-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OUVepLWXt3jgk1olJGeV3beSmDxO8JSW8oP5DiDdkUsEBRNtGE+PYs7Ox0JY/+VM w/dQa7L+DrbcoOC/Mr6tyg== 0001116502-04-002546.txt : 20041102 0001116502-04-002546.hdr.sgml : 20041102 20041101181624 ACCESSION NUMBER: 0001116502-04-002546 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20041102 DATE AS OF CHANGE: 20041101 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KIRSHNER ENTERTAINMENT & TECHNOLOGIES INC CENTRAL INDEX KEY: 0001042463 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING SERVICES [7371] IRS NUMBER: 651053546 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-24977 FILM NUMBER: 041111231 BUSINESS ADDRESS: STREET 1: 5200 NW 33RD AVENUE STREET 2: SUITE 215 CITY: FT LAUDERDALE STATE: FL ZIP: 33309 BUSINESS PHONE: 954-938-8010 MAIL ADDRESS: STREET 1: 5200 NW 33RD AVENUE STREET 2: SUITE 215 CITY: FT LAUDERDALE STATE: FL ZIP: 33309 FORMER COMPANY: FORMER CONFORMED NAME: HBOA HOLDINGS INC DATE OF NAME CHANGE: 20001116 FORMER COMPANY: FORMER CONFORMED NAME: MIZAR ENERGY CO DATE OF NAME CHANGE: 19980923 10QSB 1 kirshner-10qsb.txt QUARTERLY REPORT 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 the quarterly period ended March 31, 2004 -------- ---- [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from________to______________ Commission file number 0-24977 KIRSHNER ENTERTAINMENT & TECHNOLOGIES, INC. (Exact name of small business issuer) Florida 65-1053546 --------------------------------- ---------------------- (State or other Jurisdiction (IRS Employer of incorporation or organization) Identification Number) 5200 N.W. 33rd Avenue, Suite 215 Ft. Lauderdale, Florida 33309 (Address of principal executive offices) (954) 938-8010 (Registrant's telephone number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ ] No [X] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as to the latest practicable date: As of March 31, 2004, there were 35,906,553 shares of the registrant's common stock issued and outstanding. PART I - FINANCIAL INFORMATION PAGE Item 1. Financial Statements: Consolidated Balance Sheet as of March 31, 2004 (unaudited) 3 Consolidated Statements of Operations for the Three Months Ended March 31, 2004 and 2003 (unaudited) 5 Consolidated Statements of Changes in Stockholders' Equity (unaudited) 6 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2004 and 2003 (unaudited) 7 Notes to Consolidated Financial Statements 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3. Disclosure Controls and Procedures 16 PART II- OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 17 Signatures 18 2 Item 1. Financial Statements KIRSHNER ENTERTAINMENT & TECHNOLOGIES, INC. AND SUBSIDIARIES F/K/A HBOA HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET MARCH 31, 2004 (Unaudited) Assets Current assets Cash $ 12,232 Accounts receivable 3,984 Prepaid expenses -- -------- Total current assets 16,216 Property and equipment, net 26,271 Intangible assets, net 3,215 Other assets Deposits -- Investments in limited partnership-related party -- Due from related party -- -------- Total Assets $ 45,702 ======== The accompanying footnotes are an integral part of the financial statements. 3 KIRSHNER ENTERTAINMENT & TECHNOLOGIES, INC. AND SUBSIDIARIES F/K/A HBOA HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET MARCH 31, 2004 (Unaudited) Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 50,050 Accrued expenses -- Accrued interest 46,904 Deferred revenue 25,178 Due to related parties 210,000 ----------- Total current liabilities 332,132 Stockholders' (deficit) equity Preferred stock, no par value, 10,000,000 shares authorized; no shares issued and outstanding -- Common stock, $0.0005 par value, 150,000,000 shares authorized; 35,906,553 shares issued and 35,856,553 shares outstanding 17,953 Additional paid in capital 5,545,514 Accumulated deficit (5,837,396) ----------- Less: Treasury stock, 50,000 shares at cost (12,500) ----------- Stockholders' deficit (286,429) ----------- Total liabilities and stockholders' deficit $ 45,702 =========== The accompanying footnotes are an integral part of the financial statements. 4 KIRSHNER ENTERTAINMENT & TECHNOLOGIES, INC. AND SUBSIDIARIES F/K/A HBOA HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three months ended March 31, --------------------- 2004 2003 --------- --------- Income Sales, net of returns $ 24,598 $ 17,424 --------- --------- Expenses Salaries 7,684 66,996 Consulting 10,000 5,775 Professional fees -- 10,613 Insurance -- 11,174 Marketing and advertising -- 5,032 Rent 4,917 1,655 Other general and administrative expenses 4,286 12,582 Depreciation and amortization 6,218 16,976 --------- --------- Total Expenses 33,105 130,803 Other income (expense) Other income 65,867 60,516 Interest expense (3,000) (6,399) --------- --------- Net income (loss) $ 54,360 $ (59,262) Loss per share Net income (loss) per common share $ 0.002 $ (0.003) ========= ========= The accompanying footnotes are an integral part of the financial statements. 5 KIRSHNER ENTERTAINMENT & TECHNOLOGIES, INC. AND SUBSIDIARIES F/K/A HBOA HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
