UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO 1 TO 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) February 20, 2001
moderngroove entertainment, Inc.
--------------------------------------------------
(Exact name of Registrant as specified in charter)
Nevada 0-26073 86-0881193
---------------------------- ----------- -----------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification)
1801 E. Tropicana, Suite 9, Las Vegas, NV 89119
------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (702) 893-2556
--------------
Barrington Laboratories, Inc.
--------------------------------------------------------------
(Former name or former address, if changed, since last report)
1
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
(a) Pursuant to Share Exchange agreement with Modern Groove Entertainment
International, Inc., ("MGEI") a Nevada Corporation, all of the issued and
outstanding shares of Modern Groove Entertainment International, Inc, will
be exchanged for 26,000,000 restricted Common shares of ModernGroove
Entertainment, Inc., ("MODG") or ("moderngroove") a Nevada Corporation,
formerly called Barrington Laboratories, Inc.
This Share Exchange agreement was adopted by the unanimous consent by the
Board of Directors for both companies on December 18, 2000, and approved
by the MODG shareholders on December 18, 2000, it was subsequently filed
as a Current Report on December 19, 2000, to become effective on January 1,
2001. Current reports are required to be filed fifteen days from the date of
earliest event reported. The Current Report for this event was filed within
one day of the event. Based on the fifteen day rule, the Company is now
filing the audited financials for Modern Groove Entertainment International,
Inc., within the specified time frame following the filing of the
aforementioned Current Report.
(b) The Board of Directors, appointed John Stroppa as the Company's
President/CEO, Steven Zur, Chief Information Officer (CIO), and Adrian Crook,
Executive Producer.
(c) The following table sets forth certain information concerning the
beneficial ownership of our outstanding common stock as of December 31, 1999,
by each person known by the Company to own beneficially more than 5% of the
outstanding common stock, by each of our directors and officer and by
all of our directors and officers as a group. Unless otherwise indicated
below, all persons listed below have sole voting and investment power with
respect to their shares of common stock.
Amount
Title Name and Address of shares Percent
of of Beneficial held by of
Class Owner of Shares Position Owner Class
----------------------------------------------------------------------------
Common T. J. Jesky (1) Former CEO/CFO 3,000,000 73.2%
Common Arthur W. Skagen(2) Stockholder 350,000 8.5%
----------------------------------------------------------------------
TOTALS: 3,350,000 81.7%
Common All Executive Officers and
Directors as a Group (1 person) 3,000,000 73.2%
(1) T. J. Jesky, 1801 E. Tropicana, Suite 9, Las Vegas, NV.
(2) Arthur W. Skagen, 15127 - 100th Avenue, Surrey, B.C., Canada
2
(d) The following table sets forth certain information concerning the
beneficial ownership of our outstanding common stock after the Company
issues 26,000,000 restricted common shares to acquire the assets of
Modern Groove Entertainment International, Inc. in January, 2001, by each
person known by Moderngroove to own beneficially more than 5% of the
outstanding common stock, by each of our directors and officers and by all
of our directors and officers as a group. Unless otherwise indicated below,
all persons listed below have sole voting and investment power with respect
to their shares of common stock.
Amount of Common Percent of
Stock Common Stock
Beneficially Beneficially
Name Owned Owned (1)
John Stroppa - President/CEO (2) 8,686,000 28.9
Keith Laker (3) 3,126,903 10.4
Moderngroove Entertainment, Inc.
Employee Stock Fund (4) 2,685,000 9.0
Arthur W. Skagen (5) 2,445,000 8.1
Adrian Crook, Executive Producer (6) 1,600,000 5.3
Steven Zur, Chief Information Officer (7) 1,600,000 5.3
Bill Macklem, Stockholder (8) 1,500,000 4.9
Skagen-Danielson Family Trust (9) 1,000,000 3.3
Justin Halowaty - Director (10) 450,000 1.5
T. J. Jesky, Former Officer (11) 3,000,000 9.9
---------- ----
TOTALS: 26,092,903 86.6
Total Officers and Directors as a Group: 4 individuals
(1) The percentages listed in this column are based upon 30,100,700
outstanding shares of common stock, which will be the number of
outstanding shares of Common Stock as of the Effective Date.
(2) John Stroppa, 303-280 Nelson Street, Vancouver, B.C.
(3) The 2,685,000 shares of Common Stock beneficially owned by Willow
Trust, 1 Pier Steps St., Peter Port, Guernsey, UK, are controlled by
Keith Laker.
(4) Moderngroove Entertainment, Inc., 1685 West 5th Avenue, Vancouver, B.C.
(5) Arthur W. Skagen, 15127 - 100th Avenue, Surrey, B.C. This includes
the 1,500,000 shares of Common Stock beneficially owned by Lafoten
Capital Corporation, which is controlled by Mr. Skagen, and also
includes 500,000 shares of Common Stock beneficially owned by Cashcom
Services, Inc., which is controlled by Mr. Skagen.
(6) Adrian Crook, 2302, 1008 Cambie Street, Vancouver, B.C.
(7) Steven Zur, 507, 610 Jervis Street, Vancouver, B.C.
(8) Mr. Bill Macklem, 100-5000 Bridge Street, Delta, B.C., Canada. This
includes 1,500,000 shares of Common Stock beneficially owned by Visions
West, Ltd.
(9) Skagen-Danielson Family Trust, 15007-75th Avenue, Surrey, B.C., Canada.
Mr. Art Skagen disclaims beneficial ownership of any shares of Common
Stock owned by Skagen-Danielson Family Trust.
(10) Justin Halowaty, 3281 W. 21st Avenue, Vancouver, B.C.
(11) T. J. Jesky, 1801 E. Tropicana, Suite 9, Las Vegas, NV. Mr. Jesky,
former Officer/Director of the Company owned 3,000,000 common shares
prior to the Share Exchange Agreement and did not receive any additional
shares subsequent to the Share Exchange Agreement.
Note: The first nine names on the above chart, (reference number 2 through
10) represent the individuals/entities who were issued 23,092,903 common
shares out of the 26,000,000 common shares subsequent to the Share Exchange
Agreement. The remaining2,907,097 restricted Common Shares (i.e. 26,000,000
minus 23,092,903), where issued on a pro-rata basis to the remaining 60
shareholders of Modern Groove Entertainment International, Inc.
3
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
The consideration exchanged pursuant to the Share Exchange Agreement was
negotiated between MGEI and MODG.
