SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event being Reported): November 5, 2003
E-THE MOVIE NETWORK, INC.
(Exact name of registrant as specified in its charter)
Florida 0-50062 59-108227
(State or Other Jurisdiction Commission File IRS Employer
of Incorporation) Number) Identification No.)
1428 36TH STREET, BROOKLYN, NEW YORK 11218
(Address of Principal Executive Offices)
(718) 436-7931
(Registrant's Telephone Number, including Area Code)
On November 5, 2003, e-The Movie Network, Inc. (the "Company") filed a
Current Report on Form 8-K to report (the "Previous 8-K"), among other things,
that it completed the acquisition of all of the outstanding membership interests
(the "Acquisition")of Cell Power Technologies, LLC., a Delaware limited
liability company ("Cell Power").
This Amendment No. 1 to Form 8-K (i) amends Item 7 in the Previous 8-K,
(ii) discloses other developments relating to the Company and (iii) changes the
fiscal year of the Company as herein provided.
ITEM 5. OTHER EVENTS AND REGULATION FD DISCLOSURE
Following the Acquisition of Cell Power, Ms. Susan Parker, the former
President [and sole director] of the Company resigned from all positions held
with the Company. Mr. Jacob Herskovits has been appointed President, and sole
director of the Company.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
In accordance with Item 7(a), attached hereto are the audited financial
statements of Cell Power for the period from September 22, 2003 (inception) to
October 31, 2003.
ITEM 8. CHANGE IN FISCAL YEAR
On March 29, 2004, the Company's Board of Directors approved a change in
the Company's fiscal year. The new fiscal year will begin on November 1 and end
on October 31 of each year, effective with the year ended October 31, 2004.
The Acquisition of Cell Power was treated as a reverse acquisition of the
Company by Cell Power. Cell Power's fiscal year ends on October 31. In
accordance with the position of the Accounting Staff members in the Securities
and Exchange's Division of Corporate Finance, because the Company elected to
adopt the fiscal year of its accounting acquirer, no transition report is
necessary.
1
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DATE: April 5, 2004 e-THE MOVIE NETWORK, INC.
BY: /s/ JACOB HERSKOVITS,
---------------------------
JACOB HERSKOVITS,
CHIEF EXECUTIVE OFFICER
2
CELL POWER TECHNOLOGIES LLC
(A Development Stage Company)
FINANCIAL STATEMENTS
For the Period from September 22, 2003 (Inception) to October 31, 2003
CELL POWER TECHNOLOGIES LLC
(A Development Stage Company)
CONTENTS
- --------------------------------------------------------------------------------
Page
----
INDEPENDENT AUDITORS' REPORT F-2
FINANCIAL STATEMENTS
Balance Sheet F-3-F-4
Statement of Operations F-5
Statement of Members' Deficiency F-6
Statement of Cash Flows F-7-F-8
NOTES TO FINANCIAL STATEMENTS F-9-F-15
F-1
INDEPENDENT AUDITORS' REPORT
To the Members of
Cell Power Technologies LLC
We have audited the accompanying balance sheet of Cell Power Technologies LLC (a
development stage company) as of October 31, 2003, and the related statements of
operations, changes in members' deficiency, and cash flows for the period from
September 22, 2003 (inception) to October 31, 2003. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cell Power Technologies LLC as
of October 31, 2003, and the results of its operations and its cash flows for
the period from September 22, 2003 (inception) to October 31, 2003, in
conformity with accounting principles generally accepted in the United States of
America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements,
the Company has incurred a net loss since its inception and has a members'
deficiency. These conditions raise substantial doubt about the Company's ability
to continue as a going concern. Management's plans in regard to those matters
are described in Note 2. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ Marcum & Kliegman LLP
New York, New York
March 13, 2004
F-2
CELL POWER TECHNOLOGIES LLC
(A Development Stage Company)
BALANCE SHEET
October 31, 2003
- --------------------------------------------------------------------------------
ASSETS
------
CURRENT ASSETS
- --------------
Cash $ 93,994
Cash in escrow 300,000
Prepaid expense - related party 35,000
--------
Total Current Assets $428,994
INTANGIBLE ASSETS, Net of accumulated
amortization of $2,500 277,510
--------
TOTAL ASSETS $706,504
========
The accompanying notes are an integral part of these financial statements.
F-3
CELL POWER TECHNOLOGIES LLC
(A Development Stage Company)
BALANCE SHEET
October 31, 2003
- --------------------------------------------------------------------------------
LIABILITIES AND MEMBERS' DEFICIENCY
-----------------------------------
CURRENT LIABILITIES
- -------------------
Notes payable - related parties $600,000
Note payable 150,000
Accounts payable 285
Accrued interest - related parties 16,931
Accrued interest 4,948
Deferred revenue 30,000
--------
TOTAL LIABILITIES $802,164
COMMITMENTS
- -----------
MEMBERS' DEFICIENCY, Including
deficit accumulated during the
development stage of $95,770 (95,660)
--------
TOTAL LIABILITIES AND
MEMBERS' DEFICIENCY $706,504
========
The accompanying notes are an integral part of these financial statements.
