U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES AND EXCHANGE ACT OF 1934 for the
Quarterly period ended September 30, 2001.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 for the
transition period from _______ to _______.
Commission File Number: 0-27161
-----------------------------------
PAYFORVIEW MEDIA GROUP HOLDINGS 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)
PAYFORVIEW MEDIA GROUP HOLDINGS, INC.
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the registrant (1) filed all reports required
to be filed by Section 13 or 15 (d) of the Exchange Act
during the past 12 months (or for such shorter period that
the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the
past 90 days.
YES [X] NO [ ]
As of September 30, 2001: 6,586,008 shares of the Company's
Common Stock were issued and outstanding.
TABLE OF CONTENTS AND INFORMATION REQUIRED IN REPORT
Part I. Financial Information
-------
Item 1. Financial Statements (unaudited)
Item 2. Managements Discussion and Analysis or Plan of
Operation
Part II. Other Information
--------
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to Vote of Security
holders
Item 5. Other Information
Item 6. Exhibits and reports on form 8-K
SIGNATURES
PART I
ITEM 1. FINANCIAL STATEMENTS
C O N T E N T S
Page
Condensed Consolidated Balance Sheets F-2
Condensed Consolidated Statements of Operations F-3
Condensed Consolidated Statements of
Cash Flows F-4
Condensed Consolidated Statement of Changes
in Stockholders' Equity F-5 - F-6
Notes to Condensed Consolidated
Financial Statements F-7 - F-11
F-1
PayForView Media Group Holdings Corp.
(formerly PayForView.com Corp)
(a development stage company)
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, September 30
Assets 2000* 2001
(unaudited)
Cash and cash equivalents $ 610,968 $ 876
Prepaid expenses 1,500 14,213
------------ -----------
Total Current Assets 612,468 15,089
Fixed assets, net 412,654 351,131
Deferred offering costs 525,000 385,000
Intangible assets, net 92,748 64,748
Capitalized website
development costs, net 267,479 172,082
Other assets 183,571 192,231
---------- ---------
2,093,920 1,180,281
========= ========
LIABILITIES AND STOCKHOLDER'S
EQUITY
December 31, September 30
2000* 2001
(unaudited)
Accounts payable $ 64,735 $ 90,037
Accrued consulting fees 53,009 -
Accrued bonus 193,751 65,625
Liabilities from
discontinued
operations 275,065 288,879
---------- ----------
Total Current Liabilities 586,560 444,541
Liabilities to be paid
In common stock - 25,000
Stockholders' equity
Preferred Stock
Authorized 100,000,000 preferred
shares with a par value of
$0.0001; none issued and
outstanding
Common stock
Authorized, 250,000,000 common
shares with a par value of
$0.0001; issued and
outstanding,2,984,533
and 6,586,008 shares,
respectively 298 659
Additional paid-in capital 20,296,144 22,231,710
Shares issued to Destiny (98,750) (56,682)
Deferred compensation - (192,188)
Deficit, accumulated during
the development stage (18,690,332) (21,272,759)
----------- ----------
Stockholders' equity 1,507,360 710,740
----------- ----------
$2,093,920 $ 1,180,281
========== ==========
*Derived from audited financial statements.
The accompanying notes are an integral part of these
statements.
F-2_
PayForView Media Group Holdings Corp.
(formerly PayForView.com Corp)
(a development stage company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three months ended
September 30
--------------------
2000 2001
--------- --------
Costs and expenses
Selling, general and
administrative Expenses $ 880,812 $ 250,823
Investment Expense - 600,000
Amortization of licenses
and Goodwill 63,503 40,550
Interest income (22,433) -
---------- ----------
Total costs and expenses 921,882 891,373
---------- ----------
Loss from operations (921,882) (891,373)
Loss on disposal from
discontinued operations (127,000) (3,200)
---------- ---------
Net Loss $(1,048,882) (894,573)
========== =========
Basic and diluted loss per
share:
Continuing operations $ (.31) $ (.17)
Discontinued operations (.04) -
______ ---------- ----------
Basic and diluted loss
per share $ (.35) $ (.17)
========== ==========
Weighted-average shares
Outstanding
Basic and diluted 2,957,687 5,345,899
========== ==========
The accompanying notes are an integral part of these
statements.
