There is rightfully debate about the China film industry being overheated, but no denying the industry demonstrated significant growth in 2013 as the world’s second largest box office marketplace. Last year, box office sales from domestic movies, which generate most of the industry’s revenue in China – the opposite of the US where DVD sales, toys, advertising, etc. make up the majority of revenue – totaled 21.6 billion yuan, or $3.17 billion in U.S. dollars, a 27% rise from 2012. 2014 is looking pretty strong too with 13 new cinemas opening every day in the country and record-setting sales for homegrown movies such as "Tiny Times 3" and "The Continent."
Independent motion picture studio Crimson Forest Entertainment (OTCBB:CRIM) is looking to get in on the action in China. For a bit of background, the company was previously East Shore Distributors, a developmental outfit trading under the ticker ESTI pursuing distribution of consumer products, such as alcohol detection saliva strips, an anti-aging cream and hand moisturizer. For the year ended February 28, 2014 revenue from operations was exactly zero.
On the bright side, cost of sales was zero also.
In February, Alex Fridman, the principal shareholder, officer and director of ESTI, sold 36 million shares (90.1% of total shares outstanding) to Singapore-based Samcorp Capital Corp. and resigned along with director Scott Carpenter and new leadership with was put in place. In March, the company bought Crimson Forest Entertainment for $1,000 from Namaskar Corp. and a name and ticker change were approved shortly thereafter. As it stands now, the company has offices in Shanghai, China and Los Angeles, California, with Jonathan Lim (CEO, Chairman) and entertainment vet Justin Begnaud (VP, COO) at the helm (and only two employees). Samcorp
(controlled by Anthony Lim) holds 36 million of the 39.75 million shares outstanding of CRIM.
Crimson Forest’s website shows a wide array of content in the company’s portfolio, including films, television programs, series and documentaries, primarily focused on the Asian population.
Crimson Forest reportedly has co-production agreements in place with Cargo Entertainment, Tunnel Post, Dadi Digital Cinema Ltd. and China Film Assist Co (CFA). In its more than a decade of providing Chinese and foreign film production services, CFA has worked with some high-powered firms, including 20th Century Fox, Columbia Pictures and Warner Bros., lending some credence to a small firm like Crimson Forest.
The company in October announced that it secured $3.3 million in financing from East West Bank to produce a romantic drama fantasy motion picture, with filming slated to begin by the end of 2015. Initial distribution is targeting China, but the plot and still undisclosed cast are expected to appeal to an international audience, according to the company.
On Friday, Crimson Forest announced a second co-production agreement with CFA. In the new pact, CFA will invest $5 million for the production of a scripted science fiction film owned by Crimson Forest, called "Life Unknown." Under the terms of the agreement, up to 10 million shares of CRIM will be issued to CFA at a price of 50 cents per share. Production is targeted to start in April 2015 in the US and China.
"We are pleased to take our strategic relationship to the next level with CFA, which will become a major Crimson shareholder," said Jonathan Lim in a statement Friday.
Geng Ling, executive director of CFA, added, "Our investment demonstrates the confidence we have in the company and the momentum it is gaining in becoming a leading producer of films for the China marketplace."
There has been no market reaction to the news, but, then again, it doesn’t seem like there is but a handful of shares even available for trading. There is a convertible note out, but it doesn’t convert for several years and if Samcorp is holding tight, it looks likely that the stock, currently at 25 cents, will remain completely illiquid.
