<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
Amendment No. 1
Annual Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Fiscal Year Ended: January 31, 2000
Commission File No. 0-28759
MONUMENT GALLERIES, INC.
(Exact Name of Small Business Issuer as specified in its charter)
COLORADO 84-1461919
(State or other (IRS Employer File Number)
jurisdiction of
incorporation)
3225 East 2{nd} Ave.
DENVER, COLORADO 80206
(Address of principal executive offices) (zip code)
(303) 393-1600
(Registrant's telephone number, including area code)
Securities to be Registered Pursuant to Section 12(b) of the Act: None
Securities to be Registered Pursuant to Section 12(g) of the Act:
Common Stock, $.0.001 per share par value
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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: [X] No: [ ]
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is contained in this form and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB. [ ]
State issuer's revenues for its most recent fiscal year $-0-. The
aggregate market value of the voting stock of the Registrant held by non-
affiliates as of January 31, 2000 was not able to be determined since the
Registrant's stock has not ever traded. The number of shares outstanding of the
Registrant's common stock, as of the latest practicable date, April 6, 2000, was
1,127,625, which is after taking into account a one and one half-for-one stock
dividend effective April 4, 2000.
<PAGE> 2
References in this document to "us," "we," or "the Company" refer to
Monument Galleries, Inc.
PART I
(a) GENERAL DEVELOPMENT OF BUSINESS
We are a Colorado corporation. Our principal business address is 3225 East
2{nd} Ave., Denver, Colorado 80206. Our business plan is to develop, own and
operate a chain of Western art galleries. At the present time, our first
proposed operation is at 3225 East 2{nd} Ave., Denver, Colorado 80206, which is
our principal business address.
We were incorporated under the laws of the State of Colorado on May 15,
1998. We are presently in the development stage and have not commenced active
operations.
In 1998, we acquired the trade name "Santa Fe Trail Art Gallery" and the
assets and inventory of the Santa Fe Art Gallery and Museum Store (the
"Gallery"). As of January 31, 1999, we sold this Gallery to a third party entity
for the assumption of debt of the assets of the Gallery.
We have not been subject to any bankruptcy, receivership or similar
proceeding.
(b) NARRATIVE DESCRIPTION OF THE BUSINESS
GENERAL
We have had limited activity since inception. However, currently, we carry
no material inventories and have no accounts receivable. No independent market
surveys have ever been conducted to determine demand for our products and
services. Since inception, we have had only limited operations and generated
limited revenues through January 31, 2000. We had no profit. Our fiscal year end
is January 31st.
ORGANIZATION
We are comprised of one corporation with no subsidiaries or parent
entities.
We are filing this Form 10-SB on a voluntary basis because we plan to
engage in equity and/or debt financing in the foreseeable future and believe
that our fund raising will be enhanced by having a record of regular disclosure
under the Securities Exchange Act of 1934 (the "1934 Act"). We have no plans in
the foreseeable future, under any circumstances, to terminate our registration
under the 1934 Act.
(c) OPERATIONS
Since inception, we have been dedicated to developing a chain of art
galleries specializing in Southwestern Art. We plan to begin with one gallery
and to refine our concept. Once we have gained experience with our first
gallery, we plan to open additional galleries. We do not know at this time
whether our concept will prove to be successful and whether we can develop this
concept into a chain of galleries.
We will test our concept with our first location (the "Store"). The Store
is planned to carry the art and sculpture works of a variety of Southwestern
artists, as wells as Native American tools and artifacts, storyteller dolls, and
furniture and accessories. The Store also plans to do framing of art, with the
actual work being contracted out to an unaffiliated third party. We may also
publish the art work of artists.
Our plan in publishing the art work of artists will be to find new or
unknown artists, place them under exclusive contract, publish their works
through prints or similar reproductive media, and to seek to profit from the
increased recognition of and demand for these artists' works.
A typical project would involve signing an exclusive contract with an
artist, printing an art work in an edition of approximately two thousand
<PAGE> 3
prints, and retailing the prints at approximately $150 per print. As the artist
becomes more recognized, the price of the prints would increase, along with
profits to us.
During this fiscal year, we plan, in addition to developing the Store, to
search for and to identify potential artists and to publish their art works. As
of the date of this Registration Statement, we are not negotiating any rights to
publish art works. In fact, to date, our primary activity has been directed
solely towards organizational efforts.
In addition we plan to expand through acquisition. We will not only look at
our present industry but will reserve the right to investigate and, if
warranted, merge with or acquire the assets or common stock of an entity
actively engaged in business which generates revenues. We will seek
opportunities for long-term growth potential as opposed to short-term earnings.
As of the date hereof, we have no business opportunities under investigation.
None of our officers, directors, promoters or affiliates have engaged in any
preliminary contact or discussions with any representative of any other company
regarding the possibility of an acquisition or merger between us and such other
company.
With our acquisition of Real Estate Opportunities, Inc. in April, 2000, we
anticipate the development of substantial revenues and plan to be profitable in
the next fiscal year. We also plan to evaluate our business focus and may look
more to the development of real estate projects than to the development of a
chain of Stores. As of this date, we have not made a final decision on our
focus.
