UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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): June 3, 2011
DELTA ENTERTAINMENT GROUP, INC,
(Exact Name of Registrant as Specified in Its Charter)
Florida
(State or Other Jurisdiction of Incorporation)
333-165719 |
| 27-1059780 |
(Commission File Number) |
| (IRS Employer Identification No.) |
2950 West Cypress Creek Road Suite 201 Fort Lauderdale, Florida 33309
(Address of Principal Executive Offices)
7100 West Camino Real Suite 302 Boca Raton, FL 33433
(Former Address or Principal Executive Offices
561-414-0456
(Registrant’s Telephone Number, Including Area Code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Forward Looking Statements
Certain statements included in this Form 8-K/A-1 regarding Delta Entertainment Group, Inc. (the “Company”) that are not historical facts are forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as “expects” or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “estimates” or “intends”, or stating that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved) are not statements of historical fact and may be forward-looking statements. Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors which could cause actual events or results to differ from those expressed or implied by the forward-looking statements, including, without limitation:
| · | Our expectations about the marketplace and consumer acceptance; |
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| · | Our marketing plans and sales; and |
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| · | Our expectations regarding the growth of our business and that our business model will succeed. |
These statements are not guarantees of future performance. Future performance is subject to risks, uncertainties and assumptions that are difficult to predict and may be beyond our control. Therefore, our actual results could differ materially from anticipated results. These risks and uncertainties include those noted in risk factors above.
Section 2 - Financial Information
Item 2.01 Completion of Acquisition or Disposition of Assets
As reported on the Company’s Form 8-K filed June 10, 2011, on June 3, 2011 PearlBrite Concepts, Inc., our wholly owned subsidiary, entered into a Bill of Sale with Pearl White Professional Teeth Whitening LLC. (the “Seller”) which provided in part for PearlBrite Concepts to acquire substantially all of the assets of the Seller used in connection with the sale of its teeth whitening system which are marketed under the names “PearlBrite” and “Pearl White Professional Teeth Whitening”.
Management’s Discussion and Analysis of Financial Condition.
Pearl White Professional Teeth Whitening, LLC: Results Of Operations For Fiscal Year Ended December 31, 2010 and 2009 and for the three months ended March 31, 2011 and March 31, 2010 (unaudited).
Pearl White Professional Teeth Whitening, LLC (“Pearl White”) generated net revenues of $204,984 for the year ended December 31, 2010 with gross profits totaling $97,484. This compares to net revenues of $281,765 and gross profits of $108,874 in 2009. Operating expenses during 2010 totaled $93,184 as compared to $103,229 in 2009. For the year ended December 31, 2010 Pearl White generated $4,300 in operating income and $14,548 in other income. Net income for the year totaled $18,848, For the year ended December 31, 2009, Pearl White generated $5,645 in operating income, $11,649 in other income. Net income for the year ended December 31, 2009 totaled $17,294.
For the three months ended March 31, 2011, Pearl White had net revenues of $18,788 as compared to $59,736 for the three months ended March 31, 2010. For the three months ended March 31, 2011, Pearl White had Gross profits of $12,667, operating income of $3,137 and net income of $3,267. For the three months ended March 31, 2010, Pearl White had gross profits of $35,426, operating income of $13,767 and net income of $16,753.
2
Liquidity and Capital Resources
Assets and Liabilities
At December 31, 2010 Pearl White had cash totaling $3,422, inventory totaling $4,902 and total assets of $8,324. At December 31, 2009, cash totaled $9,476, inventory totaled $9,005 and assets totaled $18,481.
Total short term liabilities at December 31, 2010 totaled $10,351 as compared to $31,295 at December 31, 2009. Pearl White had a working capital deficit of $2,027 at December 31, 2010 as compared to a working capital deficit of $12,814 at December 31, 2009.
At March 31, 2011 Pearl White had cash totaling $4,350 and inventory of $4,133. Current liabilities totaled $7,851. Pearl White had a working capital balance of $632.
