UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________________
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarterly period Ended: June 30, 2005; or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period _________ to __________
Commission File Number: 0-22057
_________________________________
M POWER ENTERTAINMENT, INC. AND SUBSIDIARIES
(FKA GK INTELLIGENT SYSTEMS, INC.)
_____________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 76-0513297
______________________________ _________________
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
432 Park Avenue South, 2nd Floor, New York, NY 10016
______________________________________________________
(Address of principal executive offices) (Zip Code)
(212) 731-2310
__________________________________________________
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all Reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that a
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
The number of shares outstanding of the registrant's common stock, $0.001 par
value, as of August 15, 2005, was 27,264,355.
Transitional Small Business Disclosure Format. Yes [ ] No [X]
M POWER ENTERTAINMENT, INC. AND SUBSIDIARIES
(FKA GK INTELLIGENT SYSTEMS, INC.)
Report on Form 10-QSB
For the Quarter Ended June 30, 2005
INDEX
Page
Part I. Financial Information
Item 1. Financial Statements (unaudited)................... 3
Condensed Consolidated Balance Sheet............... 4
Condensed Consolidated Statements of Operations.... 5
Condensed Consolidated Statements of Cash Flows.... 6
Notes to the Condensed Consolidated Financial
Statements...................................... 8
Item 2. Management's Discussion and Analysis
or Plan of Operation .............................. 13
Item 3. Controls and Procedures ........................... 18
Part II. Other Information
Item 1. Legal Proceedings ................................. 18
Item 2. Changes in Securities ............................. 19
Item 3. Defaults Upon Senior Securities ................... 20
Item 4. Submission of Matters to a Vote of
Security Holders .................................. 20
Item 5. Other Information ................................. 20
Item 6. Exhibits .......................................... 20
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
M POWER ENTERTAINMENT, INC. AND SUBSIDIARIES
(FKA GK INTELLIGENT SYSTEMS, INC.)
FINANCIAL STATEMENTS
June 30, 2005
3
M POWER ENTERTAINMENT, INC. AND SUBSIDIARIES
(Formerly GK Intelligent Systems, Inc., and Subsidiaries)
Condensed Consolidated Balance Sheets
ASSETS
June 30, December 31,
2005 2003
------------- -------------
CURRENT ASSETS (Unaudited)
Cash $ 110,520 $ 54,096
Accounts receivable 189,343 183,104
Inventory 57,524 -
Other current assets 38,094 3,473
------------- -------------
Total Current Assets 395,481 240,673
------------- -------------
FIXED ASSETS, NET 633,180 9,964
------------- -------------
OTHER ASSETS
Goodwill 8,275,517 136,839
Patents, net 835,000 -
Music catalog and licensing rights 500,000 -
------------- -------------
Total Other Assets 9,610,517 136,839
------------- -------------
TOTAL ASSETS $ 10,639,178 $ 387,476
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 321,357 $ 257,548
Accounts payable - related parties 103,925 3,697
Bank overdraft 2,561 -
Accrued expenses 930,467 777,634
Accrued expenses - related parties 75,330 65,681
Accrued acquisition costs 166,662 -
Notes payable 250,077 164,000
Notes payable - related parties 463,940 232,421
Mandatorily redeemable series C convertible
preferred stock: $0.01 par value. 1,000,000
shares authorized; 1,000,000 and -0- shares
issued and outstanding, respectively 4,000,000 -
------------- -------------
Total Current Liabilities 6,314,319 1,500,981
------------- -------------
TOTAL LIABILITIES 6,314,319 1,500,981
------------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, Series B: $0.001 par value,
100,000 shares authorized, 232,276 and -0-
shares issued and outstanding, respectively 232 -
Common stock: $0.001 par value, 275,000,000
shares authorized, 17,658,396 and 1,112,731
shares issued and outstanding, respectively 17,659 1,113
Additional paid-in capital 59,106,191 46,811,939
Stock subscriptions receivable (500,000) (500,000)
Accumulated deficit (54,299,223) (47,426,557)
------------- -------------
Total Stockholders' Equity (Deficit) 4,324,859 (1,113,505)
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 10,639,178 $ 387,476
============= =============
The accompanying notes are an integral part of these
condensed consolidated financial statements.
4
M POWER ENTERTAINMENT, INC. AND SUBSIDIARIES
(Formerly GK Intelligent Systems, Inc. and Subsidiaries)
Condensed Consolidated Statements of Operations
(Unaudited)
For the Three Months Ended For the Six Months Ended
June 30, June 30,
--------------------------- ---------------------------
2005 2004 2005 2004
------------- ------------- ------------- -------------
<s> <c> <c> <c> <c>
REVENUES $ 659,287 $ - $ 698,718 $ -
COST OF GOODS SOLD 67,318 - 158,337 -
------------- ------------- ------------- -------------
GROSS PROFIT 591,969 - 540,381 -
------------- ------------- ------------- -------------
OPERATING EXPENSES
Depreciation and amortization 3,881 264 4,813 264
Impairment of goodwill 5,359,484 - 5,359,484 -
Payroll expenses 19,369 - 117,195 -
General and administrative 1,170,687 816,805 1,864,720 1,306,774
------------- ------------- ------------- -------------
Total Expenses 6,553,421 817,069 7,346,212 1,307,038
------------- ------------- ------------- -------------
LOSS FROM OPERATIONS (5,961,452) (817,069) (6,805,831) (1,307,038)
------------- ------------- ------------- -------------
OTHER INCOME (EXPENSE)
Gain (loss) on extinguishment of debt - (22,121) - (22,121)
Gain on release of debt - - - 871,090
Interest expense and loan discount fees (16,303) (21,388) (33,781) (50,907)
------------- ------------- ------------- -------------
Total Other Income (Expense) (16,303) (43,509) (33,781) 798,062
------------- ------------- ------------- -------------
NET LOSS BEFORE DISCONTINUED OPERATIONS (5,977,755) (860,578) (6,839,612) (508,976)
LOSS FROM DISCONTINUED OPERATIONS (41,014) - (33,054) -
------------- ------------- ------------- -------------
NET LOSS $ (6,018,769) $ (860,578) $ (6,872,666) $ (508,976)
============= ============= ============= =============
BASIC LOSS PER SHARE FROM
CONTINUING OPERATIONS $ (0.80) $ (3.81) $ (1.58) $ (13.42)
============= ============= ============= =============
BASIC LOSS PER SHARE FROM
DISCONTINUED OPERATIONS $ (0.01) $ 0.00 $ (0.01) $ 0.00
============= ============= ============= =============
TOTAL BASIC AND DILUTED NET
LOSS PER SHARE $ (0.81) $ (3.81) $ (1.59) $ (13.42)
============= ============= ============= =============
BASIC AND DILUTED WEIGHTED AVERAGE
NUMBER OF SHARES OUTSTANDING 7,518,002 226,058 4,343,946 37,913
============= ============= ============= =============
The accompanying notes are an integral part of these
condensed consolidated financial statements.
5
M POWER ENTERTAINMENT, INC. AND SUBSIDIARIES
(Formerly GK Intelligent Systems, Inc. and Subsidiaries)
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the Six Months Ended
June 30,
2005 2004
------------- -------------
<s> <c> <c>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (6,872,666) $ (508,649)
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation and amortization 6,293 264
Gain on release of debt - (871,090)
Loss on extinguishment of debt - 22,121
Amortization of unearned compensation - 232,824
Impairment of goodwill 5,359,484 -
Issuance of common stock, stock options, and
warrants for services rendered 979,701 581,260
Changes in operating assets and liabilities:
Decrease in accounts receivable 121,650 -
(Increase) decrease in other current assets (4,828) 6,476
Increase (decrease) in accounts payable and
accrued expenses 11,703 (2,425)
Increase in accounts payable and accrued
expenses - related party 109,877 131,737
------------- -------------
Net Cash Used by Operating Activities (288,786) (407,482)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (3,247) (3,209)
Cash received in acquisition transactions 84,356 -
------------- -------------
Net Cash Provided By (Used in) Investing Activities 81,109 (3,209)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable 36,479 47,000
Proceeds from notes payable - related party 225,061 -
Common stock issued for cash - 514,998
Increase in bank overdraft 2,561 -
------------- -------------
Net Cash Provided by Financing Activities 264,101 561,998
------------- -------------
NET INCREASE IN CASH 56,424 151,307
CASH AT BEGINNING OF PERIOD 54,096 97
------------- -------------
CASH AT END OF PERIOD $ 110,520 $ 151,404
============= =============
The accompanying notes are an integral part of these
condensed consolidated financial statements
6
M POWER ENTERTAINMENT, INC. AND SUBSIDIARIES
(Formerly GK Intelligent Systems, Inc. and Subsidiaries)
Condensed Consolidated Statements of Cash Flows (Continued)
(Unaudited)
For the Six Months Ended
June 30,
2005 2004
------------- -------------
<s> <c> <c>
SUPPLEMENTAL SCHEDULE OF CASH FLOW ACTIVITIES:
Cash Paid For:
Income taxes $ - $ -
Interest $ - $ -
Schedule of Non-Cash Investing and Financing Activities:
Common stock issued for debt $ - $ 271,145
Preferred stock issued in acquisition of subsidiaries $ 6,093,338 $ -
Common stock issued for acquisition of subsidiary $ 9,150,000 $ -
The accompanying notes are an integral part of these
condensed consolidated financial statements.