(Format change)
Payforview Media Group Holdings and Subsidiaries
(formerly Sierra Gold Corporation)
(a development stage company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Cumulative
amounts from
Nine months Ended April 6, 1998
September 30, (inception) to
--------------------------- September 30,
2000 2001 2001
------------ ------------ -------------
Costs and expenses
Selling, general and administrative
Expenses $ 5,858,101 $ 1,812,037 $ 10,959,970
Amortization of licenses and
Goodwill 77,101 123,404 554,991
Investment expense 2,400,000 600,000 3,010,000
Loss on impairment - - 4,247,022
Interest expense - - 348,631
Interest income (96,540) (8,896) (123,661)
----------- ----------- ------------
Total costs and expenses 8,238,662 2,526,545 (18,996,953)
----------- ----------- ------------
Loss from continuing operations (8,238,662) (2,526,545) (18,996,953)
----------- ----------- ------------
Discontinued operations (Street
Solid Records)
Loss from operations - - (1,056,167)
Loss on disposal (127,000) (55,882) (1,419,790)
----------- ----------- ------------
Loss from discontinued operations (127,000) (55,882) (2,475,957)
----------- ----------- ------------
Loss before extraordinary item (8,365,662) (2,582,427) (21,472,910)
Extraordinary item - gain on
extinguishment of debt 200,151 - 200,151
----------- ----------- ------------
NET LOSS $(8,165,511) $(2,582,427) $(21,272,759)
=========== =========== ============
Basic and diluted loss per share:
Continuing operations $ (3.47) $ (.65) $ (8.65)
Discontinued operations - (.01) (1.13)
Extraordinary item .03 - .09
----------- ----------- ------------
Basic and diluted loss per share $ (3.44) $ (.66) $ (9.69)
=========== =========== ============
Weighted-average shares outstanding 2,375,374 3,928,143 2,196,298
=========== =========== ============
The accompanying notes are an integral part of these statements.
F-3
PayForView Media Group Holdings Corp.
(formerly PayForView.com Corp)
(a development stage company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Cumulative
Nine months ended amounts from
September 30 April 6,1998
2000 2001 (inception) to
September 30,2001
------------- ------------ ------------
Cash flows from operating activities $( 8,238,662) $ (2,526,545) $(18,996,953)
Loss from continuing operations
Adjustments to reconcile net loss
to cash used in operating activities
Depreciation 68,664 61,523 152,220
Amortization 20,410 273,397 779,984
Common stock for
services 3,517,588 805,754 9,217,917
Noncash investment expense 2,400,000 600,000 3,010,000
Noncash interest expense 333,333
Changes in other operating
assets and liabilities
Prepaid expenses 7,102 (1,667) (53,167)
Other assets (127,840) (8,660) (142,031)
Accounts payable
and accrued expenses (35,641) 75,302 336,797
---------- --------- ----------
Net cash used in operating
activities of continuing operations (2,388,379) (720,896) (5,361,600)
---------- --------- ----------
Net cash used in operating
activities of discontinued
operations - - (657,080)
---------- --------- ----------
Cash flows from investing
Activities
Payments for website costs (306,072) - (306,072)
Payment of settlement costs
Relating to sale of
Discontinued Operations (58,000) - (83,000)
Payment for licenses and rights (81,519) - (84,270)
Proceeds from sale of -
Discontinued operations - - 250,000
Investment and advances to
Turn-Key Entertainment LLC (1,400,000) (11,046) (1,411,046)
Acquisition of fixed assets (145,826) - (161,351)
----------- --------- ----------
Net cash used in investing
activities (1,991,417) (11,046) (1,795,739)
----------- --------- ----------
Cash flows from financing activities
Issuance of common stock 5,208,602 94,704 5,738,298
Proceeds from loan payable - - 1,050,151
Loan from Turn-Key Entertainment LLC - 37,146 37,146
Deferred offering costs - (10,000) (10,000)
Proceeds from convertible
debenture - - 1,000,000
----------- ----------- -----------
Net cash provided by
financing activities 5,208,602 121,850 7,815,595
----------- ----------- -----------
Net change in cash and
cash equivalents
during the period 828,808 (610,092) 876
Cash and cash equivalents,
beginning of period 342,004 610,968 -
----------- ----------- -----------
Cash and cash equivalents,
end of period $1,170,812 $ 876 $ 876
=========== =========== ===========
Supplemental disclosures of cash
flow information:
Cash paid during the period for
Interest $ - $ - $ 15,298
=========== =========== ===========
Supplemental disclosures of noncash financing and investing activities (Note F)
The accompanying notes are an integral part of these statements.
F-4
Payforview Media Group Holdings and Subsidiaries
(formerly Sierra Gold Corporation)
(a development stage company)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
Period from April 6, 1998 (inception) through September 30, 2001
Deficit, Destiny
accumulated Liability
Common Stock issued Additional during the Valuation
--------------------- paid-in development Account
Number Amount capital stage Total
----------------------------------------------------------------------
Balance,
April 6, 1998 $ - $ - $ - $ - $ -
Capital stock of Voyager
International
Entertainment Inc.
issued for services 190,000 19 37,981 - 38,000
Capital stock of Voyager
International
Entertainment Inc.
issued for acquisition
of Voyager Film
Sales Inc. 10,000 1 199 - 200
Capital stock of Voyager
International Entertainment
Inc. issued for cash 16,357 2 112,490 - 112,492
Net loss - - - (275,528) (275,528)
----------------------------------------------------------------------------------------------
Balance,
December 31, 1998 216,357 22 150,670 (275,528) (124,836)
Capital stock of
Payforview.com Corp.
