UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FIRST AMENDMENT TO
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. 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
four 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
(Wayne Walrath, Lewis Hayse, Michael Gordy, Francois Escher, and Robert Short).
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.
The Initial Control Group was comprised of the following shareholders:
Shareholder Name Amount of Shares
R. Short 100,000
W. Walrath 12,750,000
CAAT, Inc. 6,125,000
Transitions & Perspectives Inc 6,125,000
Total: 25,100,000
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. The reverse stock split was done in order to
prepare the Company to be able to acquire a new business, once it had became
evident that the then-current business was not viable.
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., becoming the holders of the 4,000,000 newly issued shares, (the "New
Control Block"). The New Control Block shares as described herein are held by:
Shareholder Name Amount of Shares
Ultimatte Entertainment, Ltd. 900,000
1028215 Ontario Ltd. 600,000
45473 BC Limited 300,000
1345519 Ontario Corp. 900,000
John Cox 385,000
Marshal Reid 465,000
Financial Innovations, Ltd. 50,000
Gold Crown, Ltd. 400,000
Total: 4,000,000
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 New 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, and its
shareholders and debt holders. The purchase price was 10,000,000 shares of the
Company's common stock. The shareholders of these 10,000,000 shares are the
"Current Control Block" and they hold 10,000,000 out of 24,140,736, or 41.6%, of
the Company's common shares. The members of the Current Control Block are:
Shareholder Name Amount of Shares
Damian Lee 975,000
Briar Communications, Inc. 950,000
Pine Wood Studios, Inc. 950,000
Mike Mastercolo 975,000
John D'Acunto 500,000
Joseph Balerino 500,000
Avi Amar 525,000
Pacifica Technologies, Ltd. 750,000
Westcape Technologies, Ltd. 700,000
Jessica Mathison 625,000
Portico Industries, Ltd. 650,000
Andrew Currah 500,000
Currah & Sons, Ltd. 500,000
Aviam Holdings, Ltd. 700,000
543637 B.C. Ltd. 100,000
Margaret Hales 50,000
Susan Hales 25,000
Ken Hales 25,000
Total 10,000,000
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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 assets acquired from Stone
Canyon are comprised of intellectual property including six completed film
scripts and two program pilot scrips intended as television series and internet
programs. New Cinema believes that it will be successful in developing and
producing entertainment media and intends to target projects that have what the
Company believes to be commercial appeal, creative merit and committed third
party financing.
The Company believes that due to the special financial incentives available
in Canada, which include Federal and Provincial labor rebate programs and other
tax related benefits which fluctuate from time to time and province to province,
in conjunction with the added financial incentive to produce film and television
programming in Canada in the form of the U.S. to Canadian currency exchange
ratio, it's base in Ontario, Canada will provide it with access to a pool of
talent including experienced film crews and actors and actresses which, in turn,
will contribute to its slate of what it believes will be quality programming.
The Company believes that Toronto has or will become recognized throughout the
entertainment industry as a major center for the production of film and
television programs. 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 Damian Lee
Damian Lee, the Chief Executive Officer of the Company, has a track record
of delivering what the Company believes are quality movies, as measured by
viewership and critical acclaim. This record includes projects such as Watchers,
Ski School, Death Wish V, Jungle Boy, Baby on Board, and Fun. The Company
believes that his experience can be utilized to create demand for New Cinema's
existing and new scripts.
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 use Canadian financial benefits as
previously described. The quality and extent of creative talent in Toronto,
Canada is a widely accepted view throughout the industry as Toronto has become a
major center for the production of television and film product and has often
been deemed by the media as "Hollywood North".
Diversified Production Slate
The Company will focus on a diverse production slate including comedy,
action, science fiction, drama and family programming. This broad focus is
intended to contribute to longer term value of a film or television library
should the Company be successful at building any such library.
The Company plans to focus on a diverse production slate including comedy,
action, science fiction, drama and family programming. This broad focus
internationally is intended to contribute to longer term value of a film or
television library should the Company be successful at building any such
library.
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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. The Company believes
that 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" in the future. The Company intends to utilize CGI
effects in an attempt to lower its costs and create high production values. To
this end the Company has met with a number of individuals involved in the CGI
field in order to ascertain what type of investment will be required by the
Company in order to create an in-house CGI department.
Vertical Integration
New Cinema plans to manage and co-ordinate all aspects of a program's life,
from conception through to distribution. 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 North American and global
markets. In addition, when and if possible, the Company intends to achieve
growth through the development of what it believes to be quality intellectual
properties such as scripts or rights to literary works 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 a a producer of independent film and television for
distribution world-wide;
(ii) to produce programs a broad range of genre;
(iii)to create strong relationships with distributors of film and television
properties;
(iv) to develop and exploit intlellectual properties utilizing the highest and
best use of technology available to it; and
(v) to develop multi-media product in addition to film and television
productions as a natural industry progression;
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 investors. If the
project goes into production, this advance will be incorporated into the
production budget and it is intended that the advance will be recouped by the
investor from the actual 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. However, the company has not financed any development
projects to date. The Company is exploring the proper structure for any
development financing including limited partnerships and other forms of private
placement financing. Based on feedback which the Company has received from
potential investors, the Company believes that it will have a better audience
for its development financing once the Company becomes a fully reporting issuer.
