SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Date of Report (Date of earliest event reported): July 23, 2003
ELINE ENTERTAINMENT GROUP, INC.
-------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 000-30451 88-0429856
--------------- ----------- --------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number)
8905 Kingston Pike, Suite 313, Knoxville, TN 37923
-------------------------------------------------------------
(Address of executive offices and Zip Code)
Registrant's telephone number, including area code: (215) 895-9859
not applicable
------------------------------------------------------------------
(Former name or former address, if changed since last report)
Item 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired (commencing on page F-1).
(1) Audited financial statement of Industrial Fabrication and Repair,
Inc. for the fiscal year ended December 31, 2002 and 2001.
(b) Proforma financial information (commencing on page F-12).
(1) Proforma balance sheet of Eline Entertainment Group, Inc. as of
April 30, 2003; and
(2) Proforma income statements of Eline Entertainment Group, Inc. for
six months ended April 30, 2003 and the fiscal year ended October 31, 2002.
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.
Eline Entertainment Group, Inc.
Date: July 23, 2003 By: /s/ Barry A. Rothman
--------------------
Barry A. Rothman, President
INDUSTRIAL FABRICATION & REPAIR, INC.
FINANCIAL STATEMENTS
December 31, 2002 and 2001
TABLE OF CONTENTS
Page No.
--------
AUDITED FINANCIAL STATEMENTS
Independent Auditors' Report .............................. F-2
Balance Sheets ............................................ F-3
Statements of Operations .................................. F-4
Statements of Changes in Stockholder's Equity ............. F-5
Statements of Cash Flows .................................. F-6
Notes to the Financial Statements ......................... F-7
F-1
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Industrial Fabrication & Repair, Inc.
Knoxville, Tennessee
We have audited the accompanying balance sheets of Industrial Fabrication &
Repair, Inc. as of December 31, 2002 and 2001, and the related statements of
operations and changes in stockholder's equity and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits 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 Industrial Fabrication & Repair
as of December 31, 2002 and 2001, and the results of its cash flows for the
years then ended in conformity with accounting principles generally accepted in
the United States of America.
Murfreesboro, Tennessee
July 15, 2003
F-2
INDUSTRIAL FABRICATION & REPAIR, INC.
Balance Sheets
December 31, 2002 and 2001
2002 2001
ASSETS ----------- -----------
CURRENT ASSETS
Cash and cash equivalents ................................ $ 27,534 $ 47,754
Accounts receivable, less allowance of $47,107 and $25,000 425,499 413,745
Taxes receivable ......................................... 18,740 8,975
Inventory ................................................ 851,296 819,868
Prepaid expenses ......................................... 13,646 15,434
----------- -----------
Total current assets ................................... 1,336,715 1,305,776
PROPERTY AND EQUIPMENT
Shop equipment ........................................... 566,759 535,509
Vehicles ................................................. 119,938 133,538
Furniture, fixtures and leasehold improvements ........... 26,703 26,703
----------- -----------
Total property & equipment ............................. 713,400 695,750
Less: accumulated depreciation ......................... (350,292) (305,083)
----------- -----------
Net property & equipment ............................... 363,108 390,667
OTHER ASSETS
Deposits ................................................. 7,200 7,200
----------- -----------
$ 1,707,023 $ 1,703,643
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Trade accounts payable ................................... $ 316,912 $ 333,708
Line of credit ........................................... 290,000 255,000
Accrued expenses ......................................... 135,788 80,035
Current maturities of long-term debt ..................... 8,000 6,000
----------- -----------
Total Current Liabilities .............................. 750,700 674,743
LONG-TERM DEBT, LESS CURRENT PORTION
Long-term debt ........................................... 14,733 27,997
Shareholder note and interest payable .................... 244,430 144,810
----------- -----------
Total Liabilities ...................................... 1,009,863 847,550
STOCKHOLDER'S EQUITY
Common Stock, no par value, 2,000 shares
authorized, 1,000 shares issued and outstanding ........ 1,000 1,000
Additional paid in capital ............................... 1,272,299 1,272,299
Accumulated deficit ...................................... (576,139) (417,206)
----------- -----------
Total Stockholder's Equity ............................. 697,160 856,093
----------- -----------
$ 1,707,023 $ 1,703,643
=========== ===========
The accompanying notes are an intregal part of these financial statements.
