EXHIBIT 99.3
CALICO ENTERTAINMENT GROUP, INC.
CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2008
MORGENSTERN, SVOBODA & BAER, CPA's, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
40 Exchange Place, Suite 1820
New York, NY 10005
TEL: (212) 925-9490
FAX: (212) 226-9134
E-MAIL: msbcpas@gmail.com
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Calico Entertainment Group, Inc.
We have audited the accompanying balance sheet of Calico Entertainment Group.
Inc. ("Company"), as of April 30, 2008, and the related consolidated statements
of income, comprehensive income, consolidated statements of stockholders' equity
and cash flows from inception (June 21, 2007) to the period then ended. The
Company's management is responsible for these financial statements. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with standards of the Public Company
Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Calico Entertainment Group,
Inc., as of April 30, 2008, and the results of its operations and its cash flows
for the periods then ended, are in conformity with accounting principles
generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has suffered recurring loses from
operations, which raises substantial doubt about its ability to continue as a
going concern. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ MORGENSTERN, SVOBODA & BAER, CPA'S P.C.
___________________________________________
Morgenstern, Svoboda & Baer, CPAs, P. C.
Certified Public Accountants
New York, NY
July 21, 2008
TABLE OF CONTENTS
Balance Sheet 1
Statement of Operations 2
Statement of Cash Flows 3
Statement of Stockholders' Equity 4
Notes to Financial Statements 5
CALICO ENTERTAINMENT GROUP, INC.
BALANCE SHEET
APRIL 30, 2008
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ (432)
________
Total Current Assets (432)
INTANGIBLE ASSET, NET 20,000
________
Total Assets $ 19,568
========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses $ -
Loan payable to related party 18,852
________
Total Current Liabilities 18,852
STOCKHOLDERS' DEFICIT
Common stock, $.001 par value, 100,000,000
shares authorized, 3,450,000 issued and outstanding 3,450
Additional paid in capital 18,275
Net Loss (21,009)
________
Total Stockholders' Deficit 716
________
$ 19,568
========
CALICO ENTERTAINMENT GROUP, INC.
STATEMENT OF CASH FLOWS
FROM INCEPTION, JUNE 21, 2007 TO APRIL 30, 2008
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss (21,009)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization -
Increase/(decrease) in current liabilities:
Accounts Payable Related Party 18,852
________
Total Adjustments 18,852
________
NET CASH USED IN OPERATING ACTIVITIES (2,157)
________
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 1,725
________
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,725
________
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (432)
CASH AND CASH EQUIVALENTS, BEGINNING BALANCE -
________
CASH AND CASH EQUIVALENTS, ENDING BALANCE $ (432)
========
Non cash transactions:
Issuance of shares for intangible asset $ 20,000
========
CALICO ENTERTAINMENT GROUP, INC.
STATEMENT OF OPERATIONS
FROM INCEPTION, JUNE 21, 2007 TO APRIL 30, 2008
REVENUE, NET $ -
Cost of sales -
__________
GROSS PROFIT -
OPERATING EXPENSES:
General and administrative expenses 21,009
__________
LOSS FROM OPERATIONS (21,009)
__________
Other (Income) Expense
Interest income -
Miscellaneous expense -
Interest expense -
__________
Total Other Expense -
__________
NET LOSS $ (21,009)
==========
NET LOSS PER SHARE:
Basic & diluted $ (0.008)
==========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic & diluted 2,645,367
==========
Weighted average number of shares for dilutive securities has not been taken
since the effect of dilutive securities is anti-dilutive
CALICO ENTERTAINMENT GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
From June 21, 2007 (Inception) Through April 30, 2008
Common Stock Additional
____________________ Paid-in Accumulated
Shares Amount Capital Deficit Total
_______________________________________________________________
Stock issuance for cash 1,725,000 1,725 $ 1,725
@ par value 0.001
Stock issuance 225,000 225 (225) -
@ par value 0.001
Stock issuance for 20% 1,500,000 1,500 18,500 20,000
interest in Prodigy film
(Stuck)
Net loss, From Inception (21,009) (21,009)
to April 30, 2008
_______________________________________________________________
Balance April 30, 2007 3,450,000 3,450 18,275 (21,009) 716
===============================================================
CALICO ENTERTAINMENT GROUP, INC
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2008
NOTE 1 - ORGANIZATION
Calico Entertainment Group, Inc., (the Company) was organized June 21,
2007 under the laws of the State of Nevada.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of
America. Functional currency of the company is United States Dollars
($).
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles 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 the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
CONTINGENCIES
Certain conditions may exist as of the date the financial statements
are issued, which may result in a loss to the Company but which will
only be resolved when one or more future events occur or fail to occur.
Our management and legal counsel assess such contingent liabilities,
and such assessment inherently involves an exercise of judgment. In
assessing loss contingencies related to legal proceedings that are
pending against the Company or unasserted claims that may result in
such proceedings, the Company's legal counsel evaluates the perceived
merits of any legal proceedings or unasserted claims as well as the
perceived merits of the amount of relief sought or expected to be
sought.