Additional Common stock Common Stock Paid in Accumulated Stock to be Treasury Stock Shares Amount Capital Deficit Issued Shares Amount Total ---------- --------- ----------- ----------- ----------- ------ ----------- ----------- Balance December 3l, 2003 28,103,851 $ 14,051 $ 4,969,416 (5,891,757) $ 570,000 50,000 $ (12,500) $ (350,790) Common Stock issued under obligation 7,702,702 $ 3,851 $ 566,149 -- (570,000) -- -- $ -- Common stock issued for cash 100,000 50 9,950 -- -- -- -- $ 10,000 Net income -- -- -- 54,360 -- -- -- $ 54,360 ---------- --------- ----------- ----------- ----------- ------ ----------- ----------- Balance March 31, 2004 35,906,553 $ 17,953 $ 5,545,514 $(5,837,397) $ -- 50,000 $ (12,500) $ (286,430) ========== ========= =========== =========== =========== ====== =========== ===========
The accompanying footnotes are an integral part of the financial statements. 6 KIRSHNER ENTERTAINMENT & TECHNOLOGIES, INC. AND SUBSIDIARIES F/K/A HBOA HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three months ended March 31, --------------------- 2004 2003 -------- -------- Cash flows from operating activities: Net Income (Loss) $ 54,360 $(59,262) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 6,218 16,976 Capital contributed as rent -- 1,655 Capital contributed as salary -- 10,000 Common stock issued for services -- -- (Increase) decrease in: Accounts receivable 22,580 12,358 Prepaid expenses -- (15,860) Increase (decrease) in: Accounts payable (96,360) 12,358 Accrued expenses -- (215) Deferred income (24,598) (12,509) -------- -------- Net cash used in operating activities (37,800) (46,857) -------- -------- Cash flow from financing activities: Proceeds from notes payable-related party 20,000 40,000 Proceeds from common stock to be issued 10,000 -- -------- -------- Net cash provided by financing activities 30,000 40,000 -------- -------- Net decrease in cash (7,800) (6,857) Cash, beginning of the period 20,032 19,079 -------- -------- Cash, end of the period $ 12,232 $ 12,222 ======== ======== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ -- $ 94 ======== ======== The accompanying footnotes are an integral part of the financial statements. 7 KIRSHNER ENTERTAINMENT & TECHNOLOGIES, INC. & Subsidiaries F/K/A/ HBOA HOLDINGS, INC. NOTE 1 - UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS The accounting policies followed for interim financial reporting are the same as those disclosed in Note 1 of the Notes to Financial Statements included in the audited financial statements for Kirshner Entertainment & Technologies, Inc. f/k/a HBOA Holdings, Inc. (the "Company") for the fiscal year ended December 31, 2003, which are included in its Annual Report on Form 10- KSB for fiscal 2003 . In the opinion of management, the unaudited consolidated financial statements include all necessary adjustments (consisting of normal, recurring accruals) for a fair presentation of the financial position, results of operations and cash flow for the interim periods presented. Preparing consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results may differ from these estimates. Interim results are not necessarily indicative of results for a full year. The results of operations for the three month period ended March 31, 2004 are not necessarily indicative of operating results to be expected for a full year. The accompanying consolidated financial statements of the Company have been prepared in accordance with the instructions to Form 10-QSB and, therefore, omit or condense certain footnotes and other information normally included in financial statements prepared in accordance with generally accepted accounting principles. It is suggested that these consolidated condensed financial statements should be read in conjunction with the Company's financial statements and notes thereto included in the Company's audited financial statements on Form 10-KSB for the fiscal year ended December 31, 2003. Effective as of July 18, 2003, the Company changed its name from HBOA Holdings, Inc. to Kirshner Entertainment & Technologies, Inc. and increased its authorized common stock from 25 million shares to 150 million shares. These changes were approved by the Company's Board of Directors and a majority of the Company's shareholders effective as of June 9, 2003 . The Company filed a definitive information statement with the Securities and Exchange Commission on June 23, 2003 pursuant to Section 14C of the Exchange Act. NOTE 2 - GOING CONCERN The accompanying financial statements have been presented in accordance with generally accepted accounting principles, which assumes the continuity of the Company as a going concern. However, during the years ending December 3 1 , 2003 and 2002, the Company has experienced, and continues to experience, certain going concern and liquidity problems. The Company has incurred net losses of $1,247,625 