7
M POWER ENTERTAINMENT, INC. AND SUBSIDIARIES
(Formerly GK Intelligent Systems, Inc., and Subsidiaries)
Notes to the Condensed Consolidated Financial Statements
NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
have been condensed or omitted in accordance with such rules and regulations.
The information furnished in the interim condensed financial statements
includes normal recurring adjustments and reflects all adjustments, which, in
the opinion of management, are necessary for a fair presentation of such
financial statements. Operating results for the six months ended June 30,
2005 are not necessarily indicative of the results that may be expected for
the year ending December 31, 2005.
NOTE 2 - DESIGNATION OF PREFERRED STOCK
On February 7, 2005, the Company's Board of Directors elected to create and
designate a class of Series B Convertible Preferred Stock, primarily for the
purpose of facilitating the consummation of the Company's acquisition of
Corazong Music Management, B.V. (see Note 3). As a part of this action, the
Board of Directors authorized 100,000 shares of $0.001 par value Series B
Convertible Preferred Stock, which could be converted into common stock at a
rate of 3.15 post-split Common Shares for one Series B Preferred Share, after
May 1, 2005. The Series B Preferred Shares carry no liquidation preference,
and no dividend rate.
In March 2005 the Company issued an additional 132,276 shares of Series B
Convertible Preferred Stock as consideration for the acquisition of R.S.
Entertainment, Inc. (see Note 3).
On April 7, 2005, the Company's Board of Directors elected to create and
designate a class of Series C Convertible Preferred Stock, primarily for the
purpose of facilitating the consummation of the Company's acquisitions of
White Canyon, Inc. and Channel Access, Inc. As a part of this action, the
Board of Directors authorized 1,000,000 shares of $0.01 par value Series C
Convertible Preferred Stock, which could be converted into common stock at a
rate of four post-split Common Shares for one Series C Preferred Share. The
Series C Preferred Shares carry no liquidation preference, and no dividend
rate.
NOTE 3 - ACQUISITIONS
Acquisition of Corazong Music Management
- ----------------------------------------
On January 17, 2005, the Company entered into a Purchase Agreement with two
unrelated individuals, whereby the Company acquired all of the issued and
outstanding common stock of Corazong Music Management B.V., a Dutch
corporation ("Corazong"), in exchange for $1,260,000, paid in the form of
100,000 shares of Series B Convertible Preferred Stock. The Company also
agreed to provide Corazong with a $1,500,000 line of credit to be used to
develop and market its catalog and to develop new talent and artists. The
transaction closed on February 11, 2005. As an additional stipulation of the
Agreement with Corazong, the sellers have retained the right to repurchase 49%
of Corazong for a period of up to two years. The Company recorded goodwill
totaling $1,336,378 relating to the acquisition of Corazong.
Corazong, formerly a privately-held European company, is a music recording and
production entity that released its first music CD in 1999 and is currently
attempting to expand its operations into Western Europe and the United States.
The most significant asset currently managed by Corazong is its catalog of
music recordings.
8
M POWER ENTERTAINMENT, INC. AND SUBSIDIARIES
(Formerly GK Intelligent Systems, Inc., and Subsidiaries)
Notes to the Condensed Consolidated Financial Statements
NOTE 3 - ACQUISITIONS (Continued)
Acquisition of R.S. Entertainment
- ---------------------------------
On March 2, 2005, the Company agreed to purchase all of the outstanding common
stock of R.S. Entertainment, Inc., a Utah Corporation, ("RSE") for $1,000,000
in shares of the Company's unregistered common stock, or in the equivalent
value of Series B convertible preferred stock. The value of the shares will
be the average market value of the five business days prior to the date of
issuance. The Company elected to issue 132,276 shares of Series B Preferred
Stock as payment pursuant to the Agreement. The Company also agreed to provide
RSE with a $2,500,000 line of credit to be used for print and advertising
funds for the films it distributes. By providing the print and advertising
money for the films it distributes, RSE expects to retain a substantial
percentage of the box office and residual revenues from the films. The Line
of Credit is expected to be available to RSE upon the Company's successful
completion of its proposed financing. In the event that the line of credit is
not available as of May 31, 2005, an additional 5,000 post-split shares of the
Company's common stock will be issued each month until the line of credit
becomes available. The company effectively issued 5,000 post-split shares on
both May 31 and June 30, as the credit line had not yet been made available.
The Company recorded $987,465 in goodwill relating to this acquisition.
The Sellers of R.S. Entertainment have the right to rescind the Agreement if
line of credit is not available after 120 days of the closing date. Should
this Agreement be rescinded, the Sellers will return the Company's shares
received as part of the purchase price for the RSE stock. Sellers shall
retain any shares issued in connection with their employment with RSE
(subsequent to March 2, 2005) as liquidated damages. As of the date of this
report, the Company had not yet issued the $1,000,000 in common shares
associated with this Agreement. The amount as been recorded as accrued
acquisition costs on the Company's balance sheet. Furthermore, as of June 30,
2005, the Company has not yet secured the $2,500,000 line of credit for RSE.
As a consequence, the Company effectively issued 5,000 shares to RS
Entertainment on May 31, 2005, and another 5,000 on June 30, 2005. RSE has
agreed to extend the deadline for the line of credit for an additional 120
days.
Specializing in the independent motion picture industry, RSE provides
theatrical film distribution services and strategic market development. RSE
works with third parties in creative advertising, media placement and public
relations to achieve maximum box office return for their clients. RSE also
offers complete distribution services for clients whether the release is
limited, regional or nationwide.
The founders of R.S. are Ron Rodgers and Randy Slaughter. Each has over 35
years of theatrical distribution and marketing experience. Both Mr. Rodgers
and Mr. Slaughter will retain their executive positions with RSE subsequent to
its acquisition by the Company.
Acquisition of White Canyon, Inc. and Channel Access, Inc.
- ----------------------------------------------------------
On April 7, 2005, the Company entered into a Purchase Agreement with two
unrelated individuals, whereby it acquired 100% of the issued and outstanding
common stock of White Canyon, Inc. ("White Canyon") and Channel Access, Inc.
("Channel Access"). According to the terms of the Agreement, the Company
issued to the individuals an aggregate of 1,000,000 shares of restricted
Series C convertible preferred stock, each share of which may be converted
into four shares of post-split restricted common stock, or redeemed by the
Company at $4.00 per share. Additionally, upon the Company's completion of a
stock-split, the Company issued to the individuals an additional 100,000
post-split shares of its common stock as further consideration for the
acquisitions. Both White Canyon and Channel Access are entities specializing
in the sale and distribution of proprietary computer software programs. Both
entities reported significant revenues during the year ended December 31, 2004
as well as an overall net income from operations. The Company recorded
3,857,900 in goodwill relating to the acquisitions of White Canyon and Channel
Access.
