SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
MARK ONE
|X| Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Quarterly Period Ended January 31, 2004
|_| 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: 0-50062
E-THE MOVIE NETWORK, INC.
-------------------------
(Exact name of small business issuer as specified in its charter)
Florida 59-1082273
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1428 36TH STREET, SUITE 205, BROOKLYN, NEW YORK 11218
-----------------------------------------------------
(Address of principal executive offices, including zip code)
(718) 436-7931
--------------
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes | | No|
X|
As of January 31, 2004, the small business issuer had outstanding
25,700,000 shares of common stock.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE) YES |_| NO |X|
INDEX PAGE
PART I -- FINANCIAL INFORMATION
Forward Looking Statements (ii)
Item 1 - Financial Statements
Condensed Consolidated Balance Sheet January 31, 2004
(Unaudited) 1-2
Condensed Consolidated Statements of Operations for the
three months ended January 31, 2004 and for the period
from September 22, 2003 (inception) to January 31, 2004
(Unaudited) 3
Condensed Consolidated Statement of Changes in
Stockholders' Deficiency for the three months ended
January 31, 2004 and for the period from September 22,
2003 (inception) through January 31, 2004 4
Condensed Consolidated Statements of Cash Flows for the
three months ended January 31, 2004 and for the period
from September 22, 2003 (inception) through January 31,
2004 (Unaudited) 5-6
Notes to Condensed Consolidated Financial Statements
(Unaudited) 7
Item 2 - Plan of Operations 11
Item 3 - Controls and Procedures 13
PART II--OTHER INFORMATION
Item 1 - Legal Proceedings 14
Item 2 - Changes in Securities and Use of Proceeds 14
Item 3 - Defaults upon Senior Securities 14
Item 4 - Submission of Matters to a Vote of Security Holders 14
Item 5 - Other Information 14
Item 6 - Exhibits and Reports on Form 8-K 15
Signatures 16
FORWARD LOOKING STATEMENTS
The following discussion and explanations should be read in conjunction with the
financial statements and related notes contained elsewhere in this Form 10-QSB.
Certain statements made in this discussion are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements can be identified by terminology such as "may",
"will", "should", "expects", "intends", "anticipates", "believes", "estimates",
"predicts", or "continue" or the negative of these terms or other comparable
terminology and include, without limitation, statements below regarding: the
Company's intended business plans; expectations as to product performance;
intentions to acquire or develop other technologies; and belief as to the
sufficiency of cash reserves. Because forward-looking statements involve risks
and uncertainties, there are important factors that could cause actual results
to differ materially from those expressed or implied by these forward-looking
statements. These factors include, but are not limited to, the competitive
environment generally and in the Company's specific market areas; changes in
technology; the availability of and the terms of financing, inflation, changes
in costs and availability of goods and services, economic conditions in general
and in the Company's specific market areas, demographic changes, changes in
federal, state and /or local government law and regulations; changes in
operating strategy or development plans; the ability to attract and retain
qualified personnel; and changes in the Company's acquisitions and capital
expenditure plans. Although the Company believes that expectations reflected in
the forward-looking statements are reasonable, it cannot guarantee future
results, performance or achievements. Moreover, neither the Company nor any
other person assumes responsibility for the accuracy and completeness of these
forward-looking statements. The Company is under no duty to update any
forward-looking statements after the date of this report to conform such
statements to actual results.