We have two part-time employees, our President and our Secretary-
Treasurer. Our employees have agreed to allocate a portion of their time to our
activities, without compensation. These officers anticipate that our business
plan can be implemented by their collectively devoting approximately twenty
hours per month to our business affairs. Consequently, conflicts of interest may
arise with respect to the limited time commitment of such officers. These
officers will use their best judgements to resolve all such conflicts.
(d) MARKETS
Our marketing plan is focused initially on developing our first Store and
the activities surrounding this Store. We will use the efforts of our officers
and directors to market our services.
(e) RAW MATERIALS
The use of raw materials is not material factor in our operations and is
not expected to be material factor in the future.
(f) CUSTOMERS AND COMPETITION
At the present time, we expect to be an insignificant participant among art
galleries. There are a number of established galleries, virtually all of which
are larger and better capitalized than we are and/or have greater personnel
resources and technical expertise. In view of our combined extremely limited
financial resources and limited management availability, we believe that we will
continue to be at a significant competitive disadvantage compared to our
competitors. There can be no guarantee that we will ever generate substantial
revenues or ever be profitable.
(g) BACKLOG
At January 31, 2000, we had no backlogs.
(h) EMPLOYEES
At as of the date hereof, we have two part-time employees who receive no
salaries. We do not plan to hire employees in the future.
<PAGE> 4
(i) PROPRIETARY INFORMATION
We own no proprietary information.
(j) GOVERNMENT REGULATION
We are not subject to any material governmental regulation or approvals.
(k) RESEARCH AND DEVELOPMENT
We have never spent any amount in research and development activities.
(l) ENVIRONMENTAL COMPLIANCE
We are not subject to any costs for compliance with any environmental laws.
(m) SUBSEQUENT EVENT
On April 6, 2000, our Board of Directors approved our acquisition of all of
the issued and outstanding shares of Real Estate Opportunities, Inc., a private
Colorado corporation (REO). As a result, REO will become a wholly-owned
subsidiary of us. REO is in the business of owning and managing real estate
properties. We will issue a total of 5,482,977 of our common shares in exchange
for all of the issued and outstanding common shares of REO. We have not yet
issued the common share in this transaction but expect to do so within the next
thirty days.
ITEM 2. DESCRIPTION OF PROPERTIES.
Our business office is located at 3225 East 2{nd} Ave., Denver, Colorado
80206. We pay $300 per month in rent for this office space, which is occupied by
our President, F. Jeffrey Krupka, under month-to-month lease plus the actual
expenses of telephone and fax and $200 per month for accounting services. We
have no properties.
ITEM 3. LEGAL PROCEEDINGS.
No legal proceedings of a material nature to which we are a party were
pending during the reporting period, and we know of no legal proceedings of a
material nature pending or threatened or judgments entered against any of our
directors or officers in their capacity as such.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
We did not submit any matter to a vote of security holders through
solicitation of proxies or otherwise during the fourth quarter of the fiscal
year covered by this report.
<PAGE> 5
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(a) PRINCIPAL MARKET OR MARKETS
Our securities have never been listed for trading on any market
and are not quoted at the present time. We have applied to trade on the NASD
Over-the-Counter Bulletin Board. However, at the present time, we do not know
where secondary trading will eventually be conducted. The place of trading, to a
large extent, will depend upon our eventual size. To the extent, however, that
trading will be conducted in the Over-the-Counter market in the so-called "pink
sheets" or the NASD's "Electronic Bulletin Board," a shareholder may find it
more difficult to dispose of or obtain accurate quotations as to price of our
securities. In addition, The Securities Enforcement and Penny Stock Reform Act
of 1990 requires additional disclosure and documentation related to the market
for penny stock and for trades in any stock defined as a penny stock.
(b) APPROXIMATE NUMBER OF HOLDERS OF COMMON STOCK
As of January 31, 2000, we had a total of 751,750 of our common shares
outstanding. On April 4, 2000, our Board of Directors approved a one and one
half-for-one stock dividend effective April 4, 2000. As a result, we now have a
total of 1,127,625 common shares issued and outstanding. The number of holders
of record of our common stock at that date was approximately sixty-five.
(c) DIVIDENDS
Holders of common stock are entitled to receive such dividends as may be
declared by our Board of Directors. No dividends on the common stock were paid
by us during the periods reported herein nor do we anticipate paying dividends
in the foreseeable future.
(d) THE SECURITIES ENFORCEMENT AND PENNY STOCK REFORM ACT OF 1990
The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure and documentation related to the market for penny stock
and for trades in any stock defined as a penny stock. Unless we can acquire
substantial assets and trade at over $5.00 per share on the bid, it is more
likely than not that our securities, for some period of time, would be defined
under that Act as a "penny stock." As a result, those who trade in our
securities may be required to provide additional information related to their
fitness to trade our shares. Also, there is the requirement of a broker-dealer,
prior to a transaction in a penny stock, to deliver a standardized risk
disclosure document that provides information about penny stocks and the risks
in the penny stock market. Further, a broker-dealer must provide the customer
with current bid and offer quotations for the penny stock, the compensation of
the broker-dealer and its salesperson in the transaction, and monthly account
statements showing the market value of each penny stock held in the customer's
account. These requirements present a substantial burden on any person or
brokerage firm who plans to trade our securities and would thereby make it
unlikely that any liquid trading market would ever result in our securities
while the provisions of this Act might be applicable to those securities.