at January 5, 1999 187,500 18 982 - 1,000
Issuance of shares for
acquisition of
Voyager International
Entertainment Inc. 389,442 39 1,521 - 1,560
Issuance of shares for
acquisition of
Voyager International
Entertainment, Inc. for
potential commission 75,000 8 ( 8) - -
Cancellation of
Voyager shares ( 216,357) ( 22) 22 - -
Issuance of shares for
acquisition of Squadron
One Records and creation
of Street Solid
Records, Inc. 58,675 6 1,598,274 - 1,598,280
Issuance of shares for
acquisition of
licenses and rights 55,125 5 3,067,395 - 3,067,400
Issuance of shares for
services 6,100 1 77,835 - 77,836
Issuance of shares for
consulting services 90,000 9 652,491 - 652,500
Issuance of shares for
consulting services 16,667 2 49,998 - 50,000
Issuance of shares for
financial advisor
services 90,000 9 1,386,867 - 1,386,876
Issuance of shares for
acquisition of Software 10,000 1 291,999 - 292,000
Issuance of shares for
advertising 10,000 1 59,999 - 60,000
Issuance of shares upon
conversion of debt 1,141,850 114 827,386 - 827,500
Allocation of proceeds
of convertible debt to
additional paid-in-capital - - 333,333 - 333,333
Issuance of shares
for cash 27,027 3 99,997 - 100,000
Shares held in escrow
with attorney relating
to debentures 12,500 1 ( 1) - 0
Net loss (9,479,413) (9,479,413)
------------------------------------------------------------------------------------------------
Balance
December 31, 1999 2,169,886 $ 217 $8,598,760 $(9,754,941) $(1,155,964)
Issuance of shares for
cash, net of share
issuance costs
180,500 18 5,381,482 - 5,381,500
Issuance of shares for
convertible debt
345,000 35 172,465 - 172,500
Shares issued to
officers and consultants
for services 150,000 15 2,933,985 - 2,934,000
Shares issued for
acquisition of MAS
Acquisition Corporation
16,750 1 30 - 31
Shares issued for
transaction costs for MAS
Acquisition Corporation
16,750 1 375,199 - 375,200
Shares issued for
investment in Turn-Key
Entertainment
100,000 10 999,990 - 1,000,000
Proceeds from sale of
64,000 shares of the
75,000 shares held in
escrow from Voyager - - 899,602 - 899,602
acquisition
Cancellation of remaining
escrow shares ( 11,000) ( 1) 1 - -
Additional compensation
for services performed - - 117,000 - 117,000
Warrants issued for commitment
Fees - - 600,000 - 600,000
Stock options issued for
Services - - 82,232 - 82,232
Cancellation of partial shares
Related to Bacchus ( 20,853) ( 2) 2 - 0
Cancellation of shares held
in Escrow relating to
debentures ( 12,500) ( 1) 1 - 0
Shares issued for Destiny
legal Settlement 50,000 5 135,395 135,400
Liability Valuation
Account for Destiny 0 0 (98,750) (98,750)
Net loss (8,935,391) (8,935,391)
----------------------------------------------------------
Balance,
December 31, 2000 2,984,533 298 20,296,144 (18,690,332)(98,750) $1,507,360
Issuance of common stock
equity line of credit
(unaudited) 34,500 4 44,846 - - 44,850
Stock held by investment
banker (unaudited) 40,500 4 (4) - - -
Compensation expense for
stock options (unaudited) - (81,101) - - (81,101)
Warrants Issued for
investment banking
fees (unaudited) - - 21,067 - - 21,067
Proceeds received by Destiny
Music from previously
issued shares (unaudited) - - - 42,068 42,068
Shares issued for investment
In Turn-Key Entertainment
(unaudited) 545,455 55 599,945 - - 600,000
Shares issued to officers
And consultants for
Services
(unaudited) 1,820,911 182 1,263,929 - - 1,264,111
Shares issued for cash
From Turn-Key
Entertainment
(unaudited) 1,160,000 116 86,884 - - 87,000
Reverse split odd
Lot adjustment
(unaudited) 109 - - - - -
Net loss for nine months
Ended September 30, 2001
(unaudited) - - - (2,582,427) (2,582,427)
Balance September 30, 2001
(unaudited) ---------- -------- ----------- ----------- -------- ----------
6,586,008 659 22,231,710 (21,272,759) (56,682) 902,928
---------- -------- ----------- ----------- -------- ----------
The accompanying notes are an integral part of this statement.
(Format change)
PayForView Media Group Holdings Corp.