Plan of Operation For the remanding of 2011 and 2012
We must expand PearlBrite’s operations. We believe that with a celebrity endorsement, the Company will be able to build brand awareness which will generate additional sales. We also intend to expand our distributor network and utilize the internet as a marketing tool.
Expanding operations will require a significant infusion of either debt or equity financing. We have no commitment for additional funding nor can there be any assurance that we will be able to obtain financing on terms acceptable to us. Debt financing may cause an unreasonable encumbrance on our cash flow while equity financing will dilute our current shareholders.
Section 9 - Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits
(a) Financial Statements (Pearl White)
Auditor’s Report | |
Balance Sheet at December 31, 2010 and 2009 | |
Statement of Operations for the Year Ended December 31, 2010 and 2009 | |
Statement of Members’ Equity for the Year Ended December 31, 2010 and 2009 | |
Statement of Cash Flow for the Year Ended December 31, 2010 and 2009 | |
Notes to Financial Statements | |
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Balance Sheet at March 31, 2011 (unaudited) and December 31, 2010 | |
Statement of Operations (unaudited) for the Three Months Ended March 31, 2011 and 2010 | |
Statement of Cash Flows (unaudited) for the Three Months Ended March 31, 2011 and 2010 | |
Notes to Financial Statements (unaudited) |
(b) Pro forma financial statements
Unaudited Pro Forma Balance Sheet at March 31, 2011 | |
Unaudited Pro Forma Statement of Operations for the Three Months Ended March 31, 2011 | |
Unaudited Pro Forma Statement of Operations for the Year Ended December 31, 2010 | |
Notes to Unaudited Pro Forma Financial Statements |
3
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.
Date: November 9, 2011 |
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| Delta Entertainment Group, Inc.
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| By: | /s/ Leonard Tucker |
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| Leonard Tucker, CEO |
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4
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Pearl White Professional Teeth Whitening, LLC
Ft. Lauderdale, Florida
We have audited the accompanying balance sheets of Pearl White Professional Teeth Whitening, LLC (the “Company”) as of December 31, 2010 and 2009, and the related statements of operations, cash flows and changes in member’s equity (deficit) 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 standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits 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 audits 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 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 the Company, as of December 31, 2010 and 2009, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
/s/ MALONEBAILEY, LLP
MaloneBailey, LLP
www.malonebailey.com
Houston, Texas
November 9, 2011
F-1
Pearl White Professional Teeth Whitening, LLC
d.b.a. PearlBrite Professional Teeth Whitening, LLC
Balance Sheets
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| December 31, |
| December 31, |
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| 2010 |
| 2009 |
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Assets |
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Current Assets: |
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Cash |
| $ | 3,422 |
| $ | 9,476 |
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Inventory |
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| 4,902 |
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| 9,005 |
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Total Assets |
| $ | 8,324 |
| $ | 18,481 |
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Liabilities and Member’s Equity (Deficit) |
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Current Liabilities: |
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Accrued liabilities |
| $ | 4,176 |
| $ | 2,673 |
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Due to related party |
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| 6,175 |
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| 28,622 |
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Total Liabilities |
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| 10,351 |
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| 31,295 |
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Member’s Equity (Deficit) |
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| (2,027 | ) |
| (12,814 | ) |
Total Liabilities and Member’s Equity (Deficit) |
| $ | 8,324 |
| $ | 18,481 |
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The Accompanying Notes are an integral part of these financial statements
F-2
Pearl White Professional Teeth Whitening, LLC
d.b.a. PearlBrite Professional Teeth Whitening, LLC
Statements of Operations
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| For the |
| For the |
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| Year Ended |
| Year Ended |
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| December 31, |
| December 31, |
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| 2009 |
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Revenues, net |
| $ | 204,984 |
| $ | 281,765 |
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Cost of sales |
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| 107,500 |
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| 172,891 |
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Gross profit |
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| 97,484 |
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| 108,874 |
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General administrative expenses |
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| 93,184 |
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| 103,229 |
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Operating income |
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| 4,300 |
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| 5,645 |
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Other income |
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| 14,548 |
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| 11,649 |
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Net Income |
| $ | 18,848 |
| $ | 17,294 |