(ii)
e-THE MOVIE NETWORKS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
January 31, 2004
--------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash $ 5,657
Prepaid expense 7,500
--------
Total Current Assets $ 13,157
INTANGIBLE ASSETS, Net of accumulated amortization
of $10,000 270,010
--------
TOTAL ASSETS $283,167
========
1
e-THE MOVIE NETWORKS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
January 31, 2004
--------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Notes payable - related parties $ 600,000
Note payable 150,000
Accounts payable - related parties 35,000
Accounts payable 285
Accrued payroll and payroll taxes 11,167
Accrued interest - related parties 41,995
Accrued interest 7,566
---------
TOTAL LIABILITIES $ 846,013
COMMITMENTS
STOCKHOLDERS' DEFICIENCY
Common stock, no par value, 100,000,000 shares
authorized; 25,700,000 shares issued and outstanding 28,266
Additional paid-in capital (423,800)
Deficit accumulated during the development stage (167,186)
---------
(562,720)
Less: stock subscription receivable (126)
---------
TOTAL STOCKHOLDERS' DEFICIENCY (562,846)
---------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIENCY $ 283,167
=========
2
e-THE MOVIE NETWORKS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
--------------------------------------------------------------------------------
Period from
September 22,
For the Three 2003 (Inception)
Months Ended (Inception) to
January 31, January 31,
2004 2004
------------ ----------
REVENUE $ 42,409 $ 42,409
------------ ---------
OPERATING EXPENSES
Consulting fees - related parties 105,000 160,000
Consulting fees 35,000 35,000
Legal fees -- 15,802
Amortization 7,500 10,000
Payroll and payroll taxes 33,681 33,681
Other 733 1,321
------------ ---------
TOTAL OPERATING EXPENSES 181,914 255,804
------------ ---------
OPERATING LOSS (139,505) (213,395)
------------ ---------
OTHER EXPENSES
Interest expense - related parties 25,063 41,995
Interest expense 2,618 7,566
------------ ---------
TOTAL OTHER EXPENSES 27,681 49,561
------------ ---------
NET LOSS $ (167,186) $(262,956)
============ =========
Basic and diluted loss per common share ($ 0.01)
============
Weighed-average common shares outstanding 24,846,565
============
3
e-THE MOVIE NETWORKS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
(UNAUDITED)
Period from September 22, 2003 (Inception) to January 31, 2004
--------------------------------------------------------------------------------
Deficit
Accumulated
Common Stock Additional During the Stock
---------------------- Paid-in Development Subscription
Shares Amount Capital Stage Receivable Total
------------------------------------------------------------------------------
BALANCE - September 22, 2003 (Inception) -- $ -- $ -- $ -- $-- $ --
---------
Issuance of common stock at inception
for $.00001 per share 22,600,000 226 -- -- (226) --
Issuance of common stock in connection
with purchase of intangible assets at
October 3, 2003 for $.00001 per share 1,000,000 10 -- -- -- 10
Collection of stock subscription
receivable on October 24, 2003 -- -- -- -- 100 100
Net loss -- -- -- (95,770) -- (95,770)
---------- ------- --------- --------- ----- ---------
BALANCE - October 31, 2003 23,600,000 236 -- (95,770) (126) (95,660)
---------- ------- --------- --------- ----- ---------
Effects of reverse merger at November 3, 2003:
Capitalization of LLC's accumulated deficit at time
of recapitalization -- -- (95,770) 95,770 -- --
Equity of e-The Movie Networks, Inc. at time of --
recapitalization 2,100,000 28,030 (328,030) -- -- (300,000)
Net Loss -- -- -- (167,186) -- (167,186)
---------- ------- --------- --------- ----- ---------
BALANCE - January 31, 2004 25,700,000 $28,266 $(423,800) $(167,186) $(126) $(562,846)
========== ======= ========= ========= ===== =========
4
e-THE MOVIE NETWORKS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
--------------------------------------------------------------------------------
Period from
September 22,
For the Three 2003
Months Ended (Inception) to
January 31, January 31,
2004 2004
------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(167,186) $(262,956)
--------- ---------
Adjustments to reconcile net loss to net
cash used in operating activities:
Amortization 7,500 10,000
Changes in operating assets and liabilities:
Decrease in prepaid expenses - related party 35,000 --
Increase in prepaid expenses (7,500) (7,500)
Increase in accounts payable -- 285
Increase in accounts payable - related party 35,000 35,000
Increase in accrued payroll 11,167 11,167
Increase in accrued interest - related parties 25,064 41,995
Increase in accrued interest 2,618 7,566
Decrease in deferred revenue (30,000) (30,000)
--------- ---------
TOTAL ADJUSTMENTS 78,849 68,513
--------- ---------
NET CASH USED IN OPERATING
ACTIVITIES (88,337) (194,443)
--------- ---------
CASH USED IN INVESTING ACTIVITIES
Purchase of intangible assets -- (100,000)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Deposits in escrow -- (300,000)
Advances from related parties -- 300,000
Repayment of advances from related parties -- (300,000)
Proceeds from notes payable - related parties -- 600,000
Collection of stock subscription receivable -- 100
--------- ---------
NET CASH PROVIDED BY FINANCING
ACTIVITIES $ -- $ 300,100
--------- ---------
5
e-THE MOVIE NETWORKS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS,
Continued
(UNAUDITED)
--------------------------------------------------------------------------------
Period from
September 22,
For the Three 2003
Months Ended (Inception) to
January 31, January 31,
2004 2004
------------------------------
NET (DECREASE) INCREASE IN CASH $(88,337) $ 5,657
CASH - Beginning 93,994 --
-------- --------
CASH - Ending $ 5,657 $ 5,657
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the periods for:
Interest $ -- $ --
Non-cash investing and financing activities:
In connection with the purchase of intangible
assets:
Deferred revenue assumed $ -- $ 30,000
Note payable assumed $ -- $150,000
Common stock issued $ -- $ 10
6
e-THE MOVIE NETWORKS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE 1 - Organization and Operations of Company
Pursuant to the terms and conditions of an Exchange Agreement effective
November 3, 2003 (the "Exchange Agreement"), e-The Movie Networks, Inc.