The principle followed to determine the number of shares issued in exchange
for the outstanding shares of MGEI, was based on the audited net book value
of the outstanding Common Stock for both companies. It was the goal of the
MODG to increase its shareholder value. Post Share Exchange Agreement, the
net book value of the MODG increased to $0.0126 per share from $0.0068 per
share.
BUSINESS
---------
Except for historical information the matters set forth herein, which
are forward-looking statements, involve certain risks and uncertainties, and
other factors which may cause the actual results, performance, or achievement
expressed or implied by such forward-looking statements to differ. There are
risks and uncertainties that the company will be unable to generate a market
for the Company's products and thus will not provide the benefits to the
Company's stockholders as anticipated. Other potential risks and
uncertainties include, but are not limited to, the market acceptance and
amount of revenues anticipated to be created, the Company's ability to raise
sufficient capital for operations.
COMPANY OVERVIEW
----------------
"moderngroove entertainment, inc. is a British Columbia corporation with
studio operations in Vancouver, Canada. moderngroove now has a staff of
about 50 artists, engineers, producers and business personnel.
Founded August 6, 1998, under the name Barrington Laboratories, Inc., the
Company amended its Articles on December 18, 2000 to change its name to
ModernGroove Entertainment, Inc."
The Executive Officers are John Stroppa, Steven Zur and Adrian Crook. Stroppa
is a former Director of Business Development from Radical Entertainment, one
of Canada's largest privately owned developers of interactive entertainment
titles and 3D graphics software. Zur is a former Director of the Internet
Sports Network, a provider of enhanced content, applications and support
service for commercial portal sites. Adrian Crook is a former Producer from
Electronic Arts Canada, the world's largest independent developer, publisher
and distributor of videogame products for personal computers and videogame
consoles.
The management team has been carefully selected from the telecommunications,
music, entertainment, computer hardware and software industries. The roots of
our management team can be traced back to IBM Canada, IBM Global Services,
Motorola, Newbridge Networks, Verizon, Radical Entertainment, and Electronic
Arts.
GENERAL
THE PRODUCTS
------------
moderngroove is building an interactive music and television network that
consumers access through next-generation videogame consoles, such as the Sony
PlayStation 2.
Next-generation videogame consoles are high-powered PCs that sit in the living
room and anchor the home entertainment systems of the future. They have
better graphics than their predecessors, play DVD movies, and access the
Internet at high speed - ultimately making new forms of entertainment
possible.
4
moderngroove's videogame industry veterans are working with music labels
and entertainment studios to develop brand-led entertainment titles for next-
generation videogame consoles. Franchises are popular titles that are updated
and re-released annually, providing videogame developers and publishers with
reliable income streams. Successful titles become franchises with annual
releases. Perpetual market demand for new music will assist moderngroove's
development of initial music titles into franchises.
Each of these titles will also have an online component. moderngroove's
titles will ship bundled with a net-accessing client: the Trojan horse via
which moderngroove will get net-accessing capability into targeted homes.
Via these online components, the company will deliver their content partners'
entertainment. Entertainment from partner music labels and entertainment
studios form a proprietary network. Consumers browse the network using the
net-accessing client that ships with our packaged product. Entertainment is
delivered to the consumer via their next-generation videogame console's high-
speed modem. This forms the basis of an interactive music and television
network.
moderngroove's net-accessing client combined with net-enabled videogame
consoles and moderngroove's distribution network, seamlessly form an
interactive music and television network. Whereas consumers currently get
access to expanded television programming and channels by calling their cable
company, in the future consumers will purchase moderngroove's net-accessing
clients, or "channels," on the shelves of music and videogame retailers.
These channels will simply be DVD discs that go into net-enabled videogame
consoles (like the Sony PlayStation 2 and Microsoft Xbox), and enable the
consumer to access the desired programming on-demand from moderngroove's
network.
CURRENT DEVELOPMENTS
--------------------
To date, the Company has taken the following initiatives and steps in order to
further its operations and execute its business plan:
a) Sony is the one of the largest consumer electronics companies in the world
and the global leader in next-generation videogame consoles, with over 70
million units of the original PlayStation sold worldwide. moderngroove has a
license to develop software for their latest offering, the Sony PlayStation 2.
b) Ministry of Sound is a diverse operation that boasts the world's largest
dance music label and a variety of print magazines, including Ministry - the
best selling dance music magazine in the U.K. Moderngroove has signed an
agreement with the Ministry of Sound, providing the Company with the right to
use the Ministry of Sound brand, along with exclusive rights to new music sets
mixed by some of the world's leading DJs on a PlayStation 2 release. The
agreement between moderngroove and Ministry of Sound includes options for
subsequent titles and content for moderngroove's music and television network.
c) moderngroove has completed development of their first product release,
Ministry of Sound: Interactive Edition. The product was developed exclusively
for the PlayStation 2, and will be available from music and videogame
retailers in the Spring of 2001.
5
d) Sega is one of the major videogame console manufacturers, and was the
first to produce a net-enabled, next-generation console. moderngroove has
obtained a development license to produce entertainment software for the Sega
Dreamcast. Despite Sega's plans to cease production of the Dreamcast console,
its existing six million unit install base warrants inclusion in
moderngroove's future product development plans.
e) moderngroove is in the process of becoming a licensed software developer
for the Microsoft Xbox system, the next-generation videogame console with
which Microsoft will be entering the console market later this year. The Xbox
platform will be included in future product development plans.
f) moderngroove is in the process of licensing Renderware, a product of
Criterion LLC. Renderware is a leader in the field of rendering engines, the
software modules that are capable of drawing the high-detailed graphics that
appear on the screen of a videogame console or personal computer. By licensing
Renderware, moderngroove obtains a highly refined cross-platform rendering
engine, saving time and allowing it to focus on the creative aspects of our
products.
g) moderngroove is currently in discussions with several leading Hip Hop
labels for the exclusive rights to new music by leading HipHop acts for a
moderngroove Interactive title, discussions include content for moderngroove's
music and television network.
h) moderngroove has developed a relationship with the TELUS Corporation, one
of Canada's leading telecommunications companies. Aside from basic
telecommunications needs, TELUS provides broadband solutions for moderngroove.
The developing relationship is part of the Company's medium range plans for
the crafting of the technical architecture of its proprietary network.
i) The members of the Company's technical development team, responsible for
building the caching engine for moderngroove's network architecture, have been
trained and certified by QNX Software Systems, the company whose operating
system will run the network.