F-4
CELL POWER TECHNOLOGIES LLC
(A Development Stage Company)
STATEMENT OF OPERATIONS
For the Period from September 22, 2003 (Inception) to October 31, 2003
- --------------------------------------------------------------------------------
REVENUE $ --
- -------
OPERATING EXPENSES
- ------------------
Consulting fees - related parties $55,000
Legal fees 15,802
Amortization 2,500
Other 589
-------
TOTAL OPERATING EXPENSES 73,891
--------
OPERATING LOSS (73,891)
OTHER EXPENSES
- --------------
Interest expense - related parties 16,931
Interest expense 4,948
-------
TOTAL OTHER EXPENSES 21,879
--------
NET LOSS $(95,770)
========
The accompanying notes are an integral part of these financial statements.
F-5
CELL POWER TECHNOLOGIES LLC
(A Development Stage Company)
STATEMENT OF MEMBERS' DEFICIENCY
For the Period from September 22, 2003 (Inception) to October 31, 2003
- --------------------------------------------------------------------------------
Deficit
Accumulated
Members' Members' During the
Membership Capital Subscription Development
Units Contributions Receivable Stage Total
------------------------------------------------------------------------
BALANCE - September 22, 2003 (Inception) -- $ -- $ -- $ -- $ --
- -------
Issuance of membership units at
inception for $1 per unit 226 226 (226) -- --
Issuance of membership units in connection
with purchase of intangible asset
at October 3, 2003 for $1 per unit 10 10 -- -- 10
Collection of members' subscription
receivable -- -- 100 -- 100
Net loss -- -- -- (95,770) (95,770)
--- ---- ----- -------- --------
BALANCE - October 31, 2003 236 $236 $(126) $(95,770) $(95,660)
- ------- === ==== ===== ======== ========
The accompanying notes are an integral part of these financial statements.
F-6
CELL POWER TECHNOLOGIES LLC
(A Development Stage Company)
STATEMENT OF CASH FLOWS
For the Period from September 22, 2003 (Inception) to October 31, 2003
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
- ------------------------------------
Net loss $ (95,770)
Adjustments to reconcile net loss to net cash used
in operating activities:
Amortization $ 2,500
Changes in operating assets and liabilities:
Increase in prepaid expenses - related party (35,000)
Increase in accounts payable 285
Increase in accrued interest - related parties 16,931
Increase in accrued interest 4,948
--------
TOTAL ADJUSTMENTS (10,336)
---------
NET CASH USED IN OPERATING ACTIVITIES (106,106)
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 members' subscription receivable 100
--------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 300,100
---------
NET INCREASE IN CASH 93,994
CASH - Beginning --
- ---- ---------
CASH - Ending $ 93,994
- ---- =========
The accompanying notes are an integral part of these financial statements.
F-7
CELL POWER TECHNOLOGIES LLC
(A Development Stage Company)
STATEMENT OF CASH FLOWS, Continued
For the Period from September 22, 2003 (Inception) to October 31, 2003
- --------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
- -------------------------------------------------
Cash paid during the period for:
Interest $ --
Noncash investing and financing activities:
In connection with the purchase of intangible assets:
Deferred revenue assumed $ 30,000
Note payable assumed $150,000
Membership units issued $ 10
The accompanying notes are an integral part of these financial statements.
F-8
CELL POWER TECHNOLOGIES LLC
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - The Company
-----------
Organization
------------
Cell Power Technologies LLC (the "Company") was organized as a Delaware
limited liability company on September 22, 2003.
Description of Business and Development Stage Operations
--------------------------------------------------------
The Company acquired certain revenue/royalty rights, product purchasing
rights and exclusive distribution rights, in certain markets in the
western hemisphere, for "Cellboost" for a period of ten years (see Note
4). Cellboost is a compact, non-rechargeable, and disposable cellular
telephone battery.
In addition to the acquisition as described above, other development
stage operations include time devoted primarily to raising cash through
the issuance of notes payable and entering into an exchange agreement
(see Notes 5, 6 and 8).
NOTE 2 - Summary of Significant Accounting Policies
------------------------------------------
Basis of Presentation
---------------------
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. The Company has incurred a net
loss of $95,770 since its inception, has a members' deficiency of $95,660
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 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. As described in Note 8, the Company entered into an exchange
agreement with e-The Movie Networks, Inc. ("ETMV") and became a
wholly-owned subsidiary of ETMV. 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.