("ETMV"), a Florida Corporation, acquired all the outstanding membership
interests of Cell Power Technologies LLC ("Cell Power"), a Delaware
limited liability company engaged in the marketing and distribution of
portable cell phone batteries. As ETMV did not have any meaningful
operations prior to the consummation of the Exchange Agreement, the
transaction was treated as a recapitalization, and accounted for, on a
historical cost basis, for all periods presented. Moreover, the financial
statements set forth in this report for all periods, prior to the
recapitalization, are the financial statements of Cell Power and the
membership interests of Cell Power have been retroactively restated to
give effect to the exchange for ETMV common stock. ETMV and its
subsidiary, Cell Power, are collectively referred to as the "Company".
For further information on the Exchange Agreement, please refer to the
Current Report on Form 8-K filed by the Company with the Securities and
Exchange Commission on November 6, 2003, and as amended by the Current
Report on Form 8-K/A filed by the Company on April 5, 2004.
NOTE 2 - Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The condensed consolidated financial statements contained herein have
been prepared in accordance with generally accepted accounting principles
for interim financial statements, the instructions to Form 10-QSB and
Item 310 of Regulation S-B. Accordingly, these financial statements do
not include all the information and footnotes required by generally
accepted accounting principles for annual financial statements. In the
opinion of management, the accompanying condensed consolidated financial
statements contain all the adjustments necessary (consisting only of
normal recurring accruals) to make the financial position of the Company
at January 31, 2004, and its results of operations and cash flows for the
three months ended January 31, 2004 not misleading.
Operating results for the three months ended January 31, 2004 are not
necessarily indicative of the results that may be expected for the fiscal
year ending October 31, 2004.
The Company's condensed consolidated financial statements have been
prepared assuming the Company will continue as a going concern. The
Company has incurred a net loss of $262,956 since its inception, has a
working capital deficiency of $832,856, has a stockholders' deficiency of
$562,846 and has entered into consulting and other contractual
commitments. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. The condensed consolidated
financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
Management expects to incur additional losses for the foreseeable future
and recognizes the need to raise capital in order to develop a viable
business. The Company plans to issue stock to raise capital to fund its
operations, however, there can be no assurances that the Company can
obtain the additional financing necessary to fund its operations.
7
e-THE MOVIE NETWORKS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE 2 - Basis of Presentation and Summary of Significant Accounting Policies,
continued
Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiary. All
significant intercompany balances and transactions have been eliminated.
Revenue Recognition
The Company generates revenue from two specific sources: (a) royalties on
the sale of individual Cellboost units generated by other entities in
certain markets; and (b) Cellboost product sales generated by the
Company. Revenues generated from either royalty rights or Company product
sales are recognized when the product is shipped and collectibility is
probable.
