UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934
NEW CINEMA PARTNERS
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(Exact name of Registrant as specified in its charter)
NEVADA 87-0772357
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(State or other jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
357 Bay St., Suite 404, Toronto, Ontario M5H2T7
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(Address of Principal Executive offices)
Issuer's Telephone Number: (416) 367 - 8299
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Securities to be registered pursuant to section 12(b) of the Act:
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None
Securities to be registered pursuant to section 12(g) of the Act:
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Common Stock, $0.001 par value
(Title of Class)
DOCUMENTS INCORPORATED BY REFERENCE: See the Exhibit Index attached hereto.
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TABLE OF CONTENTS
PART I Page
Item 1. Description of Business 4
Item 2. Management's Discussion and Analysis or Plan of
Operation 18
Item 3. Description of Property 19
Item 4. Security Ownership of Certain Beneficial Owners
and Management 20
Item 5. Directors, Executive Officers, Promoters and
Control Persons 22
Item 6. Executive Compensation 23
Item 7. Certain Relationships and Related Transactions 23
Item 8. Description of Securities 24
PART II
Item 1. Market Price for Common Equity and Other Shareholder Matters 25
Item 3. Changes in and Disagreements with Accountants 26
Item 4. Recent Sales of Unregistered Securities 26
Item 5. Indemnification of Directors and Officers 27
PART F/S Financial Statements 28
PART III
Item 1. Index to Exhibits 47
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This Registration Statement contains forward-looking statements which
involve risks and uncertainties. When used in this Registration Statement, the
words "believes," "anticipates," "expects" and other such similar expressions
are intended to identify such forward-looking statements. Actual results of the
Company (as defined below) may differ significantly from the results discussed
in the forward-looking statements. Factors that might cause such a difference
include, but are not limited to, those discussed in "Item 1. - Description of
Business - Risk Factors." Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date hereof. The
Company undertakes no obligation to publicly release the results of any
revisions to these forward-looking statements which may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
An investment in New Cinema Partners (the "Company") is highly
speculative and involves a high degree of risk. Prospective investors should
consider the risk factors involved in an investment in the Company, including
the following: (a) that the Company is a development stage company that has a
limited operating history, (b) the Company has not generated a profit, (c) there
is intense competition in the industry in which the Company operates and (d) the
uncertainty of future funding. Prospective investors should carefully read each
section of this registration statement which contain these and other risk
factors.
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PART I.
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ITEM 1. DESCRIPTION OF BUSINESS
ORGANIZATION AND CHARTER
New Cinema Partners, Inc., (the "Company") was formed under the laws of
Nevada on February 2, 1998 under the name Valance 9 Development, Inc. to develop
and market a world wide web authoring software product. The initial amount of
authorized capital was $100,000 consisting of 100,000,000 shares of Common
Stock, $0.001 par value. A copy of the Company's initial Articles of
Incorporation is attached hereto and is incorporated by reference. See Part III,
Item 1.
On April 17, 1998, the Company's Articles of Incorporation were amended.
The purpose of the amendment was to change the name of the corporation from
Valance 9 Development, Inc. to Valence 9 Development, Inc. A copy of the
Company's certificate of amendment to the Articles of Incorporation is attached
hereto and is incorporated by reference. See Part III, Item 1.
Valence 9 Development, Inc. filed a Form 15(c)211 with the National
Association of Securities Dealers (NASD) to allow its Common Stock to trade on
the OTC Bulletin Board stock exchange. The Company's Common Stock began trading
on the OTC Bulletin Board in July of 1998, under the trading symbol "VLND." In
August, 1998 the symbol was changed at Valence 9 Development, Inc.'s request to
"VNIN."
On August 27, 1999 the Company's Articles of Incorporation were amended.
The purpose of the amendment was to change the name of the corporation from
Valence 9 Development, Inc. to New Cinema Partners. A copy of the Company's
certificate of amendment to the Articles of Incorporation is attached hereto and
is incorporated by reference. See Part III, Item 1.
On August 31, 1999, the Company and New Cinema Partners, Inc. executed an
Acquisition Agreement whereby the Company acquired all of the issued and
outstanding common stock of New Cinema Partners, Inc., a Canadian corporation
formed on February 18, 1999. At that time the Company changed its main business
to that of New Cinema Partners, Inc., which was to develop, locate, design,
construct, manage, and operate "high tech" specialized theater venues, including
digital interactive movies, IMAX films and other specialized films. The Company
has been unable to successfully create, finance and commence operations of any
of these theaters.
On July 4, 2000, the Company consummated an asset purchase agreement
acquiring certain intellectual properties, comprising scripts and storylines,
owned by 1255234 Ontario, Inc., also known as Stone Canyon Pictures. As part of
the transaction, Mr. Damian Lee, founder and one of the principals of Stone
Canyon Pictures, became the Chief Executive Officer and the Chairman of the
Board of Directors of the Corporation.
Through the assets acquired from Stone Canyon Pictures, and through the
industry expertise of its new Chief Executive Officer, Damian Lee, the Company
plans to be involved in developing, financing, producing and distributing
television series and feature films.
The Company was delisted for non-compliance with the OTC Bulletin Board's
reporting requirements in May of 1999, and since that time the Company's
securities have been traded on the pink sheets under the trading symbol "NCPP."
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MATERIAL CHANGES IN CONTROL SINCE INCEPTION AND RELATED BUSINESS HISTORY
There is only one class of stock - the Company's common stock. The initial
five shareholders (the "Initial Control Group") of the Company were issued
25,100,000 common shares of the Company's common stock at inception. This group
consisted of the officers and directors of the Company and their designees. From
February to March of 1999, the Company did a series of offerings pursuant to
Rule 504 promulgated under Regulation D of the Securities Act of 1933, as
amended. The total amount of common shares issued at the completion of those
offerings was 32,588,800, with the Initial Control Group controlling 77% of
those shares.
In June, 1999, the Company issued and then cancelled 438,637 shares
pursuant to a letter of intent to acquire Image Advertising Plc. The shares
were cancelled because the acquisition was never consummated.
In June, 1999, the Company did an 800 to 1 reverse split of its common
stock, resulting in the Company's issued and outstanding common shares going
from 32,588,800 to 40,736 shares.
On August 31, 1999, the Company and New Cinema Partners, Inc. executed an
Acquisition Agreement whereby the Company changed its name to New Cinema
Partners and acquired all of the issued and outstanding common stock of New
Cinema Partners, Inc., in exchange for 4,000,000 shares of its common stock.
This transaction resulted in the former shareholders of New Cinema Partners,
Inc., as the holders of the 4,000,000 newly issued shares, the new control
block.
In September, 1999 the Company issued 7,000,000 free trading shares
pursuant to Rule 504 promulgated under Regulation D of the Securities Act of
1933, as amended. The total amount of common shares issued at the completion of
this offerings was 11,040,736 with the Control Group holding 36.23% of those
shares.
In May, 2000, the Company issued 3,000,000 restricted shares to total of
six corporations to do consulting to help find a new business for the Company.
This brought the Company's total issued and outstanding common shares to
14,040,736, of which the control block held 4,000,000 shares, or 28.5%.
In June, 2000, the Company consummated an asset purchase agreement
acquiring certain intellectual properties, comprising scripts and storylines,
owned by 1255234 Ontario, Inc., also known as Stone Canyon Pictures. The
purchase price was 10,000,000 shares of the Company's common stock. The
shareholders of these 10,000,000 shares are the new control block, and they hold
10,000,000 out of 24,140,736, or 41.6%, of the Company's common shares.
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BUSINESS OF THE COMPANY
Overview
New Cinema Partners, Inc. (the "Company" or "New Cinema") plans to be an
integrated entertainment company that will develop, produce and distribute
original film, television, internet and video game programming. New Cinema
intends to manage and co-ordinate all aspects of a program's life, including the
development of original ideas or the purchase of literary rights; the engagement
of writers, directors, cast and crew; the arrangement of production financing;
the carrying out of production and post-production; and the exploitation of
worldwide distribution rights.
In order to do this, the Company plans to utilize the assets and expertise
it acquired in the asset acquisition from Stone Canyon Pictures ("Stone
Pictures"), formerly operated by the Company's Chief Executive Officer, Damian
Lee, which was a producer of feature films. The Company intends to diversify
into the production of television programs, initially in the dramatic genre. New
Cinema believes that it will be successful in developing and producing
entertainment media and intends to target projects that have commercial appeal,
creative merit and committed third party financing.
The Company believes that due to the special financial incentives available
in Canada, it's base in Ontario, Canada will provide it with access to a unique
pool of talent which, in turn, will contribute to its slate of what it believes
will be distinctive programming. The Company believes that its success will be
dependent, in large part, on its ability to identify and retain creative talent.
Competitive Positioning
The Company believes that the combination of the following strengths which
the Company believes it has will provide it with a sustainable competitive
position in the world wide entertainment industry:
Track Record of "Hits" by Damian Lee
Damian Lee, the Chief Executive Officer of the Company, has a track record
of delivering what the Company believes are "hit" movies, as measured by
viewership and critical acclaim. This record of "hits", includes projects such
as Watchers, Ski School, Death Wish V, Jungle Boy, Baby on Board, and Fun. The
Company believes that this success can be utilized to create increased demand
for New Cinema's existing and new scripts. The Company believes that the success
of Mr. Lee's movies also enhances the marketability and long-term value of its
library of film and television productions internationally.
Creative Talent
Via Damian Lee and the assets it acquired from Stone Canyon Pictures, New
Cinema has significant in-house creative capability that will enable it to
conceive and create original programming. In addition, Mr. Lee has established
personal, professional and contractual relationships within the creative
community including directors, actors, writers, comedians and musicians. Due to
what the Company believes to be the wealth of creative talent located in the
Company's region, management views its position in Toronto, Canada as a
considerable strategic advantage in maintaining a rich and distinctive
development slate (i.e. the various projects possible to have under development
at any one time) and also positions it to continue to use Canadian financial
benefits.
Diversified Production Slate
The Company believes that its production slate, including action, comedy,
variety, science fiction and family programming, will allow it to distribute its
programming to a broad range of markets and to respond quickly to changes in
market demand. It is Mr. Lee's opinion that a diversified production slate
provides operational stability as well as long-term value for the Company's
library of film and television programs. The Company will focus on comedy and
variety programming for the domestic market in an attempt to yield stable cash
flow. For the global market, the Company plans to produce action, science
fiction and family programming which is intended to contribute longer term value
to its library of film and television programming.
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Focus on Proprietary Production
New Cinema does not intend to pursue "service productions" (i.e. does not
intend to produce for others for a fee). Rather, New Cinema plans to take an
equity position in all of its productions, whether developed in-house or through
the acquisition of rights to properties. As a result of this proprietary
interest, the Company intends to retain a long term economic interest in its
programming, thereby increasing the value of its library of programming.
International Distribution Capability
New Cinema plans to develop international distribution capability to
enable it to enhance revenue and margins through:
(i) control the exploitation of its programming in order to
optimize the revenue potential of a production or group of
productions;
(ii) retain distribution fees, which are intended to range from 10% to
35% of a production's total distribution revenue;
(iii)improve its understanding of the market for its productions and
thereby enhance its ability to develop commercially successful
productions; and
(iv) broaden its revenue base by distributing programming developed by
production companies which do not have an international
distribution capability.
Technical and Creative Expertise in Special
Effects and Computer-Generated Imaging
Increasingly, special effects and computer-generated imaging ("CGI") are
playing a central role in the film and television production process. CGI
extends the bounds of what is creatively possible, permitting visual effects for
television productions that until recently were prohibitively expensive. As
well, CGI assists in containing the costs of production. Effective use of
special effects may act as a substitute for "bankable stars", particularly in
feature films, and may preclude the need to hire crews and shoot film "on
location". New Cinema, intends to be able to create cutting-edge CGI in-house
resulting in high production values.
Vertical Integration
New Cinema plans to manage and co-ordinate all aspects of a program's life,
from conception through to distribution. This is to be achieved through the
infrastructure the Company intends to build. Vertical integration is intended to
provide the Company with the ability to preserve business and creative control
over its productions, retain revenues which would otherwise be paid to third
parties and complete productions in a cost-effective manner.
Corporate Strategy
New Cinema intends to focus on growing its core business of producing
original film and television programming for both the domestic and global
markets. In addition, when and if possible, the Company intends to achieve
growth through the development and acquisition of complementary businesses that
are intended to strengthen the Company's core business. The key elements of the
Company's growth strategy are as follows:
(i) to create a position as one of the leading independent producers
for the domestic market;
(ii) to implement and increase its production of evergreen
programming for the global market in genres such as action
science fiction and family;
(iii)to create the distribution of its existing library of film and
television programming and accelerate its acquisition and
distribution of third party productions;
(iv) to develop and exploit expertise in CGI and innovative
entertainment products;
(v) to develop multi-media product; and
(vi) to pursue strategic alliances and selective acquisitions of
complementary businesses.
The Development, Production and Distribution Process
New Cinema plans to manage and coordinate all aspects of a property's
program life. The process of development, production financing, production and
distribution intended to be undertaken by New Cinema is described below.
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Development
The first stage in the creation of a television or film program is the
"development" process. Development is to begin with a concept either generated
internally by New Cinema's creative staff or acquired from a third party in the
form of rights to a proposal, a literary property or a completed script. The
development process entails refining the concept, engaging writers and drafting
and revising a script. The process is complete when a finished script is, or in
the case of a television series, one or more scripts are, ready for production.
New Cinema believes that it can finance a substantial portion of a
project's development budget through a project-specific development advance to
be obtained from one or both of a broadcaster or third party agency. If the
project goes into production, this advance will be incorporated into the
production budget. If development financing is obtained from a broadcaster, the
development agreement will typically provide the broadcaster with an option to
license the broadcast rights to the project in the event that it enters the
production phase. Alternatively, the company may explore various methods of
private placement finance or limited partnerships to finance development.
Production Financing
Prior to making a commitment to produce a project, the Company's policy
will be to arrange for third party financing for at least 90% of a production's
cost. The financing environment in the industry generally permits producers to
finance 75% to 90% of their production budget from a combination of broadcaster
license fees and after-market fees. The Company believes that the balance of 10%
to 25% of a production's cost will typically be financed through one or more of:
1. Financing from a producer. One or more producers, including New
Cinema, may provide production financing (in which case they
would typically share the revenues from distribution in
proportion to the percentage of the total production budget that
they have financed).
