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U. S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended November 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
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Commission File No.
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)
(416) 367 - 8299
--------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes No X
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State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Class Outstanding at November 30, 2000
----- ----------------------------
Common Stock, no par value 24,040,736
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Transitional Small Business Disclosure Form (check one):
Yes No X
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NEW CINEMA PARTNERS
TABLE OF CONTENTS
FORM 10-QSB
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis or
Plan of Operation
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Signatures
Exhibits
<PAGE>
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<PAGE>
<TABLE>
<CAPTION>
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NEW CINEMA PARTNERS
Balance Sheet
For the Period Ending
November 30, 2000
11/30/00 02/29/00
------------------------------------
ASSETS (Unaudited)
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 65 $99
---------- -----------
Total current assets 65 99
OTHER ASSETS
Intangible Assets 1,000,000
Debt issuance costs, net of accumulated
amortization of $214,700 and $101,000 543,300 657,000
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Total assets 1,543,365 657,099
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $413,774 $115,000
Shareholder advance 41,435 13,994
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Total current liabilities 455,209 128,994
Loan payable - related party 150,000 150,000
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Total liabilities 605,209 278,994
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STOCKHOLDERS' EQUITY
Common stock, $0.001 par value; 100,000,000 shares 24,041 11,041
authorized, 24,040,736 and 11,040,736 shares
issued and outstanding
Additional paid-in-capital 3,203,394 1,886,394
Deficit accumulated during the development stage (2,300,664) (1,525,634)
Cumulative foreign currency translation adjustment 11,385 6,304
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Total stockholders' equity 938,156 378,105
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Total liabilities and stockholders' equity $1,543,365 $657,099
========== ===========
</TABLE>
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<TABLE>
<CAPTION>
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NEW CINEMA PARTNERS
CONSOLIDATED STATEMENT OF CASH FLOWS
For The Nine Months Ended November 30, 2000
unaudited
February 18, 1999
Nine Months Nine Months (Inception) to
Ended November 30, Ended November 30 November 30, 2000
2000 1999
----------------- ----------------- ---------------------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net loss $ ( 775,030) $ ( 1,433,287) $ (2,300,664)
Stock Based Compensation 330,000 - 330,000
Amortization of debt issuance costs 113,700 63,200 214,700
Increase in accounts payable 298,774 4,125 413,774
----------------- ----------------- --------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES ( 32,556) ( 1,365,162) (1,342,190)
----------------- ----------------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES -
Sale of common stock - 1,139,435 1,139,435
Cash Overdraft - - -
Proceeds of loan payable - 150,000 150,000
Shareholder advances 27,441 83,130 41,435
----------------- ----------------- --------------------
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES 27,441 1,372,565 1,330,870
----------------- ----------------- --------------------
Effect of currency translation on cash 5,081 (6,339) 11,385
----------------- ----------------- --------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (34) $ 264 $ 65
CASH AND CASH EQUIVALENTS -
beginning of period
99 - -
----------------- ----------------- --------------------
CASH AND CASH EQUIVALENTS - end of period $ 65 $ 264 $ 65
SUPPLEMENTAL INFORMATION:
During the period presented, the Company paid no cash for interest or
income taxes (unaudited).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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NEW CINEMA PARTNERS
Statements of Operations
Three Months Nine Months Three Months Nine Months (inception)
Ended Ended Ended Ended To November
30-Nov-99 30-Nov-99 30-Nov-00 30-Nov-00 31, 2000
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Revenue 0 0 0 0 0
Selling, general and administrative expenses 642,727 1,365,962 135,641 653,830 2,071,964
Amortization of debt issuance costs 37,900 63,200 37,900 113,700 214,700
Interest expense 2,500 4,125 2,500 7,500 14,000
------------ --------------- -------------- ------------- ------------
Loss from operations before provision for income (683,127) (1,433,287) (176,041) (775,030) (2,300,664)
taxes
Provision for income taxes 0 0 0 0 0
------------ --------------- -------------- ------------- ------------
Net loss (683,127) (1,433,287) (176,041) (775,030) (2,300,664)
============ =============== ============== ============= ============
Net loss per share - basic and diluted $(0.06) (0.24) (0.01) (0.04) (0.19)
Weighted average number of common shares 9,963,813 5,973,480 24,040,736 18,855,282 12,080,700
outstanding
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
F-5
<PAGE>
NEW CINEMA PARTNERS
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 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) and of Nevada from August 31, 1999.
