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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB12G/A
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
Monarch Media and Entertainment Group, Inc.
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(Name of Small Business Issuer in its Charter)
Nevada 88-0436489
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(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
200 - 604 Columbia Street New Westminster, B.C. V3M 1A5
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (604) 515 8971 extension #307
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Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
N/A N/A
--- ---
Securities to be registered under Section 12(g) of the Act:
Common Stock, par value $0.001 per share
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(Title of Class)
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Monarch Media and Entertainment Group, Inc.
FORM 10-SB12G/A
TABLE OF CONTENTS
PART I
Page
Item 1. Description of Business......................................... 1
Item 2. Management's Discussion and Analysis or Plan of Operation....... 6
Item 3. Description of Property......................................... 7
Item 4. Security Ownership of Certain Beneficial Owners
And Management.................................................. 7
Item 5. Directors, Executive Officers, Promoters And
Control Persons................................................. 9
Item 6. Executive Compensation.......................................... 10
Item 7. Certain Relationships and Related Transactions.................. 11
Item 8. Description of Securities....................................... 12
PART II
Item 1. Market Price of and Dividends on the Registrant's
Common Equity and Other Shareholder Matters..................... 12
Item 2. Legal Proceedings............................................... 14
Item 3. Changes in and Disagreements with Accountants................... 14
Item 4. Recent Sales of Unregistered Securities......................... 14
Item 5. Indemnification of Directors and Officers....................... 14
PART F/S
Item 1. Audited Financial Statements.................................... 16
Item 2. Pro-Forma Condensed Consolidated Financials......... PF-1 thru PF6
Item 3. Interim Unaudited Financial Statements.......................... 18
PART III
Item 1. Index to Exhibits............................................... 19
Signatures...................................................... 20
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PART I
To simplify the language in this Registration Statement Monarch Media
and Entertainment Group, Inc., is referred to herein as "the Company" or "We".
Item 1. Description of Business.
Business of Issuer.
Monarch Media and Entertainment Group, Inc., a Nevada corporation (the
"Company") was formed on December 17, 1997 but did not have any material
operations until it acquired Intuitech Marketing Inc. ("Intuitech"). Intuitech
was incorporated under the laws of the province of British Columbia on March 25,
1985. The Company acquired all of Intuitech's issued and outstanding shares of
common stock making Intuitech a wholly-owned subsidiary of the Company. The
business of Intuitech has become the only operating business of the Company and
the officers and directors of Intuitech have assumed the officers and director
positions of the Company. When used herein the term "Company" refers to the
combined entity unless the context otherwise indicate.
We have not been involved in any bankruptcy, receivership or similar
proceeding. We have not been involved in any material reclassification, or
purchase or sale of a significant amount of assets not in the ordinary course of
business.
On March 29, 2000 the Company entered into an agreement with the
shareholders of Intuitech Marketing Inc., British Columbia corporation,
("Intuitech") to acquire a 100% interest in said corporation through an exchange
of shares in which the Company issued 4,322,249 restricted shares of its Common
Stock solely in exchange for all of the outstanding Common Stock of Intuitech.
As a result of this agreement, the shareholders of Intuitech would receive one
(1) share of Monarch common stock for every five (5) shares of their Intuitech
common stock. The Company then proceeded to operating the business of Intuitech
and became an operating entity to the extent of Intuitech's business, which is
presently limited.
Business of Intuitech Marketing Inc.
Having completed the acquisition of Intuitech, the Company is no longer
inactive and has succeeded to the business of Intuitech as presently existing.
Intuitech's primary business is providing M2D Services to publishers of
magazines and trade journals. M2D Services, or magazines to digital, is the
process of creating a new product for publishers by repackaging the back issues
of their magazines or trade journals into an electronic format and presenting
them on a CD-ROM or DVD using Intuitech's P2D Technology. Digital Archive
referrers to the new product created using M2D Services that may contain as few
as one or as many as hundreds of back issue of a publication.
P2D Technology, or Print to Digital, is Intuitech's proprietary technology
for reading, searching, book marking, printing and placing "post-it-notes" on
PDF files or Portable Document Format files.
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Intuitech's M2D Service begins with a full color scan of all pages of all
back issues of the particular magazine to be included in the Digital Archive.
These scanned images are processed to extract text to build a master search
index and converted to industry standard PDF files. This data is then integrated
with Intuitech's P2D Technology.
A custom user interface is designed to give the product the visual
appearance and sound effects that are consistent with the specific magazine's
style and theme. Usability labs with typical end users are held to ensure that
the custom interface is both intuitive and user friendly.
Finally all the elements are combined together onto a CD-Rom or DVD, a
commercial package is designed and the final product is then ready for printing,
duplication and assembly.
The Publishers Benefits
The Custom Magazine Archive Product can provide a significant revenue
source for our prospective clients, the publishers of our target magazine. For
example, using M2D Services to repackage 240 back issues of a monthly magazine
having an average of 80 pages each, could be placed on a 5 CD-ROM set.
Development costs plus the cost of an initial production and packaging of 30,000
sets would cost approximately $360,000 or $12.00 per set.
The new Digital Archive product created through the M2D Services provides
the publisher with a number of benefits such as:
o A new product with custom sound and graphics that reflects the look and
feel of the magazines specific style;
o A new product can be sold to existing customers/subscribers resulting in
an increase in sales revenue;
o A new promotional item that can be used in a number of ways to attract new
subscribers. (i.e. receive the last 2 years of back issues with your 1st
years paid subscription);
o A method of responding to reprint requests instantly. The publisher can
create a single issue version of the Custom Magazine Archive Product
through the P2D Service simply by copying the appropriate files to a
CD-ROM;
o Longer term exposure for advertisements in the publication;
o Recurring product potential, reissue an updated CD each year for a minimal
cost;
o Supports distribution of publication over the Internet.
o Additional product potential, Annual CD-ROM containing all the prior years
issues.
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Customers Benefit
When the customer purchases a Digital Archive product they will receive a
full archive of all the magazines back issues exactly as they were printed, in a
compact and easily accessible CD-ROM format with the ability to:
o Keep a full color copy of every issue in an easily accessible and compact
form; electronically display and zoom in and out on single or multiple
pages;
o Conduct research on specific topics or key words through simple or complex
search criteria, over the entire archive in one step;
o Bookmark specific articles, cartoons, or advertisements for quick access;
maintain multiple sets of bookmarks related to a variety of different
topics;
o E-mail all or part of their bookmark lists to others;
o Copy articles or graphics and paste them into a word processor or other
Windows applications;
o Print a single page from any issue, or print an entire magazine;
o Receive new issues, as they are published, over the Internet and
incorporate them into the archive product;
View a full color thumb nail graphic image of each magazine cover, and look
though any magazine one page at a time; or search the entire archive at once.
Second-Stage Products and Services
The Company is developing products for the second phase of its evolution.
The second set of software products will enable the company to greatly expand
the number of publications it can transfer at any given period of time. The
Company hopes to be able to eventually offer its M2D Services for use in
publications in multiple languages.
As funding permits, the Company hopes to be able to develop a strong
software team that not only works on the M2D Services but also will be able to
develop software for licensing to other software firms. All future development
will be dependant on the Company's first product, and potentially upon the
Company's ability to generate further investment capital for expansion.
Although the Company has developed its product and performed initial tests
along with Beta runs, management feels the product is several months from full
commercialization. Until commercialization of the product is commenced, there
can be no assurance of future success. Additionally, although Beta versions of
the product do not show any operating problems, upon large-scale usage of the
product, it would not be unusual for certain "bugs" to be found which would
require correction. This could slow further developments of the software.
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Marketing Strategy
The Company will initially target publishers of specific types of
magazines, those that would provide articles that would remain relevant and of
interest over a 10 to 15 year period. The ideal publication will contain feature
articles, which have maintained their relevance over a number of years, have
been in print for at least 10 years, and have a loyal and enthusiastic
subscriber base, members of which are early adopters of new electronic products.
The types of magazines to be approached are home repair, gardening, professional
journals, specific sports journals, veterinary, health care, and travel. The
categories for potential publications are numerous. Any magazine that people
have collected back issues of for intended future reference, will be ideally
suited for the M2D Service.
Competition & Market
The Company faces many challenges and competitors in its business. In
addition to competing with individuals in the Companies field, with high level
of expertise greatly exceeding management's abilities, the Company will be
competing with numerous other entities, most of which are large, well
established companies with greater assets and financial reserves than the
Company possess. The issuer will be in competition with other experts in the
field in which it operates, and it holds no advantage over its competition.
The MPA (Magazine Publishers of America) reported in their fact sheet
entitled Circulation Revenue for ABC Magazines, 1998, the total subscription and
single-issue sales for only 612 publications to be over $9.9 billion.
The Gale Database of Publications and Broadcast Media contains 24,000
listings for general and special interest periodicals and newspapers published
in the US and Canada, as well as 11,600 subscriptions, membership, and free
newsletters, bulletins and digests. The SRDS (Standard Rate and Data Service)
lists 9,600 trade magazines in its "Business Publication Advertising Source,"
and 3,200 domestic and international consumer magazines in its "Consumer
Magazine Advertising Source".
Research and Development
The Company intends to enhance the P2D Technology to develop a
second-generation product for use in its M2D Service and to test this enhanced
product during production of the first 4 publications repackaged with its M2D
Service. After the technology has been expanded, Intuitech will be able to
provide M2D Services to whatever number of publications it is able to secure.
The costs of the M2D Service is variable depending on a number of factors,
including number of publication issues to be transferred from print to digital,
the number of pages contained in each publication, and the amount and type of
graphics contained in the publication.
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Patents and Trademarks
The Company intends on filing for trademark registration on the name "M2D
Services". The Company has been granted Internet registration of the domain
names www.print2digital.com to support its P2D Technology as well as
www.mags2digital.com and www.mag2digital.com to support the magazine target
market for the M2D Services. In addition the Company has registered the Internet
domain name www.intuitechmarketing.com to be used for its corporate purposes.
Government Regulation.