F-3
INDUSTRIAL FABRICATION & REPAIR, INC.
Statements of Operations
Year Ended December 31, 2002 and 2001
2002 2001
----------- -----------
Revenues ....................................... $ 2,878,218 $ 3,783,898
Cost of revenues
Cost of materials ............................ 1,049,048 1,877,323
Inventory write down for obsolescence ........ 200,000 -
Cost of labor ................................ 454,204 525,764
Other costs .................................. 97,112 195,672
----------- -----------
Total cost of sales ........................ 1,800,364 2,598,759
----------- -----------
Gross profit ............................... 1,077,854 1,185,139
Operating expenses:
Other wages & salaries ....................... 569,722 617,937
Payroll taxes ................................ 84,938 94,281
Other general & administrative ............... 159,367 159,332
Officer salaries ............................. 60,000 60,000
Depreciation & amortization .................. 58,808 64,092
Rent ......................................... 76,240 112,345
Insurance .................................... 126,297 140,351
Repairs, maintenance & supplies .............. 8,527 20,518
Bad debts .................................... 40,000 24,931
Professional fees ............................ 3,602 6,725
Other taxes .................................. 412 20,858
State franchise and excise tax ............... 7,239 6,636
----------- -----------
Total operating expenses ....................... 1,195,152 1,328,006
----------- -----------
Income (Loss) from operations .................. (117,298) (142,867)
Other income (expense):
Interest expense ............................. (41,862) (44,827)
Interest income .............................. 227 1,577
----------- -----------
Total other income (expense) ................... (41,635) (43,250)
----------- -----------
Net loss ....................................... $ (158,933) $ (186,117)
=========== ===========
The accompanying notes are an intregal part of these financial statements.
F-4
INDUSTRIAL FABRICATION & REPAIR, INC.
Statements of Changes in Stockholder's Equity
For the Years Ended December 31, 2002 and 2001
Retained
Common Stock Additional Earnings/
----------------- Paid-In Accumulated
Shares Amount Capital Deficit Total
------ ------ ---------- --------- -----------
Balance, January 1, 2001 . 1,000 1,000 1,272,299 (231,089) 1,042,210
Net (loss) ........... - - - (186,117) (186,117)
----- ------ ---------- --------- -----------
Balance, December 31, 2001 1,000 1,000 1,272,299 (417,206) 856,093
Net (loss) ........... - - - (158,933) (158,933)
----- ------ ---------- --------- -----------
Balance, December 31, 2002 1,000 $1,000 $1,272,299 $(576,139) $ 697,160
===== ====== ========== ========= ===========
The accompanying notes are an intregal part of these financial statements.
F-5
INDUSTRIAL FABRICATION & REPAIR, INC.
Consolidated Statements of Cash Flows
Year Ended December 31, 2002 and 2001
2002 2001
--------- ---------
OPERATING ACTIVITIES:
Net (loss) ......................................... $(158,933) $(186,117)
Adjustments to reconcile net (loss) to
net cash provided by operating activities
Depreciation ..................................... 58,808 63,888
(Increase) decrease in:
Trade account receivable ....................... (11,754) 82,817
Inventory ...................................... 225,021 (191,584)
Other current assets ........................... (7,977) (9,934)
Increase (decrease) in:
Accounts payable ............................... (273,244) 233,029
Shareholder interest payable ................... 15,120 15,294
Accrued expenses ............................... 12,450 64,529
--------- ---------
Net Cash (Used) Provided by Operating Activities ..... (140,509) 71,922
INVESTING ACTIVITIES:
Purchase of property and equipment ................. (31,249) (5,344)
--------- ---------
Net Cash (Used) by Investing Activities .............. (31,249) (5,344)
FINANCING ACTIVITIES:
Net draws line of credit ........................... 35,000 -
Payments on long term debt ......................... (11,265) (23,595)
Net borrowings (repayments) - shareholder .......... 127,803 (36,400)
--------- ---------
Net Cash Provided (Used) by Financing Activities ..... 151,538 (59,995)
--------- ---------
(Decrease) Increase in Cash and Cash Equivalents ..... (20,220) 6,583
Cash and Cash Equivalents, Beginning of Period ....... 47,754 41,171
--------- ---------
Cash and Cash Equivalents, End of Period ............. $ 27,534 $ 47,754
========= =========
Supplemental Disclosure
Interest paid ...................................... $ 19,400 $ 16,619
Income taxes ....................................... - -
The accompanying notes are an intregal part of these financial statements.
