UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
February 22, 2000
Commission File Number: 0-27161
-----------------------------------
PAYFORVIEW.COM CORP.
(Exact name of registrant as specified in its charter)
Nevada, U.S.A. 91-1976310
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
509 Madison Avenue, 16th Floor, New York, New York 10022
(Address of principal executive offices)
(212) 605-0150
(Issuer's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
The following Description of Business and Management's Discussion
and Analysis of Financial Condition and Results of Operations are
updates to those same discussions in our original 8-K filed on
February 25, 2000, describing the Acquisition of Assets resulting
from our successor issuer transaction with MAS Acquisition XVI
Corp.
Formation of Company.
PayForView was organized on August 26, 1988, under the name
Sierra Gold Corporation and under the laws of the State of
Nevada. PayForView had no operations at that time and as such
was considered a development stage company.
PayForView commenced trading on the National Association of
Securities Dealers (NASD) OTC Bulletin Board on December 21, 1998
under the trading symbol SIRG.
On January 4th, 1999 the name of PayForView was changed to
PayForView.com under the trading symbol PAYV.
Description of Business.
PayForView, headquartered in New York with satellite offices
in Los Angeles, California and Vancouver, Canada, is an
integrated online and offline content company that creates and
acquires events and information-based programming and delivers
that content on a pay-for-view and free basis. We produce and
own programming and distribute it through new media (the
Internet) and old media (broadcast, DBS and cable television).
In this manner, we are able to generate revenues from traditional
sources while we build a strong brand in the Internet space in
preparation for an expanding broadband universe and the upcoming
convergence of old media with new media.
We continue to enter into alliances with entertainment and
technology companies that provide elements needed for the
completion of our plans. These companies include those providing
Internet-related technical support, filmed or live programming,
recorded music and sports related programming.
Our executive offices are located at 509 Madison Avenue,
Suite 1610, New York, New York 10022, and our telephone number is
(212) 605-0150.
PayForView.com Website.
Our website, hosted by SofTV, a leader in streaming media in
the emerging broadband E-Commerce market, provides users with a
unique and vibrant interface. The core of the site is an
embedded streaming media window, where the "primary" content,
consisting of live events, archival entertainment and promos will
be displayed. Surrounding the window is a selection of
"parallel" content areas, where dynamic and compelling
information coincides with and enhances the primary content. The
beta version of the website was launched on April 26, 2000, when
the Company offered its first boxing event.
Our leading-edge technology allows video to contain
"triggers" whereby text, photos and images are seen at specific
times when a trigger is released simultaneously to the streaming
video. This innovative development is both interesting to the
viewer and a benefit to sponsors.
Since the launch of our beta web site in April 2000, we have
successfully broadcast an International Woman's Boxing
Championship event, two Ultimate Fighting Championship events
with a contract for at least one more, a live stand-up comedy
event and two international soccer events including the USA
Woman's soccer team vs. Norway match, web-cast July 30th, 2000.
We will also acquire, distribute and sell filmed
entertainment online and, through our Voyager Film Sales
subsidiary, in the traditional manner through existing
relationships with distributors and content providers.
Strategic Alliances.
We have entered the marketplace through alliances with
entertainment and technology companies that provide elements
needed for the completion of our plans. These companies include
those providing Internet related technical support, filmed or
live programming, recorded music and sports related footage.
This creates a vertical integration of entertainment-related
products and Internet expertise, which will establish our base of
operations and cash flow.
Technology Providers.
We have aligned ourselves with various quality technology
providers to provide essential streaming video, web casting and
supporting services.
InterVu/Akamai
InterVu (which was purchased by Akami in early 2000) is a
streaming media service provider working to make the Internet a
viable broadcast medium for entertainment, business and
education.
Akami has the technical expertise and distributed server
network to allow us to reliably deliver programming via the
Internet. Akami has developed proprietary technology that allows
us to manage broadcast streams in real time and gives us access
to critical information about its video database and streaming
files.
Through its own distributed broadcast network, Akami can
provide us with reliable and efficient connectivity to the
Internet, using a premier Internet infrastructure built on a
high-speed backbone and high-speed links to the Internet.
SofTV
SofTV is a leading-edge Canadian-based Internet developer
specializing in video streaming and interactive content based on
broadcast applications. SofTV's patent pending technology allows
web site publishers to combine the emotional impact of video with
the power of images, text and graphics. SofTV has created and
also hosts our web site.
Bandwidth Growth.
In order to view good quality film and video files over the
Internet, subscribers will require a cable modem, DSL or
comparable high-bandwidth connection. Research indicates that
cable companies will be the leading provider of residential
broadband service. By 2004, the industry expects a total of 31.8
million North American subscribers with high-bandwidth access.
The following table identifies current and expected trends
in the adoption of high bandwidth Internet access. These high-
end bandwidth users represent computer users with the capacity to
use services provided by us (Source: Paul Kagen and Associates)
Year Cable Modem DSL Subscriber Total High
Users Users Bandwidth Users
1999 1,460,000 420,000 1.880,000
2000 3,600,000 2,400,000 6,000,000
2001 7,590,000 4,170,000 11,760,000
2002 12,950,000 7,090,000 20,040,000
2003 15,840,000 10,590,000 26,430,000
2004 18,980,000 12,910,000 31,890,000
A quickening pace of development in both technology and
content available to users of the World Wide Web parallels this
increase in Internet access speed. New technologies such as
video and audio streaming enable the creation of new forms of
content, combining aspects of traditional, narrowband web design
(including text, graphics, and hyper-links) with the video-based
production concepts of television. While this market is growing
rapidly, it presently accounts for a small percentage of the
Internet users online today. Accordingly, most companies
involved in the development of technology and content for the Web
are focusing on solutions that are intended to provide an
acceptable experience for the predominant narrowband customer,
while offering an improved version of the same experience to
broadband users.
Bandwidth Islands.
In the marketplace, we have identified companies which we
describe as "Bandwidth Islands". These are organizations whose
primary business is the sale and service of bandwidth and related
services to end users, both residential and commercial. Each of
these Islands has a built in subscriber base, and instant access
through their database to the high bandwidth users which we are
targeting.
In selling high bandwidth services to homes, one of the
challenges faced by the Islands is content. Consumers, while
attracted to the extra speed in Internet surfing possible with
higher bandwidth, generally question the value of upgrading to
higher bandwidth at higher cost when, to date, there is not
enough content on the net for which high bandwidth is required.
By collecting content and creating and perfecting a delivery and
tracking mechanism, we will be able to offer the Islands the
content with which they will be able to attract additional high
band width customers, and keep the ones they have on line and on
our subscriber list. Additionally, by retaining control of the
content and delivery system, we intend to sell advertising during
our programming, thus offering the Island an additional source of
revenue.
Growth of Online Commerce.
The Internet is dramatically affecting the methods by which
consumers and businesses are buying and selling goods and
services. The Web provides the ability to reach a global
audience and to operate with minimal infrastructure, reduced
overhead and greater economies of scale, while providing
consumers with a broad selection, increased pricing power and
unparalleled convenience. As a result, a growing number of
consumers are transacting business on the Web, including buying
consumer goods, trading securities, paying bills and purchasing
airline tickets. International Data Corporation estimates that
approximately 28% of Web users purchased goods or services over
the Web in 1998 and that approximately 40% of Web users will make
online purchases in 2002. Jupiter Communications estimates that
retail consumer purchases of goods and services over the Internet
will increase from $5.0 billion in 1998 to $29.4 billion in 2002.
We believe that as electronic commerce expands, advertisers and
direct marketers will increasingly use the Web to advertise
products, drive traffic to their websites, attract customers and
facilitate transactions.
Growth of Internet Advertising.
The Web is evolving into an important medium for advertisers
due to its interactive nature, global reach, rapidly growing
audience and the expected increase in online commerce. Unlike
more traditional advertising methods, the Web gives advertisers
the potential to target advertisements to broad audiences or to
selected groups of users with specific interests and
characteristics. The Web also allows advertisers and direct
marketers to measure the effectiveness and response rates of
advertisements and to track the demographic characteristics of
Web users. The interactive nature of Web advertising enables
advertisers to better understand potential customers, and to
change messages rapidly and cost effectively in response to
customer behavior and product availability.
We anticipate a significant increase in online advertising.
Forrester Research estimates that the dollar value of Internet
advertising in the U.S. will increase from $1.3 billion in 1998
to $10.4 billion in 2003, representing a 52% compounded annual
growth rate. International online ad spending is expected to grow
from $0.2 billion in 1998 to $4.7 billion in 2003, representing
an 87% compounded growth rate. By comparison, Broadcasting &
Cable estimates that $130 billion was spent in 1998 on
traditional media advertising in the U.S., including television,
radio, outdoor and print. Until recently, the leading Internet
advertisers have been technology companies, search engines and
Web publishers. However, many of the largest advertisers
utilizing traditional media, including consumer products
companies and automobile manufacturers, are expanding their use
of online advertising. We believe that online advertising will
continue to capture an increasing share of available advertising
dollars and that this trend will drive demand for online ad
inventory and for sophisticated Internet advertising solutions.
Driven by the growing online population, the rise in time
spent online and increasing digital commerce adoption, online
advertising revenues have surpassed outdoor advertising and will
exceed spending for cable advertising. By 2003, roughly three-
quarters of today's radio spending will be converted to Internet
advertising.
Revenue Streams.
Although we have a transaction/advertising revenue model it
is unlike traditional websites that offer only one or two of
these revenue streams. We have numerous methods to capitalize on
its exclusive branding, image and content. We will derive our
revenue streams from the following sources:
-Live Events
Users pay an online fee for a one-time viewing of select
live event programming. Users pay a fee of $1.99 to $4.95
depending on the exclusivity of the event. For example, the
Ultimate Fighting Championship event that PayForView offered on
June 9, 2000 was only seen on the our website and on Direct
Broadcast Satellite (DBS). It was not on either network or cable
television.
-Archival Events
In the future, users will be charged an online transactional
fee for a one-time viewing of an archived event program. The
archival programming will consist of classic sports events, major
boxing matches, films, comedy performances, etc. The charge for
these events will range from $.49 to $1.99. These events are at
the convenience of the viewers, at the time they wish to view
them.
-Advertising
Since PayForView.com is a very "sticky" site, one where a
user resides for a lengthy period of time, advertisers will pay
to have their advertising served and tracked on our website.
These advertisers will be on the website the length of time users
view either the free entertainment information, which might be
upwards of a half hour, or a live event, which they will watch
for several hours.
-E-Commerce
Users may purchase merchandise specifically related to event
programs, both live or archived from our e-commerce shop.
Merchandise pertaining to our free entertainment and sports
information will also be offered. We are in discussions to
partner with several retailers that offer event related
merchandise.
-On-line Syndication
We will capitalize on the lack of quality entertainment
produced specifically for on-line viewing. At this time, there
are a number of Internet companies who are streaming video who
are in need of the type of programming we are creating and
acquiring. Our executive team, with experience and contacts in
event production, sees an excellent opportunity to become an on-
line provider of video based events to emerging Internet based
streaming media companies. We are well positioned as a one-stop,
turnkey provider of compelling, entertaining content.
-Sales to Traditional Media
During the rollout of the Broadband universe, some of our
acquired programming will be sold to traditional media such as
DBS and cable television. This allows for revenue generation of
a magnitude greater than the present Broadband universe allows.
-VHS/DVD Sales
Since we acquire programming, we will negotiate with
international VHS/DVD distributors to release the product in
brick-and-mortar and electronic commerce distribution avenues to
gain additional revenue.
Competition.
Perhaps closest to our business model is www.centerseat.com.
Similar in design and concept, Center Seat offers a wide variety
of online entertainment, but does not charge for online
programming. The firm also does not deliver live events nor does
it offer chat room functionality. Moreover, Center Seat does not
presently offer rich media advertising as does PayForView.
Kanakaris Wireless Inc., (OTC BB: KKRS) www.kanakaris.com,
offers online pay-per-view movies, downloadable books and related
e-commerce.
House of Blues, www.hob.com, offers live and archival music
events that appear at the House of Blues venues and also offers
related e-commerce.
Our approach differs from the above through diversification.
By having an interest in a record label, sports and event
alliances and a film production and sales division, PayForView is
in a position to create revenue from non-Internet sources while
also creating the content it intends to broadcast on the
Internet. By including music, sports, comedy and other live
events, and utilizing an embedded video window, triggered
parallel content and rich media advertising, we are attempting to
differentiate ourselves from our competitors.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Forward Looking Information.
This Report on Form 8-K contains certain forward looking
statements and information relating to us that are based on the
beliefs of management, as well as assumptions made by and
information currently available to us. When used in this
document, the words "anticipate," "believe," "estimate," and
"expect" and similar expressions, as they relate to us, are
intended to identify forward looking statements. Such statements
reflect our current views with respect to future events and are
subject to certain risks, uncertainties and assumptions,
including those described in this discussion and elsewhere in
this Report on Form 8-K. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those
described herein as anticipated, believed, estimated or expected.
We do not intend to update these forward-looking statements.
General.
We are an integrated online and offline content company that
creates and acquires events and information-based content and
delivers such content on a pay-for-view and free basis. We
produce and own programming and distribute it through new media
(the Internet) and old media (broadcast, DBS and cable
television.) We have entered into alliances with entertainment
and technology companies that provide elements needed for the
completion of our plans. These companies include those providing
Internet related technical support, filmed or live programming,
recorded music and sports related footage. This creates a
vertical integration of entertainment-related products and
Internet expertise, which will establish a base of operations and
cash flow for us. We have not had any significant revenues since
purchasing Voyager Entertainment in 1999. We have incurred a
cumulative net loss in our development stage of approximately
$16.9 million as of June 30, 2000. We expect to continue to
incur substantial and increasing losses during our development
stage due to continued and increased spending on our web site,
hiring of employees, research and the costs of marketing, sales,
video streaming and administrative activities.
We anticipate that future revenues and results of operations
may continue to fluctuate significantly depending on, among other
factors, the number of available subscribers who have access to
high speed Internet connections, the costs associated with the
streaming of video based content over the Internet, our ability
to recruit and retain advertising clients, and our ability to
successfully provide viewers with compelling and entertaining
events. We anticipate our operating activities will result in
substantial net losses while in our development stage and expect
losses to continue for a period of time once in our operational
stage.
Results of Operations.
Year ended December 31, 1999 as compared to the period from
April 6, 1998 (inception) through December 31, 1998 and six
months ended June 30, 2000 as compared to the six months ended
June 30, 1999.
The Company has restated its financial statements as of and
for the six months ended June 30, 2000 to reflect the charge to
expense of our investment in Turn-Key Entertainment, LLC, a
development stage company.
Revenues.
We had no revenues from operations from our inception on
April 6, 1998 to date.
Selling, general and administrative expenses:
Selling, general and administrative expenses for the year
ended December 31, 1999 increased to $2,240,097 from $275,528, a
net increase of $1,964,569 as compared to the period from April
6, 1998 (inception) to December 31, 1998. Prior to January of
1999, the company was in its very early development stage, and
was not carrying on any significant business, which resulted in
low operating costs. As a result of venture capital funding from
a private investor beginning in January 1999,we began to build
and execute our business plan, hire staff, build our web site and
create awareness of our business through public relations and
marketing. These four areas saw the greatest increase in
spending in 1999 as compared to 1998. Management compensation
for the year ended December 31, 1999 increased to $241,750 from
$9000, an increase of $232,750 as compared to 1998. Web site
development, Public Relations and Marketing costs increased to
$565,608 for the year ended December 31, 1999 from $44,608 for
the period from April 6, 1998 (inception) to December 31, 1998.