TARGETED CUSTOMERS
------------------
The market for moderngroove's first title is comprised of consumers who own a
next-generation videogame console. The target segment moderngroove will serve
within this market are referred to as Generation Y and young Generation X
types, further defined by the following demographics: 18-34 year olds;
moderate to high level of disposable income relative to income; reside in
Europe, North America or Japan; slight skew towards males; live in close
proximity to a major metropolitan area (>500K); early-adopters of technology;
ethnically diverse; live with parents or in childless households; socially
active; listen to modern music; wear urban clothing and are influenced by
urban lifestyle, music and videogame media.
The market for moderngroove's products will expand as new and diverse titles
are launched across multiple platforms. As next-generation videogame consoles
move beyond the early adopters to the mainstream consumer, moderngroove's
market will continue to grow. This expanded growth will also move
moderngroove's products beyond North America, Europe and Japan, and into
other parts of Asia and the world.
6
LITIGATION
----------
The Company is not involved with any litigation. This does not preclude
the Company from being involved in any litigation in the future, incidental
to running a business.
PROPERTY
--------
The Company's principal office is located at 1685 West 5th Avenue, Vancouver,
B.C., Canada with a U.S. based office at 1801 E. Tropicana, Suite 9, Las
Vegas, NV 89119. Web site: www.moderngroove.com.
Description of Securities
The Company's Amended Articles of Incorporation authorizes the issuance of
200,000,000 shares of common stock, $.001 par value per share, of which
30,100,700 shares were outstanding as of February 12, 2001, and 5,000,000
shares of preferred stock, of which none were outstanding as of February 12,
2001. Holders of shares of common stock are entitled to one vote for each
share on all matters to be voted on by the stockholders. Holders of common
stock have no cumulative voting rights. Holders of shares of common stock are
entitled to share ratably in dividends, if any, as may be declared, from time
to time by the Board of Directors in its discretion, from funds legally
available therefore. In the event of a liquidation, dissolution or winding up
of the Company, the holders of shares of common stock are entitled to share
pro-rata all assets remaining after payment in full of all liabilities.
Holders of common stock have no preemptive rights to purchase the Company's
common stock. There are no conversion rights or redemption or sinking fund
provisions with respect to the common stock. All of the outstanding shares
of common stock are validly issued, fully paid and non-assessable. The
Company has no warrants nor options outstanding or issued.
MANAGEMENT
----------
The members of the Board of Directors of the Company serve until the
next annual meeting of stockholders, or until they have been elected by
the shareholders. The officers serve at the pleasure of the Board of
Directors. Information as to the directors and executive officers of the
Company is as follows:
Name Age Title
John Stroppa 32 President/CEO
Steven Zur 37 Chief Information Officer
Adrian Crook 25 Executive Producer
Justin Halowaty 25 Director/Controller
7
Duties, Responsibilities and Experience:
John Stroppa, President/CEO
John Stroppa, born in Seattle, WA, in 1968 and moved to Vancouver, B.C. with
his Canadian parents in 1970.
1992-1993 - Gold Merchant Management, currency trader
1993-1994 - Xerox Canada, Sales
1995-1996 - Axion Internet, Inc., Canada, sales coordination
1997-1998 - Hitmen-Pioneer Studio at Electronic Arts (Canada), Inc.,
Assistant Producer
1998-1999 - Radical Entertainment Limited, Project Manager, Producer, Director
of Business Development. Radical Entertainment Limited is the
largest privately owned developers of interactive entertainment
titles and 3D graphics software
1999- Pres. - Founder/President, of Moderngroove Entertainment, Inc.
In 1990, he received his Bachelor of Arts in Economics from University of
Waterloo, and, in 1992, he received his Master of Arts in Economics from
Queen's University at Kingston.
Steven Zur, Chief Information Officer (CIO)
Steven Zur is a former Director of the Internet Sports Network, a provider
of enhanced content, applications and support service for commercial portal
sites. Mr. Zur is a technological innovator who developed, implemented and
managed ticket processing for the 1988 Winter Olympics and developed all
technical aspects of delivering online gaming pools for the Internet Sports
Network. Mr. Zur's technical expertise and innovation are complimented by his
experience integrating UNIX, Macintoshes and PCs into unified networks, as
well as the critical role he played in integrating Ticketmaster's operations
across Canada. Education: BSc; Zoology, University of Alberta.
Adrian Crook, Executive Producer
Adrian Crook is a former Producer from Electronic Arts, the world's largest
independent developer, publisher and distributor of videogame products for
personal computers and videogame consoles. Mr. Crook has a proven ability to
conceive and produce world-class entertainment. Mr. Crook capped off his
five-year tenure at Electronic Arts with the production of Sled Storm, a
snowmobile racing game for the Sony PlayStation that marked Electronic Arts
Canada's first wholly original, unlicensed, internally developed project.
Conceived and produced by Mr. Crook, Sled Storm was completed in less than one
year and has gone on to sell more than 1,000,000 units (over $30 million)
since its launch in August of 1999.
Justin Halowaty, Director, Controller
Mr. Halowaty is currently the controller of moderngroove entertainment, inc.
Prior to this he was the controller of Coast Mountain Hardwoods, Inc., a
hardwood mill, with 1999 gross revenue of $40 million up over 30% from 1998.
The company was recently acquired by Northwest Hardwoods, Inc. a Weyerhaeuser
business. Mr. Halowaty has a Bachelor of commerce from the University of
British Columbia and received his professional accounting designation (CMA)
in November 1999.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
Under the Share Exchange Agreement, MGEI shareholders received their pro-rata
ownership in the 26,000,000 shares issued from MODG for MGEI. Prior the
Share Exchange Agreement, Art Skagen owned 350,000 common shares (8.5%) of
MODG. He was also a shareholder in MGEI, and subsequent to the Share Exchange
Agreement he beneficially owned and controlled 2,445,000 common shares (8.1%)
in MODG. (See Item 1(c)(d)).
At the MODG's annual shareholder Meeting, held on December 18, 2000, the
shareholders of the Company elected Justin Halowaty to its Board of Directors.
Mr. Halowaty, at the time was the controller for MGEI. Mr. Halowaty owned
no common stock in MODG, prior the Share Exchange Agreement, and subsequently
owned 450,000 common shares (1.5%) of MODG, based on his pro-rata ownership in
MGEI. Under Nevada law NRS 78.140 regarding "Restrictions on transactions
involving interested directors or officers; compensation of directors," Mr.
Halowaty was allowed to represent both MODG and MGEI.
8
ITEM 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS
The Board of Directors accepted the voluntary resignation of T. J. Jesky,
former Director and President of the Company, who is pursuing other business
interests outside the scope of the Company.