(e) BLUE SKY COMPLIANCE
The trading of penny stock companies may be restricted by the securities
laws ("Blue Sky" laws) of the several states. Management is aware that a number
of states currently prohibit the unrestricted trading of penny stock companies
absent the availability of exemptions, which are in the discretion of the
states' securities administrators. The effect of these states' laws would be to
limit the trading market, if any, for our shares and to make resale of shares
acquired by investors more difficult.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Forward-Looking Statements
The following discussion contains forward-looking statements regarding our
Company, its business, prospects and results of operations that are subject to
certain risks and uncertainties posed by many factors and events that could
cause our actual business, prospects and results of operations to differ
materially from those that may be anticipated by such forward-looking
statements. Factors that may affect such forward-looking statements include,
without limitation: our ability to successfully develop new products for new
markets; the impact of competition on our revenues, changes in law or regulatory
requirements that adversely affect or preclude clients from using our products
for certain applications; delays our introduction of new products or services;
and our failure to keep pace with emerging technologies.
When used in this discussion, words such as "believes", "anticipates",
"expects", "intends" and similar expressions are intended to identify
forward-looking statements, but are not the exclusive means of identifying
<PAGE> 6
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date of this
report. Our Company undertakes no obligation to revise any forward-looking
statements in order to reflect events or circumstances that may subsequently
arise. Readers are urged to carefully review and consider the various
disclosures made by us in this report and other reports filed with the
Securities and Exchange Commission that attempt to advise interested parties of
the risks and factors that may affect our business.
Results of Operations
We have generated minimal revenues from operations since inception. We were
not profitable for the year ended January 31, 2000. We had total revenues of
$46,087 since inception but no revenues for the year ended January 31, 1998.
Total operating expenses from inception were $161,220, compared to $14,974 for
the twelve months ended January 31, 2000. Total loss from operations inception
were $115,133 compared to a loss of $14,974 for the year ended January 31, 2000.
The major components of general and administrative expenses are legal,
accounting, rent and other expenses for the year ended January 31, 2000 and
commissions, consulting, wages, and related expenses and other expenses for the
period from May 15, 1998 (inception) through January 31, 1999.
Costs of sales include all direct costs incurred in the process of
operating. The difference between our gross revenues and cost of goods is our
gross profit.
Net loss from operations from inception was $85,801, compared to $18,374
for the year ended January 31, 2000.
The principal difference for the year ended January 31, 2000 compared to
our operations from inception was the sale of our business assets in 1999. As of
the end of our fiscal year, we had not yet replaced these operations which had
terminated so that there were no revenues for fiscal year 2000. With our
acquisition of REO in April, 2000, we anticipate the development of substantial
revenues and plan to be profitable in the next fiscal year. We also plan to
evaluate our business focus and may look more to the development of real estate
projects than to the development of a chain of Stores. As of this date, we have
not made a final decision on our focus.
Liquidity and Capital Resources
Net cash increased to $14,066 as of January 31, 2000, compared to $140 as
of January 31, 1999. The Company sold 400,000 shares of common stock to Le Fonds
Deux Mille Premier LLC for $30,000 on September 13, 1999.
Total current liabilities at January 31, 2000 were $6,050, which
principally reflected an indebtedness to a shareholder.
We have no accounts receivable or prepaid expenses for either period.
Accounts payable at January 31, 2000 was $6,000, which principally
reflected an indebtedness owed to a shareholder.
We have sustained losses since inception. Our operating expenses have been
relatively stabile during this time. In any case, we try to operate with minimal
overhead. Our primary activity will be to seek revenues, which we believe we
have done with the acquisition of REO. If we succeed in generating sufficient
revenues, we will be profitable. We cannot guarantee that this will ever occur.
Our plan is to build our Company in any manner which will be successful. To that
end, we may also look for other acquisition candidates, although we have
concluded no additional acquisitions and have spoken with no other potential
candidates.
We feel that we have inadequate working capital to pursue any business
opportunities other than absorbing REO, our acquisition candidate. During the
next twelve months, we plan to investigate an offering of our securities,
whether through a private placement or a public offering. At the present time,
we have no firm arrangements with regard to either type of offering. We do not
intend to pay dividends in the foreseeable future.
ITEM 7. Financial Statements.
<PAGE> 7
MONUMENT GALLERIES, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
WITH
REPORT OF INDEPENDENT ACCOUNTANTS
JANUARY 31, 2000
PREPARED BY:
CORDOVANO AND HARVEY, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
DENVER, COLORADO
<PAGE> 8
To the Board of Directors and Shareholders
Monument Galleries, Inc.