2. Financing from a foreign co-producer. A program produced in
compliance with an international co-production treaty, as
certified by, will generally be eligible for domestic government
incentives and tax benefits in both the production and the treaty
country. These incentives are intended to reduce the portion of
the program costs borne by the co-producers, thereby reducing
risk. Status as a co-produced program also should make it easier
for the program to penetrate foreign markets. See "The Film and
Television Industry - Co-Productions".
3. Pre-sale of rights to foreign broadcasters. A producer may
license broadcast rights to foreign broadcasters in order to fund
a portion of a project's production budget. New Cinema plans to
negotiates the shortest possible license terms for any
territories that it pre-sells.
Another form of production financing is intended to be through the sale of
distribution rights to a third party distributor in order to obtain financing in
the form of a distribution advance. New Cinema plans on retaining distribution
rights to its productions and therefore does not intend to finance its
productions through third party distributors. However, as part of its growth
strategy for its distribution business, New Cinema intends to provide other
producers with distribution advances in order to acquire programs for its
library.
When financing for 100% of the production budget is committed, these
commitments, together with additional security, will be pledged to a bank or
other industry lender in order to obtain interim financing. Interim financing
will be necessary on the majority of the Company's productions because the
timing of cash flow from financing sources will not match the cash flow required
for production. Interim financing will be repaid from the proceeds of the
pledged financing commitments.
Production
Production of a film or television program entails three phases:
pre-production, production and post-production. During pre-production, the
Company engages directors, casts and crews, prepares a detailed budget and
shooting schedule, and creates the overall design of the production, including
selecting locations and the design of costumes and sets. The production phase
involves the principal photography on location and/or on set. During
post-production, the program is edited and re-recorded, CGI, if any, is applied
to the live action portions, titles are added, and a musical score is prepared
and incorporated.
At the completion of production, the program is delivered to the
distributor for delivery.
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Distribution
The distribution of movies and television programs involves the licensing
of rights to exhibit and exploit a program. Part of the distribution revenues
from productions are derived from licensing these rights to broadcasters, video
distributors or merchandise distributors in all parts of the world. Typically, a
license gives a broadcaster the right to televise the product within a given
geographical region over a particular period of time. The license is generally
limited as to the number of transmissions and the permitted medium of broadcast
(such as conventional free television or cable television).
A typical distribution agreement permits the distributor to collect an
ongoing fee ranging from 10% to 35% of total distribution revenues and to deduct
certain expenses (collectively the "Distribution Fees") before remitting the
balance of the distribution revenues. Producers and equity investors are
entitled to the balance of distribution revenues after payment of Distribution
Fees and repayment of production costs, distributor advances, government
incentive financing and third party debt financing. For those productions for
which it is the sole producer and distributor, New Cinema intends to implement a
policy of maintaining an entitlement to at least 40% of total distribution
revenues.
After market and television program distribution has significant potential
for long-term earnings because multiple sales are possible for any one program.
Programs can be licensed to conventional, specialty, pay per view and satellite
television and for video or laser disc distribution. In addition, where a
program or movie has a long-term or high incidence of viewership, opportunities
may exist for exploiting merchandising rights in connection with the program.
Development Activities
New Cinema intends to select intellectual properties to develop based on a
strategy which utilizes the opportunities in the domestic and international
broadcast markets. New Cinema's success in the domestic market, and specifically
with the CBC, will strengthened it can create a reputation as a producer of high
quality original programs, which the Company believes would result in demand
from other domestic and international broadcasters for its programming.
New Cinema intends for its development activities to be primarily focused
on: (i) comedy and variety for the domestic market; and (ii) evergreen
programming, consisting primarily of science fiction and family programming, for
the global market. The Company also intends to pursue other formats suitable to
specialty channels (information and documentaries), dramatic mini-series,
television movies and feature films when the creative and commercial merits
suggest low risk and significant international appeal. Comedy and variety
programs have broad appeal in the domestic market, can be produced for a
relatively low cost in high volume and yield stable cash flow. Science fiction
and family programming, while having comparatively higher costs of production,
will be produced for the global market and the Company believes that it tends to
be more evergreen in that it may be licensed for re-broadcast over a longer time
period than many other genres, allowing for significant revenue potential
following recovery of its costs of production.
While the Company may have as many as 20 projects on its development slate
at any one time, active development begins only when a broadcaster and/or a
third party agency provides a development advance.
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Distribution Activities
New Cinema plans to distribute its programs directly. The distribution
activities of New Cinema will include selling to the global market, as well as
selling rights in North America after expiry of a program's first broadcast
window. New Cinema plans on establishing contractual relationships with a major
international broadcasters.
The Company plans on participating in what it believes are the three most
significant international television program trade shows, namely, NATPE (United
States), MIP-TV and MIPCOM-TV (France), and may attend other trade shows where
opportunities exist for management to develop areas of interest to the Company.
New Cinema also plans on distributing its programming through direct
communication with video distributors and television broadcasters and by
selectively advertising in major trade journals.
New Cinema's planned distribution activities include exploiting the
merchandising potential of its programming.
Building A Library
New Cinema intends to retain copyright ownership to all of its productions.
While the Company's library currently consists primarily of proprietary
productions, it is the Company's intention to acquire distribution rights from
third party producers. In this way, the Company's library can grow to be much
larger than the Company's produced properties would allow.
As its library of completed productions is built and grows, the proportion
of the Company's revenues that are derived from distribution activities should
increase.
Acquisition of Distribution Rights
New Cinema's strategy is to acquire distribution rights to programs
produced by smaller producers that do not have a distribution infrastructure by
offering modest financing (no more than 10% of budget) in the form of an advance
or guarantee against distribution rights. In doing so, New Cinema intends to
form creative alliances with these producers.
The Company has identified several program categories as a priority for
program expansion, including light documentary, nature programs and television
movies. It is the Company's belief that each of these genres has good potential
for repeat broadcasts and may be considered evergreen. The Company believes that
light documentary and nature programming will fit well in the current
entertainment atmosphere, as well as the documentary titles now in development.
Made for television movies, featuring some star value, will also be a targeted
area for acquisition because of the opportunity for early cash flow and
significant long-term return on investment (due to the on-going demand for such
programming).
Multi-Media and Interactive Ventures
The Company plans to pursue development of entertainment products
complementary to its expertise in programming for new interactive delivery
systems, such as the Internet. The goals of this aspect of the business are:
(i) to build a CGI and special effects company that will service the
commercial industry as well as provide state-of-the-art special
effects for film and television, including New Cinema's own
productions; and
(ii) to develop entertainment products such as interactive games and
on-line services.
While the future of distribution and delivery of entertainment products
remains uncertain, the Company believes that they will be digitally-based with a
high degree of interactive capability. If the Company is successful in creating
expertise in CGI, it will provide natural synergies in its production of
entertainment products for digital delivery systems such as the Internet.
Strategic Acquisitions and Alliances
The Company intends to establish relationships with producers and other
participants in the film and television industry, both domestically and
internationally. The Company believes that these relationships, if developed,
together with other industry contacts, may result in opportunities for potential
acquisitions or alliances. Acquisition and alliance opportunities will be
considered to the extent that they complement the Company's current operations
and offer potential for growth in areas considered strategic to the Company's
future. The Company has no present understandings, commitments or agreements
with respect to any strategic acquisitions or alliances.
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Current and Planned Projects
The Company has a variety of projects currently in various stages of
development. Some of the projects are co-produced and co-financed with other
companies in the industry. Damian Lee will often act in the capacity of Producer
on these projects. In some instances he will also be the Director and/or
Screenwriter. Although there is no assurance that the Company will be successful
in producing any of these projects, or that if produced the intended lead actor
will in fact be the lead actor, for during the next twelve months the company
will pursue further development and production of the following projects:
LEGION: Budget $ 4,300,000
An action adventure starring Dolph Lundgren
Based on a story by Damian Lee and Dolph Lundgren
TROUBLED WATERS: Budget $ 18,500,000
An action adventure starring Steven Seagal
Original script by Damian Lee, based on a story by Steven Seagal
THE RECEPTION: Budget $ 4,500,000
An action adventure;
Original script by Damian Lee
MARY BREATH: Budget $ 1,200,000 (pilot)
An erotic drama for Internet/TV distribution;
E.COM: Budget $ 6,600,000 (pilot)
A 'new economy' episodic drama (ER, L.A. Law); cast undecided
Now being written by Harper Quantrill, Lara Daans and Damien Lee
RAW FOOTAGE: Budget $ 3,200,000
A suspense thriller;
FREEWORLD: Budget $ 4,800,000
A science fiction thriller;
Original script by Damian Lee
OUT OF THE JUNGLE: Budget $ 1,800,000
An action adventure;
Original script by Lara Daans
During the next twelve months the Company intends to be in the constant
process of reviewing additional projects offered for their input and
participation. The Company believes that part of it's success will be what it
perceives to be Mr. Lee's ability to separate the winners from the losers and,
if necessary, take an active part in the writing, directing or producing of a
picture in which the company has an interest. The Company believes that Mr. Lee
is willing and capable of nurturing new talent while developing and maintaining
relationships with established and credentialed artists and distributors.
The company is also in discussions with several of what it believes are
leading film actors to put them under non-exclusive contract for one film per
year over an extended time period. The Company envisions that these contracts
would be financed via a series of Limited Partnerships, the proceeds of which
would be used to purchase an annuity from a recognized insurance company or
similar institution. The annuity would provide the 'talent' with monthly income
over the life of the contract, intended to be three years at a time. Due, in the
Company's opinion, to the cyclical income stream typical of working in the film
industry, the proposal has, at the preliminary stage, met with what the Company
believes to be good response.
Employees
New Cinema currently has 6 full-time employees. In addition, the
Company intends to retain individuals, including directors, cast and crew, with
the appropriate skills and background as required for particular projects under
development or in production.
None of the Company's full-time employees are unionized. However,
individuals employed by the production subsidiaries may be members of guilds or
unions which bargain collectively with producers on an industry-wide basis from
time to time. The Company intends to maintain very good relationships with its
employees and the guilds and unions.
Facilities
The Company rents 2,500 square feet of space on a month to month basis at
375 Bay St. in Toronto, Canada, for $3,500 per month, in which its executive
offices are located. This space is rented to the Company by Olympia & York who
has no affiliation to the Company.
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THE FILM AND TELEVISION INDUSTRY
The film and television industry is experiencing significant growth
globally as a result of advancements in cable and satellite technology and the
continued growth of audiences in foreign markets. This has been evidenced by the
growth of foreign box office receipts and by increasing television penetration
in developing regions. The combination of these factors has resulted in a
worldwide proliferation of television channels and increased demand for new and
existing programming.
The Film and Television Production Industry
The independent film and television production industry has demonstrated
strong growth over the last five years, with annual production increasing from
$1.4 billion in 1991-92 to $2.8 billion in 1996-97 (Source: The Film and
Television Report). A number of factors have contributed to this growth,
including an increase in the demand for certified programming from domestic
broadcasters, an increase in demand for independent productions from
international television broadcasters and an increase in the volume of foreign
production activity taking place. Sales to foreign broadcasters have become an
important source of revenue to film and television producers. (Source: The Film
and Television Report).
Conventional Television
With the proliferation of television channels , the market share of
conventional free television has decreased. In response, conventional
broadcasters are focusing on distinguishing their services from others.
The growth in private conventional television has also had a positive
effect on producers of programming. This upward trend can be attributed to the
advent of large new private cable television stations and the impact of their
respective programming commitments made part of their licensing process.
Specialty Television
Specialty television services differ from conventional channels in that
these services receive a distribution fee from the cable distributors for their
carriage. This fee is stipulated by a dollar amount per subscriber per month if
it is carried on the basic cable service. The fee is used as a reference for
negotiating a subscriber fee if the service is carried on a discretionary basis.
The programming demanded by specialty television channels is generally for
niche audiences and, as a result, the license fees payable for this type of
programming are lower than for traditional network programming. However, the
proliferation of specialty channels means an increasing number of program
purchasers and an increasing number of hours of programming demand to be
satisfied. There is therefore a demand for producers to create programming for
low cost in high volume for the domestic market and an opportunity for
distributors to enhance the value of their libraries by re-licensing existing
programs.
Feature Films
While the television industry has grown over the last decade, growth in the
feature film sector has remained relatively flat. The challenges of obtaining
adequate financing for feature films and marketing them in a manner which will
attract audiences in the current distribution and exhibition environment remain
obstacles to success. However, the increase in audience interest in independent
films and recent successes of non-Hollywood financed films, as measured by box
office receipts, suggest a considerable opportunity for feature film producers.
Skilled Labor Force
The technical, creative and logistical skills in the Canadian film and
television industries have grown in the past 15 years as a result, in part, of
the substantial increase in film and television productions undertaken in Canada
for U.S. distributors. The Company believes that this, combined with significant
increases in domestic production activity, has developed the technical capacity
of Canadian production personnel to a level highly competitive with production
centers such as New York, Los Angeles and London.
COMPETITION
Substantially all of the Company's revenues will be derived from the
production and distribution of films and television programs. The business of
producing and distributing film and television programs is highly competitive.
The Company will face intense competition with other producers and distributors
many of whom are substantially larger and have greater creative, financial,
technical and marketing resources than the Company. The Company will compete
with other film and television production companies for ideas and storylines
created by third parties as well as for actors, directors and other personnel
required for a production. Many of these film and television production
companies are substantially larger and have greater creative, financial,
technical and marketing resources than the Company.
12
<PAGE>
EMPLOYEES
New Cinema currently has 6 full-time employees. In addition, the Company
intends to retain individuals, including directors, cast and crew, with the
appropriate skills and background as required for particular projects under
development or in production.
None of the Company's full-time employees are unionized. However,
individuals employed by the production subsidiaries may be members of guilds or
unions which bargain collectively with producers on an industry-wide basis from
time to time. The Company intends to maintain very good relationships with its
employees and the guilds and unions.
TRADE NAMES
The Company plans to file for Trademark applications for use in the
Company's business, but has not yet done so. However, in the event the Company
cannot protect its marks or does not have suitable protection for its marks, the
business of the Company may be adversely affected.
RISK FACTORS
In evaluating the Company and its business, prospective investors should
consider carefully the following risk factors in addition to other information
contained herein:
Unpredictability of Commercial Success
A majority of the Corporation's revenues, if any, will arise from the
production and distribution of television series and feature films. Each
production is an individual artistic work and its commercial success depends
primarily on public reception, which is unpredictable. Even if the Corporation
limits risk through its production financing strategy, there can be no guarantee
of the financial success of a television series or feature film.