(formerly PayForView.com Corp)
(a development stage company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Nine months ended September 30, 2000 and 2001
(unaudited)
NOTE A - ORGANIZATION OF THE COMPANY AND NATURE OF BUSINESS
The Company was incorporated on August 26, 1998 under the name Sierra
Gold Corporation. On January 4, 1999, Sierra Gold Corporation changed
its name to Payforview.com Corp. On April 17, 2001, the Company
changed its name to Payforview Media Group Holdings Corp.
On March 29, 2001 the Board of Directors approved a reverse split of
twenty-for one effective with the close of business on April 23, 2001.
All share and per share amounts in the financial statements have been
retroactively restated to give effect to all of the above splits. On
August 15th, 2001, the Board of Directors approved an amendment to the
Company's Certificate of Incorporation to increase the common stock
authorized to 250,000,000 shares and authorized the issuance of up to
100,000,000 shares of preferred stock, par value $0.0001.
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.
It is also marketing a rich and streaming media advertising product,
and is developing certain traditional media business opportunities in
film, broadcasting, and sports marketing.
NOTE B - BASIS OF PRESENTATION AND LIQUIDITY MATTERS
Information in the accompanying condensed consolidated financial
statements as of September 30, 2001 and for the three and nine months
ended September 30, 2000 and 2001 and the cumulative amounts from April
6, 1998 (inception) through September 30, 2001 is unaudited and has
been prepared in accordance with accounting principles generally
accepted in the United States of America applicable to interim
financial information and the rules and regulations.
F-7
PayForView Media Group Holdings Corp.
(formerly PayForView.com Corp)
(a development stage company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
Three and nine months ended September 30, 2001 and 2000
(Unaudited)
NOTE B (continued)
promulgated by the Securities and Exchange Commission. These financial
statements should be read in conjunction with the Company's annual
financial statements included in its Annual Report on Form 10KSB for
the year ended December 31, 2000. In the opinion of the Company's
management, the September 30,2001 and 2000 unaudited condensed
consolidated interim financial statements include all adjustments,
consisting solely of normal recurring adjustments, necessary for a fair
presentation of such financial statements. The results of operations
for the three and nine months ended September 30, 2001 and 2000 are not
necessarily indicative of the results to be expected for any other
interim period or the entire year.
_
F-8
PayForView Media Group Holdings Corp.
(formerly PayForView.com Corp)
(a development stage company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and nine months ended September 30, 2001 and 2000
NOTE B (continued)
Additionally, as of September 30, 2001, the Company had recurring net
losses, a deficit accumulated in the development stage and negative
working capital.
On November 21, 2000 the Company filed a shelf registration in
connection with an equity line of credit agreement with Swartz Private
Equity LLC (described below) for the private placement of shares having
aggregate market value not to exceed $40,000,000. An aggregate of
34,500 shares were sold in 2001 for gross proceeds of approximately
$45,000.
The Company's future operations are dependent upon the markets
acceptance of its media and advertising products and services. There
can be no assurance that the Company's products and services will be
able to secure market acceptance.
The Company will require substantial additional capital to continue its
website development, marketing, sales, and administrative activities.
The Company has raised funds in the past through the sale of
securities, and is currently seeking to raise additional funds through
public offerings or private placements of securities, collaborative
arrangements and/or from other sources. We have an agreement with
Swartz Private Equity, LLC for an equity line of up to $40,000,000.
Drawdowns on this equity line are subject to market factors, and there
can be no assurance that the Company will be able to draw down funds
from such line.
Historically, the Company has been successful in meeting ongoing cash
requirements with equity placements, both public and private. However,
there can be no assurance that future discussions will result in any
investments, collaborative arrangements, agreements or funding, or that
future 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 the Company when needed, the Company may be
required to scale back its website development, marketing and
administrative activities and its business and financial results and
condition could be materially and adversely affected. As of September
30, 2001, the Company does not have sufficient working capital to
sustain operations through the year ending December 31, 2001
The Company is currently seeking to raise the additional financing that
it needs to fund its operations and satisfy its cash requirements
through a combination of debt financing, stock sales, and, in the
longer term, revenue from operations. Among the alternatives being
considered by management are plans to a) reduce or delay expenditures,
b) increase cash flow through acquisitions, c) borrow money using the
assets and cash flow of potential acquisitions and/or existing equity
investees such as Turn-Key Entertainment LLC and d) increase ownership
equity through various funding vehicles including convertible
debentures, private placements and registration of shares for sale to
the public. There can be no assurance that the company will be
successful in its efforts to raise the additional capital needed to
sustain the business through the year ending December 31, 2001.
_
F-9
PayForView Media Group Holdings Corp.
(formerly PayForView.com Corp)
(a development stage company)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Three and nine months ended September 30, 2001 and 2000
NOTE C RECENT ACCOUNTING PRONOUNCEMENTS
In June, 2001, the Financial Accounting Standards Board approved the
issuance of SFAS No. 141, "Business Combinations" and SFAS 142,
"Goodwill and Other Intangible Assets" which was issued July 20, 2001.
