SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) of the
-------------------------------------------------
SECURITIES ACT OF 1934
For the Quarterly period ended September 30, 2000
Commission File Number 0-27599
ENTERTECH MEDIA GROUP, INC.
---------------------------
(Exact Name of Registrant as Specified in Its Charter)
Nevada 88-0222729
------ ----------
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
50 West Liberty Street, Suite 880, Reno, NV 89501
-------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (775) 324-6655
Common Stock, Par Value $0.001 Per Share
(Title of Class)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
__X___Yes _____ No
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
23,010,000
NUMBER OF COMMON STOCK SHARES OUTSTANDING
-----------------------------------------
On October 16, 2000
-------------------
Traditional Small Business Disclosure Format (Check One):
[X] Yes [ ] No
<PAGE>
ITEM 1. Financial Statements
ENTERTECH MEDIA GROUP, INC.
AND SUBSIDIARIES
A DEVELOPMENT STAGE ENTERPRISE
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
Sept 30, December 31,
2000 1999
(Unaudited) (Audited)
----------- -----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ (61,317) $ 12,946
Advances 70,200 1,722
Deposits 10,000 --
Other Receivables 24,482 33,347
----------- -----------
Total Current Assets 43,365 48,015
----------- -----------
Property, Plant, & Equipment:
Vehicle 57,000 57,000
Equipment 45,206 17,190
Film Library 310,900 --
Website Development 5,600 0
----------- -----------
418,706 74,190
Less: Accumulated Depreciation 7,419 7,419
----------- -----------
Total Property, Plant & Equipment 411,287 66,771
----------- -----------
Other Assets
Advances 193,763 117,797
Work in Process-Films 390,794 37,573
Investments-Securities 3,508,440 440
----------- -----------
Total Other Assets 4,092,997 155,810
----------- -----------
TOTAL OTHER ASSETS $ 4,547,649 $ 270,596
=========== ===========
</TABLE>
The accompanying Notes are an integral part of these financial statements
F-1
<PAGE>
ENTERTECH MEDIA GROUP, INC.
AND SUBSIDIARIES
A DEVELOPMENT STAGE ENTERPRISE
LIABLITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Sept 30, December 31,
2000 1999
(Unaudited) (Audited)
----------- -----------
<S> <C> <C>
Current Liabilities:
Accounts Payable $ 7,705 $ 7,053
Charge Accounts 7,040 --
----------- -----------
Total Current Liabilities 14,745 7,053
Long Term Liabilities:
Loan from Whyteburg 1,312,689 --
Deferred Income 150,000 100,000
Deposit-Pink Motel 18,204 --
Plaza/Parkinson Loan 225,000 --
----------- -----------
Total Long Term Liabilities 1,808,393 100,000
----------- -----------
Total Liabilities $ 1,823,138 $ 107,053
----------- -----------
Stockholders' Equity:
Common Stock ($0.001 par value) 100,000,000
Shares authorized; 18,040,000 issued and outstand-
ing on December 31, 1999, and June 30, 2000 22,000 11,030
Additional Paid In Capital 4,035,358 537,723
Retained Earnings (deficit) Accumulated Before the
Development Stage (57,391) (57,391)
Deficit Accumulated During the Development Stage (1,275,456) (327,819)
----------- -----------
Total Stockholders' Equity $ 2,724,511 $ 163,543
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,547,649 $ 270,596
=========== ===========
</TABLE>
The accompanying Notes are an integral part of these financial statements
F-2
<PAGE>
ENTERTECH MEDIA GROUP, INC.
AND SUBSIDIARIES
A DEVELOPMENT STAGE ENTERPRISE
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ ------------------ Inception
Sept 30, Sept 30, Sept 30, Sept 30, to
2000 1999 2000 1999 09/30/00
(Unaudited) (Audited) (Unaudited) (Audited) (Unaudited)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Sales $ 6,108 $ - $ 38,753 $ -- $ 32,645
Cost of Sales
Gross Profit
Operating Expenses:
General and administrative expenses 354,126 94,479 986,728 150,680 950,694
Research and development -- -- -- -- --
Depreciation and amortization -- -- -- -- 6,728
Total Operating Expenses 352,322 94,479 986,728 150,680 960,421
Loss from Operations (348,018) (94,479) (947,637) (150,680) (928,776)
---------- ---------- ---------- ---------- ----------
Other Income (Expense):
Other Income -- -- 338 -- 338
Forgiveness of debt -- -- -- -- --
Organizational Costs -- -- -- -- --
Interest Income -- -- -- -- --
Dividend Income -- -- -- -- --
Interest Expense -- -- -- -- --
Loss on disposition of Fixed Assets or
Securities -- -- -- -- --
Total Other Income and Expense -- -- 338 -- 338
Net Loss $ (348,018) $ (94,479) $ (947,637) $ (150,680) $ (927,438}
========== ========== ========== ========== ==========
Loss per Common Share $ .03 $ (0.03) $ .03 -- $ --
</TABLE>
The accompanying Notes are an integral part of these financial statements.