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of the
Company as a going concern. However, the Company has no established source of
revenue. This factor raises substantial doubt about the Company's ability to
continue as a going concern. Without realization of additional capital, it would
be unlikely for the Company to continue as a going concern. The financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts and classification of liabilities that
might be necessary should the Company be unable to continue in existence.
Management plans to take the following steps that it believes will be sufficient
to provide the Company with the ability to continue in existence:
a) Raise additional working capital through a private placement. The private
placement will be in the form of debt, equity or a convertible debenture.
b) Seek acquisitions for the company. Acquisitions will be operating companies
in the entertainment, e-commerce, internet or electronic industries.
- 7 -
36
<PAGE>
NEW CINEMA PARTNERS
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2000
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Unaudited Financial Information
In the opinion of the Company, the accompanying unaudited consolidated financial
statements contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly its financial position as of August 31,
2000 and the results of its operations and cash flows for The Nine Months ended
November 30, 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
six months ended November 30, 2000 are not necessarily indicative of the results
to be expected for the full year.
Nature of Operations
The Company is currently a development-stage company under the provisions of the
Financial Accounting Standards Board ("FASB") Statement of Financial Accounting
Standards ("SFAS") NO. 7.
The Company is engaged in the location based entertainment industry, with
activities in the location, design, construction, management and operation of
"high tech", specialized theater venues, including digital interactive movies,
IMAX films and other specialized films in the "2D", "3D" format and live action
and animation features.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents.
Concentration of Credit Risk
The Company places its cash in what it believes to be credit-worthy financial
institutions. However, cash balances may exceed FDIC insured levels at various
times during the year.
Fair Value of Financial Instruments
The carrying value of cash and cash equivalents, accounts payable, loan payable
and advance from shareholder approximates fair value due to the relatively short
maturity of these instruments.
- 8 -
37
<PAGE>
NEW CINEMA PARTNERS
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2000
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Income Taxes
Income taxes are provided for based on the liability method of accounting
pursuant to SFAS No. 109, "Accounting for Income Taxes". Deferred income taxes,
if any, are recorded to reflect the tax consequences on future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts at each year-end.
Translation of Foreign Currency
The Company translates the foreign currency financial statements of its Canadian
subsidiary in accordance with the requirements of SFAS No. 52, "Foreign Currency
Translation". Assets and liabilities are translated at current exchange rates,
and related revenue and expenses are translated at average exchange rates in
effect during the period. Resulting translation adjustments are recorded as a
separate component in stockholders' equity. Foreign currency transaction gains
and losses are included in the statement of operations.
Earnings Per Share
The Company calculates earnings per share in accordance with SFAS No. 128,
"Earnings Per Share", which requires presentation of basic earnings per share
("BEPS") and diluted earnings per share ("DEPS"). The computation of BEPS is
computed by dividing income available to common stockholders by the weighted
average number of outstanding common shares during the period. DEPS gives effect
to all dilutive potential common shares outstanding during the period. The
computation of DEPS does not assume conversion, exercise or contingent exercise
of securities that would have an antidilutive effect on earnings. As of November
30, 2000, the Company has no securities that would effect loss per share if they
were to be dilutive.
Comprehensive Income
SFAS No. 130, "Reporting Comprehensive Income", establishes standards for the
reporting and display of comprehensive income and its components in the
financial statements. The items of other comprehensive income that are typically
required to be displayed are foreign currency items, minimum pension liability
adjustments, and unrealized gains and losses on certain investments in debt and
equity securities.
NOTE 2 - CORPORATE REORGANIZATION AND MERGER
On August 31, 1999, Nevada, a public shell, and Ontario executed an Acquisition
Agreement (the "Agreement") that provided that Nevada would acquire all of the
issued and outstanding common stock of Ontario. In connection with the
transaction, the sole shareholder of Ontario received 4,000,000 shares of Nevada
common stock for its 4,000,000 shares of Ontario.
As a result of this transaction the former shareholder of Ontario acquired or
exercised control over a majority of the shares of Nevada. Accordingly, the
transaction has been treated for accounting purposes as a recapitalization of
Ontario and, therefore, these financial statements represent a continuation of
the accounting acquirer, Ontario, not Nevada, the legal acquirer.