Production Financing
The Corporation believes that it will benefit from a number of advantages
relating to Canadian incentive and regulatory programs designed to promote the
production and distribution of Canadian programs. For example, the Company
believes it will benefit from the regulations of the Canadian Radio-television
and Telecommunications Commission which require Canadian broadcasters to
broadcast a minimum number of Canadian-content programs. These regulations may
be modified, from time to time, in whole or in part, or removed altogether. In
such event, the Corporation would be required to find alternate financing so as
to adapt to such changes. The Corporation is not aware of any proposed changes
which would have adverse consequences for the Corporation.
Reliance on Key Personnel
The Company is substantially dependent upon the services of certain key
personnel, particularly Damian Lee, its Chief Executive Officer. The loss of his
services could have a material adverse effect on the business of the Company.
The Company maintains no key man life insurance in respect of Mr. Lee. E
Risks Related to the Nature of the Entertainment Industry
The entertainment industry historically has involved a substantial degree
of risk. Acceptance of entertainment programming represents a response not only
to the programming's artistic components, but also to the review of critics,
promotion by the distributor, the quality and acceptance of other competing
programs released into the marketplace at or near the same time, the
availability of alternative forms of entertainment and leisure time activities,
general economic conditions, public tastes generally and other intangible
factors, all of which could change rapidly and cannot be predicted with
certainty. There is a risk that some or all of the Company's programming will
not be successful, possibly resulting in a portion of costs not being recouped
or anticipated profits not being realized. While New Cinema will continually
endeavor to develop new programming, there can be no assurance that revenue from
existing or future programming will replace a possible loss of revenue
associated with the cancellation of any particular production.
In order to mitigate risk, individual productions are financed through
pre-sales, investments by third-parties and government incentive programs. The
Company plans to institute a policy of ensuring that 90% of the production
budget is secured prior to the Company making a commitment to produce a
particular production.
13
<PAGE>
Potential for Budget Overruns and Other Production Risks
A production's costs may exceed its budget. Risks such as labor disputes,
death or disability of a star performer, changes relating to technology, special
effects or other aspects of production, shortage of necessary equipment, damage
to film negatives, master tapes and recordings or adverse weather conditions may
cause cost overruns and delay or frustrate completion of a production. Although
the Company intends to complete its productions within budget, there can be no
assurance that it will be able to do so. The Company plans on maintaining
insurance policies and when necessary, completion bonds, covering certain of
these risks. There can be no assurance that any overrun resulting from any
occurrence will be adequately covered or that such insurance and completion
bonds will continue to be available on terms acceptable to the Company. New
Cinema has never made a material claim on its insurance or called on a
completion bond. In the event of substantial budget overruns, the Company may
have to seek additional financing from outside sources in order to complete
production of a film or television program. No assurance can be given as to the
availability of such financing on terms acceptable to the Company. In addition,
in the event of substantial budget overruns, there can be no assurance that such
costs will be recouped, which could have a significant impact on the Company's
results of operations.
Fluctuating Results of Operations
Results of operations for any period are significantly dependent on the
number and timing of television programs delivered or made available to various
media. Consequently, the Company's results of operations may fluctuate
materially from period to period and the results of any one period are not
necessarily indicative of results for future periods. Cash flows may also
fluctuate and are not necessarily closely correlated with revenue recognition.
Although traditions are changing, due, in part, to increased competition from
new channels, industry practice is that broadcasters make most of their annual
programming commitments between February and June in order that new programs can
be ready for telecast at the start of the broadcast season in September, or as
mid-season replacements in January. Because of this annual production cycle, New
Cinema's revenues will probably not be earned on an even basis throughout the
year. Results from operations fluctuate materially from quarter to quarter and
the results for any one quarter are not necessarily indicative of results for
future quarters.
Technological Change
Technological change may have a material adverse effect on the Company's
business, results of operations and financial condition. The emergence of new
production or CGI technologies or a new digital television broadcasting standard
may diminish the value of the Company's existing equipment and programs.
Although the Company is committed to production technologies such as CGI and
digital post-production, there can be no assurance that it will be able to
implement its program, or to incorporate other new production and
post-production technologies which may become de facto industry standards. In
particular, the advent of new broadcast standards, which may result in
television programming being presented with greater resolution and on a wider
screen than is currently the case, may diminish the evergreen value of the
Company's programming library, if it successfully develops one, because such
productions may not be able to take full advantage of such features. There can
be no assurance that the Company will be successful in adapting to these changes
on a timely basis.
Competition
Substantially all of the Company's revenues are to be derived from the
production and distribution of television programs and feature movies. The
business of producing and distributing film and television programs is highly
competitive. The Company faces intense competition with other producers and
distributors many of whom are substantially larger and have greater creative,
financial, technical and marketing resources than the Company. The Company
competes with other film and television production companies for ideas and
storylines created by third parties as well as for actors, directors and other
personnel required for a production.
International Operations
The Company's international operations depend, in part, on local economic
conditions, currency fluctuations, changes in local regulatory requirements,
compliance with a variety of foreign laws and regulations and cultural barriers.
In addition, political instability in a foreign nation may adversely affect the
ability of the Company to distribute its product in that country. As a result of
the foregoing international risks, the Company's international operations may be
adversely effected.
14
<PAGE>
Labor Relations
Many individuals associated with the Company's projects are members of
guilds or unions which bargain collectively with producers on an industry-wide
basis from time to time. While the Company intends to maintain positive
relationships with the guilds and unions in the industry, a strike or other form
of labor protest affecting those guilds or unions could, to some extent,
disrupt production schedules which could result in delays and additional
expenses.
Defamation Insurance
The Company intends to produce satirical comedies. The content of such a
program may subject the Company to claims from individuals alleging defamation
of character. It is possible that a substantial award for damages may be
rendered against the Company and that the Company will be uninsured or under
insured. While the Company plans to obtain errors and omissions insurance on a
project by project basis, it is possible that the Company may be unable to
obtain appropriate insurance at reasonable costs to protect itself in the event
of such a claim.
Importance of Management Estimates in Reported Revenues and Earnings
The Company will make numerous estimates as to its revenues and matching
production and direct distribution expenses on a project by project basis. As a
result of this accounting policy, earnings may widely fluctuate if management
has not accurately forecast the revenue potential of a production.
Exchange Rates
The return to the Company from foreign exploitations of its properties is
customarily paid in U.S. currency. The Company's main production facilities are
in Ontario, Canada, and as such the Company may be affected by fluctuations in
the exchange rate of the U.S. dollar. Currency exchange rates are determined by
market factors beyond the control of the Company and may vary substantially
during the course of a production period. In addition, the ability of the
Company to repatriate to the United States and / or Canada funds arising in
connection with foreign exploitation of its properties may also be adversely
affected by currency and exchange control regulations imposed by the country in
which the production is exploited. At present, the Company is not aware of any
existing currency or exchange control regulations in any country in which the
Company currently contemplates exploiting its properties which would have an
adverse effect on the Company's ability to repatriate such funds. Where
warranted the Company will hedge its foreign exchange risk through the use of
derivative products.
Limited Operating History; Lack of Profitability.
The Company was organized on February 1998, has extremely limited resources
and has had no revenues. The Company's activities to date have consisted of two
business ventures which failed to be economically viable, and then searching for
a third business venture which was found in the form of the Company's
acquisition of the assets of Stone Canyon Pictures and the new business
direction. The Company's operations are subject to all the risks inherent in the
establishment and operation of a new business enterprise. The Company has not
achieved profitability.
The Company's prospects must be considered in light of the risks, expenses
and difficulties frequently encountered by companies in their early stages of
growth, which include, but are not limited to, limited access to capital,
competing against companies with strong brand names and better capitalization,
and hiring and retaining qualified personnel. To address these risks, the
Company must, among other things, maintain and increase its customer base,
maintain and develop relationships with suppliers and distributors, implement
and successfully execute its business and marketing strategies, continue to
develop and expand its product line, provide superior customer service and order
fulfillment, respond to competitive developments, and attract, retain and
motivate qualified personnel. There can be no assurance that the Company will
be successful in addressing such risks, and the failure to do so could have a
material adverse effect on the Company's business, financial condition and
results of operations.
15
<PAGE>
Limited Trading Market.
The common stock of the Company presently trades sporadically on the OTC
Pink Sheets and was recently removed from the OTC Bulletin Board market because
it did not timely become reporting Under the Securities Act of 1934 and reach
the stage of no comments with the staff of the United States Securities and
Exchange Commission with respect to this filing. Presently, there is only a
limited market for the Common Shares of the corporation and there is no
assurance that such a market will continue. Thus, holders of the Company's
common stock may have difficulty in selling their shares in the event they
desire to do so.
Need for Additional Financing.
Since the Company has failed to produce a profit and has negative cash
flow, any future acquisitions and continued business operations will probably
require the Company to raise additional capital. There can be no assurance that
the Company will be able to raise additional funds when needed, or if funds are
available, on terms acceptable to the Company. Further, the cash requirements of
the Company have been met by way of loans. If the Company fails to continue to
obtain such loans the Company would be adversely affected.
Business Dependent Upon Key Employee.
The business of the Company is specialized. The continued employment of
Damian Lee is critical to the Company's business. There can be no assurance that
in the future the Company will be able to retain Mr. Lee or other equally
qualified individuals to run the affairs of the Company. (See "Management") In
the event that the services Mr. Lee are not available to the Company the Company
will be materially and adversely affected. See "Business of the Company".
Competition.
Management is aware of many companies conducting businesses similar to the
business of the Company. These Companies have substantially greater capital
resources, larger staffs and more sophisticated facilities than the Company.
There can be no assurance that the Company will be able to compete successfully
against this competition or that other companies will not enter the Company's
markets and that they will be more successful than the Company. (See "Business
of the Company - Competition.")
No Cumulative Voting - Control by Directors.
The Company's certificate of incorporation does not provide for cumulative
voting. The present control block, including two of its directors, own or
control approximately 40% of the issued and outstanding Shares and are able to
and for the foreseeable future will be able to continue to elect all the
directors.
Dividends.
No dividends have been paid on the Shares and the Company does not
anticipate the payment of cash dividends in the foreseeable future. If the
operations of the Company become profitable, it is anticipated that, for the
foreseeable future, any income received therefrom would be devoted to the
Company's future operations and that cash dividends would not be paid to the
Company's shareholders.
16
<PAGE>
Penny Stock Rules.
The Company believes its Common Stock will be subject to the Penny Stock
Rules promulgated under the Securities Exchange Act of 1934 due to its price
being less than $5.00 per share. If the Company were to meet the requirements to
exempt its securities from application of the Penny Stock Rules, there can be no
assurance that such price will be maintained if a market develops and thus the
Penny Stock Rules may come into effect.
These rules regulate broker-dealer practices in connection with
transactions in "penny stocks." Penny stocks generally are equity securities
with a price of less than $5.00 (other than securities registered on certain
national securities exchanges or quoted on the NASDAQ system, provided that
current price and volume information with respect to transactions in such
securities is provided by the exchange or system). The Penny Stock Rules require
a broker-dealer, prior to a transaction in a penny stock not otherwise exempt
from the rules, to deliver a standardized risk disclosure document prepared by
the Commission that provides information about penny stocks and the nature and
level of risks in the penny stock market. The broker-dealer also must provide
the customer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the transaction, and
monthly account statements showing the market value of each penny stock held in
the customer's account. The bid and offer quotations, and the broker dealer and
salesperson compensation information, must be given to the customer orally or in
writing prior to effecting the transaction and must be given to the customer in
writing before or with the customer's confirmation.
In addition, the Penny Stock Rules require that prior to a transaction in a
penny stock not otherwise exempt from such rules, the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written agreement to the transaction.
These disclosure requirements may have the effect of reducing the level of
trading activity in the secondary market for the Company's securities. While the
Company's Common Stock remains subject to the Penny Stock Rules, investors may
find it more difficult to sell such securities.
Possible Rule 144 Sales.
A total of 24,140,736 Shares were issued and outstanding as of the date of
this registration statement. As of the date hereof 7,000,000 shares are
restricted securities and may be sold in open market transactions in compliance
with Rule 144 adopted under the Securities Act, which provides in pertinent part
that each Officer, Director and affiliate, after holding the securities for two
years, may sell every three months in brokerage transactions an amount equal to
the greater of 1% of the Company's outstanding Common Shares or the amount of
the average weekly trading volume, if any, during the four weeks preceding the
sale. Sales under Rule 144 may have a depressive effect on the price of the
Common Shares in the over-the-counter market. (See "Principal Shareholders.")
Sales of Shares owned by insiders may have a depressive effect on the price of
the Shares in the over-the-counter market. (See "Description of Securities.")
Lack Of Diversification.
The Company's proposed operations, even if successful, will in all
likelihood result in the Company engaging in a business which is concentrated in
only one industry. Consequently, the Company's activities will be limited to the
film industry. The Company's inability to diversify its activities into a number
of areas may subject the Company to economic fluctuations within a particular
business or industry and therefore increase the risks associated with the
Company's operations.
Regulation.
Although the Company will be subject to regulation under the Securities
Exchange Act of 1934, management believes the Company will not be subject to
regulation under the Investment Company Act of 1940, insofar as the Company is
not engaged in the business of investing or trading in securities. However, the
Company may considor purchasing equity positions in other entertainment related
companies as part of its expansion plans. In the event the Company does conclude
such transactions, which were to result in the Company holding passive
investment interests in a number of entities, the Company could be subject to
regulation under the Investment Company Act of 1940. In such event, the Company
would be required to register as an investment company and could be expected to
incur significant registration and compliance costs . The Company has obtained
no formal determination from the Securities and Exchange Commission as to the
status of the Company under the Investment Company Act of 1940 and,
consequently, any violation of such Act would subject the Company to material
adverse consequences.
17
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR THE YEAR ENDING FEBRUARY 29,2000
AND FOR THE THREE MONTHS ENDED MAY 31, 2000
The following discussion relates to the results of our operations to date,
and our financial condition:
This prospectus contains forward looking statements relating to our
Company's future economic performance, plans and objectives of management for
future operations, projections of revenue mix and other financial items that are
based on the beliefs of, as well as assumptions made by and information
currently known to, our management. The words "expects, intends, believes,
anticipates, may, could, should" and similar expressions and variations thereof
are intended to identify forward-looking statements. The cautionary statements
set forth in this section are intended to emphasize that actual results may
differ materially from those contained in any forward looking statement.
