this year.

http://prelude2cinema.com/knightstudio.htm

Knight Studio has shot scenes for a children’s TV show called “Natural Bridges” and a Civil War reenactment. Once Knight Studio expands, Prelude2Cinema expects to produce other independent movie and TV projects by third parties during 2006 and receive funds that will be used for the studio expansion.

Branded Entertainment- funds the TV Series Prelude2Cinema is using “Branded Entertainment” to fund the TV Series. So far it has received over $1,900 from local businesses who were integrated into the series. The Series has also received in-kind support as well.

What is Branded Entertainment? It is the practice of tying a brand name to an entertainment property with seamless integration and a natural fit.

Is Branded Entertainment the same thing as Product Placement? They are similar.

PRODUCT PLACEMENT is the process, which integrates an advertiser's product into movies and TV shows for clear, on-screen visibility. It is part of the rapidly expanding entertainment industry reaching millions of people daily through movies, television, and video. (Source: MMI Product Placement)

Examples of Branded Entertainment in TV While like Product Placement, Branded Entertainment involves having products and businesses appear in television shows, branded entertainment takes it a step further. The Business lends financial support to the series and its business is woven into a storyline.

“HBO's "Sex and the City" stirred Absolut Vodka into the story line. Levis were the focus of an episode of NBC's "The Apprentice." Ford's new Mustang is key to the plot on Fox's "The O.C." The WB is selling "preferred partnerships" to sponsors who want to place their products into shows. Procter & Gamble bought into "What I Like About You"; Verizon took "Smallville." A P&G shampoo was the subject of a story in "What I Like About You," with two characters competing to appear in an Herbal Essences ad. The actual ad ran during the next break.”

From the Denver Post "When ads are the TV stars "

By Joanne Ostrow An excellent website about the business of Branded Entertainment that covers the new ways movie and TV series are benefiting financially and artistically can be found at http://www.insidebrandedentertainment.com/

Support for “Out of Darkness”

Shot on location at Lucy's Sweet Surrender at 12516 Buckeye Road Cleveland, OH 44120

Michael Feigenbaum (real life owner of Lucy’s) gets some pastries while Detective Avon goes over reports

Besides being a regular location in the TV Series, Lucy’s has provided $750 which went to paying cast and securing airtime for the Series.

A scene shot at the Velvet Dog. The Velvet Dog has been the location for Six Fan parties for the TV series. The Velvet Dog provided free food for the parties and clips from the TV Series were screened on 3 large video screens. The Velvet Dog has invested $150 toward the TV Series The money went for the application for the Fiscal Sponsor Agent, so now Prelude2Cinema can accept tax-deductible donations for the Studio.

Director (Alex P. Michaels) getting ready to shoot a scene at Italian Restaurant and Sponsor

Massimo da Milano. Massimo’s was the location for a scene in the TV Series and has invested

$1,000. The money went to paying for cast and securing airtime.

Prelude2Cinema has also received additional sponsorships of $1,000 last year for the Series. Four episodes have been shot. Two have been edited. A fifth episode is currently shooting. The entire first season will be 13 episodes. Prelude2Cinema is currently seeking additional Sponsors for the TV Series.

Wright State Student Intern Ryan A. Heilman and actor Joseph Primes in Bratenahl Police Dept. and Jail Financial Sponsors include: Massimo da Milano Lucy’s Sweet Surrender The Velvet Dog Private Donors: Rosa Huffman, Sylvester Dunlap In-kind Sponsors include:

• Editor Tim Franke worked for free on the first episode. Tim is continuing to work on the TV Series and Prelude2Cinema has been able to secure some private funds to pay for his continued work. Tim has also finished editing episode #2 and is at work on Dark #3.

• Infinite Butterfly Studios created the special effects for episode one for free.

Prelude2Cinema is working on securing funds to include their working Dark #2 and other episodes • Police Technical Consultants: Bratenahl Police Chief Paul Falzone & Police Detective Michael A. Savioli

have been working for free as consultants on the series. Recently Earl Brantley who was a CMHA police officer and served in the military is working as an actor and consultant on the series.

• Locations: Whiskey Island Marina, Lucy’s Sweet Surrender, Massimo da Milano, The Velvet Dog, Bratenahl Police Department and Court

• Other resources: City of Willoughby and Police Department and Lost Nation Airport, City of Bratenahl, Wendell Teal (computer hard drives and musical score) Eric Whited (theme music and other music), Anthony Quagliato (marketing and promotion)

Prelude2Cinema is still in production with “Out of Darkness,” so additional financial support and other resources are being added to the production.