9
M POWER ENTERTAINMENT, INC. AND SUBSIDIARIES
(Formerly GK Intelligent Systems, Inc., and Subsidiaries)
Notes to the Condensed Consolidated Financial Statements
NOTE 3 - ACQUISITIONS (Continued)
Acquisition of White Canyon, Inc. and Channel Access, Inc. (Continued)
- ---------------------------------------------------------------------
Upon the Company's completion of a listing on the American Stock Exchange or
on September 30, 2005, whichever is earlier, the Company will redeem any
unconverted shares of preferred stock at $4.00 per share. Because the Series C
Preferred shares are mandatorily redeemable, they have been classified as debt
instruments in these financial statements. The Company anticipates that,
following the Closing Date, White Canyon and Channel Access will operate as
subsidiaries ("Subsidiaries") of the Company. Also, the Sellers have the right
to rescind this Agreement if any unconverted preferred shares are not redeemed
by September 30, 2005. Should this Agreement be rescinded, the Sellers will
return the Company's shares received as part of the purchase price for the
White Canyon and Channel Access stock. The Sellers shall retain the 100,000
post-split common shares issued in connection with the Agreement as full
liquidated damages.
White Canyon, Inc. is a provider of security software aimed at protecting
individuals and businesses from personal identity theft and trade secret
theft. White Canyon's markets and sells a hard drive sanitizing software
product called WipeDrive, and an individual file scanning and deletion utility
program called SecureClean.
Channel Access specializes in marketing and distributing utility and personal
productivity software products to retail stores in the United Sates and
Canada. Channel Access also distributes utility software for GetData, an
Australian software manufacturer.
Acquisition of M Power Futures, Inc.
- ------------------------------------
On May 25, 2005, the Company entered into a Purchase Agreement whereby it
acquired 82.4% of the issued and outstanding common stock of M Power Futures,
Inc., a Delaware corporation ("MPF"), in exchange for 15,250,000 of the
Company's post-split common shares. The Company recorded goodwill of
$7,252,410 relating to this acquisition.
MFP is an entity with no operations, assets, or liabilities, other than its
100% ownership of Alan Howarth, Inc., a Nevada Corporation. MPF acquired 100%
of the issued and outstanding common stock of Alan Howarth, Inc. ("Howarth")
pursuant to a Purchase Agreement dated May 18, 2005. Per the terms of the
Purchase Agreement, MPF issued 5,000,000 shares of its common stock in
exchange for all the issued and outstanding common shares of Howarth. In
addition, MPF agreed to provide, on a "best efforts" basis, $2,000,000 in
growth capital, to be paid in semi-annual installments of $500,000, to
Howarth. Per the Agreement Howarth retains the right to rescind the Agreement
if the Company is unable to have its common stock listed on the American Stock
Exchange within 180 days of the Agreement date, or if the Company fails to
issue the required number of cash and shares to Howarth within thirty days of
becoming listed on the American Stock Exchange.
At June 30, 2005, the Company determined that the operational history of M
Power Futures was not sufficient to support the goodwill of $7,252,410 that
had been recorded at acquisition. Accordingly, a goodwill impairment expense
of $5,222,645 was recorded, bringing the balance of the goodwill pertaining to
the purchase of M Power Futures to $2,029,765.
Howarth is a Nevada corporation engaged in the business of musical production
and distribution. On the date of acquisition, Howarth's primary assets
consisted of music and recording equipment with a net carrying value of
$567,090, a substantial music library with various patents and rights
pertaining to the library valued at $835,000, and various patents pertaining
to the music library, which have been valued at $500,000.
10
M POWER ENTERTAINMENT, INC. AND SUBSIDIARIES
(Formerly GK Intelligent Systems, Inc., and Subsidiaries)
Notes to the Condensed Consolidated Financial Statements
NOTE 3 - ACQUISITIONS (Continued)
Pro Forma Information
- ---------------------
The following unaudited pro forma information is presented to reflect the
operations of the Company as if the acquisitions of Corazong Music Management,
R.S. Entertainment, Channel Access, White Canyon, and M Power Futures, as well
as the Company's other subsidiaries, Stellar Software Network and Ascendant
TSG, had been completed on January 1, 2005 and 2004, respectively:
For the six months ended
June 30,
2005 2004
------------- -------------
Revenues $ 944,889 $ 697,220
Loss from Continuing Operations (6,738,602) (1,277,366)
Net Loss (6,797,541) (619,044)
Loss per Common Share:
Basic Net Income (Loss) per Common Share $ (1.56) $ (16.33)
Diluted Net Income (Loss) per Common Share $ (1.56) $ (16.33)
For the three months ended
June 30,
2005 2004
------------- -------------
Revenues $ 770,825 $ 568,260
Loss from Continuing Operations (5,922,986) (1,009,331)
Net Loss (5,899,002) (501,665)
Loss per Common Share:
Basic Net Income (Loss) per Common Share $ (0.78) $ (2.22)
Diluted Net Income (Loss) per Common Share $ (0.78) $ (2.22)
NOTE 4 - COMMON STOCK ACTIVITY
During the six months ended June 30, 2005, the Company issued 1,296,205
post-split shares of its previously unissued common stock to various parties
as consideration for services rendered at prices ranging from $0.96 to $0.32
per share (post-split) per share.
NOTE 5 - SIGNIFICANT EVENTS
Reverse Stock-Split
- -------------------
May 10, 2005, the Company's Board of Directors ratified by unanimous written
consent a proposal to effect a reverse stock-split of the authorized and
issued common stock on a one share for two hundred shares basis (1:200). The
split became effective at the opening of business on May 18, 2005. Following
the reverse stock split, the total outstanding shares of common stock was
reduced to 1,374,759 shares. All references to common stock activity within
these consolidated financial statements have been retroactively restated to
reflect the effect of this reverse stock-split.
11
M POWER ENTERTAINMENT, INC. AND SUBSIDIARIES
(Formerly GK Intelligent Systems, Inc., and Subsidiaries)
Notes to the Condensed Consolidated Financial Statements
NOTE 5 - SIGNIFICANT EVENTS (Continued)
Change of Corporate Name
- ------------------------
On May 10, 2005 the Company's Board of Directors resolved to change the
Company's name from GK Intelligent Systems, Inc. to M Power Entertainment,
Inc.
Related Party Transactions
- --------------------------
During the six months ended June 30, 2005, the Company borrowed a total of
$186,261 from Gary Kimmons, the Company's primary executive officer. The
Company made payments of $8,700 on this loan during the period. No formal note
document was drafted for this arrangement and the note has no specific terms,
other than it is due on demand. Company borrowed an additional $25,100 from
various other shareholders during the period.
NOTE 6 - BUSINESS CONDITION
The Company's consolidated financial statements are prepared using generally
accepted accounting principles applicable to a going concern which
contemplates the realization of assets and liquidation of liabilities in the
normal course of business. However, the Company does not have significant
amounts of cash or other material liquid assets, nor does it have an
established source of revenues sufficient to cover its operating costs and to
allow it to continue as a going concern. The consolidated financial
statements do not reflect any adjustments that might result from the outcome
of this uncertainty
The Company's ability to continue as a going concern is dependent upon its
ability to a) maximize and grow its current revenue streams; b) streamline
current operations to reduce costs and overhead; and c) generate additional
debt and equity capital sufficient to continue carrying-out its business plan
and to pay its obligations as they become due. In addition, the Company
anticipates entering into various arrangements with compatible operating
business.
NOTE 7 - SUBSEQUENT EVENTS
Rescission Agreement with Stellar Software
- ------------------------------------------
In July 2005, the Company's wholly-owned subsidiary, Stellar Software Network,
elected to rescind its Acquisition Agreement with the Company. The common
shares issued by the Company to the owners of Stellar Software were returned
to the Company and cancelled. The results of Stellar's operations for the six
months ended June 30, 2005 are included in these financial statements as
discontinued operations. The goodwill originally recorded in relation to the
acquisition of Stellar was fully impaired at June 30, 2005.
Legal Proceedings
- ------------------
Subsequent to June 30, 2005, a lawsuit was filed by Julie Maranto, the former
owner of Texas Source Group, Inc. ("TSG") against the Company, based on an
alleged breach of contract. Damages have not been specified in the claim.
The Company filed a Counterclaim for Recission to unwind the acquisition of
TSG based of material misrepresentation of material facts and fraud. The
Company anticipates a favorable outcome from these proceedings, and no
additional liabilities have been accrued relating this lawsuit.
Related-Party Transactions
- --------------------------
Subsequent to June 30, 2005, the Company borrowed an aggregate of $280,000
from related parties. These notes have no specific terms, and are due on
demand.