The Company is currently endeavoring to satisfy all reporting requirements which
will enable the Company to resume trading on the OTC Electronic Bullitin Board
as a fully reporting issuer. In the mean time the Company is refining its
current slate of intellectual properties which are currently in 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, pre-sales and after-market fees - which are the licensing of
rights to second cycle of distribution and specialty markets such as airline or
military use. 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 Canadian 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.
The Company has made an arrangement with Lion's Gate Entertainment, a major
international distributor, in Vancouver B.C., Canada for the production
financing on one or more of its projects in development. However, the Company
has not accepted or rejected the terms to any such arrangement and is
alternatively currently focusing on refining development projects and preparing
for the development financing stage.
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 North American and
international broadcast markets.
New Cinema intends for its development activities to be primarily focused
on: (i) comedy and variety for the Canadian and U.S. 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. The Company believes that
comedy and variety programs have broad appeal in the Canadian and U.S. market,
can be produced for a relatively low cost in high volume and yield stable cash
flow. The Company believes that 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 plans to eventually have the capacity for 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 or through development financing. The Company currently has eight
projects on its development slate and has neither received broadcaster or third
party development advances for any of the projects.
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Distribution Activities
New Cinema plans to distribute its programs through established
international distributors which are used industry wide. However, whenever
possible the company plans to distribute its programs directly to the buyer or
broadcaster in order to save on the high cost of distribution fees normally paid
to distributors or distribution agents
The Company plans on participating in industry wide trade shows as would be
customary when attempting to market any entertainment product in the television
and film industries.
New Cinema's planned distribution activities include exploiting the
possibility of merchandising potential of its programming.
Building A Library
New Cinema intends to retain copyright ownership percentages to any of the
productions which it completes. While the Company's library of scripts and
intellectual property currently consist primarily of proprietary , it is the
Company's intention to acquire rights from third party creators of intellectual
properties. In this way, the Company's library of projects in development
through the intellectual properties and ultimately through the completion of a
finished production can grow to be much larger than the Company's produced
properties would allow.
As its library of completed productions is built and growsthe company
should be able to derive revenue.
Acquisition of Distribution Rights
New Cinema's strategy is to acquire distribution rights to programs
produced by producers that do not have a distribution 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. This will only be achieved once the Company is
able to finance its development strategy.
Multi-Media and Interactive Ventures
The Company plans to pursue a broad range of development entertainment
products for new interactive delivery systems, such as the Internet. The goals
of this aspect of the business are:
(i) to utilize and build CGI and special effects.
(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, the Company believes it will provide natural synergies for the
production of entertainment products for digital delivery systems such as the
Internet. The Company is in the development stage and currently has no expertise
in this area however, has the goal of pursuing the highest and best technology
available.
Strategic Acquisitions and Alliances
The Company intends to establish relationships with producers and other
participants in the film and television industry in North America. 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 will be 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,as identified below, 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 to star Dolph Lundgren
Based on a story by Damian Lee and Dolph Lundgren.
A completed film script with artist attached currently in the development
finance stage which the Company owns 100% of the rights as acquired from Stone
Canyon Pictures.
DOUBLE TROUBLE: Budget $ 18,500,000
An action adventure to star Steven Seagal.
Original script by Steve Tymon, based on a story by Steven Seagal.
A completed film script with artist attached currently in the development
finance stage which the Company owns 100% of the rights as acquired from Stone
Canyon Pictures.
THE RECEPTION: Budget $ 4,500,000
An action adventure;
Original script by Damian Lee.
A completed film script currently in the development finance stage which the
Company owns 100% of the rights as acquired from Stone Canyon Pictures.
MARY BREATH: Budget $ 1,200,000 (pilot)
An erotic drama for Internet/TV distribution;
A television concept pilot and pilot script currently in the development finance
stage which the Company owns 100% of the rights as acquired from Stone Canyon
Pictures.
E.COM: Budget $ 6,600,000 (pilot)
A 'new economy' episodic drama (ER, L.A. Law); cast undecided
Now being written by Charle Demirs and Lara Daans.
A television concept pilot and pilot script currently in the development finance
stage which the Company owns 100% of the rights as acquired from Stone Canyon
Pictures.
JAKE FOR MAYOR: Budget $3,800,000
A Drama;
Original Script by Lou Aguilar and Damian Lee.
A completed film script currently in the development finance stage which the
Company owns 100% of the rights as acquired from Stone
Canyon Pictures.
FREEWORLD: Budget $ 4,800,000
A science fiction thriller;
Original script by Damian Lee.
A completed film script currently in the development finance stage which the
Company owns 100% of the rights as acquired from Stone Canyon Pictures.
OUT OF THE JUNGLE: Budget $ 1,800,000
An action adventure;
Original script by J. O'brien and B. Abraham.
A completed film script currently in the development finance stage which the
Company owns 100% of the rights as acquired from Stone Canyon Pictures.