Intern Becky DeNoewer in production meeting, then directing Episode Four of “Out of Darkness.” Special effect created by Infinite Butterfly Studios for “Out of Darkness.”

The TV Series “Out of Darkness” was created to be a TV Series that Prelude2Cinema could produce using its limited resources and also allow the company to gather sponsors while at the same time guaranteeing distribution. . The series would use a model of product placement known as “Branded Entertainment.” While the term “Branded Entertainment” may be new, the practice of businesses supporting television shows was always present. Currently Pepsi has lent its name and financial support to Pepsi Smash, a one-hour show featuring performances from today's hot bands and musical acts. This is no different than the first television hit show, The Texaco Star Theater, a comedy-variety hosted by Milton Berle (which ran from 1948 to 1956 and was in 86.7% of all TV households). Also, the very reason “soap operas” are called “soap operas” is because soap companies originally sponsored them.

From the Summer 2005 Shaker Connection

The Velvet Dog and the Dark Wrap Parties

From the October 15, 2004 Cleveland Plain Dealer

The first party for the TV Series was held at the Velvet Dog August 27th, 2004. Alex P. Michaels had met the manager Tino Roncone of the Velvet Dog at a Ryze business meeting some months before the screening. Tino liked the concept of the show and managed to get the owners to invest some money into the series. The Velvet Dog has also been host to Six parties named “Dark Wrap parties” to promote the TV Series. At these parties, the Velvet Dog has provided no cost appetizers and a cash bar. Each event over the last few years has had about 40 to 60 persons. The TV Series has also shot two scenes at the Velvet Dog.

Prelude2Cinema expects to continue hosting “Dark Wrap” parties at the Velvet Dog. The most recent Dark Wrap party was held March 9th, 2006

From the March 3rd, 2006 Cleveland Plain Dealer

Scheduling and Markets It has been quite a balancing act to jump between the creative and the business side of Prelude2Cinema. Both sides have a priority. With the TV Series, casting changes were made for creative reasons which pushed shooting back. At the same time, Prelude2Cinema was working on gathering sponsors who would fit into the TV series. The TV series is shooing episode five of a planned 13 season first episode. The storylines have been refined so certain members of the cast are flexible. A new director Rufus Malone is shaping the series now. Alex P. Michaels still acts as Executive Producer and has a role as the Prosecutor. The first four episodes have been providing a backdrop for a continuing storyline that will allow the series to move forward. Real life Police detective Michael Savioli and Chief of Bratenahl Police Paul Falzone have been very valuable consultants on police procedure. Prelude2Cinema expects to add new corporate sponsors and bring aboard partners that will allow the company to finish the 13 episodes in 2006 and place the series in a number of new markets. The Series first episode is

online at Google Video and it can also be seen to an audience of 130,000 at Kent University and in Portage County, Ohio. Prelude2Cinema intends to air the first episode in various markets and work on securing more markets for the series in 2006.

Police Consultant and real Detective Michael Savioli.

Ada Carolina Ortiz as Detective Teresa Marie de los Angelos (a.k.a.. Angie.) The special effects behind her were created by Infinite Butterfly Studios.

The TV Series Yahoo Fan Site To promote the TV Series established a Yahoo fan site. The group has over 200 members and is growing.

Prelude2Cinema plans to make use of the Internet in promoting all its productions.

The Future

The need to build Consumers There is a difference between having consumers and having an audience. An audience only views the work, but a consumer pays for it. Prelude2Cinema needs to gather more consumers so it can sustain its productions. In the case of the TV series, the consumers are the sponsors. The sponsors allow the audience to watch the TV Series for free. Prelude2Cinema will work on the premise of gathering more sponsors for its TV Series so the audience doesn’t have to pay for it. That will mean providing more opportunities in the Series for branded entertainment. This will have to be done very carefully so the series does not become one long commercial.

Future Revenue Streams will Sustain Prelude2Cinema The future for Prelude2Cinema lies in building a brand name for it’s productions and utilizing innovative techniques and technology to get productions out across the globe. Below are just a few of the methods the company may work on in the coming years. And of course there are new techniques and technology not invented yet, that we hope to use as well. in order to sustain productions, we will need to focus on gather consumers.

