MindWorld 1A

1.      Risk associated with the team's knowledge of the market and correctness of forecasts

Risk: The MINDWORLD STUDIO team might not have (proper) knowledge of the market and/or make incorrect forecasts, in particular an overestimation of the number of sales and the selling price.

Consequence: If the team does not have sufficient knowledge of the market, it could set incorrect targets. This could lead to a lower valuation in the event of a possible exit because the business plan could not be executed as planned. In that case, there could be lower or even non-existent returns. In the worst case, there could even be a liquidation and bankruptcy, with partial or complete loss of the invested capital.

Note: MINDWORLD STUDIO will carry out in-depth market research prior to development and will provide early access for test requests. It's worth noting that few European studios - and even fewer Belgian ones - are positioning themselves in the niche of stylized narrative ARPGs. What's more, the market is in demand, but supply remains limited outside North American and Asian productions. Finally, MINDWORLD STUDIO will be partnering with influencers right from the prototype stage, as well as running a targeted Steam/YouTube campaign.

2.      Risk associated with the size of the team 

Risk: Given the stage of development that MINDWORLD STUDIO is in, it is essential to have the right team for the future development of the company. If the company relies entirely on an indispensable person, there is a risk that this person will withdraw from the company. There is also a risk of team burnout (overload, tight deadlines).

Consequence: If there is only one manager or key person and that person withdraws, the company is (temporarily) without management. In case of difficulties, no one would be able to represent the company to make decisions or a delay in the development of MINDWORLD STUDIO's activities could occur.

Note: If necessary, MINDWORLD STUDIO will call on freelancers. It will also manage deadlines realistically.

3.      Risk associated with the need for new financing

Risk: Given the stage of development that project owner is in, it is likely that there will be a need for new financing. In fact, the company runs the risk of exceeding the planned budget (extended deadlines, unforeseen requirements).

Consequence: Exceeding the budget could lead to early publication and poor optimisation. With regard to the need for new funding, on the one hand, there is the risk that the company will not find investors, which would lead to the dissolution or bankruptcy of the company, causing the investor to lose part or all of his investment. On the other hand, there is the possibility that the company will find new investors, which will lead to dilution, which will be even greater if there is a lower valuation than the one currently used.

Note: Rapid prototyping to validate costs, fixed contracts with freelancers and “marathons” with key objectives every fortnight are planned in order to meet the projected budget. It should be noted that investors will have the opportunity to re-invest in new rounds, at the then current investment terms if new investors are found. 

1.       Risk associated with logistical compatibility

Risk: There is a risk of compatibility problems occurring when products are launched on certain platforms such as PCs or consoles.

Consequence: If this risk materialises, MINDWORLD STUDIO could be obliged to release the game in question on a single platform before being able to launch the product on other platforms at a later date. This could lead to a lower valuation in the event of a possible exit because the business plan could not be executed as planned. In that case, there could be lower or even non-existent returns. In the worst case, there could even be a liquidation and bankruptcy of MINDWORLD STUDIO, with partial or complete loss of the invested capital. 

Note: This risk is limited by the modular and scalable approach, which makes it easy to integrate a new block such as wastewater treatment.

2.       Risk associated with intellectual property

Risk: Intellectual property associated with MINDWORLD STUDIO's activities will be designed by the founders themselves. However, there are no plans to check whether competing intellectual property already exists or to register the intellectual property developed (in the company's name).

Consequence: A third party could possibly claim that MINDWORLD STUDIO's activities infringe its intellectual property or copy (and register in its name) intellectual property developed by MINDWORLD STUDIO. The company is not protected in this case.

Note: The founders assume that there is no competing intellectual property. However, it will carry out a statutory audit of the assets and take out professional liability insurance.

3.       Risk associated with competition

Risk: There is a risk that new competitors will emerge and develop products similar to those of MINDWORLD STUDIO.

Consequence: If this risk materializes, MINDWORLD STUDIO could find it difficult to retain users of the platform. MINDWORLD STUDIO's expected market share could then be lower than expected. This could lead to a lower valuation in the event of a possible exit because the business plan could not be executed as planned. In that case, there could be lower or even non-existent returns. In the worst case, there could even be a liquidation and bankruptcy of MINDWORLD STUDIO, with partial or complete loss of the invested capital.

Note for both risks: MINDWORLD STUDIO produces stylized ARGP and survival games, which are still little exploited in Europe. There is therefore a clear differentiation (USP).

4.       Risk associated with technology

Risk: There may be insufficient adaptation of the product to the market, technological disruption (game engine problems (bugs, performance)), development delays (“feature creep”, unforeseen complexity).

Consequence This could lead to a reduction in user satisfaction, damage to reputation and a reduction in commitment. There could also be financial consequences that could hamper growth.

Note: MINDWORLD STUDIO will carry out regular technical tests. It will use tools and limit the initial scope (“MVP”). It will use an agile methodology (short sprints and clear objectives).

Risk: The risk of insolvency means that MINDWORLD STUDIO does not have sufficient funds to meet its payment deadlines (cessation of payments). 

Consequence: If the company does not find alternative financing (shocked credit), it may go bankrupt. The insolvency or bankruptcy of MINDWORLD STUDIO may lead to lower or non-existent returns and in the worst case to a partial or total loss of the invested capital. 