12
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following discussion and analysis compares our results of operations for
the three months ended June 30, 2005 to the same period in 2004. This
discussion and analysis should be read in conjunction with our consolidated
condensed financial statements and related notes thereto included elsewhere in
this report and our Form 10-KSB for the year ended December 31, 2004.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This Report on Form 10-QSB contains forward-looking statements, including,
without limitation, statements concerning possible or assumed future results
of operations and those preceded by, followed by or that include the words
"believes," "could," "expects," "intends" "anticipates," or similar
expressions. Our actual results could differ materially from these anticipated
in the forward-looking statements for many reasons including the risks
described in our 10-KSB for the period ended December 31, 2004 and elsewhere
in this report. Although we believe the expectations reflected in the
forward-looking statements are reasonable, they relate only to events as of
the date on which the statements are made, and our future results, levels of
activity, performance or achievements may not meet these expectations. We do
not intend to update any of the forward-looking statements after the date of
this document to conform these statements to actual results or to changes in
our expectations, except as required by law.
OVERVIEW
M Power Entertainment develops and introduces lifestyle initiatives to
emerging global markets with an initial focus on entertainment.
We identify profitable opportunities and introduce appropriate business models
with a lifestyle component emphasizing personal initiative, creativity,
responsibility and achievement.
We attract companies with innovative lifestyle concepts, products, services,
or investment opportunities that have developed into profitable businesses,
but which lack the market clout to break the entrepreneurial glass ceiling. By
aligning with M Power Entertainment, these exciting companies obtain access to
capital, creative direction and infrastructure support that would otherwise be
unavailable to them. By aligning with M Power, these companies also create
synergies with other member companies that will result in far greater
accomplishments than they could achieve on their own.
We also identify prudent investment opportunities that will create platforms
for growth and development of our acquired companies, including investments in
the international marketplace.
This is a dynamic, emerging business model aimed at vitalizing the
relationship between lifestyle providers and consumers, whether in music,
film, communications, learning, design, apparel, real estate, franchise and
brand development or other market areas to create a full, meaningful,
empowered lifestyle.
Existing ventures may be incorporated into the initiatives, or new entities
may be created. We own and operate the initiatives using a decentralized
approach with attributes common to most franchising models.
13
Execution of the M Power strategy has resulted in M Power Entertainment, Inc.
growing rapidly through acquisition. M Power acquires profitable companies
with effective management in place to continue growing and expanding as a
subsidiary. While M Power minimizes imposing its management on subsidiary
operational management, it does provide uniform controls, access to capital,
and synergistic empowerment for line management initiatives.
M Power's has acquired its subsidiaries because of the M Power philosophy
created and developed by its founder Gary Kimmons. The philosophy is to
empower entrepreneurial people by giving them the resources to take the base
of success that they have developed and expand it to its full potential. The
philosophy recognizes that people with proven track records need little in the
way of direct intervention in the operation of their businesses. What they do
need is financing to grow, corporate structure to deal with the opportunities
that come their way and the visibility to compete effectively. M Power
provides the corporate structure through its executive management team all of
whom have proven track records in merger and acquisition, accounting, finance
and corporate development.
As the subsidiaries mature M Power may determine to spin them off as separate
public companies. The spinning off of the subsidiaries would allow them
greater autonomy, once they have proven the skills to operate at the public
level, and provide a significant return on investment to M Power and its
financial backers. The funds received in the spin offs would be reinvested in
other acquisitions or paid as dividends. M Power anticipates that the software
division will likely reach this critical mass first.
In July 2004, we acquired Stellar Software Solutions, Inc. as a wholly owned
subsidiary. Stellar Software Network is a Texas corporation that hires
programmers and contracts them to companies. The acquisition of Stellar
Software Network allowed us to generate our first revenues since 1999.
However, subsequent to June 30, 2005, we rescinded our agreement with Stellar.
In August 2004, we acquired Ascendant Texas Source Group, Inc., a Texas
corporation, that is a full service provider of quality collaborative
e-business process software, process consulting, rapid web development and
hosting services.
We acquired Stellar Software Network Inc. and Ascendant Texas Source Group,
Inc. to create positive initial cash flow and to create an internal
architecture for managing future acquisitions.
In January of 2005, Ascendant lost its only significant customer and ceased
operations. The Company is in litigation with the former owner of Ascendant,
asserting misrepresentation of its status at the time of the sale and seeking
to recover the shares issued in the transaction. The seller has made various
counter claims. The results of the litigation are undeterminable at this time.
On January 17, 2005, the Company entered into a Purchase Agreement with
two unrelated individuals, whereby the Company acquired all of the issued
and outstanding common stock of Corazong Music Management B.V., a Dutch
corporation ("Corazong"), in exchange for $1,260,000, in the form of
100 shares of Series B Convertible Preferred Stock. The Company also agreed
to provide Corazong with a $1,500,000 line of credit to be used to develop
14
and market its catalog and to develop new talent and artists. The
transaction closed on February 11, 2005. As an additional stipulation of
the Agreement with Corazong, the sellers have retained the right to
repurchase 49% of Corazong for a period of up to two years.
Corazong, formerly a privately-held European company, is a music recording
and production entity that released its first music CD in 1999 and is
currently attempting to expand its operations into Western Europe and the
United States. The most significant asset currently managed by Corazong is
its catalog of music recordings.
On March 2, 2005, the Company agreed to purchase all of the outstanding
common stock of R.S. Entertainment, Inc., a Utah Corporation, ("RSE") for
$1,020,000 in shares of the Company's unregistered common stock, or in the
equivalent value of Series B preferred shares. The Company also agreed to
provide RSE with a $2,500,000 line of credit to be used for print and
advertising funds for the films it distributes. By providing the print and
advertising money for the films it distributes, RSE expects to retain a
substantial percentage of the box office and residual revenues from the films.
The Line of Credit is expected to be available to RSE upon the Company's
successful completion of its proposed financing. In the event that the line of
credit is not available as of May 31, 2005, an additional 5,000 post-split
shares of the Company's common stock will be issued each month until the line
of credit becomes available.
The Sellers have the right to rescind this Agreement if line of credit is
not available after 120 days of the closing date. Should this Agreement
be rescinded, the Sellers will return the Company's shares received as part
of the purchase price for the RSE stock. Sellers shall retain any shares
issued in connection with their employment with RSE (subsequent to March 2,
2005) as liquidated damages.
Specializing in the independent motion picture industry, RSE provides
theatrical film distribution services and strategic market development.
RSE works with third parties in creative advertising, media placement and
public relations to achieve maximum box office return for their clients.
RSE also offers complete distribution services for clients whether the
release is limited, regional or nationwide.
The founders of R.S. are Ron Rodgers and Randy Slaughter. Each has over 35
years of theatrical distribution and marketing experience. Both Mr.
Rodgers and Mr. Slaughter will retain their executive positions with RSE
subsequent to its acquisition by the Company.
On April 7, 2005, we entered into a Purchase Agreement with two unrelated
individuals, whereby it acquired 100% of the issued and outstanding common
stock of White Canyon, Inc. ("White Canyon") and Channel Access, Inc.
("Channel Access"). According to the terms of the Agreement, we issued to the
individuals an aggregate of 1,000,000 shares of restricted Series C
convertible preferred stock, each share of which may be converted into four
shares of post-split restricted common stock, or redeemed by the Company at
$4.00 per share. Additionally, upon our completion of a stock-split, the
Company will issue to the individuals an additional 100,000 post-split shares
of its common stock as further consideration for the acquisitions. Both White
Canyon and Channel Access are entities specializing in the sale and
distribution of proprietary computer software programs. Both entities
reported significant revenues during the year ended December 31, 2004 as well
as an overall net income from operations.
15
Upon our completion of a listing on the American Stock Exchange or on
September 30, 2005, whichever is earlier, we will redeem any unconverted
shares of preferred stock at $4.00 per share. The Company anticipates that,
following the Closing Date, White Canyon and Channel Access will operate as
subsidiaries ("Subsidiaries") of the Company. Also, the Sellers have the right
to rescind this Agreement if any unconverted preferred shares are not redeemed
by September 30, 2005. Should this Agreement be rescinded, the Sellers will
return our shares received as part of the purchase price for the White Canyon
and Channel Access stock. The Sellers shall retain the 100,000 post-split
common shares issued in connection with the Agreement as full liquidated
damages.