Internet TV Station Prelude2Cinema intends to build a library of movies and programs that can be broadcast exclusively over the Internet. As broadband becomes more accessible, the company will explore this method of distribution.

DVD distribution of current movies and TV Series Prelude2Cinema intends to acquire movies from third parties and take the productions it currently owns and repackage those for distribution on DVD. Each DVD will include extra behind the scenes footage.

Business Partners Prelude2Cinema intends to gather business partners who make a financial commitment to the company and also add their skills in shaping the vision and future revenue streams. These partnerships will vary in terms of financial commitment and responsibility. Each partnership will be weighed to see it does not interfere with the relationships Prelude2Cinema currently has.

Prelude2Cinema’s Wiki The Company is always growing. It recently established a Wiki to chart the growth of the Studio Expansion. Even so, the Wiki will not cover all the changes as Prelude2Cinema grows. Being a “technology” company, we are always striving to keep ahead of the curve. We are always researching and looking for new opportunities. Years ago, there was a commercial where a guy bought the latest model of a computer and while he was driving home. He saw they were putting up another model that made his computer obsolete. While that is a bit of an extreme, anyone who works in technology knows it is pretty close to the truth. While this Annual report includes our plans for the future, as soon as it is done, another opportunity will present itself and things will change. We cannot say what all the changes will be especially as we add new partners and form strategic alliances that will help us to grow, but we can say that we will always be learning and we will always be growing.

The Wiki is at http://prelude2cinema.pbwiki.com/

Markets and Competition While on some level, it is true that Prelude2Cinema is in competition with all the major Hollywood studios, it is often true that Hollywood neglects audiences because of the high cost of movies. Prelude2Cinema’s motto is “Movies That Make You Think.” The Company will produce and acquire movies and TV series that appeal to people looking for independent artistic and genre inspired works. The description of our movies in this Annual Report give a sample of the types of works we will produce and market. The market is large enough to support the cost of these productions and to have the company expect a comfortable profit in the years to come. Profit margins will grow larger as Prelude2Cinema brands itself and starts to build a steady flow of movies and TV productions..

Financial Projections

Current Financing Needs Prelude2Cinema is working on bringing aboard Business Partners who will add finances and resources to the Company to fund the Studio expansion. Listed below is our current financing needs which covers all the essential salaries and operations for a year of expansion. By focusing on strengthening our relationship with the business community, we expect to reach financial and resources to allow us to make an impact in the economic development of the region and have a consistent flow of productions and be able to market those productions. Any financing Prelude2Cinema receives will go toward building its movie and TV library.

Item/ Staff member Annual Details/ Duties Monthly

Film Czar 24,000Oversees all studio productions and is responsible for all departments.

2,000

Public Relations & Marketing 24,000

Oversees the press sent out about the studio productions and works on creating an image for incoming productions. Creates marketing campaigns to constantly keep the Studio in the public eye. 2,000

Chief Financial Officer 12,000Responsible for all financial transactions and accounting duties for the Studio. Studio may have accountant on retainer for this position. 1,000

Web Department 12,000Responsible for promoting the studio using the Internet and also helping to create web based productions. 1,000

TV Series Production 15,000

The TV Series "Out of Darkness' will utilize Cleveland talent and will be used to promote the studio. This amount includes the airtime for those episodes in local and national markets. Five episodes are produced and aired. Businesses will also purchase sponsorship in the TV Series and other productions from the Studio. 3 episodes at $5K each 5,000

Movie Production and Sales 15,000Purchase third party movies and sell those on DVD using the Internet and grass roots marketing campaigns. Total amount $15K 15,000

Studio Rental 18,000Studio may be shared space and certain productions will be shot on location. 1,500

Equipment purchase 15,000High Definition video production and editing equipment.Total amount $15K 15,000

Operations 6,000Non- studio expenses such as phones, custodial, and security. 500Total 141,000