Development stage activities.
The Company has been a development stage enterprise from its inception
February 18, 1999 to May 31, 2000. Since July, 2000 the Company has been in the
process of developing a film production and distribution business by utilizing
assets and talent it acquired pursuant to an asset acquisition consummated on
June 27, 2000. Prior to that the Company had been involved in a venture to
develop and market internet software, and a venture to create own and manage a
proprietary type of movie theatres, none of which had resulted in any revenues.
During this period, management devoted the majority of its efforts to
initiating the process of finding a suitable business for the Company to become
involved with, obtaining the intellectual property assets, and reorganizing the
Company thereforth to enable it to go into film production, obtaining new
customers for sale of film and television productions, developing sources of
supply, developing and testing its marketing strategy and finding a management
team to begin the process of: completing its marketing goals; and furthering its
research and development for its products.
These activities were funded by the Company's management and investments
from stockholders. The Company has not yet generated sufficient revenues during
its limited operating history to fund its ongoing operating expenses, repay
outstanding indebtedness, or fund its projects or product development
activities. There can be no assurance that development of any project will be
completed in a timely manner and within the budget constraints of management and
that the Company's marketing research will provide a profitable path to utilize
the Company's marketing plans.
During this period, management has continued to finance is activities
through the issuances of stock and officer loans, and has devoted the majority
of its efforts to initiating the process of the preparing market plans to enter
the business of film production, obtaining new customers for sale of completed
projects , developing sources of supply, developing and testing its marketing
strategy and finding a management team to begin the process of: completing its
marketing goals; furthering its marketing research and development for its
products; completing the documentation for the filing of Form 10 with the
Securities and Exchange Commission to become a fully reporting Company to the
SEC. These activities were funded by the Company's management and investments
from stockholders.
The Company has not yet generated sufficient revenues during its limited
operating period of reorganization to fund its ongoing operating expenses, or
fund its marketing plans and product development activities. There can be no
assurance that development of the marketing plans will be completed and fully
tested in a timely manner and within the budget constraints of management and
that the Company's marketing research will provide a profitable path to utilize
the Company's marketing plans. Further investments into market design and
implementation and development, marketing research as defined in the Company's
operating plan will significantly reduce the cost of development, preparation,
and processing of purchases and orders by enabling the Company to effectively
compete in the market place.
Results of Operations for the year ended February 29, 2000.
For the year ended February 29, 2000, the Company generated net sales of
$-0-. The Company's cost of goods sold for the year ended February 29, 2000 was
$-0-. The Company's gross profit on sales was $-0- for the year ended February
29, 2000.
The Company's general and administrative costs aggregated approximately
$1,418,134 for the year ended February 29, 2000. These expenses represent carry
over losses from the Company's reorganization, bank charges and the payment of
fees to the stock transfer agent and other expenses necessary for the
continuation of the business.
18
<PAGE>
Results of Operations for the three months ended May 31, 2000.
For the three months ended May 31, 2000., the Company generated net sales
of $-0-. The Company's cost of goods sold for the three months ended May 31,
2000 was $-0- . The Company's gross profit on sales was $-0- for the three
months ended May 31, 2000.
The Company's general and administrative costs aggregated approximately
$78,289 for the three months ended May 31, 2000. This increase represents
essentially fees for the time spent doing the marketing research, planning and
reorganization of the business for its entry into the film and movie industry.
Liquidity and Capital Resources.
The Company had a cash balance of $7,763 at May 31, 2000, as compared to
$99 for the year ended February 29, 2000. Working capital at February 29, 2000
and May 31, 2000 was negative at $ 204,364 and $128,895 respectively. For the
year ended February 29, 2000 and for the three months ended May 31, 2000,
working capital was provided by management for the payment of expenses. At
February 29, 2000 and May 31, 2000, the Company continued to be funded through
shareholder loan balances aggregating $163,491 and 163,994 respectively.
Management believes that it will be able to fund the Company through the
continuation of the Company's reorganization process until the Company's
marketing strategy of entering the film production and distribution business is
in place.
Known trends, events or uncertainties that could be reasonably likely to
have a material adverse effect on the businesses of the Company and may thereby
materially impact the Company's short-term or long-term liquidity and/or net
sales, revenues or income from continuing operations are expected to be seasonal
and the continuation and availability of inventory from present and future
vendors at prices that will permit the Company to operate at and improved gross
profit levels; Federal Securities regulations that may effect the ability the
ability for the Company to complete its marketing strategy and a favorable
environment in which the Company will conduct its consulting activities.
Management believes that it will be able to fund the Company through
officer or shareholder loans until the Company has developed the business of the
Company and is experiencing positive cash flows.
Thereafter, if cash generated from operations is insufficient to satisfy
the Company's working capital and capital expenditure requirements, the Company
may be required to sell additional equity or debt securities or obtain
additional credit facilities. There can be no assurance that such financing, if
required, will be available on satisfactory terms, if at all.
Item 3. DESCRIPTION OF PROPERTY
The Company rents 2,500 square feet of space on a month to month basis at
375 Bay St. in Toronto, Canada, for $3,500 per month, in which its executive
offices are located. This space is rented to the Company by Olympia & York who
has no affilliation to the Company.
19
<PAGE>
Item 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the Company
regarding the beneficial ownership of Common Stock as of August 1, 2000, by (i)
each Director of the Company, (ii) each executive officer of the Company, (iii)
all directors and executive officers as a group, and (iv) each person known to
the Company to be the beneficial owner of more than 5% of its outstanding shares
of Common Stock.
<TABLE>
<CAPTION>
Shares Beneficially Owned
-------------------------
Percentage
Directors and Executive Officers Shares Held Owned (1)
- -------------------------------- ----------- ---------
<S> <C> <C>
Damian Lee (2) 975,000 4.04%
Chief Executive
Officer,
Chairman of the
Board of Directors
102 Bloor St. W
Toronto, ON M551M8
Canada
Briar Communications, Inc. (2) 950,000 3.95
2 Elm Avenue, #24
Toronto, ON M4T 1T8
Pine Wood Studios, Inc. (2) 950,000 3.95
120 Adelaide St. West
Suite 2401
Toronto, ON M5H1T1
Mike Mastercolo (2) ` 975,000 4.04
357 Bay Street
Suite 404
Toronto, On M5H2T7
John D'Acunto (2) 500,000 2.04
357 Bay Street
Suite 404
Toronto, On M5H2T7
Joseph Balerino (2) 500,000 2.04
357 Bay Street
Suite 404
Toronto, On M5H2T7
Avi Amar (2) 525,000 2.18
983 Apt. 3
Rehov Eilat, Ashdod
Israel
Pacifica Technologies, Ltd. (2) 750,000 3.10
4060 Burton Avenue
Richmond, BC
V7C4M1
Westcape Technologies, Ltd. (2) 700,000 2.90
260 QueensQuay West,
Suite 3108
Toronto, ONT M5J 2N3
Jessica Mathison (2) 625,000 2.60
1550 Johnston
White Rock, BC
VHB 328
Portico Industries, Ltd. (2) 650,000 2.70
4060 Burton Avenue
Richmond, BC V7C4M1
20
<PAGE>
Andrew Currah (2) 500,000 2.04
56 Temperance St. 6th Floor
Toronto, Ontario M5H 3V5
Currah & Sons, Ltd. (2) 500,000 2.04
56 Temperance St. 6th Floor
Toronto, Ontario M5H 3V5
Aviam Holdings, Ltd.(2) 700,000 2.90
2269 Lakeshore Blvd
Suite 2806
Toronto, ON M8V 3X6
543637 B.C. Ltd. (2) 100,000 0.44
4060 Burton Avenue
Richmond, BC V7C 4M1
Margaret Hales (2) 50,000 0.22
4060 Burton Avenue
Richmond, BC V7C 4M1
Susan Hales (2) 25,000 0.11
4060 Burton Avenue
Richmond, BC V7C 4M1
Ken Hales (2) 25,000 0.11
4060 Burton Avenue
Richmond, BC V7C 4M1
Martin Lapedus
Chief Financial
Officer and a Director
179 Oakhurst Drive
Thornhill ON L4J8H6
Canada
Paul Walters
Director
1300 Islington Ave. #2402
Toronto, ON M9A5C4
Canada
Marvin Sazant
Director
5 Julian Rd.
Downview, ON M3M3C2
Canada
John Cox 385,000 1.61%
Director
131 Bloor St. W.
Toronto, ON M551R1
Canada
As a group (3) 10,385,000 43.01%
(19 persons)
<FN>
(1) Percentage of ownership is based on 24,140,736 shares of Common Stock
issued and outstanding as of August 1, 2000.
21
<PAGE>
(2) At this time the Company is treating the Company's shareholders who were
previous shareholders of Stone Canyan, all of whom together received a
total of 10,000,000 shares of the Company's common stock in exchange for
Stone Canyan's assets, as being part of the group beneficially owned by
Damian Lee..
(3) If the prior shareholders of Stone Canyan are not included unless they are
directors or management of the Company, then these numbers go down to 5
persons ( Damian Lee, Martin Lapedus, Paul Walters, Marvin Sazant, and John
Cox) holding 1,360,000 shares representing 5.63% of the total shares
outstanding.
</FN>
</TABLE>
Item 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The Board of Directors of the Company is comprised of only one class of
director. Each director is elected to hold office until the next annual meeting
of shareholders and until his successor has been elected and qualified.
Officers are elected annually by the Board of Directors and hold office until
successors are duly elected and qualified. The following is a brief account of
the business experience of each director and executive officer of the Company.
The position(s) held by each Officer and Director of the Company are shown
on the following table. Each Director was elected or re-elected in July, 2000,
and will serve for one year or until the next annual meeting of the Company's
Shareholders and until a successor is elected and has qualified.
<TABLE>
<CAPTION>
Age Position
<S> <C> <C>
Damian Lee 50 Chief Executive Officer, Prsident,
Chairman of the Board of Directors
Martin Lapedus 57 Chief Financial Officer and a Director
Paul Walters 46 Director
Marvin Sazant 64 Director
John Cox 68 Director
</TABLE>
Damian Lee has been the Chief Executive Officer, President, and Chairman of
the Board of Directors of the Company since July 4, 2000, pursuant to the
Company's asset purchase of Stone Canyon Pictures, Inc. Prior to that, Mr.
Lee had been the President of Stone Canyon Pictures, Inc., a producer and
developer of television series and full length movies from September of 1997.
From February, 1990 to December, 1996, Mr. Lee was the President of Richmond
House Productions, Inc. of Toronto, Ontario, Canada. Mr. Lee received a BA in
political science from the University of Guelph in 1970.
Martin Lapedus has been the Company's Chief Financial Officer, secretary,
and a Director since November 1, 1999. Mr. Lapedus is a chartered accountant in
Ontario, Canada, and has been self employed since graduating with a degree in
accounting from Queens University, of Ontario, Canada, in 1967.
Paul Walters has been a Director of the Company since July 4, 1999. Since
April of 1991 Mr. Walters has worked as an independent sales representative for
Royal LePage real estate of Toronto, Canada. Prior to that Mr. Walters had spent
13 years in the banking industry working at varied positions in the Toronto
Dominion Bank of Toronto, Canada. Mr. Walters received his BA in economics and
history from the University of Western Ontario in 1977.
Dr. Marvin Sazant has been a Director of the Company since March 1, 2000.
Dr. Sazant received his M.D. from the University of Toronto in 1961, and a B.A.
in biology from the University of Toronto in 1957. Since 1967 Dr. Sazant has
been a self employed physician in Toronto, Canada.
John Cox has been a Director of the Company since March 1, 2000. Mr. Cox
was a principal in Coventry Lane Jaguar car dealership of Toronto, Ontario,
Canada from 1993 to 1999, and was the President and a principal of Jaguar
Rolls-Royce on Bay car dealership of Toronto, Ontario, Canada from 1983 to 1992.
22
<PAGE>
Item 6. EXECUTIVE COMPENSATION
The following table sets forth the compensation paid during the fiscal year
ended December 31, 1999, to the Company's Chief Executive Officer and each of
the Company's officers and directors. No person received compensation equal to
or exceeding $100,000 in fiscal 1999 and no bonuses were awarded during fiscal
1998. The company will enter into agreements which entail compensation for
management however, has not yet done so. The company plans to complete a
financing at which time it will be able to enter into such agreements.
<TABLE>
<CAPTION>
Annual Compensation Awards Payouts
------------------------------ ------------------------- ---------
Other All
Annual Restricted Securities Other
compen- Stock Underlying LTIP Compen-
sation Award(s) Options/SAR Payouts sation
Name and Principal Position Year Salary ($) Bonus ($) ($) ($) (#) (1) ($) ($)
- ---------- ---- ---------- --------- ------- ----------- ------------ --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Damian Lee
Chief Executive 2000 -0- -0- -0- -0- 480,000 -0- -0-
Officer, President 1999 -0- -0- -0- -0- -0- -0- -0-
Chairman of the 1998 -0- -0- -0- -0- -0- -0- -0-
Board of Directors 1997 -0- -0- -0- -0- -0- -0- -0-
Martin Lapedus 2000 -0- -0- -0- -0- 480,000 -0- -0-
Chief Financial 1999 -0- -0- -0- -0- -0- -0- -0-
Officer, Secretary 1998 -0- -0- -0- -0- -0- -0- -0-
and a Director 1997 -0- -0- -0- -0- -0- -0- -0-
Paul Walters 2000 -0- -0- -0- -0- 480,000 -0- -0-
Director 1999 -0- -0- -0- -0- -0- -0- -0-
1998 -0- -0- -0- -0- -0- -0- -0-
1997 -0- -0- -0- -0- -0- -0- -0-
Marvin Sazant 2000 -0- -0- -0- -0- 480,000 -0- -0-
Director 1999 -0- -0- -0- -0- -0- -0- -0-
1998 -0- -0- -0- -0- -0- -0- -0-
1997 -0- -0- -0- -0- -0- -0- -0-
John Cox 2000 -0- -0- -0- -0- 480,000 -0- -0-
Director 1999 -0- -0- -0- -0- -0- -0- -0-
1998 -0- -0- -0- -0- -0- -0- -0-
1997 -0- -0- -0- -0- -0- -0- -0-
</TABLE>
---------------------------------------------
1. On August 1, 2000, the Company granted each director options to purchase
480,000 shares of the Company's common stock at the price of $0.50 per
share. These shares are to be registered on Form S-8 as soon as
practicable, and will expire on August 1, 2001.