TROUBLED WATERS: Budget $ 12,500,000
An action adventure
Based on a story by Steven Seagal wrtitten by Steven Seagal and Damian Lee
A completed film script currently in the development
finance stage which the Company owns 100% of the rights as acquired from Stone
Canyon Pictures.
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 ability to succeed 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 Dolph Lundgren and Steven Segal to
put them under non-exclusive contract for one film per year over an extended
time period the status of these discussions is ongoing and will depend on
completing sufficient financing to enter into the development phase of financing
and the contract financing as described below. 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. It is envisioned by the
Company that the limited partnerships would be structured where the Company
would act as principal of a wholly owned subsidiary which would then act as
general partner and in turn the limited partners would be purchasing limited
partnership units in the partnership. The partnership would own the percentage
of any given project of the remainder interest after production financing or
third party production commitments. Traditionally in such limited partnerships,
the limited partner is paid their principal first in addition to owning half of
the partnership share of the project.
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 programming from North American
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 North American 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 Canadian 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.
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EMPLOYEES
New Cinema currently has 6 full-time employees, including the Company's
president, Damian Lee. Mr. Lee is currently the only contract employee of the
Company. Mr. Lee has also entered into a non-competition agreement with the
Company, attached hereto as part of xhibit 6.1. 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, most of
the companies productions will be established under seperate wholly owned
corporation of the Company, called production subsidiaries, and individuals
employed by any of the Company's 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:
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, create, 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.
Reliance on Key Personnel
The Company is substantially dependent upon the services of certain key
personnel, particularly Damian Lee, its Chief Executive Officer. Mr. Lee is a
contract employee and has also signed confidentiality and non-competition
agreements. 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.
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 revenues or 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.
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.
Modification or Removal of Canadian Incentive and Regulatory Programs:
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.
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.
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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. 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.
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.
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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.
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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. Mr. Lee has entered
into an employment and non-competetion contracts with the Company (see Exhibit
XX), but 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".
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.
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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.
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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.
Since December, 1999 management has 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 in the amount of 163,994 . 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.
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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.
During the next twelve months the Company's Plan of Operation recognizes
that due to the fact that the company does not have sufficient cash on hand to
continue its current operations based on its current general and admistrative
expenses that the company will require private placement financing or will
require additional loans from shareholders or the officers and directors of the
Company. Additionally, the Company recognizes that there are no assurances that
it will be successful in obtaining any private placement financing the Company
is confident that it will be capable of obtaining such loans.
Additionally, the Company believes that upon completion of becoming a
reporting company and commences trading on the NASD Electronic Bulletin Board
that its ability to complete private placement financing will be made more
feasible.
The Company will continue to explore development financing for its
entertainment projects in development which may contribute to basic corporate
general and administrative expenses however management of the company realizes
that there is no assurance that it will be successful in obtaining any
development financing for its entertainment projects in development. The Company
does not intend to sell any of its intellectual property rights at this time
however, in connection with the development financing strategy it may joint
venture or co-produce projects related to the underlying intellectual property.
The Company does not anticipate a significant increase or decrease in the
number of full time employees it currently employs.
In view of the uncertainties concerning the Companies continued existence
as a going concern, the Company plans to pursue its business plan as an
independent film production company. In order to mitigate the possibility of the
Company failing to maintain as a going concern the Company will endeavor to
initiate the following steps:
1. Become a fully reporting company and apply to have its common stock traded
on the OTC Electronic Bulletin Board. Management of the Company believes
that should the Company resume trading on the OTC Electronic Bulletin Board
that the Company will have a better chance of completing development
financing for selected projects. This is a critical element of the
companies ability to continue as a going concern due to credibility of the
Company to investors and possible improved liquidity in the trading of the
companies common stock which would increase the Companies ability to attain
financing.
2. The Company believes that it can leverage its current intellectual
properties and industry relationships in order to successfully proceed from
development to production of such projects.
3. Identify the appropriate financing strategy to finance one or more of the
Companies intellectual properties through the development phase.
4. Work closely with global distributors to secure production financing for
any given project.
5. Pursue production on any given project.
6. Capitalize on any completed project.
7. Pursue additional intellectual properties.
8. Gain relationships with creative talent including Stars.
9. Repeat the development through production process if successful.
In Managements opinion the Company has the potential to realize this plan.
Specifically, the Company believes that intellectual property acquired from
Stone Canyon Pictures represent quality programs creatively and could have broad
commercial appeal. Management also believes that Damian Lee will be successful
at attracting major talent to projects, which is a major industry requirement to
attain distribution appeal. The Company's current expenses are manageable. All
six employees have not taken a salary to date and will not draw a salary until
such time as the Company completes a significant financing. Management loans
should satisfy current expenses until such time the Company completes any such
financing and management believes that it will be capable of maintaining under
current arrangements for at least the next twelve months.
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
357 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 $100,000 in fiscal 1999 and no bonuses were awarded during fiscal
1998.
The Company has explored various forms of financing to finance both the
companies ongoing general and administrative expenses and its first phase of
project based development financing however, has not initiated any such
financing since its acquisition of the assets of Stone Canyon Pictures. The
Company intends to pursue these financing upon becoming compliant with all
reporting requirements to become a fully reporting issuer and resume trading on
the OTC Electronic Bullitin Board. If and when such a financing is completed,
then at that time the Company will negotiate and enter into compensation
agreements with management, except for Mr. Lee who has already entered into a
contract with the Company.