The new standards require that all business combinations initiated
after June 30, 2001 must be accounted for under the purchase method. In
addition, all intangible assets acquired that are obtained through
contractual or legal right, or are capable of being separately sold,
transferred, licensed, rented or exchanged shall be recognized as an
asset apart from goodwill. Goodwill and intangibles with indefinite
lives will no longer be subject to amortization, but will be subject to
at least an annual assessment for impairment by applying a fair value
based test.
The Company will continue to amortize intangible assets existing at
September 30, 2001 under its current method until January 1, 2002.
Thereafter, annual and quarterly amortization of approximately $16,000
and $4,000 respectively, will no longer be recognized. By June 30,
2002, the Company will perform a transitional fair value based
impairment test and if the fair value is less than the recorded value
at January 1, 2002, the Company will record an impairment loss in the
March 31, 2002 quarter, as a cumulative effect of a change in
accounting principal.
In August 2001, the FASB issued a statement of Financial Accounting
Standard No. 144 "Accounting for the Impairment or Disposal of Long
Lived Assets", ("SFAS144"). This statement is effective for the fiscal
years beginning after December 15, 2001. This supercedes SFAS 121,
while retaining many of the requirements of such statement. The Company
is currently evaluating the impact of the statement.
NOTE D 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
exercise of stock options and warrants are not reflected in diluted
net loss per share because such shares are anti-dilutive. An aggregate
of 39,531 outstanding stock options and 110,534 outstanding warrants as
of September 30, 2001 were excluded from the loss per share calculation
because the effect would be anti-dilutive. No warrants or options were
outstanding as of September 30, 2000. All stock splits have been
retroactively reflected in the loss per share calculations for all
periods presented.(see Note A)
F-10
PayForView Media Group Holdings Corp.
(formerly PayForView.com Corp)
(a development stage company)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Three and nine months ended September 30, 2001 and 2000
NOTE E - DISCONTINUED OPERATIONS
As of September 30, 2001 and 2000 the following liabilities
relating to Street Solid, an operation discontinued by the Company as
of October 29, 1999, remained on the books of the Company.
On November 8, 2000 the Company settled an outstanding lawsuit
with Destiny Music ("Destiny") for $325,000 subject to adjustment to
$350,000. In November 2000, a cash payment of $25,000 was made. The
remainder of the obligation is payable in cash or at the option of the
Company through the liquidation of shares held by Destiny. The
settlement requires a minimum monthly payment to Destiny of $25,000
payable either in cash or through liquidation of stock. In connection
with its purchase of Street Solid, the Company had assumed a liability
of $198,000. Accordingly, an additional $127,000 was recorded in the
third quarter of 2000 as additional loss on disposal of discontinued
operations. As of December 31, 2000, an aggregate of 50,000 post-split
shares were transferred to Destiny. Destiny is restricted under certain
laws from selling these securities, except as permitted under such
laws. As of December 31, 2000, the Company recorded approximately
$12,000 of additional estimated losses relating to these shares.
Additionally, the Company is required to transfer collateral of
additional shares of stock aggregating $10,800 of value per month to
Destiny pursuant to the settlement agreement. Through September 30,
2001, 30,000 shares were liquidated for proceeds to Destiny of $66,733,
which reduced the value of the Company's liability to Destiny and the
contra-equity account. As of September 30, 2001, the Company estimated
its remaining loss on this litigation settlement and recognized losses
which were charged to discontinued operations, due to the decline in
value of the shares of the Company held by Destiny between January 1,
2001 and September 30, 2001, aggregating $55,882. The Company will
continue to estimate its remaining obligation pursuant to this
litigation periodically and as of each reporting date, and adjust the
account accordingly.
_ F-11
PayForView Media Group Holdings Corp.
(formerly PayForView.com Corp)
(a development stage company)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Three and nine months ended September 30, 2001 and 2000
Note F SUPPLEMENTAL DISCLOSURES OF NONCASH
FINANCING AND INVESTING ACTIVITIES
In 1999, the following transactions occurred
1. In January 1999 in order to complete the acquisition of Voyager,
the Company issued 389,442 common shares (and a commission of 75,000
shares valued at $1,568).
2. In January 1999, the Company issued 58,675 common shares with an
aggregate fair market value of 1,598,280 to acquire Street Solid. In
connection with such acquisition, the Company assumed liabilities of
$198,000.
3. The Company issued 55,125 common shares valued at $3,067,400 in
exchange for licenses and rights.
4. The Company issued 202,767 common shares valued at $2,167,212 for
services rendered.
5. The Company issued 10,000 shares valued at $342,000 towards the
acquisition of software.
6. The Company issued 10,000 shares valued at $60,000 for fees
incurred for advertising.
7. The Company issued 1,141,850 common shares upon the conversion of
825,500 of convertible debentures.
In 2000, the following transactions occurred
8. In January 2000, holders of $172,500 of convertible debentures
exchanged such debentures into 345,000 shares of the Company's common
stock.
