<PAGE> 1
U.S. Securities And Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to _________________
Commission file number 0-28154
Music Tones Ltd.
---------------------------------------
(Exact name of small business issuer as
specified in its charter)
Colorado 84-1337504
-------------------------------- ------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
12146 East Amherst Circle, Aurora, Colorado 80014
--------------------------------------------------
(Address of principal executive offices)
(303) 695-9554
--------------------------
(Issuer's telephone number)
Not applicable
--------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes No X
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by court. Yes _____ No _____
APPLICABLE ONLY TO CORPORATE ISSUERS:
<PAGE> 2
State the number of shares outstanding of each of the issuers classes of
common equity, as of the latest practicable date: 36,000,000 shares of Common
Stock, $.0001 par value per share, outstanding as of June 3, 1996.
Transitional Small Business Disclosure Format (check one);
Yes No X
----- ---
<PAGE> 3
MUSIC TONES LTD.
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
PART I--FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Independent Auditor's Report . . . . . . . . . . . . . . . . 1
Balance Sheet - March 31, 1996. . . . . . . . . . . . . . . . 2
Statement of Operations - For the Three Months
Ended March 31, 1996 . . . . . . . . . . . . . . . . . 3
Statement of Stockholders' Equity - For the
Period from October 26, 1987 (Inception)
through March 31, 1996 . . . . . . . . . . . . . . . . 4
Statement of Cash Flows - For the Three Months
Ended March 31, 1996 . . . . . . . . . . . . . . . . . 5
Notes to Financial Statements . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis or
Plan of Operation . . . . . . . . . . . . . . . . . . 7
PART II--OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . 8-9
</TABLE>
<PAGE> 4
JANET LOSS, C.P.A., P.C.
9101 EAST KENYON AVENUE, SUITE 2000
DENVER, COLORADO 80237
(303) 220-0227
Board of Directors
Music Tones Ltd.
Aurora, Colorado 80014
I have audited the accompanying balance sheet of Music Tones Ltd. (a
development stage enterprise) as of March 31, 1996, and the related statements
of operations, changes in stockholders' equity and cash flows for the three
months ended March 31, 1996. These financial statements are the responsibility
of the Company's management. My responsibility is to express an opinion on
these financial statements based on my audit.
I conducted my audit in accordance with generally accepted accounting
standards. These standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. I believe that my audit provides a
reasonable basis for my opinion.
In my opinion, based upon my examination, the financial statements referred to
above present fairly, in all material respects, the financial position of Music
Tones Ltd. as of March 31, 1996, in conformity with generally accepted
accounting principles.
/s/ JANET LOSS
- ------------------------
Janet Loss, C.P.A., P.C.
May 15, 1996
1
<PAGE> 5
MUSIC TONES LTD.
(A Development Stage Enterprise)
BALANCE SHEET
March 31, 1996
ASSETS
<TABLE>
<S> <C> <C>
CURRENT ASSETS:
Cash in checking $ 5,400
Notes Receivable (Note IV) $ 5,000
---------
TOTAL CURRENT ASSETS $ 10,400
OTHER ASSETS
Organization Costs,
net of amortization 0
---------
TOTAL ASSETS $ 10,400
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable $ 4,453
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred Stock, $.01 par value,
10,000,000 shares authorized, no
shares issued and outstanding -
Common Stock, $.0001 par value,
100,000,000 shares authorized
36,000,000 shares issued and
outstanding 3,600
Additional paid-in-capital 12,000
(Deficit) accumulated during the
development stage (9,653)
---------
TOTAL STOCKHOLDERS' EQUITY 5,947
---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 10,400
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE> 6
MUSIC TONES LTD.
(A Development Stage Enterprise)
STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 1996
<TABLE>
<S> <C>
INCOME FROM OPERATIONS $ -
---------
OPERATING EXPENSES:
Audit Fees 600
Filing Fees 200
Legal Fees 8,000
Office Expenses 178
---------
TOTAL OPERATING EXPENSES 8,978
---------
NET (LOSS) $ (8,978)
=========
NET (LOSS) PER SHARE $ N/A
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 7
MUSIC TONES LTD.