White Canyon, Inc. is a provider of security software aimed at protecting
individuals and businesses from personal identity theft and trade secret
theft. White Canyon's markets and sells a hard drive sanitizing software
product called WipeDrive, and an individual file scanning and deletion utility
program called SecureClean.
Channel Access specializes in marketing and distributing utility and personal
productivity software products to retail stores in the United Sates and
Canada. Channel Access also distributes utility software for GetData, an
Australian software manufacturer.
On May 25, 2005, we entered into a Purchase Agreement whereby we acquired 70%
of the issued and outstanding common stock of M Power Futures, Inc., a
Delaware corporation ("MPF"), in exchange for 15,250 of our post-split common
shares.
MFP is an entity with no operations, assets, or liabilities, other than its
100% ownership of Alan Howarth, Inc., a Nevada Corporation. MPF acquired 100%
of the issued and outstanding common stock of Alan Howarth, Inc. ("Howarth")
pursuant to a Purchase Agreement dated May 18, 2005. Per the terms of the
Purchase Agreement, MPF issued 5,000,000 shares of its common stock in
exchange for all the issued and outstanding common shares of Howarth. In
addition, MPF agreed to provide, on a "best efforts" basis, $2,000,000 in
growth capital, to be paid in semi-annual installments of $500,000, to
Howarth. Per the Agreement Howarth retains the right to rescind the Agreement
if we are unable to have its common stock listed on the American Stock
Exchange within 180 days of the Agreement date, or if the Company fails to
issue the required number of cash and shares to Howarth within thirty days of
becoming listed on the American Stock Exchange.
Howarth is a Nevada corporation engaged in the business of musical production
and distribution. Howarth's primary assets are a substantial music library,
various patents and rights pertaining to the library, and music and recording
equipment.
RESULTS OF OPERATIONS
THREE MONTHS ENDED June 30, 2005 AS COMPARED TO THE THREE MONTHS ENDED June
30, 2004
We had net revenues of $659,287 for the three months ended June 30, 2005
compared to $-0- for same period in 2004. The increase in net revenues was the
result of our purchasing our subsidiaries. Our revenues for the quarter were
generated by our newly acquired subsidiaries, White Canyon, Channel Access,
Corazong Music, R.S. Entertainment, and M Power Futures, each of which were
acquired subsequent to June 30, 2004.
16
We had operating expenses of $6,553,421 for the three months ended June 30,
2005 compared to $817,069 for the comparative period of 2004. The primary
reason for this increase was the impairment of goodwill of $5,359,484
pertaining to the Company's acquisition of its M Power Futures subsidiary, and
the acquisitions of other operating subsidiaries. The total operating
expenses of our subsidiaries totaled $177,992 for the three months ended June
30, 2005.
Our net loss was $ 6,018,769 during the three months ended June 30, 2005
compared to a loss of $860,578 incurred in the comparable period of 2004. Our
increased net loss was the primarily the result of the $5,359,484 impairment
of goodwill, and our acquisitions of operating subsidiaries, all of which
incurred significant operating expenses during the three months ended June 30,
2005.
SIX MONTHS ENDED June 30, 2005 AS COMPARED TO THE SIX MONTHS ENDED June 30,
2004
We had net revenues of $698,718 for the six months ended June 30, 2005
compared to $-0- for same period in 2004. The increase in net revenues was the
result of our purchasing our subsidiaries. Our revenues for the quarter were
generated in full by our newly acquired subsidiaries, White Canyon, Channel
Access, Corazong Music, R.S. Entertainment, and M Power Futures, each of which
were acquired subsequent to June 30, 2004.
We had operating expenses of $7,346,212 for the six months ended June 30, 2005
compared to $1,307,038 for the comparative period of 2004. The primary reason
for this increase was the Company's impairment of goodwill pertaining to M
Power futures, its acquisition of its operating subsidiaries, as well as an
increase of $395,190 in the value of common stock issued for services. The
total operating expenses of our subsidiaries totaled $355,393 for the six
months ended June 30, 2005.
Our net loss was $6,872,666 during the six months ended June 30, 2005 compared
to a loss of $508,976 incurred in the comparable period of 2004. Our increased
net loss was the primarily the result of our recording impairment of goodwill
of $5,359,484, and a $871,090 gain on release of debt during the six months
ended June 30, 2004, which was not duplicated during the six months ended June
30, 2005.
LIQUIDITY
During the six months ended June, 2005, we used cash from operations of
$288,786 compared to using $407,482 in the comparative period of the prior
year. This change results in part from the fact that we recorded a significant
gain on extinguishment of debt during the six months ended June 30, 2004,
which was not duplicated during the comparable period in 2005. We had cash on
hand of $110,520 as of June 30, 2005 compared to $151,404 cash as of June 30,
2004. We acquired $84,356 in cash from the acquisitions of subsidiaries, and
received an additional $225,061 in the form of loans from related parties.
We anticipate that we will need to raise approximately $1,000,000 in cash in
the next twelve months to cover general and administrative expenses and other
anticipated cash needs. We are seeking to raise such needed funds through the
sale of our shares of stock or through issuing debt. We may not be able to
raise the necessary funds on terms acceptable to us, or at all.
17
Item 3. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures. The Company's Chief
Executive Officer, Gary F. Kimmons, and Chief Financial Officer, Gary F.
Kimmons, have reviewed the Company's disclosure controls and procedures as of
the end of the period covered by this report. Based upon this review, Mr.
Kimmons believes that the Company's disclosure controls and procedures are
effective in ensuring that material information related to the Company is made
known to him by others within the Company.
(b) Changes in Internal Controls Over Financial Reporting.
There have been no significant changes in internal controls over financial
reporting that occurred during the fiscal period covered by this report that
have materially affected, or are reasonably likely to materially affect, the
registrant's internal control over financial reporting.
PART II - OTHER INFORMATION.
Item 1. Legal Proceedings.
Texas Workforce Commission. On February 10, 2000, the Texas Workforce
Commission placed an administrative lien on us in the amount of $109,024 in
connection with a claim for unpaid compensation by our former employees.
Awalt Group, Inc. Awalt Group, Inc. commenced litigation against us in
January 2004 in the United States District Court, Southern District of Texas,
Houston Division (Cause No. H-03-5832). This case relates to advertising and
promotional services rendered prior to July, 1999. The Plaintiff is
requesting $77,189 for actual amounts invoiced and $10,000 in attorney's fees.
Per their invoices, these are for services rendered from May 26, 1998 through
June 15, 1999. We filed an answer and are defending the lawsuit under Section
16.004 of the Texas Civil Practice and Remedies Code, i.e., we believe that
the statute of limitations has tolled the claim. The case was dismissed by
the Federal court in 2005 for lack of diversity, but the plaintiffs re-filed
in state court alleging a sworn account in the amount of $78,294 plus costs,
interest and attorney fees. We have filed an Answer asserting our statute of
limitations defense. On August 10, 2005 we filed a Motion for Summary
Judgment based on the limitations defense and set it for hearing to be held on
September 2, 2005.
11500 Northwest, L.P. 11500 Northwest, L.P. commenced litigation against us
on October 31, 2003 in the 11th Judicial District Court for Harris County,
Texas (Cause No. 2003-60705). This case relates to a breach of a lease
agreement allegedly entered into on or about March 5, 1999 for certain office
space we never occupied. Plaintiff is requesting past due rents of an
unspecified amount, broker's commission of $21,806, tenant improvements of
$51,439, attorney's fees, costs, and prejudgment interest. We defended the
lawsuit, denied breach of the alleged lease agreement and further defended the
claim for past due rents under Section 16.004 of the Texas Civil Practice &
Remedies Code, i.e. we believe that the statute of limitations has tolled some
or all of the claims. The case was tried on May 12, 2005. Post-trial briefs
have been submitted to the Court and a ruling is pending.
Marathon Oil Company. A default judgment was taken against us in favor of
Marathon Oil Company on August 31, 1999 in the amount of $326,943 representing
past and future rentals under a lease agreement, together with $7,500 in
attorney's fees and post judgment interest at 10% per annum until paid.
Credit towards the judgment was ordered for sale of personal property by the
Sheriff or Constable. We believe the personal property sold for approximately
$28,000. To the extent that the property was leased during the unexpired
term, it is possible that there would be a mitigation of the damages claim in
our favor. We believe that some or all of the space was subsequently rented
approximately 90 days later. The remaining $306,443 has been accrued in our
financial statements under the heading "accrued expenses."
