UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
10-QSB
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR QUARTER ENDED July 31, 1997 COMMISSION FILE NO. 0-8512
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MONARCH AVALON, INC.
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(Exact name of small business issuer as specified in its charter)
Delaware 52-1073628
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation)
4517 Harford Road, Baltimore, Maryland 21214
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code 410-254-9200
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Not applicable
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Former name, former address and former fiscal year, if changed since last
report.
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
YES [ X ] NO [ ]
As of July 31, 1997, the number of shares outstanding of the issuer's common
stock was 1,619,820 shares.
Transitional Small Business Issue Format (check one): YES [ ] NO [ X ]
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
MONARCH AVALON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)
(000's Omitted)
<CAPTION>
July 31, April 30,
1997 1997
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<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $1,665 $2,131
Investments (at lower of cost or market) 148 148
Accounts receivable, net 1,097 1,213
Inventories, net 2,152 2,070
Other current assets 334 134
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TOTAL CURRENT ASSETS 5,396 5,696
PROPERTY AND EQUIPMENT 4,553 4,494
Less allowance for depreciation (3,934) (3,921)
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619 573
OTHER ASSETS AND DEFERRED CHARGES 49 43
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TOTAL ASSETS $6,064 $6,312
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 441 $ 459
Accrued expenses 307 281
Deferred subscription revenues 617 617
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TOTAL CURRENT LIABILITIES 1,365 1,357
STOCKHOLDERS' EQUITY
Preferred Stock - par value $.01 per share:
Authorized 100,000 shares; no shares
issued
Common Stock - par value $.25 per share:
Authorized 3,000,000 shares; shares
issued - 2,109,985; shares outstanding
1,619,820 on July 31, 1997 and
April 30, 1997 527 527
Capital surplus 3,378 3,378
Retained earnings 916 1,172
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4,821 5,077
Treasury stock at par - shares
outstanding 490,165 on July
31, 1997 and April 30, 1997 (122) (122)
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4,699 4,955
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $6,064 $6,312
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<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
MONARCH AVALON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<CAPTION>
Three Months Ended
July 31,
----------------------
1997 1996
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(000's omitted, except per share data)
<S> <C> <C>
Net sales $ 1,628 $ 1,177
Cost of goods sold 1,178 940
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Gross profit 450 237
Selling, general and
administrative expenses 616 365
Research and development 113 92
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Operating expenses 729 457
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Loss from operations (279) (220)
Other income, net 23 43
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Loss before income taxes (256) (177)
Provision for income taxes 0 0
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Net loss (256) (177)
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Loss per share $ (.16) $ (.11)
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Weighted average shares
outstanding 1,619,820 1,620,170
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<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
MONARCH AVALON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
Three Months Ended
July 31,
------------------
1997 1996
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(000's omitted)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss from operations $ (256) $ (177)
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Adjustments to reconcile net loss
to net cash provided by operating
activities:
Depreciation and amortization 13 36
Unrealized loss on investments 0 0
Changes in accounts receivable,
inventories, other assets, accounts
payable, accrued expenses and
deferred subscription revenue (164) (132)
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Net cash used in operating activities (407) (273)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (59) (18)
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Net cash used in investing activities (59) (18)
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Net decrease in cash and cash equivalents (466) (291)
Cash and cash equivalents at beginning of
period 2,131 1,966
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Cash and cash equivalents at end of period $1,665 $1,675
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<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
MONARCH AVALON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include Monarch
Avalon, Inc. ("Monarch") and its wholly-owned subsidiaries, Girls' Life, Inc.
and Creampuffs Inc. (Monarch, Girls' Life Inc. and Creampuffs Inc. collectively
referred to herein as "the Company") have been prepared in accordance with the
instructions to Form 10-QSB and do not include all of the information and
disclosures required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals and charges) considered necessary for a fair
presentation have been included. All material intercompany balances between
Monarch and its subsidiaries have been eliminated in consolidation. Operating
results for the three months ended July 31, 1997 are not necessarily indicative
of the results that may be expected for the year ending April 30, 1998. For
further information, reference should be made to the financial statements and
notes included in the Company's annual report on Form 10-KSB for the fiscal year
ended April 30, 1997.