(A Development Stage Enterprise)
STATEMENT OF STOCKHOLDERS' EQUITY
From (Inception) October 26, 1987, through March 31, 1996
<TABLE>
<CAPTION>
Additional Deficit Accumulated Total
Common Stock Common Stock Paid-In during the Stockholders'
Number of Shares Amount Capital Development Stage Equity
---------------- ---------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
Balance
October 26, 1987 -- $ -- $ -- $ -- $ --
March 18, 1990,
600 shares issued,
for services
rendered; no par
value 600 -- -- -- --
March 22, 1992,
1,600 shares issued
for consulting
services, no par
value 1,600 -- -- -- --
December 31, 1992,
Amortization of
organization costs -- -- -- (75) (75)
March 21, 1993,
800 shares issued for
services rendered, no
par value 800 -- -- -- --
March 20, 1996,
15,000 shares issued
for cash and notes,
no par value 15,000 15,000 -- -- 15,000
Stock split,
2000 to 1 for common
stock, $.0001 par
value 35,982,000 (11,400) 12,000 (600) --
Net (loss) for the
Three Months Ended
March 31, 1996 -- -- -- (8,978) (8,978)
----------------------------------------------------------------------------------------------------
Balance,
March 31, 1996 36,000,000 $ 3,600 $ 12,000 $ (9,653) $ 5,947
====================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 8
MUSIC TONES LTD.
(A Development Stage Enterprise)
STATEMENT OF CASH FLOWS
-----------------------
For the Three Months Ended March 31, 1996
Cash Flows From Operating Activities:
Net (loss) $ (8,978)
Decrease in Organization Costs (75)
Increase in Payables, Stockholder 4,453
---------
Net cash used by Operating Activities (4,600
---------
Cash Flows From Financing Activities:
- ------------------------------------
Proceeds from issuance of stock 15,000
Increase in Notes Receivable (5,000)
Net cash provided by Financing Activities 10,000
---------
NET INCREASE IN CASH $ 5,400
CASH, BEGINNING OF THE PERIOD 0
--------
CASH, END OF THE PERIOD $ 5,400
========
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 9
MUSIC TONES LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
NOTE I - HISTORY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Music Tones Ltd., a Colorado Corporation, was incorporated October 26, 1987,
and since its inception, the Company has been in the development state. The
original name of the corporation was The Trader's Edge Ltd.; the name change
occurred March 20, 1996.
Year End
The Company has elected a calendar year-end.
Accounting Method
The company records income and expenses on the accrual method.
Organization Costs
Costs incurred in organizing the Company are being amortized over a
sixty-month period.
NOTE II - CAPITAL STOCK
On March 20, 1996, the corporation issued a 2,000 to 1 forward stock split for
common stock. Thus, the total common stock authorized changed from 50,000 to
100,000,000; and from no par value to $.0001 par value.
NOTE III - RELATED PARTIES
The Company has issued 3,000 shares of stock for services rendered from March
18, 1990 to March 21, 1993.
NOTE IV - NOTES RECEIVABLE
On March 20, 1996, 15,000 shares of stock was issued in consideration of
$10,000 cash and two non-interest bearing promissory notes, each in the
principal amount of $2,500. These notes were paid on May 13, 1996.
6
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Plan of Operations
Since its inception, Music Tones Ltd. (hereinafter referred to as the
"Company"), which is now known as "Music Tones Ltd.," has conducted no business
operations except for organizational activities. As of March 31, 1996, the
Company had no item of revenue and operating expenses for legal, audit and
filing fees and office expenses aggregating $8,978. Accordingly, the Company
realized a net loss from operations in the amount of $(8,978) for the quarter
ended March 31, 1996. The Company proposes to engage in business as a talent
or booking agency for musical artists and groups, various types of comedy acts
and other artists and performers whose performances are targeted, primarily, to
the young adult under 25 years of age. Management expects that the Company
will initially obtain contracts with performing artists or groups through the
concert promotion and production activities of 2 B Announced Presents and the
contacts with musicians, musical groups, agents, directors, producers and
others which Mr. Daniel C. Steinberg, the Company's President, has developed as
a concert promoter and producer since 1989. If the Company is unable to
generate sufficient revenue from operations, management intends to explore all
available alternatives for debt and/or equity financing including but not
limited to private and public securities offerings.