The remaining selling, general and administrative expenses of
$1,432,739 for the twelve months ended December 31, 1999
increased from $221,920 for the period from April 6, 1998
(inception) to December 31, 1998, and consisted primarily of
$936,000 in consulting fees of which $653,000 was non cash based,
equity compensation, and $183,000 in travel and entertainment
expenses.
Selling, general and administrative expenses for the six
months ended June 30, 2000 increased to $4,977,289 from
$1,013,131, a net increase of $3,964,158 as compared to the six
months ended June 30, 1999. The increase was primarily due to
increases in personnel costs and consulting fees of $3,530,312
(of which $3,051,000 was non-cash equity based compensation),
transaction costs relating to the MAS Acquisition of $475,000 (of
which $375,000 was non-cash, equity based compensation), and
$110,000 increase in professional fees offset by a decrease in
advertising and promotion of $290,000. The increases in
personnel costs, consulting and professional fees resulted from
our web-design, marketing and content acquisition efforts.
Advertising and promotion decreased during the six months ended
June 30, 2000 due to our efforts being focused on the development
of a new version of our website which was in its beta test phase
and therefore we spent less time and effort on advertising and
marketing. Advertising and marketing costs incurred during the
six months ended June 30, 1999 included $103,000 paid for the
marketing of a live web cast from the Cannes film festival and
approximately $180,000 in Investor relations, public relations
and market research costs. The remaining increase of $139,000 is
due to higher overhead costs relating to our move from Vancouver
British Columbia to New York City.
Loss From Impairment:
We had a loss from impairment during the twelve months ended
December 31, 1999 of $4,247,022 due to the fact that we issued
shares of our common stock in payment for certain deliverables
that we subsequently became aware did not exist.
We had a loss from impairment during the six months ended
June 30, 1999 of $2,821,500 due to the fact that we issued shares
in payment for certain deliverables that we subsequently became
aware did not exist.
Loss From Discontinued Operations:
For the twelve months ended December 31, 1999, our results
of operations included approximately $2,281,360 of losses
relating to Street Solid, a record label that we acquired on
January 5, 1999. We disposed of 81% of Street Solid in October
1999, resulting in a loss from disposal of $1,225,193.The results
of operations during 1999 of Street Solid have been accounted for
as discontinued operations and amounted to $1,056,167. During
the six months ended June 30, 1999, our results of operations
included approximately $675,000 of losses from discontinued
operations relating to Street Solid.
Investment Expense:
During the six months ended June 30, 2000, the Company had
$2,400,000 of investment expense. This related to a strategic
investment that we made in Turn-Key Entertainment LLC ("Turn-
Key"). Since the Company neither manages nor controls Turn-Key,
which remains in the development stage and has had no significant
operations to date, the investment was charged to expense in
accordance with generally accepted accounting principles.
Interest Income:
Interest Income for the six months ended June 30, 2000 was
$41,000 and $74,000,respectively, as compared to $8,000 for the
six months ended June 30, 1999. This is due to larger cash and
cash equivalents balances during the six months ended June 30,
2000 resulting from the net proceeds received by us from our
private placements of shares of our common stock.
Interest Expense:
Interest expense for the year ended December 31, 1999 was
$348,631 as compared to zero for the period from April 6, 1998
(inception) to December 31, 1998. This is due to a one-time
interest charge resulting from the net proceeds received by the
company from its private placement of convertible debentures and
subsequent conversion to common shares.
Interest expense for the six months ended June 30, 2000 was
zero. Interest expense for the six months ended June 30, 1999
was $334,795, which was primarily a result of a non-cash interest
charge related to a convertible debenture agreement, whereby such
debentures would be convertible into shares of our common stock
at a 25% discount to the market price.
Extraordinary Item.
During the six months ended June 30, 2000, we recorded a
gain on extinguishment of debt of $200,151. This was due to a
May 2000 settlement of debt.
Liquidity and Capital Resources.
Since inception through June 30 2000, we had a deficit
accumulated during the development stage of approximately $16.9
million and expect to continue to incur substantial operating
losses for the next several years of our development stage. We
have financed our operations primarily through private placements
of our Common Stock. From inception to June 30, 2000 we received
proceeds from the sale of equity securities, net of share
issuance expenses, of approximately $6 million. Cash proceeds
from the sale of our securities during January 2000 were
approximately $5.4 million, including the $222,500 received in
December 1999.
We used net cash in operating activities of $ 1,711,000 for
the six months ended June 30, 2000. Net cash and cash
equivalents used in operations for the six months ended June 30,
2000 consisted of the loss from continuing operations of
$7,316,780, less non cash items of $5,887,414, increases in
prepaid expenses of $44,968, increases in other assets of
$177,840 (which represented a security deposit on our new
premises), and decreases in accounts payable of $18,939.
Net cash used in investing activities consisted of
$1,873,000 for the six months ended June 30, 2000. Investing
activities included payments for website costs of $291,000, a
settlement payment to the purchaser of Street Solid of $58,000,
capital expenditures of $124,000 and a strategic equity
investment of $1.4 million in a start-up private company which
intends to build an online product synergistic with our core
business.
Net cash provided by financing activities consisted of
$5,159,000 for the six months ended June 30, 2000, resulting from
the proceeds from the sale of common stock of $5,159,000.
Our capital funding requirements will depend on numerous
factors, including the progress and magnitude of the our website
development, marketing plans, technological advances, competitive
and market conditions, our ability to establish and maintain
collaborative arrangements, the cost of streaming video content
on the Internet and effectiveness of commercialization activities
and arrangements.
We are likely to require substantial funding to continue our
website development, marketing, sales, and administrative
activities. We have raised funds in the past through the sale of
securities, and may raise funds in the future through public
offerings or private placements of securities, collaborative
arrangements or from other sources. We continue to explore and,
as appropriate, will enter into discussions with other companies
regarding the potential for equity investment, collaborative
arrangements, license agreements or development or other funding
programs with us in exchange for marketing, distribution or other
rights to our products and services. However, there can be no
assurance that discussions with other companies will result in
any investments, collaborative arrangements, agreements or
funding, or that the necessary additional financing through debt
or equity financing will be available to us on acceptable terms,
if at all. Further, there can be no assurance that any
arrangements resulting from these discussions will successfully
reduce our funding requirements. If additional funding is not
available to us when needed, we will be required to scale back
our website development, marketing and administrative activities
and our business and financial results and condition would be
materially and adversely affected.
CHANGES IN SECURITIES
1. During the first quarter of 2000 we entered into two
separate subscription agreements for the private
placement of shares of our Common Stock at a price of
$1.50 per share. We received $1,215,000 from the sale
of 810,000 shares under the terms of the first
agreement on January 15, 2000, and $4,200,000 from the
sale of 2,800,000 shares under the terms of the second
agreement dated January 21, 2000, for a total proceeds
of $5,381,000, which is net of $34,000 of offering
costs.
2. During the first quarter of 2000, holders of $172,500
of convertible debentures exchanged such debentures for
6,900,000 shares of common stock pursuant to a
Debenture Agreement dated June 25, 1999.
3. In February 2000, we granted an aggregate of 3,000,000
shares to officers and consultants as equity based
compensation. The shares were distributed and vested
on that date.
4. In March of 2000, we acquired MAS Acquisition
Corporation, an inactive public shell corporation in
exchange for an aggregate of 670,000 shares of its
common stock (including a commission of 335,000 shares)
and $100,000.
5. In May of 2000, we made a strategic investment in
Turn-key Entertainment LLC, a private development stage
Delaware Corporation that intends to develop an online
streaming media product that is synergistic with our
core business. We issued 2,000,000 shares of our
restricted common stock and paid $1,400,000 in cash in
exchange for 25% of the outstanding stock of Turn-key
Entertainment LLC.
6. On July 13, 2000, our Board of Directors approved a
stock option plan ("the Plan") and reserved 4 million
shares of our common stock to attract, motivate and
retain individuals upon whose continued efforts the
success of the company in large measure depends. On
July 25, 2000, we issued 1,675,000 options pursuant to
the Plan to certain employees, officers, directors and
consultants. The exercise price of such options were
$0.25 per share, based, as per the terms of the plan,
on the closing price on the day immediately preceding
the issue date. These options vest over a three-year
period and expire in July 2003.
Item 7. Financial Statements and Exhibits.
Financial Statements.
On February 25, 2000, the Company filed an 8-K describing a
change in control resulting from a Stock Exchange Agreement
entered into as of February 22, 2000, between MRC Legal Services
Corporation, a California corporation, which entity is the
controlling shareholder of MAS Acquisition XVI Corp. ("MAS XVI"),
an Indiana corporation, and PayForView.com Corp. ("PayForView" or
the "Company"), a Nevada corporation. Filed herewith are the
updated and revised financial statements, as required by the
Securities Exchange Act of 1934. Such financial statements
consist of the consolidated balance sheets of Payforview.com
Corp. and Subsidiaries (formerly Sierra Gold Corporation) as of
December 31, 1999 and 1998, and the related consolidated
statements of operations, stockholders' equity, and cash flows
for the year ended December 31, 1999 and the period April 6, 1998
(inception) to December 31, 1998, and the cumulative consolidated
statement of operations and cash flows for the period April 6,
1998 (inception) through December 31, 1999. The Company has also
included its unaudited interim consolidated financial statements
as of June 30, 2000 and for the six months ended June 30, 2000
and 1999.
Exhibits.
10.__ Turn-Key Entertainment Investment Agreement
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
Dated: October 24, 2000
PAYFORVIEW.COM CORP.
/s/ Marc A. Pitcher
Marc A. Pitcher,
President and Director
<PAGE>
C O N T E N T S
Page
Report of Independent Certified Public Accountants
- Grant Thornton LLP F-2
Independent Auditors' Report - Davidson & Company F-3
Financial Statements
Consolidated Balance Sheets F-4
Consolidated Statements of Operations F-5
Consolidated Statement of Changes
in Stockholders' Equity F-6 - F-7
Consolidated Statements of Cash Flows F-8
Notes to Consolidated Financial Statements F-9 - F-29
<PAGE> F-1
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Payforview.com Corp. and Subsidiaries
We have audited the accompanying consolidated balance sheet of
Payforview.com Corp. and Subsidiaries (formerly Sierra Gold
Corporation) (a development stage company) as of December 31,
1999, and the related consolidated statements of operations,
stockholders' equity, and cash flows for the year then ended and
the cumulative consolidated statement of operations and cash
flows for the period April 6, 1998 (inception) through December
31, 1999. 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 did
not audit the financial statements of the Company for the period
from April 6, 1998 (inception) through December 31, 1998 which
represents 2.8% of the cumulative net loss for the period from
April 6, 1998 (inception) through December 31, 1999. These
statements were audited by other auditors whose report thereon
has been furnished to us, and in our opinion, insofar as it
related to the 1998 results, is based solely on the report of the
other auditors.
We conducted our audit in accordance with auditing standards
generally accepted in the United States of America. 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, based on our audit and the report of the other
auditors, the financial statements referred to above present
fairly, in all material respects, the consolidated financial
position of Payforview.com Corp. and Subsidiaries as of December
31, 1999, and the consolidated results of their operations and
their consolidated cash flows for the year then ended and the
cumulative results of operations and cash flows for the period
from April 6, 1998 through December 31, 1999, in conformity with
accounting principles generally accepted in the United States of
America.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed
in Note B, the Company has experienced recurring net losses, has
an accumulated deficit and is experiencing difficulty in
generating sufficient cash flow to meet its obligations and
sustain its operations, which raises substantial doubt about its
ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note B. The
financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
GRANT THORNTON LLP
New York, New York
July 7, 2000
<PAGE> F-2
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Directors of Payforview.com Corp. and
Subsidiaries
(formerly Voyager International Entertainment Inc.)
(A Development Stage Company)
We have audited the accompanying consolidated balance sheet of
Payforview.com Corp. and Subsidiaries (formerly Voyager
International Entertainment Inc.) as of December 31, 1998 and the
related consolidated statements of operations, changes in
stockholders' equity, and cash flows for the period from
incorporation on April 6, 1998 to December 31, 1998. 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 auditing standards
generally accepted in the United States of America. 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 financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Payforview.com Corp. and Subsidiaries
(formerly Voyager International Entertainment Inc.) as of
December 31, 1998, and the consolidated results of its
operations, its consolidated changes in stockholders' equity and
its consolidated cash flows for the period from incorporation on
April 6, 1998 to December 31, 1998 in conformity with accounting
principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been
prepared assuming that Payforview.com Corp. and Subsidiaries
(formerly Voyager International Entertainment Inc.) will continue
as a going concern. As discussed in Note B to the consolidated
financial statements, unless the Company attains future
profitable operations and/or obtains additional financing, there
is substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters are
discussed in Note B. The consolidated financial statements do
not include any adjustments that might result from the outcome of
this uncertainty.