- 9 -
38
<PAGE>
NEW CINEMA PARTNERS
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2000
NOTE 2 - CORPORATE REORGANIZATION AND MERGER (Continued)
In accounting for this transaction:
i) Ontario is deemed to be the purchaser and surviving company for accounting
purposes. Accordingly, its net assets are included in the balance sheet at
their historical book values;
ii) Control of the net assets and business of Nevada was acquired effective
August 31, 1999 (the "Effective Date"). This transaction has been accounted
for as a purchase of the assets and liabilities of Nevada by Ontario. At
the effective date Nevada had no assets or liabilities.
iii) The consolidated statements of operations and cash flows include Ontario's
results of operations and cash flows from February 18, 1999 (date of
inception) and Nevada's results of operations from the Effective Date.
39
<PAGE>
NEW CINEMA PARTNERS
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2000
NOTE 3 - 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.
During the period ending August 31, 2000, the Company issued 10,000,000 shares
of common stock valued at $1,000,000 (fair value on date of issuance) to acquire
certain intangible assets. The Company also issued 3,000,000 shares of common
stock valued at $330,000 (fair value on date of issuance) for services provided
in connection with the intangible assets. This amount has been charged to
expense.
NOTE 4 - LOAN PAYABLE - RELATED PARTY
The Company received a loan from a related party in the amount of $150,000. The
loan bears interest at 6.5% per year and is due on July 9, 2004.
In connection with obtaining this loan, the Company granted an option to
purchase 250,000 shares of common stock to a third party. The option is
exercisable at $2.50 per share for nine months after the Company files a
registration statement. This option has been valued at $758,000 using the Black
Sholes option pricing model with the following assumptions: Interest rate, 4%;
Volatility rate, 200%; Expected life, 1 year; Dividend yield, $0. This amount is
being amortized over the five year life of the loan.
NOTE 5 - 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 6 - ACQUISITION OF INTANGIBLE ASSETS
The Company consummated an asset purchase agreement acquiring certain
intellectual properties, comprising scripts and storylines, owned by 1255234
Ontario, Inc., also known as Stone Canyon Pictures. The purchase price was
10,000,000 shares of Company common stock, valued at $0.10 per share.
Additionally, the Company issued 3,000,000 shares of common stock as payment for
services provided in connection with the acquisition. These shares have been
valued at $0.11 per share.
<PAGE>
Item 2. Management Discussion and Analysis or Plan of Operation
Three Months Ending November 30, 2000 Compared to
Three Months Ending November 30, 1999
PLAN OF OPERATIONS
FOR THE YEAR ENDING FEBRUARY 29, 2000
AND FOR THE THREE MONTHS ENDED November 30, 2000
The following discussion relates to the results of our operations to date,
and our financial condition:
This document 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 November 30, 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.
18
<PAGE>
Results of Operations for the three months ended November 30, 2000.
For the three months ended August 31, 2000, the Company generated net
sales of $-0-. The Company's cost of goods sold for the three months ended
November 30, 2000 was $-0- . The Company's gross profit on sales was $-0- for
the three months ended November 30, 2000.
The Company's general and administrative costs aggregated approximately
$37,900 for the three months ended November 30, 2000. This 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 $65 at November 30, 2000, as compared to
$99 for the year ended February 29, 2000. Working capital at February 29, 2000
and November 30, 2000 was negative at $ 204,364 and $ 455,154 respectively. For
the year ended February 29, 2000 and for the three months ended November 30,
2000, working capital was provided by management for the payment of expenses. At
February 29, 2000 and November 30, 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. 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.
2. Identify the appropriate financing strategy to finance one or more of the
Companies intellectual properties through the development phase.
3. Work closely with global distributors to secure production financing for
any given project.
4. Pursue production on any given project.
5. Capitalize on any completed project.
6. Pursue additional intellectual properties.
7. Gain relationships with creative talent including Stars.
8. 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.
<PAGE>
PART II - OTHER INFORMATION
Item 1. 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. Item 2. Changes in
Securities and Use of Proceeds
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
--------
27.1 Financial Data Schedule
(B) Reports on Form 8-K
----------------------
None
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
New Cinema Partners Corporation
(Registrant)
Dated: January 15, 2000 By: /s/ Damian Lee
---------------------------
Damian Lee
President and CEO
<PAGE>