The Company is not subject to any government regulations other than those
that normally apply to companies in this industry. Although we will be subject
to regulation under the Exchange Act, we believe we will not be subject to
regulation under the Investment Company Act of 1940, insofar as we will not be
engaged in the business of investing or trading in securities.
We are registering a class of its securities on this Form 10-SB
registration statement on a voluntary basis. We have no obligation to file a
Form 10-SB registration statement pursuant to the Securities Exchange Act of
1934, as amended (the "Exchange Act"). We believe that by filing this Form 10-SB
and being obligated to file reports subject to Section 13 of the Exchange Act,
we can attract valuable opportunities to complement the companies business.
We have conducted, and others have made available to us, results of market
research indicating that strong demand exists for the business of transference
of traditional print to the new digital medium.
Employees.
The Companies employees consist of its officers and directors. (See
"Directors and Executive Officers.")
Offices.
The Company's temporary executive offices are located at Suite 200 - 604
Columbia Street, New Westminster, B.C. V3M 1A5. The Company believes that these
facilities are adequate for the foreseeable needs of the Company for the
immediate future; however, as the Company expands its employee base, it
anticipates adding additional office space.
Reports to Security Holders.
The Company has elected December 31, as its year-end. Thereafter, the
Company will furnish its shareholders with annual reports containing audited
financial statements within 90 days after the Company's year-end.
From time to time, the Company may also furnish its shareholders with such
other information, as it may deem appropriate, relative to the business
operations of the Company. Such information may include news of a change in the
management, purpose and control of the Company, or any material condition
affecting the Company.
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In addition to receipt and examination of annual report and other
information, shareholders of record shall as required, be allowed to examine the
books and records of the company at a reasonable time upon written demand.
The public may read and copy any materials filed with the SEC at the SEC's
Public Reference Room located at 450 Fifth Street, N.W., Washington, D.C. 20549.
Information on the operations of the Public Reference Room can be obtained by
calling 1-800-SEC-0330. The SEC also maintains an Internet site that contains
reports, proxy and information statements, and other information regarding
issuers located at http://www.sec.gov.
Item 2. Plan of Operation.
The Company has acquired a license for an existing archive publisher
technology that was used to create a published magazine archive product, and
since that time the Company has been updating and enhancing its archive
publisher technology. The Company expects to have completed the first set of
major enhancements by October 2000. The Company has only just begun limited
marketing of its technology. Previous efforts have been focused on the
development of the technology and obtaining funds necessary to continue
development.
We have never had revenues from operations. We believe that our plan of
operations can be executed through the efforts of current management and will
require additional funds. We anticipate that additional business opportunities
will be available to us through the contacts of our Officers and Directors. The
final evaluation of any additional business opportunities and the negotiation,
drafting and execution of all relevant agreements, and any other related
instruments will be done by the direction of Tom Williams the company's
President. We plan to investigate, to the extent believed reasonable by us, all
additional potential business opportunities.
Although the Company does have other products and services it plans to
design and develop, it is unlikely however, that we will have the capital to
develop and market these potential products or services at this time. Even if
the Company is successful in generating a market for its technology it is likely
that the Company will need additional capital to aggressively market its
technology and to work on the development of additional products and services.
Management anticipates any future capital will be raised through the sale of its
securities, which may dilute current shareholders.
We will also seek to expand through acquisitions which are not currently
identified and which entail risks, which you will not have a basis to evaluate.
We may seek to expand our operations by acquiring companies in businesses that
we believe will complement or enhance our business. We cannot assure you that we
will be able to ultimately effect any acquisition, successfully integrate any
acquired business in our operations or otherwise successfully develop our
operations. We have not established any minimum criteria for any acquisition and
our management may have complete discretion in determining the terms of any
acquisition. Consequently, there is no basis for you to evaluate the specific
merits or risks of any potential acquisition that we may undertake.
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Potentially, available business opportunities may occur in many different
industries and at various stages of development, all of which make the task of
comparative investigation and analysis of such business opportunities extremely
difficult and complex. We do not and will not have capital to provide the owners
of business opportunities with any significant cash or other assets. However, we
believe we can offer owners of acquisition candidates the opportunity to acquire
ownership interest in a publicly registered company without incurring the cost
and time required to become a fully reporting company or to conduct an initial
public offering. The Exchange Act specifically requires that any merger or
acquisition candidate, comply with all applicable reporting requirements, which
include providing audited financial statements to be included within the filings
relevant to complying with the Exchange Act. Nonetheless, we have not conducted
market research and are not aware of statistical data, which would support the
perceived benefits for the owners of a business opportunity.
We anticipate that any securities issued as a result of a business
opportunity will be issued in reliance upon exemption from registration under
applicable federal and state securities laws. In some circumstances, however, as
a negotiated element of our transaction, we may agree to register all or a part
of such securities immediately after the transaction is consummated or at
specified times thereafter. Until such time as this occurs, we will not attempt
to register any additional securities. The issuance of substantial additional
securities and their potential sale into any trading market which may develop in
our securities may have a depressive effect on the value of our securities in
the future, if such a market develops, of which there is no assurance. The
completion of any business opportunity may result in a significant issuance of
shares and substantial dilution to our present stockholders.
Item 3. Description of Property.
We currently own the source code and the license to use this computer
software, which was used to create a Digital Archive product. The Company is
creating an enhanced version of this software, referred to as P2D Technology,
and has accumulated $37,578 in deferred development costs to June 30, 2000. We
currently operate in leased office space at 200-604 Columbia Street New
Westminster, B.C. V3M 1A5; we believe that this space is sufficient for us at
this time.
We have no policy with respect to investments in real estate interests in
real estate and no policy with respect to investments in real estate mortgages.
Further, we have no policy with respect to investments in securities of or
interests in persons primarily engaged in real estate activities.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
As of August 21, 2000 there were 23,444,349 Shares of our common stock,
$0.001 par value outstanding. The following tabulates holdings of our shares of
common stock by each person who, as of August 21, 2000, holds of record or is
known by management to own beneficially more than 5% of the Common Shares and,
in addition, by all Directors and officers of the Company individually and as a
group. Each named beneficial owner has sole voting and investment power with
respect to the shares set forth opposite his name.
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Security Ownership of Beneficial Owners (1):
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Title of Name & Address Amount Percent
Class
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Common Stock Maria Lousa DiRuggiero 1,375,000 5.8%
15185 22nd Ave. Suite 209
Surrey, BC V4E9T4
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Common Stock Steve Haqq 1,375,000 5.8%
13626 22 A Ave.
Surrey, BC V4A9V2
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Security Ownership of Management (2):
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Title of Name & Address Amount Percent
Class
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Common Stock Tom Williams 590,022 2.52%
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Common Stock Allan Nienhuis 1,075,000 4.5%
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(1) Pursuant to Rule 13-d-3 under the Securities Exchange Act of 1934, as
amended, beneficial ownership of a security consists of sole or shared voting
power (including the power to vote or direct the voting) and/or sole or shared
investment power (including the power to dispose or direct the disposition) with
respect to a security whether through a contract, arrangement, understanding,
relationship or otherwise. Unless otherwise indicated, each person indicated
above has sole power to vote, or dispose or direct the disposition of all shares
beneficially owned, subject to applicable unity property laws.
(2) This table is based upon information obtained from our stock records. Unless
otherwise indicated in the footnotes to the above table and subject to community
property laws where applicable, we believe that each shareholder named in the
above table has sole or shared voting and investment power with respect to the
shares indicated as beneficially owned.
Change of Control.
There are currently no arrangements, which would result in a change of
control of the Company. A business opportunity involving the issuance of our
common shares will, in all likelihood, result in shareholders of a private
company obtaining a controlling interest in our Company. Any such business
opportunity may require our management to sell or transfer all or portions of
our common shares held by him, or resign as a member of our Board of Directors.
The resulting change in control of the Company could result in the removal of
the present management of the Company and a corresponding reduction or
elimination of their participation in the future affairs of the Company.
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Item 5. Directors, Executive Officers, Promoters and Control Persons.
The names of the Company's executive officers and directors and the
positions held by them are set forth below:
Name Age Position Director Since
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Tom Williams 42 President, Secretary 2000
& Director
James Dungate 33 Director 2000
Allan Nienhuis 37 Director 2000
The term of office of each director is one year and until his successor is
elected at the Company's annual shareholders' meeting and is qualified, subject
to removal by the shareholders. The term of office for each officer is for one
year and until a successor is elected at the annual meeting of the board of
directors and is qualified, subject to removal by the board of directors.
Biographical Information.
Set forth below is certain biographical information with respect to each
of the Company's officers and directors.
Tom Williams, 42 years of age, is the President, Secretary and Director of
the Company. Mr. Williams has served as President and Director of the Company
since April 2000 and his terms expire on December 31, 2000.
Mr. Williams is President and Director of Intuitech Marketing Inc. and is
contracted to provide sales and marketing services. Mr. Williams has 16 years of
experience in the financial industry across Canada, currently holding licenses
in the insurance and securities industries. Mr. Williams has specialized, over
the last 6 years, in corporate structure and financing. Prior to this time, from
1984 to 1990, Mr. Williams was employed with Go Vacations Capital Inc., a
restricted securities dealer, in various sales positions including sales manager
for British Columbia. From 1990 to 1995 Mr. Williams invested extensive time and
studies developing his private practice to be independent in the financial
industry. He is a member in good standing of The Canadian Association of
Insurance and Financial Advisors.
Mr. Williams serves as a director and or officer of a number of private
companies. Mr. Williams is a Director of 2001 Global Technologies Inc., a
company developing credit card security technology with manufacturing and
marketing, initially in China. He is also the President of Dominion Game
Marketing Ltd., a company that develops computer games to be played over the
Internet (massive multiplayer games). He is also the Secretary/Treasurer and
Director of Freedom IV Entertainment Group & Associates Inc. a global
multi-media company positioned to provide high quality entertainment product for
film, television, video, and Internet distribution. Mr. Williams is the
President of WCYC Canada Management Ltd. a corporation established to manage and
operate investment properties in British Columbia.