F-6
INDUSTRIAL FABRICATION & REPAIR, INC.
Notes to Financial Statements
For the Years Ended December 31, 2002 and 2001
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS - Located in Knoxville, Tennessee, Industrial
Fabrication & Repair is engaged in machining, welding, specialty design and
fabrications for custom applications to customers from various industries
including paper, steel mills, rock quarry operations, coal mining applications
and bottling facilities located in the South Eastern United States.
BASIS OF ACCOUNTING - For financial statement and income tax reporting purposes,
income and expenses are reported on the accrual method of accounting with income
being reported when earned and expenses reported when incurred in accordance
with generally accepted accounting principles.
USE OF ESTIMATES - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
CASH AND CASH EQUIVALENTS - Cash equivalents consist of highly liquid
investments, such as money market accounts, deposit accounts, government-backed
securities, and overnight repurchase agreements, each with an original maturity
of less than three months. The costs of these investments approximate their fair
market value.
ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS - An allowance for
doubtful accounts is provided for the estimated amount of uncollectible accounts
receivable.
INVENTORIES - Inventories are stated at the lower of cost or market; cost is
determined using the first in, first out method.
PROPERTY AND EQUIPMENT - Property and equipment are recorded at cost less
accumulated depreciation and amortization. Depreciation is computed using
accelerated methods over the estimated useful lives of the assets, which are 5
to 15 years for machinery and equipment and up to 10 years for other assets.
Maintenance and repair costs are charged directly to expense as incurred. Major
renewals or replacements that substantially extend the useful life of an asset
are capitalized and depreciated.
DEFERRED INCOME TAXES - Deferred income taxes are recognized for the tax
consequences of temporary differences between the tax and financial reporting
basis of the Company's assets and liabilities based on enacted tax laws and
statutory tax rates applicable to the future years that the differences are
expected to affect taxable income. The principal differences relate to bad debt
expense and depreciation expense.
F-7
INDUSTRIAL FABRICATION & REPAIR, INC.
Notes to Financial Statements
For the Years Ended December 31, 2002 and 2001
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
FINANCIAL INSTRUMENTS - The carrying values of the Company's financial
instruments (cash and cash equivalents, accounts receivable, bank overdrafts,
notes and accounts payable and accrued expenses) approximate fair value due to
their current availability or relatively short maturities.
ACCOUNTING PRONOUNCEMENTS - In July 2001, the Financial Accounting Standards
Board (the "FASB") issued Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets" ("SFAS 142"). This statement revises the
standards for accounting for goodwill and other intangible assets by not
allowing amortization of goodwill and establishing accounting for impairment of
goodwill and other intangible assets. The Company adopted SFAS 142 during the
year ended December 31, 2001. Such adoption had no effect on operations for
either year.
In August 2001, the FASB issued Statement of Financial Accounting Standards No.
144 ("SFAS 144"), "Accounting for the Impairment or Disposal of Long-lived
Assets." SFAS 144 supersedes SFAS 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-lived Assets to be Disposed Of," and the
accounting and reporting provisions relating to the disposal of a segment of a
business. The provision of this statement provides a single accounting model for
impairment of long-lived assets. The Company adopted SFAS 144 on January 1,
2003; the adoption of this statement did not have a significant impact on the
Company's financial statements.