18
A lawsuit was filed by Julie Maranto, the former owner of Texas Source Group,
Inc. ("TSG") against us, Texas Source Group, Inc. and Gary Kimmons as CEO. The
cause of action from the pleadings appears to be breach of contract relating
to her employment agreement against TSG, breach of contract, statutory fraud,
breach of fiduciary duty, common law fraud and negligent misrepresentation
against GKI. Damages have not been specified. We filed a Counterclaim for
Rescission to unwind the transaction entered into effective August 19, 2004
based of material misrepresentation of material facts and fraud. Based on
preliminary discovery, we believe that a favorable outcome of this case for
GKI, now M Power, will be reached.
We are not aware of other claims or assessments, other than as described
above, which may have a material adverse impact on our financial position or
results of operations.
Item 2. Changes in Securities.
Recent Sales of Unregistered Securities
---------------------------------------
On January 18, 2005, February 11, 2005 and March 30, 2005, we issued 1,471
post-split shares of common stock to Sunny Nariani for consulting services
rendered to the Company. The securities were registered under Regulation S-8.
The party to whom the shares were issued received information concerning the
Company. No underwriters were involved in the transactions and no commissions
were paid.
On February 11, 2005, we issued 15,000 post-split shares, of common stock to
various individuals for consulting services rendered to the Company. The
securities were registered under Regulation S-8. The party to whom the shares
were issued received information concerning the Company. No underwriters were
involved in the transactions and no commissions were paid.
On February 18, 2005, we issued 22,500 post-split restricted shares of common
stock to the Company's CEO, Gary F. Kimmons, for compensation. The securities
were issued pursuant to an exemption from registration provided under Section
4(2) and 4(6) of the Securities Act of 1933. The party to whom the shares
were issued received information concerning the Company. The shares were
appropriately restricted. No underwriters were involved in the transactions
and no commissions were paid.
On March 30, 2005, we issued 150,000 post-split shares, of common stock to
various consultants for consulting services rendered to the Company. The
securities were registered under Regulation S-8. The party to whom the shares
were issued received information concerning the Company. No underwriters were
involved in the transactions and no commissions were paid.
In April 2005, we issued 47,697 post-split shares of our common stock to
various consultants for consulting services rendered to the Company. The
securities were registered under Regulation S-8. The party to whom the shares
were issued received information concerning the Company. No underwriters were
involved in the transactions and no commissions were paid.
In May 2005, we issued 589,596 post-split shares of our common stock to
various consultants for consulting services rendered to the Company. The
securities were registered under Regulation S-8. The party to whom the shares
were issued received information concerning the Company. No underwriters were
involved in the transactions and no commissions were paid.
19
In June 2005, we issued 467,000 post-split shares of our common stock to
various consultants for consulting services rendered to the Company. The
securities were registered under Regulation S-8. The party to whom the shares
were issued received information concerning the Company. No underwriters were
involved in the transactions and no commissions were paid.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
In March 2005, the Company submitted to its shareholders a proposal to split
its common shares on a one share for two hundred shares basis. The reverse
split was approved by a majority of the Company's shareholders and effectuated
in May of 2005. In addition, the Company's shareholders approved an official
change of the Company's corporate name from GK Intelligent Systems, Inc. to M
Power Entertainment, Inc.
Item 5. Other Information.
On April 7, 2005, the Company's Articles of Incorporation were amended to
create a certificate of designation for Series C Convertible Preferred Stock
in connection with the acquisition of White Canyon, Inc. and Channel Access,
Inc.
On April 7, 2005, the Company acquired all of the outstanding shares of White
Canyon, Inc. and Channel Access, Inc., Utah Corporations for 1,000,000 shares
of its Series C Convertible Preferred Stock.
On May 18, 2005, the Company amended its Articles of Incorporation to record
the reverse split of its common stock on a one share for two hundred shares
basis. Also on this date the Company further amended its Articles of
Incorporation so as to change its corporate name from GK Intelligent Systems,
Inc. to M Power Entertainment, Inc.
On May 23, 2005, the Company's independent auditors resigned and the Company
engaged new independent auditors.
On May 25, 2005, the Company acquired all of the issued and outstanding shares
of M Power Futures, Inc., for 13,250,000 post-split shares of the Company's
common stock.
Item 6. Exhibits
(a) List of Exhibits attached or incorporated by referenced pursuant to Item
601 of Regulation S-B.
Exhibit Description
- -------- -----------
2.1 Corporate Reorganization Agreement between the Company and Julie Maranto,
dated August 13, 2004 (included as Exhibit 2.1 to the Form 8-K filed
August 19, 2004, and incorporated herein by reference).
20
3.1 Amended and Restated Certificate of Incorporation, dated August 11, 1995
(included as Exhibit 3.(i) to the Form 10-SB12G filed January 24, 1997,
and incorporated herein by reference).
3.2 Amended and Restated Bylaws, dated August 11, 1995 (included as Exhibit
3.(ii) to the Form 10-SB12G filed January 24, 1997, and incorporated
herein by reference).
3.3 Certificate of Amendment to the Certificate of Incorporation (included as
Exhibit 3.3 to the Form 10-KSB filed September 14, 1998, and incorporated
herein by reference).
3.4 Certificate of Amendment to the Certificate of Incorporation (included as
Exhibit 3.(i) to the Form 10-QSB filed May 5, 2003, and incorporated
herein by reference).
3.5 Certificate of Amendment of Certificate of Incorporation (included as
Exhibit 3.1 to the Current Report on Form 8K filed on May 19, 2005, and
incorporated herein by reference).
4.1 Registration Rights Agreement between the Company and Benchmark
Consulting Inc., dated May 30, 2003 (included as Exhibit 10.37 to the
Form 10-QSB filed August 18, 2003, and incorporated herein by reference).
4.2 Warrant Agreement between the Company and Benchmark Consulting Inc.,
dated May 30, 2003 (included as Exhibit 10.38 to the Form 10-QSB filed
August 18, 2003, and incorporated herein by reference).
4.3 Registration Rights Agreement between the Company and Dutchess Private
Equities Fund, II, L.P., dated June 23, 2004 (included as Exhibit 10.70
to the Form 8-K filed June 29, 2004, and incorporated herein by
reference).
4.4 Warrant Agreement between the Company and Rubenstein Investor Relations,
Inc., dated September 16, 2004 (included as Exhibit 4.1 to the Form
10-QSB filed November 22, 2004, and incorporated herein by reference).
4.5 Amended and Restated Certificate of Designation for Series B Convertible
Preferred Stock, dated March 2, 2005 (included as Exhibit 4.1 to the Form
8-K filed March 10, 2005, and incorporated herein by reference).
4.6 Certificate of Designation for Series C Convertible Preferred Stock,
dated April 1, 2005 (included as Exhibit 4.1 to the Form 8-K filed April
13, 2005, and incorporated herein by reference).
10.1 Consulting Agreement between the Company and Berkshire Capital
Management Co., Inc., dated April 24, 2001 (included as Exhibit 10.11 to
the Form 8-K filed November 6, 2002, and incorporated herein by
reference).
10.2 Consulting and Finder's Fee Agreement between the Company and The Herman
Group, L.P., dated May 29, 2001 (included as Exhibit 10.12 to the Form
8-K filed November 6, 2002, and incorporated herein by reference).
10.3 Engagement Letter between the Company and Petty International
Development Corp., dated April 5, 2001 (included as Exhibit 10.13 to the
Form 8-K filed November 6, 2002, and incorporated herein by reference).
21
10.4 Consulting Agreement between the Company and Ron Sparkman, dated March
7, 2001 (included as Exhibit 10.14 to the Form 8-K filed November 6,
2002, and incorporated herein by reference).
10.5 Consulting Agreement between the Company and Rockne J. Horvath, dated
March 6, 2002 (included as Exhibit 10.15 to the Form 8-K filed November
6, 2002, and incorporated herein by reference).
10.6 Consulting Agreement between the Company and Stephen K. Carper, dated
March 13, 2002 (included as Exhibit 10.16 to the Form 8-K filed November
6, 2002, and incorporated herein by reference).