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Mr. James Dungate, 33 years of age, is a director of the company and has
served as Director of the Company since April 2000 and his term expires on
December 31, 2000. Mr. Dungate has 6 years experience in the securities
industry. Mr. Dungate is also Regional Sales Manager of Spectrum Investments, a
wholly owned subsidiary of Sun Life Financial, operating Spectrum's Vancouver
B.C. office since 1999. Spectrum is an investment management and mutual fund
company. Mr. Dungate was an Investment Advisor with Nesbitt Burns, a Canadian
full service securities dealer owned by the Bank of Montreal, from 1996 to 1999.
Prior to this he worked as a Journalist and Researcher on a documentary on the
Canadian Financial Crisis "The Days of Reckoning" produced by Stornoway
Productions. During this time he has also provided investor relations services
to various companies. Mr. Dungate has also been involved with a number of
non-profit organizations including Generation 2000 Toronto where he was a
founding member and logistics co-coordinator from 1991 to 1992, and The
Evergreen Foundation where he acted as the regional manager for British Columbia
from 1992 to 1994. Mr. Dungate graduated from the University of British Columbia
in 1990 with a Bachelor of Arts in International Relations.
Mr. Allan Nienhuis, 37 years of age, is a Director of the company and
has served as Director of the Company since April 2000 and his term expires
on December 31, 2000. Mr. Nienhuis has been involved in the computer and
software development industry for over 15 years. He is currently employed by
Class Software Solutions Ltd., as a software developer and has been since
1998. Prior to this time he was self-employed, as a computer aided design
and manufacturing system specialist. Mr. Nienhuis has also operated a
successful community (not for profit) based computer bulletin board system
for several years, focusing on multiplayer computer games.
We currently have no significant employees other than the officers and
directors who provide consulting services and anticipate hiring additional
support staff in the near future. There are no family relationships among
directors, executive officers, or nominees for such positions. In the last five
years, no director, executive officer, promoter or control person of the Company
has been involved in any legal proceedings material to the evaluation of the
ability or integrity of any of the aforementioned persons.
Item 6. Executive Compensation.
<TABLE>
<CAPTION>
--------------------------- --------------------- ---------- ----------- ------------ ------------------ --------------- ----------
Name Position Year Salary / Bonus Other Other Stock All Other
Wage Compensation Options
--------------------------- --------------------- ---------- ----------- ------------ ------------------ --------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Tom Williams (1) President & 2000 42,857 2,142 (2) 0 0 0
Secretary
--------------------------- --------------------- ---------- ----------- ------------ ------------------ --------------- ----------
</TABLE>
(1) Jim Snow was the president of the Company prior to its merger with
Intuitech. Mr. Snow did not receive a salary. Mr. Williams was the President of
Intuitech prior to its merger with the Company and did receive a salary during
this time. The Company had no operations prior to its merger with Intuitech.
(2) Mr. Williams will receive, a bonus of $2,142 per magazine archive product
unit sold after the first 6 units Prior to February 2001.
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Options/SAR Grants in Last Fiscal Year.
The Company has never granted options or stock appreciation rights.
Bonuses and Deferred Compensation.
Prior to February 2001, Mr. Williams will receive, a bonus of $2,142 per
unit for each unit after the first 6 units.
Compensation Pursuant to Plans.
The Company does not have any compensation or option plans.
Pension Table.
None
Other Compensation.
None
Compensation of Directors.
Directors receive no compensation except for reimbursement for expenses
associated with attending a directors meeting.
Termination of Employment and Change of Control Arrangement.
Their neither are presently nor are there anticipated any agreements
regarding change of control of the Company.
Item 7. Certain Relationships and Related Transactions.
Mr. Williams the President of the company is also the President of
Dominion Game Marketing Ltd., a company that develops computer games to be
played over the Internet (massive multiplayer games). In October 1999, the
Company loaned $50,000 to Dominion Game Marketing Ltd., a Canadian corporation
controlled by, Tom Williams the President of the Company. The note was payable
on March 30, 2000 and bears interest at 1% per annum on the unpaid balance. The
company extended the note repayment to July 2000.
We have not and do not intend to enter into any transactions with our
management or any nominees for such positions. We have not and do not intend to
enter into any transactions with beneficial owners of the Company. We are not a
subsidiary of any parent company. Since inception, we have not entered into any
transactions with promoters.
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Item 8. Description of Securities
General
The Company is authorized to issue 50,000,000 shares of capital stock, par
value $0.001 per share designated as Common Stock. There are 23,444,349 fully
paid and non-assessable shares of Common Stock currently issued and outstanding
as of August 21, 2000.
Common Stock
The holders of Common Stock are entitled to one vote per share on each
matter submitted to a vote at any meeting of shareholders. Shares of Common
Stock do not carry cumulative voting rights and, therefore, a majority of the
shares of outstanding Common Stock will be able to elect the entire board of
directors and, if they do so, minority shareholders would not be able to elect
any persons to the board of directors. The Company's bylaws provide that a
majority of the issued and outstanding shares of the Company constitutes a
quorum for shareholders' meetings, except with respect to certain matters for
which a greater percentage quorum is required by statute or the bylaws.
Shareholders of the Company have no preemptive rights to acquire
additional shares of Common Stock or other securities. The Common Stock is not
subject to redemption and carries no subscription or conversion rights. In the
event of liquidation of the Company, the shares of Common Stock are entitled to
share equally in corporate assets after satisfaction of all liabilities.
Holders of Common Stock are entitled to receive such dividends, as the
board of directors may from time to time declare out of funds legally available
for the payment of dividends. The Company seeks growth and expansion of its
business through the reinvestment of profits, if any, and does not anticipate
that it will pay dividends in the foreseeable future.
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters.
The Company's Common Stock is currently not quoted or listed for trading
with any exchange or market. None of the Company's Common stock is subject to
outstanding options or warrants to purchase shares of the Company
Since its inception, the Company has not paid any dividends on its Common
Stock, and the Company does not anticipate that it will pay dividends in the
foreseeable future.
As of August 21, 2000 the Company had 23,444,349 shares of its Common
Stock issued and outstanding held by approximately 144 shareholders.
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There are 1,662,320 shares of the Common stock of the Company held by Mr.
Williams and Mr. Nienhuis, who are affiliated, all of these securities are
restricted securities as defined under Rule 144 of the Securities Act and may
only be sold under the Rule or otherwise under an effective registration
statement or an exemption from registration, if available. Rule 144 generally
provides that a person who has satisfied a one year holding period for the
restricted securities may sell, within any three month period subject to certain
manner of resale provisions, an amount of restricted securities which does not
exceed the greater of 1% of a company's outstanding common stock or the average
weekly trading volume in such securities during the four calendar weeks prior to
such sale. All 1,662,320 shares of common stock outstanding are restricted
shares for which the one-year holding period has not expired. A sale of shares
by such security holders, whether under Rule 144 or otherwise, may have a
depressing effect upon the price of our common stock in any market that might
develop.
Under Rule 144, Directors, Executive Officers and persons or entities they
control or who control them and may sell shares of common stock in any
three-month period in an amount limited to the greater of 1% of our outstanding
shares of common stock or the average of the weekly trading volume in our common
stock during the four calendar weeks preceding a sale. Sales under Rule 144 must
also be made without violating the manner-of-sale provisions, notice
requirements, and the availability of public information about us.
Penny Stock Considerations.
Broker-dealer practices in connection with transactions in penny stocks
are regulated by certain penny stock rules adopted by the Securities and
Exchange Commission. Penny stocks generally are equity securities with a price
of less than $5.00. Penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document that provides information about penny
stocks and the risks in the penny stock market. The broker-dealer also 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. In addition, the penny stock rules generally require
that prior to a transaction in a penny stock, the broker-dealer make a special
written determination that the penny stock is a suitable investment for the
purchaser and receive the purchaser's written agreement to the transaction.
These disclosure requirements may have the effect of reducing the level of
trading activity in the secondary market for a stock that becomes subject to the
penny stock rules. Our shares will likely be subject to such penny stock rules
and our shareholders will in all likelihood find it difficult to sell their
securities.
No market exists for our securities and there is no assurance that a
regular trading market will develop, or if developed will be sustained. A
shareholder in all likelihood, therefore, will not be able to resell the
securities referred to herein should he or she desire to do so. Furthermore, it
is unlikely that a lending institution will accept our securities as pledged
collateral for loans unless a regular trading market develops. There are no
plans, proposals, arrangements or understandings with any person with regard to
the development of a trading market in any of our securities.
13
<PAGE>
As of the date of this registration, we had one hundred forty four (144)
holders of record of our common Stock. We currently have one class of Common
Stock outstanding.
We have not paid any dividends since we were formed. There are no
restrictions that limit our ability to pay dividends, but we do not anticipate
paying dividends in the near future.
Item 2. Legal Proceedings.
The Company is not, and has not been, involved in any legal proceedings.
Item 3. Changes in and Disagreements with Accountants.
During the two most recent fiscal years and the subsequent interim period,
the Company has had no disagreement, resignation or dismissal of the principal
independent accountant for the Company. The accountant for the Company at this
time is Albright, Persing and Associates Ltd.
Item 4. Recent Sales of Unregistered Securities.
The following sets forth information relating to all previous sales by us,
which were not registered under the Securities Act of 1933. During the period
ended December 31, 1999, the Company commenced a private offering, exempt from
registration requirements under Rule 504 of Regulation D, of 6,000,000 shares of
common stock at $.0125 per share. A total of 6,000,000 shares were purchased,
resulting in proceeds to the Company of $75,000.
We have never utilized an underwriter for an offering of our securities.
Item 5. Indemnification of Directors and Officers.
Our Articles of Incorporation provide that to the fullest extent permitted
by law, that Directors of the corporation or its stockholders shall not be
liable to either the corporation or its stockholders for monetary damages for a
breach of fiduciary duties unless the breach involves: (1) a directors duty of
loyalty to the corporation or its stockholders; (2) acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of the
law; (3) liability for unlawful payments or dividends or unlawful stock
purchases or redemption by the corporation; (4) a transaction from which the
director derived an improper personal benefit.
