-----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, C+wPg3C/dJBWejfmfuSjeTnJuAJg2Ggjg/fB4eC3uoRQHft6dhTrZPwHY06fGmNO 8mnaI7jWxlBpO54qifsKrw== 0001144204-04-003078.txt : 20040316 0001144204-04-003078.hdr.sgml : 20040316 20040316172859 ACCESSION NUMBER: 0001144204-04-003078 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20040101 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20040316 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST DELTAVISION INC CENTRAL INDEX KEY: 0001051488 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES [3690] IRS NUMBER: 870412182 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-23511 FILM NUMBER: 04673616 BUSINESS ADDRESS: STREET 1: 9005 COBBLE CANYON LANE CITY: SANDY STATE: UT ZIP: 84093 BUSINESS PHONE: 8019420555 MAIL ADDRESS: STREET 1: 9005 COBBLE LANE CITY: SANDY STATE: UT ZIP: 84093 8-K/A 1 form8ka.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A /1/ CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported): JANUARY 1, 2004 FIRST DELTAVISION, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER) NEVADA 0-23511 87-0412182 (STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.) 695 TOWN CENTER DRIVE, SUITE 260, COSTA MESA, CALIFORNIA 92626 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) Registrant's telephone number, including area code: (714) 434-9191 ----------------------------------------------------------- (FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT) /1/ This Report amends the Registrant's report on Form 8-K originally filed with the Securities and Exchange Commission on January 16, 2004. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. On January 16, 2004, First Deltavision, Inc., a Nevada corporation ("FDTV"), filed a Current Report on Form 8-K to report its acquisition of Mogel Management Group, Inc. ("Mogel"). As permitted under Items 7(a)(4) and 7(b)(2) of Form 8-K, FDTV indicated that it would file the financial statements and pro forma financial information required under Item 7 of Form 8-K no later than the date required. This Amendment No. 1 of Current Report on Form 8-K provides the required financial information and amends Item 7 of the Current Report on Form 8-K filed by FDTV on January 16, 2004. (a) Financial Statements The financial statements required by this item are included as an exhibit hereto. (b) Pro Forma Financial Information The pro forma financial information required by this item is included as an exhibit hereto. (c) Exhibits 2.1 Securities Purchase Agreement by and among First Deltavision, Inc., Mogel Management Group, Inc., and the stockholders of Mogel Management Group, Inc., dated as of January 1, 2004 (previously filed with the Securities and Exchange Commission on January 16, 2004 as Exhibit 2.1 to FDTV's Current Report on Form 8-K, and incorporated herein by this reference). 99.1 Financial statements of Mogel Management Group, Inc. for the year ended December 31, 2003. 99.2 Unaudited pro forma condensed combined financial statements giving effect to the combination of FDTV and Mogel Management Group, Inc. 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 hereunto duly authorized. First Deltavision, Inc. Date: March 16, 2004 By: /s/ Bruce Mogel --------------- Name: Bruce Mogel Title: Chief Executive Officer INDEX TO EXHIBITS EXHIBIT DESCRIPTION NUMBER 2.1 Securities Purchase Agreement by and among First Deltavision, Inc., Mogel Management Group, Inc., and the stockholders of Mogel Management Group, Inc., dated as of January 1, 2004 (previously filed with the Securities and Exchange Commission on January 16, 2004 as Exhibit 2.1 to FDTV's Current Report on Form 8-K, and incorporated herein by this reference). 99.1 Financial statements of Mogel Management Group, Inc. for the year ended December 31, 2003. 99.2 Unaudited pro forma condensed combined financial statements giving effect to the combination of FDTV and Mogel Management Group, Inc. EX-99.1 3 ex99_2.txt Financial Statements and Report of Independent Certified Public Accountants MOGEL MANAGEMENT GROUP, INC. (A Development Stage Enterprise) December 31, 2003 Table of Contents Report of Independent Certified Public Accountants ......................... 3 Financial Statements Balance Sheet ..................................................... 4 Statement of Operations ........................................... 5 Statement of Stockholders' Equity ................................. 6 Statement of Cash Flows ........................................... 7 Notes to Financial Statements ..................................... 8 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS -------------------------------------------------- To: The Board of Directors of Mogel Management Group, Inc. We have audited the accompanying balance sheet of Mogel Management Group, Inc. (the "Company") (a Development Stage Enterprise) as of December 31, 2003 and the related statements of operations, stockholders' equity and cash flows for the period from inception (October 2, 2003) through December 31, 2003. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. 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 audits provide 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 Mogel Management Group, Inc. as of December 31, 2003 and the results of its operations and cash flows for the period from inception (October 2, 2003) through December 31, 2003, in conformity with generally accepted accounting principles. RAMIREZ INTERNATIONAL Financial & Accounting Services, Inc. March 15, 2004 Irvine, CA Financial Statements and Report of Independent Certified Public Accountants MOGEL MANAGEMENT GROUP, INC. (A DEVELOPMENT STAGE COMPANY) BALANCE SHEET
