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.