Davidson & Company
Vancouver, Canada
July 21, 1999
<PAGE> F-3
<TABLE>
Payforview.com Corp. and Subsidiaries
(formerly Sierra Gold Corporation)
(a development stage company)
CONSOLIDATED BALANCE SHEETS
<S> <C> <C> <C>
December 31, June 30,
ASSETS 1998 1999 2000
(unaudited)
(As Restated)
Current assets
Cash and cash equivalents $ - $ 342,004 $ 1,916,673
Prepaid expenses 2,802 63,602 58,570
Due from related parties 7,648 - 49,602
--------- ----------- ------------
10,450 405,606 2,024,845
Fixed assets, net 7,025 351,780 468,341
Investment in Street Solid Records - 10,000 10,000
Intangible assets, net - 39,169 25,571
Capitalized website development costs 291,072
Other assets - - 227,840
--------- ----------- ------------
$ 17,475 $ 806,555 $ 3,047,669
========= =========== ============
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIENCY)
Current liabilities
Accounts payable $ 82,893 $ 261,368 $ 242,429
Liabilities from discontinued
operations - 256,000 198,000
Loan payable 59,418 1,050,151
--------- ----------- ------------
142,311 1,567,519 440,429
--------- ----------- ------------
Other Liabilities - 222,500 -
2% Series a Senior Convertible
Redeemable Debentures - 172,500 -
Stockholders' equity (deficiency)
Common stock
Authorized, 100,000,000 common
shares with a par value of $0.0001;
issued and outstanding, 4,327,131
and 43,397,727 and 57,577,727
Shares, respectively 433 4,340 5,936
Additional paid-in capital 150,259 8,594,637 19,472,874
Deficit, accumulated during the
development stage (275,528) (9,754,941) (16,871,570)
--------- ----------- ------------
(124,836) (1,155,964) 2,607,240
--------- ----------- ------------
$ 17,475 $ 806,555 $ 3,047,669
========= =========== ============
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE> F-4
<TABLE>
Payforview.com Corp. and Subsidiaries
(formerly Sierra Gold Corporation)
(a development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
<S> <C> <C> <C>
Period from Cumulative
incorporation amounts from
on April 6, April 6, 1998
1998 to Year ended (inception) to
December 31, December 31, December 31,
1998 1999 1999
------------ ------------ -------------
Costs and expenses
Selling, general and administrative
Expenses $ 275,528 $ 2,240,097 $ 2,515,625
Amortization of licenses and
Goodwill - 362,303 362,303
Loss on impairment - 4,247,022 4,247,022
Interest expense - 348,631 348,631
Interest income - - -
----------- ----------- -----------
Total costs and expenses 275,528 7,198,053 7,473,581
----------- ----------- -----------
Loss from continuing
operations (275,528) (7,198,053) (7,473,581)
----------- ----------- -----------
Discontinued operations (Street
Solid Records)
Loss from operations (1,056,167) (1,056,167)
Loss on disposal - (1,225,193) (1,225,193)
----------- ----------- -----------
NET LOSS $ (275,528) $(9,479,413) $(9,754,941)
=========== =========== ===========
Basic and diluted loss per share:
Continuing operations $ (.03) $ (.39) $ (.49)
Discontinued operations - (.13) (.15)
----------- ----------- -----------
Basic and diluted loss per share $ (.03) $ (.52) $ (.64)
=========== =========== ===========
Weighted-average shares outstanding 8,424,087 18,284,185 15,321,804
=========== =========== ===========
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
Payforview.com Corp. and Subsidiaries
(formerly Sierra Gold Corporation)
(a development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS (continued)
<S> <C> <C> <C>
Cumulative
amounts from
Six months ended April 6, 1998
June 30, (inception) to
--------------------------- June 30,
1999 2000 2000
------------ ------------ -------------
(unaudited) (unaudited) (unaudited)
(As Restated) (As Restated)
Costs and expenses
Selling, general and administrative
Expenses $ 1,013,131 $ 4,977,289 $ 7,492,914
Amortization of licenses and
Goodwill 205,738 13,598 375,901
Loss on impairment 2,821,500 - 4,247,022
Investment expense - 2,400,000 2,400,000
Interest expense 334,795 - 356,715
Interest income (8,084) (74,107) (82,191)
----------- ----------- ------------
Total costs and expenses 4,367,080 7,316,780 14,790,361
----------- ----------- ------------
Loss from continuing operations (4,367,080) (7,316,780) (14,790,361)
----------- ----------- ------------
Discontinued operations (Street
Solid Records)
Loss from operations (674,761) - (1,056,167)
Loss on disposal - - (1,225,193)
----------- ----------- ------------
Loss from discontinued operations (674,761) - (2,281,360)
----------- ----------- ------------
Loss before extraordinary item (5,041,841) (7,316,780) (17,022,119)
Extraordinary item - gain on
extinguishment of debt (Note H) - 200,151 200,151
----------- ----------- ------------
NET LOSS $(5,041,841) $(7,116,629) $(16,871,570)
=========== =========== ============
Basic and diluted loss per share:
Continuing operations $ (.29) $ (.13) $ (.60)
Discontinued operations (.05) - (.09)
Extraordinary item - - -
----------- ----------- ------------
Basic and diluted loss per share $ (.34) $ (.13) $ (.69)
=========== =========== ============
Weighted-average shares outstanding 14,865,914 56,193,606 24,426,661
=========== =========== ============
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE> F-5
<TABLE>
Payforview.com Corp. and Subsidiaries
(formerly Sierra Gold Corporation)
(a development stage company)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Years ended December 31, 1999 and 1998
and six months ended June 30, 2000 (unaudited) (As Restated)
<S> <C> <C> <C> <C> <C>
Deficit,
accumulated
Common Stock issued Additional during the
--------------------- paid-in development
Number Amount capital stage Total
---------- ------ ---------- ----------- -----------
Balance,
April 6, 1998 - $ - $ - $ - $ -
Capital stock of Voyager
International
Entertainment Inc.
issued for services 3,800,000 380 37,620 - 38,000
Capital stock of Voyager
International
Entertainment Inc.
issued for acquisition
of Voyager Film
Sales Inc. 200,000 20 180 - 200
Capital stock of Voyager
International Entertainment
Inc. issued for cash 327,131 33 112,459 - 112,492
Net loss (275,528) (275,528)
---------- ------ ---------- ----------- -----------
Balance,
December 31, 1998 4,327,131 433 150,259 (275,528) (124,836)
Capital stock of
Payforview.com Corp.
at January 5, 1999 3,750,000 375 625 - 1,000
Issuance of shares for
acquisition of
Voyager International
Entertainment Inc. 7,788,840 779 781 1,560
Issuance of shares for
acquisition of
Voyager International
Entertainment, Inc. for
potential commission 1,500,000 150 (150) -
Cancellation of
Voyager shares (4,327,131) (433) 433 -
Issuance of shares for
acquisition of Squadron
One Records and creation
of Street Solid
Records, Inc. 1,173,509 117 1,598,163 1,598,280
Issuance of shares for
acquisition of
licenses and rights 1,102,500 110 3,067,290 3,067,400
Issuance of shares for
services 122,000 12 77,824 77,836
Issuance of shares for
consulting services 1,800,000 180 652,320 652,500
Issuance of shares for
consulting services 333,333 33 49,967 50,000
Issuance of shares for
financial advisor
services 1,800,000 180 1,386,696 1,386,876
Issuance of shares for
acquisition of Software 200,000 20 291,980 292,000
Issuance of shares for
advertising 200,000 20 59,980 60,000
Issuance of shares upon
conversion of debt 22,837,005 2,284 825,216 827,500
Allocation of proceeds
of convertible debt to
additional paid-in capital 333,333 333,333
Issuance of shares
for cash 540,540 55 99,945 100,000
Shares held in escrow
with attorney relating
to debentures 250,000 25 (25)
Net loss (9,479,413) (9,479,413)
---------- ------ ---------- ----------- -----------
Balance,
December 31, 1999 43,397,727 $4,340 $8,594,637 $(9,754,941) $(1,155,964)
========== ====== ========== =========== ===========
</TABLE>
<PAGE> F-6
<TABLE>
Payforview.com Corp. and Subsidiaries
(formerly Sierra Gold Corporation)
(a development stage company)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (continued)
Years ended December 31, 1999 and 1998
and six months ended June 30, 2000 (unaudited) (As Restated)
<S> <C> <C> <C> <C> <C>
Deficit,
accumulated
Common Stock issued Additional during the
--------------------- paid-in development
Number Amount capital stage Total
---------- ------ ---------- ----------- -----------
Issuance of shares for
cash, net of share
issuance costs
(unaudited) 2,800,000 $ 361 $5,381,139 $ - $ 5,381,500
Issuance of shares for
convertible debt
(unaudited) 6,900,000 690 171,810 - 172,500
Shares issued to
officers and consultants
for services (unaudited) 3,000,000 300 2,933,700 - 2,934,000
Shares issued for
acquisition of MAS
Acquisition Corporation
(unaudited) 335,000 33 (2) - 31
Shares issued for
transaction costs for MAS
Acquisition Corporation
(unaudited) 335,000 34 375,166 - 375,200
Shares issued for
investment in Turnkey
Entertainment
(unaudited) 2,000,000 200 999,800 1,000,000
Proceeds from sale of
1,280,000 shares of the
1,500,000 shares held in
escrow (unaudited) - - 899,602 899,602
Cancellation of remaining
escrow shares (unaudited) (220,000) (22) 22 - -
Additional compensation
for services performed
(unaudited) - - 117,000 - 117,000
Net loss for the six
months ended June 30, 2000
(unaudited) - - - (7,116,629) (7,116,629)
---------- ------ ---------- ----------- -----------
Balance,
June 30, 2000
(unaudited) 59,357,727 $5,936 $19,472,874 $(16,871,570) $ 2,607,240
========== ====== ========== =========== ===========
The accompanying notes are an integral part of this statement.
</TABLE>
<PAGE> F-7
<TABLE>
Payforview.com Corp. and Subsidiaries
(formerly Sierra Gold Corporation)
(a development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<S> <C> <C> <C>
Period from Cumulative
incorporation amounts from
on April 6, April 6, 1998
1998 to Year ended (inception) to
December 31, December 31, December 31,
1998 1999 1999
------------ ------------ -------------
Cash flows from operating activities
Loss from continuing operations $ (275,528) $(7,198,053) $(7,473,581)
Adjustments to reconcile net loss
to cash used in operating activities
Depreciation 1,899 4,536 6,435
Amortization of licenses and goodwill - 362,303 362,303
Issuance of common stock for services 38,000 4,865,700 4,903,700
Noncash interest expense - 333,333 333,333
Changes in other operating assets
and liabilities
Prepaid expenses (2,802) (60,800) (63,602)
Due from related party (7,648) 7,648
Other assets 200 200
Increase in accounts payable 82,893 128,475 211,368
----------- ----------- -----------
Net cash used in operating
activities of continuing
operations (162,986) (1,556,858) (1,719,844)
----------- ----------- -----------
Net cash used in operating
activities of discontinued
operations - (657,080) (657,080)
----------- ----------- -----------
Cash flows from investing activities
Payments for website costs - - -
Payment of settlement costs
relating to discontinued operations - - -
Proceeds from sale of discontinued
operations - 250,000 250,000
Acquisition of fixed assets (8,924) (7,291) (16,215)
----------- ----------- -----------
Net cash (used in) provided
by investing activities (8,924) 242,709 233,785
----------- ----------- -----------
Cash flows from financing activities
Issuance of common stock 112,492 100,000 212,492
Advances for common stock - 222,500 222,500
Proceeds from loan payable 59,418 1,050,151 1,050,151
Repayment of loan payable - (59,418) -
Proceeds from convertible debenture - 1,000,000 1,000,000
----------- ----------- -----------
Net cash provided by
financing activities 171,910 2,313,233 2,485,143
----------- ----------- -----------
Net change in cash and
cash equivalents
during the period - 342,004 342,004
Cash and cash equivalents,
beginning of period - - -
----------- ----------- -----------
Cash and cash equivalents,
end of period $ - $ 342,004 $ 342,004
=========== =========== ===========
Supplemental disclosures
of cash flow information:
Cash paid during the period for
Interest $ - $ 15,298 $ 15,298
Supplemental disclosures of noncash,
financing and investing activities (Note L)
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
Payforview.com Corp. and Subsidiaries
(formerly Sierra Gold Corporation)
(a development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
<S> <C> <C> <C>
Cumulative
amounts from
Six months ended April 6, 1998
June 30, (inception) to
--------------------------- June 30,
1999 2000 2000
------------ ------------ -------------
(unaudited) (unaudited) (unaudited)
(As Restated) (As Restated)
Cash flows from operating activities
Loss from continuing operations $(4,367,080) $(7,316,780) $(14,790,361)
Adjustments to reconcile net loss
to cash used in operating activities
Depreciation 1,000 7,585 14,020
Amortization of licenses and
goodwill 205,738 13,598 375,901
Issuance of common stock for services
and transaction costs 2,888,612 3,426,231 8,329,931
Noncash interest expense 333,333 - 333,333
Noncash investment expense - 2,400,000 2,400,000
Changes in other operating assets
and liabilities
Prepaid expenses (14,274) (44,968) (108,570)
Due from related party (7,648) - -
Other assets - (177,840) (177,640)
Increase in accounts payable 236,360 (18,939) 192,429
----------- ----------- -----------
Net cash used in operating
activities of continuing
operations (708,663) (1,711,113) (3,430,957)
----------- ----------- -----------
Net cash used in operating
activities of discontinued
operations (375,058) - (657,080)
----------- ----------- -----------
Cash flows from investing activities
Payments for website costs - (291,072) (291,072)
Payment of settlement costs
relating to discontinued operations - (58,000) (58,000)
Proceeds from sale of discontinued
operations - - 250,000
Investment in equity investee - (1,400,000) (1,400,000)
Acquisition of fixed assets (5,518) (124,146) (140,361)
----------- ----------- -----------
Net cash used in investing
activities (5,518) (1,873,218) (1,639,433)
----------- ----------- -----------
Cash flows from financing activities
Issuance of common stock - 5,159,000 5,593,992
Advances for common stock - - -
Proceeds from loan payable 994,593 - 1,050,151
Repayment of loan payable (59,418) - -
Proceeds from convertible debenture 178,000 - 1,000,000
----------- ----------- -----------
Net cash provided by
financing activities 1,113,175 5,159,000 7,644,143
----------- ----------- -----------
Net change in cash and
cash equivalents
during the period 23,936 1,574,669 1,916,673
Cash and cash equivalents,
beginning of period - 342,004 -
----------- ----------- -----------
Cash and cash equivalents,
end of period $ 23,936 $ 1,916,673 $ 1,916,673
=========== =========== ===========
Supplemental disclosures
of cash flow information:
Cash paid during the period for
Interest $ 1,462 $ - $ 15,298
=========== =========== ===========
Supplemental disclosures of noncash,
financing and investing activities (Note L)
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE> F-8
Payforview.com Corp. and Subsidiaries
(formerly Sierra Gold Corporation)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Period from April 6, 1998 (inception) to December 31, 1998,
year ended December 31, 1999 and six months
ended June 30, 1999 and 2000 (Unaudited) (As Restated)
NOTE A - ORGANIZATION OF THE COMPANY AND
NATURE OF BUSINESS
Sierra Gold Corporation was incorporated on August 26, 1988. On
January 4, 1999, Sierra Gold Corporation changed its name to
Payforview.com Corp. (the "Company"). On January 5, 1999, the
Company issued 7,788,840 common shares (plus 1,500,000 shares
held in trust as commission) (see Note H), in exchange for the
issued and outstanding shares of Voyager International
Entertainment Inc. ("Voyager"). Voyager was incorporated on
April 6, 1998 in Nevada. As a result of the share exchange,
control of the combined companies passed to the former
shareholders of Voyager. This type of share exchange has been
accounted for as a capital transaction accompanied by a
recapitalization of Voyager. Recapitalization accounting results
in consolidated financial statements of Voyager being issued
under the name of Payforview.com Corp. and Subsidiaries, but are
considered a continuation of Voyager. No goodwill or other
intangible assets were recognized in connection with such
recapitalization. (See Note D.)
On January 15, 1999, the Company implemented a two-for-one
forward stock split. On April 9, 1999, the Company implemented a
three-for-two forward stock split. All share and per share
amounts in the financial statements have been retroactively
restated to give effect to the above splits. Loss per share
information reflects the recapitalization.
The Company is considered a development stage company as its
planned principal operations have not yet commenced. Presently,
the Company is developing an internet-based website to distribute
movies, music, live events and sports events direct to consumers
on a pay-for-view basis.
NOTE B - BASIS OF PRESENTATION
The accompanying financial statements have been prepared on a
going concern basis, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of
business. The Company has not generated any revenue from its
planned businesses and has generated losses from continuing
operations, net losses and an accumulated deficit for all periods
presented. As shown in the financial statements during the
period from April 6, 1998 (inception) to December 31, 1998 and
the year ended December 31, 1999, the Company incurred losses of
<PAGE> F-9
Payforview.com Corp. and Subsidiaries
(formerly Sierra Gold Corporation)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Period from April 6, 1998 (inception) to December 31, 1998,
year ended December 31, 1999 and six months
ended June 30, 1999 and 2000 (Unaudited) (As Restated)
NOTE B (continued)
$275,528 and $9,479,413, respectively. As of December 31, 1999
and 1998, the Company had deficits accumulated in the development
stage of $9,754,941 and $275,528, respectively. These factors,
among others, raise substantial doubt about the Company's ability
to continue as a going concern for a reasonable period of time.
These financial statements do not include any adjustments that
might result from this uncertainty.
Management has obtained additional equity financing in the amount
of $5,415,000 (Note O.1) in the first quarter of 2000 and the
Company intends to file a shelf registration in the future
through private placements of shares. As of June 30, 2000, the
Company had approximately $2.0 million in cash. Management
believes this will be adequate for at least the next twelve
months.
The Company has restated its financial statements as of and for
the six months ended June 30, 2000 to reflect the expense of an
investment in a development stage company (see Note O).
NOTE C - SIGNIFICANT ACCOUNTING POLICIES
1. Principles of Consolidation
These consolidated financial statements include the accounts
of Payforview.com Corp. and Subsidiaries (formerly Sierra
Gold Corporation) and its wholly-owned subsidiaries, from
their respective dates of acquisition (see Notes A and D).
All significant intercompany balances and transactions have
been eliminated.