NOTE B - STATEMENT OF CASH FLOWS SUPPLEMENTAL DISCLOSURE
During the year ended December 31, 2001, the Company acquired an automobile for
$41,252 through the assumption of debt.
NOTE C - INVENTORY
Inventory consisted of the following:
2002 2001
-------- --------
Raw materials ................ $828,133 $802,827
Work-in-process .............. 23,163 17,041
-------- --------
$851,296 $819,868
======== ========
NOTE D - CREDIT FACILITY
In 1998, the Company secured a revolving line of credit facility in an aggregate
amount up to $300,000. Interest on the line is due at 4.25%. The line is secured
by the Company's accounts receivable, inventory, and certain equipment. The line
is also personally guaranteed by the Company's sole shareholder.
F-8
INDUSTRIAL FABRICATION & REPAIR, INC.
Notes to Financial Statements
For the Years Ended December 31, 2002 and 2001
NOTE E - LONG TERM DEBT
Long term obligations consisted of the following:
2002 2001
------- -------
Note payable to finance company, secured by
automobile , interest at 1.9% per annum.
Monthly payments of $600 due
through April 2005 .................................. $22,733 $32,914
Capital lease payable, secured by related equipment.
Imputed interest at 9.9% per annum. Minimum lease
payments of $500 due monthly through May 2002 ...... - 1,083
------- -------
22,733 33,997
Less: current maturities ............................ 8,000 6,000
------- -------
$14,733 $27,997
======= =======
Current maturities are as follows:
Year ending December 31,
2003 $ 8,000
2004 8,500
2005 6,233
-------
$22,733
=======
NOTE F - OPERATING LEASE
The Company leases its facility from the Company's sole shareholder for a
monthly rental of $6,500.
Rent expense totaled $71,500 and $78,000 for the years ended December 31, 2002
and 2001, respectively.
NOTE G - RELATED PARTY TRANSACTIONS
In addition to the month to month lease described in Note F, the Company's sole
shareholder, from time to time, provides the Company with working capital. Gross
advances totaled $249,400 and $100,000 and gross repayments totaled $121,597 and
$136,400 during the years ended December 31, 2002 and 2001, respectively. The
net balance owed to the shareholder accrues interest at 10% per annum.
F-9
INDUSTRIAL FABRICATION & REPAIR, INC.
Notes to Financial Statements
For the Years Ended December 31, 2002 and 2001
NOTE H - INCOME TAXES
As of December 31, 2002 and 2001, the Company has net operating loss carry
forwards totaling approximately $389,877 and $311,411, respectively to offset
federal and state taxable income in future years.
These carry forwards will expire for the years ending December 31, 2016 for
federal and state purposes.
Realization of deferred tax assets is dependent on future earnings, if any, the
timing and amount of which is uncertain. Accordingly, a valuation allowance, in
an amount equal to the deferred tax asset at December 31, 2002 and 2001 has been
established to reflect these uncertainties. The deferred tax asset before
valuation allowance is approximately $49,277 and $58,482 for federal and state
tax purposes at December 31, 2002 and 2001.
The Company's provision for deferred income taxes for the current year is
summarized as follows:
Current benefit of net operating loss ....... $ 49,277
Adjustment to allowance for realization ..... (49,277)
--------
-
========
NOTE I - CREDIT CONCENTRATIONS
Deposit balances in FDIC insured bank accounts sometimes exceed insured amounts.
At December 31, 2002 and 2001, the Company was within these limits.
Trade accounts receivable represent credit concentrations in various industries
as described in Note A. The Company does not require collateral on trade
receivables.
During the year ended December 31, 2002, the Company had sales to two customers
totaling 22.72% of total sales.