14
<PAGE>
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
AUDITED FINANCIAL STATEMENTS
DECEMBER 31, 1999, AND 1998
15
<PAGE>
Item 1.
TABLE OF CONTENTS
PAGE
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS
Balance Sheets 2
Statements of Operations 3
Statements of Cash Flows 4
Statements of Stockholders' Equity (Deficit) 5
Notes to Financial Statements 6-10
16
<PAGE>
[Letterhead of Albright, Persing & Associates, Ltd.]
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
Monarch Media and Entertainment Group, Inc.
We have audited the accompanying balance sheets of Monarch Media and
Entertainment Group, Inc. (a development stage company) as of December 31, 1999,
and 1998, and the related statements of operations, stockholders' equity and
cash flows for the years ended December 31, 1999, 1998, and 1997, and for the
period from inception (December 30, 1997) to December 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Monarch Media and
Entertainment Group, Inc. as of December 31, 1999, and 1998, and the results of
its operations and its cash flows for the years ended December 31, 1999, 1998,
and 1997, and for the period from inception (December 30, 1997) to December 31,
1999 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company's ability to generate sufficient cash flows to
meet its obligations and sustain its operations, either through future revenues
and/or additional debt or equity financing, cannot be determined at this time.
These uncertainties raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Albright, Persing & Associates, Ltd.
Reno, Nevada
June 13, 2000
A-1
<PAGE>
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
DECEMBER 31, 1999, AND 1998
(See Independent Auditors' Report)
ASSETS
<TABLE>
<CAPTION>
December 31, December 31,
1999 1998
------------------- -------------------
<S> <C> <C>
Current Assets
Cash $ 1,904 $ -
Note Receivable 50,000 -
------------------- -------------------
Total Assets $ 51,904 $ -
=================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts Payable $ - $ 11,017
------------------- -------------------
Total Current Liabilities - 11,017
------------------- -------------------
Stockholders' Equity (Deficit)
Common stock, $.001 par value
authorized 50,000,000 shares,
issued and outstanding 19,122,000
shares at December 31, 1999 and
2,105,300 shares at December 31,
1998 19,122 2,105
Additional paid in capital 69,000 -
Deficit accumulated during the
development stage (36,218) (13,122)
-------------------- -------------------
Net Stockholders' Equity (Deficit) 51,904 (11,017)
------------------- -------------------
Total Liabilities and Stockholders'
Equity (Deficit) $ 51,904 $ -
=================== ===================
</TABLE>
The accompanying notes are an integral part of these financial statements.
A-2
<PAGE>
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE PERIODS ENDED DECEMBER 31, 1999, 1998, AND 1997
AND INCEPTION (DECEMBER 30, 1997) TO DECEMBER 31, 1999
(See Independent Auditors' Report)
<TABLE>
<CAPTION>
Inception through
Years ended
December 31, December 31,
1999 1998 1997 1999
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Expenses:
Professional Services $ 23,060 $ 11,017 $ 2,105 $ 36,182
Other general and administrative
expenses 36 - - 36
------------------- ------------------- ----------------- ----------------
23,096 11,017 2,105 36,218
------------------- ------------------- ----------------- ----------------
Net (Loss) (23,096) (11,017) (2,015) (36,218)
Other Comprehensive Income (Loss) - - - -
------------------- ------------------- ----------------- ----------------
Comprehensive (Loss) $ (23,096) $ (11,017) $ (2,015) $ (36,218)
==================== ==================== ================== =================
Net Loss per Share $ (.002) $ (.005) $ (.001) $ (.005)
==================== ==================== ================== =================
Weighted average
shares outstanding 12,393,495 2,105,300 2,105,300 7,235,343
=================== =================== ================= ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
A-3
<PAGE>
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE PERIODS ENDED DECEMBER 31, 1999, 1998, AND 1997
AND INCEPTION (DECEMBER 30, 1997) TO DECEMBER 31, 1999
(See Independent Auditors' Report)
<TABLE>
<CAPTION>
Inception through
Years ended
December 31, December 31,
1999 1998 1997 1999
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash Flows from (for) Operating Activities:
Net income (loss) $ (23,096) $ (11,017) $ (2,015) $ (36,128)
------------------ ------------------- ----------------- ----------------
Adjustments to reconcile net loss to
net cash used by operating
activities:
(Increase) Decrease in
notes receivable (50,000) - - (50,000)
Increase (Decrease) in
accounts payable (11,017) 11,017 - -
Stock issued for professional
services rendered 11,017 - 2,015 13,032
----------------- ------------------ ---------------- ---------------
Net Adjustments (50,000) 11,017 2,015 (36,968)
------------------ ------------------ ---------------- ----------------
Net Cash (Used) by
Operating Activities (73,096) - - (73,096)
------------------ ------------------ ---------------- ----------------
Cash Flows From Financing Activities:
Proceeds from sales of stock 75,000 - - 75,000
----------------- ------------------ ---------------- ---------------
Net Cash Provided by
Financing Activities 75,000 - - 75,000
----------------- ------------------ ---------------- ---------------
Net increase (decrease) in cash 1,904 - - 1,904
Cash at beginning of year - - - -
----------------- ------------------ ---------------- ---------------
Cash at end of period $ 1,904 $ - $ - $ 1,904
================= ================== ================ ===============
SUPPLEMENTAL DISCLOSURES
Amount paid for interest $ - $ - $ - $ -
================= ================== ================ ===============
Amount paid for income taxes $ - $ - $ - $ -
================= ================== ================ ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
A-4
<PAGE>
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIODS ENDED DECEMBER 31, 1999, 1998, AND 1997
AND INCEPTION (DECEMBER 30, 1997) TO DECEMBER 31, 1999
(See Independent Auditors' Report)
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the
Common Stock Paid-in Development
Shares Amount Capital
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total
Issuance of shares of common stock during
1997, for professional services
rendered 2,105,300 $ 2,105 $ - $ -
Net loss for 1997 - - - (2,105)
---------------- ----------------- ---------------- ----------------
Balance, December 31, 1997 2,105,300 2,105 - (2,105)
Net loss for 1998 - - - (11,017)
---------------- ----------------- ---------------- -----------------
Balance, December 31, 1998 2,105,300 2,105 - (13,122)
Issuance of shares of common stock during
1999, for professional services
rendered 11,016,800 11,017 - -
Issuance of shares of common stock for cash
on December 1, 1999, at $.0125 per
share 6,000,000 6,000 69,000 -
Net loss for 1999 - - - (23,096)
---------------- ----------------- ---------------- ----------------
Balance, December 31, 1999 19,122,100 $ 19,122 $ 69,000 $ (36,218)
================ ================= ================ ================
<CAPTION>
Stage
-----------------
<S> <C>
Total
Issuance of shares of common stock during
1997, for professional services
rendered $ 2,015
Net loss for 1997 (2,105)
----------------
Balance, December 31, 1997 -
Net loss for 1998 (11,017)
----------------
Balance, December 31, 1998 (11,017)
Issuance of shares of common stock during
1999, for professional services
rendered 11,017
Issuance of shares of common stock for cash
on December 1, 1999, at $.0125 per
share 75,000
Net loss for 1999 (23,096)
----------------
Balance, December 31, 1999 $ 51,904
================
</TABLE>
The accompanying notes are an integral part of these financial statements.
A-5
<PAGE>
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998, AND 1997 AND INCEPTION
(DECEMBER 30, 1997) TO DECEMBER 31, 1999
NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Business
Monarch Media and Entertainment Group, Inc. (the "Company") a Nevada
corporation located in Dickson, Tennessee, was incorporated on December 17,
1997. The Company is in the business of developing, managing, and marketing
and distribution for the publishing and recording industry.
The Company has been in the development stage since its formation. It is
primarily engaged in financial planning, raising capital, and developing its
planned business activities.
Risks and Uncertainties
The Company has not generated significant revenue during the years ended
December 31, 1999, 1998, and 1997, and has funded its operations primarily
through the issuance of equity. Accordingly, the Company's ability to accomplish
its business strategy and to ultimately achieve profitable operations is
dependent upon its ability to obtain additional financing and execute its
business plan. There can be no assurance that the Company will be able to obtain
additional funding, and if available, that the Company will obtain the funding
on terms favorable to or affordable. As discussed in Note 4 below, the Company
is in the process of completing a merger acquisition, but there are no
assurances that the merger will be profitable. Ultimately, however, the company
will need to achieve profitable operations in order to continue as a going
concern.
These conditions raise substantial doubt about the Company's ability to
continue as a going concern. The financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of liabilities that may result from the outcome of this
uncertainty.
Estimates
The preparation of financial statements in conformity 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 differ from these estimates.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash balances and instruments with
maturities of three months or less at the time of purchase.
A-6
<PAGE>
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998, AND 1997 AND INCEPTION
(DECEMBER 30, 1997) TO DECEMBER 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS ACTIVITY -
Continued
Concentrations of Credit Risk
The Company maintains cash balances at one bank located in Hendersonville,
Tennessee. Accounts at this institution are insured by the Federal Deposit
Insurance Corporation up to $100,000. The Company's cash balances, at times, may
exceed federally insured limits.
Fair Value of Financial Instruments
Effective December 30, 1997, the Company adopted Statement of Financial
Accounting Standards No. 107, "Disclosures about Fair Value of Financial
Instruments" ("SFAS No. 107"). The carrying amounts reported in the balance
sheet for cash and cash equivalents approximate those assets' fair values.
Active markets for the Company's other financial instruments that are subject to
the fair value disclosure requirements of SFAS No. 107 do not exist and there
are no quoted market prices for these instruments. Accordingly, it is not
practicable to estimate the fair values of such financial instruments because of
(1) the limited information available to the Company, and (2) the significance
of the cost to obtain independent appraisals for this purpose.