December 31, 2003 ASSETS ------------ Current assets Cash and cash equivalents $ 8,534 ------------ Total current assets 8,534 Due from affilate 7,632 Deposit 7,794 ------------ Total assets $ 23,960 ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 10,000 ------------ Total current liabilities 10,000 Commitments and contingencies Stockholders' equity: Preferred stock, $0.0001 par value; 50,000,000 shares authorized; no shares issued Common stock, $0.0001 par value; 200,000,000 shares authorized; 48,000,000 shares issued and outstanding 4,800 Additional paid in capital 49,547 Deficit accumulated during the development stage (40,387) ------------ Total stockholders' equity 13,960 ------------ Total liabilities and stockholders' equity $ 23,960 ============
The accompanying notes are an integral part of these financial statements. MOGEL MANAGEMENT GROUP, INC. (A DEVELOPMENT STAGE COMPANY) STATEMENT OF OPERATIONS
PERIOD FROM INCEPTION (OCTOBER 2, 2003) THROUGH DECEMBER 31, 2003 ----------------------- Revenue $ - General and administrative expenses 40,387 ----------------------- Loss from operations before income taxes (40,387) Provision for income taxes - ----------------------- Net loss $ (40,387) ======================= Basic and diluted net loss per share $ (0.00) Weighted average shares outstanding 48,000,000
The accompanying notes are an integral part of these financial statements. MOGEL MANAGEMENT GROUP, INC. (A DEVELOPMENT STAGE COMPANY) STATEMENT OF SHAREHOLDERS' EQUITY
DEFICIT COMMON STOCK ADDITIONAL ACCUMULATED DURING ----------------------- PAID-IN THE DEVELOPMENT SHARES AMOUNT CAPITAL STAGE TOTAL ---------- ------------ ----------- ------------------ ------------ Initial capitalization on October 2, 2003 48,000,000 $ 4,800 $ 49,547 $ - $ 54,347 Net loss (40,387) (40,387) ---------- ------------ ----------- ------------------ ------------ Balance, December 31, 2003 48,000,000 $ 4,800 $ 49,547 $ (40,387) $ 13,960 ========== ============ =========== ================== ============
The accompanying notes are an integral part of these financial statements. MOGEL MANAGEMENT GROUP, INC. (A DEVELOPMENT STAGE COMPANY) STATEMENT OF CASH FLOWS
PERIOD FROM INCEPTION (OCTOBER 3, 2003) THROUGH DECEMBER 31, 2003 -------------------- Cash flows from operating activities: Net loss $ (40,387) Adjustments to reconcile net loss to cash used in operating activities: Increase in accounts payable 10,000 -------------------- Net cash used by operating activities (30,387) -------------------- Cash flows from investing activities: Deposit on facility lease (7,794) Cash flows from financing activities: Cash proceeds from issuance of stock 54,347 Advance to affiliate (7,632) -------------------- Net cash provided by financing activities 46,715 -------------------- Net increase in cash 8,534 Cash and cash equivalents, beginning of period -- -------------------- Cash and cash equivalents, end of period $ 8,534 ====================
MOGEL MANAGEMENT GROUP, INC. (A Developement Stage Enterprise) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2003 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ------------------------------------------ Organization - Mogel Management Group, Inc. ("the Company") was organized under the laws of the State of Nevada on October 2, 2003. The Company has not engaged in any business activities that have produced any revenues and, therefore, is considered a development stage company as defined in Statement of Financial Accounting Standards No. 7. Principles of Accounting - The accompanying financial statements have been prepared in conformity with generally accepted accounting principles. Cash and Cash Equivalents - The Company considers all highly liquid debt investments purchased with a maturity of three months or less to be cash equivalents. Accounting Estimates - The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America required management to make estimates and assumptions that effect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimated by management. Recently Enacted Accounting Standards - Statement of Financial Accounting Standards ("SFAS") No. 146, "Accounting for Costs Associated with Exit or Disposal Activities", SFAS No. 147, "Acquisitions of Certain Financial Institutions - an Amendment of FASB Statements No. 72 and 144 and FASB Interpretation No. 9", SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure - an Amendment of FASB Statement No. 123", SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities", and SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity", were recently issued. SFAS No. 146, 147, 148, 149 and 150 have no current applicability to the Company or their effect on the financial statements would not have been significant. Stock-Based Compensation -Statement of Financial Accounting Standards No. 123, Accounting for