9. In February 2000, the Company issued an aggregate of 150,000
shares of common stock valued at $2,934,000 to officers and
consultants.
10. In February 2000, the Company issued 16,750 shares in payment of
transaction costs related to the MAS acquisition valued at $31.
11. In May 2000, the Company invested 100,000 shares that were valued
at $1,000,000, as part of its investment in Turn-Key Entertainment LLC.
This investment was subsequently written down to zero as of June 30,
2000
12. 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 through June 30,
2000. No additional compensation was required to be recorded during the
remainder of the year ended December 31, 2000.
13. On August 31,2000 the Company issued warrants to purchase 100,000
shares of common stock to an investment bank in connection with a
proposed financing at an exercise price of $1.40 per share, subject to
adjustment under certain conditions. The Company valued such warrants
at $600,000 based on a Black-Scholes pricing model, and included these
warrants in deferred offering costs.
14. In December 2000 the Company issued 50,000 shares to Destiny in
connection with a settlement of an outstanding lawsuit. Through March
31, 2001, approximately 30,000 shares have been liquidated, for net
proceeds to Destiny of $66,733.
15. In May 2000, the Company sold 64,000 of the 75,000 shares
placed in escrow in connection with the Voyager acquisition for
proceeds of $899,502 of which $850,000 was used to settle a debt of
$1,050,151.
In 2001, the following transactions occurred
16. In February 2001, the Company issued additional warrants to
purchase 10,534 shares of common stock to an investment bank in
connection with the equity agreement and Put exercised in February
2001. The Company valued such warrants at $21,067 using the Black-
Scholes pricing model.
17. In May 2001, the Company issued 701,366 shares of common stock
valued at $790,750 to officers and consultants as follows: Senior
Consultant 312,502, officer 136,364, former officer and director
112,500, former officers 40,000 and for legal services 100,000.
18. On July 30, 2001, the Company purchased an additional 5% equity
interest in Turn-Key Entertainment LLC, thereby increasing the
Company's investment to 30%, which consisted of 545,455 shares valued
at $600,000. This investment has been charged to expense in accordance
with generally accepted accounting principles.
19. On July 30, 2001, an aggregate of 300,000 shares were issued
to consultants in exchange for services to be rendered with a aggregate
fair market value of $51,000. The change has been included in the
Company Statement of Operations for the three and nine months ended
September 30, 2001.
20. On March 12, 2001, the Company signed compensation agreements with
Marc Pitcher and Sid Amira. Under such agreements, Marc Pitcher would
receive $75,000, payable in shares, for each of up to three letters of
agreement to acquire business that are signed before December 31,
2001 and Sid Amira would receive $25,000 payable in shares, for each
of up to three letters of agreement to acquire business that are
signed before December 31, 2001. One conditional letter of agreement
subject to financing was signed on May 30, 2001 and the Company issued
68,182 shares valued at $75,000 to Marc Pitcher. On July 31, 2001, the
Company issued, subject to forfeiture, an additional 136,364 shares
valued at $150,000 to Marc Pitcher in advance for future letters of
intent. As of June 30, 2001, 204,545 shares were issued to Marc Pitcher
and none to Sid Amira. The issuances are included in the Statement of
Stockholder's Equity as deferred compensation.
21. In July and August 2001 the company issued 615,000 shares of
common stock valued at $197,360 to officers and consultants as follows:
former officer and director, 42,500, former officer 42,500, directors
30,000 and consultants 500,000.
22. In August 2001, the Company issued 1,160,000 shares of its Common
Stock for $87,000 to Turn-Key Entertainment LLC in exchange for cash of
$49,854 and the balance of $37,146 for shares in lieu of repayment of
advances made to the Company.
NOTE G - ISSUANCE OF WARRANTS
On February 27,2001 the Company issued additional warrants to
purchase 10,534 shares of common stock , at an exercise price of $1.87
per share in connection with the equity agreement and put exercised in
February 2001. The Company valued the warrants at $21,067 based on
Black-Scholes pricing model. The warrants have been included in equity
related financing costs.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Forward Looking Information.
This Quarterly Report on Form 10-QSB 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
Quarterly Report on Form 10-QSB. 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.
DESCRIPTION OF BUSINESS.
PayForView Media Group Holdings Corp. is an integrated on-line and
off-line broadcast entertainment and information, advertising and
design company with broad experience and expertise in the on-line
streaming, rich-media and advertising sectors. Since launching the
PayForView.com website in April of 2000, PayForView Media Group
Holdings Corp. has distributed movies, music, sports and live events
direct to viewers on a pay-for-view, retail and e-commerce basis. The
Company also uses its streaming media expertise and a proprietary,
rich-media template to design on-line advertising and marketing
solutions. Additionally, the Company owns several other interests.