Income Taxes
In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109, Accounting for Income Taxes ("SFAS
No. 109"). SFAS No. 109 required a change from the deferred method of accounting
for income taxes of APB Opinion 11, to the asset and liability method of
accounting for income taxes. Under the asset and liability method of SFAS No.
109, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under SFAS No. 109, the
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. The Company
adopted SFAS No. 109 effective December 30, 1997, at its inception.
Net Loss per Share
In February, 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, Earnings per Share ("SFAS No. 128").
SFAS No. 128 simplifies the standards for computing earnings per share ("EPS")
and was effective for financial statements issued for periods ending after
December 15, 1997, with earlier application not permitted. The Company adopted
SFAS No. 128 effective December 30, 1997.
A-7
<PAGE>
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998, AND 1997 AND INCEPTION
(DECEMBER 30, 1997) TO DECEMBER 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS ACTIVITY -
Continued
Basic EPS is determined using net income divided by the weighted average
shares outstanding during the period. Diluted EPS is computed by dividing net
income by the weighted average shares outstanding, assuming all dilutive
potential common shares were issued.
Since the Company has no common shares that are potentially issueable, such
as stock options, convertible preferred stock, and warrants, basic and diluted
earnings per share are the same.
New Accounting Standards
In June, 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS
130"). SFAS No. 130 establishes standards for reporting and presentation of
comprehensive income and its components in a full set of general-purpose
financial statements. This statement does not, however, require a specific
format for the disclosure, but requires the Company to display an amount
representing total comprehensive income for the period in its financial
statements. Comprehensive income is determined by adjusting net income by other
items not included as a component of net income, such as the unrealized gain
(loss) on certain marketable securities. During the periods presented, the
Company had no additional components that were not a part of net income (loss),
therefore, comprehensive income and net income are the same amount.
In June, 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information ("SFAS No. 131"). SFAS No. 131 establishes
standards for the manner in which public business enterprises report information
about operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports issued to shareholders. This statement also requires that a
public business enterprise report financial and descriptive information about
its reportable operating segments. The Company is currently not in formal
business operations and does not have any reportable operating segments.
In June, 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities. However, the effective date for this pronouncement was
delayed for one year from the original
A-8
<PAGE>
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998, AND 1997 AND INCEPTION
(DECEMBER 30, 1997) TO DECEMBER 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS ACTIVITY -
Continued
effective date of fiscal years beginning after June 15, 1999. Since the Company
does not deal in derivative instruments or hedging activities, it is anticipated
that this pronouncement will have no impact on the Company's financial
statements.
NOTE 2 - INCOME TAXES
As discussed in Note 1, the Company adopted SFAS No. 109 effective December
30, 1997. One of the provisions of SFAS 109 enables companies to record deferred
tax assets for the benefit to be derived from the utilization of net operating
loss carryforwards and certain deductible temporary differences. At December 31,
1999, 1998 and 1997, the tax effects of temporary differences that give rise to
significant portions of deferred tax assets are presented below:
<TABLE>
<CAPTION>
1999 1998 1997
------------------------------------------
<S> <C> <C> <C>
Net operating loss carryforwards (tax) $ 5,433 $ 1,968 $ 316
Less: valuation allowance (5,433) (1,968) (316)
------------- ------------ ------------
$ - $ - $ -
============= ============ ============
</TABLE>
As of December 31, 1999, the Company has net operating loss carryforwards of
approximately $36,218 for Federal income tax return purposes, which expire
through 2014. The future tax benefits are dependent upon the Company's ability
to generate future earnings.
In addition, the Company has not filed any income tax returns since its
inception. As such, it is unclear whether expenses for services rendered in
exchange for common stock could be deducted under current federal tax law.
Assuming the providers of such services included the fair value of their
services in income on their personal tax returns, the Company should be able to
deduct such losses. However, due to the uncertainty of this inclusion, coupled
with the judgment involving the realizability of any net operating loss
carryforward due to the lack of revenues by the Company, a deferred income tax
valuation allowance has been recorded for the full amount of the deferred tax
asset attributable to the net operating loss carryforward.
A-9
<PAGE>
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998, AND 1997 AND INCEPTION
(DECEMBER 30, 1997) TO DECEMBER 31, 1999
NOTE 3 - STOCKHOLDERS' EQUITY
During the period ended December 31, 1999, the Company commenced a private
offering, exempt from registration requirements under Rule 504 of Regulation D,
of 6,000,000 shares of common stock at $.0125 per share. A total of 6,000,000
shares were purchased, resulting in proceeds to the Company of $75,000.
NOTE 4 - SUBSEQUENT EVENTS
Acquisition
On March 29, 2000, the Company entered into an agreement to acquire all the
issued and outstanding shares of stock of Intuitech Marketing, Inc., a Canadian
company that acquires and enhances existing software technologies and products
so that they can be reintroduced to the market place, in exchange for 4,322,249
shares of restricted common stock at $.01 per share.
A-10
<PAGE>
MONARCH MEDIA & ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In April 2000, Monarch Media and Entertainment Group, Inc. merged with
Intuitech Marketing, Inc. (collectively "the Company"). Intuitech Marketing,
Inc. ("Intuitech") was a Canadian corporation in the business of acquiring and
enhancing existing software technologies for reintroduction into the market
place. In connection with the legal form of the transaction, Intuitech became a
wholly owned subsidiary or Monarch Media and Entertainment Group, Inc. (Monarch)
even though the Company's new Board of Directors consists solely of Intuitech
management, and Monarch Media lacks substantial assets, liabilities or
marketable products. The existing shareholders of Monarch Media retained their
19,122,000 shares and the stockholders of Intuitech received shares of Monarch
Media at a ratio of approximately 5 to 1 for a total of 4,322,349 shares. For
accounting purposes, the acquisition was treated as a recapitalization of
Intuitech rather than a business combination. Intuitech, as the accounting
acquiror, did not record goodwill or any other intangible asset for this
"reverse acquisition".
The accompanying condensed consolidated financial statements illustrate
the effect of the acquisition (Pro Forma) on the results on the Company's
financial position and results of operations. The consolidated balance sheet as
of December 31, 1999, is based on the historical balance sheets of Monarch Media
and Intuitech as of that date and assumes the acquisition took place on that
date. The condensed consolidated statements of income for the year ended
December 31, 1999, and the period ended June 30, 1999, are based on the
historical statements of income of Monarch Media and Intuitech for those
periods. The pro forma condensed consolidated statements of income assume the
acquisition took place on January 1, 1999. No pro forma condensed consolidated
balance sheet as of June 30, 2000, has been presented because the accounting for
the acquisition was reflected in the Company's condensed consolidated balance
sheet as of June 30, 2000.
Intuitech reported using a fiscal year end date of April 30th. To prepare
the pro forma condensed consolidated financial statements, the financial
information of Intuitech had to be presented on the December 31 year-end of
Monarch Media.
The pro forma condensed consolidated financial statements may not be
indicative of the actual results of the acquisition.
The accompanying pro forma condensed consolidated financial statements
should be read in connection with the historical financial statements of Monarch
Media and Intuitech.
PF-1
<PAGE>
MONARCH MEDIA & ENTERTAINMENT GROUP, INC.
PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF FINANCIAL POSITION
UNAUDITED
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Monarch Monarch
Media Intuitech Purchase Media
Pre-Merger Pre Merger Adjustments Post-Merger
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Cash $ 1,904 $ 1,493 $ - $ 3,397
GST Receivable - 1,284 - 1,284
Note Receivable 50,000 - - 50,000
Subscriptions Receivable - 27,532 - 27,532
Software - 33,910 - 33,910
------------------ ------------------ ------------------ ------------------
Total Assets $ 51,904 $ 64,219 $ - $ 116,123
================== ================== ================== ==================
Accounts Payable $ - $ 6,804 $ - $ 6,804
Loans Payable - 344 - 344
Due to Shareholders - 121 - 121
------------------ ------------------ ------------------ ------------------
Total Liabilities - 7,269 - 7,269
------------------ ------------------ ------------------ ------------------
Common Stock 19,122 90,534 4,323 23,445
(90,534)
Paid in Capital 69,000 - (4,323) 118,993
(36,218)
90,534
Accumulated Deficit (36,218) (33,584) 36,218 (33,584)
------------------ ------------------ ------------------ ------------------
Total Equity 51,904 56,950 - 108,853
------------------ ------------------ ------------------ ------------------
Total Liabilities and Equity $ 51,904 $ 64,219 $ - $ 116,123
================== ================== ================== ==================
</TABLE>
PF-2
<PAGE>
MONARCH MEDIA & ENTERTAINMENT GROUP, INC.
PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
UNAUDITED
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Monarch
Media &
Entertainment Intuitech
Group, Inc. Marketing, Inc. Adjustments Pro Forma
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Revenues $ - $ - $ - $ -
Cost of Revenues - - - -
------------------ ------------------ ------------------ ------------------
Gross Profit - - - -
------------------ ------------------ ------------------ ------------------
Operating Expenses 23,096 3,970 - 27,066
Income (Loss) from
Operations (23,096) (3,970) - (27,066)
Other Income (Expense) - 3 - 3
Income (Loss) Before
Provision for Income
Taxes (23,096) (3,967) - (27,063)
Provision for Income Taxes` - - - -
------------------ ------------------ ------------------ ------------------
Net Income (Loss) $ (23,096) $ (3,967) $ - $ (27,063)
================== ================== ================== ==================
Net (Loss) per Share $ (0.002) $ (0.002)
================== ==================
Weighted Average
Number of Shares
Outstanding 12,393,495 4,322,249 16,715,744
================== ===================== ==================
</TABLE>
PF-3
<PAGE>
MONARCH MEDIA & ENTERTAINMENT GROUP, INC.
PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
UNAUDITED
SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
Monarch
Media &
Entertainment Intuitech
Group, Inc. Marketing, Inc. Adjustments Pro Forma
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Revenues $ - $ - $ - $ -
Cost of Revenues - - - -
------------------ ------------------ ------------------ ------------------
Gross Profit - - - -
------------------ ------------------ ------------------ ------------------
Operating Expenses 11,530 3,040 - 14,570
Income (Loss) from
Operations (11,530) (3,040) - (14,570)
Other Income (Expense) - - - -
Income (Loss) Before
Provision for Income
Taxes (11,530) (3,040) - (14,570)
Provision for Income Taxes` - - - -
------------------ ------------------ ------------------ ------------------
Net Income (Loss) $ (11,530) $ (3,040) $ - $ (14,570)
================== ================== ================== ==================
Net (Loss) per Share $ (0.001) $ (0.001)
================== ==================
Weighted Average
Number of Shares
Outstanding 10,697,364 4,322,249 15,019,613
================== ================== ==================
</TABLE>
PF-4
<PAGE>
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - ADJUSTMENTS TO THE CONDENSED CONSOLIDATED BALANCE SHEET
To reflect the recapitalization of Intuitech, adjustments were made to
record the issuance of 4,322,249 of $.001 par value Monarch Media common stock
in exchange for the outstanding shares of Intuitech, eliminate Intuitech's
common stock, and eliminate Monarch Media's accumulated deficit.
NOTE 2 - ADJUSTMENTS TO THE CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Intuitech reported on a fiscal year ending in April. Monarch Media
reported on a calendar year end (December 31). To properly consolidate the two
entities, Intuitech's financial statements were restated to an interim period
ending in June and a calendar year ending in December. Interim income statements
were added and subtracted to arrive at the six month and twelve month periods.
Also, since Intuitech's financial statements were reported in Canadian currency,
it was necessary to translate revenues and expenses into U.S. currency. The
following is summary of the amounts in U.S. currency included and excluded to
arrive at the restated statements.
For the Six Months Ended June 30, 1999
<TABLE>
<CAPTION>
Net
Gross Gross Income
Revenues Profit (Loss)
------------------ ------------------ ------------------
<S> <C> <C> <C>
Intuitech
---------
Twelve months ended 4/30/99 $ - $ - $ 3,063
Less:
Eight months ended 12/31/98 - - (23)
Plus:
Two months ended 6/30/99 - - -
------------------ ------------------ ------------------
Six months ended 6/30/99 $ - $ - $ 3,040
================== ================== ==================
</TABLE>
PF-5
<PAGE>
For the Year Ended December 31, 1999
<TABLE>
<CAPTION>
Net
Gross Gross Income
Revenues Profit (Loss)
------------------ ------------------ ------------------
<S> <C> <C> <C>
Intuitech
Six months ended 6/30/99 $ - $ - $ 3,040
Plus:
Six months ended 12/31/99 (3) 930 927
------------------ ------------------ ------------------
Twelve months ended 12/31/99 $ - $ - $ 3,967
================== ================== ==================
</TABLE>
PF-6
<PAGE>
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
INTERIM UNAUDITED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
17
<PAGE>
ITEM 3.
TABLE OF CONTENTS
PAGE
ACCOUNTANTS' DISCLAIMER OF OPINION 1
FINANCIAL STATEMENTS
Unaudited Balance Sheets 2
Unaudited Statements of Operations 3
Unaudited Statements of Cash Flows 4-5
Unaudited Statements of Stockholders' Equity (Deficit) 6-9
Notes to Unaudited Financial Statements 10-15
18
<PAGE>
[Letterhead of Albright, Persing & Associates, Ltd.]
ACCOUNTANTS' DISCLAIMER OF OPINION
To the Shareholders and Board of Directors
Monarch Media and Entertainment Group, Inc.
The accompanying consolidated balance sheet of Monarch Media and
Entertainment Group, Inc. and subsidiaries as of June 30, 2000, and the related
consolidated statements of operations, stockholders equity, and cash flows for
the six months ended June 30, 2000, were not audited by us, and accordingly, we
do not express an opinion on them.
Also, the statements of operations, stockholders equity, and cash flows
for Monarch Media and Entertainment Group, (previously Intuitech Marketing,
Inc.) for the six months ended June 30, 1999, and for the period from inception
(March 27, 1985) to June 30, 2000, were not audited by us, and accordingly, we
do not express an opinion on them.
/s/ Albright, Persing & Associates, Ltd.
August 18, 2000
I-1
<PAGE>
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
JUNE 30, 2000
(Unaudited - See Accountants' Disclaimer of Opinion)
ASSETS
<TABLE>
<S> <C>
Current Assets
Cash $ 76,990
Accounts receivable 1,446
Note Receivable 50,000
-------------------
Total Current Assets 128,436
-------------------
Other Assets:
Software, net of accumulated amortization
of $6,782 27,128
Deferred Development Costs, net of accumulated
amortization of $1,296 37,578
-------------------
64,706
-------------------
Total Assets $ 193,142
===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ 7,583
Due to Stockholders 400
-------------------
Total Current Liabilities 7,983
-------------------
Stockholders' Equity
Common stock, $.001 par value
authorized 50,000,000 shares,
issued and outstanding 23,444,349
shares at June 30, 2000 23,444
Additional paid in capital 220,122
Deficit accumulated during the
development stage (61,587)
Aggregate translation adjustment 3,180
-------------------
Net Stockholders' Equity 185,159
-------------------
Total Liabilities and Stockholders'
Equity $ 193,142
===================
</TABLE>
The accompanying notes are an integral part of these financial statements.
I-2
<PAGE>
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE PERIODS ENDED JUNE 30, 2000 AND 1999
AND INCEPTION (MARCH 27, 1985) TO JUNE 30, 2000
(Unaudited - See Accountants' Disclaimer of Opinion)
<TABLE>
<CAPTION>
Six Months Ended Inception
June 30, Through
---------------------------------------- June 30,
2000 1999 2000
------------------- ----------------- ----------------
<S> <C> <C> <C>
Net Sales $ - $ - $ 52,827
Cost of Sales - - 36,731
------------------- ----------------- ----------------
Gross Profit - - 16,096
------------------- ----------------- ----------------
Expenses
Professional Services 14,502 311 21,632
Other general and administrative expenses 5,474 - 51,956
------------------- ----------------- ----------------
19,976 311 73,588
------------------- ----------------- ----------------
Loss from Operations (19,976) (311) (57,492)
------------------- ----------------- ----------------
Other Income (Expense)
Interest income 256 - 256
Interest expense - (1,517) (7,531)
------------------- ----------------- ----------------
256 (1,517) (7,275)
------------------- ----------------- ----------------
Net (Loss) (19,720) (1,828) (64,767)
Other Comprehensive Income (Loss)
Foreign currency translation adjustment (857) (1,212) 3,180
------------------- ----------------- ----------------
Comprehensive (Loss) $ (20,577) $ (3,040) $ (61,587)
=================== ================= ================
Net Loss per Share $ (0.006) $ - $ (0.590)
=================== ================= ================
Weighted average shares outstanding 3,147,040 - 104,316
=================== ================= ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
I-3
<PAGE>
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE PERIODS ENDED JUNE 30, 2000 AND 1999
AND INCEPTION (MARCH 27, 1985) TO JUNE 30, 2000
(Unaudited - See Accountants' Disclaimer of Opinion)
<TABLE>
<CAPTION>
Six Months Ended Inception
June 30, Through
---------------------------------------- June 30,
2000 1999 2000
------------------- ----------------- ----------------
<S> <C> <C> <C>
Cash Flows from (for) Operating Activities:
Net income (loss) $ (20,577) $ (3,040) $ (61,587)
------------------- ----------------- ----------------
Adjustments to reconcile net loss to
net cash used by operating
activities:
Amortization 4,687 - 8,078
(Increase) in translation adjustments (857) (1,212) 3,180
(Increase) Decrease in
receivables 27,620 - (1,196)
(Increase) Decrease in prepaid expenses 1,381 - 1,381
(Increase) in software - - (33,910)
(Increase) in deferred development costs (38,873) - (38,873)
Increase (Decrease) in
accounts payable 435 595 7,583
(Decrease) in due to stockholders (1,721) 3,657 (1,600)
------------------- ----------------- ----------------
Net Adjustments (7,328) 3,040 (55,357)
------------------- ----------------- ----------------
Net Cash (Used) by
Operating Activities (27,905) - (116,944)
------------------- ----------------- ----------------
Cash Flows From Investing Activities:
Cash acquired during recapitalization 1,880 - 1,880
------------------- ----------------- ----------------
Net Cash Provided by Investing
Activities 1,880 - 1,880
------------------- ----------------- ----------------
Cash Flows From Financing Activities:
Proceeds from sales of stock 101,522 - 192,054
------------------- ----------------- ----------------
Net Cash Provided by
Financing Activities 101,522 - 192,054
------------------- ----------------- ----------------
Net increase (decrease) in cash 75,497 - 76,990
Cash at beginning of year 1,493 - -
------------------- ----------------- ----------------
Cash at end of period $ 76,990 $ - $ 76,990
=================== ================= ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
I-4
<PAGE>
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE PERIODS ENDED JUNE 30, 2000 AND 1999
AND INCEPTION (MARCH 27, 1985) TO JUNE 30, 2000
(Unaudited - See Accountants' Disclaimer of Opinion)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
<TABLE>
<S> <C> <C> <C>
Amount paid for interest $ - $ - $ -
==================== ================= =================
Amount paid for income taxes $ - $ - $ -
==================== ================= =================
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Assets and Liabilities Acquired in Recapitalization
Note receivable $ 50,250
Prepaid expenses 1,381
Accounts payable (1,095)
Due to stockholders (2,000)
The accompanying notes are an integral part of these financial statements.