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The Accompanying Notes are an integral part of these financial statements
F-3
Pearl White Professional Teeth Whitening, LLC
d.b.a. PearlBrite Professional Teeth Whitening, LLC
Statements of Member’s Equity (Deficit)
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| For the |
| For the |
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| Year Ended |
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| December 31, |
| December 31, |
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| 2010 |
| 2009 |
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Member’s Equity (Deficit), beginning of year |
| $ | (12,814 | ) | $ | (39,195 | ) |
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Capital Contributions |
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| 3,000 |
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| 18,800 |
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Distributions to Member |
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| (11,061 | ) |
| (9,713 | ) |
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Net Income |
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| 18,848 |
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| 17,294 |
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Member’s Equity (Deficit), end of year |
| $ | (2,027 | ) | $ | (12,814 | ) |
The Accompanying Notes are an integral part of these financial statements
F-4
Pearl White Professional Teeth Whitening, LLC
dba PearlBrite Professional Teeth Whitening, LLC
Statements of Cash Flows
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| For the |
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| Year Ended |
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| December 31, |
| December 31, |
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| 2010 |
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Operating Activities: |
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Net Income |
| $ | 18,848 |
| $ | 17,294 |
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Adjustments to reconcile net income to net cash provided (used) by operating activities: |
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Changes in Assets and Liabilities: |
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Accounts receivable |
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| — |
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| 1,073 |
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Inventory |
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| 4,103 |
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| 16,547 |
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Accounts payable |
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| — |
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| (189 | ) |
Accrued liabilities |
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| 1,503 |
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| 2,405 |
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Net Cash Provided (Used) by Operating Activities |
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| 24,454 |
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| 37,130 |
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Financing Activities: |
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Contributions from Member |
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| 3,000 |
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| 18,800 |
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Distributions to Member |
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| (11,061 | ) |
| (9,713 | ) |
Due to related party |
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| (22,447 | ) |
| (44,636 | ) |
Net Cash Provided (Used) by Financing Activities |
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| (30,508 | ) |
| (35,549 | ) |
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Net Increase (Decrease) in Cash |
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| (6,054 | ) |
| 1,581 |
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Cash at Beginning of Year |
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| 9,476 |
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| 7,895 |
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Cash at End of Year |
| $ | 3,422 |
| $ | 9,476 |
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Supplemental Disclosures: |
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Cash paid for income taxes |
| $ | — |
| $ | — |
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Cash paid for interest |
| $ | — |
| $ | — |
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The Accompanying Notes are an integral part of these financial statements
F-5
Pearl White Professional Teeth Whitening, LLC
dba PearlBrite Professional Teeth Whitening, LLC
Notes to Financial Statements
NOTE 1: Description of Company and Basis of Presentation
Pearl White Professional Teeth Whitening, LLC (“we”, “our”, the “Company” or “PearlBrite”) was formed in the State of Florida in May 2008 as a limited liability company. The general business purpose of PearlBrite is the wholesale distribution of teeth whitening products, marketing materials, and services correlated to the distribution or sale of teeth whitening materials and products.
NOTE 2: Summary of Accounting Policies
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, which 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.
Cash and Cash Equivalents:
Cash and cash equivalents are considered to be all highly liquid investments purchased with an initial maturity of three (3) months or less.
Concentration of Credit Risk:
Financial instruments that potentially subject the company to credit risk consist principally of cash and cash equivalents and receivables. The Company places its cash and cash equivalents with financial institutions. Deposits are insured to FDIC limits. At December 31, 2010 and 2009 there was no uninsured cash.
Inventory
Inventories are stated at the lower of cost or market. Cost is determined using the weighted average method. To ensure inventories are carried at the lower of cost or market, the Company periodically evaluates the carrying value of its inventory. The Company also periodically performs an evaluation of inventory for excess and obsolete items. Such evaluations are based on management’s judgment and use of estimates. Such estimates incorporate inventory quantities on-hand, aging of the inventory and sales forecasts.