F-3
<PAGE>
ENTERTECH MEDIA GROUP, INC.
AND SUBSIDIARIES
A DEVELOPMENT STAGE ENTERPRISE
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996, 1997, 1998, & 1999
& NINE MONTHS ENDED
SEPTEMBER 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
Accum.
Additional Deficit
COMMON STOCK Paid-in Retained Development
Shares Amount Capital Earnings Stage
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance January 1, 1995, 2,063,749 $ 10,319 $ 45,822 $ (56,141) --
Retroactive restatement of par value in
common stock -- (8,255) 8,255 -- --
Retroactive restatement of 6 for 1 reverse
stock split -- (1,720) 1,720 -- --
Restated Balance, January 1, 1995, 343,958 344 55,797 (56,141) --
Issue of shares of common stock for services
on May 22, 1995 recorded at no value 39,375 39 (39) -- --
Balance, December 31, 1995 383,333 383 55,758 (56,141) --
Net profit for the years ending
December 31, 1996 and 1997 -- -- -- -- --
Issue of shares of common stock for services
on July 31, 1998 116,667 117 1,133 -- --
Net Income (Loss) for year ending December
31, 1998 -- -- -- (1,250) --
Balance December 31, 1998 500,000 500 56,891 (57,291) --
Issue of shares of common stock for services
on April 21, 1999, recorded at invoice amount 400,000 400 600 -- --
Sale of shares of common stock for cash on
April 22, 1999 10,000,000 10,000 271,966 -- --
Issue of shares of common stock for services
valued at $13,000, Oct & Dec,'99 130,000 130 12,870 -- --
</TABLE>
The accompanying Notes are an integral part of these financial statements.
F-4
<PAGE>
ENTERTECH MEDIA GROUP, INC
AND SUBSIDIARIES
A DEVELOPMENT STAGE ENTERPRISE
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996, 1997, 1998, & 1999
& THREE MONTHS ENDED
SEPTEMBER 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
Accum.
Additional Deficit
COMMON STOCK Paid-in Retained Development
Shares Amount Capital Earnings Stage
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Capital contributed from shareholder -- -- 195,396 -- --
Net income (loss) for year ending December 31,
1999 -- -- -- -- (327,819)
Balance December 31, 1999 11,030,000 11,030 537,723 (57,391) (327,819)
Net income (loss) for the three months
Ending March 31, 2000 -- -- -- (294,620) (294,620)
Balance, March 31, 2000 11,030,000 11,030 537,723 (352,011) (622,439)
Issue of shares of common stock
For services 5,000,000 -- -- -- --
Net income (loss) for three months
Ending June 30, 2000 -- -- -- (304,999) (304,999)
Balance, June 30, 2000 16,030,000 11,030 537,723 (657,010) (927,438)
Correction to 2nd quarter issuance
Of shares (5,000,000) -- -- -- --
Purchase of 10,000,000 of World Net
Resources 2,000,000 2,000 1,498,000 -- --
Purchase of shares by Cullen Trading, Ltd 3,500,000 3,500 171,500 -- --
Purchase of 3,500,000 shares of TalkVisual Corp 3,666,000 3,666 1,829,334 -- --
Issuance of shares of common stock for
Services 1,804,000 1,804 -- -- --
Issuance of stock for services 10,000 -- -- -- --
Net income (loss) for three months
Ending September 30, 2000 -- -- -- (348,018) (348,010)
Balance, September 30, 2000 22,010,000 22,000 4,026,557 (1,005,028) (1,275,456)
</TABLE>
F-5
<PAGE>
ENTERTECH MEDIA GROUP, INC. AND SUBSIDIARIES
A DEVELOPMENT STAGE ENTERPRISE
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended Inception) to
September September September
30, 2000 30, 1999 30,2000
(Unaudited) (Unaudited) (Unaudited)
----------- ----------- ------------
Reconciliation of Net Loss to Net Cash
Operating Activities:
<S> <C> <C> <C>
Net Loss $ (947,637) (150,680) $ (1,275,456)
Adjustments to Reconcile Net Loss to
Net Cash Provided by (Used in)
Operating Activities:
Depreciation -- -- 7,419
Stock for services -- -- 14,000
(Increase) Decrease in: -- -- --
Advances and Receivables (102,961) (41,187) (138,030)
Increase in Other Assets -- -- (155,370)
Organizational Costs ( 6,414)
Accounts Payable 651 -- 7,704
Other Current Liabilities 7,041 -- 7,041
Net Cash Provided (Used) by
Operating Activities (1,042,906) (198,281) (1,532,692)
----------- ----------- ------------