I-5
<PAGE>
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIODS ENDED JUNE 30, 2000 AND 1999
AND INCEPTION (MARCH 27, 1985) TO JUNE 30, 2000
(Unaudited - See Accountants' Disclaimer of Opinion)
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During the
-------------------------------------- Paid-in Development
Shares Amount Capital Stage
---------------- ------------------ ---------------- -----------------
<S> <C> <C> <C> <C>
Aggregate Adjustment
resulting from trans-
lation of financial state-
ments into U.S. dollars - $ - $ - $ -
Net loss for 1986 - - - (4,891)
---------------- ------------------ ---------------- -----------------
Balance, April, 30, 1986 - - - (4891)
Aggregate Adjustment
resulting from trans-
lation of financial state-
ments into U.S. dollars - - - -
Net loss for 1987 - - - (10,048)
---------------- ------------------ ---------------- -----------------
Balance, April 30, 1987 - - - (14,939)
Aggregate Adjustment
resulting from trans-
lation of financial state-
ments into U.S. dollars - - - -
Net loss for 1988 - - - (11,998)
---------------- ------------------ ---------------- -----------------
Balance, April 30, 1988 - - - (26,937)
Aggregate Adjustment
resulting from trans-
lation of financial state-
ments into U.S. dollars - - - -
Net loss for 1989 - - - (1,246)
---------------- ------------------ ---------------- -----------------
Balance, April 30, 1989 - - - (28,183)
Aggregate Adjustment
resulting from trans-
lation of financial state-
ments into U.S. dollars - - - -
Net loss for 1990 - - - 5,525
---------------- ------------------ ---------------- -----------------
Balance, April 30, 1990 - - - (22,658)
<CAPTION>
Equity
Adjustment
From Foreign
Currency
Translation Total
--------------- ---------------
<S> <C> <C>
Aggregate Adjustment
resulting from trans-
lation of financial state-
ments into U.S. dollars $ (34) $ (34)
Net loss for 1986 - (4,891)
--------------- ---------------
Balance, April, 30, 1986 (34) (4,925)
Aggregate Adjustment
resulting from trans-
lation of financial state-
ments into U.S. dollars (1,435) (1,435)
Net loss for 1987 - (10,048)
--------------- ---------------
Balance, April 30, 1987 (1,469) (16,408)
Aggregate Adjustment
resulting from trans-
lation of financial state-
ments into U.S. dollars (1,972) (1,972)
Net loss for 1988 - (11,998)
--------------- ---------------
Balance, April 30, 1988 (3,441) (30,378)
Aggregate Adjustment
resulting from trans-
lation of financial state-
ments into U.S. dollars (832) (832)
Net loss for 1989 - (1,246)
--------------- ---------------
Balance, April 30, 1989 (4,273) (32,456)
Aggregate Adjustment
resulting from trans-
lation of financial state-
ments into U.S. dollars 9 9
Net loss for 1990 - 5,525
--------------- ---------------
Balance, April 30, 1990 (4,264) (26,922)
</TABLE>
The accompanying notes are an integral part of these financial statements.
I-6
<PAGE>
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIODS ENDED JUNE 30, 2000 AND 1999
AND INCEPTION (MARCH 27, 1985) TO JUNE 30, 2000
(Unaudited - See Accountants' Disclaimer of Opinion)
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During the
-------------------------------------- Paid-in Development
Shares Amount Capital Stage
---------------- ------------------ ---------------- -----------------
<S> <C> <C> <C> <C>
Aggregate Adjustment
resulting from trans-
lation of financial state-
ments into U.S. dollars - - - -
Net loss for 1991 - - - (534)
---------------- ------------------ ---------------- -----------------
Balance, April 30, 1991 - - - (23,192)
Aggregate Adjustment
resulting from trans-
lation of financial state-
ments into U.S. dollars - - - -
Net loss for 1992 - - - (276)
---------------- ------------------ ---------------- -----------------
Balance, April 30, 1992 - - - (23,468)
Aggregate Adjustment
resulting from trans-
lation of financial state-
ments into U.S. dollars - - - -
Net loss for 1993 - - - (3,802)
---------------- ------------------ ---------------- -----------------
Balance, April 30, 1993 - - - (27,270)
Aggregate Adjustment
resulting from trans-
lation of financial state-
ments into U.S. dollars - - - -
Net loss for 1994 - - - (2,699)
---------------- ------------------ ---------------- -----------------
Balance, April 30, 1994 - - - (29,969)
Aggregate Adjustment
resulting from trans-
lation of financial state-
ments into U.S. dollars - - - -
Net loss for 1995 - - - (1,316)
---------------- ------------------ ---------------- -----------------
Balance, April 30, 1995 - - - (31,285)
<CAPTION>
Equity
Adjustment
From Foreign
Currency
Translation Total
--------------- ---------------
<S> <C> <C>
Aggregate Adjustment
resulting from trans-
lation of financial state-
ments into U.S. dollars 1,047 1,047
Net loss for 1991 - (534)
--------------- ---------------
Balance, April 30, 1991 (3,217) (26,409)
Aggregate Adjustment
resulting from trans-
lation of financial state-
ments into U.S. dollars 2,442 2,442
Net loss for 1992 - (276)
--------------- ---------------
Balance, April 30, 1992 (775) (24,243)
Aggregate Adjustment
resulting from trans-
lation of financial state-
ments into U.S. dollars 1,170 1,170
Net loss for 1993 - (3,802)
--------------- ---------------
Balance, April 30, 1993 395 (26,875)
Aggregate Adjustment
resulting from trans-
lation of financial state-
ments into U.S. dollars 1,158 1,158
Net loss for 1994 - (2,699)
--------------- ---------------
Balance, April 30, 1994 1,553 (28,416)
Aggregate Adjustment
resulting from trans-
lation of financial state-
ments into U.S. dollars (393) (393)
Net loss for 1995 - (1,316)
--------------- ---------------
Balance, April 30, 1995 1,160 (30,125)
</TABLE>
The accompanying notes are an integral part of these financial statements.
I-7
<PAGE>
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIODS ENDED JUNE 30, 2000 AND 1999
AND INCEPTION (MARCH 27, 1985) TO JUNE 30, 2000
(Unaudited - See Accountants' Disclaimer of Opinion)
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During the
-------------------------------------- Paid-in Development
Shares Amount Capital Stage
---------------- ------------------ ---------------- -----------------
<S> <C> <C> <C> <C>
Aggregate Adjustment
resulting from trans-
lation of financial state-
ments into U.S. dollars - - - -
Net loss for 1996 - - - (576)
---------------- ------------------ ---------------- -----------------
Balance, April 30, 1996 - - - (31,861)
Aggregate Adjustment
resulting from trans-
lation of financial state-
ments into U.S. dollars - - - -
Net loss for 1997 - - - (1,249)
---------------- ------------------ ---------------- -----------------
Balance, April 30, 1997 - - - (33,110)
Aggregate Adjustment
resulting from trans-
lation of financial state-
ments into U.S. dollars - - - -
Net loss for 1998 - - - (543)
---------------- ------------------ ---------------- -----------------
Balance, April 30, 1998 - - - (33,653)
Aggregate Adjustment
resulting from trans-
lation of financial state-
ments into U.S. dollars - - - -
Net loss for May, 1998
through December
31, 1998 - - - -
------------------ ------------------ ---------------- ----------------
Balance, December 31,
1998 - - - (33,653)
Issuance of common
stock during 1999
for cash 1,713,858 1,714 - -
<CAPTION>
Equity
Adjustment
From Foreign
Currency
Translation Total
--------------- ---------------
<S> <C> <C>
Aggregate Adjustment
resulting from trans-
lation of financial state-
ments into U.S. dollars (169) (169)
Net loss for 1996 - (576)
--------------- ---------------
Balance, April 30, 1996 991 (30,870)
Aggregate Adjustment
resulting from trans-
lation of financial state-
ments into U.S. dollars 1,447 1,447
Net loss for 1997 - (1,249)
--------------- ---------------
Balance, April 30, 1997 2,438 (30,672)
Aggregate Adjustment
resulting from trans-
lation of financial state-
ments into U.S. dollars 2,331 2,331
Net loss for 1998 - (543)
--------------- ---------------
Balance, April 30, 1998 4,769 (28,884)
Aggregate Adjustment
resulting from trans-
lation of financial state-
ments into U.S. dollars (91) (91)
Net loss for May, 1998
through December
31, 1998 - -
----------------- ---------------
Balance, December 31,
1998 4,678 (28,975)
Issuance of common
stock during 1999
for cash - 1,714
</TABLE>
The accompanying notes are an integral part of these financial statements.
I-8
<PAGE>
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIODS ENDED JUNE 30, 2000 AND 1999
AND INCEPTION (MARCH 27, 1985) TO JUNE 30, 2000
(Unaudited - See Accountants' Disclaimer of Opinion)
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During the
-------------------------------------- Paid-in Development
Shares Amount Capital Stage
---------------- ------------------ ---------------- -----------------
<S> <C> <C> <C> <C>
Aggregate Adjustment
resulting from trans-
lation of financial state-
ments into U.S. dollars - - - -
Net loss for 1999 - - - (7,357)
---------------- ------------------ ---------------- -----------------
Balance, December 31,
1999 1,713,858 1,714 - (41,010)
Issuance of common
stock during 2000
for cash 2,608,391 2,608 - -
Effects of recapitalization 19,122,100 19,122 220,122 -
Aggregate Adjustment
resulting from trans-
lation of financial state-
ments into U.S. dollars - - - -
Net loss through June 30,
2000 - - - (20,577)
---------------- ------------------ ---------------- -----------------
Balance, June 30, 2000 23,444,349 $ 23,444 $ 220,122 $ (61,587)
================ ================== ================ =================
<CAPTION>
Equity
Adjustment
From Foreign
Currency
Translation Total
--------------- ---------------
<S> <C> <C>
Aggregate Adjustment
resulting from trans-
lation of financial state-
ments into U.S. dollars (641) (641)
Net loss for 1999 - (7,357)
--------------- ---------------
Balance, December 31,
1999 4,037 (35,259)
Issuance of common
stock during 2000
for cash - 2,608
Effects of recapitalization - 239,244
Aggregate Adjustment
resulting from trans-
lation of financial state-
ments into U.S. dollars (857) (857)
Net loss through June 30,
2000 (20,577)
--------------- ---------------
Balance, June 30, 2000 $ 3,180 $ 185,159
=============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
I-9
<PAGE>
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
AND INCEPTION (MARCH 27, 1985) TO JUNE 30, 2000
(Unaudited - See Accountants' Disclaimer of Opinion)
NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Organization and Operations
Monarch Media and Entertainment Group, Inc. and its wholly owned subsidiary,
Intuitech Marketing, Inc. (collectively "the Company"), a development stage
enterprise, operates in the business of acquiring and enhancing existing
software technologies and products so that they can be reintroduced to the
market place.