ITEM 7. FINANCIAL STATEMENTS
Financial statements of Moderngroove Entertainment International, Inc. are
filed herewith
EXHIBITS
1.1* Agreement dated as of December 18, 2000 among the Company, and Modern
Groove Entertainment International, Inc. and the shareholders of Modern Groove
Entertainment International, Inc.
1.2** Moderngroove Entertainment International, Inc. Audited Consolidated
Financial Statements.
1.3** Unaudited Pro Forma Consolidated Financial Information
______
*filed by Form 8-K on December 19, 2000
**filed herewith
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Current Report on Form 8-K to be signed on
its behalf by the undersigned hereunto duly authorized.
ModernGroove Entertainment, Inc.
By: /s/ John Stroppa
---------------------------
John Stroppa, President
Date: April 5, 2001
9
Exhibit 1.2
-----------
Modern Groove Entertainment International, Inc.
(A development stage company)
Consolidated Financial Statements
For the year ended December 31, 2000
(Expressed in US Dollars)
Modern Groove Entertainment International, Inc.
(A development stage company)
Financial Statements
For the year ended December 31, 2000
(Expressed in US Dollars)
Contents
------------------------------------------------------------------------
Independent Auditors' Report F-1
Consolidated Financial Statements
Balance Sheets F-2
Statements of Operations F-3
Statements of Changes in Stockholders' Equity F-4
Statements of Cash Flows F-5
Summary of Significant Accounting Policies F-6-9
Notes to Financial Statements F-10-14
==========================================================================
Independent Auditors' Report
--------------------------------------------------------------------------
To the Directors and Stockholders of
Modern Groove Entertainment International, Inc.
We have audited the Consolidated Balance Sheets of Modern Groove
Entertainment International, Inc. (a development stage company) as
at December 31, 2000 and 1999 and the Consolidated Statements of
Operations, Changes in Stockholders' Equity and Cash Flows for the
year ended December 31, 2000, for the period from September 20,
1999 (date of inception) to December 31, 1999 and for the
cumulative period from September 20, 1999 (date of inception)
to December 31, 2000. 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. Those standards require that we plan and
perform an audit to obtain reasonable assurance 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, these consolidated financial statements present fairly, in
all material respects, the financial position of Modern Groove Entertainment
International, Inc. as at December 31, 2000 and 1999 and the results of its
operations and its cash flows for the year ended December 31, 2000, for the
period from September 20, 1999 (date of inception) to December 31, 1999 and
for the cumulative period from September 20, 1999 (date of inception) to
December 31, 2000 in accordance with accounting principles generally
accepted in the United States.
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. As discussed in
Note 1 to the financial statements, the Company has recognized no revenue
to date and has suffered recurring losses from operations. This raises
substantial doubt about its ability to continue as a going concern.
Management's plans in this regard are described in Note 1. These
consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
/s/ BDO Dunwoody LLP
--------------------
Abbotsford, Canada
January 24, 2001
F-1
==========================================================================
Modern Groove Entertainment International, Inc.
(A development stage company)
Consolidated Balance Sheets
(Expressed in US Dollars)
December 31 2000 1999
--------------------------------------------------------------------------
Assets
Current
Cash $ - 4,888
Cash in Trust (Note 2) 100,155 -
Receivables 9,109 6,255
Prepaid expenses 8,623 36,019
117,887 47,162
--------------------------
Property and equipment (Note 3) 404,420 65,978
Software development costs (Note 4) 238,727 -
--------------------------
$ 761,034 $ 113,140
======================================================================
Liabilities and Stockholders' Equity (deficit)
Current
Bank overdraft $ 49,579 $ -
Loans payable (Note 2) 83,463 179,062
Accounts payable 228,117 55,208
Accrued liabilities 19,196 -
--------------------------
380,355 234,270
--------------------------
Commitments (Note 6)
Stockholders' equity (deficit) (Note 5)
Share capital
Authorized
100,000,000 common shares, par value of $0.01 per share
Issued
20,000,000 (1999 - 1 ) common shares 200,000 -
Additional paid-in capital 2,067,446 -
Deficit accumulated in
the development stage (1,763,898) (119,265)
Accumulated other comprehensive income-
foreign exchange translation losses (2,869) (1,865)
---------------------------
500,679 (121,130)
Stock subscriptions receivable (120,000) -
---------------------------
380,679 (121,130)
---------------------------
$ 761,034 $ 113,140
======================================================================
The accompanying summary of significant accounting policies and notes are an
integral part of these consolidated financial statements.
F-2
============================================================================
Modern Groove Entertainment International, Inc.
(A development stage company)
Statements of Operations
(Expressed in US Dollars)
Period from Period from
September 20, 1999 September 20, 1999
(date of inception) Year ended (date of inception)
to December 31 December 31 to December 31
2000 2000 1999
----------------------------------------------------------------------------
(cumulative)
Expenses
Advertising and promotion $ 35,345 $ 28,963 $ 6,382
Communication 46,830 45,609 1,221
Computer technology 14,919 10,867 4,052
Contractor fees 57,369 19,343 38,026
Depreciation of property
and equipment 178,930 170,901 8,029
Employee recruitment
and retention 42,731 42,421 310
Equipment rental l9,041 6,543 2,498
Insurance 6,053 6,053 -
Office and miscellaneous 85,822 78,895 6,927
Professional fees 86,910 86,106 804
Rent 71,487 64,958 6,529
Repairs and maintenance 3,623 3,078 545
Research and development
(Note 7) 335,603 316,270 19,333
Salaries and
employee benefits
(Note 5) 633,519 614,919 18,600
Travel 142,348 136,339 6,009
Utilities 13,368 13,368 -
----------------------------------------
Net loss for the period $ (1,763,898) $ (1,644,633) $ (119,265)
=====================================================================
Loss per share - basic
and diluted $ (0.09) $ (0.02)
===========================
Weighted average
shares outstanding 18,854,167 6,250,000
==========================
The accompanying summary of significant accounting policies and notes are an
integral part of these consolidated financial statements.
F-3
==========================================================================
Modern Groove Entertainment International, Inc.
(A development stage company)
Statement of Changes in Stockholders' Equity
(Expressed in US Dollars)
Deficit
accumu- Accumu-
lated lated Stock Total
Addit- in the other Sub- Stock
Common Stock ional Develop- Compre- script- holders'
------------ Paid-in ment hensive tions Equity
Dec. 31 2000 Shares Amt Capital Stage Income Receivable (Deficit)
-----------------------------------------------------------------------------
Share issued
On incorpor-
ation on Sept.
