To OTC Journal Members:

The investment community loves biotech companies because the upside potential is enormous. Biotech companies may spend years and hundreds of millions of dollars developing exciting new drugs and therapies. Along the way, the market begins assigning a value to the company as progress is made. As a biotech companies moves through the various studies and clinical trials of a new drug, both positive and negative results drive the stock up and down. Successful new drug introductions can yield billions in profits over the long term.

Long before the company generates revenues from a new drug the market has assigned a value. The market was willing to drive the price of Immclone (NASDAQ: IMCL) up to $75 as early results from its new cancer drug Erbitux were promising. Once the FDA determined early studies were flawed, the stock dropped below 10% of its previous high. Now, the stock is beginning to trade up again as the company has submitted new trial plans, in partnership with Bristol Myers, to the FDA.

Today's idea is tailored made for the same investors who like the risk oriented upside of a biotech idea. However, we love this one because it has the upside potential of a biotech company without most of the downside risk. Over the next five years this company could enjoy millions of dollars in profits off properties it is developing right now without spending hundreds of millions of dollars to get there. They are doing it with other people's money, and they have two potential blockbuster products coming to a theater near you between now and the end of this year, which is why you need to act today. Very few investors know about this company, but that will change over the next three months as millions of potential investors go to the theater and see their new movies.

For your review:
 

Trading Alert- Family Room Entertainment (OTC BB: FMLY)

Family Room Entertainment develops, produces and performs production related services for the entertainment industry mainly through its wholly owned subsidiary Emmett/Furla Films Productions Corporation. Primarily, it's a film production company. Family Room also has a music and theater division.

After three years of proving themselves to the movie industry, wholly owned subsidiary Emmet/Furla Productions has its first two major theatrical releases coming to theaters between now and the end of the year. Half Past Dead, staring Steven Seagal and Nia Peeples, and rapper JaRule, premiers on November 15th.

Their second movie, Narc, starring Ray Liotta and Jason Patric, has been coproduced by Tom Cruise. There is best actor Oscar buzz associated with Ray Liotta on this film. It is scheduled to premier in theaters on December 20th.

Family Room has been producing and coproducing movies for three years, and has finally made a successful transition to the big time with these major films.

Today, just after the market closed, Family Room announced the completion of the filming of their second Seagal feature, Out For A Kill, and the signing of Val Kilmer to play the lead role in the upcoming feature they will produce entitled Blind Horizon. Evidence is building of this company's potential as they continue to fill their pipeline with properties.
 

Business Model- BioTech Upside Without the Risk

Millions of dollars are made in Hollywood from successful movies. Hundreds of millions of dollars are made from successful franchise movie series- i.e. Austin Powers, Star Wars, Harry Potter, etc.

The movie industry has two major segments- Production and Distribution. Distribution requires enormous capital expenditure, and is handled by the major names like Paramount, Warner Brothers, MGM, and Sony.

The production process requires the funding of the hard costs associated with making a film, which include actors salaries, crew, location, etc. Emmett/Furla Productions, the wholly owned subsidiary of Family Room, is an independent producer which obtains financing for the hard costs of production, and then retains anywhere from 10% to 50% of the profits throughout the life of a film. Therefore, a successful movie can provide cash flow and profits for years after the movie is released, with the first real moneys coming in about 15 months after hitting the box office.

Over the past three years, Emmett/Furla has developed a reputation for getting big name actors recruited, and delivering a movie on budget and on time. Therefore, demand is increasing for their services. In order to achieve this reputation, they spent three years producing the following list of films, most of which went straight to content hungry cable:
 

With the exception of Speedway Junky, Try 17, and Shottas all of these films went directly to cable. These films allowed Emmett/Furla to establish a reputation for delivering films on time and on budget.

Speedway Junky, Held For Ransom, and After Sex could begin to spin out residual revenues for Emmet/Furla in 2003. Money will flow in with no cost associated. Amounts could range from $250,000 to $2 million over the life of each film. This money will be bio-tech like profits, as all the costs have already been defrayed. However, these have minimal potential as compared to the two movies coming out later this year.