NOTE B - ACCOUNTS RECEIVABLE
Accounts receivable are net of the following allowances:
July 31, 1997 April 30, 1997
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(000's Omitted)
Doubtful accounts $139 $139
Customer returns 194 194
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$333 $333
NOTE C - INVENTORIES
For quarterly reporting purposes, Monarch values inventory using both
perpetual records and physical counts, while at year-end values are
determined solely on the basis of physical counts.
The major components of inventories consist of the following:
July 31,1997 April 30, 1997
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(000's omitted)
Raw materials $ 822 $ 752
Work in progress 115 112
Finished goods 1,215 1,206
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$2,152 $2,070
The above components are shown net of lower of cost of market reserves of
$350,000 at July 31, 1997 and April 30, 1997. The Company values its
inventories at the lower of cost (first-in, first-out) or market.
<PAGE>
ITEM II MONARCH AVALON, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For purposes of this discussion references to "fiscal 1998" are to the fiscal
year ending April 30, 1998, and references to "fiscal 1997" are to the fiscal
year ended April 30, 1997.
RESULTS OF OPERATIONS
Monarch consists of two divisions, games and printing. Girls' Life, Inc. , a
wholly-owned subsidiary, publishes a magazine. Creampuffs, Inc., a wholly-owned
subsidiary, had no business transacted for the three months ended July 31, 1997
or for the year ended April 30, 1997.
Sales of products in the games division, primarily board games and software
games designed for use on microcomputers, are somewhat seasonal in nature
because of increased retail game sales during the Christmas season, while sales
of the Company's other products (envelopes, printing and graphic arts services
and Girls' Life magazine) are not seasonal. The timing of new releases of the
Company's games also may affect sales in the game division.
RESULTS FOR THE FIRST QUARTER OF FISCAL YEAR 1998 AND 1997
Net sales increased by $451,000 or 38% in the first quarter of fiscal 1998 as
compared to the first quarter of fiscal 1997. Sales in the games division
increased by $200,000 or 37% in the first quarter of fiscal 1998 compared to the
first quarter of fiscal 1997 as a result of the increase in the number of new
releases of computer games in the first quarter of fiscal 1998 compared to the
first quarter in 1997. Sales in the printing division increased by $64,000 in
the first quarter of fiscal 1998 or 13% from the first quarter of fiscal 1997
due to the increase of new customers. Sales of Girls' Life magazine in the
first quarter of fiscal 1998 increased by $187,000 or 147% from the first
quarter of fiscal 1997. The increase in sales of Girls' Life magazine relates
primarily to the increase in promotional and direct mailing advertising of the
magazine and increased revenue from newstand sales and advertising.
Gross profit increased by $213,000 or 90% during the first quarter of fiscal
1998 compared to the first quarter of fiscal 1997. Consolidated gross margin
was 28% of net sales during the first quarter of fiscal 1998 as compared to 20%
during the first quarter of fiscal 1997. The increase in gross margin primarily
related to increases in game sales overall and increases in publishing sales
which carry higher gross margins than printing sales.
Operating expenses were 45% of net sales in the first quarter of fiscal 1998 as
compared to 39% in the first quarter of fiscal 1997. Operating expenses for the
first quarter of fiscal 1998 increased by $272,000 or 59% from the same period
in fiscal 1997, primarily because of higher advertising, royalty and salary
expenses associated with computer game sales.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At July 31, 1997, the Company has cash and cash equivalents of approximately
$1,665,000, a decrease of $466,000 from the amount at April 30, 1997. The
decrease resulted from cash used in operations of $407,000 and purchases of
equipment in the amount of $59,000. The Company's cash and cash equivalents are
subject to variation based upon the timing of receipts and the payment of
payables.
At July 31, 1997, the Company has no debt with third party lenders.
PART II. OTHER INFORMATION
ITEMS 1 THROUGH 5
NONE / NOT APPLICABLE
ITEM 6. EXHIBITS AND REPORTS FOR FORM 8-K
(a) Exhibits
Number Description
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3 Amended and Restated Bylaws
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during
the three months ended July 31, 1997.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
MONARCH AVALON, INC.
Date 9/15/96 By /s/ A. Eric Dott
-----------------------------
A. Eric Dott
Chariman of the Board
Date 9/15/97 /s/ A. Eric Dott
-----------------------------
A. Eric Dott
Chairman of the Board
(Principal Executive Officer)
Date 9/15/97 /s/ Marshall Chadwell
-----------------------------
Marshall Chadwell
Chief Financial Officer
(Principal Accounting and
Financial Officer)
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
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3 Amended and Restated Bylaws
27 Financial Data Schedule
EXHIBIT 3
Article 5
MONARCH AVALON, INC.