10.7 Consulting Agreement between the Company and Renee H. Ethridge, dated
March 15, 2002 (included as Exhibit 10.17 to the Form 8-K filed November
6, 2002, and incorporated herein by reference).
10.8 Consulting Agreement between the Company and Technical Objective, Inc.,
dated March 18, 2002 (included as Exhibit 10.18 to the Form 8-K filed
November 6, 2002, and incorporated herein by reference).
10.9 Debt Resolution Agreement between the Company and Gary F. Kimmons, dated
March 20, 2002 (included as Exhibit 10.19 to the Form 8-K filed November
6, 2002, and incorporated herein by reference).
10.10 Interim Compensation Agreement between the Company and Gary F. Kimmons,
dated March 20, 2002 (included as Exhibit 10.20 to the Form 8-K filed
November 6, 2002, and incorporated herein by reference).
10.11 Amended and Restated Consulting Agreement between the Company and Dick
Meador, dated March 20, 2002 (included as Exhibit 10.21 to the Form 8-K
filed November 6, 2002, and incorporated herein by reference).
10.12 Promissory Note between the Company and BDO Seidman LLP, dated June 2,
2002 (included as Exhibit 10.22 to the Form 8-K filed November 6, 2002,
and incorporated herein by reference).
10.13 Consulting Agreement between the Company and Alan S. Litvak, dated
September 13, 2002 (included as Exhibit 10.23 to the Form 8-K filed
November 6, 2002, and incorporated herein by reference).
10.14 Promissory Note from the Company to Gary Kimmons, dated September 26,
2002 (included as Exhibit 10.24 to the Form 8-K filed November 6, 2002,
and incorporated herein by reference).
10.15 Marketing Agreement between the Company and BTH2, dated June 1, 2002
(included as Exhibit 10.25 to the Form 10-QSB filed May 5, 2003, and
incorporated herein by reference).
10.16 Consulting Agreement between the Company and AfterPlay Entertainment
Inc., dated November 12, 2002 (included as Exhibit 10.26 to the Form
10-KSB filed May 5, 2003, and incorporated herein by reference).
10.17 Consulting Agreement between the Company and Suns Associates Group,
dated November 13, 2002 (included as Exhibit 10.27 to the Form 10-KSB
filed May 5, 2003, and incorporated herein by reference).
10.18 Non-Employee Director Agreement between the Company and Dick Meador,
dated March 31, 2003 (included as Exhibit 10.28 to the Form 10-KSB filed
May 5, 2003, and incorporated herein by reference).
22
10.19 Employment Agreement between the Company and Gary F. Kimmons, dated
February 1, 2003 (included as Exhibit 10.29 to the Form 10-KSB filed May
5, 2003, and incorporated herein by reference).
10.20 2003 Stock Option Plan, dated February 1, 2003 (included as Exhibit 4.1
to the Form S-8 filed May 12, 2003, and incorporated herein by
reference).
10.21 Non-Employee Directors and Consultants Retainer Stock Plan for the Year
2003, dated April 1, 2003 (included as Exhibit 4.2 to the Form S-8 filed
May 12, 2003, and incorporated herein by reference).
10.22 Settlement Agreement between the Company and Brewer & Pritchard, P.C.,
dated April 28, 2003 (included as Exhibit 4.3 to the Form S-8 filed May
12, 2003, and incorporated herein by reference).
10.23 Financial Public Relations Agreement between the Company and Strategic
Resources, dated April 24, 2003 (included as Exhibit 10.32 to the Form
10-QSB filed August 18, 2003, and incorporated herein by reference).
10.24 Settlement Agreement between the Company and Brewer & Pritchard, P.C.,
dated April 28, 2003 (included as Exhibit 10.33 to the Form 10-QSB filed
August 18, 2003, and incorporated herein by reference).
10.25 Consulting Agreement between the Company and Sage Office Solutions,
dated May 4, 2003 (included as Exhibit 10.34 to the Form 10-QSB filed
August 18, 2003, and incorporated herein by reference).
10.26 Consulting Agreement between the Company and Donald Giebler, dated May
14, 2003 (included as Exhibit 10.35 to the Form 10-QSB filed August 18,
2003, and incorporated herein by reference).
10.27 Consulting Agreement between the Company and Benchmark Consulting Inc.,
dated May 30, 2003 (included as Exhibit 10.36 to the Form 10-QSB filed
August 18, 2003, and incorporated herein by reference).
10.28 Consulting Agreement between the Company and W. Andrew Stack, dated
July 22, 2003 (included as Exhibit 10.39 to the Form 10-QSB filed August
18, 2003, and incorporated herein by reference).
10.29 Consulting Agreement between the Company and Gust C. Kepler, dated
September 17, 2003 (included as Exhibit 4.1 to the Form S-8 filed
September 19, 2003, and incorporated herein by reference).
10.30 Compensation Agreement between the Company and Wenthur & Chachas, LLP,
dated September 17, 2003 (included as Exhibit 4.2 to the Form S-8 filed
September 19, 2003, and incorporated herein by reference).
10.31 BMA Ventures, Inc. Agreement between the Company and BMA Ventures, Inc.,
dated November 11, 2003 (included as Exhibit 10.42 to the Form 10-QSB
filed November 17, 2003, and incorporated herein by reference).
10.32 Distribution Agreement between the Company and NPI Management Group,
Inc., dated October 10, 2003 (included as Exhibit 99.1 to the Form
10-QSB filed November 17, 2003, and incorporated herein by reference).
23
10.33 Consulting Services Agreement between the Company and Stanton, Walker &
Company, dated November 5, 2003 (included as Exhibit 4.1 to the Form S-8
filed November 10, 2003, and incorporated herein by reference).
10.34 Consulting Services Agreement between the Company and Wenthur & Chachas,
LLP, dated November 5, 2003 (included as Exhibit 4.2 to the Form S-8
filed November 10, 2003, and incorporated herein by reference).
10.35 2004 Stock Option Plan (included as Exhibit 4.1 to the Form S-8 filed
April 5, 2004, and incorporated herein by reference).
10.36 Non-Employee Director Agreement between the Company and Dick Meador,
dated December 24, 2003 (included as Exhibit 10.47 to the Form 10-KSB
filed April 23, 2004, and incorporated herein by reference).
10.37 Promissory Note from the Company to Deanna Slater, dated December 31,
2003 (included as Exhibit 10.48 to the Form 10-KSB filed April 23, 2004,
and incorporated herein by reference).
10.38 Promissory Note from the Company to Joel Pickell, dated December 31,
2003 (included as Exhibit 10.49 to the Form 10-KSB filed April 23, 2004,
and incorporated herein by reference).
10.39 Referral Fee Agreement between the Company and Michael Aczon, dated
January 19, 2004 (included as Exhibit 10.50 to the Form 10-KSB filed
April 23, 2004, and incorporated herein by reference).
10.40 Notice of Default and Termination Letter from the Company to NPI
Management Group, Inc., dated February 5, 2004 (included as Exhibit
10.51 to the Form 10-KSB filed April 23, 2004, and incorporated herein
by reference).
10.41 Consulting Agreement between the Company and Z.A. Consulting, LLC, dated
February 27, 2004 (included as Exhibit 10.52 to the Form 10-KSB filed
April 23, 2004, and incorporated herein by reference).
10.42 Investor Relations Agreement between the Company and FOCUS Partners LLC,
March 12, 2004 (included as Exhibit 10.53 to the Form 10-KSB filed April
23, 2004, and incorporated herein by reference).
10.43 First Amendment to Consulting Services Agreement between the Company and
Stanton, Walker & Company, dated March 29, 2004 (included as Exhibit
10.54 to the Form 10-KSB filed April 23, 2004, and incorporated herein
by reference).
10.44 Consulting Agreement between the Company and Isabella Elliott, dated
March 26, 2004 (included as Exhibit 10.56 to the Form 10-KSB filed April
23, 2004, and incorporated herein by reference).
10.45 Second Amended and Restated Consulting Agreement between the Company and
Harvey Levin, dated October 11, 2004 (included as Exhibit 99.6 to the
Form S-8 filed October 19, 2004, and incorporated herein by reference).
10.46 Second Amended and Restated Consulting Agreement between the Company and
Jon Pearman, dated October 11, 2004 (included as Exhibit 99.5 to the
Form S-8 filed October 19, 2004, and incorporated herein by reference).