20, 1999 at
$0.01 per
share 1 - $ - $ - $ - $ - $ -
--------------------------------
Net loss for
the period - - - (119,265) - - (119,265)
Foreign ex-
Change trans-
lation losses - - - - (1,865) - (1,865)
---------------------------------
Total
compre-
hensive
loss - - - (119,265) (1,865) - (121,130)
-----------------------------------------------------------------
Balance,
Dec. 31, 1999 1 - - (119,265) (1,865) - (121,130)
Recapitaliz-
ation of
shares issued
to founder 6,249,999 62,500 - - -(62,500) -
Shares issued
on Feb. 1, 2000
at $0.01 per
share with a
deemed value
of $0.03125
per share
(Note 5) 5,750,000 57,500 122,187 - -(57,500) 122,187
Shares issued
on Feb. 1, 2000
at $0.03125
per share
(Note 5) 8,000,000 80,000 170,000 - - - 250,000
Additional
capital
contribu-
tions
(Note 5) - 1,775,259 - - - 1,775,259
-----------------------------------------------------------------
20,000,000 200,000 2,067,446 (119,265) (1,865)(120,000) 2,026,316
--------------------------------------
Net loss for
the year - - - (1,644,633) - - (1,644,633)
Foreign ex-
Change trans-
lation losses - - - - (1,004) - (1,004)
---------------------------------------
Total
compre-
hensive
loss - - - (1,644,633) (1,004) - (1,644,633)
---------------------------------------------------
Balance,
Dec. 31,
2000 20,000,000 $2,067,446 $(2,869) $380,679
$200,000 $(1,763,898) $(120,000)
=============================================================================
The accompanying summary of significant accounting policies and notes are an
integral part of these consolidated financial statements.
F-4
============================================================================
Modern Groove Entertainment International, Inc.
(A development stage company)
Statements of Cash Flows
(Expressed in US Dollars)
Period from Period from
September 20, 1999 September 20, 1999
(date of inception) Year ended (date of inception)
to December 31 December 31 to December 31
2000 2000 1999
----------------------------------------------------------------------------
(cumulative)
Cash provided by (used in)
Operating activities
Net loss for the period $ (1,763,898) $ (1,644,633) $ (119,265)
Adjustments to reconcile
net loss for the period
to net cash used in
operating activities
Depreciation 178,930 170,901 8,029
Stock compensation 122,187 122,187 -
(Increase) decrease in assets
Receivables (9,232) (3,073) (6,159)
Prepaid expenses (8,919) 26,546 (35,465)
Increase in liabilities
Accounts payable 230,599 176,241 54,358
Accrued liabilities 19,378 19,378 -
------------------------------------------
(1,230,955) (1,132,453) (98,502)
------------------------------------------
Investing activities
Purchase of property
and equipment (587,560) (514,568) (72,992)
Software development costs (240,979) (240,979) -
------------------------------------------
(828,539) (755,547) (72,992)
------------------------------------------
Financing activities
Contributions from stockholder 1,775,259 1,775,259 -
Issuance of common stock 250,000 250,000 -
Proceeds on loan payable 260,556 84,250 176,306
Repayment of loan payable (176,306) (176,306) -
Bank overdraft 50,047 50,047 -
------------------------------------------
2,159,556 1,983,250 176,306
------------------------------------------
Increase in cash 100,062 95,250 4,812
Effect of foreign exchange on cash 93 17 76
Cash, beginning of period - 4,888 -
------------------------------------------
Cash, end of period $ 100,155 $ 100,155 $ 4,888
===========================================================================
Supplemental information:
Non cash investing and financing activities:
Issuance of common stock in return for
subscriptions receivable (Note 5) $ 120,000 $
===========================================================================
The accompanying summary of significant accounting policies and notes are an
integral part of these consolidated financial statements.
F-5
===========================================================================
Modern Groove Entertainment International, Inc.
(A development stage company)
Summary of Significant Accounting Policies
December 31, 2000
----------------------------------------------------------------------------
Basis of Presentation These consolidated financial statements are
prepared in accordance with accounting
principles generally accepted in the United
States and include the accounts of the Company
and its wholly-owned subsidiary, Modern Groove
Entertainment, Inc. All significant
intercompany balances and transactions have
been eliminated on consolidation. The Company
is considered a development stage company in
accordance with Statement of Financial
Accounting Standards ("SFAS") No. 7.
The Company has selected December 31 as its
fiscal year end.
Foreign Currency Translation The Company's functional currency is the
Canadian dollar as all operations to date have
been conducted through the Company's Canadian
subsidiary. These consolidated financial
statements are stated in US dollars as the
Company was incorporated in the United States
and for comparison purposes with other industry
competitors registered with the Securities and
Exchange Commission ("SEC") in the United
States. Assets and liabilities denominated in
Canadian dollars are translated to US dollars
using the exchange rate in effect at the period
end date. Revenue and expenses are translated
to US dollars using the average rate of
exchange for the respective period. Gains and
losses on exchange are recorded as
comprehensive income (loss) and are reported
separately in Stockholders' Equity
Financial Instruments The Company's financial assets and liabilities
consist of cash, cash in trust, receivables,
bank overdraft, accounts payable, accrued
liabilities and loans payable. Unless
otherwise noted, it is management's opinion
that the Company is not exposed to significant
interest, currency or credit risks arising from
these financial instruments. The fair values
of these financial instruments approximate
their carrying values due to the short term or
demand nature of these assets and liabilities.
Property and Equipment Property and equipment is stated at cost less
accumulated depreciation. Depreciation based
on the estimated useful life of the asset is
calculated at the following rates:
Computer equipment - 30% diminishing-balance
basis
Computer software - 50% diminishing-balance
basis
Office equipment - 20% diminishing-balance
basis
Audio and sound
equipment - 20% diminishing-balance
basis
Leasehold improvements are depreciated over
the remaining term of the underlying premises
lease which approximates its estimated useful
life.
F-6
===========================================================================
Modern Groove Entertainment International, Inc.
(A development stage company)
Summary of Significant Accounting Policies
December 31, 2000
----------------------------------------------------------------------------
Property and Equipment
Continued Direct costs associated with the development
of the features, content and functionality of
the Company's website incurred during the
application development stage are capitalized
and will be amortized over the estimated useful
life of 3 years once development is complete.