Financial Condition, Capital Resources and Liquidity
At March 31, 1996, the Company had assets totaling $10,400 and $4,453 in
liabilities. Since the Company's inception, it has received $10,000 in cash
contributed as consideration for the issuance of shares of common stock, $.0001
par value per share (hereinafter referred to as the "Common Stock"), and an
additional $5,000 from the payment by two Company shareholders on May 8 and May
13, 1996, respectively, of non-interest bearing promissory notes in the
aggregate principal amount of $5,000 collateralized by 15,000,000 shares of the
Company's Common Stock, after giving effect to the 2,000:1 forward split
in the Company's Common Stock effective March 28, 1996, owned by each
shareholder.
Management expects, without assurance, that the Company will be able to
satisfy its cash requirements for a period of six months to one year from the
date hereof because it is engaged in a service business operated, at present,
on a limited scale from the home of its President and at minimal expense.
While Company management believes that the Company will require an infusion of
capital upon the expiration of the next six to twelve months approximately, the
Company may be required to raise additional funding at an earlier time, i.e.,
in the next six months to one year, depending upon its success in obtaining,
and realizing revenues from, management contracts with musical artists or
groups, comedy acts or other artists or performers and because the Company may
incur significant unanticipated expenditures which deplete its capital at a
more rapid rate. Nevertheless, for the foreseeable future over the period of
six months to one year from the date hereof, management anticipates that the
Company will only be able to implement its business plan on a limited scale
and, accordingly, the Company is not expected to achieve a level of revenues or
profits from operations which would eliminate the need for additional capital
after the expiration of such period.
The Company has no potential capital resources.
7
<PAGE> 11
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company knows of no legal proceedings to which it is a party or to
which any of its property is the subject which are pending, threatened or
contemplated or any unsatified judgments against the Company.
ITEM 2. CHANGES IN SECURITIES.
(a) No instruments defining the rights of shareholders of the
Company's Common Stock have been modified.
(b) No rights evidenced by the Company's Common Stock have been
limited or qualified by the issuance or modification of any other class of
securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
The Company has no indebtedness as of the date of this report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of the Company's shareholders, by means
of the solicitation of proxies or otherwise, during the quarter ended March 31,
1996, covered by this report.
ITEM 5. OTHER INFORMATION.
There is no information with respect to which information is not otherwise
called for by this form.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Index to Exhibits.
<TABLE>
<CAPTION>
Exhibit Number As
Listed in Document Incor-
Exhibit No. Description porated by Reference
- ------------- ---------------------------------------------- -------------------------
<S> <C> <C>
Ex-3(i)* Articles of Incorporation of The Trader's Edge 2.1
Ltd. filed October 28, 1987.
Ex-3(ii) Bylaws of The Trader's Edge Ltd. 2.4
Ex-3(iii) Articles of Amendment to the Articles of 2.2
Incorporation of The Trader's Edge Ltd.
filed March 28, 1996.
</TABLE>
8
<PAGE> 12
<TABLE>
<S> <C> <C>
Ex-3(iv) Amended and Restated Articles of Incor- 2.3
poration of Music Tones Ltd. filed April
2, 1996.
Ex-27 Financial Data Schedule
- ------------------
</TABLE>
*Incorporated herein by reference to the Amendment No. 1 to the Form
10-SB Registration Statement of Music Tones Ltd. filed May 10, 1996, a
confirming copy of which was filed on the Commission's Edgar System on May 28,
1996.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended March
31, 1996, for which this report is filed.
9
<PAGE> 13
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
MUSIC TONES LTD. (Registrant)
Dated: June 4, 1996 By: /s/DANIEL C. STEINBERG
---------------------------------
Daniel C. Steinberg, President
10
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description Page
- ------- ------------------- ----
<S> <C> <C>
Ex-27 Financial Data Schedule
</TABLE>
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE THREE
MONTHS ENDED MARCH 31, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 5,400
<SECURITIES> 0
<RECEIVABLES> 5,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,400
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,400
<CURRENT-LIABILITIES> 4,453
<BONDS> 0
15,600
0
<COMMON> 0
<OTHER-SE> (9,653)
<TOTAL-LIABILITY-AND-EQUITY> 10,400
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 8,978
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (8,978)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,978)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,978)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