Turn-Key Entertainment, (in which the company owns as of September 30,
2001 a 30% interest) is building an on-line, pay-per-view industry
product that is synergistic with the Company's core business. Voyager
International Entertainment, a wholly owned subsidiary of the Company,
intends to develop and package motion picture projects for production.
Voyager Film Sales, a wholly owned subsidiary of the Company, is our
foreign sales division for these projects. We intend to produce and own
programming and distribute it through new media (the Internet) and old
media (broadcast, DBS and cable television). In this manner, we will
be 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. In April of 2001, we signed a letter of
intent to purchase 51% of Building America Television, a producer of
business affairs programming for the Network Television Market. We
continue to negotiate the terms of the purchase agreement and intend to
close subject to satisfactory completion of financing and due
diligence.
Results of Operations.
General.
We have incurred a cumulative net loss in our development stage of
approximately $21.3 million as of September 30, 2001. 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 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 we are in our operational stage.
Three and nine months ended September 30, 2001 compared to three and
nine months ended September 30, 2000
Revenues.
We had no revenues from continuing operations from our inception
on April 6, 1998 to date.
Selling, general and administrative expenses:
Selling, general and administrative expenses decreased to $285,925
for the three months ended September 30, 2001 from $880,812 for the
three months ended September 30, 2000, which is a net decrease of
$594,887. The decrease was primarily due to decreases in personnel
costs and consulting fees of $428,662 and a $188,506 decrease in travel
and web events. The decreases in personnel costs, consulting and
professional fees resulted from our consolidation of executive offices,
and the reduction in consulting and management personnel.
Selling, general and administrative expenses decreased to
$1,847,139 for the nine months ended September 30, 2001 from $5,858,101
for the nine months ended September 30, 2000, which is a net decrease
of 4,010,962. The decrease in 2001 was primarily due to decreases in
personnel costs, consulting fees and financing fees of $3,384,555 (of
which $2,460,545 was non cash equity-based compensation) and a $626,407
decrease in professional fees, consulting fees, travel, web events and
telephone. The decreases in personnel cost and consulting fees resulted
from our consolidation of executive offices, and the reduction in
consulting and management personnel.
Amortization of Licenses and Goodwill:
We had amortization of license fees and goodwill of $40,550 and
$63,503 for the three months ended September 30, 2001 and 2000
respectively. The decrease is due to the elimination of certain license
agreements.
We had amortization of license fees and goodwill of $123,404 and
$77,101 for the nine months ended September 30, 2001 and 2000
respectively. The increase is due to license agreements signed in the
third and fourth quarters of 2000.
Interest Income:
Interest income for the three months ended September 30, 2001
decreased to none from $22,433, a net decrease of $22,433 as compared
to September 30, 2000. This is due to a decrease in available cash and
cash equivalents balances.
Interest income for the nine months ended September 30, 2001
decreased to $8,896 from $96,540, a net decrease of $87,644 as compared
to September 30, 2000. This is due to a decrease in available cash and
cash equivalents balances.
Investment Expense:
Investment expense of $600,000 during the three and nine months ended
September 30, 2001 represents additional investment in Turn-Key
Entertainment LLC, and was expensed in accordance with generally
accepted accounting principles, compared to $2,400,000 investment in
Turn-Key for the nine months ended September 30, 2000, and none for the
three months ended September 30, 2000.
Liquidity and Capital Resources
Since inception through September 30, 2001, we had a deficit
accumulated during the development stage of approximately $21.3 million
and expect to continue to incur losses for the next several years. We
have financed our operations primarily through private placements of
our common stock. From inception to September 30, 2001 we received
proceeds from the sale of equity securities, net of share issuance
expenses, of approximately $5.8 million.
We used net cash in operating activities of $741,942 for the nine
months ended September 30, 2001. Net cash and cash equivalents used in
operations for the nine months ended September 30, 2001 primarily
consisted of the net loss from continuing operations of $2,526,545 less
non cash items of $1,784,603.
Net cash provided by financing activities was $131,850 for the
nine months ended September 30, 2001. Cash provided by financing
activities consisted of proceeds from the sale of our common stock of
pursuant to the equity line with Swartz Private Equity, LLC., and sale
of common stock for $87,000 to Turn-Key Entertainment LLC.
Our capital funding requirements will depend on numerous factors,
including the progress and magnitude of 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 have an agreement with Swartz Private Equity, LLC for an
equity line of up to $40,000,000. Draw downs on this equity line are
subject to market factors, and there can be no assurance that the
Company will be able to draw down funds from such line. Historically,
the Company has been successful in meeting ongoing cash requirements
with equity placements, both public and private. However, there can be
no assurance that discussions will result in any investments,
collaborative arrangements, agreements or funding, or that future
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. As of September
30, 2001, we do not have sufficient working capital to sustain
operations through December 31, 2001. We will pursue opportunities to
finance operations and satisfy cash requirements with a combination of
debt financing, stock sales, and, in the longer term, revenue from
operations.