Investment Activities:
Investment in securities (3,508,000) (440) (3,508,440)
Investment in plant and equipment (344,516) (58,966) (418,706)
Investment in Film Production (395,840) (68,495) (395,840)
Net Cash Provided by (Used in)
Investment Activities (4,248,356) (127,901) (4,322,986)
----------- ----------- ------------
Financing Activities:
Common Stock 3,508,606 92,532 3,985,967
Advances 345,704 -- 345,704
Increase in long term debt 1,362,689 270,468 1,462,689
----------- ----------- ------------
Net Cash Provided (Used) in-
Investing Activities 5,216,999 318,434 5,794,360
----------- ----------- ------------
Increase (Decrease) in Cash and Cash
Equivalents (74,263) (7,748) (61,317)
Cash at Beginning of Period 12,946 -- --
----------- ----------- ------------
Cash at End of Year $ (61,317) (7,748) $ (61,317)
=========== =========== ============
</TABLE>
F-6
<PAGE>
ENTERTECH MEDIA GROUP, INC.
AND SUBSIDIARIES
A DEVELOPMENT STAGE ENTERPRISE
(FORMERLY ARMAS INTL. MFG. CO., INC.)
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2000, DECEMBER 31, 1999, 1998 AND 1997
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS AND ORGANIZATION:
EnterTech Media Group, Inc. and Subsidiaries (formerly Armas Intl. Mfg. Co.,
Inc. d.b.a. Inter-Link Communications Group, Inc.), hereafter referred to as the
Company, is a Nevada Corporation and a Development Stage Enterprise as defined
by FASB's Statements of Financial Accounting Standards ("SFAS") 7. Since the
beginning of 1999, the Company devoted all of its efforts to establishing a new
business. Planned principal operations to produce and distribute films have
commenced, production rights have been secured and services contracted out.
The Company was incorporated November 17, 1986, under the name Stones Stores,
Inc. The Company changed its name in 1987 to Stone International, Inc., and
again in 1990 to Armas Intl. Mfg. Co., Inc. The Company became inactive in 1989
and remained inactive until 1999. On April 22, 1999, the Company changed its
name to EnterTech Media Group, Inc., and authorized capital stock of 100,000,000
shares with a par value of $.001 per share (following a 6 to 1 reverse split in
October 1998). These financial statements reflect the changes made in the
Company's name and the par value of common stocks retroactively. See also Note
2.
Prior to 1995, all books and records were destroyed. Federal income tax
returnshave been prepared for the years ending December 31, 1998 and 1997 based
on these financial statements.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION:
The accompanying consolidated financial statements include the accounts of
EnterTech Media Group, Inc., and its wholly owned subsidiary, EnterTech Limited
(along with EnterTech Limited's subsidiaries, EnterTech Picture Corporation and
EnterTech Releasing Corporation). See also Notes 2 and 3. All significant
intercompany balances and transactions have been eliminated.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally accepted
accounting principals requires management to make estimates and assumptions that
affect certain reported accounts and disclosures. Accordingly, actual results
could differ from these estimates.
REVENUE RECOGNITION:
Revenues on motion pictures are recognized on show dates under both percentage
of receipts and flat fee arrangements. Nonrefundable guarantees are deferred and
recognized as revenue as show dates occur. Outright sales of motion pictures are
recognized as revenue as of date of sale.
PRODUCTION COSTS:
Production costs of motion pictures are capitalized as inventory and amortized
using the individual-film-forecast method.
PROPERTY AND EQUIPMENT:
Property and Equipment are recorded at cost and depreciated over their useful
lives using the straight-line method.
EARNINGS PER SHARE:
The earnings per share calculation is based on the weighted average number of
shares outstanding during the period: 6,670,000 shares in 2000 and 1999; 431,944
shares in 1998; and 383,333 shares in 1997.
F-7
<PAGE>
ENTERTECH MEDIA GROUP, INC.