BYLAWS
ARTICLE 1.
OFFICES AND REGISTERED AGENT
1.1 Registered Offices and Registered Agent. The initial registered
office of the corporation and the initial registered agent of the corporation at
said office shall be as set forth in the Certificate of Incorporation of the
corporation. The registered office of the corporation and the registered agent
of the corporation at such office may be changed from time to time by the Board
of Directors of the corporation.
1.2 Additional Offices. The corporation may establish offices at
such other place or places both within and without the State of Delaware as the
Board of Directors may from time to time determine.
ARTICLE 2.
MEETINGS OF SHAREHOLDERS
2.1 Place and Time of Meetings. Meetings of the Shareholders shall
be held at the registered office of the corporation, or at such other place
either within or without the State of Delaware as the Board of Directors or the
Shareholders may from time to time select, at such time as may be fixed by the
Board of Directors or the Shareholders.
2.2 Annual Meeting. An annual meeting of the shareholders shall be
held at such place, on such date, and at such time as the Board of Directors
shall each year fix, which date shall be within thirteen months of the last
annual meeting of shareholders.
2.3 Special Meetings. Special meetings of the Shareholders may be
called at any time by the President, by a majority of the Board of Directors, or
by the holder or holders of not less than twenty-five percent (25%) of the
capital stock of the corporation issued and outstanding and entitled to vote in
an election of directors.
2.4 Notice of Meeting. Written notice stating the place, day, and
hour of the meeting and, in the case of a special meeting, the purpose or
purposes for which the meeting is called, shall be given not less than ten (10)
nor more than fifty (50) days before the date of the meeting, either by hand or
by first-class mail, by or at the direction of the President, the Secretary or
the other person or persons calling the meeting, to each Shareholder of record
entitled to vote at such meeting. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail with first-class postage
thereon prepaid, addressed to the Shareholder at his address as it appears on
the stock transfer books of the corporation.
2.5 Waiver of Notice. Notice of a meeting need not be given to any
Shareholder who signs a waiver of notice, in person or by proxy, either before
or after the meeting; and a Shareholder's waiver shall be deemed the equivalent
of giving notice. Attendance of a Shareholder at a meeting either in person or
by proxy, shall of itself constitute waiver of notice and waiver of any and all
objections to the place of the meeting, the tine of the meeting, or the manner
in which it has been called or convened, except when a Shareholder attends a
meeting solely for the purpose of stating, at the beginning of the meeting, any
such objection or objections to the transaction of business. Unless otherwise
specified herein, neither the business transacted nor the purpose of the meeting
need be specified in the waiver.
2.6 Quorum. A majority of the shares entitled to vote, represented
in person or by proxy, shall constitute a quorum at any meeting of Shareholders.
If a quorum is present, the affirmative vote of a majority of the shares
represented at the meeting and entitled to vote on the subject matter shall be
the act of the Shareholders, unless the vote of a greater number or voting by
classes or series is required by the Delaware General Corporation Law. When a
quorum is once present to organize a meeting, the Shareholders present may
continue to do business at the meeting or any adjournment thereof
notwithstanding the withdrawal of enough Shareholders to leave less than a
quorum.
2.7 Adjournment. Any meeting of the Shareholders may be adjourned by
the holders of a majority of the voting shares represented at a meeting, whether
or not a quorum is present. Notice of the adjourned meeting or of the business
to be transacted at such meeting shall not be necessary, provided the time and
place to which the meeting is adjourned are announced at the meeting at which
the adjournment is taken. At an adjourned meeting at which a quorum is present
or represented, any business may be transacted which could have been transacted
at the meeting originally called.
2.8 Voting Rights. Each Shareholder shall be entitled at each
Shareholders' meeting to one vote for each share of the capital stock having
voting power held by such Shareholder.
2.9 Proxies. A Shareholder entitled to vote may vote in person or by
proxy executed in writing by the Shareholder or by his attorney-in-fact. A
proxy shall not be valid after eleven months from the date of its execution
unless a longer period is expressly stated in such proxy.