Current Financing Needs Chart

Knight Studio Movie Incubator Expansion

Equipment purchase11%

Studio Rental13%

Movie Production and Sales11%

TV Series Production11%

Web Department9%

Chief Financial Off icer9%

Public Relations & Marketing16%

Film Czar16%

Operations4%

Film Czar

Public Relations & Marketing

Chief Financial Off icer

Web Department

TV Series Production

Movie Production and Sales

Studio Rental

Equipment purchase

Operations

Projected Income from Expansion

Income TV Series sponsors Per 30 second spot Spots availableTotal Total EpisodesMonthly income Total income 6 min.per episode 250 12 3,000 13 6,000 39,000Production 4 episodes every 2 months Movies Projected Unit CostNo. of Units Selling Price Gross Sales Net Sales DVD Cost 2 2,500 10 25,000 20,0003 Movies released Year One Total Movies 75,000 60,000 Studio Rental Income Cost for space Day rented Total Income Rent min 3 x per month 500 36 18,000 Production Services No. Clients Total Income Scriptwriting 2,000 12 24,000 Casting 500 12 6,000 Production Services 2,500 12 30,000 Total Monthly Services 5,000 Total Annual Income 60,000

Income Production Services 25,000Sponsors TV Series 39,000 Movie Sales 60,000

Prom Forma Statement Year One Expansion PRO FORMA STATEMENT

Quarter First Second Third Fourth

Month Month Month Month Month Month Month Month Month Month Month Month Year End Totals Item 1 2 3 4 5 6 7 8 9 10 11 12 Item INCOME INCOME Production Services 5,000 5,000 5,000 5,000 5,000 25,000 Production Services

Sponsors TV Series 6,000 6,000 6,000 6,000 6,000 6,000 3,000 39,000 Sponsors TV

Series Movie Sales 20,000 20,000 20,000 60,000 Movie Sales Interest (100,000)

333 333 333 333 333 333 333 333 333 333 333 333 4,000 Total Income 6,333 6,333 6,333 11,333 11,333 31,333 8,333 5,333 20,333 333 333 20,333 128,000 Total

Income

EXPENSES

Studio Cost Studio Cost- Rental (6,500 sq ft) 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 18,000 Studio Cost Depreciation (equipment $15K) 125 125 125 125 125 125 125 125 125 125 125 125 1,500 Equipment: TOTAL STUDIO COSTS 1,625 1,625 1,625 1,625 1,625 1,625 1,625 1,625 1,625 1,625 1,625 1,625 19,500 TOTAL STUDIO COSTS

Productions Cost

Productions Cost TV Series 5,000 5,000 5,000 15,000 TV Series

Movies -purchase & marketed 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 15,000 Movies -purchase & marketed

TOTAL PRODUCTIONS COST 6,500 6,500 6,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 0 0 30,000 TOTAL PRODUCTIONS COST

Operations cost

Operations cost Telephone 100 100 100 100 100 100 100 100 100 100 100 100 1,200 Telephone Utilities 300 300 300 300 300 300 300 300 300 300 300 300 3,600 Utilities Insurance 100 100 100 100 100 100 100 100 100 100 100 100 1,200 Insurance TOTAL STUDIO OPERATIONS 500 500 500 500 500 500 500 500 500 500 500 500 6,000 TOTAL STUDIO

OPERATIONS

SALARIES SALARIES KEY STAFF KEY STAFF

Film Czar 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 24,000 Film Czar Public Relations & Marketing 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 24,000 Public Relations & Marketing Chief Financial Officer 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000 Chief Financial Officer TOTAL STAFF SALARIES 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 60,000 TOTAL STAFF SALARIES

Benefits (20%) 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000 Benefits

Quarter First Second Third Fourth

Month Month Month Month Month Month Month Month Month Month Month Month Year End Totals Item 1 2 3 4 5 6 7 8 9 10 11 12 Item

TOTAL SALARIES & BENEFITS 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 72,000 TOTAL SALARIES & BENEFITS

SUPPLIES

SUPPLIES Office Supplies 100 100 100 100 100 100 100 100 100 100 100 100 1,200 Office Supplies Computer Supplies 150 150 150 150 150 150 150 150 150 150 150 150 1,800 Computer Supplies TOTAL SUPPLIES 250 250 250 250 250 250 250 250 250 250 250 250 3,000 TOTAL SUPPLIES

TOTAL EXPENSES Before Taxes 14,875 14,875 14,875 9,875 9,875 9,875 9,875 9,875 9,875 9,875 8,375 8,375 130,500 TOTAL EXPENSES

Net Before Tax (8,542) (8,542) (8,542) 1,458 1,458 21,458 (1,542) (4,542) 10,458 (9,542) (8,042) 11,958 (2,500) Net before Tax

TAXES (28%)

0

6,825

1,225

(8,050) 0 Tax

NET PROFIT (LOSS) (8,542) (8,542) (8,542) 1,458 1,458 14,633 (1,542) (4,542) 9,233 (9,542) (8,042) 20,008 (2,500) NET PROFIT (LOSS)

Board & Bios

The Prelude2Cinema Team The Prelude2Cinema Team will be responsible for crafting the Studio.