Stock Options
As of January 31, 2004, the Company had stock options outstanding to its
Chief Executive Officer granted in November 2003. The options are for
500,000 shares of the Company's common stock, have an exercise price of
$0.50 per share and vest ratably over 5 years beginning two years from
the date of grant. As permitted under SFAS No. 148, "Accounting for
Stock-Based Compensation-Transition and Disclosure," which amended SFAS
No. 123 ("SFAS 123"), "Accounting for Stock Based Compensation," the
Company has elected to continue to follow the intrinsic value method in
accounting for its stock-based employee compensation arrangements, as
defined by Accounting Principles Board Opinion ("APB") No. 25, Accounting
for Stock Issued to Employees," and related interpretations including
Financial Accounting Standards Board Interpretations No. 44, "Accounting
for Certain Transactions Involving Stock Compensation," an interpretation
of APB No. 25. No stock-based employee compensation cost is reflected in
net loss, as all options granted had an exercise price equal to or
greater than the market value of the underlying common stock on the date
of grant. The following table illustrates the effect on net loss and loss
per share if the Company had applied the fair value recognition
provisions of SFAS 123 to stock-based compensation for the three months
ended January 31, 2004:
Net loss as reported $(167,186)
Deduct: total stock-based employee compensation
expense determined under fair
value-based method for all options (2,346)
---------
Proforma net loss $(169,532)
=========
Basic and diluted net loss per share as reported $ 0.01
=========
Basic and diluted proforma net loss per share $ 0.01
=========
8
e-THE MOVIE NETWORKS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE 2 - Basis of Presentation and Summary of Significant Accounting Policies,
continued
Stock Options, continued
The fair value of options at date of grant was estimated using the
Black-Scholes fair value-based method with the following weighted average
assumptions:
Expected Life (Years) 5
Interest Rate 3.33%
Annual Rate of Dividends --%
Volatility 96%
The weighted average fair value of options at date of grant using the
fair value-based method is estimated at $0.06.
NOTE 3 - Deferred and Income Taxes
Income taxes have been computed in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" This standard
requires, among other things, recognition of future tax expenses or
benefits, measured using enacted tax rates, attributable to taxable or
deductible temporary differences between financial statements and income
tax reporting bases of assets and liabilities.
Cell Power, a limited liability company, had previously been treated as a
partnership under the Internal Revenue Code and relevant state statutes.
As a result of the Exchange Agreement, the taxable status of Cell Power
as a partnership was terminated as of November 3, 2003. No provision or
liability for federal or state income taxes has been included in the
accompanying condensed consolidated financial statements for the period
prior to the effective date of the Exchange Agreement. Proforma income
taxes are not presented as it would not be different from actual.
NOTE 4 - Loss Per Share
Basic net loss per share is computed based on the weighted average shares
of common stock outstanding and excludes any potential dilution. Diluted
net loss per share reflects the potential dilution from the exercise or
conversion of all dilutive securities, such as stock options, into common
stock. The Company's outstanding stock options are not included in the
computation of basic or diluted net loss per share since they are
anti-dilutive. Potentially dilutive securities consist of 500,000 options
at January 31, 2004.
NOTE 5 - Significant Customer
All of the Company's revenue has been generated by one customer.
9
e-THE MOVIE NETWORKS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE 6 - Commitments
Consulting Services Contracts
In January 2004, the Company entered into a consulting contract for
operational and financial services. The contract provides for monthly
payments of $5,000 for six months and an option to purchase common stock
of the Company. The option, extending into perpetuity, provides for the
purchase of an amount equal to 2% of the outstanding common stock of the
Company at the time of exercise for $0.50 per share.
Employment Agreement
The Company entered into a three-year employment agreement, effective
November 1, 2003, with a member of the Company to serve as its Chief
Executive Officer and President. The agreement provides for a salary of
$120,000 per annum, incentive bonuses and options to purchase 500,000
shares of common stock of ETMV, pursuant to terms in the Agreement.
NOTE 7 - Subsequent Events
Issuance of Common Stock
In March 2004, the Company issued 250,000 shares of common stock for
$50,000.
Consulting Agreements
In February 2004, the Company entered into two one-year consulting
agreements each in exchange for 1.5 million shares of the Company's
common stock.
10
ITEM 2. PLAN OF OPERATIONS
The following analysis of the results of operations and financial
condition of the Company should be read in conjunction with the financial
statements for the period September 22, 2003 (inception) to October 31, 2003 and
notes thereto contained in the Report on Form 8-K of e the Movie Network, Inc.