As discussed more thoroughly in Note D, Street Solid is
presented as discontinued operations.
2. Cash Equivalents
Cash equivalents consist of highly liquid investments with a
maturity of three months or less when purchased.
<PAGE> F-10
Payforview.com Corp. and Subsidiaries
(formerly Sierra Gold Corporation)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Period from April 6, 1998 (inception) to December 31, 1998,
year ended December 31, 1999 and six months
ended June 30, 1999 and 2000 (Unaudited) (As Restated)
NOTE C (continued)
3. Stock-based Compensation
The Company has adopted Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation"
("SFAS No. 123"). As permitted under SFAS No. 123, the
Company has elected to follow Accounting Principles Board
Opinion No. 25 ("APB No. 25"), "Accounting for Stock Issued
to Employees," and related interpretations in accounting for
its employee stock options. Under APB No. 25, when the
exercise price of employee stock options equals or exceeds
the market price of the underlying stock on the date of
grant, no compensation expense is recorded. However, with
respect to common stock and options granted to nonemployees,
the Company records expense equal to the fair value of the
common stock or option on the measurement date, which
generally is the date of completion of services. Expenses
relating to such options or stock are estimated based upon
fair value as of the end of each reporting period prior to
the measurement date.
4. Income Taxes
Income taxes are provided in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for
Income Taxes." A deferred tax asset or liability is
recorded for temporary differences between financial and tax
reporting and net operating loss carryforwards.
Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than
not that some portion or all of the deferred tax assets will
not be realized. Deferred tax assets and liabilities are
adjusted for the effects of changes in tax laws and rates on
the date of enactment.
5. Use of Estimates
The preparation of consolidated 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
<PAGE> F-11
Payforview.com Corp. and Subsidiaries
(formerly Sierra Gold Corporation)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Period from April 6, 1998 (inception) to December 31, 1998,
year ended December 31, 1999 and six months
ended June 30, 1999 and 2000 (Unaudited) (As Restated)
NOTE C (continued)
the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates.
6. Financial Instruments
The Company's financial instruments consist of cash and cash
equivalents, accounts payable, loans payable and convertible
debentures. The fair values of these financial instruments
approximate their carrying values, due to the short-term
maturities of such items.
7. Reporting on Costs of Start-up Activities
Effective January 1, 1999, the Company adopted Statement of
Position 98-5 ("SOP 98-5"), "Reporting on the Costs of
Start-Up Activities," which requires costs of start-up
activities and organization costs to be expensed as
incurred. The cumulative effect of adopting this principle
was immaterial.
8. Foreign Currency Transactions
Transaction amounts denominated in foreign currencies are
converted into United States currency at exchange rates
prevailing at transaction dates. Gains and losses from
foreign currency transactions are recorded as operating
expenses and are immaterial.
9. Revenue Recognition
The Company is currently in the development stage and
therefore has no revenues. Revenues from services will be
recognized at the time the services are provided to the
customer.
<PAGE> F-12
Payforview.com Corp. and Subsidiaries
(formerly Sierra Gold Corporation)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Period from April 6, 1998 (inception) to December 31, 1998,
year ended December 31, 1999 and six months
ended June 30, 1999 and 2000 (Unaudited) (As Restated)
NOTE C (continued)
10. Fixed Assets
Fixed assets are stated at cost. Depreciation is based on
the estimated useful lives of the assets and is computed
using the straight-line method as follows:
Computer equipment 3 years
Furniture and office equipment 5 years
Software 3 years
11. Intangible Assets
Intangible assets consist of goodwill, licenses and rights.
Goodwill represents the excess of acquisition costs over the
fair market value of the net assets of businesses acquired
and is being amortized on a straight-line basis over its
estimated useful life of five years. Costs of licenses and
rights are deferred and amortized on a straight-line basis
over their estimated useful lives, which are generally one
to five years.
12. Long-lived Assets and Impairment of Long-lived Assets
The Company's policy is to review all long-lived assets,
including goodwill, for impairment whenever events or
changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. In such circumstances,
the Company will estimate the future cash flows expected to
result from the use of the asset and its eventual
disposition. Future cash flows are the future cash inflows
expected to be generated by an asset less the future cash
outflows expected to be necessary to obtain those inflows.
If the sum of the expected future cash flows (undiscounted
and without interest charges) is less than the carrying
amount of the asset, the Company would recognize an
impairment loss to adjust to the fair value of the asset.
<PAGE> F-13
Payforview.com Corp. and Subsidiaries
(formerly Sierra Gold Corporation)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Period from April 6, 1998 (inception) to December 31, 1998,
year ended December 31, 1999 and six months
ended June 30, 1999 and 2000 (Unaudited) (As Restated)
NOTE C (continued)
13. Loss per Share
The Company computes net loss per share in accordance with
Statement of Financial Accounting Standards No. 128 ("SFAS
No. 128"), "Earnings Per Share." Under the provisions of
SFAS No. 128, basic net loss per share is computed by
dividing the net loss for the period by the weighted-average
number of common shares outstanding during the period.
Diluted net loss per share is computed by dividing the net
loss for the period by the weighted-average number of common
and common equivalent shares outstanding during the period.
However, as the Company generated net losses in all periods
presented, common equivalent shares, composed of incremental
common shares issuable upon the conversion of debentures,
are not reflected in diluted net loss per share because such
shares are antidilutive. As of December 31, 1999, $172,500
of debentures were not yet converted. Such debentures were
converted into 6,900,000 shares of common stock in January
and February 2000. There were no outstanding options or
warrants as of December 31, 1998 or 1999, or as of June 30,
1999 or 2000.
All per share amounts are calculated to reflect the
Company's change in capital structure for all periods
presented.
14. Comprehensive Income
The Company has adopted Statement of Financial Accounting
Standards No. 130 ("SFAS No. 130"), "Reporting Comprehensive
Income." This statement establishes rules for the reporting
of comprehensive income and its components. The Company has
no transactions that are required to be reported as other
comprehensive income.
15. New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards
No. 133 ("SFAS No. 133"), "Accounting for Derivative
<PAGE> F-14
Payforview.com Corp. and Subsidiaries
(formerly Sierra Gold Corporation)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Period from April 6, 1998 (inception) to December 31, 1998,
year ended December 31, 1999 and six months
ended June 30, 1999 and 2000 (Unaudited) (As Restated)
NOTE C (continued)
Instruments and Hedging Activities," which establishes
accounting and reporting standards for derivative
instruments and for hedging activities. SFAS No. 133, as
amended by SFAS No. 137, is effective for all fiscal
quarters of fiscal years beginning after June 15, 2000. The
Company does not anticipate that the adoption of the
statement will have a material impact on its financial
statements.
16. Interim Financial Information (Unaudited)
Information in the accompanying condensed consolidated
financial statements for the six months ended June 30, 1999
and 2000 and the cumulative information from April 6, 1998
(inception) through June 30, 2000 is unaudited. The
condensed consolidated financial statements as of June 30,
2000 and for the six months ended June 30, 1999 and 2000 and
the cumulative amounts from April 6, 1998 (inception)
through June 30, 2000 have been prepared in accordance with
generally accepted accounting principles applicable to
interim financial information and the rules and regulations
promulgated by the Securities and Exchange Commission. In
the opinion of the Company's management, the June 30, 1999
and 2000 unaudited condensed consolidated interim financial
statements include all adjustments, consisting of normal
recurring adjustments necessary for a fair presentation of
such financial statements. The results of operations for
the six months ended June 30, 1999 and 2000 are not
necessarily indicative of the results to be expected for the
entire year.
17. Reclassifications
Certain 1998 information has been reclassified to conform
with the current year's presentation.
<PAGE> F-15
Payforview.com Corp. and Subsidiaries
(formerly Sierra Gold Corporation)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Period from April 6, 1998 (inception) to December 31, 1998,
year ended December 31, 1999 and six months
ended June 30, 1999 and 2000 (Unaudited) (As Restated)
NOTE D - ACQUISITIONS
1. Voyager Acquisition (Note A)
On January 5, 1999, Payforview acquired all the issued and
outstanding shares of Voyager in exchange for 7,788,840 of
its shares (plus 1,500,000 shares held in trust as a
commission, see Note H). This transaction has been
accounted for as a capital transaction accompanied by a
recapitalization of Voyager rather than a business
combination. Therefore, the total cost of the acquisition
represents the net book value of the acquired liabilities.
No goodwill or other intangibles have been recognized in
connection with this transaction. The consolidated
financial statements include the assets, liabilities and
operations of Voyager for all periods presented.
Liabilities acquired were $1,450, which pertained to
accounts payable and accrued expenses.
2. Street Solid Acquisition and Disposition
On January 6, 1999, Payforview acquired all the issued and
outstanding shares of Street Solid Records Inc. ("Street
Solid"), a Nevada corporation. As consideration, Payforview
issued 1,173,509 common shares. The acquisition was
accounted for using the purchase method. The operations of
Street Solid are included in the consolidated financial
statements subsequent to the date of acquisition and through
the date of disposition. The purchase price was determined
based on the fair market value of the Company's common
stock.
The total purchase price was allocated as follows:
Total purchase price $1,598,280
Liabilities assumed in business combination 198,000
----------
Excess purchase price $1,796,280
==========
The Company has allocated excess purchase price to
intangible assets, including record contracts and goodwill.
Intangible assets and goodwill are being amortized over five
years.
Pro forma information has not been provided as the
acquisition is not significant.
<PAGE> F-16
Payforview.com Corp. and Subsidiaries
(formerly Sierra Gold Corporation)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Period from April 6, 1998 (inception) to December 31, 1998,
year ended December 31, 1999 and six months
ended June 30, 1999 and 2000 (Unaudited) (As Restated)
NOTE D (continued)
On October 29, 1999, the Company sold an aggregate of 81% of
Street Solid in two separate transactions. In the first
transaction, the Company sold 70% of Street Solid for
aggregate consideration of $192,000 (net of an additional
$58,000 paid by the Company to them in 2000). In the second
transaction, the Company sold 11% of Street Solid, in
exchange for a note receivable of $39,000. Since there was
doubt about the collectibility of such note, the Company
wrote-off such note at December 31, 1999. The operations of
Street Solid have been reported as a discontinued operation
for the period from January 6, 1999 through October 29,
1999, which was the date of disposal. Additionally, a loss
on disposal of operations, which included the write-off of
intangible assets and goodwill of $1,225,193, was recognized
in connection with the disposal of Street Solid.
Summarized financial information for Street Solid was as
follows:
Period from
January 6, 1999
through
October 29, 1999
----------------
Net revenues $ 169,000
============
Net loss $ (1,056,167)
============
As of December 31, 1999, the following liabilities relating
to Street Solid remained on the books of the Company.
Amounts due to Destiny Music pursuant to
contract assumed by Payforview $ 198,000
Settlement amounts paid to purchaser of
Street Solid in 2000 58,000
----------
$ 256,000
==========
The liability for $198,000 arises from a transaction
occurring prior to Payforview's acquisition of Street Solid.
The Company is currently a defendant in a lawsuit from
Destiny seeking to recover the full $198,000.
<PAGE> F-17
Payforview.com Corp. and Subsidiaries
(formerly Sierra Gold Corporation)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Period from April 6, 1998 (inception) to December 31, 1998,
year ended December 31, 1999 and six months
ended June 30, 1999 and 2000 (Unaudited) (As Restated)
NOTE D (continued)
The $58,000 arose from a settlement agreement signed in
March 2000 between Payforview and the purchaser of Street
Solid. In March 2000, the Company remitted $58,000 to the
purchaser of Street Solid.
As of October 29, 1999, the Company began accounting for its
investment in Street Solid under the cost method of
accounting.
NOTE E - LICENSES AND RIGHTS
1. Reel Media - In February 1999, the Company entered into an
agreement with Reel Media International to acquire the
license and internet broadcast rights to a 750-film library.
As consideration for the license rights, the Company issued
52,500 common shares at a value of $101,150, determined
based on the market price of the common stock of the
Company. The term of the agreement is for four years. As
of December 31, 1999, the Company's website was not
completed. At the same time, it became apparent to the
Company that the technology for showing such movies on the
internet is not yet widely available in the mass market.
Therefore, management determined that an event has occurred
that indicates that such asset may be impaired. Management
determined that the expected future cash flows from the
license agreement, on an undiscounted basis, will not exceed
the carrying value of the license. The Company reviewed the
expected future cash flows on a discounted basis and
determined that the fair value of the licenses was
approximately $40,000. Accordingly, the Company recorded an
impairment loss of approximately $40,000 as of December 31,
1999.
2. Bacchus - In March 1999, the Company issued 1,012,500 common
shares to Bacchus Entertainment Ltd. at a value of
$2,821,500, as determined by the market price of shares of
the Company's common stock, as consideration for the
purchase of various rights and interests in feature films
and motion picture productions. Management determined that
the rights it purchased did not exist, and believes that the
seller misrepresented the items available and breached the
contract. Therefore, the full value of the consideration
issued to Bacchus has been recorded as an impairment loss as
of December 31, 1999. (See Note P.)
<PAGE> F-18
Payforview.com Corp. and Subsidiaries
(formerly Sierra Gold Corporation)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Period from April 6, 1998 (inception) to December 31, 1998,
year ended December 31, 1999 and six months
ended June 30, 1999 and 2000 (Unaudited) (As Restated)
NOTE E (continued)
3. Sportsworld - In April 1999, the Company entered into an
agreement with Sportsworld Network (Australia) Pty. Limited
to acquire the nonexclusive, worldwide license rights to
broadcast various sports-related filmclips and highlights.
As consideration for the license rights, the Company issued
37,500 common shares at a value of $144,750, as determined
by the market price of shares of the Company's common stock.
The agreement also provides for a royalty of 8% of gross
revenues to be paid by the Company. As of December 31,
1999, the Company's website was not yet ready for use.
Because of the delay in completion of the website and the
short-term nature of the agreement, the Company believes
that an event has occurred that would indicate impairment.
The license agreement expired July 1, 2000. The Company
charged the unamortized balance at December 31, 1999 of
$72,375 to selling, general and administrative expenses
since the Company was not able to broadcast these programs
prior to expiration of the licenses.
NOTE F - FIXED ASSETS
Fixed assets consist of the following:
December 31,
1998 1999
Computer equipment $ 856 $ 856
Furniture and office equipment 8,068 13,460
Software licenses (websites) - 342,000
-------- --------
8,924 356,316
Accumulated depreciation
and amortization 1,899 4,536
-------- --------
$ 7,025 $351,780
======== ========
<PAGE> F-19
Payforview.com Corp. and Subsidiaries
(formerly Sierra Gold Corporation)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Period from April 6, 1998 (inception) to December 31, 1998,
year ended December 31, 1999 and six months
ended June 30, 1999 and 2000 (Unaudited) (As Restated)
NOTE G - INTANGIBLE ASSETS
Intangible assets consist of the following at
December 31, 1999:
Licenses $134,052
Accumulated amortization (94,883)
--------
$ 39,169
========
NOTE H - LOAN PAYABLE
Amounts due under the loans payable represent advances
during 1999 from a third party to cover certain operating
expenses. The advances are noninterest-bearing and payable
on demand.
In May 2000, the Company settled this obligation through
liquidation of approximately 1,280,000 shares of the
1,500,000 shares held by the trustee in connection with the
Voyager acquisition (Note D). Such shares were sold to
unrelated third-parties for aggregate proceeds of $899,602,
of which $850,000 were distributed to the holders of the
loan payable and in payment of transaction costs. On the
date of the transaction, the Company recorded a gain on
extinguishment of debt of approximately $250,000 which will
be reflected as an extraordinary item during the second
quarter of 2000. The remaining 220,000 shares held in trust
are the property of the Company and the remaining proceeds
from the sale of the shares of $49,602 became property of
the Company. The proceeds of the sale of such shares were
included in additional paid-in capital during the second
quarter of 2000.