Revenue Recognition:
Revenues are recognized when all of the following have been met:
| · | Persuasive evidence of an arrangement exists; |
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| · | Delivery or service has been performed; |
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| · | The customer’s fee is deemed to be fixed or determinable and free of contingencies or significant uncertainties |
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| · | Collectability is probable. |
These conditions are typically met upon shipment of products to our customers.
F-6
Pearl White Professional Teeth Whitening, LLC
dba PearlBrite Professional Teeth Whitening, LLC
Notes to Financial Statements
Advertising:
Advertising costs are charged to operations when incurred. Advertising costs for the years ended December 31, 2010 and 2009 were $9,689 and $24,571, respectively
Shipping and Handling
Shipping and handling costs billed to customers are included in net sales. Shipping and handling costs are expensed as incurred and are recorded as a component of costs of goods sold.
Income Taxes:
As a limited liability company, the Company is not a taxpaying entity for federal income tax purposes. Accordingly, the Company’s taxable income or loss is allocated to its member. Therefore, no provision or liability for income taxes has been included in the accompanying financial statements.
Fair value of financial instruments
We account for our assets and liabilities using a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. These two types of inputs have created the following fair-value hierarchy:
| · | Level 1 — Quoted prices for identical instruments in active markets; |
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| · | Level 2 — Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and |
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| · | Level 3 — Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
Our financial instruments, including cash, cash equivalents, accounts receivable, accounts payable and accrued liabilities are carried at cost, which approximates their fair value because of the short-term maturity of these instruments.
Recent Accounting Pronouncements
The Company has implemented all new relevant accounting pronouncements that are in effect through the date of these financial statements. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
F-7
Pearl White Professional Teeth Whitening, LLC
dba PearlBrite Professional Teeth Whitening, LLC
Notes to Financial Statements
NOTE 3: Related Party Transactions
The Company has been provided office space by a related party at a minimal cost to the Company on an as needed basis.
For the years ended December 31, 2010 and 2009 the member contributed $3,000 and $18,800 and the Company made distributions to the member of $11,061 and $9,713, respectively.
During the years ended December 31, 2010 and 2009, the Company received advances from a related party, primarily through the use of a personal credit card, of $71,686 and $106,859, respectively. During 2010 and 2009, the Company repaid $94,133 and $151,684 of these advances. As of December 31, 2010 and 2009, the Company had advances from the related party of $6,175 and $28,622, respectively
NOTE 4: Subsequent Events
In May 2011, the Company entered into an agreement to sell all of its assets for consideration of $70,000. The sale price is payable $50,000 upon closing and two payments of $10,000 upon completion of certain conditions.
F-8
Pearl White Professional Teeth Whitening, LLC
dba PearlBrite Professional Teeth Whitening, LLC
Balance Sheets
(Unaudited)
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| March 31, |
| December 31, |
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| 2011 |
| 2010 |
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Assets |
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Current Assets: |
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Cash |
| $ | 4,350 |
| $ | 3,422 |
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Inventory |
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| 4,133 |
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| 4,902 |
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Total Assets |
| $ | 8,483 |
| $ | 8,324 |
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Liabilities and Member’s Equity (Deficit) |
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Current Liabilities: |
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Accrued liabilities |
| $ | 1,676 |
| $ | 4,176 |
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Due to related party |
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| 6,175 |
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| 6,175 |
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Total Liabilities |
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| 7,851 |
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| 10,351 |
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Member’s Equity (Deficit) |
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| 632 |
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| (2,027 | ) |
Total Liabilities and Member’s Equity (Deficit) |
| $ | 8,483 |
| $ | 8,324 |
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The Accompanying Notes are an integral part of these financial statements
F-9
Pearl White Professional Teeth Whitening, LLC
dba PearlBrite Professional Teeth Whitening, LLC
Statements of Operations
(Unaudited)
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| For the Three Months |
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| Ended March 31, |
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| 2011 |
| 2010 |