NOTE J - SUBSEQUENT EVENT
During the first two quarters of fiscal 2003 the Company's then sole shareholder
advanced the Company an additional $450,000, that included $300,000 used by the
Company to satisfy the outstanding obligations under the revolving line of
credit (see Note D) in conjunction with the transaction described below. The
Company has issued the then sole shareholder a secured promissory note
representing all of its obligations to him, which such note bears interest at
the rate of 7% per annum, and is collateralized by a security interest in all of
the Company's assets.
F-10
INDUSTRIAL FABRICATION & REPAIR, INC.
Notes to Financial Statements
For the Years Ended December 31, 2002 and 2001
NOTE J - SUBSEQUENT EVENT - (CONTINUED)
In May 2003 the then sole shareholder of the Company sold 100% of the issued and
outstanding common stock of the Company to Industrial Holding Group, Inc., a
Florida corporation ("Industrial Holding") in exchange for 1 million shares of
Industrial Holding's common stock in a private transaction exempt from
registration under the Securities Act of 1933. Industrial Holding is a
subsidiary of Eline Entertainment Group, Inc., a publicly-held Nevada
corporation ("Eline"). The shares of Industrial Holding common stock issued to
the seller are convertible into shares of Eline's common stock at such time and
upon such terms and conditions as the parties may agree to in the future. Prior
to the transaction with the Company, Eline had formed Industrial Holding as a
first tier subsidiary. The authorized capital of Industrial Holding consists of
100 million shares of common stock and 10 million shares of blank check
preferred stock, of which one share has been designated as Series A Preferred
Stock. In conjunction with its organization Industrial Holding issued the one
share of authorized Series A Preferred Stock to Eline. The designations, rights
and preferences of the Series A Preferred Stock provides that (I) it does not
pay dividends, (ii) it is not convertible or transferrable, (iii) it is
redeemable only upon Eline's consent, (iv) it carries a liquidation preference
of $1.00, and (v) it votes together with the common stock and any other class of
voting securities as may then be authorized and entitles Eline to one vote more
than one_half of all votes entitled to be cast by all holders of voting capital
stock of Industrial Holding so as to ensure that the votes entitled to be cast
by Eline are equal to at least 51% of the total of all votes entitled to be
cast.
F-11
ELINE ENTERTAINMENT GROUP, INC.
UNAUDITED PROFORMA FINANCIAL STATEMENTS
TABLE OF CONTENTS
Page No.
--------
UNAUDITED PROFORMA FINANCIAL STATEMENTS
Proforma balance sheet as of April 30, 2003 ............ F-15 & F-16
Proforma income statements for six months
ended April 30, 2003 and the fiscal year
ended October 31, 2002 ................................. F-17 & F-18
F-12
ELINE ENTERTAINMENT GROUP, INC.
UNAUDITED PROFORMA FINANCIAL STATEMENTS
In May 2003 the then sole shareholder of Industrial Fabrication and
Repair, Inc. ("IFR") sold 100% of the issued and outstanding common stock of IFR
to Industrial Holding Group, Inc. ("Industrial Holding") in exchange for 1
million shares of Industrial Holding's common stock in a private transaction
exempt from registration under the Securities Act of 1933. Industrial Holding is
a subsidiary of Eline Entertainment Group, Inc. (the "Company"). The shares of
Industrial Holding common stock issued to the seller are convertible into shares
of the Company's common stock at such time and upon such terms and conditions as
the parties may agree to in the future. Prior to the transaction with IFR, the
Company had formed Industrial Holding as a first tier subsidiary. The authorized
capital of Industrial Holding consists of 100 million shares of common stock and
10 million shares of blank check preferred stock, of which one share has been
designated as Series A Preferred Stock. In conjunction with its organization
Industrial Holding issued the one share of authorized Series A Preferred Stock
to the Company. The designations, rights and preferences of the Series A
Preferred Stock provides that (i) it does not pay dividends, (ii) it is not
convertible or transferrable, (iii) it is redeemable only upon the Company's
consent, (iv) it carries a liquidation preference of $1.00, and (v) it votes
together with the common stock and any other class of voting securities as may
then be authorized and entitles the Company to one vote more than one-half of
all votes entitled to be cast by all holders of voting capital stock of
Industrial Holding so as to ensure that the votes entitled to be cast by the
Company are equal to at least 51% of the total of all votes entitled to be cast.