Emmett/Furla has made the transition to the big time with this year's upcoming releases and projects in the pipeline. Here are quick overviews of the two due out this year:
 

Half Past Dead

Half Past Dead, starring Steven Seagal and popular rapper JaRule, premiers in movie theaters on November 15th. In this movie a criminal (Morris Chestnut) tries to sneak into a high tech, futurist prison at Alcatraz. His intent- to find out where death row inmate has hidden $200 million worth of gold. Just click on the logo to visit the film's web site.

The plan is sabotaged by undercover FBI agent Steven Seagal. This movie is already being heavily promoted on billboards, buses, and TV nationwide. We first saw a TV ad during the seventh game of the World Series.

Seagal's action films have a long history of profitability. His 2001 film, entitled Exit Wounds, featured rapper DMX, which expands the demographic target audience significantly. The film cost $33 million to produce, and did $18.5 million at the box office opening weekend. The film grossed $52 million before going to DVD and subsequently to cable, where the real profits are made.

Seagal's action films have a history of commercial success. Under Siege, which premiered in 1992, cost $12 million to produce. The film did $14.5 million opening weekend, eventually grossed $73 million, and has since generated $154 million worldwide and $37 million in rental fees.
 

Narc

NARC, starring Ray Liotta and Jason Patrick is scheduled to debut in theaters on December 20th. According to the NY Post: "Ray Liotta gives his strongest performance since "GoodFellas" as a dirty Detroit cop who recruits a disgraced narcotics officer (Jason Patric) to hunt down his partner's killer. Joe Carnahan's gritty indie makes the similar "Training Day" look like a Disney flick by comparison." Just click on the logo to visit the film's web site.

Produced for a mere $7.5 million budget, this movie promises to be one of the biggest box office successes of 2002. Ray Liotta is being talked about for an Oscar nomination for his performance.

This movie met with tremendous critical acclaim at the Sundance Film Festival. Lion's Gate, which had acquired the distribution rights when the film was in its infancy, sold part of its rights to Paramount.

Emmett/Furla coproduced this movie along with Tom Cruise's Cruise/Wagner productions. This movie has the potential to be a box office blockbuster and huge money maker.
 

Market Valuation and Upside Potential

Family Room closed today at $.40. With approximately 19 million shares issued and outstanding, the market value of the entire company is only $7.6 million.

In mid 2001, the stock was hot for a brief period, and traded to nearly $2 on the heels of announcements concerning upcoming projects.

Volume has been picking up in the stock recently as investors are starting to understand the potential magnitude of the upcoming major theatrical releases for Family Room's future bottom line. Today, the stock traded the highest volume it has this year, posting 478,000 shares of volume. Fortunately for our subscribers, the stock did not move up dramatically in price.

Like a biotech company, their products are finally finding their way to the market. Unlike a biotech company, they didn't have to spend $2 billion to get to this point.

This stock should now begin to trade more efficiently as these movies become commercially successful. In the meantime, Emmett/Furla productions is already on to other projects.

Today, just after the market closed, Family Room announced they just completed the filming of another Steven Seagal movie slated for release in the Spring, and signed Val Kilmer to play the starring role in upcoming thriller "Blind Horizon".

As more film properties get released, Family Room's potential for windfall profits grows dramatically. Unlike other independent production companies, Family Room's annual overhead is minuscule. Cochairmen Randall Emmett and George Furla don't even take salaries out of the company. They take income out of production budgets which are financed with other people's money.

If one of their projects develops into a franchise film series the company could enjoy hundreds of millions in profits. Their relationship with Steven Seagal holds that promise, just as the Chuck Norris character in the Missing in Action series, Sylvester Stallone in Rocky and Rambo, and many others did in the past.

We can easily see this company with a $25 million market cap this year as these new films hit the box office. This would put the stock at $1.30. A more realistic short term target would be $.80 to $.90 as investors catch on to Family Room. Allow at least 30 days for this stock to pick up steam. In the interim, a 20% stop loss would be prudent if the market trades against us.

Go to the theaters and see their upcoming films. Decide for yourself if you feel this company is on the verge of a major break out.

Here is the complete text of today's news release for your review:
 

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