If the assessment of a contingency indicates that it is probable that a
material loss has been incurred and the amount of the liability can be
estimated, then the estimated liability would be accrued in the
Company's financial statements. If the assessment indicates that a
potential material loss contingency is not probable but is reasonably
possible, or is probable but cannot be estimated, then the nature of
the contingent liability, together with an estimate of the range of
possible loss if determinable and material would be disclosed.
Loss contingencies considered to be remote by management are generally
not disclosed unless they involve guarantees, in which case the
guarantee would be disclosed.
RISKS AND UNCERTAINTIES
The Company is subject to substantial risks from, among other things,
intense competition associated with the industry in general, other
risks associated with financing, liquidity requirements, and limited
operating history.
CALICO ENTERTAINMENT GROUP, INC
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2008
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash in hand and cash in time
deposits, certificates of deposit and all highly liquid debt
instruments with original maturities of three months or less.
INTANGIBLE ASSETS
The Company has the following intangible assets as of April 30, 2008:
Film revenue interest $ 20,000
________
Total $ 20,000
========
Amortization expense for the period ended April 30, 2008 was $0.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standard No. 107 ("SFAS 107"),
Disclosures about fair value of financial instruments, requires that
the Company disclose estimated fair values of financial instruments.
The carrying amounts reported in the statements of financial position
for current assets and current liabilities qualifying as financial
instruments are a reasonable estimate of fair value.
REVENUE RECOGNITION
Revenue is recognized when persuasive evidence of an arrangement
exists, delivery has occurred, the revenue is fixed or determinable,
and collectibility is probable.
BASIC AND DILUTED EARNINGS PER SHARE
Net loss per share is calculated in accordance with the Statement of
Financial Accounting Standards No. 128 ("SFAS No. 128"), "Earnings per
share". Basic net loss per share is based upon the weighted average
number of common shares outstanding. 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.
CALICO ENTERTAINMENT GROUP, INC
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2008
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Weighted average number of shares used to compute basic and diluted
loss per share is the same since the effect of dilutive securities is
anti-dilutive.
INCOME TAXES
The Company utilizes Statement of Financial Accounting Standards No.
109 ("SFAS 109"), "Accounting for Income Taxes," which requires the
recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred income
taxes are recognized for the tax consequences in future years of
differences between the tax bases of assets and liabilities and their
financial reporting amounts at each period end based on enacted tax
laws and statutory tax rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances
are established, when necessary, to reduce deferred tax assets to the
amount expected to be realized.
SEGMENT REPORTING
Statement of Financial Accounting Standards No. 131 ("SFAS 131"),
"Disclosure About Segments of an Enterprise and Related Information"
requires use of the "management approach" model for segment reporting.
The management approach model is based on the way a company's
management organizes segments within the company for making operating
decisions and assessing performance. Reportable segments are based on
products and services, geography, legal structure, management
structure, or any other manner in which management disaggregates a
company. SFAS 131 has no effect on the Company's consolidated financial
statements as the Company consists of one reportable business segment
as of April 30, 2008.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 2006, FASB issued Statement of Financial Accounting
Standards No. 155 ("SFAS 155"), "Accounting for Certain Hybrid
Financial Instruments". SFAS No. 155 amends SFAS No 133, "Accounting
for Derivative Instruments and Hedging Activities", and SFAS No. 140,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities". SFAS No. 155, permits fair value
remeasurement for any hybrid financial instrument that contains an
embedded derivative that otherwise would require bifurcation, clarifies
which interest-only strips and principal-only strips are not subject to
the requirements of SFAS No. 133, establishes a requirement to evaluate
interest in securitized financial assets to identify interests that are
freestanding derivatives or that are hybrid financial instruments that
contain an embedded derivative requiring bifurcation, clarifies that
concentrations of credit risk in the form of subordination are not
embedded derivatives, and amends SFAS No. 140 to eliminate the
prohibition on the qualifying special-purpose entity from holding a
derivative financial instrument that pertains to a beneficial interest
other than another derivative financial instrument. This statement is
effective for all financial instruments acquired or issued after the
beginning of the Company's first fiscal year that begins after
September 15, 2006.
In March 2006 FASB issued Statement of Financial Accounting Standards
No. 156 'Accounting for Servicing of Financial Assets' ("SFAS 156"),
this Statement amends SFAS No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities, with
respect to the accounting for separately recognized servicing assets
and servicing liabilities. This Statement:
CALICO ENTERTAINMENT GROUP, INC
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2008
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
1. Requires an entity to recognize a servicing asset or servicing
liability each time it undertakes an obligation to service a
financial asset by entering into a servicing contract.
2. Requires all separately recognized servicing assets and servicing
liabilities to be initially measured at fair value, if
practicable.
3. Permits an entity to choose 'Amortization method' or Fair value
measurement method' for each class of separately recognized
servicing assets and servicing liabilities:
4. At its initial adoption, permits a one-time reclassification of
available-for-sale securities to trading securities by entities
with recognized servicing rights, without calling into question
the treatment of other available-for-sale securities under
Statement 115, provided that the available-for-sale securities
are identified in some manner as offsetting the entity's exposure
to changes in fair value of servicing assets or servicing
liabilities that a servicer elects to subsequently measure at
fair value.