REPORT OF INDEPENDENT ACCOUNTANTS
We have audited the balance sheet of Monument Galleries, Inc. (A Development
Stage Company) as of January 31, 2000, and the related statements of operations,
shareholders' equity and cash flows for the year 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides 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 Monument Galleries, Inc. as of
January 31, 2000, and the related statements of operations and cash flows for
the year then ended, in conformity with generally accepted accounting
principles.
Cordovano and Harvey, P.C.
Denver, Colorado
March 29, 2000
F-2
<PAGE> 9
To the Board of Directors and Shareholders
Monument Galleries, Inc.
REPORT OF INDEPENDENT ACCOUNTANTS
We have audited the balance sheet of Monument Galleries, Inc. as of January 31,
1999 (not separately included herein), and the related statements of operations,
shareholders' equity and cash flows for the initial period May 15, 1998 through
January 31, 1999. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides 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 Monument Galleries, Inc. as of
January 31, 1999, and the related statements of operations and cash flows for
the initial period May 15, 1998 through January 31, 1999, in conformity with
generally accepted accounting principles.
Kish, Leake & Associates, P.C.
Certified Public Accountants
Englewood, Colorado
December 6, 1999
F-3
<PAGE> 10
ASSETS
<TABLE>
<S> <C>
Current assets:
Cash $ 14,066
=========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts and notes payable:
Trade accounts payable $ 50
Indebtedness to related party (Note B) 6,000
---------
Total current liabilities 6,050
---------
Shareholders' equity (Note D):
Preferred stock, $0.001 par value; 1,000,000 shares authorized,
-0- issued and outstanding --
Common stock, $0.001 par value, 10,000,000 shares authorized,
751,750 shares issued and outstanding 752
Additional paid-in-capital 111,439
Deficit accumulated during the development stage (18,374)
Retained deficit (85,801)
---------
Total shareholders' equity 8,016
---------
$ 14,066
=========
</TABLE>
F-4
<PAGE> 11
MONUMENT GALLERIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE FOR THE PERIOD
YEAR FROM MAY 15, 1998
ENDED (INCEPTION) THROUGH
JANUARY 31, JANUARY 31,
2000 1999
----------- -------------------
<S> <C> <C>
Net sales ............................................................................... $ -- $ 46,087
--------- ---------
Operating expenses:
Cost of sales ....................................................................... -- 35,449
General and administrative .......................................................... 12,974 91,454
General and administrative, related parties (Note B) ................................ 2,000 --
General and administrative, stock-based
compensation (Note D) ........................................................... -- 34,317
--------- ---------
14,974 161,220
--------- ---------
Loss from operations ............................................... (14,974) (115,113)
Non-operating income:
Gain from sale of business assets (Note A) .......................................... -- 29,332
--------- ---------
Loss before income tax and cumulative effect of change
in accounting principle ......................................................... (14,974) (85,801)
Income taxes (Note C) ................................................................... -- --
--------- ---------
Loss before cumulative effect of change in accounting principle ..................... (14,974) (85,801)
Cumulative effect of change in accounting principle,
net of income taxes (Note A) .................................................... (3,400) --
--------- ---------
Net loss ........................................................... $ (18,374) $ (85,801)
========= =========
Net loss per share:
Loss before cumulative effect of change in accounting principle ..................... $ (0.03) $ (0.25)
Cumulative effect of change in accounting principle ................................. (0.01) --
--------- ---------
Net loss per basic common share .................................... $ (0.04) $ (0.25)
========= =========
Number of shares outstanding for purposes
Of computing net loss per basic and diluted share ................................... 518,417 343,375
========= =========
</TABLE>
F-5
<PAGE> 12
MONUMENT GALLERIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
--------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
------ ------- ------- --------
<S> <C> <C> <C> <C>
May 15, 1998 (inception) ................... -- $ -- -- $ --
Sale of common stock
(Note D) ................................ -- -- 205,750 206
Common stock issued for
services, valued at the
fair value of the stock
(Note D) ................................... -- -- 224,000 224
Shares cancelled ................................. -- -- (78,000) (78)
Net loss for the period .......................... -- -- -- --
---- ------- ------- --------
January 31, 1999 ........................... -- -- 351,750 352
Sale of common stock
(Note D) ................................ -- -- 400,000 400
Contributed capital .............................. -- -- -- --
Net loss for the year ............................ -- -- -- --
---- ------- ------- --------
January 31, 2000 ........................... -- $ -- 751,750 $ 752
==== ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
ADDITIONAL DEFICIT ACCUMULATED
PAID-IN DURING DEVELOPMENT RETAINED
CAPITAL STAGE (NOTE A) DEFICIT TOTAL
---------- ------------------- -------- --------
<S> <C> <C> <C> <C>
May 15, 1998 (inception) .............. $ -- $ -- $ -- $ --
Sale of common stock
(Note D) ........................... 46,444 -- -- 46,650
Common stock issued for
services, valued at the
fair value of the stock
(Note D) .............................. 34,317 -- -- 34,541