and $403,713 for the years ended December 31, 2003 and 2002, respectively. These conditions raise substantial doubt as to the ability of the Company to continue as a going concern. Management's plans with regard to these matters include raising working capital to assure the Company's viability through private equity offerings, debt financing, or through the acquisition of new business or private ventures. The eventual outcome of the success of management's plans cannot be ascertained with any degree of certainty. The 8 accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. NOTE 3 - STOCKHOLDER'S EQUITY The Company issued 100,000 shares of common stock to an investor in the July 2003 private placement offering. NOTE 4 - OTHER INCOME During 2004, the Company recuperated various cost associated with an investment it had written off during fiscal year 2003. NOTE 5 - SUBSEQUENT EVENTS In 2004, the Company will issue warrant certificates to each purchaser of shares in the July 2003 offering in the aggregate amount of 2,477,500 warrants. Each warrant is exercisable into one share of common stock at an exercise price of $.25 per share. The warrant certificates were to be issued at the same time as the shares purchased in the July 2003 offering but were inadvertently not issued at such time. 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THE FOLLOWING INFORMATION HAS BEEN DERIVED FROM OUR FINANCIAL STATEMENTS AND SHOULD BE READ IN CONJUNCTION WITH OUR FINANCIAL STATEMENTS AND RELATED NOTES THERETO INCLUDED IN PART 1 -ITEM 1 OF THIS 10-QSB. THE DISCUSSION FOLLOWING CONTAINS FORWARD LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS, INCLUDING THOSE SET FORTH UNDER THE SECTION ENTITLED "RISK FACTORS" UNDER MATERIAL CHANGES IN FINANCIAL CONDITION, RESULTS OF OPERATIONS AND LIQUIDITY HEREIN. WE CAUTION READERS THAT THESE FORWARD-LOOKING STATEMENTS SPEAK ONLY AS OF THE DATE HEREOF. WE HEREBY EXPRESSLY DISCLAIM ANY OBLIGATION OR UNDERTAKING TO RELEASE PUBLICLY ANY UPDATES OR REVISIONS TO ANY SUCH STATEMENTS TO REFLECT ANY CHANGE IN OUR EXPECTATIONS OR ANY CHANGES IN EVENTS, CONDITIONS, OR CIRCUMSTANCES ON WHICH SUCH STATEMENTS ARE BASED. OVERVIEW We had two divisions: (1) our Entertainment Division and (2) our Technology Division. Our Technology Division consists of our Aerisys, Inc. Intellectual Community for Schools business. Effective March 31, 2004, we discontinued our Entertainment Division because we were unsuccessful in attracting a suitable candidate to operate that division. The entertainment Division did not have any assets liabilities equity or operations up through March 31, 2004. We continue to operate only our Aerisys Intelligent Community for Schools division. RESULTS OF OPERATIONS Sales, net of returns, were $24,598 during the three months ended March 31, 2004 compared to $17,424 during the three months ended March 31, 2003. Substantially all of these sales were generated from sales of the Aerisys Intelligent Community for Schools. All of the sales for the three months ended March 31, 2004 represent revenue that had been deferred. Expenses were $33,105 during the three months ended March 31, 2004 and $130,803 during the three months ended March 31, 2003 . The expenses that decreased the most during the three months ended March 31, 2004 compared with the prior period in fiscal 2003 were (i) salaries, which decreased by $59,312, (2) professional fees, which decreased by $10,613 and (iii) other general and administrative expenses decreased by decreased by $8,296. During the three months ended March 31, 2003, we had a loss in other income of $65,867 from services rendered to related parties. 10 LIQUIDITY AND CAPITAL RESOURCES As of March 31, 2004, we had cash on hand of $12,232. Because there is extremely limited capital, we may not be able to continue our business operations and are actively searching for other sources of capital. Our capital requirements have been and will continue to be significant due to, among other things, the expenses that we need to incur to develop our Aerisys Intelligent Community product. At the present time, we do not have any extensive capital commitments. We only have normal operating business costs, which consist of (i) salary to one employee, (ii) consulting fees, and (iii) fees to our lawyers and accountants. We do not plan on making any new purchases of plant or equipment or hiring any additional employees at this time. During the three months ended March 31, 2004, we used $ 37,800 in operating activities and received $30,000 in financing as a result of a loan from Gary Verdier, our founder, Chairman and President and proceeds from a private placement of our securities. We did not use any funds in investing activities. RISK FACTORS In evaluating our business, the following risk factors should be considered: WE HAVE SIGNIFICANT WORKING CAPITAL NEEDS AND IF WE ARE UNABLE TO OBTAIN ADDITIONAL FINANCING, WHEN NEEDED, WE MAY NOT HAVE SUFFICIENT CASH FLOW TO RUN OUR BUSINESS. As of March 31, 2004, we had cash