Studio Chief: Alex P. Michaels Emmy winning writer and acclaimed director Alex P. Michaels has studied screenwriting at Stanford University, filmmaking at DeAnza College in California, and acted and directed on the stages of the Karamu House and the Cleveland Public Theatre. His digital movie company Prelude2Cinema has shown movies in New York, France, the U.K. and Cleveland, Ohio. He remains dedicated to recreating the

Hollywood studio system in Cleveland, Ohio. Alex has created the TV Series “Out of Darkness,” which will be the first production from the Studio. Mr. Michaels will head the Studio until he finds a Studio Chief for the Studio or a Co-Studio Chief. For more info on Mr. Michaels, go to www.prelude2cinema.com/alexmichaels.htm Board Member/ Financial Advisor: Theron Cyrus

Theron Cyrus is a Financial Advisor with the Global Private Client Branch Office in Cleveland, Ohio. He assists a select group of affluent clients in investment management and tax, estate and wealth transfer planning. Drawing on his experience and Merrill Lynch's global resources, Theron develops personalized, strategic solutions to address the complex needs of individuals with substantial wealth. Together with specialists in

different areas of expertise, Theron offers clients a comprehensive range of services, including: discretionary porfolio management; stock option analysis and sophisticated retirement planning; hedging and monetization of concentrated equity positions; life insurance analysis and funding; and a full complement of wealth preservation and transfer services. Prior to joining

Merrill Lynch Theron has previous experience as an advisor. He holds various board positions with civic organizations in Cleveland. Board Member/ Sponsor TV Series Michael Feigenbaum

Born in Cleveland Ohio, Michael is the owner of Lucy’s Sweet Surrender. He believes in the community and supports other small businesses. He has financially supported the TV Series “Out of Darkness.” His bakery serves as the location where the main cops congregate. Michael is a graduate of Shaker Heights. High School, the New College of California. B.A., The California Culinary Academy, (professional chef degree).

He was recently inducted into Shaker Heights. Alumni Hall of Fame 2005

Movie and TV Library A Movie Studio needs a Library of Movies and other productions to market. Prelude2Cinema is working on building a Library and will soon have the tools in place to properly market all of its productions. The Studio also plans to acquire other movies from third parties. Prelude2Cinema plans to continue focusing on its TV Series since that production has managed to secure consumers (sponsors). It does plan to build its movie library and release the following features in limited release. As Prelude2Cinema builds its distribution pipeline, it will be able to control when and how audience across the globe see its movies. With an international distribution pipeline, Prelude2Cinema will be able to find the right audience for its movies, even if that audience is on the other side of the world.

Movies: “Blood Kiss: Soul of a Woman” Synopsis Beth thinks she has everything under control. On her 30th birthday, she decides to be bold and take what she wants. Yet things go wrong when her ex-lover returns offering her a chance at a darker life where one survives off the souls of others. Length Approx. 80 minutes This movie will be re-released and a proper audience targeted once Prelude2Cinema has the resources to do so.

Unedited Features Both features need to be edited, but with proper marketing should attain cult status and a good audience. Although Prelude2Cinema will be focusing on the TV Series for right now, it does intend to place their movies into release once it has funds for editors. And new computer editing systems.

Our Place in the Community “No Man is an Island.” John Donne February 1st, 2006, Alex P. Michaels lead a civic forum at Myers University on creating the film industry in Northeast Ohio. Thanks to the help of I-open, a group that spurs open source economic development, Alex was able to reach out to the community. Prelude2Cinema is focused on building a strong tie with the business community and bring aboard organizations and community leaders to fund the Studio expansion. The Studio will create numerous jobs for each production and firmly establish the film industry in the region. This goal can only be achieved by remaining focused on those who are positive in the community. Prelude2Cinema has formed a number of strategic partnerships to accomplish this goal.

Strategic Partners & Support for Prelude2Cinema Prelude2Cinema is receiving economic development assistance from the following organizations in expanding the Studio.

CAAO (pronounced K-O) is an umbrella consulting organization for the black professional organizations of Northeast Ohio. CAAO serves as a conduit and referral source to existing resources for entrepreneurial development, professional development, and leadership empowerment for its member organizations and their members.