The former sole shareholder of IFR is currently owns all of Industrial Holding's
issued and outstanding common stock.
The following Unaudited Consolidated Balance Sheet presents the
proforma financial position of the Company as of April 30, 2003 as if formation
of Industrial Holding and the acquisition of IFR which Industrial Holding
acquired in May 2003 had been consummated as of April 30, 2003.
The following Unaudited Consolidated Proforma Statements of Operations
for the six months ended April 30, 2003 and for the year ended October 31, 2002
present the proforma results of operations of the Company as if Industrial
Holding had been formed and the acquisition of IFR, which was acquired in May
2003, had been consummated as of the beginning of the periods presented.
The unaudited proforma net loss per share is based on the combined
weighted average number of shares of common stock, which include the shares
issued in connection with the formation of Industrial Holding and the
acquisition of IFR Since the effect of common stock equivalents was
anti-dilutive, all such equivalents are excluded from the calculation of
proforma net loss per share.
F-13
These Unaudited Consolidated Proforma Financial Statements should be
read in conjunction with the respective historical consolidated financial
statements and notes thereto of the Company and IFR. These Unaudited
Consolidated Proforma Financial Statements were prepared utilizing the
accounting policies of the respective entities as outlined in their historical
financial statements except as described in the accompanying notes. The
acquisition of IFR has been accounted for under the purchase method of
accounting. Accordingly, the Unaudited Consolidated Proforma Financial
Statements reflect the Company's allocation of the purchase price of $based upon
the historical costs as reflected in IFR's financial statements in accordance
with generally accepted accounting principles. The unaudited consolidated
proforma results of operations do not necessarily reflect actual results which
would have occurred if the acquisition had taken place on the assumed dates, nor
are they necessarily indicative of the results of future combined operations.
F-14
ELINE ENTERTAINMENT GROUP, INC.
UNAUDITED PROFORMA BALANCE SHEET
AT APRIL 30, 2003
Proforma
-----------------------------------------------------------
Eline IFR Adjustments Combined
----- --- ----------- --------
ASSETS
Current Assets
Cash and cash equivalents .................... $ 0 $ 114,571 $ 0 $ 114,571
Accounts receivable .......................... 0 479,098 0 479,098
Inventory .................................... 0 1,214,177 0 1,214,177
Prepaid expenses ............................. 0 12,443 0 12,443
------------ ----------- ------------ ------------
Total current assets ................... 0 1,820,289 0 1,820,289
Property and Equipment
Shop equipment ............................... 0 572,291 0 572,291
Vehicles ..................................... 0 117,530 0 117,530
Furniture, fixtures and leasehold improvements 0 27,060 0 27,060
------------ ----------- ------------ ------------
Total property and equipment ........... 0 716,881 0 716,881
Less: accumulated depreciation ......... 0 (380,292) 0 (380,292)
------------ ----------- ------------ ------------
Net property and equipment ............. 0 336,589 0 336,589
Other Assets
Deposits ..................................... 0 7,200 0 7,200
------------ ----------- ------------ ------------
Total Assets ........................... $ 0 $ 2,164,078 $ 0 $ 2,164,078
============ =========== ============ ============
The accompanying notes are an integral part of these statements.
F-15
ELINE ENTERTAINMENT GROUP, INC.