Shares cancelled ............................ 78 -- -- --
Net loss for the period ..................... -- -- (85,801) (85,801)
-------- -------- -------- --------
January 31, 1999 ...................... 80,839 -- (85,801) (4,610)
Sale of common stock
(Note D) ........................... 29,600 -- -- 30,000
Contributed capital ......................... 1,000 -- -- 1,000
Net loss for the year ....................... -- (18,374) -- (18,374)
-------- -------- -------- --------
January 31, 2000 ...................... $111,439 $(18,374) $(85,801) $ 8,016
======== ======== ======== ========
</TABLE>
F-6
<PAGE> 13
MONUMENT GALLERIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM MAY 15, 1998
FOR THE YEAR (INCEPTION)
ENDED THROUGH
JANUARY 31, JANUARY 31,
2000 1999
------------ -----------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ........................................................ $(18,374) $(85,801)
Adjustments to reconcile net loss to net cash
used in operating activities:
Amortization ................................................ -- 912
Gain on sale of business assets (Note A) .................... -- (29,332)
Cumulative effect of change in accounting
principle (Note A) ...................................... 3,400 --
Stock issued for services (Note D) .......................... -- 34,541
Changes in current assets and liabilities:
Inventory and other current assets .......................... -- --
Accounts payable and accrued expenses ....................... (2,100) --
Working capital changes on sale of business assets (Note A)
Inventory and other current assets .......................... -- 22,901
Accounts payable and accrued expenses ....................... -- (22,342)
-------- --------
Net cash flow (used in) operating activities ........ (17,074) (79,121)
Cash flows from investing activities:
Cash paid for security deposit .................................. -- (700)
Cash paid for leasehold improvements and fixtures ............... -- (2,189)
Cash paid for organizational costs .............................. -- (4,000)
Cash paid on sale of business assets (Note A) ................... -- (100)
-------- --------
Net cash flow used in investing activities .......... -- (6,989)
Cash flows from financing activities:
Proceeds from working capital advances .......................... -- 33,600
Proceeds form sale of common stock (Note D) ..................... 30,000 46,650
Proceeds from shareholder advance (Note B) ...................... -- 6,000
Contributed capital ............................................. 1,000 --
-------- --------
Net cash provided by financing activities ............... 31,000 86,250
Net change in cash .................................................. 13,926 140
Cash at beginning of period ......................................... 140 --
-------- --------
Cash at end of period ................................... $ 14,066 $ 140
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest ...................................... $ -- $ --
======== ========
Cash paid for income taxes .................................. $ -- $ --
======== ========
Liabilities assumed by purchaser of assets .................. $ -- $ 33,600
======== ========
Assets sold in exchange for extinguishment of debt .......... $ -- $ 3,232
======== ========
</TABLE>
F-7
<PAGE> 14
MONUMENT GALLERIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
Note A: Organization and summary of significant accounting policies
Operations and transfer of business
On June 27, 1988, Monument Galleries, Inc. (the "Company") was incorporated in
Colorado on May 15, 1998. The Company operated as a local retail art gallery
from the date of incorporation through January 31, 1999. During that period, the
Company issued a total of 429,750 shares of its common stock, of which 78,000
shares were subsequently cancelled, for cash of $46,650 and services valued at
$34,541. Effective January 31, 1999, the Company transferred substantially all
of its assets, subject to its liabilities, and operations to Santa Trail Folk
Art Market, LLC, an unrelated third party. On the date of transfer, the
Company's assets consisted principally of stock-in-trade and fixtures totaling
$26,546. Its liabilities consisted of loans from principle shareholders and
trade payables totaling $55,878. The Company recorded a gain of $29,332 on the
transfer. On February 1, 1999, became an inactive shell corporation.
DEVELOPMENT STAGE ENTERPRISE
On February 1, 1999, as a result of the transfer described in the first
paragraph, the Company entered the development stage. Accordingly, the
accompanying financial statements have been prepared in accordance with
Statement of Financial Accounting Standards No. 7 "ACCOUNTING FOR DEVELOPMENT
STAGE ENTERPRISES".
CHANGE OF CONTROL
On September 13, 1999, the Company sold 400,000 shares of its common stock to Le
Fonds Duex Mille Premier, LLC, a Colorado Limited Liability Company, for $30,000
to be used to finance the preparation and filing of a registration statement
with the SEC. The sale resulted in 751,750 shares of common stock outstanding at
January 31, 2000. The board of directors further approved the lease of office
space from an affiliate and the employment of a part-time accountant. On January
4, 2000, the Company filed its registration statement on Form 10-SB with the
SEC, which became effective March 4, 2000. The Company is seeking a business
combination with an operating company in order to pursue its plan of developing,
owning, and operating a chain of Western art galleries.
Use of estimates
The preparation of the financial statements in conformity with generally
accepted accounting principals requires management to make estimates and
assumptions that affect certain reported amounts of assets and liabilities;
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. Accordingly, actual results could differ from those estimates.