<TABLE>
<CAPTION>
Annual Compensation Awards Payouts
------------------------------ ------------------------- ---------
Other All
Annual Restricted Securities Other
compen- Stock Underlying LTIP Compen-
sation Award(s) Options/SAR Payouts sation
Name and Principal Position Year Salary ($) Bonus ($) ($) ($) (#) (1) ($) ($)
- ---------- ---- ---------- --------- ------- ----------- ------------ --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Damian Lee(2)
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.
2. On September 1, 2000 the Company entered into an employment agreement with
its Chief Executive Officer, Damian Lee, which entails compensation of
$10,000 per month however, the contract specifies that no cash
consideration will be paid to Mr. Lee until such time as the Company is
successful at completing adequate financing. In the interim the
compensation owed to Mr. Lee under the agreement will accrue.
Item 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT AND OTHERS
The Company received a loan from Pueblo Trust, 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.
The Pueblo Trust is the majority shareholder of Ultimatte Entertainment,
Ltd. Which was a control block shareholder.
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.
The Company had an urgent need for cash at the time the loan was made, to
meet crital cash requirements. Due to its precarious financial postion, the
Company was required to provide favorable terms in the options issued in
connection with obtaining the financing.
Other than this transaction,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. To the extent that additional shares of Common
Stock are issued, the relative interests of the then existing shareholders may
be diluted.
TRANSFER AGENT
The Company uses Executive Registrar and Transfer Agency, Inc. whose
mailing address is 3118 W. Thomas Rd., Ste. 707, Phoenix, AZ 85017 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 will commence 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.
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 7-13
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
May 15, 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
-------------------- ------------------
Total current assets 7,763 99
OTHER ASSETS
Debt issuance costs, net of accumulated amortization
of $138,900 and $101,000 619,100 657,000
-------------------- ------------------
Total assets 626,863 657,099
==================== ==================
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 (1,974,323) (1,525,634)
Cumulative foreign currency translation adjustment 11,624 6,304
-------------------- ------------------
Total stockholders' equity 264,736 378,105
-------------------- ------------------
Total liabilities and stockholders' equity $ 626,863 $ 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 408,289 1,418,134 1,826,423
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 ( 448,689) (1,525,634) (1,974,323)
Provision for income taxes - - -
-------------------- -------------------- -------------------
Net loss $ ( 448,689) $ (1,525,634) $ (1,974,323)
==================== ==================== ===================
Net loss per share - basic and diluted $ ( 0.04) $ ( 0.21) $ ( 0.25)
==================== ==================== ===================
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 $ ( 448,689) $ (1,855,634)
Foreign currency translation adjustment 5,320 6,304
------------ ----------
Comprehensive loss $ ( 443,369) $ (1,849,330)
============== ============
</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 3,000 297,000 - - 330,000
Net loss (unaudited) - - - ( 448,689 ) - (448,689)
Foreign currency translation adjustment (unaudited) - - - - 5,320 5,320
----------- --------- ---------- ------------ -------- -----------
Balance, May 31, 2000 (unaudited) 14,040,736 $ 14,041 $2,183,394 $(1,974,323 ) $11,624 $264,736
=========== ========= ========== ============ ======== ===========
</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 $ ( 448,689) $ (1,525,634) $ (1,974,323)
Stock based compensation 330,000 330,000
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.
In view of the uncertainties concerning the Company's continued existence as a
going concern, the Company plans to pursue its business plan as an independent
film production company. In order to mitigate the possibility of the Company
failing to remain a going concern, the Company will endeavor to initiate the
following steps:
- 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)
* Become a fully reporting company and apply to have its common stock traded
on the OTC Electronic Bulletin Board. Management of the Company believes
that should the Company resume trading on the OTC Electronic Bulletin Board
it will have a better chance of completing develoipment financing for
selected projects. This is a critical element of the Company to investors
and possible improved liquidity in the trading of the Company's common
stock which would increase the Company's ability to attain financing.
* The Company believes it can leverage its current intellectual properties
and industry relationships in order to successfully proceed from
development to production of such projects.
* Identify the appropriate financing strategy to finance one or more of the
Company's intellectual properties through the development phase.
* Work closely with global distributers to secure production financing for
any given project.
* Pursue any given project.
* Capitalize on any completed project.
* Pursue additional intellectual properties.
* Gain relationships with creative talent including Stars.
* Repeat the development through production process, if successful.
In management's opinion, the Company has the potential to realize this plan.
Specifically, the Company believes that intellectual property acquired from
Stone Vanyon Pictures represents quality programs creatively and could have
broad commercial appeal. Management also believes that it will be successful at
attracting major talents to projects, which is a major industry requirement to
attain distribution appeal. Management loans should satisfy current expenses
until such time the Company completes financing and management believes that it
will be capable of maintaining under current arrangements for at least the next
twelve months.
- 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)
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.
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.