Item 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT AND OTHERS
There have been no material transactions, series of similar transactions,
currently proposed transactions, or series of similar transactions, to which the
Company or any of its subsidiaries was or is to be a party, in which the amount
involved exceeds $60,000 and in which any director or executive officer, or any
security holder who is known to the Company to own of record or beneficially
more than five percent of the Company's Common Stock, or any member of the
immediate family of any of the foregoing persons, had a material interest.
23
<PAGE>
CERTAIN BUSINESS RELATIONSHIPS
There have been no material transactions, series of similar transactions,
currently proposed transactions, or series of similar transactions, to which the
Company or any of its subsidiaries was or is to be a party, in which the amount
involved exceeds $60,000 and in which any director or executive officer, or any
security holder who is known to the Company to own of record or beneficially
more than five percent of the Company's Common Stock, or any member of the
immediate family of any of the foregoing persons, had a material interest.
Item 8. DESCRIPTION OF SECURITIES
The Company's authorized capital consists of 100,000,000 shares of common
stock, $0.001 par value per share, of which 24,140,736 are issued and
outstanding. Each holder of record of Common Stock is entitled to one vote for
each share held on all matters properly submitted to the shareholders for their
vote. Cumulative voting is not authorized by the Articles of Incorporation.
Holders of outstanding Common Stock are entitled to those dividends
declared by the Board of Directors out of legally available funds, and, in the
event of liquidation, dissolution or winding up of the affairs of the Company,
holders are entitled to receive ratably the net assets of the Company available
to the shareholders. Holders of outstanding Common Stock have no preemptive,
conversion or redemptive rights. All of the issued and outstanding shares of
Common Stock are, and all unissued shares of Class A Common Stock when offered
and sold will be, duly authorized, validly issued, fully paid and
non-assessable. To the extent that additional shares of Common Stock are issued,
the relative interests of the then existing shareholders may be diluted.
DIVIDEND POLICY
Holders of Common Stock are entitled to dividends in the discretion of the
Board of Directors and payment thereof will depend upon, among other things, the
Company's earnings, its capital requirements and its overall financial
condition. The Company has not paid any cash dividends on its Common Stock since
inception and intends to follow a policy of retaining any earnings to finance
the development and growth of its business. Accordingly, it does not anticipate
the payment of cash dividends in the foreseeable future.
TRANSFER AGENT
The Company uses Executive Registrar and Transfer Agency, Inc. to act as
its transfer agent for its Common Stock. The Company acts as transfer agent for
all of its other securities.
INTEREST OF NAMED EXPERTS AND COUNSEL
The financial statements of the Company at December 31, 1999, included in
this Disclosure Statement, have been audited by Merdinger, Fruchter Rosen &
Corso, P.C. as indicated in their report with respect thereto and are included
herein in reliance upon authority of said firm as experts in giving said
reports.
24
<PAGE>
PART II
Item 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
Market for Common Stock
The Company's Common Stock is quoted on the pink sheets under the symbol
"NCPP." The following table sets forth the high and low bid prices as reported
by FinancialWeb.com, Inc. for the periods ending June 30, 2000 and prior. These
quotations for the fiscal year 1998, and the first two quarters of 199 reflect
trading done by Valence 9 Development, Inc., under the symbol "VNIN." All
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commissions, and may not reflect actual transactions. As of June 30, 2000 there
were 296 shareholders of Common Stock.
<TABLE>
<CAPTION>
High Low
2000 ----- ----
-----
<S> <C> <C>
Second Quarter $0.25 0.06
First Quarter $0.25 0.10
1999
-----
Fourth Quarter $2.94 $0.16
Third Quarter 5.06 1.06
Second Quarter 2.71 1.12
First Quarter 4.25 2.00
1998
-----
Fourth Quarter 4.62 2.12
Third Quarter 4.12 0.62
</TABLE>
Dividends
The Company has never declared or paid any cash dividends on its capital
stock. The Company currently intends to retain all available funds and any
future earnings of its business for use in the operation of its business and
does not anticipate paying any cash dividends in the foreseeable future. The
declaration, payment and amount of future dividends, if any, will depend upon
the future earnings, results of operations, financial position and capital
requirements of the Company, among other factors, and will be at the sole
discretion of the Board of Directors.
Item 2. LEGAL PROCEEDINGS
The Company had previously occupied premises in a different location. The
Company maintains that it did not sign, and did not enter into, a lease for the
previous location. The real estate property manager maintains that there is a
five-year lease, and that legal action has commenced to recover outstanding rent
and damages. The Company has no knowledge of any legal action, believes there is
no merit to any possible action, and has not included a provision for any
outstanding rent or damages in these financial statements.
25
<PAGE>
Item 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
There have been no changes in, and no disagreements with, the Company's
public accountants.
Item 4. RECENT SALES OF UNREGISTERED SECURITIES
At inception in June of 1998, the Company issued 25,100,000 common shares
to its founders in reliance upon section 4(2) of the Securities Act of 1933 in
exchange for assets and services valued at $25,100.
On February 23, 1998, the Company issued 7,100,000 shares of its common
stock to non-US citizens at $0.001 per share, for a total consideration of
$7,100. This issuance was a transaction exempt from registration under Section
4(2) of the Securities Act and Regulation D, Rule 504 thereunder as a
transaction not involving a public offering. No commission was paid on these
sales.
On March 5, 1998, the Company issued 388,800 shares of its common stock at
$0.50 per share, for a total consideration of $194,400. This issuance was a
transaction exempt from registration under Section 4(2) of the Securities Act
and Regulation D, Rule 504 thereunder as a transaction not involving a public
offering. No commission was paid on these sales.
On September 28, 1998, the Company escrowed 438,637 shares of its common
stock for the proposed acquisition of Image Advertising Plc. These shares were
exempt from registration under Section 4(2) of the Securities Act. The
acquisition did not occur and said shares were returned to the Company from
escrow and were cancelled and retired in June, 1999.
On June 22, 1999, the Company did an 800 to 1 reverse split of its common
stock, resulting in the Company's issued and outstanding common shares going
from 32,588,800 to 40,736 shares.
On August 31, 1999, the Company issued 4,000,000 of its commons shares to
the owners of New Cinema Partners, Inc. pursuant to an Acquisition Agreement.
This transaction was exempt from registration under Section 4(2) of the
Securities Act and Rule 144 thereunder. Stock issued under these exemptions
carries certain resale restrictions and the stock certificates bear restrictive
legends. The Company valued this transaction at $159,435.
On September 14, 1999, the Company issued 7,000,000 shares of its common
stock at $0.14 per share, for a total consideration of $980,000. This issuance
was a transaction exempt from registration under Section 4(2) of the Securities
Act and Regulation D, Rule 504 thereunder as a transaction not involving a
public offering. No commission was paid on these sales.
On May 22, 2000, the Company issued 3,000,000 of its commons shares to six
consulting corporations hired to help the Corporation find a new business. This
transaction was exempt from registration under Section 4(2) of the Securities
Act and Rule 144 thereunder. Stock issued under these exemptions carries certain
resale restrictions and the stock certificates bear restrictive legends. The
Company valued this transaction at $330,000.
On July 4, 2000, the Company issued 10,000,000 of its commons shares to the
owners of New Cinema Partners, Inc. pursuant to an Acquisition Agreement. This
transaction was exempt from registration under Section 4(2) of the Securities
Act and Rule 144 thereunder. Stock issued under these exemptions carries certain
resale restrictions and the stock certificates bear restrictive legends. The
Company valued this transaction at $1,000,000.
On July 10, 2000, the Company issued 100,000 shares of Common Stock to Jay
Hait, Esq., valued at $10,000, for legal services rendered pursuant to Rule 701
promulgated under Section 3(b) of the Securities Act of 1933. The Company relied
on the following facts in determining that Rule 701 was available: (a) the
shares were issued pursuant to a written agreement between Mr. Hait and the
Company, (b) Mr. Hait rendered bonafide services not in connection with the
offer or sale of securities in capital raising transaction, (c) the shares were
issued pursuant to a written contract relating to the issuance of shares paid as
compensation for services rendered, and (d) the amount of shares offered and
sold in reliance on Rule 701 did not exceed $500,000 and all securities sold in
the last 12 months have not exceeded $5,000,000.
26
<PAGE>
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Bylaws, grants indemnification to the Company's officers and
directors, present and former, for expenses incurred by them in connection with
any proceeding that they are involved in by reason of their being or having been
an officer or director of the Company. The person being indemnified must have
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the Company.
Insofar as indemnification for liability arising under the Securities Act
may be permitted to directors or officers the Company pursuant to the foregoing
provisions, or otherwise, the Company has been advised that in the opinion of
the Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director or officer of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director or officer in connection with the securities being registered, the
Company will, unless in the opinion of its legal counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question of whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
27
<PAGE>
PART F/S
FINANCIAL STATEMENTS.
NEW CINEMA PARTNERS
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 2000 AND MAY 31, 2000
28
<PAGE>
NEW CINEMA PARTNERS
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
PAGE
INDEPENDENT AUDITORS' REPORT 1
CONSOLIDATED BALANCE SHEET 2
CONSOLIDATED STATEMENT OF OPERATIONS 3
CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS 4
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY 5
CONSOLIDATED STATEMENT OF CASH FLOWS 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7-12
29
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS OF NEW CINEMA PARTNERS:
We have audited the accompanying consolidated balance sheet of New Cinema
Partners (A Development Stage Company) as of February 29, 2000 and the related
consolidated statements of operations, comprehensive loss, stockholders'
deficiency and cash flows for the period from February 18, 1999 (inception) to
February 29, 2000. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of New
Cinema Partners as of February 29, 2000 and the consolidated results of its
operations and its cash flows for the period from February 18, 1999 (inception)
to February 29, 2000 in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
accompanying financial statements, the Company has no established source of
revenue, which raises substantial doubt about its ability to continue as a going
concern. Management's plans in regard to this matter are also discussed in Note
1. These financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
/s/MERDINGER, FRUCHTER ROSEN & CORSO
MERDINGER, FRUCHTER ROSEN & CORSO, P.C.
Certified Public Accountants
New York, New York
May15, 2000
30
<PAGE>
<TABLE>
<CAPTION>
NEW CINEMA PARTNERS
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
May 31, February 29,
2000 2000
-------------------- ------------------
ASSETS (Unaudited)
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 7,763 $ 99
OTHER ASSETS
Prepaid asset acquisition costs 330,000 -
Debt issuance costs, net of accumulated amortization
of $138,900 and $101,000 619,100 657,000
-------------------- ------------------
Total assets 956,863 657,099
==================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 198,636 $ 115,000
Shareholder advance 13,491 13,994
-------------------- ------------------
Total current liabilities 212,127 128,994
Loan payable - related party 150,000 150,000
-------------------- ------------------
Total liabilities 362,127 278,994
-------------------- ------------------
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value;
100,000,000 shares authorized,
14,040,736 and 11,040,736
shares issued and outstanding 14,041 11,041
Additional paid-in-capital 2,213,394 1,886,394
Deficit accumulated during
the development stage (1,644,323) (1,525,634)
Cumulative foreign currency translation adjustment 11,624 6,304
-------------------- ------------------
Total stockholders' equity 594,736 378,105
-------------------- ------------------
Total liabilities and stockholders' equity $ 956,863 $ 657,099
==================== ==================
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
- 2 -
31
<PAGE>
<TABLE>
<CAPTION>
NEW CINEMA PARTNERS
(A Development Stage Company)
CONSOLIDATED STATEMENT OF OPERATIONS
February 18, February 18,
1999 1999
Three Months (inception) (inception)
Ended To February 29, To May 31, 2000
May 31, 2000 2000
-------------------- -------------------- -------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Revenue $ - $ - $ -
Selling, general and administrative expenses 78,289 1,418,134 1,496,423
Amortization of debt issuance costs 37,900 101,000 138,900
Interest expense 2,500 6,500 9,000
-------------------- -------------------- -------------------
Loss from operations before provision for income taxes ( 118,689) (1,525,634) (1,644,323)
Provision for income taxes - - -
-------------------- -------------------- -------------------
Net loss $ ( 118,689) $ (1,525,634) $ (1,644,323)
==================== ==================== ===================
Net loss per share - basic and diluted $ ( 0.01) $ ( 0.21) $ ( 0.21)
==================== ==================== ===================
Weighted average number of common shares
outstanding 11,366,823 7,218,713 7,969,985
==================== ==================== ===================
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
- 3 -
32
<PAGE>
<TABLE>
<CAPTION>
NEW CINEMA PARTNERS
(A Development Stage Company)
CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS
Three Months February 18, 1999
Ended (Inception)
May 31, 2000 to February 29, 2000
(Unaudited)
<S> <C> <C>
Net loss $ ( 118,689) $ (1,525,634)
Foreign currency translation adjustment 5,320 6,304
------------ ----------
Comprehensive loss $ ( 113,369) $ (1,519,330)
============== ============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
- 4 -
33
<PAGE>
<TABLE>
<CAPTION>
NEW CINEMA PARTNERS
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Defecit
Accumulated Foreign
Additional During the Currency
Common Stock Paid in Development Translation
Shares Amount Capital Stage Adjustment Total
---------- -------- ---------- --------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, February 18, 1999 (Inception) - $ - $ - $ - $ - $ -
- -
Sale of common stock, February 18, 1999 4,000,000 4,000 155,435 - - 159,435
Acquisition of public shell corporation, August 31, 1999 40,736 41 ( 41) - - -
Sale of common stock, September 15, 1999 7,000,000 7,000 973,000 - - 980,000
Issuance of options in connection with debt - - 758,000 - - 758,000
Net loss - - - ( 1,525,634 ) - (1,525,634)
Foreign currency translation adjustment - - - - 6,304 6,304
----------- --------- ---------- ------------ -------- -----------
Balance, February 29, 2000 11,040,736 11,041 1,886,394 ( 1,525,634 ) 6,304 378,105
Issuance of shares in connection with asset acquisition,
May 22, 2000 (unaudited) 3,000,000 3,000 327,000 - - 330,000
Net loss (unaudited) - - - ( 118,689 ) - (118,689)
Foreign currency translation adjustment (unaudited) - - - - 5,320 5,320
----------- --------- ---------- ------------ -------- -----------
Balance, May 31, 2000 (unaudited) 14,040,736 $ 14,041 $2,213,394 $(1,644,323 ) $11,624 $594,736
=========== ========= ========== ============ ======== ===========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
- 5 -
34
<PAGE>
<TABLE>
<CAPTION>
NEW CINEMA PARTNERS
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOWS
February 18, 1999
Three Months (Inception) to February 18, 1999
Ended May 31, February 29, 2000 (Inception)
2000 to May 31, 2000
----------------- ---------------------- --------------------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net loss $ ( 118,689) $ (1,525,634) $ (1,644,323)
Amortization of debt issuance costs 37,900 101,000 138,900
Increase in accounts payable 83,636 115,000 198,636
----------------- ---------------------- --------------------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
2,847 (1,309,634) (1,306,787)
----------------- ---------------------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES -
Sale of common stock - 1,139,435 1,139,435
Proceeds of loan payable - 150,000 150,000
Shareholder advances ( 503) 13,994 13,491
----------------- ---------------------- --------------------
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES
( 503) 1,303,429 1,302,926
----------------- ---------------------- --------------------
Effect of currency translation on cash 5,320 6,304 11,624
----------------- ---------------------- --------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS
7,664 99 7,763
CASH AND CASH EQUIVALENTS -
beginning of period -
99 -
----------------- ---------------------- --------------------
CASH AND CASH EQUIVALENTS - end of period $ $ $
7,763 99 7,763
================= ====================== ====================
SUPPLEMENTAL INFORMATION:
During the period ended February 29, 2000, the Company paid no cash for
interest or income taxes. During the period ended May 31, 2000, the
Company paid no cash for interest or income taxes (unaudited).