FINANCIAL INSTRUMENTS AND CASH EQUIVALENTS
The Company's financial instruments consist of cash, accounts payable and
indebtedness to a related party. The carrying value of these financial
instruments approximates fair value because of their short-term nature or
because they bear interest at rates which approximate market rates. For
financial accounting purposes and the statement of cash flows, cash equivalents
include all highly liquid debt instruments purchased with an original maturity
of three months or less.
F-8
<PAGE> 15
MONUMENT GALLERIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," (SFAS 123) was issued in October 1995. This
accounting standard encourages all entities to adopt the fair value based method
defined in SFAS No. 123 for all of their employee stock-based compensation
plans. However, it permits an entity to continue to measure compensation cost
for those plans under the method defined in Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB 25). Companies that
elect to use the method provided in APB 25 are required to disclose the pro
forma net income and earnings per share that would have resulted from the use of
the fair value based method. The Company has elected to continue to determine
the value of the stock-based compensation under the provisions of APB 25.
MARCH 31, 1998
Income Taxes
The Company reports income taxes in accordance with SFAS No. 109, "Accounting
for Income Taxes", which requires the liability method in accounting for income
taxes. Deferred tax assets and liabilities arise from the difference between the
tax basis of an asset or liability and its reported amount on the financial
statements. Deferred tax amounts are determined by using the tax rates expected
to be in effect when the taxes will actually be paid or refunds received, as
provided under currently enacted law. Valuation allowances are established when
necessary to reduce the deferred tax assets to the amounts expected to be
realized. Income tax expense or benefit is the tax payable or refundable,
respectively, for the period plus or minus the change during the period in the
deferred tax assets and liabilities.
LOSS PER COMMON SHARE
The Company reports loss per share using a dual presentation of basic and
diluted loss per share as required by SFAS No. 128 "Earnings per Share". Basic
loss per share was computed by dividing net loss by the weighted average number
of shares outstanding for the period ended. Diluted loss per share is similar to
basic loss per share except that the weighted average number of common shares
outstanding is increased by the number of common shares that would have been
outstanding if dilutive potential common shares had been issued. The Company has
a simple capital structure with no dilutive potential shares outstanding as of
January 31, 2000; therefore, dilutive loss per share is not presented.
ADOPTION OF A NEW ACCOUNTING PRINCIPLE
Effective February 1, 1999, the Company adopted Statement of Position ("SOP")
98-5, "Reporting on the Costs of Start-Up Activities." SOP 98-5 provides, among
other things, guidance on the reporting of start-up costs and organization
costs. It requires costs of start-up activities and organization costs to be
expensed as incurred. The cumulative effect of the adoption of SOP 98-5 was a
charge to operations for the year ended January 31, 2000, totaling $3,400,
related to organization costs previously capitalized.
NOTE B: RELATED PARTY TRANSACTIONS
The Company rented office space and equipment from an affiliate for $300 per
month, on a month-to-month basis, beginning in September 1999. For the year
ended January 31, 2000 and for the period from May 15, 1998 (inception) through
January 31, 1999, the Company paid rent to the affiliate in the amount of $1,200
and $-0-, respectively.
F-9
<PAGE> 16
MONUMENT GALLERIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
In addition, the Company purchased accounting services from the affiliate for
$200 per month beginning in September 1999. For the year ended January 31, 2000
and for the period from May 15, 1998 (inception) through January 31, 1999, the
Company paid rent to the affiliate in the amount of $800 and $-0-, respectively.
MARCH 31, 1998
ACCRUED LOSS CONTINGENCIES
On August 17, 1995, the Company advanced $50,000 to a merger candidate. The
advance was evidenced by a promissory. The $50,000 had previously been held in
escrow, pending a merger with an operating company, in accordance with
applicable state law. The merger was subsequently abandoned and the $50,000 note
is in default. Management has established an allowance for the full amount of
the principal due on the note and accrued interest. The Company continues
collection efforts.
During the year ended January 31, 1999, a shareholder advanced the Company
$6,000 for working capital. As of January 31, 2000, the $6,000 is reflected as
indebtedness to related party in the accompanying financial statements.
NOTE C: INCOME TAXES
A reconciliation of U.S. statutory federal income tax rate to the effective rate
follows for the year ended January 31, 2000 and the period from May 15, 1998
(inception) through ended January 31, 1999:
<TABLE>
<CAPTION>
MAY 15, 1998
(INCEPTION)
YEAR ENDED THROUGH
JANUARY 31, JANUARY 31,
2000 1999
----------- ------------
<S> <C> <C>
U.S. statutory federal rate 15.00% 15.00%
State income tax rate 4.40% 4.40%
Net operating loss for which no
tax benefit is currently
available 19.04% 19.04%
------ ------
0.00% 9.00%
====== ======
</TABLE>
The benefit for income taxes from operations consisted of the following
components at January 31, 19982000: current tax benefit of $44713,131 resulting
from a net loss before income taxes, and deferred tax expense of $44713,131
resulting from the valuation allowance recorded against the deferred tax asset
resulting from net operating losses. The change in the valuation allowance for
year ended January 31, 2000 and the period from May 15. 1998 (inception) through
January 31, 1999 and 1997 was $2,851 and $10,280, respectively. Net operating
loss carryforwards at January 31, 2000 will begin expire in 2020. The valuation
allowance will be evaluated at the end of each year, considering positive and
negative evidence about whether the asset will be realized. At that time, the
allowance will either be increased or reduced; reduction could result in the
complete elimination of the allowance if positive evidence indicates that the
value of the deferred tax asset is no longer impaired and the allowance is no
longer required.