Software Development Costs In accordance with SFAS No. 86 "Accounting for
the Cost of Computer Software to be Sold,
Leased or Otherwise Marketed" software
development costs are expensed as incurred
until technological feasibility in the form of
a working model has been established. Deferred
software development costs will be amortized
over the estimated economic life of the
software once the product is available for
general release to customers. Annual
amortization, thereafter, will be the greater
of the amount computed using (a) the ratio of
current revenues to current and anticipated
gross revenues for the product and (b) the
straight-line method over the product's
economic life.
Impairment of Long-Lived
Assets On a quarterly basis, the Company evaluates
the future recoverability of its property and
equipment and deferred software development
costs in accordance with SFAS No. 121,
"Accounting for the Impairment of Long-lived
Assets to be Disposed of". SFAS No. 121
requires recognition of impairment of
long-lived assets in the event the net book
value of such assets exceeds the estimated
undiscounted future cash flows attributable to
such assets or the business to which such
assets relate. No impairment was required to
be recognized during the periods presented in
these financial statements.
Use of Estimates The preparation of financial statements in
accordance with generally accepted accounting
principles requires management to make
estimates and assumptions that affect the
reported amounts of assets and liabilities and
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 materially differ from
these estimates. The assets which required
management to make significant estimates and
assumptions in determining carrying values
included property and equipment and deferred
software and website development costs.
F-7
===========================================================================
Modern Groove Entertainment International, Inc.
(A development stage company)
Summary of Significant Accounting Policies
December 31, 2000
----------------------------------------------------------------------------
Income Taxes The Company follows the provisions of SFAS No.
109, "Accounting for Income Taxes", which
requires the Company to recognize deferred tax
liabilities and assets for the expected future
tax consequences of events that have been
recognized in the Company's financial
statements or tax returns using the liability
method. Under this method, deferred tax
liabilities and assets are determined based on
the temporary differences between the financial
statement carrying amounts and tax bases of
assets and liabilities using enacted rates in
effect in the years in which the differences
are expected to reverse.
Loss Per Share Loss per share is computed in accordance with
SFAS No. 128, "Earnings Per Share". Basic loss
per share is calculated by dividing the net
loss available to common stockholders by the
weighted average number of common shares
outstanding for the period. Diluted earnings
per share reflects the potential dilution of
securities that could share in earnings of an
entity. In loss periods, dilutive common
equivalent shares are excluded as the effect
would be anti-dilutive.
For the period from September 20, 1999 (date of
inception) to December 31, 2000 there were no
common equivalent shares granted or
outstanding.
Advertising The Company follows the provisions of Statement
of Position 93-7 in accounting for the costs of
advertising. Advertising costs are charged to
expense in the period incurred.
Cash and Equivalents The Company considers all highly liquid
investments with an original maturity of three
months or less to be cash equivalents.
New Accounting
Pronouncement In June 1998, SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities"
was issued. SFAS No. 133 required companies to
recognize all derivatives contracts as either
assets or liabilities on the balance sheet and
to measure them at fair value. If certain
conditions are met, a derivative may be
specifically designated as a hedge, the
objective of which is to match the timing of
gain or loss recognition on the hedging
derivative with the recognition of (i) the
changes in the fair value of the hedged asset
or liability that are attributable to the
hedged risk or (ii) the earnings effect of the
hedged forecasted transaction. For a
derivative not designated as a hedging
instrument, the gain or loss is recognized in
income in the period of change. SFAS No. 133
is effective for all fiscal quarters of fiscal
years beginning after June 15, 2000.
F-8
===========================================================================
Modern Groove Entertainment International, Inc.
(A development stage company)
Summary of Significant Accounting Policies
December 31, 2000
----------------------------------------------------------------------------
Historically, the Company has not entered into
derivatives contracts either to hedge existing
risks or for speculative purposes.
Accordingly, the Company does not expect
adoption of the new standards on January 1,
2001 to affect its financial statements.
F-9
===========================================================================
Modern Groove Entertainment International, Inc.
(A development stage company)
Notes to Consolidated Financial Statements
(Expressed in US Dollars)
December 31, 2000
----------------------------------------------------------------------------
1. Nature of Business and Continuing Operations
The Company, a development stage company, was incorporated under the laws of
the State of Nevada on September 20, 1999 and carries on operations through
its wholly-owned British Columbia subsidiary, moderngroove entertainment,
inc. The Company is developing an interactive music and television network
that consumers will access through next-generation videogame consoles. In
January 2001, the Company's stockholders completed a share exchange agreement
with Barrington Laboratories, Inc. ("Barrington", Note 9), an inactive Nevada
company, which resulted in the Company becoming a wholly-owned subsidiary of
Barrington. The common stock of Barrington is traded on the National
Association of Securities Dealers Over-the-Counter Bulletin Board and was
registered with the Securities and Exchange Commission in the United States.
These consolidated financial statements have been prepared in accordance
with generally accepted accounting principles applicable to a going concern
which contemplates the realization of assets and the satisfaction of
liabilities and commitments in the normal course of business. As at December
31, 2000, the Company has not recognized revenue to date and has accumulated
operating losses of approximately $1.8 million since inception. The
Company's ability to continue as a going concern is contingent upon the
successful completion of additional financing arrangements, the development
of its interactive entertainment products and its ability to achieve and
maintain profitable operations. Management plans to raise equity capital
to finance the operating and capital requirements of the Company. It is
management's intention to raise new equity financing of approximately
$3,000,000 within the upcoming year. Amounts raised will be used to further
development of the Company's products, to provide financing for marketing
and promotion, to secure additional property and equipment and for other
working capital purposes. While the Company is expending its best efforts
to achieve the above plans, there is no assurance that any such activity
will generate funds that will be available for operations.
These conditions raise substantial doubt about the Company's ability to
continue as a going concern. The Company's financial statements do not
include any adjustments related to the recoverability and classification
of recorded asset amounts or the amounts and classification of liabilities
that may be necessary should the Company be unable to continue in existence.
----------------------------------------------------------------------------
2. Loans Payable
The 2000 operating loan is due on demand and bears interest at the bank's
prime rate plus 2%, calculated and payable monthly. It is secured by a
general security agreement covering all assets and a CDN $150,000 ($100,155)
term deposit in trust. On January 6, 2001, the operating loan was repaid in
full out of proceeds of the term deposit.
The 1999 loan was unsecured, non-interest bearing and repaid in 2000.
F-10
===========================================================================
Modern Groove Entertainment International, Inc.