AND SUBSIDIARIES
A DEVELOPMENT STAGE ENTERPRISE
(FORMERLY ARMAS INTL. MFG. CO., INC.)
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2000, DECEMBER 31, 1999, 1998 AND 1997
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
INVENTORIES:
Inventories are stated at the lower of cost or market. Film costs are segregated
between current and non-current assets. Unamortized cost of films released,
completed films not released and television films in production under contract
of sale are current assets. All other capitalized film costs are classified as
non-current assets.
ORGANIZATIONAL COSTS:The Company has adopted Statement of Position ("SOP) 98-5
"Reporting on the Costs of Start-up Activities" issued in April 1998 by the
Accounting Standards Executive Committee of the American Institute of Certified
Public Accountants. Pursuant to SOP 98-5, organizational costs are expensed as
incurred instead of being capitalized and amortized.
DIVIDEND POLICY:
The Company has not paid dividends and any dividends that may be paid in the
future will depend upon the financial requirements of the Company and other
relevant factors.
INCOME TAXES:
The Company adopted Financial Accounting Statement No. 109, "Accounting for
Income Taxes," which requires recognition of deferred tax liabilities and assets
for the expected future tax consequences of events that have been included in
the financial statements or tax returns. The Company made the required
calculation based upon the difference between financial statements and tax bases
of assets and liabilities using tax rates in effect for the year in which the
differences were expected to reverse.
CASH EQUIVALENTS:
The Company records as cash equivalents all highly liquid short-term investments
with original maturities of three months or less.
NOTE 2 - OPERATING LOSS CARRYFORWARD:
A deficit of $57,391 reflected on the financial statements from prior losses
will not be available as a net operating loss carry forward because of change in
ownership and business purpose. The current period loss of $304,999 will be
available to offset future taxable income for 15 years.
NOTE 3 - BUSINESS ACQUISITIONS:
On April 22, 1999, the Company acquired EnterTech Limited, a Nevada Corporation,
in a business combination accounted for as a combination of entities under
common control. EnterTech Limited had previously been known as EnterTech Media
Group, but exchanged names with the Company in conjunction with the business
combination. EnterTech Limited, which plans to engage in film production and
distribution, became a wholly-owned subsidiary of the Company through the
exchange of 10,000,000 shares of the Company's common stock for all of the
outstanding stock of EnterTech Limited. The acquisition has been accounted for
as a combination of entities under common control, which is similar to a pooling
of interests. Accordingly, the accompanying financial statements are restated
for all periods presented to give effect to the combination. Assets and
liabilities are reflected at their original cost bases using the pooling of
F-8
<PAGE>
ENTERTECH MEDIA GROUP, INC.
AND SUBSIDIARIES
A DEVELOPMENT STAGE ENTERPRISE
(FORMERLY ARMAS INTL. MFG. CO., INC.)
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2000, DECEMBER 31, 1999, 1998 AND 1997
NOTE 4 - PRIVATE PLACEMENT:
On March 31, 1999, EnterTech Limited (then known as EnterTech Media Group as
discussed in Note 2) offered a minimum of 1,500,000 shares and a maximum of
5,000,000 shares of its common stock in units of 25,000 at a price of $1.00
pershare pursuant to a Private Placement Memorandum. Subsequently, this private
placement was cancelled.
NOTE 5 - DEPOSIT ON FILM PRODUCTION:
The Company has accepted a deposit of $100,000 that is to be used for production
costs of a film. The deposit is to be repaid from the final budget and no later
than the first day of principal photography.
NOTE 6 - UNCERTAINTY REGARDING GOING CONCERN:
The Company's financial statements have been prepared assuming that the Company
will continue as a going concern. The Company's ability to continue as a going
concern is dependent on attaining future profitable operations. If operations do
not become profitable, then substantial doubt exists about the Company's ability
to continue as a going concern. The financial statements do not include any
adjustment that might result from the outcome of this uncertainty.
F-9
<PAGE>
ITEM 2: Management's Discussion and Analysis or Plan of Operation
Plan of Operation
Statements contained herein that are not historical facts are
forward-looking statements as that term is defined by the Private Securities
Litigation Reform Act of 1995. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, the
forward-looking statements are subject to risks and uncertainties that could
cause actual results to differ from those projected. The Company cautions
investors that any forward-looking statements made by the Company are not
guarantees of future performance and that actual results may differ materially
from those in the forward-looking statements. Such risks and uncertainties
include, without limitation: well established competitors who have substantially
greater financial resources and longer operating histories, regulatory delays or
denials, the Company's ability to compete as a start-up company in a highly
competitive market, and access to sources of capital.