Use of Estimates
----------------
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and reported amounts
of revenue and expenses during the reporting period. Actual results could
differ from those estimates.
F-9
CELL POWER TECHNOLOGIES LLC
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 2 - Summary of Significant Accounting Policies, continued
------------------------------------------
Intangible Assets and Impairment
--------------------------------
The Company acquired certain revenue/royalty rights, product purchasing
rights and exclusive distribution rights, in certain markets, for
Cellboost. These rights have been reflected as intangible assets in the
accompanying financial statements.
The intangible assets are carried at cost less accumulated amortization.
Amortization is computed on the straight-line method over the ten-year
estimated useful life of the assets.
The Company periodically reviews the carrying value of its intangible
assets to determine whether impairment may exist. The Company considers
relevant cash flow and profitability information, including estimated
future operating results, trends and other available information, in
assessing whether the carrying value of the intangible assets can be
recovered. If it is determined that the carrying value of the intangible
assets will not be recovered from the undiscounted future cash flows, the
carrying value of the assets would be considered impaired. An impairment
charge is measured as any deficiency in the amount of estimated fair
value of the intangible assets over carrying value. Based on the
impairment tests performed, there was no impairment during the period
from September 22, 2003 (inception) to October 31, 2003. There can be no
assurance that future impairment tests on the intangible assets will not
result in a charge to operations.
Income Taxes
------------
The Company was organized as a limited liability company and has elected
to be taxed as a partnership. Partnerships are taxed at the individual
partner level and thus there is no provision for income taxes presented
in these financial statements. Effective with the closing on the exchange
agreement on November 3, 2003 (see Note 8), the Company became a
wholly-owned subsidiary of an incorporated entity.
Revenue Recognition and Deferred Revenue
----------------------------------------
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. For the period from September 22, 2003 (inception) to October
31, 2003, the Company did not generate any revenue from Cellboost product
sales.
Revenue received in advance is deferred until such time the criteria
specified above is met. As of October 31, 2003, the Company had deferred
revenue, consisting of advanced royalties assumed, of $30,000.
F-10
CELL POWER TECHNOLOGIES LLC
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 2 - Summary of Significant Accounting Policies, continued
------------------------------------------
Fair Value of Financial Instruments
-----------------------------------
The carrying amounts of current assets and current liabilities
approximate fair value because of the immediate or short-term maturity of
these financial instruments.
Recent Accounting Pronouncements
--------------------------------
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.
NOTE 3 - Concentrations of Credit Risk
-----------------------------
Financial instruments that potentially subject the Company to significant
concentration of credit risk consist primarily of cash and cash in
escrow. The Company's cash is maintained at one financial institution,
and from time to time the account balance at this financial institution
may exceed the amount of insurance provided on such accounts. The
Company's cash in escrow was held by an attorney and used in connection
with the closing on the exchange agreement with ETMV (see Note 8).
F-11
CELL POWER TECHNOLOGIES LLC
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 4 - Acquisition of Intangible Assets
--------------------------------
On December 23, 2003, the Company entered into an Amended and Restated
Asset Purchase Agreement (the "Amended Agreement") effective as of
October 3, 2003, with Global Link Technologies, Inc. ("GBLK"). The
Amended Agreement primarily granted distribution rights in addition to
previously granted royalty rights. The Amended Agreement supercedes and
fully replaces an Asset Purchase Agreement and an Option Agreement, both
dated and effective October 3, 2003, between the Company and GBLK.
Pursuant to the Amended Agreement, the Company was granted GBLK's rights
as they relate to the sale and distribution of Cellboost in Canada, the
United States of America ("USA"), Mexico, Latin and/or South America
(which is defined as all those countries and territories south of Mexico
and north of Tierra Del Fuego), Puerto Rico, the US Virgin Islands, the
Caribbean and Israel, with E & S International Enterprises, Inc. ("ESI"),
a California corporation. These rights expire on February 12, 2013.
ESI is the exclusive licensee for Cellboost worldwide. ESI must meet
certain financial commitments and/or performance targets, on an annual
basis, in order to maintain the exclusive worldwide license for
Cellboost. If the agreement that granted ESI its exclusive worldwide
license were to be terminated, the rights the Company acquired from GLBK
would also be terminated. The termination of these rights will have an
adverse material impact on the Company's current and future financial
position and results of operations.
Primarily, these rights entitle the Company to receive royalties on the
net number of units sold by ESI in the defined territories. The royalty
payments are based on the type of sale and territory where sold. The
Company is also required to remit royalties to GBLK through 2005, based
on units sold, and ESI, based on gross profit on units sold by the
Company as a sub-distributor, in certain defined territories. The royalty
fees due GBLK can be paid, at the Company's sole discretion, either in
the form of cash or, subsequent to the ETMV acquisition (see Note 8),
shares of ETMV common stock with a market value equal to the amount of
the obligation.