Because the Company underwent an ownership change in January 1999, as defined in
Section 382 of the Internal Revenue Code, the Company's tax net operating loss
carryforwards generated prior to the ownership change will be subject to an
annual limitation which could reduce or defer the utilization of those losses.
F-10
<PAGE> 17
MONUMENT GALLERIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE D: SHAREHOLDERS' EQUITY
PREFERRED STOCK
The preferred stock may be issued in series as determined by the Board of
Directors. As required by law, each series must designate the number of shares
in the series and each share of a series must have identical rights of (1)
dividend, (2) redemption, (3) rights in liquidation, (4) sinking fund provisions
for the redemption of the shares, (5) terms of conversion and (6) voting rights.
PRIVATE OFFERINGS OF COMMON STOCK
The Company sold 205,750 shares of its common stock to non-accredited investors
for $46,650 during the period from May 15, 1998 (inception) through January 31,
1999. The proceeds of the sale were used to finance the art gallery operations.
The Company claimed exemption from registration under Regulation D of the
securities Act of 1933, as amended when offering and selling the shares.
On September 13, 1999, the Company sold 400,000 shares of its common stock to Le
Fonds Duex Mille Premier, LLC, a Colorado Limited Liability Company, for
$30,000. The shares were sold in accordance with the exemption from registration
afforded by Section 4 (2) of the Securities Act of 1933, as amended.
STOCK-BASED COMPENSATION
The Company issued 199,000 shares and 25,000 shares of its common stock,
respectively, to its founders and its attorney in exchange for their services
during the period from May 15, 1998 (inception) through January 31, 1999. The
shares were issued in accordance with the exemption from registration afforded
by Section 4 (2) of the Securities Act of 1933, as amended. The shares were
valued at the estimated fair value of the common stock ($.23 per share) as
determined by the board of directors based on contemporaneous equity
transactions and other analyses. The Company has elected to account for the
stock-based compensation paid to its founders under the provisions of APB No.
25; however, it has computed, for pro forma disclosure purposes, the value of
the stock-based compensation using the method prescribed by SFAS No. 123:
<TABLE>
<CAPTION>
MAY 15, 1998
(INCEPTION)
YEAR ENDED THROUGH
JANUARY 31, JANUARY 31,
2000 1999
----------- ------------
<S> <C> <C>
Net loss as reported $(18,374) $(85,801)
Effect of SFAS No. 123 --
-------- --------
Pro forma net loss $(18,374) $(85,801)
======== ========
</TABLE>
Six class "A" and two class "B" common stock purchase warrants were issued with
each share of common stock issued to the Company's founders. In connection with
the "blind pool " public offering, two class "A" and one class "B" common stock
purchase warrants were offered with each unit. As of March 31, 1998, there were
10,465,000 class "A" and 3,732,500 class "B" common stock purchase warrants
outstanding, respectively (See Note A).
F-11
<PAGE> 18
MONUMENT GALLERIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE E: RESTATEMENT OF 1999 FINANCIAL STATEMENTS
When valuing the issuance of shares for services for financial statement
purposes, the Company did not take into account contemporaneous equity
transactions and other analysis. The Company is restating its operating
statement for the year ended January 31, 1999 to record $34,317 of stock-based
compensation relating to the issuance of those shares.
F-12
<PAGE> 19
ITEM 8. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
The Company did not have any disagreements on accounting and financial
disclosures with its present accounting firm during the reporting period.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
Our Directors and Executive Officers, their ages and positions held in the
Company as of January 31, 2000 are as follows:
Our Directors and Executive Officers, their ages and present positions held are
as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION HELD
---- --- -------------
<S> <C> <C>
F. Jeffrey Krupka 44 President, Chief Executive Officer
And Director
Cynthia Kettl 52 Secretary-Treasurer and Director
</TABLE>
Our Directors will serve in such capacity until our next annual meeting of
shareholders and until their successors have been elected and qualified. The
officers serve at the discretion of our Directors. There are no family
relationships among our officers and directors, nor are there any arrangements
or understandings between any of our directors or officers or any other person
pursuant to which any officer or director was or is to be selected as an officer
or director.
F. Jeffrey Krupka. Mr. Krupka has been our President and a Director since
September 13, 1999. He has also been the Chief Executive Officer of Platinum
Financial Fund, LLC, a private investment company, since 1998. From October,
1995 to 1998, he was the owner of Krupka and Associates, LLC., a private
investment company. He has been involved in real estate as well as securities
investment activities since 1981.