("ETMV"). These financial statements reflect the consolidated operations of ETMV
and its consolidated subsidiary for the three months ended January 31, 2004.
Overview
e-The Movie Network, Inc. ("ETMV") was incorporated in the state of
Florida in January 2001 to sell movie videos over the internet. ETMV's original
plan never materialized and, in November 2003, ETMV entered into an agreement
with the holders of the membership interests in Cell Power Technologies LLC.
("Cell Power"), a Delaware limited liability company, to issue shares of ETMV
for outstanding membership interests in Cell Power. Cell Power was organized
under Delaware law in September 2003 and is engaged in the marketing and sale of
a product known as Cellboost. Following the transaction, Cell Power became a
wholly owned subsidiary of ETMV (Collectively the "Company").
Cell Power is the sub-exclusive agent for Cellboost products (the
"Products") in Latin and South America. Cellboost, is a portable cell-phone
battery. Smaller than a matchbook, Cellboost comes in phone specific models to
fit most cellphones and includes a portable battery with a non-degenerating
three-year shelf life that includes 60 hours of standby and one hour talk time.
Reflecting the changed focus of its business, the Company's objective
is to accelerate the development of new markets for Products in Latin and South
America. The Company's immediate objective is to implement a dual-pronged
marketing plan in an effort to establish markets for the Products in Latin and
South American markets. The first prong of the Company's marketing plan is,
marketing and sales to wireless phone carriers in the region through industry
specific print advertising and active marketing at trade shows such as, the CTIA
show which the Company attended, in an effort to begin the process of
introducing the Products to carriers and their distributors. As this market
segment grows, the Company intends to actively market the Products to regional
distributors and retailers in order to broaden Product availability.
The second prong of the marketing plan consists of, marketing and sales
to consumers. Experience in North America has shown that education of consumers
to the benefits of the product leads directly to increased sales. However, the
Company believes that this prong of the marketing plan cannot commence until
there is sufficient availability of product in the market to satisfy consumer
demand. The Company anticipates that it will rollout this segment of the plan on
a regional basis.
The Company has engaged several consultants in order to design an
appropriate marketing plan for the penetration of the South and Latin American
11
markets. These consultants have prepared budgets and financials indicating what
the cost of the marketing plan will be. Management has approved the marketing
plan and intends to raise the funds needed to implement the plan through
offerings of the Company's securities. However, the Company currently has no
funding commitments and no assurance can be provided that the Company will be
able to raise funds on commercially acceptable terms.
Financial Condition
The Company is considered a development stage company and has a limited
operating history upon which an evaluation of its prospects can be made. The
Company's prospects must therefore be evaluated in light of the problems,
expenses, delays and complications associated with a development stage company.
The Company expects to incur significant additional expenditures in
implementing its marketing plan and operating losses are expected for the
foreseeable future. There can be no assurance that the Company can be operated
profitably in the future.
The Company's continuation as a going-concern is dependent upon, among
other things, its ability to obtain additional financing when and as needed, and
to generate sufficient cash flow to meet its obligations on a timely basis. No
assurance can be given that the Company will be able to obtain such financing on
terms acceptable to it. Cell Power's auditors' report on the financial
statements for the period September 22, 2003 (inception) to October 31, 2003
indicated that substantial doubt exists regarding Cell Power's ability to
continue as a going concern. Such indication may make it more difficult for the
Company to raise funds.
For the three months ended January 31, 2004, the Company recorded
revenues of approximately $42,000. This revenue is attributable to royalty
income earned as a result of the Company's purchase of a royalty stream from
Global Link Technologies, Inc.
Operating expenses, which include consulting, legal and other
professional fees, payroll and payroll taxes and other expenses, were
approximately $182,000 for the three months ended January 31, 2004.
The Company had net cash used in operations of approximately $88,000.
As a result, its cash balances were reduced by such amount.
The Company has notes payable resulting from the acquisition of Cell
Power in the approximate amount of $750,000 that continue to accrue interest.
Liquidity and Capital Resources
On January 31, 2004, we had approximately $6,000 in available cash
resources. In March 2004, the Company raised $50,000 from the issuance of
250,000 shares of Common Stock to an investor.