The Company continued with its efforts to build a Feature Film library
during the second and third quarter of 2000. It acquired certain distribution
rights to a number of feature films including "In China They Eat Dogs", a full
length feature film from Scandinavia that the Company intends to release
theatrically in the first quarter of 2001. In view of the number of films
scheduled for a fall release the Company moved the planned release date for
"Kids World" from November 2000 to January 2001.
The Company also entered into an agreement with WorldNet Resource Group
to jointly develop the streaming of feature films, short films and related
content to Internet users that visit the parties' websites. This agreement
provides for close business liaisons and an exchange of shares between the two
companies.
As previously reported, the Company formed EnterTech Home
Entertainment, Inc., a wholly-owned subsidiary in order to develop a video and
television sales business. EnterTech Home Entertainment is active in the market
place and fully expects to achieve its goal of starting to contribute revenues
to the Company from the fourth quarter of 2000.
Management continued to arrange funding for the Company by way of
shareholders loans and subscription for new shares, as well as the issuance of
shares to certain companies and individuals for services rendered.
Management continues to expect that its efforts and strategy will
deliver revenues and profitability to the Company within the next year.
<PAGE>
PART II
Other Information
ITEM 1: Legal Proceedings
The Company is not party to, and none of the Company's property is
subject to, any pending or threatened legal, governmental, administrative or
judicial proceedings. The Company was involved in the legal proceedings
described below, both of which have been resolved. Both actions involved the
same circumstances and both actions were resolved by way of settlement between
the parties. The parties agreed to dismiss with prejudice the action pending in
the United States with each party bearing its own costs and attorneys fees. The
action in England was struck out, again with each party bearing its own costs
and fees.
1. Interlink Communications Group, Inc. v. Unisat, Inc., Sam Lupton,
Richard Elliot_ Square and Does 1 through 50. On or about April 1,
1999, the Company filed a complaint in the District Court, Washoe
County, State of Nevada naming itself as the plaintiff and Unisat,
Inc., Sam Lupton and Richard Elliot_Square as defendants. The
allegations in the complaint involve an agreement the Company had with
an entity named Telforce Communications, Ltd. and an individual named
Christopher James Clark to acquire all of the issued and outstanding
shares of Telforce. The Company alleges that the individual defendants,
one of whom was a director of the Company at the time of the Company's
agreement with Telforce, caused Telforce to breach its agreement with
the Company and enter into a different agreement with Unisat for the
acquisition of Telforce. The Company alleges that defendants
intentionally interfered with the Company's contractual rights, breach
their fiduciary duties to the Company, engaged in unfair business
practices, and were unjustly enriched by their actions, among other
things. The complaint in that action does contain a specific dollar
amount for monetary damages. The Company seeks an accounting of
defendants' profits in the Unisat agreement for the acquisition of
Telforce and seeks damages against the defendants. No counterclaim has
been filed. This action has been dismissed.
2. Interlink Communications Group, Inc. v. Christopher James Clark. On or
about April 22, 1999, the Company commenced an action in the High Court
of Justice, Queen's Bench Division, in Great Britain naming itself as
plaintiff and Christopher James Clark as the defendant. In that action,
the Company alleges that Clark breached his agreement to sell the
Company all of the issued and outstanding shares of Telforce
Communications, Ltd., a Nevada corporation. The Company seeks an order
of specific performance requiring Clark to honor his agreement to sell
or, in the alternative, an award of damages against Clark for his
failure to honor his agreement. This action has been struck out.
ITEM 2: Changes in Securities and Use of Proceeds
None.
ITEM 3: Defaults Upon Senior Securities
None
ITEM 4: Submission of Matters to a Vote of Security Holders
No matters have been submitted to a vote of the security holders during
the period covered by this report through the solicitation of proxies or
otherwise.
ITEM 5: Other Information
None.
ITEM 6: Exhibits and Reports on Form 8-K
A. Exhibits
(2) Plan of acquisition, reorganization, liquidation or succession:
NONE.
(3) (i) Articles of Incorporation *
(ii) By-laws *
(27) Financial Data Schedule.
* Incorporated by reference from the Registrant's Form 10-SB.
B. Reports on Form 8-K.
The Registrant did not file reports on Form 8-K during the quarter
covered by this report.
Signatures
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: January 15, 2001.
ENTERTECH MEDIA GROUP, INC.
By /s/ Mark Tolner
------------------
Mark Tolner
President