- 9 -
38
<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)
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.
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.
- 10 -
39
<PAGE>
NEW CINEMA PARTNERS
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 2000
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.
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 -
- 11 -
40
<PAGE>
NEW CINEMA PARTNERS
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 2000
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%
===========
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.
On May 22, 2000, the Company issued 3,000,000 shares for services (see note 7).
- 12 -
41
<PAGE>
NEW CINEMA PARTNERS
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 2000
NOTE 5 - LOAN PAYABLE - RELATED PARTY
The Company received a loan from Pueblo Trust, 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.
The Pueblo Trust is the majority shareholder of Ultimatte Entertainment, Ltd.
Which was a control block shareholder..
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.
The Company had an urgent need for cash at the time the loan was made, to meet
crital cash requirements. Due to its precarious financial postion, the Company
was required to provide favorable terms in the options issued in connection with
obtaining the financing.
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.
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 - 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. The
amount has been recorded as an expense in the statement of operations.
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.
- 13 -
42
<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*
6.1 Employment and Non-competition Agreements with Damian Lee**
(10)(a) Consents - Experts:
10.1 Consent of Accountant*
27 Financial Data Schedule*
* Incorporated by reference from the Company's Form 10-SB
filed on August 9, 2000.
** Filed electronically herewith
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-6.1
This Agreement made the 5th day of September, 2000
BETWEEN:
(1) Damian Lee
Whose registered address is:
102 Bloor St. W.
Penthouse #1
Toronto, ON M5S 1M8
Canada
(the "Employee")
and
(2) New Cinema Partners
Whose registered head office is at:
355 Bay Street, Suite 404
Toronto, ON M5H 2T7
(the "Company")
Recitals
WHEREAS the Employee has certain skills and abilities which are useful to the
ongoing development and growth of the Company; and
WHEREAS the Company is engaged in the business of developing and marketing
intellectual property in the Entertainment field and requires the Employee to
perform various services in connection with the ongoing development, leadership
and finance of the Company;
SERVICES
1.01 The Employee agrees to provide the following services to the Company upon
the terms and conditions set out in this Agreement:
a) The Employee shall submit a written report to the the board of directors of
the Company, on a monthly basis, on the developments of the Company with
the task of developing the intellectual properties which the Company has
acquired from Stone Canyon Pictures and other projects which may develop
from time to time (The "Projects").
Additionally, the employee shall participate in all corporate tasks which
may be required in the companies efforts to regain its listing on the
NASDAQ Bullitin Board and agrees to maintain all listing requirements
subsequent to the filing of the initial Form 10-SB.(the "Objective")
b) Any relative tasks and services as may be dictated in relation to the
Objective including and not limited to:
1. The Development of the Business Plan
2. The Development of Proforma Financial Projections
3. The Development of a Plan of Finance for the Company
4. The Development of a Plan of Finance for the Projects.
5. Carry out the tasks and objectives as set forth
in the Business and Financial Plans.
6. Carrying out the tasks as required by law for reporting purposes.
7. Any further studies or consultation that would lend to
the Objective of the Company.
1.02 The Employee shall provide his/her services with reasonable care and skill
and to the best of his/her ability principally at the address of the
Company.
1.03 The Employee shall act under this Agreement as an an Employee.
1.04 The Employee reserves full control of his/her activities as to the method
and manner of performing services under this Agreement.
TERM
2.01 This Agreement shall be for a period of One Year (12) Months commencing on
the 5th of September, 2000 and terminating on the 5th of September, 2000.
FEE
3.01 The Company shall pay to the Employee a fee of $10,000 per month, payable
on the 15th of each month commencing in September, 2000.
3.02 It is further understood that the Executive earns various industry
standard professional fees from the exploitation of the Projects.
Including but not limited to Producers Fees, Writers Fees (other than
those scripts which have previously been acquired by the Company),
Directors Fees, Acting Fees, etc.
4.01 The Company shall reimburse the Employee for all out of pocket
expenses, long distance telephone, fax, and travel incurred as a result
of the performance of his duties under this Agreement. The Employee
shall provide the Company with documentation or other evidence of
actual payment and shall invoice the Company separately. Such invoice
will be payable by the Company within ten (10) days of receipt thereof.
4.02 It is understood that until such time as the Company has sufficient
funds as will be provided under the Finance Plan to make payment under
the terms of this agreement that the Executive will be owed such
compensation however accrued until payment is available for
distribution to the Executive.
TERMINATION
(a) 5.01 Without limiting the foregoing, either party may upon six months
(180) days if prior to the Company receiving it's lisitng on the NASDAQ
Bullitin Board or sixty (60) days if after such listing through written
notice terminate this Agreement
PROVIDED that the Company may not terminate this Agreement solely for the reason
of the Employee's absence through illness or injury unless such illness or
injury prevents the Employee from providing any services to the Company for a
period of two consecutive weeks, or an aggregate period two weeks in any 12
calendar months.
CONFIDENTIAL INFORMATION
6.01 The Employee agrees to treat as confidential any information relating to
the Company's technology, technical processes, business affairs or finances
or any other information relating to the Company, its subsidiaries,
affiliates, suppliers or customers, learned solely as a result of services
performed under this Agreement.