Among the options available to and being considered by management to
ensure the Company has sufficient working capital for the next twelve
months are a) plans to reduce or delay expenditures, b) plans to
increase cash flow through acquisitions, c) plans to borrow money using
the assets and cash flow of potential acquisitions and/or our existing
equity investees such as Turn-Key Entertainment LLC and d) plans to
increase ownership equity through various funding vehicles including
convertible debentures, private placements and registration of shares
for sale to the public. There can be no assurances that any of these
opportunities will be successful.
PART II - - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are subject to claims and suits arising in the ordinary course of
business. At this time, except as otherwise indicated, it is not
possible to estimate the final outcome of these legal matters or the
ultimate loss or gain, except as otherwise stated.
On February 5, 2000, Destiny Music ("Destiny") filed a lawsuit against
PayForView (Los Angeles Superior Court Case #BC225482), claiming that
the Company owed a long-term lease obligation, further financial
support on certain projects and/or group promotional efforts and a
return of funds allegedly loaned to Street Solid Records, a subsidiary
of the Company at the time, which have not been returned as promised.
In addition to PayForView, the suit also named Solid Disc Records;
Solid Disc, Inc.; Street Solid Records, Inc.; Jay Warsinske, Marc
Pitcher and Nic Meredith.
On November 8, 2000 the Company settled the outstanding lawsuit with
Destiny for $325,000 subject to adjustment to $350,000. In November
2000 the Company paid $25,000 in cash to Destiny. The remainder is
payable either in cash or through the liquidation of shares of the
company's common stock. On December 6, 2000, 50,000 shares were issued
to Destiny to be liquidated to settle the remaining obligation of
$300,000. The Company is required to pay Destiny a monthly minimum of
$25,000 which is payable either in cash or through the liquidation of
shares. On December 6, 2000, the Company transferred 50,000 restricted
shares to Destiny. Destiny is restricted under certain securities laws
from selling these securities, except as permitted under such laws. The
Company is required to transfer additional shares of stock aggregating
$10,800 of value per month to Destiny pursuant to the settlement
agreement. Through September 2001 approximately 30,000 shares have been
liquidated for proceeds of $66,733.
The Company has been notified of a default entered against it in a
case in Los Angeles Superior Court (SC061720), of which it had
previously received no notification. The Company did not did not
receive notice of the Summons or Complaint, and for a series of
reasons, no notice was provided by the various individuals or entities
on which Plaintiff claims service was effected. The Company believes
that this judgment will be removed and the case tried upon its merits,
which is in favor of the Company.
ITEM 2. CHANGES IN SECURITIES
In February 2001, the Company issued additional warrants to
purchase 10,534 shares of common stock to an investment bank in
connection with the equity agreement and Put exercised in February
2001. The Company valued such warrants at $21,067 based on a Black-
Scholes pricing model.
In May 2001, the Company issued 701,366 shares of common stock
valued at $790,750 to officers and consultants as follows: for payment
of past due amounts on consulting contract and contract renewal
incentive to Senior Consultant 312,502, contract renewal incentive for
an officer 136,364, contract buy-out for former officer and director
112,500, severance payment for former officers 40,000 and for legal
services 100,000.
On July 30, 2001, the Company purchased an additional 5%
equity interest in Turn-Key Entertainment LLC, thereby increasing
the Company's investment to 30%, which consisted of 545,455 shares
valued at $600,000. This investment was charged to expense in
accordance with generally accepted accounting principals.
On July 30, 2001, an aggregate of 300,000 shares were to be issued
to consultants in exchange for services to be rendered valued at
$51,000. No services were rendered prior to September 30, 2001.
On March 12, 2001, the Company signed compensation agreements with
Marc Pitcher and Sid Amira. Under such agreements, Marc Pitcher would
receive $75,000, payable in shares, for each of up to three letters of
agreement to acquire business that are signed before December 31,
2001 and Sid Amira would receive $25,000 payable in shares, for each
of up to three letters of agreement to acquire business that are
signed before December 31, 2001. One conditional letter of agreement
subject to financing was signed on May 30, 2001 and subsequent to June
30, 2001, 204,545 shares were issued to Marc Pitcher and none to Sid
Amira.
In July and August 2001, the Company issued 615,000 shares of
common stock valued at $473,360 to officers and consultants as follows:
officer, 204,545, former officer and director 42,500, former officer
42,500, legal services 7,360, directors 30,000 and consultants 800,000.
In August 2001, the Company issued 1,160,000 common shares for
$87,000 in exchange for advances of $49,854 and the balance of $37,146
for shares in lieu of repayment for advances made to the company by
Turn-Key Entertainment LLC.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the Registrant has caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
PAYFORVIEW MEDIA GROUP HOLDINGS CORP.
Date: November 16, 2001 By: /s/ Marc A. Pitcher
Marc A. Pitcher,
President & Director