on hand of $12,232. During the past five years, Mr. Verdier, our Chairman, President and founder, has advanced an aggregate of $ 993,645 to us. However, Mr. Verdier has stated that he will no longer continue to fund our business and if we cannot locate other sources of capital, we may not be able to continue our business. If we do not have sufficient cash on hand, we may be required to file a petition for Chapter 11 or enter into some liquidation or reorganization proceeding. WE PROBABLY WILL NOT GENERATE SIGNIFICANT REVENUES IN FISCAL 2004. During fiscal 2004, we hope to continue to generate revenues from the sale of our Aerisys Intelligent Community to schools. As of March 31 , 2004, we had contracts with five private schools. However, there can be no assurances that we will obtain contracts to provide services at other schools or that we will generate revenues from these agreements. WE HAVE A HISTORY OF OPERATING LOSSES, A GOING CONCERN QUALIFICATION AND EXPECT TO INCUR FUTURE LOSSES. We have a net income of $54,360 during the three ended March 31, 2004 compared to a net loss of $59,262 for the three months ended March 31, 2003. Although we had net income for the period, the footnotes to our financial statements for the three months ended March 31, 2004 include an explanatory paragraph relating to 11 the uncertainty of our ability to continue as a going concern, which may make it more difficult for us to raise additional capital. We do not anticipate that we will earn a profit during the 2004 fiscal year due, in part to our inability to generate revenue to cover our operating costs. THE MARKET WE SERVE IS HIGHLY COMPETITIVE AND MANY OF OUR COMPETITORS HAVE MUCH GREATER RESOURCES. The market for providing private, branded intranets to schools is competitive. Our current and potential competitors include products that are developed in-house by schools and companies that are well established both in the technology marketplace and the school arena. Many of our competitors have substantially greater financial, technical and marketing resources, larger customer bases, longer operating histories, greater name recognition and more established relationships in the industry than we do. We cannot be sure that we will have the resources or expertise to compete successfully in the future. Our competitors may be able to (1) more quickly develop and expand their network infrastructure and service offerings; (2) better adopt to new or emerging technologies and changing customer needs; (3) negotiate more favorable licensing agreements with software application vendors; (4) devote greater resources to the marketing and sale of their products and (5) adopt more aggressive pricing polices. THE GROWTH IN DEMAND FOR OUR AERISYS INTELLIGENT COMMUNITIES(TM) IS HIGHLY UNCERTAIN. As of March 31, 2004, we have signed contracts with five schools which are multi-year contracts. However, it is difficult to predict if any additional schools will want to purchase our product. The market for providing private, branded intranets to K-12 schools is competitive. It is unclear if we will be able to distinguish ourselves from our competitors. WE FACE RISKS RELATED TO INTELLECTUAL PROPERTY RIGHTS. Our success in our Aerisys Intelligent Community business depends on our internally developed technologies and other intellectual property. Despite our precautions, it may be possible for a third party to copy or otherwise obtain and use our intellectual property or trade secrets without authorization. In addition, it is possible that others may independently develop substantially equivalent intellectual property. If we do not effectively protect our intellectual property, our business could suffer. In the future, we may have to resort to litigation to enforce our intellectual property rights, to protect our trade secrets, or to determine the validity and scope of the proprietary rights of others. This type of litigation, regardless of its outcome, could result in substantial costs and diversion of management and technical resources. We may receive in the future notices of claims of infringement of other parties' proprietary rights. Infringement or other claims could be made against us in the future. Any claims, with or without merit, could be time-consuming, result in costly litigation and diversion of technical and management personnel, cause product delays or require us to develop non-infringing technology or enter into 12 royalty or licensing agreements. Royalty or licensing agreements, if required, may not be available on acceptable terms or at all. If a successful claim of product infringement were made against us, it could have a material adverse effect on our business. OUR LIABILITY FOR INFORMATION RETRIEVED FROM THE WEB. Because users of our web sites for our Intelligent Communities(TM) may distribute our content to others, third parties might sue us for defamation, negligence, copyright or trademark infringement, personal injury or other matters. These types of claims have been