Section 2.10. Director Nominations. Nominations of candidates for
election as directors at any annual meeting of stockholders may be made (a) by,
or at the direction of, a majority of the Board of Directors or (b) by any
stockholder entitled to vote at such annual meeting. Only persons nominated in
accordance with the procedures set forth in this Section shall be eligible for
election as directors at an annual meeting.
Nominations, other than those made by, or at the direction of, the
Board of Directors, shall be made pursuant to timely notice in writing to the
secretary of the Corporation as set forth in this Section. To be timely, a
stockholder's notice shall be delivered to, or mailed to and received at, the
principal executive offices of the Corporation not less than 60 days nor more
than 90 days prior to the date of the annual meeting, as established pursuant to
Section 2.2 hereof, regardless of postponements, deferrals, or adjournments of
that meeting to a later date; provided, however, that if less than 70 days'
notice or prior public disclosure of the date of the scheduled annual meeting is
given or made, notice by the stockholder to be timely must be so delivered or
received not later than the close of business on the 10th day following the
earlier of the day on which such notice of the date of the scheduled annual
meeting was mailed or the day on which such public disclosure was made. Such
stockholder's notice shall set forth (a) as to each person whom the stockholder
proposes to nominate for election or reelection as a director and as to the
stockholder giving the notice (i) the name, age, business address and residence
address of such person, (ii) the principal occupation or employment of such
person, (iii) the class and number of shares of Corporation stock which are
beneficially owned by such person on the date of such stockholder notice and
(iv) any other information relating to such person that is required to be
disclosed in solicitations of proxies with respect to nominees for election as
directors, pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended, including, but not limited to, information required to be disclosed
by Item 4(b) and Item 6 of Schedule 14A of Regulation 14A and information which
would be required to be filed on Schedule 14B of Regulation 14A with the
Securities and Exchange Commission; and (b) as to the stockholder giving the
notice (i) the name and address, as they appear on the Corporation's books, of
such stockholder and any other stockholders known by such stockholder to be
supporting such nominees and (ii) the class and number of shares of Corporation
stock which are beneficially owned by such stockholder on the date of such
stockholder notice and by any other stockholders known by such stockholder to be
supporting such nominees on the date of such stockholder notice. At the request
of the Board of Directors, any person nominated by, or at the direction of, the
Board for election as a director at an annual meeting shall furnish to the
secretary of the Corporation that information required to be set forth in a
stockholder's notice of nomination which pertains to the nominee.
No person shall be elected as a director of the Corporation unless
nominated in accordance with the procedures set forth in this Section. Ballots
bearing the names of all the persons who have been nominated for election as
directors at an annual meeting in accordance with the procedures set forth in
this Section shall be provided for use at the annual meeting.
The Board of Directors may reject any nomination by a stockholder not
timely made in accordance with the requirements of this Section. If the Board
of Directors, or a designated committee thereof, determines that the information
provided in a stockholder's notice does not satisfy the informational
requirements of this Section in any material respect, the secretary of the
Corporation shall promptly notify such stockholder of the deficiency in the
notice. The stockholder shall have an opportunity to cure the deficiency by
providing additional information to the secretary within such period of time,
not to exceed five days from the date such deficiency notice is given to the
stockholder, as the Board of Directors or such committee shall reasonably
determine. If the deficiency is not cured within such period, or if the Board
of Directors or such committee reasonably determines that the additional
information provided by the stockholder, together with information previously
provided, does not satisfy the requirements of this Section in any material
respect, then the Board of Directors may reject such stockholder's nomination.
The secretary of the Corporation shall notify a stockholder in writing whether
his nomination has been made in accordance with the time and informational
requirements of this Section. Notwithstanding the procedure set forth in this
paragraph, if neither the Board of Directors nor such committee makes a
determination as to the validity of any nominations by a stockholder, the
presiding officer of the annual meeting shall determine and declare at the
annual meeting whether a nomination was made in accordance with the terms of
this Section. If the presiding officer determines that a nomination was made in
accordance with the terms of this Section, he shall so declare at the annual
meeting and ballots shall be provided for use at the meeting with respect to
such nominee. If the presiding officer determines that a nomination was not
made in accordance with the terms of this Section, he shall so declare at the
annual meeting and the defective nomination shall be disregarded.
ARTICLE 3.