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Revenue, net |
| $ | 18,788 |
| $ | 59,736 |
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Cost of sales |
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| 6,121 |
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| 24,310 |
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Gross profit |
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| 12,667 |
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| 35,426 |
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General administrative expenses |
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| 9,530 |
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| 21,659 |
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Operating income |
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| 3,137 |
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| 13,767 |
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Other income |
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| 130 |
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| 2,986 |
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Net Income |
| $ | 3,267 |
| $ | 16,753 |
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The Accompanying Notes are an integral part of these financial statements
F-10
Pearl White Professional Teeth Whitening, LLC
dba PearlBrite Professional Teeth Whitening, LLC
Statements of Cash Flows
(Unaudited)
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| For the Three Months |
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| Ended March 31, |
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| 2011 |
| 2010 |
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Operating Activities: |
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Net income |
| $ | 3,267 |
| $ | 16,753 |
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Adjustments to reconcile net income to net cash provided (used) by operating activities: |
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Changes in Assets and Liabilities: |
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Inventory |
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| 769 |
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| 2,141 |
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Accrued liabilities |
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| (2,500 | ) |
| (2,451 | ) |
Net Cash Provided by Operating Activities |
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| 1,536 |
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| 16,443 |
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Financing Activities: |
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Contributions from Member |
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| 6,200 |
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| 1,000 |
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Distributions to Member |
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| (6,808 | ) |
| (3,593 | ) |
Due to related party |
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| — |
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| (4,953 | ) |
Net Cash Used by Financing Activities |
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| (608 | ) |
| (7,546 | ) |
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Net Increase in Cash |
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| 928 |
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| 8,897 |
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Cash at Beginning of Year |
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| 3,422 |
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| 9,476 |
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Cash at End of Year |
| $ | 4,350 |
| $ | 18,373 |
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Supplemental Disclosures: |
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Cash paid for income taxes |
| $ | — |
| $ | — |
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Cash paid for interest |
| $ | — |
| $ | — |
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The Accompanying Notes are an integral part of these financial statements
F-11
Pearl White Professional Teeth Whitening, LLC
dba PearlBrite Professional Teeth Whitening, LLC
Notes to Financial Statements
(Unaudited)
NOTE 1: Basis of Presentation
The accompanying unaudited interim financial statements of Pearl White Professional Teeth Whitening, LLC have been prepared in accordance with accounting principles generally accepted in the United States of America, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission for interim financial information. Accordingly, the financial statements do not include all information and footnotes required by generally accepted accounting principles in the United States for complete annual financial statements. In the opinion of management, the accompanying unaudited interim financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation. Interim operating results are not necessarily indicative of results that may be expected for the year ending December 31, 2011, or for any subsequent period. These interim financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended December 31, 2010.
Notes to the financial statement which would substantially duplicate the disclosure contained in the audited financial statements for the year ended December 31, 2010 have been omitted.
NOTE 2: Subsequent Events
In May 2011, the Company entered into an agreement to sell all of its assets for consideration of $70,000. The sale price is payable $50,000 upon closing and two payments of $10,000 upon completion of certain conditions.