Stock Based Compensation, encourages, but does not require, companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has chosen to account for stock-based compensation using the intrinsic value method prescribed in previously issued standards. Accordingly, compensation cost for stock options issued to employees is measured as the excess, if any, of the fair market value of the Company's stock at the date of grant over the amount an employee must pay to acquire the stock. Compensation is charged to expense over the shorter of the service or vesting period. Stock options issued to non-employees are recorded at the fair value of the services received or the fair value of the options issued, whichever is more reliably measurable, and charged to expense over the service period. Income Taxes -The Company has not made a provision for income taxes because of its financial statement and tax losses since its inception on October 2, 2003. A valuation allowance has been used to offset the recognition of any deferred tax assets related to net operating loss carryforwards due to the uncertainty of future realization. The use of any tax loss carry-forward benefits may also be limited as a result of changes in Company ownership. NOTE 1 -NATURE OF OPERATIONS AND ACCOUNTING POLICIES - Continued -------------------------------------------------------- Fair Value of Financial Instruments - The Company considers all liquid interest-earning investments with a maturity of three months or less at the date of purchase to be cash equivalents. Short-term investments generally mature between three months and six months from the purchase date. All cash and short-term investments are classified as available for sale and are recorded at market using the specific identification method; unrealized gains and losses are reflected in other comprehensive income. Cost approximates market for all classifications of cash and short-term investments. Net Loss per Common Share - Net loss per share is calculated in accordance with Statement of Financial Accounting Standards No. 128, Earnings Per Share. Basic net loss per share is based upon the weighted average number of common shares outstanding. Diluted net loss per share is based on the assumption that options are included in the calculation of diluted earnings per share, except when their effect would be anti-dilutive. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. NOTE 2 -CAPITALIZATION -------------- In connection with the Company's incorporation on October 2, 2003, the Company entered into an Asset Purchase Agreement to acquire all of the assets and assume all of the liabilities of Mogel Management Group, LLC, ("MMG LLC"). The Company issued 48,000,000 shares of its common stock as consideration for contributions of net assets of $54,347. MMG LLC was formed on July 15, 2003 as a California limited liability company that has common ownership with the Company. MMG LLC has not engaged in any business activities that have produced any revenues and, therefore, is considered a development stage company as defined in Statement of Financial Accounting Standards No. 7. NOTE 3 - INCOME TAXES ------------ The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes" which requires the liability approach for the effect of income taxes. The Company has available at December 31, 2003, unused operating loss carryforwards of approximately $39,000, which may be applied against future taxable income and which expire in various years through 2023. If certain substantial changes in the Company's ownership should occur, there could be an annual limitation on the amount of net operating loss carryforward which can be utilized. The amount of and ultimate realization of the benefits from the operating loss carryforwards for income tax purposes is dependent, in part, upon the tax laws in effect, the future earnings of the Company and other future events, the effects of which cannot be determined. Because of the uncertainty surrounding the realization of the loss carryforwards, the Company has established a valuation allowance equal to the tax effect of the loss carryforwards, therefore, no deferred tax asset has been recognized for the loss carryforwards. The net deferred tax assets are approximately $14,000 at December 31, 2003, with an offsetting valuation allowance of the same amount as of December 31, 2003. NOTE 4 - RELATED PARTY TRANSACTIONS -------------------------- Notes Payable - During the period from inception, October 2, 2003, through December 31, 2003, the Company paid for certain administrative expenses in the amount of $7,632 on behalf of First Deltavision, Inc., an entity with certain common ownership with the Company. As of December 31, 2003, the Company had an amount receivable of $7,632 from First Deltavision, Inc. Management Compensation - During the period from inception, October 2, 2003, through December 31, 2003, the Company did not pay any compensation to its officers and directors. NOTE 5 - COMMITMENTS AND CONTINGENCIES ----------------------------- Operating Lease - The Company leases its office space under an operating lease agreement, which expires in January 2006. The Company incurred rent expense of $4,330 for the period from inception, October 2, 2003, through December 31, 2003. The Company's future minimum lease payments under its non-cancelable lease agreement as of December 31, 2003 are as follows: December 31, ------------ 2004 $ 51,960 2005 51,960 2006 4,330 ======== $108,250 ======== Consulting Agreement - In 2003, the Company entered into a certain consulting agreement for investment banking services. The Company has cancelled this agreement and the warrant to purchase approximately 972,000 shares of the Companies common stock, which was included in this consulting agreement. NOTE 6 - LOSS PER SHARE -------------- The following data show the amounts used in computing loss per share for the periods presented:
For the Period from Inception (October 2, 2003) December 31, 2003 --------------------------- Loss from continuing operations available to Common shareholders (numerator) $ (40,387) ------------- Weighted average number of common shares outstanding used in loss per share during the period (denominator) $ 48,000,000 -------------
Dilutive loss per share was not presented, as the Company had no common equivalent shares for all periods presented that would effect the computation of diluted loss per share. Note 7 - SUBSEQUENT EVENT ---------------- On January 1, 2004, the Company entered into a Securities Purchase Agreement and Plan of Reorganization with First Deltavision, Inc., an entity with certain common ownership with the Company. The Company's shareholders agreed to sell all of the outstanding shares of the Company's stock, 48 million shares of common stock, in exchange for promissory notes in the aggregate amount of $60,000. The promissory notes bear interest at 6% per annum and the entire principal and unpaid interest are due on December 31, 2004. EX-99.2 4 ex99_3.txt UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
September 30, 2003 --------------------------------------------------------- Historical ------------------------- First Mogel Deltavision, Management Pro Forma Pro Forma Inc. Group, Inc. Adjustments Combined --------------------------------------- --------- ASSETS Current assets Cash and cash equivalents $ -- $ -- $ -- $ -- -------------------------------------- --------- Total current assets -- -- -- -- Due from affilate -- -- -- -- Deposit -- -- -- -- Goodwill -- -- 46,040(a) 46,040 Net assets of Mogel Management Group, Inc. -- -- 13,960(a) 13,960 -------------------------------------- --------- Total assets $ -- $ -- $ 60,000 $ 60,000 ====================================== ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 1,200 $ -- $ -- $ 1,200 Accounts payable - related party 67,087 -- -- 67,087 Due to officers 42,386 -- -- 42,386 --------- Notes payable to shareholders -- -- 60,900(a) 60,900 -------------------------------------- --------- Total current liabilities 110,673 -- 60,900 171,573 Commitments and contingencies -- -- -- -- Stockholders' equity: Common stock, $0.001 par value; 50,000,000 shares authorized; 1,342,000 shares issued and outstanding 1,342 -- -- 1,342 Additional paid in capital 101,269 -- -- 101,269 Deficit accumulated during the development stage (213,284) -- (900)(b) (214,184) -------------------------------------- --------- Total stockholders' equity (110,673) -- (900) (111,573) -------------------------------------- --------- Total liabilities and stockholders' equity $ -- $ -- $ 60,000 $ 60,000 ====================================== =========
September 30, 2003 --------------------------------------------------------- Historical ------------------------- First Mogel Deltavision, Management Pro Forma Pro Forma Inc. Group, Inc. Adjustments Combined --------------------------------------- --------- ASSETS Current assets Cash and cash equivalents $ -- $ -- $ -- $ -- -------------------------------------- --------- Total current assets -- -- -- -- Due from affilate -- -- -- -- Deposit -- -- -- -- Goodwill -- -- 46,040(a) 46,040 Net assets of Mogel Management Group, Inc. -- -- 13,960(a) 13,960 -------------------------------------- --------- Total assets $ -- $ -- $ 60,000 $ 60,000 ====================================== ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 500 $ -- $ -- $ 500 Accounts payable - related party 65,467 -- -- 65,467 Due to officers 40,868 -- -- 40,868 Notes payable to shareholders -- -- 63,600(a) 63,600 -------------------------------------- --------- Total current liabilities 106,835 -- 63,600 170,435 Commitments and contingencies -- -- -- -- Stockholders' equity: Common stock, $0.001 par value; 50,000,000 shares authorized; 1,342,000 shares issued and outstanding 1,342 -- -- 1,342 Additional paid in capital 101,269 -- -- 101,269 Deficit accumulated during the development stage (209,446) -- (3,600)(b) (213,046) -------------------------------------- --------- Total stockholders' equity (106,835) -- (3,600) (110,435) Total liabilities and stockholders' equity $ -- $ -- $ 60,000 $ 60,000 ====================================== =========
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