6.02 Upon termination of this Agreement the Employee shall deliver to the
Company any and all documents, computer disks or other material prepared by
him/her pursuant to this Agreement.
Notice
7.01 Any notice given by either party under this Agreement shall be in writing
and shall be sent by mail or facsimile transmission to the last known
address of the other party.
Entire Agreement
8.01 This Agreement constitutes the entire Agreement between the parties.
GOVERNING LAW
9.01 This Agreement shall be construed in accordance with the laws of Ontario.
Agreed to this 5th day of August, 2000.
New Cinema Partners
/s/ Martin Lapedus
By: Martin Lapedus, CFO
The Executive
/s/ Damian Lee
Damian Lee
<PAGE>
CONFIDENTIALITY & NON-COMPETITION AGREEMENT
THIS AGREEMENT is made the 5th day of September, 2000,
B E T W E E N:
NEW CINEMA PARTNERS,
a corporation incorporated under
the laws of the State of Nevada
(the "Corporation")
- and -
Damian Lee ,
an individual residing in the
City of Toronto
in the Province of Ontario
(the "Executive")
WHEREAS:
1. The Corporation is employing the Executive as its President and C.E.O. ; and
2. The Corporation desires to receive from the Executive covenants
relating to non-disclosure of confidential information and
non-competition, and the employment of the Executive by the Corporation
is conditional on the Corporation receiving such covenants,
THE PARTIES AGREE AS FOLLOWS:
1. Treatment of Information
(a) The Executive acknowledges that as the of the Corporation and in
any other positions that the Executive may hold, in and as a result of the
Executive's employment by the Corporation, the Executive shall, or may, be
making use of, acquiring or adding to information about certain matters and
things which are confidential to the Corporation and which information is the
exclusive property of the Corporation.
(b) As a material inducement to the Corporation to employ or to
continue to employ the Executive and to pay to the Executive compensation for
such services to be rendered to the Corporation by the Executive (it being
understood and agreed by the parties that the compensation shall also be paid
and received in consideration of this agreement), the Executive agrees that the
Executive shall not, except with the prior written consent of the Corporation,
or except if the Executive is acting as an employee of the Corporation solely
for the benefit of the Corporation in connection with the Corporation's business
and in accordance with the Corporation's business practices and employment
policies, at any time during or following the term of the Executive's employment
by the Corporation, directly or indirectly, disclose, divulge, reveal, report,
publish, transfer or use for any purpose any of the information which has been
obtained or disclosed to the Corporation as a result of the Executive's
employment by the Corporation, including any of the information referred to in
section 2.
(c) Disclosure of any information of the Corporation shall not be
prohibited if the disclosure is directly pursuant to a valid and existing order
of a court or other governmental body or agency within Canada; provided,
however, that (i) the Executive shall first have given prompt notice to the
Corporation of any possible or prospective order (or proceeding pursuant to
which any order may result), and (ii) the Corporation shall have been afforded a
reasonable opportunity to prevent or limit any disclosure.
2. Definition of Protected Information
(a) For purposes of this agreement, the term "Protected Information"
shall mean all of the information referred to in paragraph 1 and all of the
following materials and information (whether or not reduced to writing and
whether or not patentable or protectible by copyright) which the Executive
receives, received access to, conceived or developed, in whole or part, directly
or indirectly, in connection with the Executive's employment with the
Corporation or in the course of the Executive's employment with the Corporation
(in any capacity, whether executive, managerial, planning, technical; sales,
research, development, manufacturing, engineering or otherwise) or through the
use of any of the Corporation's facilities or resources:
(i) production processes, marketing techniques and arrangements,
mailing lists, purchasing information, pricing policies,
quoting procedures, financial information, customer and
prospect names and requirements, employee, customer, supplier
and distributor data and other materials or information
relating to the Corporation's business and activities and the
manner in which the Corporation does business;
(ii) discoveries, concepts, and ideas including, without
limitation, the nature and results of research and development
activities, processes, formulas, inventions, technology,
techniques, "know-how" designs, drawings and specifications;
(iii) any other materials or information related to the business or
activities of the Corporation which are not generally known to
others engaged in similar businesses or activities; and
(iv) all ideas which are derived from or related to the Executive's
access to or knowledge of any of the above enumerated materials
and information.
(b) Failure to mark any of the Protected Information as confidential,
proprietary or Protected Information shall not affect its status as part of the
Protected Information under the terms of this agreement.
(c) For purposes of this agreement, the term "Protected Information"
shall not include information which is or becomes publicly available without
breach of (i) this agreement, (ii) any other agreement or instrument to which
Corporation is a party or a beneficiary, or (iii) any duty owed to the
Corporation by the Executive or any third party; provided, however, that the
Executive acknowledges and agrees that, except as otherwise provided in section
1(c), if the Executive shall seek to disclose, divulge, reveal, report, publish,
transfer or use, for any purpose, any Protected Information, the Executive shall
bear the burden of proving that any information shall have become publicly
available without any breach.