24
10.47 Third Amended and Restated Consulting Agreement between the Company and
Lisa L. Fincher, dated October 11, 2004 (included as Exhibit 99.4 to
the Form S-8 filed October 19, 2004, and incorporated herein by
reference).
10.48 Third Amended and Restated Consulting Agreement between the Company and
Ted Davis, dated October 11, 2004 (included as Exhibit 99.1 to the Form
S-8 filed October 19, 2004, and incorporated herein by reference).
10.49 Third Amended and Restated Consulting Agreement between the Company and
D. Scott Elliott, dated October 11, 2004 (included as Exhibit 99.2 to
the Form S-8 filed October 19, 2004, and incorporated herein by
reference).
10.50 Stock and Warrant Purchase Agreement between the Company and D. Scott
Elliot, dated April 5, 2004 (included as Exhibit 10.30 to the Form
10-QSB filed August 18, 2004, and incorporated herein by reference).
10.51 Amended and Restated Consulting Agreement between the Company and Linda
Davis, dated June 3, 2004 (included as Exhibit 10.16 to the Form 10-QSB
filed August 18, 2004, and incorporated herein by reference).
10.52 Consulting Agreement between the Company and Deanna Slater, dated May
14, 2004 (included as Exhibit 10.68 to the Form 10-QSB filed May 19,
2004, and incorporated herein by reference).
10.53 Promissory Note between the Company and Elaine Leonard, dated February
28, 2004 (included as Exhibit 10.62 to the Form 10-QSB filed May 19,
2004, and incorporated herein by reference).
10.54 Promissory Note between the Company and Joel Pickell, dated March 31,
2004 (included as Exhibit 10.63 to the Form 10-QSB filed May 19, 2004,
and incorporated herein by reference).
10.55 Promissory Note between the Company and Deanna Slater, dated March 31,
2004 (included as Exhibit 10.64 to the Form 10-QSB filed May 19, 2004,
and incorporated herein by reference).
10.56 Promissory Note between the Company and Harvey Levin, dated April 2,
2004 (included as Exhibit 10.65 to the Form 10-QSB filed May 19, 2004,
and incorporated herein by reference).
10.57 Promissory Note between the Company and Jon Pearman, dated April 2,
2004 (included as Exhibit 10.66 to the Form 10-QSB filed May 19, 2004,
and incorporated herein by reference).
10.58 Promissory Note between the Company and Ted Davis, dated April 2, 2004
(included as Exhibit 10.67 to the Form 10-QSB filed May 19, 2004, and
incorporated herein by reference).
10.59 Investment Agreement between the Company and Dutchess Private Equities
Fund, II, L.P., dated June 23, 2004 (included as Exhibit 10.69 to the
Form 8-K filed June 29, 2004, and incorporated herein by reference).
10.60 Purchase Agreement between the Company and Sunil Nariani, dated June
16, 2004 (included as Exhibit 2.1 to the Form 8-K filed June 23, 2004,
and incorporated herein by reference).
25
10.61 Amended Purchase Agreement between the Company and Sunil Nariani, dated
June 18, 2004 (included as Exhibit 2.2 to the Form 8-K filed June 23,
2004, and incorporated herein by reference).
10.62 Consulting Agreement between the Company and Sunil Nariani, dated July
15, 2004 (included as Exhibit 10.72 to the Form 8-K filed July 28,
2004, and incorporated herein by reference).
10.63 Employment Agreement between Stellar Software Network, Inc. and Sunil
Nariani, dated July 15, 2004 (included as Exhibit 10.71 to the Form 8-K
filed July 28, 2004, and incorporated herein by reference).
10.64 Employment Agreement between the Company and Julie Maranto, dated
August 19, 2004 (included as Exhibit 10.22 to the Form 10-QSB filed
November 22, 2004, and incorporated herein by reference).
10.65 Referral Fee Agreement between the Company and Shay Kronfeld, dated
July 23, 2004 (included as Exhibit 10.23 to the Form 10-QSB filed
November 22, 2004, and incorporated herein by reference).
10.66 Consulting Agreement between the Company and Richard Russotto, dated
September 13, 2004 (included as Exhibit 99.3 to the Form S-8 filed
October 19, 2004, and incorporated herein by reference).
10.67 Sublease Agreement between the Company and 432 Group, LLC, dated
October 1, 2004 (included as Exhibit 10.25 to the Form 10-QSB filed
November 22, 2004, and incorporated herein by reference).
10.68 Letter re: Agreement to retain Rubenstein Investor Relations, Inc.,
dated September 15, 2004 (included as Exhibit 99.2 to the Form 8-K
filed September 27, 2004, and incorporated herein by reference).
10.69 Referral Fee Agreement between the Company and Wade Brooks, dated
August 30, 2004 (included as Exhibit 10.27 to the Form 10-QSB filed
November 22, 2004, and incorporated herein by reference).
10.70 Referral Fee Agreement between the Company and Barry Bergman, dated
September 9, 2004 (included as Exhibit 10.28 to the Form 10-QSB filed
November 22, 2004, and incorporated herein by reference).
10.71 Referral Fee Agreement between the Company and Hantman & Associates
and/or Robert Hantman, dated August 27, 2004 (included as Exhibit 10.29
to the Form 10-QSB filed November 22, 2004, and incorporated herein by
reference).
10.72 Amended Consulting Services Agreement between the Company and Diya
Systems, Inc., dated November 19, 2004 (included as Exhibit 10.1 to the
Form 8-K filed November 23, 2004, and incorporated herein by
reference).
10.73 Amended 2004 Stock Option Plan (included as Exhibit 4.1 to the Form S-8
filed December 28, 2004, and incorporated herein by reference).
10.74 Purchase Agreement between the Company and Evert Wilbrink and Bert De
Ruiter, dated January 17, 2005 (included as Exhibit 10.1 to the Form
8-K filed February 16, 2005, and incorporated herein by reference).
26
10.75 Purchase Agreement between the Company and Ronald C. Rodgers and W. R.
Slaughter, dated March 2, 2005 (included as Exhibit 10.1 to the Form
8-K filed March 10, 2005, and incorporated herein by reference).
10.76 Employment Agreement between the Company and RS Entertainment, Inc. and
William R. Slaughter, dated February 28, 2005 (included as Exhibit 10.1
to the Form S-8 filed March 30, 2005, and incorporated herein by
reference).
10.77 Consulting Agreement between the Company and Randall Hicks, dated March
21, 2005 (included as Exhibit 10.2 to the Form S-8 filed March 30,
2005, and incorporated herein by reference).
10.78 Employment Agreement between the Company and RS Entertainment, Inc. and
Ronald C. Rodgers, dated February 28, 2005 (included as Exhibit 10.3 to
the Form S-8 filed March 30, 2005, and incorporated herein by
reference).
10.79 Purchase Agreement between the Company and Royce D. Bybee and Stephen
Elderkin, dated April 7, 2005 (included as Exhibit 10.1 to the Form 8-K
filed April 14, 2005, and incorporated herein by reference).
10.80* Consulting Agreement between the Company and Alan Howarth, dated May
18, 2005
10.81* Purchase Agreement between the Company and Alan Howarth, Gordon Jones,
Gary Kimmons, and Sheila Testa, dated May 25, 2005
10.82* Purchase Agreement between the Company and Sunil Nariani, dated May 31,
2005
10.83* Consulting Services Agreement between the Company and Ronald C. Rogers,
dated July 13, 2005
10.84* Consulting Services Agreement between the Company and William R.
Slaughter, dated July 13, 2005
10.85* Consulting Services Agreement between the Company and Mark Laisure,
dated May 15, 2005
31.1* Certification of C.E.O. Pursuant to Section 302 of the Sarbanses-Oxley
Act of 2002.
31.2* Certification of Chief Financial Officer Pursuant to Section 302 of the
Sarbanses-Oxley Act of 2002.
32.1* Certification of C.E.O. Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2* Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
* Filed herewith.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the Undersigned, thereunto duly authorized.
M POWER ENTERTAINMENT, INC. AND SUBSIDIARIES
(FKA GK INTELLIGENT SYSTEMS, INC.)
Dated: August 22, 2005 /s/ Gary F. Kimmons
By____________________________________
Gary F. Kimmons
President, Chief Executive Office and
Chief Financial Officer
27