Three Months Ended September 30, 2003 ---------------------------------------------------------------- First Mogel Deltavision, Management Pro Forma Pro Forma Inc. Group, Inc. Adjustments Combined -------------------------------------------- ----------- Revenue $ -- $ -- $ -- $ -- General and administrative expenses 3,838 -- -- 3,838 -------------------------------------------- ----------- Loss from operations (3,838) -- -- (3,838) Interest expense -- -- 900(b) 900 -------------------------------------------- ----------- Loss from operations before income taxes (3,838) -- (900) (4,738) Provision for income taxes -- -- -- -- -------------------------------------------- ----------- Net loss $ (3,838) $ -- $ (900) $ (4,738) ============================================ =========== Basic and diluted net loss per share $ (0.00) $ -- $ -- $ (0.00) Weighted average shares outstanding 1,342,000 -- -- 1,342,000
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
Year Ended September 30, 2003 ---------------------------------------------------------------- First Mogel Deltavision, Management Pro Forma Pro Forma Inc. Group, Inc. Adjustments Combined -------------------------------------------- ----------- Revenue $ -- $ -- $ -- $ -- General and administrative expenses 35,162 -- -- 35,162 -------------------------------------------- ----------- Loss from operations (35,162) -- -- (35,162) Interest expense -- -- 3,600(b) 3,600 -------------------------------------------- ----------- Loss from operations before income taxes (35,162) -- (3,600) (38,762) Provision for income taxes -- -- -- -- -------------------------------------------- ----------- Net loss $ (35,162) $ -- $ (3,600) $ (38,762) ============================================ =========== Basic and diluted net loss per share $ (0.03) $ -- $ -- $ (0.03) Weighted average shares outstanding 1,342,000 -- -- 1,342,000
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION 1. BASIS OF PRESENTATION The following unaudited pro forma condensed combined financial statements give effect to the acquisition by First Deltavision, Inc. ("the Company") of Mogel Management Group, Inc. ("MMG, Inc.") This acquisition was completed on January 1, 2004. The accompanying Unaudited Pro Forma Condensed Combined Statements of Operations (the "Pro Forma Statements of Operations") for the year ended June 30, 2003 and the three months ended September 30, 2003 give effect to the acquisition of MMG, Inc., accounted for as a purchase business combination, as if it had occurred on July 1, 2002. The Pro Forma Statements of Operations are based on historical results of operations of the Company and MMG, Inc. for the year ended June 30, 2003 and the three months ended September 30, 2003. The Unaudited Pro Forma Condensed Combined Balance Sheet (the "Pro Forma Balance Sheet") gives effect to the acquisition as if it had occurred on July 1, 2002. MMG, Inc. was incorporated on October 2, 2003 and does not have historical results of operations for the year ended June 30, 2003 and the three months ended September 30, 2003. The Pro Forma Statements of Operations and Pro Forma Balance Sheet and accompanying notes (the "Pro Forma Financial Information") should be read in conjunction with, and are qualified by reference to, the historical financial statements of the Company and MMG, Inc. and the related notes thereto. The Pro Forma Financial Information is intended for informational purposes only and is not necessarily indicative of the future financial position or future results of operations of the Company after the acquisition of MMG, Inc., or of the financial position or results of operations of the Company that would have actually occurred had the acquisition of MMG, Inc. been effected on July 1, 2002. 2. PRO FORMA ASSUMPTIONS The acquisition has been accounted for under the purchase method of accounting. The following represents the preliminary allocation of the purchase price over the historical net book values of the acquired assets and assumed liabilities of MMG, Inc. at December 31, 2003, and is included for illustrative pro forma purposes only. Assuming the transaction had occurred on December 31, 2003, the allocation would have been as follows: Value of promissory notes issued by the Company $60,000 ------- Preliminary allocation of purchase price to: Cash $8,534 Deposit 7,794 Due from affiliate 7,632 Accounts payable (10,000) Goodwill 46,040 ------- $60,000 ------- The purchase price of MMG, Inc. of $60,000 consists of three promissory issued to the shareholders of MMG, Inc. The promissory notes bear interest at 6% per annum and are due on December 31, 2004. MMG, Inc. previously had agreed to issue a warrant to purchase up to shares of MMG, Inc.'s common stock pursuant to a certain consulting agreement. MMG, Inc. has cancelled this certain consulting agreement and has cancelled the issuance of this warrant. The unaudited condensed pro foma financial information assume that this warrant was cancelled and not issued. 3. PRO FORMA ADJUSTMENTS The pro forma financial information reflects the following adjustments: (a) To record the preliminary allocation of the purchase price to goodwill and the net assets of MMG, Inc. as of December 31, 2003. (b) To record interest expense on the promissory notes issued by the Company. 4. EARNINGS PER SHARE Basic and diluted loss per share for each period are calculated by dividing pro forma net loss by the weighted average outstanding shares used to calculate loss per share in the historical period. -----END PRIVACY-ENHANCED MESSAGE-----