NOTE I - CONVERTIBLE DEBENTURES
In June 1999, the Company entered into a Debenture Agreement
and Securities Subscription Agreement with BSD Holdings
L.L.C. ("BSD").
Under the agreement, the Company can issue up to $1,000,000
of 2% Series A senior subordinated convertible redeemable
debentures. The principal sum outstanding plus accrued
interest calculated at a rate of 2% per annum is due at
maturity on June 25, 2001.
<PAGE> F-20
Payforview.com Corp. and Subsidiaries
(formerly Sierra Gold Corporation)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Period from April 6, 1998 (inception) to December 31, 1998,
year ended December 31, 1999 and six months
ended June 30, 1999 and 2000 (Unaudited) (As Restated)
NOTE I (continued)
Each $10,000 debenture is convertible immediately upon
issuance into common shares of the Company at the option of
the holder at a conversion price equal to 75% of the closing
bid price of the Company's common stock on the OTC Bulletin
Board for the day immediately preceding the date of the
notice of conversion.
Payforview has the option to redeem the debentures at 125%
of the principal amount to the extent conversion has not
occurred.
Under the agreement, Payforview has issued $1,000,000 of
debentures to BSD at various dates during 1999. An
aggregate of $827,500 of the outstanding debentures were
converted during 1999, resulting in the issuance of
22,837,005 common shares of Payforview. As of December 31,
1999, $172,500 of debentures remained outstanding which were
converted into 6,900,000 shares of common stock in January
2000.
Because the debentures contained a beneficial conversion
feature, the Company recorded a charge to interest expense
(with a credit to additional paid-in capital) for $333,333
during 1999. Since the debt was convertible immediately
upon issuance, a charge to operations for the entire
beneficial conversion feature was recorded in 1999.
NOTE J - CAPITAL STOCK
1. Common Stock
The Company has one series of common shares with a par value
of $.0001 per share. Each share is entitled to one vote.
2. Cash Received in Advance of Stock Issuance
In December 1999, the Company received $222,500 in advance
of a subscription agreement dated January 15, 2000 (see Note
O.1). These advance payments have been reflected as other
liabilities as of December 31, 1999.
<PAGE> F-21
Payforview.com Corp. and Subsidiaries
(formerly Sierra Gold Corporation)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Period from April 6, 1998 (inception) to December 31, 1998,
year ended December 31, 1999 and six months
ended June 30, 1999 and 2000 (Unaudited) (As Restated)
NOTE J (continued)
3. Other Common Share Issuances
a. The Company issued an aggregate of 200,000 shares in
payments for the license and rights for website software.
The value of these shares was determined to be $292,000
based on the market price of the Company's common stock on
the date of issuance. These software license costs are
included in fixed assets as of December 31, 1999.
b. The Company issued an aggregate of 1,800,000 shares to an
investment banker in exchange for financial advisory
services. This investment banker is the owner of the
company that purchased the 70% share of Street Solid Records
(see Note D). The shares were issued in anticipation of
services which were never received. The Company and the
investment banker signed a mutual release of liabilities and
obligations in March 2000. These shares were valued at
$1,386,876, based on the market value on the date of grant.
The value of these shares has been charged to expense as a
loss from impairment.
c. The Company issued an aggregate of 333,333 shares of common
stock to a consultant in exchange for services pursuant to a
contract which extends from July 1, 1999 through June 30,
2000. The value of the shares will not be determinable
until completion of the service period. These shares were
valued at $100,000, based on the market price as of December
31, 1999. One-half of the expense relating to such stock,
or $50,000, has been charged to operations and reflected in
selling, general and administrative expenses in 1999.
d. The Company on behalf of Street Solid issued 200,000 shares
to a Company in exchange for eight ads in their magazine.
These shares were valued at $60,000, based on the market
price on October 29, 1999, which is the date the services
had been completed. Upon the sale of Street Solid, the
Company forfeited future rights to these ads.
e. The Company issued an additional 122,000 shares to various
parties in exchange for services. These shares were valued
at $77,836, based on the market price of the Company's
common stock when services had been completed, or when
services had not yet been completed, as of December 31,
1999. The value of these shares has been charged to
selling, general and administrative expenses.
<PAGE> F-22
Payforview.com Corp. and Subsidiaries
(formerly Sierra Gold Corporation)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Period from April 6, 1998 (inception) to December 31, 1998,
year ended December 31, 1999 and six months
ended June 30, 1999 and 2000 (Unaudited) (As Restated)
NOTE J (continued)
f. The Company issued 1,800,000 shares to a consultant pursuant
to a consulting agreement. Since the shares are not
contingent on future performance, the value of the shares is
determinable on the date of grant. The value of these
shares was calculated based upon the market value of the
Company's common stock on the date of the agreement. An
aggregate charge of $652,500 has been charged to selling,
general and administrative expenses. (See Note N-3.)
NOTE K - RELATED PARTY TRANSACTIONS
During the period from April 6, 1998 to December 31, 1998, the
Company (Voyager) issued 3,800,000 shares of common stock at a
value of $38,000 to the founders of the Company in order to
reimburse them for a like amount of incorporation costs. In
addition, the Company (Voyager) issued 200,000 shares of common
stock at a value of $200 to companies controlled by directors for
the acquisition of Voyager Film Sales Inc. (see Note A).
During 1999, the Company sold 11% of Street Solid to a related
party (see Note D).
NOTE L - SUPPLEMENTAL DISCLOSURES OF NONCASH OPERATING,
FINANCING AND INVESTING ACTIVITIES
The significant transactions for the six months ended June 30,
2000 were as follows:
1. In January 2000, holders of $172,500 of convertible
debentures exchanged such debentures into 6,900,000 shares
of the Company's common stock
2. In February 2000, the Company issued an aggregate of
3,000,000 shares of common stock valued at $2,934,000 to
officers and consultants. (See Note O-3)
3. In February 2000, the Company issued 335,000 shares in
payment of transaction costs relating to the MAS acquisition
discussed in Note O-4.
4. As of June 30, 2000, the Company recognized an aggregate of
$117,000 of additional compensation relating to stock awards
granted in 1999, for which services were still being
performed during the six months ended June 30, 2000.
5. In May 2000, the Company invested 2,000,000 shares as part
of its investment in Turn-key Entertainment (see Note O).
The significant noncash transactions for the year ended December
31, 1999 were as follows:
1. In order to complete the acquisition of Voyager, the Company
issued 7,788,840 common shares, (and a commission of
1,500,000 shares) (see Note D).
2. The Company issued 1,173,509 common shares to acquire Street
Solid. The value of the shares issued was estimated to be
$1,598,280 (see Note H-2).
<PAGE> F-23
Payforview.com Corp. and Subsidiaries
(formerly Sierra Gold Corporation)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Period from April 6, 1998 (inception) to December 31, 1998,
year ended December 31, 1999 and six months
ended June 30, 1999 and 2000 (Unaudited) (As Restated)
NOTE L (continued)
In connection with such acquisition, liabilities assumed
were $198,000.
3. The Company issued 1,102,500 common shares valued at
$3,067,400 towards the acquisition of licenses and rights
(see Note E-1 -3).
4. The Company issued 4,055,333 common shares valued at
$2,167,212 for services rendered. (See Note J-3b. - e.)
5. The Company issued 200,000 shares valued at $292,000 towards
the acquisition of software. (See Note J-3a.)
6. The Company issued 200,000 shares valued at $60,000 for fees
incurred for advertising. (See Note J-3d.)
7. The Company issued 22,837,005 common shares upon the
conversion of $827,500 of convertible debentures. In
connection with such financing, the Company placed 250,000
shares in escrow. (Note I.)
The significant noncash transactions for the period from April 6,
1998 to December 31, 1998 were as follows:
1. The Company issued 3,800,000 shares of common stock valued
at $38,000 for reimbursement of incorporation costs.
2. The Company issued 200,000 shares of common stock valued at
$200 to acquire all of the issued and outstanding common
stock of Voyager Film Sales Inc.
<PAGE> F-24
Payforview.com Corp. and Subsidiaries
(formerly Sierra Gold Corporation)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Period from April 6, 1998 (inception) to December 31, 1998,
year ended December 31, 1999 and six months
ended June 30, 1999 and 2000 (Unaudited) (As Restated)
NOTE M - INCOME TAXES
The Company had net losses for tax purposes during the period
from April 6, 1998 (inception) to December 31, 1998 and the years
ended December 31, 1999 and 1998. Accordingly, no income tax
provision has been recorded in the financial statements.
The Company's total deferred tax asset is as follows:
December 31,
1999 1998
---------- ---------
Prepaid expenses $ 47,000 $ -
Net operating loss
carryforwards 2,008,000 104,701
Valuation allowance (2,055,000) (104,701)
---------- ---------
$ - $ -
========== =========
The Company has net operating loss carryforwards of approximately
$5,423,000. Pursuant to United States Federal income tax
regulations, the Company's ability to utilize this NOL may be
limited due to changes in ownership, as defined in the Internal
Revenue Code. The valuation allowance against the deferred tax
assets increased to $2,055,000 from $104,701 during the year
ended December 31, 1999, since the Company does not believe that
evidence is more likely than not that these benefits will be
realized.
The net operating loss carryforwards expire as follows:
2018 $ 275,000
2019 5,148,000
-----------
$ 5,423,000
===========
A reconciliation of income taxes computed at the Federal
statutory rate to the income taxes recorded in the Company's
financial statements is as follows:
<PAGE> F-25
Payforview.com Corp. and Subsidiaries
(formerly Sierra Gold Corporation)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Period from April 6, 1998 (inception) to December 31, 1998,
year ended December 31, 1999 and six months
ended June 30, 1999 and 2000 (Unaudited) (As Restated)
NOTE M (continued)
<TABLE>
<S> <C> <C> <C>
Cumulative
amounts for
Period the period
April 6, 1998 April 6, 1998
(inception) to Year ended (inception) to
December 31, December 31, December 31,
1998 1999 1999
------------ ------------ -------------
Federal tax benefit
at statutory rate $(94,000) $(3,223,000) $(3,317,000)
State and local taxes (10,701) (263,000) (273,701)
Loss from Street Solid 359,000 359,000
Bacchus impairment loss 959,000 959,000
Interest charge for
beneficial conversion
feature in convertible debt 113,000 113,000
------------ ------------ -------------
Change in valuation
allowance 104,701 2,055,000 2,159,701
Income taxes per
financial statements $ - $ - $ -
============ ============ =============
</TABLE>
NOTE N - COMMITMENTS AND CONTINGENCIES
1. Leases
The Company leases office space in New York and Vancouver,
B.C. under noncancellable operating leases which expire
through 2000. Rent expense for the years ended December 31,
1999 and 1998 was $71,967 and $29,015, respectively. The
remaining commitment under such lease at December 31, 1999
was $17,480.
In March 2000, the Company entered into a new lease in New
York City, which began on June 1, 2000. The lease has a
term of five years. The Company provided a security deposit
equal to $177,480 in connection with such lease.
<PAGE> F-26
Payforview.com Corp. and Subsidiaries
(formerly Sierra Gold Corporation)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Period from April 6, 1998 (inception) to December 31, 1998,
year ended December 31, 1999 and six months
ended June 30, 1999 and 2000 (Unaudited) (As Restated)
NOTE N (continued)
Future minimum rent commitments under the above lease are as
follows:
Year ending December 31,
2000 $ 88,920
2001 180,354
2002 185,457
2003 190,713
2004 196,126
Thereafter 99,437
---------
$ 941,005
=========
2. Agreements With Officers
The Company signed one-year agreements dated January 5, 1999
with three of its officers, providing aggregate annual
compensation of $180,000. These agreements were renewed on
January 3, 2000 for a period of one year, increasing the
aggregate annual compensation to $330,000. The agreements
contain other customary provisions.
3. Consulting Agreement
On October 1, 1999, the Company entered into a consulting
agreement with an individual, which expires on December 31,
2002, which provides to such consultant aggregate annual
consulting fees (including minimum bonuses) of $375,000,
$437,500 and $500,000 and provides for additional bonuses if
certain targets are met. Additionally, the agreement
granted 1,800,000 shares of common stock to such consultant,
which were issued on October 1, 1999. The consultant is
required to act on a "best-efforts" basis to pursue certain
goals for the Company. (See Note J-3f.)
<PAGE> F-27
Payforview.com Corp. and Subsidiaries
(formerly Sierra Gold Corporation)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Period from April 6, 1998 (inception) to December 31, 1998,
year ended December 31, 1999 and six months
ended June 30, 1999 and 2000 (Unaudited) (As Restated)
NOTE O - SUBSEQUENT EVENTS
1. Sale of Common Stock - On January 15, 2000, the Company
entered into a stock subscription and option agreement with
three unrelated third-party shareholders. Pursuant to this
agreement, the Company sold 120,000 shares of stock to these
investors at a price of $1.50 per share and provided the
investors with an option to purchase up to a maximum of an
additional 690,000 shares. The investors purchased an
aggregate of 810,000 shares during 2000, for proceeds of
$1,215,000, of which $222,500 was paid in 1999. The shares
were issued in July 2000.
On January 21, 2000, the Company entered into a stock
subscription and option agreement with certain unrelated
third-party shareholders. Pursuant to this agreement, the
Company sold 1,000,000 shares of stock to these investors at
a price of $1.50 per share. Additionally, the agreement
provided the investors with an option to purchase up to a
maximum of an additional 2,000,000 shares. The investors
purchased an aggregate of 2,800,000 shares for net proceeds
of approximately $4,166,000 (net of $34,000 of transaction
costs). Such shares were issued during the first quarter of
2000.
2. Conversion to Debentures - During January and February 2000,
holders of $172,500 of convertible debentures exchanged such
debentures for 6,900,000 shares of common stock pursuant to
the debenture agreement dated June 25, 1999.
3. Stock Issuance - In February 2000, the Company granted an
aggregate of 3,000,000 shares to officers and consultants.
No additional services were required to be performed, and,
therefore, the Company recorded a charge to operations for
$2,934,000, which represented the market value of such
shares on the date of grant.
<PAGE> F-28
Payforview.com Corp. and Subsidiaries
(formerly Sierra Gold Corporation)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Period from April 6, 1998 (inception) to December 31, 1998,
year ended December 31, 1999 and six months
ended June 30, 1999 and 2000 (Unaudited) (As Restated)
NOTE O (continued)
4. Acquisition - In February 2000, the Company acquired MAS
Acquisition Corporation, an inactive public shell
corporation in exchange for an aggregate of 335,000 shares
of its common stock. Additionally, the Company incurred
transaction costs relating to this acquisition, and settled
such cost by issuing 335,000 shares and paying cash of
$100,000, which resulted in an aggregate charge to expense
of $475,000 in the first quarter of 2000. This acquisition
was accounted for at the historical basis of the assets of
MAS (which were $31) since there was no business acquired.
No goodwill or other intangibles were acquired.
5. On May 10, 2000, the Company made a strategic investment of
$1,400,000 plus 2,000,000 shares of restricted common stock
to purchase a 25% interest in a company controlled by a
consultant of the Company, Turn-Key Entertainment LLC ("the
investee), whose plan is to develop an on-line streaming
media product that is synergistic with its core business.
The investee had no operations through June 30, 2000 other
than the Company's investment and had cash available of
$1,396,562. The company has the right to participate in
future financings by the investee. The consultant discussed
in Note N-3 owns the remaining 75% of the investee.