12
The Company needs to raise at least $250,000 on an immediate basis in
order to meet its obligation as they come due to maintain operations as
presently conducted through the third quarter of 2004. Additionally, the Company
will need at least an additional $1.25 million in order to realize its business
plan. Management intends to seek additional financing through loans, the sale
and issuance of additional debt and/or equity securities, or other financing
arrangements. The Company has no commitments for any funding and no assurance
can be given that the Company will be able to raise needed funds on commercially
acceptable terms.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In January 2003, and revised in December 2003, the Financial Accounting
Standards Board ("FASB") issued Interpretation No. 46 ("FIN 46"), "Consolidation
of Variable Interest Entities." FIN 46 requires certain variable interest
entities to be consolidated by the primary beneficiary of the entity if the
equity investors in the entity do not have the characteristics of a controlling
financial interest or do not have sufficient equity at risk for the entity to
finance its activities without additional financial support from other parties.
FIN 46 is effective for all new variable interest entities created or acquired
after January 31, 2003. For variable interest entities created or acquired prior
to February 1, 2003, the provisions of FIN 46 must be applied for the first
interim or annual period beginning after December 15, 2004.
In May 2003, the FASB issued Statement of Financial Accounting Standard
No. 150, "Accounting for Certain Financial Instruments with Characteristics of
Both Liabilities and Equity" ("SFAS 150"). SFAS 150 establishes standards for
classification and measurement of certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within its scope as a liability (or an
asset in certain cases). The provisions of SFAS 150 are effective for
instruments entered into or modified after May 31, 2003 and pre-existing
instruments as of July 1, 2003. On October 29, 2003, the FASB voted to
indefinitely defer the effective date of SFAS 150 for mandatory redeemable
instruments as they relate to minority interests in consolidated finite-lived
entities through the issuance of FASB Staff Position 150-3.
The Company does not expect the adoption of these pronouncements to
have a material effect on its financial position or results of operations.
ITEM 3. CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures that are
designed to ensure that information required to be disclosed in the Company's
Exchange Act reports is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission's rules and
forms, and that such information is accumulated and communicated to the
Company's management, as appropriate, to allow timely decisions regarding
required disclosure. In designing and evaluating the disclosure controls and
procedures, management recognized that any controls and procedures, no matter
how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives, and management necessarily was
required to apply its judgment in evaluating the cost-benefit relationship of
possible controls and procedures.
13
As of the end of the period covered by this report, we carried out an
evaluation, under the supervision and with participation of management,
including our Chief Executive Officer and Principal Financial Officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures. Based on the foregoing, our Chief Executive Officer and Principal
Financial Officer concluded that our disclosure controls and procedures were
effective.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
During the three months ended January 31, 2004, there have been no
changes in our internal controls over financial reporting that have materially
affected, or are reasonably likely to materially affect, these controls.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
SALE OF UNREGISTERED SECURITIES
Set forth below is certain information concerning sales by the Company
of unregistered securities during the three months ended January 31, 2004. The
issuances by the Company of the securities sold in the transactions referenced
below were not registered under the Securities Act of 1933, as amended, pursuant
to the exemption contemplated by Section 4(2) thereof for transactions not
involving a public offering.
In connection with the acquisition of Cell Power, in November 2003 the
Company issued to the previous members of Cell Power 23,600,000 shares of the
Company's Common Stock in consideration of all of the then outstanding
membership interests of Cell Power.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
None
31. Rule 13a-14(a) / 15d-14(a) Certification
32. Section 1350 Certification
(b) Reports on Form 8-K
(i) The Company filed a Current Report on Form 8-K on November 6,
2003 announcing the acquisition of Cell Power.
(ii) The Company filed Amendment No. 1 to such Current Report on Form
8-K on April 5, 2003 to file the audited 2003 year-end financial
statements of Cell Power.
15
SIGNATURES
In accordance with the requirements of the Exchange Act the registrant caused
this report to be signed by the undersigned thereunto duly authorized.
DATE: April 26, 2004 e-THE MOVIE NETWORK, INC.
/s/ JACOB HERSKOVITS
--------------------------------------
JACOB HERSKOVITS
CHIEF EXECUTIVE OFFICER
(AND PRINCIPAL FINANCIAL OFFICER)
16