DIRECTORS
3.1 Number, Qualification and Term of Office. The business and
affairs of the corporation shall be managed by a Board of Directors. The number
of Directors of the corporation shall be not less than the minimum number
required by the applicable provisions of the General Corporation Law of the
State of Delaware and shall not be more than 15. At any regular meeting or at
any special meeting called for that purpose, a majority of the entire Board of
Directors may increase or decrease the number of Directors, provided that the
number thereof shall never be less than the minimum number required by the
General Corporation Law of the State of Delaware, nor more than 15, and further
provided that the tenure of office of a Director shall not be affected by any
decrease in the number of Directors. At each annual meeting of the
Shareholders, the Shareholders shall elect Directors to hold office until the
next succeeding annual meeting. Each Director shall hold office for the term
for which he is elected and until his successor shall have been elected and
qualified, or until his earlier resignation, removal from office, death, or
incapacity to serve.
3.2 Vacancies and Newly Created Directorships. Vacancies and newly
created directorships resulting from any increase in the authorized number of
Directors may be filled by a majority of the Directors then in office, although
less than a quorum, or by a sole remaining Director. A Director elected by the
Board of Directors to fill a vacancy or a newly created directorship shall serve
until the next annual meeting of Shareholders and until his successor is elected
and qualifies.
3.3 Compensation. Directors shall receive such compensation for
their services as Directors and expenses of attendance at Directors meetings as
determined from time to time by the Board of Directors. A Director may serve
the corporation in a capacity other than that of Director and receive
compensation for the services rendered in that other capacity.
ARTICLE 4.
MEETINGS OF THE BOARD
4.1 Place and Time of Meetings. Regular meetings of the Board of
Directors may be held without notice at such time and place within or without
the State of Delaware that the Board of Directors may from time to time
designate.
4.2 Annual Meeting. The Board of Directors shall meet each year
immediately following the annual meeting of the Shareholders at the place that
meeting has been held for the purpose of electing officers and for the
consideration of other business.
4.3 Special Meetings. Special meetings of the Board of Directors may
be called at any time by the President or by any two Directors.
4.4 Notice of Meetings. Notice of the annual meeting of the Board of
Directors need not be given. Written notice of each special meeting setting
forth the time and place of the meeting shall be given to each Director at least
two days before the meeting. This notice may be given either by hand or by
sending a copy of the notice through the United States mail or by telegram,
charges prepaid, to the address of each Director appearing on the books of the
corporation. No notice of any meeting of the Board of Directors need state the
business to be transacted, nor the purpose of, any regular or special meeting of
the Board of Directors.
4.5 Waiver of Notice. A Director may waive in writing notice of a
special meeting of the Board either before or after the meeting; and his waiver
shall he deemed the equivalent of giving notice. Attendance of a Director at a
meeting shall constitute a waiver of notice of that meeting unless he attends
for the express purpose of objecting to the transaction of business because the
meeting has not been lawfully called or convened.
4.6 Quorum. At meetings of the Board of Directors, a majority of the
Directors in office shall be necessary to constitute a quorum for the
transaction of business. If a quorum is present, the acts of a majority of the
Directors in attendance shall be the acts of the Board.
4.7 Adjournment. A meeting of the Board of Directors may be adjourned
by a majority of the Directors present, whether or not a quorum exists. Notice
of the time and the place of the adjourned meeting and of the business to be
transacted thereat, other than by announcement at the meeting at which the
adjournment is taken, shall not be necessary. At an adjourned meeting at which
a quorum is present, any business may be transacted which could have been
transacted at the meeting originally called.
4.8 Action by Consent. Any action required or permitted to be taken
at a meeting of the Board of Directors may be taken without a meeting if written
consent, setting forth the action so taken, shall be signed by all the
Directors, and be filed with the minutes of the proceedings of the Board of
Directors. Such consent shall have the same force and effect as a unanimous
vote.
ARTICLE 5.
OFFICERS
5.1 Officers. The officers of the corporation shall consist of a
Chairman of the Board, President, Secretary and Treasurer, and, if deemed by the
Board of Directors to be necessary or appropriate to conduct the business of the
corporation, one or more Vice Presidents. Two or more offices may be held by
the same person except that one person shall not at the same time hold the
offices of President and Secretary. The officers shall be elected by the
Directors and shall serve at the pleasure of the Board of Directors.
5.1A Chairman of the Board The Chairman of the Board shall preside at
all meetings of Shareholders and Directors and discharge the duties of a
presiding officer and shall, in general, perform all duties incident to the
office of Chairman of the Board and such other duties as, from time to time, may
be assigned to him by the Board of Directors.