(A development stage company)
Notes to Consolidated Financial Statements
(Expressed in US Dollars)
December 31, 2000
----------------------------------------------------------------------------
3. Property and Equipment
2000 1999
---------------------------------------------
Accumulated Accumulated)
Cost Depreciation Cost Depreciation
---------------------------------------------
Computer equipment $ 326,370 $ 101,482 $ 48,818 $ 4,882
Leasehold improvements 75,307 26,799 15,756 1,751
Computer software 72,560 36,816 3,318 1,106
Office equipment 32,249 6,554 2,023 135
Audio and sound equipment 26,697 5,558 4,218 281
Website development costs 48,446 - - -
---------------------------------------------
581,629 177,209 74,133 8,155
============================================
Net book value $ 404,420 $ 65,978
==============================
----------------------------------------------------------------------------
4. Software Development Costs
2000 1999
------------------------
Salaries and employee benefits $ 209,667 $ -
Consulting fees 29,060 -
------------------------
$ 238,727 $ -
=========================
----------------------------------------------------------------------------
5. Share Capital
The Company was incorporated on September 20, 1999 in the State of Nevada
with the issuance of one share of common stock and has been the sole
stockholder of its subsidiary (Modern Groove Entertainment Inc.) since
that date. The Company's founder recapitalized the Company whereby his
shareholdings were increased to 6,250,000 shares of common stock at $0.01
per share being the estimated fair value of the Company at incorporation.
The recapitalized shares were not issued until February 1, 2000. Also on
February 1, 2000, certain key employees of the Company's subsidiary
subscribed for a total of 5,750,000 shares of common stock at $0.01 per
share. The estimated fair value of the shares of the Company on that date
was $0.03125 per share. Accordingly, compensation expense totalling $122,187
has been recognized in respect of shares issued to these employees. Such
amount was included in Salaries and employee benefits in the Statement of
Operations in the year ended December 31, 2000. Consideration for the shares
issued on recapitalization and to employees was the receipt of promissory
notes totalling $120,000. The notes are unsecured, non-interest bearing and
repayable on demand. The underlying common stock, and the Barrington common
stock subsequently exchanged, is held in trust by the Company as collateral
against the notes receivable.
Also on February 1, 2000, the Company issued 8,000,000 shares of common stock
to a Canadian company in exchange for total proceeds of $250,000 and an
agreement to provide the Company with $2 million of working capital financing
on a non-interest bearing basis.
F-11
===========================================================================
Modern Groove Entertainment International, Inc.
(A development stage company)
Notes to Consolidated Financial Statements
(Expressed in US Dollars)
December 31, 2000
----------------------------------------------------------------------------
Repayment of amounts advanced would only occur if the Company did not go
public. To December 31, 2000 the Company has received $1,775,259 under this
agreement. Upon closing the share exchange agreement with Barrington (Note
9), the advances have been classified as additional paid-in capital.
===========================================================================
Modern Groove Entertainment International, Inc.
(A development stage company)
Notes to Consolidated Financial Statements
(Expressed in US Dollars)
December 31, 2000
----------------------------------------------------------------------------
6. Commitments
The Company has an operating lease for its premises at approximately $5,700
per month, expiring in December 2002. The minimum annual lease payments in
connection with this lease are as follows:
2001 - $ 68,500
2002 - $ 68,500
----------------------------------------------------------------------------
7. Research and Development
The Company expensed the following software research and development costs
during the period:
Period from
September 20, 1999
Year ended (date of inception)
December 31 to December 31
2000 1999
-------------------------------
Salaries and employee benefits $ 231,486 $ -
Consulting fees 84,784 19,333
-------------------------------
$ 316,270 $ 19,333
===============================
----------------------------------------------------------------------------
8. Income Taxes
The tax effects of temporary differences that give rise to the Company's
deferred tax assets are as follows:
2000 1999
-----------------------
Tax loss carryforwards $ 508,000 $ 42,000
Property and equipment 81,000 4,000
Deferred research and development 152,000 9,000
Valuation allowance (741,000) (55,000)
-----------------------
$ - $ -
======================
The provision for income taxes differs from the amount estimated using the
federal statutory income tax rate as follows:
F-12
===========================================================================
Modern Groove Entertainment International, Inc.
(A development stage company)
Notes to Consolidated Financial Statements
(Expressed in US Dollars)
December 31, 2000
---------------------------------------------------------------------------
8. Income Taxes - Continued
Period from
September 20, 1999
Year Ended (date of inception)
December 31 to December 31
2000 1999
-----------------------------------
Provision (benefit) at federal
statutory rate $ (559,000) $ (41,000)
Effect of difference in
Canadian tax rates (190,000) (14,000)
Stock compensation and other permanent
differences 63,000 -
Increase in valuation allowance 686,000 (55,000)
---------------------------------
$ - $ -
=================================
The Company evaluates its valuation allowance requirements based on
projected future operations. When circumstances change and this causes a
change in management's judgement about the recoverability of deferred tax
assets, the impact of the change on the valuation allowance is reflected in
current income.
At December 31, 2000, the Company has operating losses carried forward for
income tax purposes in Canada of approximately $1,110,000 which may be
applied to reduce future years' taxable income. The losses expire as
follows:
2006 - $ 90,000
2007 - $ 1,020,000
----------------------------------------------------------------------------
9. Reverse Acquisition with Barrington Laboratories, Inc.
On December 18, 2000, the Company entered into an agreement with
Barrington Laboratories, Inc. whereby Barrington would acquire all the
issued and outstanding common stock of the Company in exchange for 26
million voting shares of Barrington common stock. Barrington was
incorporated in the State of Nevada on August 6, 1998 and was inactive
from incorporation to the acquisition date. The acquisition closed and
the shares were exchanged on January 2, 2001. The acquisition will be
accounted for in subsequent fiscal periods using the purchase method of
accounting as applicable to reverse acquisitions because the former
stockholders of the Company controlled Barrington's common stock
immediately upon conclusion of the transaction. Under reverse acquisition
accounting, the post-acquisition entity will be accounted for as a
recapitalization of the Company. Common stock issued by Barrington will
be recorded at the fair value of Barrington's net assets at the acquisition
date. Further, the stockholders of the Company agreed that they would not
request repayment on any stockholders' loans outstanding on completion of
the acquisition. (Note 5)
F-13
===========================================================================
Modern Groove Entertainment International, Inc.