1.           Risk associated with the lack of guarantees

Risk: Neither the shares of MINDWORLD STUDIO nor the Participatory Notes of the MINDWORLD 1A compartment of Spreds Finance provide guarantees of a return or repayment of the invested capital. 

2.           Risk associated with the lack of a fixed return

Risk: Participatory Notes do not offer a fixed return. The return of the Participatory Notes depends solely on the performance of the Underlying Asset, namely the shares of MINDWORLD STUDIO .

Consequence for both risks: If the project owner's predictions do not come true (within the predetermined timing), there is a risk of lower or non-existent returns and, in the worst case, partial or complete loss of the invested capital. 

Note for both risks: Investors in Participatory Notes bear the same economic risk as if they were investing directly as shareholders of MINDWORLD STUDIO.

Risk: Although each Spreds Finance compartment is ‘bankruptcy remote’ (meaning that no other creditor can claim a right on or against this compartment) in relation to the others and in relation to the ‘general’ liabilities of Spreds Finance itself, as a result of (i) the terms and conditions of the Notes, (ii) the articles of association of Spreds Finance and (iii)  Article 4 of the Law of 18 December 2016 on crowdfunding; there is a subsidiary risk of  insolvency of Spreds Finance. 

Consequence: Should such insolvency occur, Noteholders may be exposed to the risk of a significant delay in the recovery of their investment.

Note: The probability of this risk occurring is extremely low given the structure and organization of Spreds Finance, in particular the compartmentalization mechanism and the "bankruptcy-remoteness" described above. Each participation taken or loan granted to a project owner is recorded in a separate compartment and is appropriately accounted for in the accounts, taking into account the fact that the accounts are kept by compartment. As a result of (i) the conditions attached to the issue of Participatory Notes, (ii) the articles of association of Spreds Finance and (iii) article 10 of the law regulating the recognition and delimitation of crowdfunding and containing various provisions relating to finance and notwithstanding articles 7 and 8 of the Mortgage Law of 16 December 1851, the assets of a particular compartment serve exclusively to guarantee the rights of investors with respect to this compartment.

1.               Risk associated with the absence of an organized exchange market for Participatory Notes

Risk: Neither the project owner nor Spreds Finance organizes an exchange market for Participatory Notes. It is thus up to the investor himself to find a buyer for his Participating Notes. Given the absence of an exchange market for Participatory Notes, there is no way to adequately establish a comparative pricing methodology for Participatory Notes.

Consequence: A holder of Participatory Notes may not be able to find a buyer for the Participatory Notes it wishes to sell (at the price at which it wishes to sell).

Note: The intention is not to sell the Participatory Notes but to sell the Underlying Asset, often on the occasion of the sale of the Company itself.

2.           Risk associated with the vote by the general meeting of holders of Participatory Notes to sell

Risk: Any decision by Spreds Finance to sell shares of MINDWORLD STUDIO is subject to the approval of the holders of Participatory Notes representing at least 75% of the outstanding Participatory Notes, unless Spreds Finance is required to sell them under a contractual or statutory provision. 

Consequence: Investors thus bear the risk that the general meeting of the holders of Participatory Notes may refuse to approve the sale of the participation, in which case all investors are bound by this decision and thus must wait to obtain redemption of the Participatory Notes.

1.               Risk associated with the absence of analysis by Spreds Finance

Risk: Spreds Finance has not conducted an analysis of the proposed project or of the financial situation of the Company.

Consequence: Any investor considering subscribing to Participatory Notes should make its own analysis of MINDWORLD STUDIO’s solvency, activity, financial situation and prospects.

Note: Any decision to invest in Participatory Notes should be based on a comprehensive analysis of the project and of this sheet of essential investment information. Spreds Finance's model does not provide for the presentation of analyzed projects to investors but allows investors to invest based on the information made available to them, after making their own analyses.

2.               Risk associated with the lack of (periodic) reporting

Risk: There is no obligation for periodic reporting in unlisted companies (except for the cases provided by law, such as the annual general meeting of shareholders and an alarm bell procedure). While some entrepreneurs proactively communicate good and bad news (with a certain periodicity), others do not. As a (minority) shareholder, one cannot enforce reporting (other than in cases provided by law).

Consequence: If an entrepreneur does not do (periodic) reporting, there can be long periods during which investors have no insight into the (financial) state of the company. The lack of reporting does not in itself change the (financial) state of the company but can create a sense of unease among investors. If at some point a company has to file a procedure of judicial reorganization or bankruptcy, this can be a (big) surprise for the investor. 

Note: Investors in Participatory Notes bear the same risk as if they invested directly in MINDWORLD STUDIO and became shareholders. However, Spreds, as a crowdfunding service provider, tries to encourage each project owner to report at least 2x per year.

3.               Risk associated with the tax treatment of capital gains - government tax on capital gains

Risk: Investors are not currently subject to capital gains tax. However, such a tax has been proposed by the federal coalition agreement.

Consequence: If this tax is in force when investors realise a capital gain, it is possible that this capital gain will be taxed at the rate provided for by the new law.

Note: The date of entry into force of this measure is uncertain. Capital gains existing prior to the entry into force of this measure will not be taken into account. An exemption of €10,000 could be taken into account (this amount would be indexed each year in line with inflation).

To the best of the project owner's knowledge, there are no other material risks associated with its activities.