brought, sometimes successfully, against online services in the past. Others could also sue us for the content that is accessible from our web site through links to other web sites or through content and materials that may be posed by members in chat rooms or bulletin boards. THE SUCCESS OF OUR AERISYS INTELLIGENT COMMUNITIES(TM) DEPENDS ON THE ACCEPTANCE AND INCREASED USE OF INTERNET-BASED BUSINESS SOFTWARE SOLUTIONS AND WE CANNOT BE SURE THAT THIS WILL HAPPEN. The success of our Aerisys Intelligent Community (TM) depends on the adoption of Internet-based business software solutions by schools. Our business could suffer dramatically if Internet-based solutions are not accepted or perceived to be effective. The growth of Internet-based business software solutions could also be limited by: concerns over transaction security and user privacy; inadequate network infrastructure for the entire Internet; and inconsistent performance of the Internet. We cannot be certain that this market will continue to grow or to grow at the rate we anticipated. RELIABILITY OF WEB SITES AND TECHNOLOGY; RISK OF CAPACITY CONSTRAINTS. The performance, reliability and availability of our web sites, systems and network infrastructure will be critical to our business and our ability to promote our business for our Intelligent Communities(TM) Our web sites are hosted by a server owned and operated by a third party, limiting the extent to which we will have control over, or the ability to cure, technical problems, which may arise. Any systems problems that result in the unavailability of our web sites or interruption of information or access of information to members through the web sites would diminish their effectiveness as a means of promoting our business. If the volume of traffic on our web sites is greater than anticipated, we will be required to expand and upgrade our web sites and related infrastructure. Although we intend that our systems will be designed for scalability, the can be no assurance that the systems will be fully scalable. Any inability to add additional software and hardware to accommodate increased usage may cause unanticipated systems disruptions and degradation in levels of service to customers. There can be no assurance that we will be able to 13 effectively upgrade and expand our web sites in a timely manner or to integrate smoothly any newlydeveloped or purchased technology with its existing systems. Any inability to do so would have a material adverse effect on our business, prospects, financial condition and results of operations. SECURITY RISKS. A party who is able to circumvent our security measures could misappropriate proprietary information or cause interruptions in our Internet operations. We may be required to expend significant capital and resources to protect against the threat of such security breaches or to alleviate problems caused by such breaches. Consumer concern over Internet security has been, and could continue to be, a barrier to commercial activities requiring consumers to send their credit card information over the Internet. Computer viruses, break-ins, or other security problems could lead to misappropriation of proprietary information and interruptions, delays, or cessation in service to our Aerisys Intelligent Community(TM) customers. Moreover, until more comprehensive security technologies are developed, the security and privacy concerns of existing and potential customers may inhibit the growth of the Internet as a communication and merchandising medium. GOVERNMENTAL REGULATION AND LEGAL UNCERTAINTIES. We are not currently subject to direct federal, state, or local regulation, and laws or regulations applicable to access to or commerce on the Internet, other than regulations applicable to businesses generally. Due to the increasing popularity and use of the Internet and other online services, however, it is possible that a number of laws and regulations may be adopted with respect to the Internet or other online services covering issues such as user privacy, "indecent" materials, freedom of expression, pricing, content and quality of products and services, taxation, advertising, intellectual property rights and information security. The adoption of any such laws or regulations might also decrease the rate of growth of Internet use, which in turn could decrease the demand for our products and services or increase the cost of doing business or in some other manner have a material adverse effect on our business, results of operations, and financial condition. In addition, applicability to the Internet of existing laws governing issues such as property ownership, copyrights and other intellectual property issues, taxation, libel, obscenity, and personal privacy is uncertain. The vast majority of such laws were adopted prior to the advent of the Internet and related technologies and, as a result, do not contemplate or address the unique issues of the Internet and related technologies. We do not believe that such regulations, which