F-12
Delta Entertainment Group, Inc
Unaudited Pro Forma Balance Sheet
March 31, 2011
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| Historical |
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| Pro Forma |
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| Delta |
| PearlBrite |
| Adjustments |
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| Pro Forma |
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Assets |
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Current Assets: |
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Cash |
| $ | 4,294 |
| $ | 4,350 |
| $ | (4,350 | ) | (1) | $ | 4,294 |
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Inventory |
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| — |
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| 4,133 |
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| — |
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| 4,133 |
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Current assets |
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| 4,294 |
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| 8,483 |
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| (4,350 | ) |
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| 8,427 |
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Computer equipment, net |
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| 1,026 |
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| — |
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| — |
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| 1,026 |
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Customer list |
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| — |
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| — |
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| 65,867 |
| (1) |
| 65,867 |
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Total Assets |
| $ | 5,320 |
| $ | 8,483 |
| $ | 61,517 |
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| $ | 75,320 |
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Liabilities and Stockholders’ Equity (Deficit) |
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Current Liabilities: |
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Accounts payable |
| $ | 5,479 |
| $ | — |
| $ | — |
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| $ | 5,479 |
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Accrued wages- related party |
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| 2,248 |
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| — |
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| — |
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| 2,248 |
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Accrued liabilities |
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| — |
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| 1,676 |
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| (1,676 | ) | (1) |
| — |
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Accrued liabilities -related parties |
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| 1,850 |
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| 6,175 |
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| (6,175 | ) | (1) |
| 1,850 |
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Convertible notes payable-related party |
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| 5,000 |
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| — |
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| 70,000 |
| (1) |
| 75,000 |
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Total Current Liabilities |
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| 14,577 |
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| 7,851 |
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| 62,149 |
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| 84,577 |
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Total Liabilities |
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| 14,577 |
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| 7,851 |
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| 62,149 |
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| 84,577 |
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Stockholder’s Equity (Deficit) |
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30,152,815 shares issued as of March 31, 2011 |
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| 30,153 |
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| — |
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| — |
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| 30,153 |
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Additional Paid in Capital |
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| 119,911 |
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| — |
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| — |
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| 119,911 |
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Other Equity |
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| — |
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| 632 |
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| (632 | ) | (1) |
| — |
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Deficit Accumulated in the Development Stage |
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| (159,321 | ) |
| — |
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| — |
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| (159,321 | ) |
Total Stockholder’s Equity (Deficit) |
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| (9,257 | ) |
| 632 |
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| (632 | ) |
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| (9,257 | ) |
Total Liabilities and Stockholders’ Equity (Deficit) |
| $ | 5,320 |
| $ | 8,483 |
| $ | 61,517 |
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| $ | 75,320 |
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(1) To reflect the purchase of the assets of PearlBrite Teeth Whitening as if the transaction has occurred as of March 31, 2011.
F-13
Delta Entertainment Group, Inc
Unaudited Pro Forma Statement of Operations
March 31, 2011
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| Historical |
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| For the Three Months |
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| Ended March 31, 2011 |
| Pro Forma |
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| Delta |
| PearlBrite |
| Adjustments |
| Pro Forma |
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Revenue, net |
| $ | 1,550 |
| $ | 18,788 |
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| — |
| $ | 20,338 |
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Cost of sales |
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| 1,079 |
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| 6,121 |
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| — |
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| 7,200 |
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Gross profit |
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| 471 |
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| 12,667 |
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| — |
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| 13,138 |
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General administrative expenses |
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| 29,417 |
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| 9,530 |
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| — |
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| 38,947 |
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Operating income (loss) |
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| (28,946 | ) |
| 3,137 |
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| — |
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| (25,809 | ) |
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Other income (expense) |
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Other income |
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| — |
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| 130 |
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| — |
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| 130 |
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Interest expense |