Since the Company neither manages nor controls the investee,
which remains in the development stage and has no
significant operations to date, the investment was charged
to expense in accordance with generally accepted accounting
principles.
NOTE P - SUBSEQUENT EVENTS (UNAUDITED)
1. On July 13, 2000, the Company's Board of Directors approved
a stock option plan ("the Plan") and reserved 4 million
shares of the Company's common stock to attract, motivate
and retain individuals upon whose continued efforts the
success of the Company in large measure depends. On July
25th 2000, the Company issued 1,675,000 options pursuant to
the Plan to certain employees, officers, directors and
consultants. The exercise price of such options was $0.25
per share, based, as per the terms of the plan, on the
closing price on the day immediately preceding the issue
date. These options vest over a three-year period and
expire in July 2003.
2. On August 3, 2000, the Company and Bacchus (and related
entities) signed an agreement whereby 487,200 (of the
aggregate of 1,012,500 shares originally issued) will be
returned to the Company for cancellation.
3. On August 31, 2000, the Company entered into an agreement
with an investment bank, to register and underwrite shares
of its common stock with an aggregate market value not to
exceed $40,000,000, which will be offered for sale to the
public. In connection with such agreement, the Company is
obligated to issue warrants to purchase 2,000,000 shares of
common stock to such investment bank, at an exercise price
of $0.28 per share, subject to adjustment under certain
conditions. These warrants remain the property of the
investment bank, whether or not the registration and
proposed sale of shares to the public is completed. The
agreement also provides for additional warrants to be issued
to the investment bank upon achieving certain milestones in
the registration process.
<PAGE> F-29
<PAGE>
EXHIBIT 10._ TURN-KEY ENTERTAINMENT INVESTMENT AGREEMENT
TURN-KEY ENTERTAINMENT LLC
Company Agreement
THIS COMPANY AGREEMENT, dated as of May ____, 2000, among
Sid Amira, an individual residing in the State of New York
("Amira"), Payforview.com Corp., a Nevada corporation (PFV), and
the parties who shall hereafter be admitted to the Company as
Members and Substituted Members. In consideration of the mutual
covenants and agreements herein and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Defined Terms
The following terms shall have the following meanings
for purposes of this Agreement:
"Adjusted Capital Account Deficit" shall mean, with
respect to any Member, the deficit balance, if any, in such
Member's Capital Account as of the end of the relevant tax year,
after giving effect to the following adjustments:
(i) Credit to such Capital Account any amounts
which such Member is deemed to be obligated to restore pursuant
to the penultimate sentences in Sections 1.704-2(g)(1) and
1.704-2(i)(5) of the Regulations; and
(ii) Debit to such Capital Account the items
described in Sections 1.704-1(b)(2) (ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of the
Regulations.
The foregoing definition of Adjusted Capital Account Deficit is
intended to comply with the provisions of Section
1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted
consistently therewith.
"Affiliate" of a Person shall mean any Person that is
directly, or indirectly through one or more intermediaries,
controlling, controlled by, or under common control with, such
Person; for purposes of this definition, "control" shall mean the
possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract,
or otherwise.
"Agreement" shall mean this Company Agreement, as
originally executed and as amended, modified, supplemented, or
restated from time to time, as the circumstances may require.
"Applicable Percentage" shall mean such percentage as
may be determined by the Manager from time to time to reflect the
appropriate effective combined federal, state and local income
taxation rate payable by any Member with respect to its Taxable
Income Allocation, determined without regard to any tax
attributes of any such Member.
"Assignee" shall mean any recipient of a Transfer
permitted under the provisions of Article 7 who has not become a
Substituted Member.
"Capital Account" shall have the meaning set forth in
Section 4.5.
"Capital Contribution" shall mean, as of any
determination date, any contribution (or as the context requires,
the aggregate amount of all contributions) to the capital of the
Company in cash or property by a Member as of such date.
"Closing" shall mean a closing in which Persons who
have executed counterparts of this Agreement are admitted to the
Company as Members and reflected as such on the books and records
of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as
amended and in effect from time to time, as interpreted by the
applicable regulations thereunder. Any reference herein to a
specific section or sections of the Code shall be deemed to
include a reference to any corresponding provision of future law.
"Company" shall mean the limited liability company
created and governed hereby, as such Company may from time to
time be constituted.
"Company Act" shall mean the Delaware Limited Liability
Company Act, Section 18-101, et seq., as amended from time to
time.
"Company Expenses" shall have the meaning set forth in
Section 5.5.
"Distributable Cash" shall mean all cash proceeds
received by the Company from sources other than Capital
Contributions, less all amounts required to pay current Company
Expenses and such reserves as may be created by the Manager to
defray actual or expected future Company Expenses.
"Entity" shall mean any partnership, corporation,
limited liability company, unincorporated organization or
association, trust, or other entity.
"Fair Market Value" shall mean the fair market value of
Company assets as determined in good faith by the Manager.
"Fiscal Year" means (i) the period commencing on the
date first written above and ending on December 31, 2000; (ii)
any subsequent twelve (12) month period commencing January 1 and
ending on December 31; or (iii) any portion of the period
described in clause (ii) for which the Company is required to
allocate Profits, Losses, and other items of the Company's
income, gain, loss, or deduction pursuant to Article 4 hereof.
"Incapacity" shall mean, in the case of any Person, (i)
when such Person (A) makes an assignment for the benefit of
creditors, (B) files a voluntary petition in bankruptcy, (C) is
adjudged bankrupt or insolvent, or has entered against it an
order of relief in any bankruptcy or insolvency proceeding, (D)
files a petition or answer seeking for itself any reorganization,
arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any statute, law or regulation, (E) files
an answer or other pleading admitting or failing to contest the
material allegations of a petition filed against it in any
proceeding of such a nature, or (F) seeks, consents to or
acquiesces in the appointment of a trustee, receiver or
liquidator of or for it or of or for all or any substantial part
of its properties; (ii) if within 120 days after the commencement
of any proceeding against such Person seeking reorganization,
arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any statute, law or regulation, the
proceeding has not been dismissed, or if within 90 days after the
appointment, without such Person's consent or acquiescence, of a
trustee, receiver or liquidator of or for such Person or of or
for all or any substantial part of its properties, the
appointment is not vacated or stayed, or if within 90 days after
the expiration of any such stay, the appointment is not vacated;
or (iii) upon the filing of a certificate of dissolution or its
equivalent for such Person, or the revocation of such Person's
Certificate of Incorporation or Formation.
"Including" shall mean including, without limitation.
"Indemnified Person" shall have the meaning set forth
in Section 5.7.
"Interest" shall mean the entire ownership interest of
a Member in the Company at any particular time, including the
right of such Member to any and all benefits to which a Member
may be entitled as provided in this Agreement and such Member's
"limited liability company interest" under the Company Act,
together with the obligations of such Member to comply with the
terms and provisions of this Agreement.
"Manager" shall mean a Member appointed by the Members
to manage the Company in accordance with Section 5.1.
"Member" shall mean any Person who, at the time of
reference thereto, has been admitted as a member of the Company
(whether an initial, additional, or Substituted Member), and has
not ceased to be a member of the Company as provided in this
Agreement, in such Person's capacity as a member of the Company.
"Notification" shall mean a writing containing
information to be communicated to any Person, sent in accordance
with the provisions of Section 11.1.
"Percentage Interest" shall mean, with respect to any
Member, such Member's percentage interest set forth on Exhibit A
hereto as it may be amended, modified or supplemented from time
to time.
"Person" shall mean any individual and any Entity.
"Preferred Interests" shall have the meaning set forth
in Section 3.2.
"Profits" and "Losses" shall mean, for each Fiscal
Year, an amount equal to the Company's taxable income or loss for
such Fiscal Year, determined in accordance with Code Section
703(a) (for this purpose, all items of income, gain, loss, or
deduction required to be stated separately pursuant to Code
Section 703(a)(1) shall be included in taxable income or loss),
with the following adjustments:
(i) Any income of the Company that is exempt from
federal income tax and not otherwise taken into account in
computing Profits or Losses pursuant to this definition shall be
added to such taxable income or loss;
(ii) Any expenditures of the Company described in
Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B)
expenditures pursuant to Regulations Section
1.704-1(b)(2)(iv)(i), and not otherwise taken into account in
computing Profits or Losses pursuant to this definition shall be
subtracted from such taxable income or loss;
(iii) Gain or loss resulting from any disposition
of property with respect to which gain or loss is recognized for
federal income tax purposes shall be computed by reference to the
Fair Market Value of the property disposed of, notwithstanding
that the adjusted tax basis of such property differs from its
Fair Market Value; and
(iv) To the extent an adjustment to the adjusted
tax basis of any Company asset pursuant to Code Section 734(b) or
Code Section 743(b) is required pursuant to Regulations Section
1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining
Capital Accounts as a result of a distribution other than in
liquidation of a Member's Interest in the Company, the amount of
such adjustment shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the
adjustment decreases the basis of the asset) from the disposition
of the asset and shall be taken into account for purposes of
computing Profits or Losses.
For purposes of determining the Profits, Losses, or any
other items allocable to any period, Profits, Losses, and any
such other items shall be determined on a daily, monthly, or
other basis, as determined by the Manager using any permissible
method under Code Section 706 and the Regulations thereunder.
"Regulations" shall mean the Income Tax Regulations
promulgated under the Code, as such regulations may be amended
from time to time (including corresponding provisions of
succeeding regulations).
"Substituted Member" shall mean any Person admitted to
the Company as a Member pursuant to the provisions of Section
7.3.
"Tax Liability Deficiency" shall mean, in any Fiscal
Year with respect to any Member, the amount (if any) by which (A)
the product of (i) such Member's Taxable Income Allocations
multiplied by (ii) the Applicable Percentage exceeds (B) the
amount of Distributable Cash distributed to such Member in such
Fiscal Year pursuant to Section 4.1.
"Tax Liability Distributions" shall have the meaning
set forth in Section 4.2.
"Taxable Income Allocation" shall mean, in any Fiscal
Year with respect to any Member, the cumulative allocations of
federal taxable income of the Company made in such Fiscal Year to
such Member pursuant to Section 4.4.
2. Organization
2.1 Domicile
The Company is a Delaware limited liability company
organized under, and governed by the provisions of, the Company
Act, subject to the terms and conditions of this Agreement.
2.2 Name
The name of the Company is Turn-key Entertainment LLC.
The business of the Company may be conducted, upon compliance
with all applicable laws, under any name designated by the
Manager.
2.3 Principal Office
The principal office of the Company shall be located at
575 Madison Avenue, 10th Floor, New York, New York 10022-2511.
The Manager may from time to time change the principal office and
establish additional offices.
2.4 Registered Office; Registered Agent
The Manager shall cause the Company to maintain a
registered agent and registered office in accordance with the
Company Act. The name and address of initial registered agent is
Corporation Service Company. The address of the initial
registered office of the Company is 1013 Centre Road, Wilmington,
Delaware 19805-1297.
2.5 Purpose
The purpose of the Company is to engage in any act or
activity which is not prohibited by the Company Act. The Company
shall have the power to do any and all acts necessary,
appropriate, proper, advisable, incidental or convenient to or
for the protection and benefit of the Company.
2.6 Powers
The Company shall have all lawful powers to take any
and all actions and to engage in any and all activities and
transactions as may be necessary or desirable to carry out its
purpose.
2.7 Term
The term of the Company shall commence on the date the
Certificate of Formation of the Company is filed in the office of
the Secretary of State of Delaware in accordance with the Company
Act and shall continue until the tenth anniversary of such date,
unless earlier terminated pursuant to the provisions of Article
8.
3. Members; Capital
3.1 Members
(a) The names, addresses, Capital Contributions and
Percentage Interests of the Members are set forth in Exhibit A
hereto, in the form attached and as it may hereafter be amended,
modified, or supplemented from time to time in accordance with
this Agreement, and shall be reflected in the books and records
of the Company.
(b) No Member shall be required to lend any funds to
the Company.
(c) The Interest each Member holds in the Company
shall be uncertificated.
3.2 Capital
(a) As its initial Capital Contribution to the
Company, each Member is contributing to the Company
simultaneously herewith the amount in cash and other property
described on Exhibit A hereto. No Member shall be obligated to
make any additional Capital Contributions.
(b) In addition to the Capital Contribution to the
Company described in Exhibit A, PFV agrees to provide the Company
with (i) office space and (ii) the services of its employees, as
requested by the Company from time to time, each at no cost to
the Company for so long as PFV is a Member.
(c) The Manager may accept additional Capital
Contributions in addition to the initial Capital Contributions
referred to above from existing Members or upon the admission of
additional Members. In the event that the Manager desires to
solicit additional Capital Contributions it shall first offer
each of the existing Members the opportunity for a period of
twenty (20) days to make such additional Capital Contributions in
proportion to their respective Percentage Interests at that time.
To the extent that the existing Members do not subscribe for the
full amount of the aggregate additional Capital Contribution
requested by the Manager, the Manager shall be entitled for a
period of sixty (60) days to solicit such Capital Contributions
from Persons who are not Members. It is understood and agreed
that such additional Capital Contributions will have the effect
of diluting the Percentage Interests of the Members who do not
elect to make the full amount of the additional Capital
Contributions which they are entitled to make.
(d) No Member shall be paid interest on nor shall
interest be payable in respect of any Capital Contribution to the
Company or on or in respect of such Member's Capital Account.
(e) Except as otherwise provided by the express terms
of any Preferred Interests, no Member shall have any right to
receive the return of its Capital Contribution, except as
provided in Article 8. No distribution to a Member shall be
treated as a return of the Capital Contribution of such Member
except as provided by the express terms of any Preferred
Interests, in Article 8 or except as required by the Company Act.
(f) The Manager shall have the authority, in its
discretion, to dilute the Percentage Interest of the Members as
in effect from time to time through the solicitation of
additional Capital Contributions which may provide for preferred
economic rights (the "Preferred Interests"), including, but not
limited to, relative Percentage Interests which are greater or
lesser in proportion to the aggregate amount invested than prior
rounds of investment in the Company, subject, however, to the
rights of the existing Members to subscribe for such Preferred
Interests pursuant to the provisions of clause (c) of this
Section 3.2. Upon the receipt of any additional Capital
Contributions, including, but not limited to, Capital
Contributions with respect to Preferred Interests, the Manager
shall amend the names, addresses, Capital Contributions and
Percentage Interests of the Members as set forth in Exhibit A
hereto and shall promptly distribute a copy of such amended
Exhibit A to the Members.
(g) The Manager shall value all Capital Contributions
consisting of assets other than cash in good faith and all
determinations by the Manager as to the fair market value of such
non-cash Capital Contributions shall be conclusive and binding on
all Members for all purposes of this Agreement.
4. Distributions; Allocations
4.1 Distributions
(a) To the extent permitted by the Company Act,
Distributable Cash shall be distributed to Members at the times
and in the amounts provided in Section 4.2 and at such other
times and in such other amounts as the Manager shall determine in
its sole and absolute discretion.
(b) Subject to Section 8.2, distributions of
Distributable Cash will be made to all Members pro rata in
accordance with their respective Percentage Interests.
(c) Notwithstanding any provision to the contrary
contained in this Agreement, no distribution shall be made by the
Company in violation of Section 18-607 of the Company Act.
4.2 Tax Liability Distributions
Distributions of Distributable Cash shall be made to the
Members pro rata in accordance with the amount of their Tax
Liability Deficiency (if any) until each Member has received such
distributions in the amount equal to such Member's Tax Liability
Deficiency ("Tax Liability Distributions"). In determining the
amount of distributions of Distributable Cash made to any Member
pursuant to Section 4.1, the amounts of Tax Liability
Distributions made pursuant to this Section 4.2 shall be treated
as an advance distribution of Distributable Cash otherwise made
to such Member pursuant to Section 4.1. Tax Liability
Distributions shall be made quarterly unless the Manager
determines that such distributions should be made either more or
less frequently.