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCIAL ACTIVITY:
The Company issued options in connection with obtaining a loan. These
options have been valued at $758,000.
During the period ended May 31, 2000, the Company issued 3,000,000
shares of Common Stock, valued at $330,000, for services provided in
connection with an asset acquisition (unaudited).
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
- 6 -
35
<PAGE>
NEW CINEMA PARTNERS
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 2000
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements include the accounts of New Cinema
Partners ("Nevada"), a Nevada corporation formed on February 2, 1998 as Valence
9 Development, Inc. and its wholly owned subsidiary New Cinema Partners, Inc.
("Ontario"), a Canadian corporation formed on February 18, 1999. Nevada and
Ontario are collectively referred to as the "Company". All significant
inter-company accounts and transactions have been eliminated in consolidation.
The Company conducts its operations from offices located in Toronto, Ontario,
Canada.
Effective August 31, 1999, Nevada acquired all of the issued and outstanding
common stock of Ontario. As a result of this transaction, Ontario's former
shareholder obtained control of Nevada, a shell corporation with no operations.
For accounting purposes, this acquisition has been treated as a recapitalization
of Ontario.
The financial statements presented include only the accounts of Ontario from its
inception (February 18, 1999) through February 29, 2000 and of Nevada from
August 31, 1999 through February 29, 2000.
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of the
Company as a going concern. However, the Company has no established source of
revenue. This factor raises substantial doubt about the Company's ability to
continue as a going concern. Without realization of additional capital, it would
be unlikely for the Company to continue as a going concern. The financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts and classification of liabilities that
might be necessary should the Company be unable to continue in existence.
Management plans to take the following steps that it believes will be sufficient
to provide the Company with the ability to continue in existence:
a) Raise additional working capital through a private placement. The private
placement will be in the form of debt, equity or a convertible debenture.
b) Seek acquisitions for the company. Acquisitions will be operating companies
in the entertainment, e-commerce, internet or electronic industries.
- 7 -
36
<PAGE>
NEW CINEMA PARTNERS
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 2000
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Unaudited Financial Information
In the opinion of the Company, the accompanying unaudited consolidated financial
statements contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly its financial position as of May 31,
2000 and the results of its operations and cash flows for the three months ended
May 31, 2000. These statements are condensed and therefore do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. The results of operations for the
three months ended May 31, 2000 are not necessarily indicative of the results to
be expected for the full year.
Nature of Operations
The Company is currently a development-stage company under the provisions of the
Financial Accounting Standards Board ("FASB") Statement of Financial Accounting
Standards ("SFAS") NO. 7.
The Company is engaged in the location based entertainment industry, with
activities in the location, design, construction, management and operation of
"high tech", specialized theater venues, including digital interactive movies,
IMAX films and other specialized films in the "2D", "3D" format and live action
and animation features.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents.
Concentration of Credit Risk
The Company places its cash in what it believes to be credit-worthy financial
institutions. However, cash balances may exceed FDIC insured levels at various
times during the year.
Fair Value of Financial Instruments
The carrying value of cash and cash equivalents, accounts payable, loan payable
and advance from shareholder approximates fair value due to the relatively short
maturity of these instruments.
- 8 -
37
<PAGE>
NEW CINEMA PARTNERS
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 2000
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Income Taxes
Income taxes are provided for based on the liability method of accounting
pursuant to SFAS No. 109, "Accounting for Income Taxes". Deferred income taxes,
if any, are recorded to reflect the tax consequences on future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts at each year-end.
Translation of Foreign Currency
The Company translates the foreign currency financial statements of its Canadian
subsidiary in accordance with the requirements of SFAS No. 52, "Foreign Currency
Translation". Assets and liabilities are translated at current exchange rates,
and related revenue and expenses are translated at average exchange rates in
effect during the period. Resulting translation adjustments are recorded as a
separate component in stockholders' equity. Foreign currency transaction gains
and losses are included in the statement of operations.
Earnings Per Share
The Company calculates earnings per share in accordance with SFAS No. 128,
"Earnings Per Share", which requires presentation of basic earnings per share
("BEPS") and diluted earnings per share ("DEPS"). The computation of BEPS is
computed by dividing income available to common stockholders by the weighted
average number of outstanding common shares during the period. DEPS gives effect
to all dilutive potential common shares outstanding during the period. The
computation of DEPS does not assume conversion, exercise or contingent exercise
of securities that would have an antidilutive effect on earnings. As of February
29, 2000, the Company has no securities that would effect loss per share if they
were to be dilutive.
Comprehensive Income
SFAS No. 130, "Reporting Comprehensive Income", establishes standards for the
reporting and display of comprehensive income and its components in the
financial statements. The items of other comprehensive income that are typically
required to be displayed are foreign currency items, minimum pension liability
adjustments, and unrealized gains and losses on certain investments in debt and
equity securities.
NOTE 2 - CORPORATE REORGANIZATION AND MERGER
On August 31, 1999, Nevada, a public shell, and Ontario executed an Acquisition
Agreement (the "Agreement") that provided that Nevada would acquire all of the
issued and outstanding common stock of Ontario. In connection with the
transaction, the sole shareholder of Ontario received 4,000,000 shares of Nevada
common stock for its 4,000,000 shares of Ontario.
As a result of this transaction the former shareholder of Ontario acquired or
exercised control over a majority of the shares of Nevada. Accordingly, the
transaction has been treated for accounting purposes as a recapitalization of
Ontario and, therefore, these financial statements represent a continuation of
the accounting acquirer, Ontario, not Nevada, the legal acquirer.
- 9 -
38
<PAGE>
NEW CINEMA PARTNERS
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 2000
NOTE 2 - CORPORATE REORGANIZATION AND MERGER (Continued)
In accounting for this transaction:
i) Ontario is deemed to be the purchaser and surviving company for accounting
purposes. Accordingly, its net assets are included in the balance sheet at
their historical book values;
ii) Control of the net assets and business of Nevada was acquired effective
August 31, 1999 (the "Effective Date"). This transaction has been accounted
for as a purchase of the assets and liabilities of Nevada by Ontario. At
the effective date Nevada had no assets or liabilities.
iii) The consolidated statements of operations and cash flows include Ontario's
results of operations and cash flows from February 18, 1999 (date of
inception) and Nevada's results of operations from the Effective Date.
NOTE 3 - INCOME TAXES
The components of the provision for income taxes for the period from February
18, 1999 (inception) to February 29, 2000, are as follows:
Current Tax Expense
U.S. Federal $ -
State and Local -
--------------
Total Current -
Deferred Tax Expense
U.S. Federal -
State and Local -
Total Deferred -
Total Tax Provision (Benefit) from
Continuing Operations $ -
=============
The reconciliation of the effective income tax rate to the Federal
statutory rate is as follows:
Federal Income Tax Rate 34.0%
Effect of Valuation Allowance ( 34.0)%
---------
Effective Income Tax Rate 0.0%
===========
- 10 -
39
<PAGE>
NEW CINEMA PARTNERS
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 2000
NOTE 3 - INCOME TAXES (Continued)
At February 29, 2000, the Company had net carryforward losses of approximately
$1,526,000. Because of the current uncertainty of realizing the benefits of the
tax carryforward, a valuation allowance equal to the tax benefits for deferred
taxes has been established. The full realization of the tax benefit associated
with the carryforward depends predominantly upon the Company's ability to
generate taxable income during the carryforward period.
Deferred tax assets and liabilities reflect the net tax effect of temporary
differences between the carrying amount of assets and liabilities for financial
reporting purposes and amounts used for income tax purposes. Significant
components of the Company's deferred tax assets and liabilities as of February
29, 2000 are as follows:
Deferred Tax Assets
Loss Carryforwards $ 519,000
Less: Valuation Allowance ( 519,000)
------------
Net Deferred Tax Assets $ -
==================
Net operating loss carryforwards expire in 2020.
NOTE 4 - COMMON STOCK
On September 15, 1999, the Company sold 7,000,000 shares of common stock,
pursuant to a private placement, for proceeds of $980,000.
NOTE 5 - LOAN PAYABLE - RELATED PARTY
The Company received a loan from a related party in the amount of $150,000. The
loan bears interest at 6.5% per year and is due on July 9, 2004.
In connection with obtaining this loan, the Company granted an option to
purchase 250,000 shares of common stock to a third party. The option is
exercisable at $2.50 per share for nine months after the Company files a
registration statement. This option has been valued at $758,000 using the Black
Sholes option pricing model with the following assumptions: Interest rate, 4%;
Volatility rate, 200%; Expected life, 1 year; Dividend yield, $0. This amount is
being amortized over the five year life of the loan.
NOTE 6 - SHAREHOLDER ADVANCES
A shareholder has advanced funds to the Company for working capital purposes.
These advances bear no interest and are due upon demand.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
The Company leases its premises on a month-to-month basis. Rent expense included
in the statement of operations for the initial period ended February 29, 2000 is
$47,612.
- 11 -
40
<PAGE>
NEW CINEMA PARTNERS
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 2000
NOTE 7 - COMMITMENTS AND CONTINGENCIES (Continued)
The Company had previously occupied premises in a different location. The
Company maintains that it did not sign, and did not enter into, a lease for the
previous location. The real estate property manager maintains that there is a
five-year lease, and that legal action has commenced to recover outstanding rent
and damages. The Company has no knowledge of any legal action, believes there is
no merit to any possible action, and has not included a provision for any
outstanding rent or damages in these financial statements.
NOTE 8 - PREPAID ASSET ACQUISITION COSTS
On May 22, 2000, the Company issued 3,000,000 shares of Common Stock, valued at
$330,000, in connection with the asset acquisition described in Note 9. These
direct acquisition costs will be included in the cost of the assets acquired.
NOTE 9 - SUBSEQUENT EVENTS
The Company consummated an asset purchase agreement acquiring certain
intellectual properties, comprising scripts and storylines, owned by 1255234
Ontario, Inc., also known as Stone Canyon Pictures. The purchase price is
10,000,000 shares of Company common stock, valued at $0.10 per share.
Additionally, the Company issued 3,000,000 shares of common stock as payment for
services provided in connection with the acquisition. These shares have been
valued at $0.11 per share.
- 12 -
41
<PAGE>
New Cinema Partners, Inc.
Pro forma Financial Information
On June 27, 2000, the registrant completed the acquisition of certain
intellectual property assets owned by 1255234 Ontario Inc., also known as Stone
Canyon Pictures. The assets acquired were scripts and storylines owned by Stone
Canyon Pictures.
The pro forma balance sheet presented reflects the historical balance sheet
of New Cinema Partners Inc. as of May 31, 2000. Pro forma adjustments have been
made to give effect to the acquisition as if it had occurred at May 31, 2000.
The pro forma income statements for the year ended February 29,2000 and the
three month period ended May 31, 2000 reflects the historical income statements
of New Cinema Partners, Inc. for the periods then ended. Pro forma adjustments
have been made to give effect to all above transaction as if it had occurred at
the beginning of the fiscal year presented and carried through the interim
period presented. The only income statement adjustment required is to adjust
loss per share and outstanding share data to reflect the outstanding shares as
if they had been issued at the beginning of the fiscal year presented. No
adjustment is necessary for amortization of the intellectual property, since it
has not yet been placed in operation.
42
<PAGE>
<TABLE>
<CAPTION>
New Cinema Partners, Inc.
PROFORMA BALANCE SHEET
May 31, 2000
Pro Forma Adjustments
New Cinema To Record Acquisition
Partners, Inc. At May 31,2000
May 31, 2000 Pro Forma
ASSETS
Current assets
<S> <C> <C> <C>
Cash and cash equivalents
7,763 - 7,763
--------------- ---------------
Total current assets
7,763 7,763
-
Intellectual properties
330,000 1,000,000 1,330,000
Other intangibles, less accumulated amortization
619,100 619,100
-
--------------- ---------------
Total assets
956,863 1,956,863
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses
198,636 198,636
Shareholder advance
13,491 13,491
-
--------------- ---------------
Total current liabilities
212,127 212,127
--------------- ---------------
Long term Liabilities
Due to related party
150,000 150,000
Shareholders' equity (deficit)
Common stock
14,041 10,000 24,041
Additional paid in capital
2,213,394 990,000 3,203,394
Deficit acumulated during the development stage
(1,644,323) (1,644,323)
Foreign currency translation adjustment
11,624 11,624
-
--------------- ---------------
Total shareholders' equity
594,736 1,594,736
--------------- ---------------
Total liabilities and shareholders' equity
956,863 1,956,863
=============== ===============
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
New Cinema Partners, Inc.