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| (33 | ) |
| — |
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| — |
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| (33 | ) |
Other income (expense) |
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| (33 | ) |
| 130 |
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| — |
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| 97 |
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Net Income (Loss) |
| $ | (28,979 | ) | $ | 3,267 |
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| — |
| $ | (25,712 | ) |
F-14
Delta Entertainment Group, Inc
Unaudited Pro Forma Statement of Operations
December 31, 2010
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| Historical |
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| For the Year Ended |
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| December 31, 2010 |
| Pro Forma |
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| Delta |
| PearlBrite |
| Adjustments |
| Pro Forma |
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Revenue, net |
| $ | 10,200 |
| $ | 204,984 |
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| — |
| $ | 215,184 |
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Cost of sales |
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| 17,396 |
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| 107,500 |
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| — |
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| 124,896 |
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Gross profit |
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| (7,196 | ) |
| 97,484 |
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| — |
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| 90,288 |
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General administrative expenses |
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| 114,293 |
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| 93,184 |
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| — |
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| 207,477 |
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Operating income (loss) |
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| (121,489 | ) |
| 4,300 |
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| — |
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| (117,189 | ) |
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Other income (expense) |
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Gain on deconsolidation of subsidiary |
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| 87,290 |
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| — |
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| — |
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| 87,290 |
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Other income |
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| — |
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| 14,548 |
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| — |
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| 14,548 |
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Interest expense |
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| — |
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| — |
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| — |
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| — |
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Other income (expense) |
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| 87,290 |
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| 14,548 |
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| — |
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| 101,838 |
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Net Income (Loss) |
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| (34,199 | ) |
| 18,848 |
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| — |
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| (15,351 | ) |
Net loss attributable to non controlling interest |
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| 1,941 |
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| — |
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| 1,941 |
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Net Income (Loss) attributable to shareholders |
| $ | (32,258 | ) | $ | 18,848 |
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| $ | (13,410 | ) |
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Basic and Diluted Income (Loss) |
| $ | (0.00 | ) |
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| $ | (0.00 | ) |
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Basic and Diluted Weighted Average |
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| 24,959,089 |
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| 24,959,089 |
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F-15
Delta Entertainment Group, Inc
Notes to Unaudited Pro Forma Financial Statements
Note 1: Basis of Presentation
The unaudited pro forma consolidated balance sheet as of March 31, 2011 was based on the unaudited balance sheet of Delta Entertainment Group, Inc. (“the Company”) and the unaudited balance sheet of Pearl White Professional Teeth Whitening, LLC (“PearlBrite”) combined with pro forma adjustments to give effect the PearlBrite asset purchase as if it had occurred on March 31, 2011.
The unaudited pro forma consolidated statements of operations for the three months ended March 31, 2011 was based on the unaudited statements of operations for the Company and PearlBrite, together with pro forma adjustments to give effect to the asset purchase as if it occurred on January 1, 2011.
The unaudited pro forma statement of operations for the year ended December 31, 2010 was based on the audited statement of operations for the Company and the audited statement of operations for PearlBrite for the year ended December 31, 2010, together with pro forma adjustment to give effect to the asset purchase as if it occurred on January 1, 2010.
These unaudited pro forma financial statements are provided for illustrative purposes and do not purport to represent what the Company’s results of operations of financial position would have been if such transactions had occurred on the above mentioned dates. These financial statements were prepared based on accounting principles generally accepted in the United States. The use of estimates is required and actual results could differ from estimates used. The Company believes the assumptions used provide a reasonable basis for presenting the significant effects directly attributable to the asset purchase.
Note 2: Pearl White Asset Purchase
On June 3, 2011 PearlBrite Concepts, Inc., our wholly owned subsidiary, entered into a Bill of Sale with Pearl White Professional Teeth Whitening LLC. (the “Seller”) which provided in part for PearlBrite Concepts to acquire substantially all of the assets of the Seller used in connection with the sale of its teeth whitening system which are marketed under the names “PearlBrite” and “Pearl White Professional Teeth Whitening”.
The purchase price for the assets was $70,000 (the “Purchase Price”) of which $50,000 has been paid. The remaining portion of the Purchase Price will be paid pursuant to the terms and conditions of two promissory notes. PearlBrite Concepts will pay the Seller $10,000 within five calendar days following delivery by the Seller of Seller’s audited financial statements in accordance with Generally Accepted Accounting Principles and as required by the rules and regulations as promulgated by the Securities and Exchange Commission in connection with the acquisition of a business entity. The balance of the purchase price ($10,000) is due pursuant to the terms and conditions of a second promissory note which provides for four monthly payments of $2,500 commencing July 3, 2011 and continuing on the third day of each month thereafter.
The promissory notes are secured by all of the current and after-acquired assets, tangible or intangible, of PearlBrite Concepts related to the operations and sales of either the PearlBrite or Pearl White Professional Teeth Whitening systems.
The purchase was allocated to inventory valued at $3,479, which represented the original cost basis, with the balance of the purchase price being allocated to the intangible asset Customer List, pending a final valuation determination.
F-16