Cynthia Kettl. Ms. Kettl has been our Treasurer since September 13, 1999. She
has been involved with Platinum Financial Fund, LLC, a private investment
company, since 1998. From October, 1995 to 1998, she was employed by Krupka and
Associates, LLC., a private investment company. Ms. Kettl received a
F-13
<PAGE> 20
Bachelor's degree in Business Management from Metropolitan State College in
1981, a Bachelor's degree in Accounting from Metropolitan State College in 1998,
and an Associates Degree in Business from Community College North Denver in
1978.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934.
Section 16(a) of the Securities Exchange Act of 1934 (the "34 Act") requires our
officers and directors and persons owning more than ten percent of the our
Common Stock, to file initial reports of ownership and changes in ownership with
the Securities and Exchange Commission ("SEC"). Additionally, Item 405 of
Regulation S-B under the 34 Act requires us to identify in its Form 10-KSB and
proxy statement those individuals for whom one of the above referenced reports
was not filed on a timely basis during the most recent fiscal year or prior
fiscal years. Given these requirements, we have the following report to make
under this section. None of our Officers or Directors made timely filings of
their Forms 3 and 5 in the last fiscal year. All such persons have been advised
concerning their responsibilities regarding future compliance with these rules.
ITEM 10. EXECUTIVE COMPENSATION.
None of our executive officers received any compensation during the fiscal years
ended January 31, 1999 or 2000, except for Ms. Kettl. See "Certain
Transactions.". Our date of inception is May 15, 1998.
We have granted no shares of our capital stock as additional compensation and
have no plans to do so.
We do not pay members of our Board of Directors any fees for attendance or
similar remuneration, but reimburse them for any out-of-pocket expenses
incurred by them in connection with our business.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following sets forth the number of shares of the Registrant's $.0.001 par
value common stock beneficially owned by (i) each person who, as of January 31,
2000, was known by the Company to own beneficially more than five percent (5%)
of its common stock; (ii) the individual Directors of the Registrant and (iii)
the Officers and Directors of the Registrant as a group. As of January 31, 2000,
there were a total of 751,750 shares issued and outstanding. These shares are
listed before giving effect to a one and one half-to one stock dividend
effective April 4, 2000.
F-14
<PAGE> 21
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1)(2) CLASS
------------------- --------------------------- ----------
<S> <C> <C>
F. Jeffrey Krupka 90,258(3) 12%
3225 East 2{nd} Ave.
Denver, Colorado 80206
Cynthia Kettl 4,000 .5%
3225 East 2{nd} Ave.
Denver, Colorado 80206
Arthur W. Zarlengo Rev. Trust 91,851 12.2%
621 17{th} Street
Suite 911
Denver, Colorado 80202
Nancy M. Miller 91,851 12.2%
470 Sunset Drive
Golden, Colorado 80401
Janet Brophy 90,258 12%
6195 South Akron Way
Greenwood Village, Colorado 80111
All Officers and Directors as a Group 94,258(3) 12.5%
3225 East 2{nd} Ave.
(two persons)
</TABLE>
(1) All ownership is beneficial and on record, unless indicated otherwise.
(2) Beneficial owners listed above have sole voting and investment power with
respect to the shares shown, unless otherwise indicated.
(3) Mr. Krupka's father, Frank Krupka, owns a total of 4,000 shares of record
Mr. Krupka disclaims any beneficial ownership in his father's interest.
F-15
<PAGE> 22
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Our business office is located at 3225 East 2{nd} Ave., Denver, Colorado 80206.
We began paying $300 per month in rent in September, 1999 for this office space,
which is occupied by our President, F. Jeffrey Krupka, under a month-to-month
lease.
We purchase accounting services from Ms. Kettl, our Secretary-Treasurer at the
rate of $200 per month, beginning in September, 1999.
During the year ended January 31, 1999, a shareholder advanced us $6,000 for
working capital, which is still reflected as an indebtedness.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following financial information is filed as part of this
report:
(1) FINANCIAL STATEMENTS
(2) SCHEDULES
(3) EXHIBITS. The following exhibits required by Item 601
to be filed herewith are incorporated by reference to
previously filed documents:
EXHIBIT NO. DESCRIPTION
+ 3A Articles of Incorporation
+ 3B Bylaws
27.1 Financial Data Schedule
+ Previously Filed.
(b) REPORTS ON FORM 8-K. The Company filed no reports on Form
8-K during the fourth quarter of the fiscal year ended January 31, 2000.
F-16
<PAGE> 23
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Monument Galleries, Inc.
Dated: 12/14/00 By: /s/ F. JEFFREY KRUPKA
-------------------------------------
F. Jeffrey Krupka
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
CHIEF FINANCIAL OFFICER
Dated: 12/14/00 By: /s/ CYNTHIA KETTL
-------------------------------------
Cynthia Kettl
Treasurer
Dated: 12/14/00 By: /s/ F. JEFFREY KRUPKA
-------------------------------------
F. Jeffrey Krupka
Director
<PAGE> 24
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
+ 3A Articles of Incorporation
+ 3B Bylaws
27.1 Financial Data Schedule
</TABLE>
+ Previously Filed.