PROFORMA STATEMENT OF OPERATIONS
For the Three Months Ended May 31,2000
Pro Forma Adjustments to
Reflect Acquisition Income Statement
for the for the
Three Months Ended Three Months
Ended
New Cinema May 31, 2000 May 31, 2000
Partners, Inc Pro Forma
<S> <C> <C> <C>
Revenue
- -
Cost of sales
- -
------------------ ------------------
Gross profit
- -
------------------ ------------------
General and administrative
78,289 78,289
Amortization
37,900 37,900
Interest expense
2,500 2,500
------------------ ------------------
Total
118,689 118,689
------------------ ------------------
Loss from operations
(118,689) (118,689)
Basic and diluted loss per share
(0.01) (0.00)
Weighted average shares outstanding
11,366,823 12,673,913 24,040,736
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
New Cinema Partners, Inc.
PROFORMA STATEMENT OF OPERATIONS
For the Year Ended February 29,2000
Pro Forma Adjustments to Income Statement
Reflect Acquisition for the
for the year ended for the year
ended
New Cinema February 29, 2000 February 29, 2000
Partners, Inc Pro Forma
<S> <C> <C> <C>
Revenue
- -
Cost of sales
- -
------------------ ------------------
Gross profit
- -
------------------ ------------------
General and administrative
1,418,134 1,418,134
Amortization
101,000 101,000
Interest expense
6,500 6,500
------------------ ------------------
Total
1,525,634 1,525,634
------------------ ------------------
Loss from operations
(1,525,634) (1,525,634)
Basic and diluted loss per share
(0.21) (0.08)
Weighted average shares outstanding
7,218,713 13,000,000 20,218,713
</TABLE>
45
<PAGE>
New Cinema partners, Inc.
Notes to pro forma financial statements
Balance Sheet, May 31, 2000
1) To record the acquisition of intellectual property from 1255234 Ontario
Inc. The purchase price is 10,000,000 shares of New Cinema Partners, Inc.
common stock valued at $0.10 per share, the fair value on the date of
acquisition. Additionally, at May 31, 2000, 3,000,000 shares of common
stock had been issued for services provided which were directly connected
to the acquisition. These shares have been valued at $0.11 per share.
Income Statement, fiscal year ended February
29, 2000 and three months ended May 31, 2000
2) To adjust outstanding shares to reflect the acquisition as if it had
occurred at the beginning of the fiscal year presented.
46
<PAGE>
PART IV
ITEM 1. EXHIBIT INDEX.
EXHIBIT
NUMBER DESCRIPTION LOCATION
------- ------------------------------ ----------------------------
(2) Articles of Incorporation
and Bylaws:
2.1 Articles of Incorporation Filed electronically herewith
2.2 Bylaws Filed electronically herewith
(10)(a) Consents - Experts:
10.1 Consent of Accountant Filed electronically herewith
27 Financial Data Schedule Filed herewith electronically
47
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant caused this report to be signed on its behalf by the
undersigned, there unto duly authorized.
NEW CINEMA PARTNERS
(Registrant)
Date: August 8, 2000 By: /s/ Damian Lee
----------------------------
Damian Lee
Chairman and
Chief Executive Officer
In accordance with the requirements of the Securities Exchange Act of 1934,
this Disclosure Statement has been signed by the following persons in the
capacities and on the dates stated.
Signature Title Date
/s/ Martin Lapedus Chief Financial Officer and August 8, 2000
---------------------- a Director
Martin Lapedus
/s/ Paul Walters Director August 8, 2000
----------------------
Paul Walters
/s/ Marvin Sazant Director August 8, 2000
----------------------
Marvin Sazant
/s/ John Cox Director August 8, 2000
----------------------
John Cox
48
<PAGE>
EX-2.1
ARTICLES OF INCORPORATION
ARTICLES OF INCORPORATION
OF
VALANCE 9 DEVELOPMENT, INC.
We, the undersigned, having associated ourselves together for the
purpose of forming a corporation under the general corporation laws of the State
of Nevada, do hereby certify:
1. The name of the corporation is: VALANCE 9 DEVELOPMENT, INC.
2. The principal place of business of the corporation is to be located at 1655
Heitman Court, Reno, Nevada, 89509
3. The purposes to be transacted, promoted, or carried on by this corporation
are: a. The corporation may engage in any lawful activity.
4. The amount of the total authorized capital stock of this corporation is
consisting of 100,000,000 shares at the par value of $0.001 each per share.
5. The members of the governing board of this corporation are styled
"Directors", and their number shall not be less than two (2) nor more than
five (5). Subject to the aforementioned limitations, the number of
directors may, from time to time, be increased or decreased in such manner
as shall be provided by the by-laws of this corporation. The number of the
first board of directors of this corporation shall be two (2) and their
names and post office addresses are as follows:
Name Address
Wayne Walrath 55 Danbury Rd.
Ridgefield, Connecticut 06877
Lew Hayse Ferdinand - Maria - Strasse 36
82319 Starnberg, Germany
6. The capital stock of this corporation shall not be subject to assessment to
pay the debts of the corporation, and in this particular, the Articles of
Incorporation shall not be subject to amendment.
7. The name and post office address of the incorporator, signing these
Articles of Incorporation is as follows:
Name Address
Max McCombs 1655 Heitman Court
P.O Box 5966
Reno, NV 89513
8. The Resident Agent of the Corporation is:
Max McCombs
1655 Heitman Court
P.O Box 5966
Reno, NV 89513
9. This corporation shall have perpetual existence.
IN WITNESS WHEREOF, we have hereunto subscribed our names this 29th day of
January, 1998
/s/ Max McCombs
--------------------------
Max McCombs
<PAGE>
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
OF VALANCE 9 DEVELOPMENT, INC.
Before payment or issuance of Stock
Filed by: Max McComb
1655 Heitman Court
P.O Box 5966
Reno, NV 89513
I, ROBERT E. SHORT
---------------------------
Chief Executive Officer
Certify that:
1. They constitute at least two thirds of the original incorporators or of the
directors of Valence 9 Development, Inc., a Nevada corporation.
2. The Original Articles were filed in the office of the Secretary of State on
FEB. 02 1998.
3. As of the date of this certificate, no stock of the corporation has been
issued.
4. The undersigned accept the following amendments to the Articles of
Incorporation of this corporation.
Article 1 is amended to read as follows:
REFERENCE INCORPORATION NO. C1963-98 DATED FEBRUARY 2, 1998.
At the time of filing, VALENCE 9 DEVELOPMENT, INC., the word VALENCE was
mispelled. YOUR RECORDS SHOW THE FIRST WORD OF THE INCORPORATION TITLE AS "
VALANCE". THE PROPER SPELLING IS V-A-L-E-N-C-E. PLEASE AMEND THE FIRST WORD
IN THE CORPORATE TITLE. THANK YOU VERY MUCH.
/S/ Robert Short
------------------------
Robert Short
<PAGE>
CERTIFICATE AMENDING ARTICLES OF INCORPORATION
OF
VALENCE 9 DEVELOPMENT, INC.
The undersigned, being the President and Secretary of VALENCE 9
DEVELOPMENT, INC., a Nevada Corporation, hereby certify that by
majority vote of the Board of Directors and majority vote of the
stockholders at a meeting held on Aug. 24, 1999, it was agreed by
unanimous vote that this CERTIFICATE AMENDING ARTICLES OF INCORPORATION
be filed.
The undersigned further certifies that the original Articles of
Incorporation of VALENCE 9 DEVELOPMENT, INC. were filed with the
Secretary of State of Nevada on the 2nd day of February, 1998. The
undersigned further certifies that ARTICLE FIRST of the original
Articles of Incorporation filed on the 2nd day of February, 1998,
herein is amended to read as follows:
ARTICLE FIRST
FIRST. The name shall be:
New Cinema Partners
<PAGE>
CERTIFICATE AMENDING ARTICLES OF INCORPORATION
OF
VALENCE 9 DEVELOPMENT, INC.
CONTINUED
The undersigned hereby certify that they have on this 24th day
of Aug., 1999, executed this certificate amending the original Articles
of Incorporation heretofore filed with the Secretary of State of Nevada
/s/ Lynde A. Russell
---------------------------
President
/s/ Lynde A. Russell
---------------------------
Secretary
<PAGE>
EX-2.2
BYLAWS
OF
NEW CINEMA PARTNERS
ARTICLE I
OFFICES
The principal office of the Corporation in the State of Nevada shall be located
in Toronto, Ontario, Canada. The Corporation may have such other offices,
either within or without the State of Nevada, as the Board of Directors may
designate or as the business of the Corporation may require from time to time.
ARTICLE II
SHAREHOLDERS
SECTION 1. Annual Meeting. The annual meeting of the shareholders shall be held
on the first day in the month of July in each year, beginning with the year
2001, at the hour of one o'clock p.m., for the purpose of electing Directors and
for the transaction of such other business as may come before the meeting. If
the day fixed for the annual meeting shall be a legal holiday, such meeting
shall be held on the next business day. If the election of Directors shall not
be held on the day designated herein for any annual meeting of the shareholders,
or at any adjournment thereof, the Board of Directors shall cause the election
to be held at a special meeting of the shareholders as soon thereafter as soon
as conveniently may be.
SECTION 2. Special Meetings. Special meetings of the shareholders, for any
purpose or purposes, unless otherwise prescribed by statute, may be called by
the President or by the Board of Directors, and shall be called by the President
at the request of the holders of not less than fifty percent (50%) of all the
outstanding shares of the Corporation entitled to vote at the meeting.
SECTION 3. Place of Meeting. The Board of Directors may designate any place,
either within or without the State of Nevada, unless otherwise prescribed by
statute, as the place of meeting for any annual meeting or for any special
meeting. A waiver of notice signed by all shareholders entitled to vote at a
meeting may designate any place, either within or without the State of Nevada,
unless otherwise prescribed by statute, as the place for the holding of such
meeting. If no designation is made, the place of the meeting will be the
principal office of the Corporation.
SECTION 4. Notice of Meeting. Written notice stating the place, day and hour of
the meeting and, in case of a special meeting, the purpose or purposes for which
the meeting is called, shall unless otherwise prescribed by statute, be
delivered not less than ten (10) days nor more than sixty (60) days before the
date of the meeting, to each shareholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be delivered when deposited
in the United States mail, addressed to the shareholder at his/her address as it
appears on the stock transfer books of the Corporation, with postage thereon
prepaid.
SECTION 5. Closing of Transfer Books or Fixing of Record. For the purpose of
determining shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or shareholders entitled to receive
payment of any dividend, or in order to make a determination of shareholders for
any other proper purpose, the Board of Directors of the Corporation may provide
that the stock transfer books shall be closed for a stated period, but not to
exceed in any case fifty (50) days. If the stock transfer books shall be closed
for the purpose of determining shareholders entitled to notice of or to vote at
a meeting of shareholders, such books shall be closed for at least ten (10) days
immediately preceding such meeting. In lieu of closing the stock transfer books,
the Board of Directors may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than fifty
(50) days and, in case of a meeting of shareholders, not less than ten (10) days
prior to the date on which the particular action requiring such determination of
shareholders is to be taken. If the stock transfer books are not closed and no
record date is fixed for determination of shareholders entitled to notice of or
to vote at a meeting of shareholders, or shareholders entitled to receive
payment of a dividend, the date on which notice of the meeting is mailed or the
date on which the resolution of the Board of Directors declaring such dividend
is adopted, as the case may be, shall be the record date for such determination
of shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this section, such
determination shall apply to any adjournment thereof.
SECTION 6. Voting Lists. The officer or agent having charge of the stock
transfer books for shares of the Corporation shall make a complete list of the
shareholders entitled to vote at each meeting of shareholders or at any
adjournment thereof, arranged in alphabetical order, with the address of and the
number of shares held by each. Such list shall be produced and kept open at the
time and place of the meeting and shall be subject to the inspection of any
shareholder during the whole time of the meeting for the purposes thereof.
SECTION 7. Quorum. A majority of the outstanding shares of the Corporation
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders. If less than a majority of the outstanding shares
are represented at a meeting, a majority of the shares so represented may
adjourn the meeting from time to time without further notice. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed. The shareholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
SECTION 8. Proxies. At all meetings of shareholders, a shareholder may vote in
person or by proxy executed in writing by the shareholder by his/her duly
authorized attorney-in-fact. Such proxy shall be filed with the secretary of the
Corporation before or at the time of the meeting.
SECTION 9. Voting of Shares. Each outstanding share entitled to vote shall be
entitled to one vote upon each matter submitted to a vote at a meeting of
shareholders.
SECTION 10. Voting of Shares by Certain Holders. Shares standing in the name of
another corporation may be voted by such officer, agent or proxy as the Bylaws
of such corporation may prescribe or, in the absence of such provision, as the
Board of Directors of such corporation may determine. Shares held by an
administrator, executor, guardian or conservator may be voted by him, either in
person or by proxy, without a transfer of such shares into his name. Shares
standing in the name of a trustee may be voted by him, either in person or by
proxy, but no trustee shall be entitled to vote shares held by him without a
transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such receiver, and the
shares held by or under the control of a receiver may be voted by such receiver
without the transfer thereof into his name, if authority to do so be contained
in an appropriate order of the court by which such receiver was appointed.
A shareholder whose shares are pledged shall be entitled to vote such shares
until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Shares of its own stock belonging to the Corporation shall not be voted,
directly or indirectly, at any meeting, and shall not be counted in determining
the total number of outstanding shares at any given time.
SECTION 11. Informal Action by Shareholders. Unless otherwise provided by law,
any action required to be taken at a meeting of the shareholders, or any other
action which may be taken at a meeting of the shareholders, may be taken without
a meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the shareholders entitled to vote with respect to the subject
matter thereof.
ARTCLE III
BOARD OF DIRECTORS
SECTION 1. General Powers. The Board of Directors shall be responsible for the
control and management of the affairs, property and interests of the Corporation
and may exercise all powers of the Corporation, except as are in the Articles of
Incorporation or by statute expressly conferred upon or reserved to the
shareholders.
SECTION 2. Number, Tenure and Qualifications. The number of directors of the
Corporation shall be fixed by the Board of Directors, but in no event shall be
less than one (1). Each director shall hold office until the next annual meeting
of shareholders and until his/her successor shall have been elected and
qualified.
SECTION 3. Regular Meetings. A regular meeting of the Board of Directors shall
be held without other notice than this Bylaw immediately after, and at the same
place as, the annual meeting of shareholders. The Board of Directors may
provide, by resolution, the time and place for the holding of additional regular
meetings without notice other than such resolution.
SECTION 4. Special Meetings. Special meetings of the Board of Directors may be
called by or at the request of the President or any two directors. The person or
persons authorized to call special meetings of the Board of Directors may fix
the place for holding any special meeting of the Board of Directors called by
them.