3. Ownership of Information
(a) Subject to section 3(c), the Executive acknowledges and agrees that
all rights, title and interest in any Protected Information shall remain the
exclusive property of the Corporation. Accordingly, the Executive specifically
agrees and acknowledges that he shall have no interest in the Protected
Information, including, without limitation, no interest in know-how, copyright,
trade-marks or trade names, notwithstanding the fact that the Executive may have
created or contributed to the creation of the same.
(b) The Executive does hereby waive any moral rights which the
Executive may have with respect to the Protected Information.
(c) Sections 3(a) and (b) shall not apply in respect of any invention
for which no equipment, supplies, facility or Protected Information of the
Corporation was used, which was developed entirely on the Executive's own time,
and which does not (i) relate to the business of the Corporation, (ii) relate to
the Corporation's actual or demonstrably anticipated processes, research or
development, or (iii) result from any work performed by the Executive for the
Corporation. The Executive agrees immediately to disclose to the Corporation all
Protected Information developed in whole or in part by the Executive during the
term of the Executive's employment with the Corporation and to assign to the
Corporation any right, title or interest the Executive may have in the Protected
Information. The Executive agrees to execute any instruments and to do all other
things reasonably requested by the Corporation (both during and after the
Executive's employment with the Corporation) in order to vest more fully in the
Corporation all ownership rights in those items transferred by the Executive to
the Corporation.
4. Covenants Not to Compete
The Executive shall not, except with the prior written consent of the
Corporation, at any time during the period of the Executive's employment with
the Corporation and for a further period of two (2) years following the
termination of the Executive's employment with the Corporation for any reason
whatsoever, directly or indirectly, in any manner whatsoever, including, without
limitation, either individually or in partnership or jointly, or in conjunction
with any person or persons, as principal, agent, shareholder or in any other
manner whatsoever, carry on or be engaged in or be an employee of or be
concerned with, or lend money to, or guarantee the debts or obligations of, or
permit his name or any part thereof to be used or employed by any person or
persons engaged in or concerned with or interested in a business in Canada or
the United States that is competitive with or similar to the business carried on
by the Corporation from time to time. In this section 4, the term "person" shall
mean and include any individual, corporation, partnership, firm, joint venture,
syndicate, association, trust, government, governmental agency or board or
commission or authority, and any other form of entity or organization.
5. Covenants Not to Hire Employees
It is recognized and understood by the parties that the employees of
the Corporation are an integral part of the Corporation's business and that it
is extremely important for the Corporation to use its maximum efforts to prevent
the Corporation from losing those employees. It is therefore understood and
agreed by the parties that, because of the nature of the business as of the
Corporation, it is necessary to afford fair protection to the Corporation from
the loss of any employees. Consequently as a material inducement to the
Corporation to employ the Executive, the Executive covenants and agrees that,
for the period commencing on the date of the termination of the Executive's
employment with the Corporation, for any reason whatsoever, and ending two (2)
years after the termination of the Executive's employment with the Corporation,
the Executive shall not, directly or indirectly, hire or engage or attempt to
hire or engage any individual who shall have been an employee of the Corporation
at any time during the one (1) year period prior to the date of the Executive's
termination of employment with the Corporation, whether for or on behalf of the
Executive or for any entity in which the Executive shall have a direct or
indirect interest, or any subsidiary of affiliate of any entity, whether as a
proprietor, partner, co-venturer, financier, investor or stockholder, director,
officer, employer, employee, servant, agent, representative or otherwise.
6. Injunctive Relief
The Executive understands and agrees that the Corporation shall suffer
irreparable harm in the event that the Executive breaches any of the Executive's
obligations under this agreement and that monetary damages shall be inadequate
to compensate the Corporation for the breach. Accordingly, the Executive agrees
that, in the event of a breach or threatened breach by the Executive of any of
the provisions of this agreement, the Corporation, in addition to and not in
limitation of any other rights, remedies or damages available to the Corporation
at law or in equity, shall be entitled to an interim injunction, interlocutory
injunction and permanent injunction in order to prevent or to restrain any such
breach by the Executive, or by any or all of the Executive's partners,
co-venturers, employers, employees, servants, agents, representatives and any
and all persons directly or indirectly acting for, on behalf of or with the
Executive.
7. Materials
All notes, data, tapes, reference items, sketches, drawings, memoranda,
records, files, diskettes and other materials in any way relating to any of the
information referred to in sections 1 and 2 (including any Protected
Information) or to the Corporation's business shall belong exclusively to the
Corporation and the Executive agrees to turn over to the Corporation all
originals and all copies of the materials in the Executive's possession or under
the Executive's control at the request of the Corporation or, in the absence of
a request, on the termination of the Executive's employment with the
Corporation.
8. Accounting for Profits; Indemnification
The Executive agrees that if the Executive shall violate any of the
Executive's covenants or agreements under this agreement, the Corporation shall
be entitled to an accounting and repayment of all profits, compensation,
royalties, commissions, remunerations or benefits which the Executive directly
or indirectly shall have realized or may realize relating to, growing out of, or
in connection with any violations; the remedy shall be in addition to and not in
limitation of any injunctive relief or other rights or remedies to which the
Corporation is or may be entitled at law or in equity or otherwise under this
agreement. The Executive agrees to defend, indemnify the Corporation against and
in respect of (i) any and all losses and damages resulting from, relating or
incident to, or arising out of any misrepresentation or breach by the Executive
of any warranty, covenant or agreement made or contained in this agreement; and
(ii) any and all actions, suits, proceedings, claims, demands, judgments, costs
and expenses (including reasonable lawyers' fees) incidental to the foregoing.