Alex is a member of CAAO and they have been very supporting in connecting Prelude2Cinema to the necessary contacts it needs to expand the Studio.

I-Open (The Institute for Open Economic Networks), accelerates innovation and economic transformation in local and regional economies. I-Open's approach is founded on open source development, an effective innovation engine developed in the software industry. Open source development is based on voluntary communities of people contributing to common projects. I-Open hosts civic forums to build open networks and stimulate innovation and entrepreneurship.

On February 1st, 2006, Alex P. Michaels lead a civic form on creating the Film Industry at Myers University.

Networked Creative Industries Build Innovating Regions

Alex Michaels (Prelude2Cinema) lead our forum this evening begining with a call to action: we can benefit by working together to strengthen our NEO film industry. Alex suggested we place renewed value on some important behaviors: the value of being adaptable, having a clear vision that is inclusive of others and sharing resources with others so everyone can benefit. The Knight film incubator initiative will be a co-operative effort everyone will benefit from.

The full comments can be found at the link to realneo.us at Prelude2Cinema’s wiki at

http://prelude2cinema.pbwiki.com/

In addition to our TV Series sponsors, and Board Members, there are others who are supporting Prelude2Cinema.

Name/ Job Title In alphabetical order

Support for Prelude2Cinema Intended support for KSMI

Anthony Houston- Director of Empowerment Zone

We are discussing with Anthony potential city space that could be used for the studio and also tapping into economic development money. He is very supportive of K.SM.I.

Anthony Quagliata AGA Marketing

Anthony is president of a marketing company and will be working with K.S.MI. on its marketing of the studio. His clients have included Zeppe’s Pizza, CSU, The Cleveland Cavaliers, and others.

Brendan Malloy Owner Infinite Butterfly Studios

Brendan created the special effects for the TV Series “Out of Darkness.” Prelude2Cinema will be working with him to provide effects for incoming productions who use K.SM.I.

Dale and Shawn Tufts Corporate Executive Housing

Dale and Shawn have a mansion named Quentin Manor in Novelty Ohio that Prelude2Cinema can use as a shooting location. The mansion will also be available as lodging for incoming producers.

Independent Pictures Creators of the Ohio Independent Film Festival, this organization is acting as the fiscal agent for K.SM.I. Prelude2Cinema is able to accept tax- deductible donations for the studio thanks to Independent Pictures.

Joseph Marshall Parnell Librarian Assistant Grade 1. Ohio Rep. for the Screen Actors Guild Board member Prelude2Cinema

Joseph has worked in the business department of the Cleveland Public Library for over 30 years. He has been helpful in forming the business structure of Prelude2Cinema. He is also a writer and Emmy winning actor. Joseph will help to create a strategy to recognize and attract incoming productions for K.S.M.I.

Peter Lawson Jones County Commissioner

We are currently talking to Peter about involving the city in the studio since it would add to the Mayor’s expected economic development goals. Both Anthony Houston (Director of the Empowerment Zone) and Peter are very supportive and although we don’t have an agreement with the city of Cleveland about their involvement, we are diligently pursuing it. Alex P. Michaels has a meeting in January 2006 with the Commissioner.

Thomas Mulready Cool Cleveland

Thomas is very supportive of KS.M.I. and has helped to promote it in Cool Cleveland. We expect to continue our relationship with Thomas and other members of the press in spreading the word about KS.M.I. The press will help to gather clients to KS.M.I. Thanks to a piece Thomas did in Cool Cleveland, we gathered the first sponsor for our TV Series.

Prelude2Cinema Internship Program

Prelude2Cinema launched its internship program and has had nearly a dozen individuals and students working on the production for “Out of Darkness” and assisting the Film Czar with the business details of the Studio. Interns have come from Wright State University, Cleveland State University, Bowling Green University, Avon Lake High School, and Kenyon University.

Prelude2Cinema has used http://www.clevelandintern.net to gather interns. Also students have contacted the company through an Internet search for opportunities as well. One of the interns arranged for Kenyon College to pay for Alex to speak at the college. Prelude2Cinema expects to continue its internship program during the Studio expansion and later bring aboard certain interns who perform well as company employees.

To Be Continued

It has been the best of times and the worst of times, but it has been fun. Now the real work lies ahead and with our partners, we are ready to continue. As the old song goes, “The Best is Yet to Come.”

Prelude2Cinema “Movies That Make You Think.”

www.prelude2cinema.com