were adopted prior to the advent of the Internet, govern the operations of our business nor have any claims been filed by any state implying that we are subject to such legislation. There can be no assurance, however, that a state will not attempt to impose these regulations upon us in the future or that such imposition will not have a material adverse effect on our business, results of operations, and financial condition. Several states have also proposed legislation that would limit the uses of personal user information gathered online or require online services to establish privacy policies. The Federal Trade Commission has also initiated action against at least one online service regarding the manner in 14 which personal information is collected from users and provided to third parties. Changes to existing laws or the passage of new laws intended to address these issues, including some recently proposed changes, could create uncertainty in the marketplace that could reduce demand for the services, increase the cost of doing business as a result of litigation costs or increased service delivery costs, or could in some other manner have a material adverse effect on our business, results of operations, and financial condition. In addition, because our services are accessible worldwide, and we facilitate sales of goods to users worldwide, other jurisdictions may claim that we are required to qualify to do business as a foreign corporation in a particular state or foreign country. We are qualified to do business in Florida, and failure by us to qualify as a foreign corporation in a jurisdiction where it is required to do so could subject us to taxes and penalties for the failure to quality and could result in our inability to enforce contracts in such jurisdictions. Any such new legislation or regulation, or the application of laws or regulations from jurisdictions whose laws do not currently apply to our business, could have a material adverse effect on our business, results of operations, and financial condition. In January 2004, the SEC commenced an informal inquiry of our company. As of November 1, 2004 we are not certain of the status of the investigation. RAPID TECHNOLOGICAL CHANGE. The markets in which the Aerisys Division competes is characterized by frequent new product introductions, rapidly changing technology, and the emergence of new industry standards. The rapid development of new technologies increases the risk that current or new competitors will develop products or services that reduce the competitiveness and are superior to our products and services. The future success of our Aerisys division will depend to a substantial degree upon their ability to develop and introduce in a timely fashion new products and services and enhancements to their existing products and services that meet changing customer requirements and emerging industry standards. The development of new, technologically advanced products and services is a complex and uncertain process requiring high levels of innovation, as well as the accurate anticipation of technological and market trends. There is a potential for product development delay due to the need to comply with new or modified standards. There can be no assurance that our Aerisys division will be able to identify, develop, market, support, or manage the transition to new or enhanced products or services successfully or on a timely basis, that new products or services will be responsible to technological changes or will gain market acceptance, or that these divisions will be able to respond effectively to announcements by competitors, technological changes, or emerging industry standards. Our business, results of operations, and financial condition would be materially and adversely affected if our Aerisys division was to be unsuccessful, or to incur significant delays in developing and introducing new products, services, or enhancements. ADDITIONAL SHARES ELIGIBLE FOR FUTURE SALE Our Articles of Incorporation authorize the issuance of up to 150 million shares of common stock and 10 million shares of preferred stock. As of March 31, 2004, we had 35,906,553 shares of our common stock issued and outstanding. The issuance of additional shares of our common stock or preferred stock is solely within the discretion of our Board of Directors. The issuance of a substantial 15 number of additional shares of common or preferred stock will result in dilution to existing shareholders. NO DIVIDENDS. We anticipate that earnings, if any, will be retained for the development of our business and will not be distributed to shareholders as cash dividends. The declaration and payment of cash dividends, if any, at some future time will depend upon our results of operations, financial condition, cash requirements, future prospects, limitations imposed by credit agreements or senior securities and any other factors deemed relevant by our Board of Directors. The declaration and payment of cash dividends, if at all, by our company