SECTION 5. Notice. Notice of any special meeting shall be given at least one (1)
day previous thereto by written notice delivered personally or mailed to each
director at his business address, or by telegram. If mailed, such notice shall
be deemed to be delivered when deposited in the United States mail so addressed,
with postage thereon prepaid. If notice be given by telegram, such notice shall
be deemed to be delivered when the notice be given to the telegraph company. Any
directors may waive notice of any meeting. The attendance of a director at a
meeting shall constitute a waiver of notice of such meeting, except where a
director attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called or
convened.
SECTION 6. Quorum. A majority of the number of directors fixed by Section 2 of
this Article shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, but if less than such majority is present at
a meeting, a majority of the directors present may adjourn the meeting from time
to time without further notice.
SECTION 7. Telephonic Meeting. A meeting of the Board of Directors may be had by
means of a telephone conference or similar communications equipment by which all
persons participating in the meeting can hear each other, and the participation
in a meeting under such circumstances shall constitute presence at the meeting.
SECTION 8. Manner of Acting. The act of the majority of the directors present at
a meeting at which a quorum is present shall be the act of the Board of
Directors.
SECTION 9. Action Without a Meeting. Any action that may be taken by the Board
of Directors at a meeting may be taken without a meeting if a consent in
writing, setting forth the action so to be taken, shall be signed before such
action by all of the directors.
SECTION 10. Vacancies. Any vacancy occurring in the Board of Directors may be
filled by the affirmative vote of a majority of the remaining directors though
less than a quorum of the Board of Directors, unless otherwise provided by law.
A director elected to fill a vacancy shall be elected for the unexpired term of
his/her predecessor in office. Any directorship to be filled by reason of an
increase in the number of directors may be filled by election by the Board of
Directors for a term of office continuing only until the next election of
directors by the shareholders.
SECTION 11. Resignation. Any director may resign at any time by giving written
notice to the Board of Directors, the President or the Secretary of the
Corporation. Unless otherwise specified in such written notice such resignation
shall take effect upon receipt thereof by the Board of Directors or such
officer, and the acceptance of such resignation shall not be necessary to make
it effective.
SECTION 12. Removal. Any director may be removed with or without cause at any
time by the affirmative vote of shareholders holding of record in the aggregate
at least a majority of the outstanding shares of stock of the Corporation at a
special meeting of the shareholders called for that purpose, and may be removed
for cause by action of the Board.
SECTION 13. Compensation. By resolution of the Board of Directors, each director
may be paid for his/her expenses, if any, of attendance at each meeting of the
Board of Directors, and may be paid a stated salary as director or a fixed sum
for attendance at each meeting of the Board of Directors or both. No such
payment shall preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor.
SECTION 14. Contracts. No contract or other transaction between this Corporation
and any other corporation shall be impaired, affected or invalidated, nor shall
any director be liable in any way by reason of the fact that one or more of the
directors of this Corporation is or are interested in, or is a director or
officer, or are directors or officers of such other corporations, provided that
such facts are disclosed or made known to the Board of Directors, prior to their
authorizing such transaction. Any director, personally and individually, may be
a party to or may be interested in any contract or transaction of this
Corporation, and no directors shall be liable in any way by reason of such
interest, provided that the fact of such interest be disclosed or made known to
the Board of Directors prior to their authorization of such contract or
transaction, and provided that the Board of Directors shall authorize, approve
or ratify such contract or transaction by the vote (not counting the vote of any
such Director) of a majority of a quorum, notwithstanding the presence of any
such director at the meeting at which such action is taken. Such director or
directors may be counted in determining the presence of a quorum at such
meeting. This Section shall not be construed to impair, invalidate or in any way
affect any contract or other transaction which would otherwise be valid under
the law (common, statutory or otherwise) applicable thereto.
SECTION 15. Committees. The Board of Directors, by resolution adopted by a
majority of the entire Board, may from time to time designate from among its
members an executive committee and such other committees, and alternate members
thereof, as they may deem desirable, with such powers and authority (to the
extent permitted by law) as may be provided in such resolution. Each such
committee shall serve at the pleasure of the Board.
SECTION 16. Presumption of Assent. A director of the Corporation who is present
at a meeting of the Board of Directors at which action on any corporate matter
is taken shall be presumed to have assented to the action taken unless his/her
dissent shall be entered into the minutes of the meeting or unless he/she shall
file written dissent to such action with the person acting as the Secretary of
the meeting before the adjournment thereof, or shall forward such dissent by
registered mail to the Secretary of the Corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action.
ARTICLE IV
OFFICERS
SECTION 1. Number. The officers of the Corporation shall be a President, one or
more Vice Presidents, a Secretary, and a Treasurer, each of whom shall be
elected by the Board of Directors. Such other officers and assistant officers as
may be deemed necessary may be elected or appointed by the Board of Directors,
including a Chairman of the Board. In its discretion, the Board of Directors may
leave unfilled for any such period as it may determine any office except those
of President and Secretary. Any two or more offices may be held by the same
person. Officers may be directors or shareholders of the Corporation.
SECTION 2. Election and Term of Office. The officers of the Corporation to be
elected by the Board of Directors shall be elected annually by the Board of
Directors at the first meeting of the Board of Directors held after each annual
meeting of the shareholders. If the election of officers shall not be held at
such meeting, such election shall be held as soon thereafter as conveniently may
be. Each officer shall hold office until his/her successor shall have been duly
elected and shall have qualified, or until his/her death, or until he/she shall
resign or shall have been removed in the manner hereinafter provided.
SECTION 3. Resignation. Any officer may resign at any time by giving written
notice of such resignation to the Board of Directors, or to the President or the
Secretary of the Corporation. Unless otherwise specified in such written notice,
such resignation shall take effect upon receipt thereof by the Board of
Directors or by such officer, and the acceptance of such resignation shall not
be necessary to make it effective.
SECTION 4. Removal. Any officer or agent may be removed by the Board of
Directors whenever, in its judgment, the best interests of the Corporation will
be served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of an officer
or agent shall not of itself create contract rights, and such appointment shall
be terminable at will.
SECTION 5. Vacancies. A vacancy in any office because of death, resignation,
removal, disqualification or otherwise, may be filled by the Board of Directors
for the unexpired portion of the term.
SECTION 6. President. The President shall be the principal executive officer of
the Corporation and, subject to the control of the Board of Directors, shall in
general supervise and control all of the business and affairs of the
Corporation. He/she shall, when present, preside at all meetings of the
shareholders and of the Board of Directors, unless there is a Chairman of the
Board, in which case the Chairman will preside. The President may sign, with the
Secretary or any other proper officer of the Corporation thereunto authorized by
the Board of Directors, certificates for shares of the Corporation, any deeds,
mortgages, bonds, contracts, or other instruments which the Board of Directors
has authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors or by these
Bylaws to some other officer or agent of the Corporation, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties incident to the office of President and such other duties as may be
prescribed by the Board of Directors from time to time.
SECTION 7. Vice President. In the absence of the President or in event of
his/her death, inability or refusal to act, the Vice President shall perform the
duties of the President, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the President. The Vice President shall
perform such other duties as from time to time may be assigned by the President
or by the Board of Directors. If there is more than one Vice President, each
Vice President shall succeed to the duties of the President in order of rank as
determined by the Board of Directors. If no such rank has been determined, then
each Vice President shall succeed to the duties of the President in order of
date of election, the earliest date having first rank.
SECTION 8. Secretary. The Secretary shall: (a) keep the minutes of the
proceedings of the shareholders and of the Board of Directors in one or more
minute book provided for that purpose; (b) see that all notices are duly given
in accordance with the provisions of these Bylaws or as required by law; (c) be
custodian of the corporate records and of the seal of the Corporation and see
that the seal of the Corporation is affixed to all documents, the execution of
which on behalf of the Corporation under its seal is duly authorized; (d) keep a
register of the post office address of each shareholder which shall be furnished
to the Secretary by such shareholder; (e) sign with the president certificates
for shares of the Corporation, the issuance of which shall have been authorized
by resolution of the Board of Directors; (f) have general charge of the stock
transfer books of the Corporation; and (g) in general perform all duties
incident to the office of the Secretary and such other duties as from time to
time may be assigned by the President or by the Board of Directors.
SECTION 9. Treasurer. The Treasurer shall: (a) have charge and custody of and be
responsible for all funds and securities of the Corporation; (b) receive and
give receipts for moneys due and payable to the Corporation from any source
whatsoever, and deposit all such moneys in the name of the Corporation in such
banks, trust companies or other depositories as shall be selected in accordance
with the provisions of Article VI of these Bylaws; and (c) in general perform
all of the duties incident to the office of Treasurer and such other duties as
from time to time may be assigned to him by the President or by the Board of
Directors.
SECTION 10. Salaries. The salaries of the officers shall be fixed from time to
time by the Board of Directors, and no officer shall be prevented from receiving
such salary by reason of the fact that he/she is also a director of the
corporation.
SECTION 11. Sureties and Bonds. In case the Board of Directors shall so require
any officer, employee or agent of the Corporation shall execute to the
Corporation a bond in such sum, and with such surety or sureties as the Board of
Directors may direct, conditioned upon the faithful performance of his/her
duties to the Corporation, including responsibility for negligence for the
accounting for all property, funds or securities of the Corporation which may
come into his/her hands.
SECTION 12. Shares of Stock of Other Corporations. Whenever the Corporation is
the holder of shares of stock of any other corporation, any right of power of
the Corporation as such shareholder (including the attendance, acting and voting
at shareholders' meetings and execution of waivers, consents, proxies or other
instruments) may be exercised on behalf of the Corporation by the President, any
Vice President or such other person as the Board of directors may authorize.
ARTICLE V
INDEMNITY
The Corporation shall indemnify its directors, officers and employees as
follows:
Every director, officer, or employee of the Corporation shall be indemnified by
the Corporation against all expenses and liabilities, including counsel fees,
reasonably incurred by or imposed upon him/her in connection with any proceeding
to which he/she may be made a party, or in which he/she may become involved, by
reason of being or having been a director, officer, employee or agent of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of the Corporation, partnership, joint
venture, trust or enterprise, or any settlement thereof, whether or not he/she
is a director, officer, employee or agent at the time such expenses are
incurred, except in such cases wherein the director, officer, employee or agent
is adjudged guilty of willful misfeasance or malfeasance in the performance of
his/her duties; provided that in the event of a settlement the indemnification
herein shall apply only when the Board of Directors approves such settlement and
reimbursement as being for the best interests of the Corporation.
The Corporation shall provide to any person who is or was a director, officer,
employee or agent of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of the corporation,
partnership, joint venture, trust or enterprise, the indemnity against expenses
of a suit, litigation or other proceedings which is specifically permissible
under applicable law.
The Board of Directors may, in its discretion, direct the purchase of liability
insurance by way of implementing the provisions of this Article.
ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. Contracts. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the Corporation, and such authority
may be general or confined to specific instances.
SECTION 2. Loans. No loans shall be contracted on behalf of the Corporation and
no evidences of indebtedness shall be issued in its name unless authorized by a
resolution of the Board of Directors. Such authority may be general or confined
to specific instances.
SECTION 3. Checks, Drafts, etc. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the Corporation, shall be signed by such officer or officers, agent or agents of
the Corporation and in such manner as shall from time to time be determined by
resolution of the Board of Directors.
SECTION 4. Deposits. All funds of the Corporation not otherwise employed shall
be deposited from time to time to the credit of the Corporation in such banks,
trust companies or other depositories as the Board of Directors may select.
ARTICLE VII
SHARES OF STOCK
SECTION 1. Certificates for Shares. Certificates representing shares of the
Corporation shall be in such a form as shall be determined by the Board of
Directors. Such certificates shall be signed by the President and by the
Secretary or by such other officers authorized by law and by the Board of
Directors to do so, and sealed with the corporate seal. All certificates for
shares shall be consecutively numbered or otherwise identified. The name and
address of the person to whom the shares represented thereby are issued, with
the number of shares and date of issue, shall be entered on the stock transfer
books of the Corporation. All certificates surrendered to the Corporation for
transfer shall be canceled and no new certificate shall be issued until the
former certificate for a like number of shares shall have been surrendered and
canceled, except that in the case of a lost, destroyed or mutilated certificate,
a new one may be issued therefor upon such terms and indemnity to the
Corporation as the Board of Directors may prescribe.
SECTION 2. Transfer of Shares. Transfer of shares of the Corporation shall be
made only on the stock transfer books of the Corporation by the holder of record
thereof or by his/her legal representative, who shall furnish proper evidence of
authority to transfer, or by his/her attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary of the Corporation, and on
surrender for cancellation of the certificate for such shares. The person in
whose name shares stand on the books of the Corporation shall be deemed by the
Corporation to be the owner thereof for all purposes. Provided, however, that
upon any action undertaken by the shareholders to elect S Corporation status
pursuant to Section 1362 of the Internal Revenue Code and upon any shareholders'
agreement thereto restricting the transfer of said shares so as to disqualify
said S Corporation status, said restriction on transfer shall be made a part of
the Bylaws so long as said agreement is in force and effect.
ARTICLE VIII
FISCAL YEAR
The fiscal year of the Corporation shall begin on the first day of March and
end on the twenty eighth day of February of each year.
ARTICLE IX
DIVIDENDS
The Board of Directors may from time to time declare, and the corporation may
pay, dividends on its outstanding shares in the manner and upon the terms and
conditions as it deems appropriate.
ARTICLE X
CORPORATE SEAL
The Board of Directors shall provide a corporate seal which shall be circular in
form and shall have inscribed thereon the name of the Corporation and the state
of incorporation and the words "Corporate Seal".
ARTICLE XI
WAIVER OF NOTICE
Unless otherwise provided by law, whenever any notice is required to be given to
any shareholder or director of the Corporation under the provisions of these
Bylaws or under the provisions of the Articles of Incorporation or under the
provisions of the applicable Business Corporation Act, a waiver thereof in
writing, signed by the person or persons entitled to such notice, whether before
or after the time stated therein, shall be deemed equivalent to the giving of
such notice.
ARTICLE XII
AMENDMENTS
These Bylaws may be altered, amended or repealed and new Bylaws may be adopted
by the Board of Directors at any regular or special meeting of the Board of
Directors.
The above Bylaws are certified to have been adopted by the Board of Directors of
the Corporation on July 15, 2000.
/s/Martin Lapedus
Secretary
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