(A development stage company)
Notes to Consolidated Financial Statements
(Expressed in US Dollars)
December 31, 2000
----------------------------------------------------------------------------
9. Reverse Acquisition with Barrington Laboratories, Inc. -- Continued
Unaudited Pro-forma revenue, net loss and loss per share assuming the
transaction had been completed on September 20, 1999 (date of inception)
is as follows:
Period from
September 20, 1999
Year Ended (date of inception)
December 31 to December 31
2000 1999
----------------------------------
Revenue $ - $ -
Net loss for the period (1,658,654) (119,265)
Loss per share $ (0.06) $ (0.01)
The continuing company has retained December 31 as its fiscal year end.
Concurrent with the acquisition, Barrington changed its legal name to
Modern Groove Entertainment, Inc.
F-14
Exhibit 1.3
-----------
Unaudited Pro Forma Consolidated Financial Information
------------------------------------------------------
The Unaudited Pro Forma Consolidated Financial Information reflects financial
information which gives effect to the acquisition of the 20,000,000
outstanding common shares of Modern Groove Entertainment International, Inc.
("Modern Groove") in exchange for 26,000,000 shares of common stock of the
Registrant.
The Pro Forma Consolidated Statements included herein reflect the use of the
purchase method of accounting for the above transaction. The acquisition of
Modern Groove (which closed on January 2, 2001) was accounted for as a reverse
acquisition as the former stockholders of Modern Groove controlled the voting
common shares of the Company immediately after the acquisition. Such
financial information has been prepared from, and should be read in
conjunction with, the historical financial statements and notes thereto
included elsewhere in this 8-K current report as well as the 10-QSB quarterly
reports and the 10-KSB annual report of the Registrant.
The Pro-forma Consolidated Balance Sheet gives effect to the transaction as if
it had occurred on December 31, 2000. The Pro Forma Consolidated Statement of
Operations gives effect to the transaction as if it had occurred at the
beginning of the earliest period presented, combining the results of the
Registrant for the twelve-month period ended September 30, 2000 and Modern
Groove for the year ended December 31, 2000.
The Pro Forma Consolidated Financial Information is unaudited and is not
necessarily indicative of the consolidated results which actually would have
occurred if the above transactions had been consummated at the beginning of
the periods presented; nor does it purport to present the results of
operations for future periods.
F-1
===========================================================================
Modern Groove Entertainment International, Inc.
(A Development Stage Company)
Pro-Forma Consolidated Balance Sheet
(Expressed in US dollars)
(Unaudited)
Modern Pro-forma
December 31, 2000 Groove Barrington Adjustments Balance
----------------------------------------------------------------------------
Assets
Current
Cash $ - $ 18,923 $ - $ 18,923
Cash in trust 100,155 - - 100,155
Receivables 9,109 - - 9,109
Prepaid expenses 8,623 - - 8,623
------------------------------------------------
117,887 18,923 - 136,810
Property and equipment 404,420 - - 404,420
Software development costs 238,727 11,716 (11,716)(1) 238,727
------------------------------------------------
$ 761,034 $ 30,639 $(11,716) $ 779,957
===============================================================================
Liabilities and Stockholders' Equity
Liabilities
Current
Bank overdraft $ 49,579 $ - $ - $ 49,579
Loan payable 83,463 - - 83,463
Accounts payable 228,117 360 - 228,477
Accrued liabilities 19,196 - - 19,196
-------------------------------------------------
380,355 360 - 380,715
-------------------------------------------------
Stockholders' equity
Capital stock
Authorized
5,000,000 preferred shares
200,000,000 common shares, $0.001 par value
Issued
29,750,000 common shares 200,000 3,751 (174,001)(2) 29,750
Additional paid-in capital 2,067,446 43,784 174,001 (2) 2,256,259
(28,972)(3)
Deficit accumulated in the
development stage (1,763,898) (17,256) (11,716)(1)(1,763,898)
28,972 (3)
Accumulated other
comprehensive income-
Foreign exchange
translation loss (2,869) - - (2,869)
-------------------------------------------------
500,679 30,279 (11,716) 519,242
Subscriptions receivable (120,000) - - (120,000)
-------------------------------------------------
380,679 30,279 (11,716) 399,242
-------------------------------------------------
$ 761,034 $ 30,639 $ (11,716) $ 779,957
===============================================================================
The accompanying notes are an integral part of these pro-forma consolidated
financial statements.
F-2
===========================================================================
Modern Groove Entertainment International, Inc.
(A Development Stage Company)
Pro-Forma Consolidated Statement of Operations
(Expressed in US dollars)
(Unaudited)
Pro-forma
For the year Modern Consolidated
ended December 31, 2000 Groove Barrington Adjustments Balance
----------------------------------------------------------------------------
Expenses
Advertising and promotion $ 28,963 $ - $ - $ 28,963
Depreciation 170,901 - - 170,901
Communication 45,609 - - 45,609
Computer technology 10,867 - - 10,867
Contractor fees 19,343 - - 19,343
Employee recruitment 42,421 - - 42,421
Equipment rental 6,543 - - 6,543
Insurance 6,053 - - 6,053
Office and miscellaneous 78,895 2,305 78,895
Professional fees 86,106 - - 86,106
Rent 64,958 - - 64,958
Repairs and maintenance 3,078 - - 3,078
Research and development 316,270 - - 316,270
Salaries and benefits 614,919 - - 614,919
Travel 136,339 - - 136,339
Utilities 13,368 - - 13,368
-----------------------------------------------
Net loss for the year $ 1,644,633 $ 2,305 $ - $ 1,646,938
==============================================================================
Loss per share - basic
and diluted $ (0.09) $ - $ $ (0.06)
======================= =============
Weighted average
shares outstanding 18,854,167 3,750,000 28,260,417
======================= =============
The accompanying notes are an integral part of these pro-forma consolidated
financial statements.
F-3
=========================================================================
Modern Groove Entertainment International, Inc.
(A Development Stage Company)
Notes to the Pro-Forma Consolidated Financial Statements
(Expressed in US dollars)
(Unaudited)
December 31, 2000
--------------------------------------------------------------------------
1. Capitalized development costs of the Registrant were assigned no value on
the date of the reverse acquisition for the purposes of purchase price
allocation.
2. To adjust share capital on reverse acquisition to reflect the par value
of the Registrant's common stock.
3. To reflect the recapitalization of Modern Groove with the book value of
net assets of the Registrant at the acquisition date. Because the
acquisition was accounted for as a reverse acquisition (or a
recapitalization) there was neither goodwill recognized nor any adjustments
to the book value of the net assets of the Registrant that would affect
the pro-forma statement of operations.
F-4