will be at the discretion of the Board of Directors. INVESTMENT RISKS No representation can be made regarding the future operations or profitability or the amount of any future revenues, income or loss of our company. The success of our company is subject to many factors outside of our control, such as general economic conditions, competition, and general conditions in the Intranet and Entertainment markets. Prospective investors should be aware that they could lose their entire investment in our company. Even if we are successful in our operations, there can be no assurance that investors will receive any cash dividend or derive a profit or benefit from their investment. ABSENCE OF PUBLIC MARKET; RESTRICTIONS ON TRANSFERABILITY. Our shares presently trade in the "pink sheets". They formerly traded on the OTC Bulletin Board but, due to our failure to timely file our Exchange Act reports with the SEC, our securities were delisted from the OTC Bulletin Board in March, 2004. We intend to have our securities included for trading on the OTC Bulletin Board once again after we file all of our delinquent reports but we cannot make any assurances that this will occur. Securities trading on the OTC Bulletin Board, and to a greater extent in the "pink sheets", generally attract a smaller number of market makers and a less active public market and may be subject to significant volatility. Factors such as our ability to (i) generate revenues from our existing contracts and locate new customers, (ii) to raise additional capital and(iii) other risk factors listed in this Form 1 0-QSB could have a material effect on the price of our common stock. ITEM 3. CONTROLS AND PROCEDURES Within 90 days prior to the date of this Quarterly Report on Form 10-QSB, we adopted and have now implemented a new policy of internal controls and procedures. Based upon our adoption and implementation of this new policy, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are now effective in timely alerting them to 16 material information required to be included in our periodic SEC reports. It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. In addition, we reviewed our internal controls, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of their last evaluation. PART II. OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES (a) Not Applicable. (b) Not Applicable. (c) Not Applicable. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. A. Exhibits 31.1 Certification of Gary Verdier, Chief Executive Officer and Chief Operating Officer, Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. 31.2 Certification of Harvey Judkowitz, Chief Financial Officer, Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. 32.1 Certification of Gary Verdier, Chief Executive Officer and Chief Operating Officer, Pursuant to 18 U.S.C. Section 1350. 32.2 Certification of Harvey Judkowitz, Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350. B. Reports on Form 8-K The Company did not file any reports on Form 8-K during the three month period ended March 31, 2004. 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: November 1, 2004 KIRSHNER ENTERTAINMENT & TECHNOLOGIES, INC. By: /s/ HARVEY JUDKOWITZ ---------------------------------------- Harvey Judkowitz Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer) 18 EX-31.1 2 exh311.txt CERTIFICATIONS EXHIBIT 31.1 CERTIFICATIONS I, Gary Verdier, certify that: 1. I have reviewed this Form 10-Q of Kirshner Entertainment & Technologies, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ GARY VERDIER --------------------------------- Gary Verdier Chief Executive Office and Chief Operating Officer (Principal Executive Officer) Date: November 1, 2004 EX-31.2 3 exh312.txt CERTIFICATIONS EXHIBIT 31.2 CERTIFICATIONS I, Harvey Judkowitz, certify that: 1. I have reviewed this Form 10-Q of Kirshner Entertainment & Technologies, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ HARVEY JUDKOWITZ ----------------------------- Harvey Judkowitz Chief Financial Officer (Principal Financial Officer) Date: November 1, 2004 EX-32.1 4 exh321.txt CERTIFICATIONS EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Kirshner Entertainment & Technologies, Inc. (the "Company") on Form 10-QSB for the period ended March 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Gary Verdier, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. Date: November 1, 2004 /s/ GARY VERDIER ----------------------------- Gary Verdier Chief Executive Officer (Principal Executive Officer) EX-32.2 5 exh322.txt CERTIFICATION EXHIBIT 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Kirshner Entertainment & Technologies, Inc. (the "Company") on Form 10-QSB for the period ended March 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Harvey Judkowitz, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. Date: November 1, 2004 /s/ HARVEY JUDKOWITZ ----------------------------- Harvey Judkowitz Chief Financial Officer (Principal Financial Officer) -----END PRIVACY-ENHANCED MESSAGE-----