UNAUDITED PROFORMA BALANCE SHEET
AT APRIL 30, 2003
(continued)
Proforma
-----------------------------------------------------------
Eline IFR Adjustments Combined
----- --- ----------- --------
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)
Current Liabilities
Trade accounts payable ....................... $ 44,096 $ 305,846 $ 0 $ 349,942
Accrued expenses ............................ 6,000 186,967 0 192,967
Current maturities of long-term debt ......... 0 10,471 0 10,471
------------ ----------- ------------ ------------
Total current liabilities .............. 50,096 503,284 0 553,380
Long-term Debt, Less Current Portion
Long-term debt ............................... 0 7,098 0 7,098
Shareholder note and interest payable ........ 0 918,135 0 918,135
------------ ----------- ------------ ------------
Total liabilities ...................... 50,096 1,428,517 0 1,478,613
Minority interest in subsidiary ................. 0 0 457,464(a) 457,464
Stockholder's Equity (Deficit)
Preferred stock, $.001 par value; 5,000,000 shares
authorized, 180,000 shares Series B Convertible
Preferred issued and outstanding .............. 180 0 0 180
Common stock, $.001 par value; 20,000,000 shares
authorized, 2,295,662 and 40,662 issued
and outstanding ............................ 2,295 1,000 (1,000) 2,295
Additional paid in capital ...................... 13,803,317 1,272,299 (994,202) 14,081,414
Deficit accumulated during the development stage (13,855,888) (537,738) 537,738 (13,855,888)
------------ ----------- ------------ ------------
Total stockholders' deficit ............ $ (50,096) 735,561 (457,464) 228,001
------------ ----------- ------------ ------------
Total Liabilities and Stockholders' Equity $ 0 $ 2,164,078 $ 0 $ 2,164,078
============ =========== ============ ============
(a) Represents 49% of the IFR equity as of April 20, 3003.
The accompanying notes are an integral part of these statements.
F-16
ELINE ENTERTAINMENT GROUP, INC.
UNAUDITED PROFORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2003
Proforma
---------------------------------------------------------
Eline IFR Adjustments Combined
----- --- ----------- --------
Revenues ......................... $ 1,000 $ 1,813,517 $ 0 $ 1,814,517
Cost of revenues ................. 0 1,090,728 0 1,090,728
----------- ----------- ---------- -----------
Gross profit ..................... 1,000 722,789 0 723,789
Total operating expenses ......... 187,000 698,388 0 885,388
----------- ----------- ---------- -----------
Income (loss) from operations .... (186,000) 24,401 0 (161,599)
Other income (expense)
Interest expense .............. 0 (30,000) 0 (30,000)
Interest income ............... 0 0 0 0
----------- ----------- ---------- -----------
Total other income (expense) 0 (30,000) 0 (30,000)
----------- ----------- ---------- -----------
Net loss ......................... $ (186,000) $ ( 5,599) $ 0 $ (191,599)
=========== =========== ========== ===========
Basic loss per share ............. $ (0.65) $ (0.67)
Basic weighted average
shares outstanding ............ 284,029 284,029
The accompanying notes are an integral part of these statements.
F-17
ELINE ENTERTAINMENT GROUP, INC.
UNAUDITED PROFORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 2002
Proforma
---------------------------------------------------------
Eline IFR Adjustments Combined
----- --- ----------- --------
Revenues ......................... $ 94,527 $ 2,878,218 $ 0 $ 2,972,745
Cost of revenues ................. 0 1,800,364 0 1,800,364
----------- ----------- ---------- -----------
Gross profit ..................... 94,527 1,077,854 0 1,172,381
Total operating expenses ......... 8,250,583 1,195,152 0 9,445,735
----------- ----------- ---------- -----------
Income (loss) from operations .... (8,156,056) (117,298) 0 (8,273,354)
Other income (expense)
Interest expense .............. (10,000) (41,862) 0 (51,862)
Interest income ............... 0 227 0 227
----------- ----------- ---------- -----------
Total other income (expense) (10,000) (41,635) 0 (51,635)
----------- ----------- ---------- -----------
Net loss ......................... $(8,166,056) $ (158,933) $ 0 $(8,324,989)
=========== =========== ========== ===========
Basic loss per share ............. $ (223.78) $ (228.14)
Basic weighted average
shares outstanding ............ 36,491 36,491
The accompanying notes are an integral part of these statements.
F-18