These rights were acquired for $280,010, which was comprised of $100,000
in cash, the assumption of $30,000 in advanced royalties received by GBLK
from ESI, the assumption of a $150,000 promissory note payable (see Note
6) and 10 membership units in the Company valued at $10.
The intangible assets and the rights to receive payments related to the
intangible assets were pledged as security for promissory notes (see
Notes 5 and 6).
F-12
CELL POWER TECHNOLOGIES LLC
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 4 - Acquisition of Intangible Assets, continued
--------------------------------
As of October 31, 2003, intangible assets consist of the following:
Estimated
Amount Useful Life
-------- -----------
Royalty and distribution rights $280,010 10 years
Less: accumulated amortization (2,500)
--------
Intangible Assets, Net $277,510
========
Amortization expense for the period from September 22, 2003 (inception)
to October 31, 2003 amounted to $2,500.
Expected amortization expense for the intangible assets for the
succeeding five years and thereafter is as follows:
Year Ending
October 31, Amount
----------- --------
2004 $ 28,000
2005 28,000
2006 28,000
2007 28,000
2008 28,000
Thereafter 137,510
--------
Total $277,510
========
NOTE 5 - Notes Payable - Related Parties
-------------------------------
On September 23, 2003, the Company issued a $400,000 unsecured promissory
note to a member of the Company. The note bears interest at 8% to
maturity and had an original maturity date of November 30, 2003. The
maturity date of the note was extended to May 15, 2004 and currently
bears interest at 6% per annum. In the event of a default, the holder is
granted the option, subordinate to any security interest granted, to
collect receivables related to ESI until the obligation is satisfied.
On October 20, 2003, the Company issued a $200,000 secured promissory
note to another member of the Company. The note bears interest 10% per
annum and had an original maturity date of March 1, 2004. The maturity
date of the note was extended to May 15, 2004 and continues to bear
interest at 10% per annum. The intangible assets and all rights to
receive payments related to the intangible assets, as described in Note
4, secure this note, which are subordinated to the security rights
described in Note 5.
F-13
CELL POWER TECHNOLOGIES LLC
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 6 - Note Payable
------------
In connection with the purchase of the intangible assets described in
Note 4, the Company assumed a $150,000 secured promissory note originally
issued by GBLK on May 12, 2003. The note bears interest at 7% per annum
and matures on May 8, 2004. Receivables related to the intangible assets,
as described in Note 4, secure this note.
NOTE 7 - Related Party Transactions
--------------------------
Notes Payable
-------------
As described in Note 5, the Company has outstanding notes payable to
related parties amounting to $600,000.
Advances
--------
For the period from September 22, 2003 (inception) to October 31, 2003,
the Company received and repaid non-interest bearing advances from
members of the Company or affiliates of members of the Company, amounting
to $300,000.
Consulting Services Contract
----------------------------
In October 2003, the Company entered into a consulting services contract
with an entity related to a member of the Company. The agreement requires
monthly payments of $35,000 for five years. The Company paid $70,000
related to this contract in which $35,000 is incurred as a consulting fee
for the period from September 22, 2003 (inception) to October 31, 2003
and $35,000 is reflected as a prepaid expense as of October 31, 2003.
Scheduled future minimum commitments under the consulting services
contract are as follows:
For the
Year Ending
October 31, Amount
----------- ----------
2004 $ 420,000
2005 420,000
2006 420,000
2007 420,000
2008 385,000
----------
Total $2,065,000
==========
Other Related Parties Transactions
----------------------------------
For the period from September 22, 2003 (inception) to October 31, 2003,
the Company paid a fee for operational and financial consulting services
of $20,000 to an entity controlled by a member of the Company.
F-14
CELL POWER TECHNOLOGIES LLC
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 8 - Subsequent Events
-----------------
Consulting Services Contracts
-----------------------------
In January 2004, the Company has entered into a consulting contract for
operational and financial services. The contract provides for monthly
payments of $5,000 for six months and options to purchase common stock of
ETMV, pursuant to terms in the agreement.
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 common
stock of ETMV, pursuant to terms in the agreement.
Exchange Agreement
------------------
The Company entered into an exchange agreement, which closed on November
3, 2003, with ETMV, a Florida corporation. ETMV was previously an
inactive public shell. Pursuant to the agreement, ETMV repurchased
20,000,000 shares of its common stock for $300,000 and accounted for them
as treasury stock. The shares were cancelled and EMTV then issued
23,600,000 unregistered shares of common stock for 100% of the
outstanding membership units in the Company. Each membership unit of the
Company received 100,000 shares of ETMV common stock. As a result of this
exchange, the members of the Company gained voting control of ETMV and,
thus, the exchange was accounted for as a reverse merger and the Company
became a wholly-owned subsidiary of ETMV.
F-15