5. Requires separate presentation of servicing assets and servicing
liabilities subsequently measured at fair value in the statement
of financial position and additional disclosures for all
separately recognized servicing assets and servicing liabilities.
This Statement is effective as of the beginning of the Company's first
fiscal year that begins after September 15, 2006. Management believes
that this statement will not have a significant impact on the
consolidated financial statements.
In September 2006, FASB issued Statement of Financial Accounting
Standards No. 157 'Fair Value Measurements'("SFAS 157"). This Statement
defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles (GAAP), and expands
disclosures about fair value measurements. This Statement applies under
other accounting pronouncements that require or permit fair value
measurements, the Board having previously concluded in those accounting
pronouncements that fair value is the relevant measurement attribute.
Accordingly, this Statement does not require any new fair value
measurements. However, for some entities, the application of this
Statement will change current practice. This Statement is effective for
financial statements issued for fiscal years beginning after November
15, 2007, and interim periods within those fiscal years. Management is
currently evaluating the effect of this pronouncement on financial
statements.
In September 2006, FASB issued Statement of Financial Accounting
Standards No. 158 'Employers' Accounting for Defined Benefit Pension
and Other Postretirement Plans' ("SFAS 158"), an amendment of SFAS Nos.
87, 88, 106, and 132(R)' This Statement improves financial reporting by
requiring an employer to recognize the over funded or under funded
status of a defined benefit postretirement plan (other than a
multiemployer plan) as an asset or liability in its statement of
financial position and to recognize changes in that funded status in
the year in which the changes occur through comprehensive income of a
business entity or changes in unrestricted net assets of a
not-for-profit organization. This Statement also improves financial
reporting by requiring an employer to measure the funded status of a
plan as of the date of its year-end statement of financial position,
with limited exceptions. An employer with publicly traded equity
securities is required to initially recognize the funded status of a
defined benefit postretirement plan and to provide the required
disclosures as of the end of the fiscal year ending after December 15,
2006. An employer without publicly traded equity securities is required
to recognize the funded status of a defined benefit postretirement plan
and to provide the required disclosures as of the end of the fiscal
year ending after June 15, 2007. However, an employer without publicly
traded equity securities is required to disclose the following
information in the notes to financial statements for a fiscal year
ending after December 15, 2006, but before June 16, 2007, unless it has
applied the recognition provisions of this Statement in preparing those
financial statements:
CALICO ENTERTAINMENT GROUP, INC
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2008
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
a. A brief description of the provisions of this Statement
b. The date that adoption is required
c. The date the employer plans to adopt the recognition provisions
of this Statement, if earlier.
The requirement to measure plan assets and benefit obligations as of
the date of the employer's fiscal year-end statement of financial
position is effective for fiscal years ending after December 15, 2008.
Management is currently evaluating the effect of this pronouncement on
financial statements.
In July 2006, the FASB released FASB Interpretation No. 48, Accounting
for Uncertainty in Income Taxes, an interpretation of SFAS No. 109 (FIN
48). FIN 48 clarifies the accounting and reporting for uncertainties in
income tax law. This interpretation prescribes a comprehensive model
for the financial statement recognition, measurement, presentation and
disclosure of uncertain tax positions taken or expected to be taken in
income tax returns. This statement is effective for fiscal years
beginning after December 15, 2006. Management is currently in the
process of evaluating the expected effect of FIN 48 on the Company's
results of operations and financial position.
GOING CONCERN
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. The Company
has net losses of $21,009 since its inception, and the Company's
operations do not generate sufficient cash to cover its operating
costs. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. These consolidated financial
statements do not include any adjustments that might result from the
outcome of this uncertainty.
The Company has taken certain steps to provide the necessary capital to
continue its operations. These steps included: 1) acquire revenue
generating assets through issuance of equity instruments, 2) to
continue actively seeking additional funding to increase profits and
minimize the liabilities.
NOTE 3 - COMMON STOCK
In June 2007 the Company issued 1,725,000 shares of common stock to
Donald Bell, director of the company at par value of $1,750.
In November 2007 the Company issued an additional 225,000 shares of
common stock to Paul Ebeling and John Costello at no cost.
In November 2007 the Company issued an additional 1,500,000 shares of
common stock to Prodigy Pictures Inc. (Prodigy) in exchange of a film
interest acquisition agreement. This agreement consists of 20% of the
revenue interest that Prodigy owns in the motion picture and motion
picture rights in an original literary composition entitled "Stuck".
Prodigy's revenue interest is 90% of "Stuck".
CALICO ENTERTAINMENT GROUP, INC
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2008
NOTE 4- RELATED PARTY LOAN TRANSACTIONS
As of April 30, 2008, the company had non-interest bearing, unsecured
loans payable to a shareholder of the Company amounting to $18,852.
These loans are payable on demand.
NOTE 5 - INTANGIBLES
The Company's intangible asset consist of a 20% revenue interest in
Prodigy's 90% revenue interest in a motion picture and motion picture
rights in an original literary composition entitled "Stuck".