9. Reasonableness of Restriction; Severability
(a) The Executive has carefully read and considered the provisions of
sections 1 through 8 and, having done so, agrees that the restrictions set forth
in these paragraphs are fair and reasonable and are reasonably required for the
protection of the interests of Corporation and its business, officers,
directors, and employees. The Executive further agrees that the restrictions set
forth in this agreement shall not impair the Executive's ability to secure
employment within the field or fields of the Executive's choice including,
without limitation, those areas in which the Executive is, is to be, or has been
employed by the Corporation.
(b) In the event that any provision or part of any provision of this
agreement shall be deemed void or invalid by a court of competent jurisdiction,
the remaining provisions or parts shall be and remain in full force and effect.
The Executive agrees that the breach or alleged breach by the Corporation of:
(i) any covenant contained in another agreement (if any)
between the Corporation and the Executive, or
(ii) any obligation owed to the Executive by the Corporation,
shall not affect the validity or enforceability of the covenants and agreements
of the Executive set forth in this agreement.
10. No Prior Agreements
The Executive represents the Executive's performance of all the terms
of this agreement do not and shall not breach any fiduciary or other duty or any
covenant, agreement or understanding (including any agreement relating to any
proprietary information, knowledge or data acquired by the Executive in
confidence, trust or otherwise prior to the Executive's employment by the
Corporation) to which the Executive is a party or by the terms of which the
Executive may be bound. The Executive covenants and agrees that the Executive
shall not disclose to the Corporation, or induce the Corporation to use any
proprietary information, knowledge or data belonging to any previous Corporation
or others. The Executive further covenants and agrees not to enter into any
agreement or understanding, either written or oral, in conflict with the
provisions of this agreement.
11. Executive's Status
Nothing in this agreement shall be construed as constituting a
commitment, guarantee, agreement or understanding of any kind or nature that the
Corporation shall continue to employ the Executive, nor shall this agreement
affect in any way the right of the Corporation to terminate the employment of
the Executive at any time and for any reason. No change of the Executive's
duties as an Executive of the Corporation shall result in, or be deemed to be, a
modification of the terms of this agreement.
12. Independent Legal Advice
The Executive represents and warrants to the Corporation that (i) he
has read and understands this Agreement, and (ii) that he has either (a)
obtained independent legal advice in connection with his execution, delivery and
performance of this Agreement, or (b) voluntarily elected not to obtain such
advice.
13. Burden and Benefit; Corporation
This agreement shall be binding on, and shall enure to the benefit of,
the Corporation and the Executive, and their respective heirs, personal and
legal representatives, successors and assigns. As used in this agreement, the
term "Corporation" shall also include any corporation or entity which is a
parent, subsidiary or affiliate of the Corporation. The Executive consents to
the enforcement of any and all of the provisions of this agreement by or for the
benefit of the Corporation and any other corporation or entity as to any
Protected Information.
14. Governing Law
This agreement shall at all times and in all respects be governed and
construed in accordance with the laws of the Province of Ontario, as they were
as at the date of execution of this agreement by both parties hereto.
15. Notices
(a) Any notice required or permitted to be given to the Executive shall
be sufficiently given, if delivered to the Executive personally or if mailed by
registered mail to the Executive's address last known to the Corporation.
(b) Any notice required or permitted to be given to the Corporation
shall be sufficiently given if mailed by registered mail to the Corporation's
head office at its address last known to the Executive.
(c) Any notice given by mail shall be deemed to have been given
forty eight (48) hours after the time it is posted.
16. Entire Agreement
This agreement contains the entire agreement and understanding by and
between the Corporation and the Executive with respect to the subject matter,
and no representations, promises, agreements or understandings, written or oral,
express or implied, not contained in this agreement, shall be valid or binding
unless the same is in writing and signed by the party intended to be bound. No
waiver of any provision of this agreement shall be valid unless it is in writing
and signed by the party against whom the waiver is sought to be enforced;
moreover, no valid waiver of any provision of this agreement at arty rime shall
be deemed a waiver of any other provision of this agreement at the time or shall
be deemed a valid waiver of the provision at any other time.
17. Headings
The headings and other captions in this agreement are for convenience
and reference only and are not to be construed in any way as additions or
limitations of the covenants and agreements contained in this agreement.
IN WITNESS WHEREOF, the Corporation and the Executive have duly
executed this agreement on the date first written above.
NEW CINEMA PARTNERS INC.
Per: ___/s/ Martin Lapedus
---------------------------------
Name: __ Martin Lapedus
---------------------------------
Witness
Title: Chief Financial Executive
I have authority to bind this Corporation.
DAMIAN LEE, (The Executive)
Name: /s/ DAMIAN LEE,
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