4.3 Allocations of Profits and Losses
The Profits and Losses of the Company shall be determined
and allocated to each Member with respect to each Fiscal Year of
the Company. The determination shall be as of the end of each
Fiscal Year and shall be made within ninety (90) days after the
close of each Fiscal Year. Except as provided in Section 4.4 or
4.5 below, Profits and Losses for any Fiscal Year shall be
allocated among the Members pro rata in accordance with their
respective Percentage Interests.
4.4 Special Allocations - Qualified Income Offset
If any Member unexpectedly receives an adjustment,
allocation or distribution described in Treasury Regulations
Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), that causes such
Member to have an Adjusted Capital Account Deficit, items of
Company income and gain shall be allocated, in accordance with
Treasury Regulation Section 1.704-1(b)(2)(ii)(d), to the Member
in an amount and manner sufficient to eliminate, to the extent
required by such Treasury Regulation, the Adjusted Capital
Account Deficit of the Member as quickly as possible; provided
that an allocation pursuant to this Section 4.4 shall be made if
and only to the extent that such Member would have an Adjusted
Capital Account Deficit after all other allocations provided in
this Article 4 have been tentatively made as if this Section 4.4
were not in this Agreement. It is intended that this Section 4.4
qualify and be construed as a "qualified income offset" within
the meaning of treasury Regulations 1.704-1(b)(2)(ii)(d), which
shall be controlling in the event of a conflict between such
Treasury Regulation and this Section 4.4.
4.5 Tax Allocations: Code Section 704(c)
Solely for tax purposes, in determining each Member's
allocable taxable income or loss, depreciation, depletion,
amortization and gain or loss with respect to any contributed
property, or with respect to revalued property where the
Company's property is revalued pursuant to paragraph
(b)(2)(iv)(f) of Section 1.704-1 of the Regulations, shall be
allocated to the Members in the manner (as to revaluations, in
the same manner as) provided in Section 704(c) of the Code. The
allocation shall take into account, to the full extent required
or permitted by the Code, the difference between the adjusted
basis of the property to the Member contributing it (or, with
respect to property which has been revalued, the adjusted basis
of the property to the Company) and the fair market value of the
property determined in good faith by the Manager at the time of
its contribution or revaluation, as the case may be.
Any elections or other decisions relating to such
allocations shall be made by the Manager in any manner that
reasonably reflects the purpose and intention of this Agreement.
Allocations pursuant to this Section 4.4 are solely for purposes
of federal, state, and local taxes and shall not affect, or in
any way be taken into account in computing, any Person's Capital
Account or share of Profits, Losses, other items, or
distributions pursuant to any provisions of this Agreement.
4.6 Maintenance of Capital Accounts
Each Member's Capital Account shall be maintained by the
Company in accordance with the capital accounting rules of
Section 704(b) of the Code as follows:
(a) The Capital Account of each Member shall be
credited with (i) the amount of cash and the Fair Market Value of
any property contributed to the Company by such Member (net of
liabilities secured by such contributed property that the Company
is considered to assume or take subject to under Section 752 of
the Code), (ii) the amount of Profits allocated to such Member
for federal income tax purposes pursuant to the provisions of
this Agreement and any items in the nature of income or gain that
are specially allocated to such Member, and (iii) the amount of
any Company liabilities assumed by such Member or secured by any
property distributed to such Member;
(b) The Capital Account of each Member shall be
debited by (i) the amount of cash and the Fair Market Value of
any property distributed to such Member, (ii) such Member's
allocable share of Losses and any items in the nature of
deduction or loss that are specially allocated to such Member,
and (iii) the amount of any liabilities of such Member assumed by
the Company or secured by any assets contributed by that Member
to the Company (to the extent of the value of the securing
assets); and
(c) In the event all or a portion of an Interest in
the Company is transferred in accordance with the terms of this
Agreement, the transferee shall succeed to the Capital Account of
the transferor to the extent it relates to the transferred
Interest.
(d) In determining the amount of any liability for
purposes of subparagraphs (a) and (b) above, there shall be taken
into account Code Section 752(c) and any other applicable
provisions of the Code and Regulations.
The foregoing provisions and the other provisions of
this Agreement relating to the maintenance of Capital Accounts
are intended to comply with Regulations Section 1.704-1(b), and
shall be interpreted and applied in a manner consistent with such
Regulations. In the event the Manager shall determine (for
example, in connection with the Company's incurring or assuming
indebtedness to an extent not anticipated as of the date hereof)
that it is prudent to modify the manner in which the Capital
Accounts, or any debits or credits thereto are computed in order
to comply with such Regulations, the Manager may make such
modification, provided that it is not likely to have a material
effect on the amounts distributable to any Member pursuant to
Section 8.2 hereof upon the dissolution and liquidation of the
Company. The Manager also shall (i) make any adjustments that
are necessary or appropriate to maintain equality between the
Capital Accounts of the Members and the amount of Company capital
reflected on the Company's balance sheet, as computed for book
purposes in accordance with Regulations Section
1.704-1(b)(2)(iv)(q), and (ii) make any appropriate modifications
in the event unanticipated events might otherwise cause this
Agreement not to comply with Regulations Section 1.704-1(b).
5. Management of the Company
5.1 Management by the Manager
(a) The business and affairs of the Company shall be
managed and conducted under the direction of a Member appointed
to act as the Company's manager (the "Manager"). The Manager
shall be Amira for so long as Amira shall be the beneficial owner
of an Interest. In the event that Amira ceases to be the
beneficial owner of an Interest, then Members whose aggregate
Percentage Interests represent at least 66 2/3% of the Percentage
Interests of all Members shall be entitled to elect a new
Manager. Notwithstanding the foregoing, should the powers
conferred to the Manager pursuant to this Section 5.1(a) devolve
to a board of directors or similar body then PFV shall have the
right to nominate one person to such board of directors or
similar body for so long as PFV shall be a Member.
(b) The Manager shall be entitled to such compensation
from the Company for serving as the Manager as shall be agreed to
from time to time by Members whose aggregate Percentage Interest
represent at least 66 2/3% of the Percentage Interests of all
Members.
(c) Meetings (if any) of the Manager and the Members
relating to the management of the Company shall be held on such
dates and in such places as the Manager shall determine in its
sole discretion. There shall be no requirements that formal
meetings of the Manager or the Members be held.
5.2 Powers of the Manager
Except as otherwise expressly provided in this Agreement,
the Manager shall have all of the rights, powers, and obligations
of a manager of a manager-managed limited liability company
organized under the Company Act and otherwise as provided by law.
Except as otherwise expressly provided in this Agreement
(including, without limitation, in Section 5.3 hereof), the
Manager is hereby granted the right, power, and authority to do
on behalf of the Company all things which, in its reasonable
commercial judgment, are necessary or appropriate to manage the
Company's affairs and fulfill the purposes of the Company,
including, by way of illustration and not by way of limitation,
the power and authority from time to time:
(a) to perform all normal business functions and
otherwise operate and manage the business and affairs of the
Company in accordance with and as limited by this Agreement;
(b) to employ and dismiss from employment on behalf of
the Company any and all employees, agents, attorneys, consultants
and other professionals;
(c) to enter into, make and perform on behalf of the
Company such contracts, agreements and other undertakings as it
may deem necessary for the conduct of the business of the
Company;
(d) to establish and maintain one or more bank
accounts for the Company in such bank or banks as may, from time
to time, be designated as depositories of the funds of the
Company;
(e) to incur on behalf of the Company all expenditures
permitted by this Agreement and, to the extent that funds of the
Company are available, to pay all such expenses and debts and
obligations of the Company;
(f) to admit new Members to the Company and to admit
an Assignee of a Member's Interest as a Substituted Member in the
Company, pursuant to and subject to the terms of Article 7;
(g) to establish and maintain a Capital Account and
other appropriate accounts for each Member subject to and in
accordance with the provisions of this Agreement;
(h) subject to Article 4 and Section 8.2, to determine
the amount and timing of distributions of Distributable Cash to
the Members;
(i) to establish and maintain the books and records of
the Company in accordance with Section 10.1;
(j) to cause the Company to purchase or bear the cost
of any insurance covering the potential liabilities of the
Manager;
(k) to establish subsidiaries of the Company;
(l) to compromise and settle claims against or on
behalf of the Company;
(m) to cause the Company to merge into or with another
Entity, to restructure or recapitalize the Company;
(n) to invest and reinvest the assets of the Company;
and
(o) to select, employ and dismiss from employment the
auditors of the Company.
The specific grants of power and authority to the
Manager under this Section 5.2 in no way limit the rights, power,
or authority of the Manager under this Agreement, the Company
Act, or as otherwise provided by law.
5.3 Obligations of the Manager; Tax Matters
(a) The Manager shall take all action which may be
necessary or appropriate for the continuation of the Company's
valid existence as a limited liability company under the laws of
the State of Delaware and of each other jurisdiction in which
such action is necessary or appropriate to protect the limited
liability of the Members.
(b) The Manager shall prepare or cause to be prepared
and shall cause the Company to file on or before the due date (or
any extension thereof) any federal, state, local, or foreign tax
return required to be filed by the Company. The Manager shall
cause the Company to pay any taxes payable by the Company (it
being understood that the expenses of preparation and filing of
such tax returns, and the amounts of such taxes, are expenses of
the Company, not of the Manager); provided, however, that the
Manager shall not be required to agree to payment of any tax so
long as the Manager or the Company is in good faith and by
appropriate legal proceeding contesting the validity,
applicability, or amount thereof and such contest does not
materially endanger any right or interest of the Company.
(c) The Manager shall be the "tax matters partner" of
the Company for purposes of the Code.
(d) Except as otherwise provided herein, the Manager
shall determine whether to make any and all elections for
federal, state, local and foreign tax purposes including, without
limitation, making the election under Section 754 of the Code in
accordance with applicable regulations thereunder. The Manager
shall have the right to seek or revoke any such election
(including, without limitation, the election under Section 754 of
the Code) upon the Manager's determination that such revocation
is in the best interests of the Members. Notwithstanding any
contrary provision hereof, the Manager shall have no right to
make an election under Section 301.7701-3 of the Regulations to
classify the Company for federal income tax purposes as anything
other than a partnership.
5.4 Restricted Transactions
The Company shall not perform any act that would subject any
Member to personal liability for the debts or obligations of the
Company.
5.5 Company Expenses
The Company shall bear (i) all of the amounts expended by or
on behalf of the Company for its organization, including legal
fees associated with the preparation of this Agreement, and (ii)
all expenses related to the Company's existence and operations,
including any out-of-pocket expenses related to the
investigation, acquisition, monitoring, management and sale of
investments, and the investment and management of funds, on
behalf of any Person or Persons with whom the Company has entered
into an advisory, consulting, management or similar agreement,
and ancillary expenses related to these activities, including
costs of communications, meeting expenses, taxes, custodial and
settlement fees or expenses, transaction costs (including
brokerage commissions and transaction taxes), legal and
accounting fees, costs of quotation services and other fees and
expenses paid by the Company on behalf of such Person or Persons
(the amounts described in clauses (i) and (ii), collectively,
"Company Expenses"). All or any portion of the Company Expenses
may be borne or reimbursed to the Company by any Person or
Persons with whom the Company has entered into an advisory,
consulting, management or similar agreement pursuant to the terms
and conditions of such agreement. The Manager may, in its
discretion, arrange for any of the Members or any of their
Affiliates to advance funds to the Company for the payment of
Company Expenses and each such Member or Affiliate shall be
entitled to the reimbursement on demand of any funds so advanced.
5.6 Duty and Liability of the Manager
(a) The sole duty of the Manager to the Company and
the Members shall be to act in a manner the Manager believes in
good faith to be in the best interests of the Company.
(b) Neither the Manager, its Affiliates, nor any of
its respective directors, officers, employees or agents shall be
liable, responsible, or accountable in damages or otherwise to
the Company or any Member for any act or omission performed or
omitted by one or more of them except for breach of the duty set
forth in Section 5.6(a), and none of such Persons shall have any
liability to the Company or any Member for such Person's good
faith reliance on the provisions of this Agreement, including the
provisions of Section 5.6(a). Notwithstanding the generality of
this paragraph, this paragraph shall not limit the liability of
any Person for any intentional misconduct, for any knowing
violation of law, or for any transaction for which such Person
(or, in the case of individual appointees, the entity that
appointed such Person) received a benefit in violation or breach
of any provision of this Agreement.
(c) Neither the Manager, its Affiliates, nor any of
its directors, officers, employees or agents shall have any
liability to any Member for the repayment of any amounts
outstanding in the Capital Account of a Member, including Capital
Contributions. Any such payment shall be solely from the assets
of the Company.
5.7 Indemnification of the Manager
(a) The Company shall, solely from the assets of the
Company, indemnify and hold harmless, to the maximum extent
permitted by law, any present or former Manager, its Affiliates,
and any present or former director, officer, employee or agent of
such Manager or its Affiliates (each, an "Indemnified Person")
against any claims, demands, liabilities, costs, losses, damages,
or expenses (including attorneys' fees and costs, judgments,
fines, penalties and amounts paid in settlement) incurred by any
such Indemnified Party arising out of or relating to any acts or
omissions or alleged acts or omissions of such Indemnified Person
that relate in any way to the Company or the business or assets
thereof; provided, however, that such Indemnified Person has not
been adjudicated in a final judgment or other final adjudication
(not subject to appeal) to have breached the duty set forth in
Section 5.6(a) or to have engaged in intentional misconduct, a
knowing violation of law, or any transaction for which such
Indemnified Person (or in the case of individual appointees, the
entity that appointed such Indemnified Person) received a benefit
in violation or breach of any provision of this Agreement.
(b) The Company shall pay expenses (including
attorneys' fees and costs) as they are incurred by an Indemnified
Person in connection with any action, claim, or proceeding that
such Indemnified Person asserts in good faith to be subject to
the indemnification provisions of this Section 5.7, upon receipt
of an undertaking from such Indemnified Person to repay all
amounts so paid by the Company to the extent that it is
adjudicated in a final judgment or other final adjudication (not
subject to appeal) that such Indemnified Person is not entitled
to be indemnified by the Company under this Agreement.
(c) The Manager, notwithstanding any apparent conflict
of interest, and subject only to the duty expressly set forth in
Section 5.6(a) hereof, shall have the power to, and is hereby
authorized and directed to, cause the Company to comply with the
indemnification and expense payment provisions hereof. If a
claim for indemnification or payment of expenses hereunder is not
paid in full within ten (10) days after a written claim therefor
has been received by the Company, the claimant may file suit to
recover the unpaid amount and, if successful in whole or in part,
shall be entitled to be indemnified for the expense of
prosecuting such claim. In any such action the Company shall
have the burden of proving that the claimant is not entitled to
the requested indemnification or payment of expenses under this
Agreement.
(d) The indemnification provided or granted pursuant
to this Section 5.7 shall not be deemed exclusive of any other
rights to which any Person seeking indemnification may be
entitled under any law, agreement, or otherwise, either as to
actions in such Person's official capacity or as to actions in
another capacity while holding such office.
(e) In no event shall a Member be subject to personal
liability by reason of the indemnification provisions set forth
in this Agreement.
5.8 Officers
The Manager may, at its discretion, appoint officers of
the Company. The officers of the Company may consist of all or
any of the following: a President, one or more Vice Presidents, a
Treasurer and a Secretary or such other officers as the Manager
may prescribe from time to time. The officers shall exercise
such powers and perform such duties as are prescribed by the
Manager. Any number of offices may be held by the same person,
as the Manager may determine.