In April 2000, Monarch Media and Entertainment Group, Inc. ("Monarch Media")
acquired all of the outstanding common stock of Intuitech Marketing, Inc.
("Intuitech") by issuing 4,322,249 shares of its common stock. In connection
with the legal form of the transaction, Intuitech became a wholly owned
subsidiary of Monarch Media, even though the Company's new Board of Directors
consists solely of Intuitech management and Monarch Media lacks substantial
assets, liabilities, or marketable products. For accounting purposes, the
acquisition was treated as a recapitalization of Intuitech rather than a
business combination. Intuitech, as the accounting acquiror, did not record
goodwill or any other intangible asset for this "reverse acquisition."
The historical financial statements are those of Intuitech. Intuitech, a
development stage enterprise, was a Canadian corporation formed in 1985 and
reported using a fiscal year end of April 30. Intuitech has been and continues
to be involved in acquiring and enhancing existing software technologies for
reintroduction into the market place. All financial statement amounts have been
translated from Canadian currency to U.S. currency and, as of 1998, have been
presented on the December 31 year-end of Monarch Media. Loss per share has been
restated for all periods prior to the acquisition to include the number of
equivalent shares received by Intuitech's stockholders in the reverse
acquisition.
The following summarized pro forma (unaudited) information assumes the
acquisition had occurred on January 1, 1999:
Net Loss $ (27,063)
===========
Earnings per share:
Basic
Net Loss $ (0.002)
===========
I-10
<PAGE>
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
AND INCEPTION (MARCH 27, 1985) TO JUNE 30, 2000
(Unaudited - See Accountants' Disclaimer of Opinion)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS ACTIVITY -
Continued
Risks and Uncertainties
Since its inception, Intuitech, and more recently the Company, has been
primarily engaged in directing, supervising, and coordinating research and
development efforts in the continuing development of its products and raising
funds.
There is no assurance that the Company's research, development, and
marketing activities will be successful, that the Company will have commercially
acceptable products, or that the Company will achieve significant sales of such
products. The Company has incurred net losses and has an accumulated deficit at
June 30, 2000. In addition, the Company operates in an environment of rapid
change in technology and is dependent upon its ability to obtain additional
funding and execute its business plan. If the Company is unable to successfully
bring its technologies to commercialization, it is unlikely that the Company
could continue as a business.
These conditions raise substantial doubt about the Company's ability to
continue as a going concern. The financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of liabilities that may result from the outcome of this
uncertainty.
Estimates
The preparation of financial statements in conformity 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 differ from these estimates.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash balances and instruments with
maturities of three months or less at the time of purchase.
Concentrations of Credit Risk
The Company maintains cash balances at various banks; one is located in
Hendersonville, Tennessee. Accounts at this institution are insured by the
Federal Deposit Insurance Corporation up to $100,000. The other bank deposit
accounts are maintained in several banks throughout Canada. Accounts at each
bank are insured by the Canadian Deposit Insurance Corporation (CDIC) up to
$60,000 (Canadian currency) per bank. The Company's cash balances, at times, may
exceed insured limits.
I-11
<PAGE>
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
AND INCEPTION (MARCH 27, 1985) TO JUNE 30, 2000
(Unaudited - See Accountants' Disclaimer of Opinion)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS ACTIVITY -
Continued
Fair Value of Financial Instruments
In accordance with the Statement of Financial Accounting Standards No. 107,
Disclosures about Fair Value of Financial Instruments ("SFAS No. 107"), the
carrying amounts reported in the balance sheet for cash and cash equivalents
approximate those assets' fair values. Active markets for the Company's other
financial instruments that are subject to the fair value disclosure requirements
of SFAS No. 107 do not exist and there are no quoted market prices for these
instruments. Accordingly, it is not practicable to estimate the fair values of
such financial instruments because of (1) the limited information available to
the Company, and (2) the significance of the cost to obtain independent
appraisals for this purpose.
Software and Deferred Development Costs
The company accounts for the costs of developing software products to be
used internally in accordance with Statement of Position 98-1, Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use which
allows for costs incurred during the application development stage to be
capitalized upon the establishment of technological feasibility and subsequently
reported on the balance sheet at the lower of unamortized cost or net realizable
value. Capitalized costs are amortized based on current and future revenue for
each product with an annual minimum equal to the straight-line amortization over
the remaining estimated economic life of the product.
Asset Impairment
The Company reviews its intangibles and other long-lived assets periodically
in accordance with Statement of Financial Accounting Standard ("SFAS") No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of, to determine potential impairment by comparing the carrying
value of the assets with estimated undiscounted future cash flows expected to
result from the use of the assets, including cash flows from disposition. Based
on this analysis, if the sum of the expected future undiscounted net cash flow
is less than its carrying value, the Company would determine whether an
impairment loss should be recognized. At June 30, 2000, it was determined that
there were no asset impairments.
I-12
<PAGE>
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
AND INCEPTION (MARCH 27, 1985) TO JUNE 30, 2000
(Unaudited - See Accountants' Disclaimer of Opinion)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS ACTIVITY -
Continued
Income Taxes
The Company accounts for income taxes by the asset/liability approach in
accordance with the provisions of SFAS No. 109, Accounting for Income Taxes.
Under this pronouncement, deferred income taxes, if any, reflect the estimated
future tax consequences when reported amounts of assets and liabilities are
recovered or paid. Deferred income tax assets and liabilities are determined
based on differences between the financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that are
scheduled to be in effect when the differences are expected to reverse. The
provision for income taxes, if any, represents the total income taxes paid or
payable for the current year, plus the change in deferred taxes during the year.
The tax benefits related to operating loss carryforwards are recognized if
management believes, based on available evidence, that it is more likely than
not that they will be realized.
Net Loss per Share
In February, 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, Earnings per Share ("SFAS No. 128").
SFAS No. 128 simplifies the standards for computing earnings per share ("EPS")
and was effective for financial statements issued for periods ending after
December 15, 1997, with earlier application not permitted. Upon adoption, all
prior EPS data was restated.
Basic EPS is determined using net income divided by the weighted average
shares outstanding during the period. Diluted EPS is computed by dividing net
income by the weighted average shares outstanding, assuming all dilutive
potential common shares were issued.
Since the Company has no common shares that are potentially issueable, such
as stock options, convertible preferred stock, and warrants, basic and diluted
earnings per share are the same.
I-13
<PAGE>
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
AND INCEPTION (MARCH 27, 1985) TO JUNE 30, 2000
(Unaudited - See Accountants' Disclaimer of Opinion)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS ACTIVITY -
Continued
New Accounting Standards
In June, 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS
130"). SFAS No. 130 establishes standards for reporting and presentation of
comprehensive income and its components in a full set of general-purpose
financial statements. This statement does not, however, require a specific
format for the disclosure but requires the Company to display an amount
representing total comprehensive income for the period in its financial
statements. Comprehensive income is determined by adjusting net income by other
items not included as a component of net income, such as the unrealized gain
(loss) on certain marketable securities. During the periods presented, the
Company had no additional components that were not a part of net income (loss),
therefore, comprehensive income and net income are the same amount.
In June, 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information ("SFAS No. 131"). SFAS No. 131 establishes
standards for the manner in which public business enterprises report information
about operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports issued to shareholders. This statement also requires that a
public business enterprise report financial and descriptive information about
its reportable operating segments. The Company is currently not in formal
business operations and does not have any reportable operating segments.
In June, 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities. However, the effective date for this pronouncement was
delayed for one year from the original effective date of fiscal years beginning
after June 15, 1999. Since the Company does not deal in derivative instruments
or hedging activities, it is anticipated that this pronouncement will have no
impact on the Company's financial statements.
I-14
<PAGE>
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
AND INCEPTION (MARCH 27, 1985) TO JUNE 30, 2000
(Unaudited - See Accountants' Disclaimer of Opinion)
NOTE 2 - INCOME TAXES
One of the provisions of SFAS 109 enables companies to record deferred tax
assets for the benefit to be derived from the utilization of net operating loss
carryforwards and certain deductible temporary differences. At June 30, 2000 and
December 31, 1999, the tax effects of temporary differences that give rise to
significant portions of deferred tax assets are presented below:
2000 1999
------------ ------------
Net operating loss carryforwards (tax) $ 6,740 $ 5,433
Less: valuation allowance (6,740) (5,433)
------------ ------------
$ - $ -
============ ============
As of June 30, 2000, the Company has net operating loss carryforwards of
approximately $44,933 for Federal income tax return purposes, which expire
through 2015. The future tax benefits are dependent upon the Company's ability
to generate future earnings.
In addition, the Company has not filed any income tax returns since its
inception. As such, it is unclear whether expenses for services rendered in
exchange for common stock could be deducted under current federal tax law.
Assuming the providers of such services included the fair value of their
services in income on their personal tax returns, the Company should be able to
deduct such losses. However, due to the uncertainty of this inclusion, coupled
with the judgment involving the realizability of any net operating loss
carryforward due to the lack of revenues by the Company, a deferred income tax
valuation allowance has been recorded for the full amount of the deferred tax
asset attributable to the net operating loss carryforward.
I-15
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS
Copies of the following documents are included as exhibits to this Form 10-SB
pursuant to item 601 of regulation S-B.
Exhibit
No. Title of Document
1 Agreement and Plan of Reorganization by and between
Monarch Media and Entertainment Group, Inc. and
Intuitech Marketing Inc.
2 Articles of Incorporation of the Company and related
Amendments
3 Bylaws of the Company
4 Specimen Stock Certificate
19
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Registrant caused this registration statement to be signed on its behalf by the
undersigned, there under duly authorized.
Monarch Media and Entertainment Group, Inc.
/s/ Tom Williams
-----------------
By: Tom Williams, President
20