5.9 Term of Officers
The officers of the Company (if any) shall hold office
for the term for which they were appointed and until their
successors are elected and qualified; provided, however, that any
officer may be removed with or without cause by the Manager.
6. Rights and Obligations of Members
6.1 Limitation of Liability
No Member shall have any liability under this Agreement
except as expressly provided in this Agreement and the Company
Act.
6.2 Management of the Business
A Member, as such, shall have no right to control and
shall take no part in the management or control of the Company's
business but may exercise the rights and powers of a Member under
this Agreement.
6.3 No Authority to Act
A Member, as such, shall have no power to represent,
act for, sign for, or bind the Company. The Members hereby
consent to the exercise by the Manager of the powers conferred on
it by law and this Agreement.
6.4 Outside Activities of the Members
Except as expressly provided herein and subject to any
contrary agreement entered into by a Member with the Company, any
Member and any officer, director, employee, agent, trustee,
Affiliate, or shareholder of any Member, may have business
interests and engage in business activities in addition to those
relating to the Company, including business interests and
activities in direct competition with the Company. Neither the
Company nor any Member shall have any rights by virtue of this
Agreement in any business venture of any other Member and such
Person shall have no obligation pursuant to this Agreement to
offer any interest in any business venture to the Company or any
other Member.
7. Transferability of Interests
7.1 Restrictions on Transfers of Interests
(a) Notwithstanding any other provision of this
Agreement, except as provided in Section 7.1(b) below, no sale,
exchange, transfer, pledge, assignment or other disposition,
whether voluntary or by operation of law ("Transfer"), of a
Member's Interest or any portion thereof or interest therein
shall be made unless such Transfer: (x) is approved by the
Manager, (y) the transferring Member and the transferee comply
with all applicable provisions of this Article 7, and (z) in the
opinion of legal counsel (who may be legal counsel to the
Company), satisfactory in form and substance to the Manager
(which opinion may be waived, in whole or in part, at the
discretion of the Manager),
(i) will not subject the Company to regulation
under the Investment Company Act of 1940, as amended;
(ii) in the absence of registration, will not
violate any federal securities law or any state securities or
"Blue Sky" law (including any investor suitability standard)
applicable to the Company or the Interest to be Transferred; and
(iii) will not cause the Company to cease to be
classified as a partnership for federal income tax purposes or to
become a "publicly traded partnership" within the meaning of
Section 7704 of the Code;
and any such opinion of counsel is delivered in writing to the
Company prior to the date of the proposed Transfer.
(b) Each Member agrees that it shall, upon request of
the Manager, execute and deliver such certificates or other
documents and perform such acts as the Manager deems appropriate
in connection with a Transfer of an Interest by that Member to
preserve the limited liability of the Members under the laws of
the jurisdictions in which the Company is doing business.
(c) Any purported Transfer of an Interest (or any
portion thereof or any interest therein) which is made in advance
of Notification thereof to the Company in accordance with Section
7.2 or is not made in compliance with this Agreement is hereby
declared to be null and void and of no force or effect
whatsoever.
(d) Each Member agrees that it will, prior to the time
the other Members approve the proposed Transfer of an Interest
(or any portion thereof or any interest therein) by such Member,
pay all reasonable expenses, including attorneys' fees and costs,
incurred by the Company in connection with such Transfer.
7.2 Assignees
(a) The Company shall not recognize for any purpose
any purported Transfer of all or any fraction of the Interest of
a Member unless the provisions of this Article 7 shall have been
complied with and there shall have been filed with the Company a
dated Notification of such Transfer, in form satisfactory to the
Manager, executed and acknowledged by both the transferor and the
transferee, and such Notification contains (i) the acceptance by
the transferee of all of the terms and provisions of this
Agreement and (ii) the representations of the transferor and the
transferee that such Transfer was made in accordance with all
applicable laws and regulations and all applicable provisions of
this Agreement. If the provisions of this Agreement have been
complied with, the Transfer shall be recognized by the Company as
effective on the day on which such Notification is filed with the
Company and the transferee shall become an Assignee as of such
date.
(b) Unless and until an Assignee becomes a Substituted
Member, such Assignee shall not be entitled to vote or give
consents with respect to any Interest held by such Assignee.
(c) Any Member which Transfers all of its Interest
shall not cease to be a Member until one or more Substituted
Members are admitted in its stead as transferee(s) of its entire
Interest.
(d) Anything herein to the contrary notwithstanding,
both the Company and the Manager shall be entitled to treat the
transferor of all or any portion of an Interest as the absolute
owner thereof in all respects, and shall incur no liability for
distributions made in good faith to it, until such time as a
Notification conforming to the requirements of this Article 7 has
been received by the Company and accepted by the Manager.
(e) A Person who is the Assignee of all or any portion
of the Interest of a Member, but does not become a Substituted
Member with respect thereto and desires to make a further
Transfer of all or any portion of such Interest, shall be subject
to all the provisions of this Article 7 to the same extent and in
the same manner as any Member desiring to make a Transfer of its
Interest.
7.3 Substituted Members
(a) No Member shall have the right to substitute in
its place any Assignee of all or any portion of such Member's
Interest. Any such Assignee shall be admitted to the Company as
a Substituted Member only if a decision to admit the Assignee as
a Substituted Member is adopted by the Manager pursuant to
Section 5.2. The Members hereby agree that the Manager may, on
behalf of each Member and on behalf of the Company, cause Exhibit
A hereto and the books and records of the Company to be
appropriately amended in the event of such admission.
(b) Each Substituted Member, as a condition to its
admission as a Member, shall execute and acknowledge such
instruments, in form and substance satisfactory to the Manager,
as the Manager deems necessary or desirable to effectuate such
admission and to confirm the agreement of the Substituted Member
to be bound by all the terms and provisions of this Agreement
with respect to the Interest acquired. All reasonable expenses,
including attorneys' fees and costs, incurred by the Company in
this connection shall be borne by such Substituted Member.
7.4 Indemnification
Each Member shall indemnify and hold harmless the Company
and the Manager and their respective directors, officers,
employees, and agents from and against any and all claims,
demands, liabilities, costs, losses, damages, or expenses
(including attorneys' fees and costs, judgments, fines,
penalties, and amounts paid in settlement) incurred by any such
Person by reason of or arising from any actual or alleged
misrepresentation, or misstatement or omission of facts, by such
Member or its transferee in connection with any Transfer or
purported Transfer of such Member's Interest (or any portion
thereof or interest therein), or the admission of a Substituted
Member to the Company in respect thereof.
7.5 Incapacity of a Member
Upon the Incapacity of a Member, the trustee or receiver of
its estate shall have all the rights of a Substituted Member for
the purpose of settling or managing the estate of such Member and
such power as the Member possessed to assign all or any part of
its Interest and to join with such Assignee in satisfying
conditions precedent to such Assignee becoming a Substituted
Member.
8. Dissolution; Liquidation
8.1 Dissolution
(a) The Company shall be dissolved upon the written
consent of the Members holding at least 66 2/3% of the Percentage
Interests of all Members.
(b) The death, retirement, resignation, expulsion,
bankruptcy or dissolution of any Member or the occurrence of any
other event that terminates the continued membership of any
Member shall not cause the Company to be dissolved or its affairs
to be wound up, and upon the occurrence of any such event, the
Company shall be continued without dissolution, unless within 90
days following the occurrence of such event, the Members
unanimously agree in writing to dissolve the Company.
(c) Dissolution of the Company shall be effective on
the day on which the event occurs giving rise to the dissolution,
but the Company shall not terminate until the certificate of
cancellation of the Company has been filed with the office of the
Secretary of State of the State of Delaware in accordance with
Section 18-203 of the Company Act and the winding up and
liquidation of the Company has been completed in accordance with
Section 8.2.
8.2 Liquidation
(a) Upon dissolution, the Company shall cease to carry
on its business, and the Manager or a liquidating trustee, if one
is appointed by the Manager (reference in this Section 8.2 to the
Manager to be construed hereafter as reference as well to such
liquidating trustee), shall, at the expense of the Company, wind
up the affairs of the Company and, in its sole discretion,
liquidate all or any part of the assets of the Company. The
Manager shall determine the time, manner and terms of any sale or
other disposition of the Company's assets for the purpose of
obtaining, in its opinion, fair value for such assets, and the
time, manner and terms of any distribution of assets provided for
in Section 8.2(b), it being expressly recognized that deferral of
a distribution, or distribution of all or any portion of the
assets of the Company in kind, rather than in cash, may be
appropriate by reason of the nature of the assets or the
restrictions under which they are held.
(b) After adjustment of the Capital Accounts of
Members as provided in Section 4.5 for any gains or losses
realized or deemed realized with respect to the disposition of
Company assets or with respect to Company assets to be
distributed in kind, the assets of the Company shall be paid out
in the following order:
(i) first, to pay all expenses of liquidation and
winding up;
(ii) second, to the payment and discharge of all
of the Company's debts and obligations to creditors other than
Members which are also creditors of the Company;
(iii) third, to the payment and discharge of all
of the Company's debts and obligations to Members which are also
creditors of the Company;
(iv) fourth, to fund reserves for contingent or
other potential liabilities of the Company (whether or not
specifically foreseen) other than in respect of items listed in
subsequent clauses of this Section 8.2(b), to the extent deemed
reasonable by the Manager; and
(v) fifth, to the Members in accordance with and
to the extent of the positive balances of their Capital Accounts.
(c) When the Manager has complied with the foregoing
liquidation plan, the Manager shall cause the Company, to the
extent required by applicable law, to execute, acknowledge, and
cause to be filed a certificate of cancellation of the Company.
(d) Any reserves established by the Manager pursuant
to Section 8.2(b)(iv) shall be held for so long as the Manager
shall deem necessary in a special account maintained for the
purpose of paying contingent or other potential liabilities or
obligations and shall thereafter be distributed in accordance
with Section 8.2(b).
9. Amendments
9.1 Adoption of Amendments
(a) Amendments to this Agreement must be approved in
writing by all of the Members; provided, however, that amendments
to this Agreement which are of a ministerial nature and do not
affect the rights of the Members (including, without limitation,
ministerial amendments appropriate to reflect changes in the
Company Act and mechanical amendments appropriate to admit
Substituted Members) may be adopted and implemented by the
Manager.
(b) The Manager shall, within a reasonable time after
the adoption of any amendment to this Agreement, send
Notification of such amendment to the Members and make any
filings necessary or desirable to reflect and effect such
amendment.
(c) Upon the adoption of any amendment to this
Agreement, the amendment shall be executed by the Members whose
consent is required hereunder and shall be recorded in the
records of each jurisdiction, if any, in which recording is
necessary for the Company to conduct business or to preserve the
limited liability of the Members.
10. Accounting and Reporting
10.1 Records and Accounting
Proper and complete records and books of account of the
business of the Company, including a current and updated list of
the names, business addresses, Capital Contributions, Capital
Accounts and Percentage Interests of all Members, and any other
items required by the Company Act, shall be maintained at the
Company's principal place of business. Each Member or its duly
authorized representative shall have the access and information
rights set forth in Section 18-305 of the Company Act.
10.2 Financial Reports
The Manager shall prepare in accordance with generally
accepted accounting principles, and deliver to each Member:
(a) within one hundred and twenty (120) days after the
end of each Fiscal Year, annual financial statements of the
Company, including statements of operations and statements of
assets and liabilities and Members' capital examined by a firm of
independent certified public accountants selected by the Manager;
and
(b) from time to time and with reasonable promptness,
such further information with respect to the condition of the
Company as any Member may reasonably request.
10.3 Tax Information
Within ninety (90) days after the end of each Fiscal
Year, the Manager will cause to be delivered to each Person who
was a Member at any time during such Fiscal Year all information
necessary for the preparation of such Member's income tax returns
in all jurisdictions designated by such Member, including a
statement showing such Member's share of Profits or Losses and
credits for such year for federal income tax purposes, and the
amounts of any distributions made to or for the account of such
Member pursuant to this Agreement.
10.4 Elections
In addition to the matters referred to in Section 5.2
and subject to the limitations of Section 5.4, the Manager may
cause the Company to make all elections required or permitted to
be made by the Company under the Code.
11. Miscellaneous
11.1 Notification
(a) Any Notification to any Member shall be given at
the address of such Member set forth in Exhibit A hereto, as
amended, modified or supplemented from time to time, and if
subsequently changed, to such other address of which such Member
shall advise each of the other Members in writing. Any
Notification to the Company shall be given at the principal
office of the Company.
(b) Any Notification shall be deemed to have been duly
given if personally delivered or sent by overnight courier
service, mail, or facsimile transmission (provided confirmation
of receipt is obtained) and will be deemed given, unless earlier
received, (i) if sent by certified or registered mail, return
receipt requested, five calendar days after being deposited in
the United States mail, postage prepaid; (ii) if sent by United
States Express Mail or overnight courier, one business day after
being deposited in the United States mail or with the overnight
courier, postage prepaid; (iii) if sent by facsimile
transmission, on the date sent provided confirmation of receipt
is obtained; and (iv) if delivered by hand, on the date of
receipt.
11.2 Governing Law; Separability of Provisions
The internal substantive laws of the State of Delaware,
as in effect from time to time, shall govern the validity of this
Agreement, the construction of its terms and interpretation of
the rights and duties of the parties. The invalidity or
unenforceability of any one provision of this Agreement shall in
no way affect the validity of any other provision, and all other
provisions shall remain in full force and effect.
11.3 Further Action
The parties shall execute and deliver all documents,
provide all information, and take or refrain from taking action
as may be necessary or appropriate to achieve the purposes of
this Agreement.
11.4 Headings, etc.
The headings in this Agreement are inserted for
convenience of reference only and shall not affect interpretation
of this Agreement. Wherever from the context it appears
appropriate, each term stated in either the singular or the
plural shall include the singular and the plural, and pronouns
stated in either the masculine or the neuter gender shall include
the masculine, the feminine, and the neuter.
11.5 Binding Provisions
The covenants and agreements contained herein shall be
binding upon and inure to the benefit of the heirs, executors,
administrators, successors, and assigns of the respective parties
hereto.
11.6 No Waiver
No waiver by any party of any breach of any term hereof
shall be construed as a waiver of any subsequent breach of that
term or any other term of the same or of a different nature.
11.7 Counterparts
This Agreement may be executed through the use of
separate signature pages or in any number of counterparts, and
each of such counterparts shall, for all purposes, constitute one
agreement binding on all the parties, notwithstanding that all
parties are not signatories to the same counterpart.
11.8 No Third Party Rights
This Agreement is intended solely for the benefit of
the parties hereto and is not intended to confer any benefits
upon, or create any rights in favor of, any Person other than the
parties hereto, except as expressly provided to the contrary
elsewhere in this Agreement.
11.9 Integration
This Agreement constitutes the entire agreement among
the parties pertaining to the subject matter contained in this
Agreement and supersedes all prior understandings of the parties
with respect to such subject matter.
IN WITNESS WHEREOF, the partes hereto have executed
this Company Agreement as of the date first above written.
__________________________________
Sid Amira
PAYFORVIEW.COM CORP.
By:__________________________________
Name: Marc A. Pitcher
Title: President and COO
<PAGE>
Exhibit A
CAPITAL PERCENTAGE
MEMBERS CONTRIBUTIONS INTERESTS
Sid Amira $100.00 75%
15 West 72nd Street
Apartment 4C
New York, NY 10023
Payforview.com Corp. $1,400,000 25%
575 Madison Avenue 2,000,000 shares
10th Floor of unregistered common
New York, NY 10022-2511 stock of Payforview.com Corp.