5.2 President. The President shall have general supervision and
direction over the business affairs of the corporation subject, however, to the
control of the Board of Directors. He shall present at each annual meeting of
the Shareholders a report of the business of the corporation for the preceding
fiscal year, and shall, in general, perform all duties incident to the office of
President and such other duties as, from time to time, may be assigned to him by
the Board of Directors.
5.3 Secretary. The Secretary shall keep minutes of all meetings of
the Shareholders and Directors and have charge of the minute books, stock books
and seal of the corporation and shall perform such other duties and have such
other powers as may from time to time be delegated to him by the President or
the Board of Directors.
5.4 Treasurer. The Treasurer shall be charged with the management of
the financial affairs of the corporation and shall have the power to recommend
action concerning the corporation's affairs to the President.
5.5 Vice President. The Board of Directors may designate one or more
Vice Presidents or may otherwise specify the order of seniority of the Vice
Presidents. The duties and powers of the President shall disburse to the Vice
Presidents in such specified order of seniority.
5.6 Assistant Secretary and Assistant Treasurer. Assistants to the
Secretary and Treasurer may be appointed and shall have such duties as shall be
delegated to them by the President or the Board of Directors.
5.7 Vacancies. When a vacancy occurs in one of the executive offices
by death, resignation, or otherwise, it shall be filled by the Board of
Directors. The officer so selected shall hold office until his successor is
chosen and qualified.
5.8 Salaries. The Board of Directors shall fix the salaries of the
officers of the corporation. The salaries of other agents and employees of the
corporation may be fixed by the Board of Directors or by an officer to whom that
function has been delegated by the Board.
5.9 Delegation of Duties. Whenever an officer is absent or whenever
for any reason the Board of Directors may deem it desirable, the Board may
delegate the powers and duties of an officer to any other officer or officers or
to any director or directors.
5.10. Removal of Officers and Agents. An officer or agent of the
corporation may be removed by a majority vote of the Board of Directors whenever
in their judgment the best interests of the corporation will be served by the
removal. The removal shall be without prejudice to the contract rights, if any,
of the person so removed.
ARTICLE 6.
CAPITAL STOCK
6.1 Certificates. The interest of each Shareholder shall be
evidenced by a certificate or certificates representing shares of stock of the
corporation which shall be in such form as the Board of Directors may from time
to time adopt and shall be numbered and shall be entered in the books of the
corporation as they are issued. Each certificate shall be signed by the
President or a Vice President and the Secretary or an Assistant Secretary and
shall be sealed with the seal of the corporation or a facsimile thereof;
provided, however, that when such certificate is countersigned by a transfer
agent, or registered by a registrar, the signatures of such officers may be
facsimiles.
6.2 Transfers. Transfers of stock shall be made on the books of the
corporation only by the person named in the certificate, or by attorney lawfully
constituted in writing, and upon surrender of the certificate therefor, or in
the case of a certificate alleged to have been lost, stolen or destroyed, upon
compliance with the provisions of Section 6.4 of these Bylaws.
6.3 Record Date. In lieu of closing the stock transfer books, the
Board of Directors may fix in advance a date as the record date for a
determination of Shareholders entitled to notice of and to vote at any meeting
of Shareholders of any adjournment thereof, or entitled to receive payment of
any dividend, or in order to make a determination of Shareholders for any other
proper purpose, such date to be not more than fifty (50) days and, in case of a
meeting of Shareholders, not less than ten (10) days, prior to the date on which
the particular action, requiring such determination of Shareholders, is to be
taken.
6.4 Lost Certificates. Any person claiming a certificate of stock to
be lost, stolen or destroyed shall make an affidavit or affirmation of the fact
in such manner as the Board of Directors may require and shall, if the Directors
so require, give the corporation a bond of indemnity in form and amount and with
one or more sureties satisfactory to the Board of Directors, whereupon an
appropriate new certificate may be issued in lieu of the one alleged to have
been lost, stolen or destroyed.
ARTICLE 7.
MISCELLANEOUS
7.1 Inspection of Books. The Board of Directors shall have power to
determine which accounts and books of the corporation, if any, shall be open to
the inspection of Shareholders, except such as may by law be specifically open
to inspection, and shall have power to fix reasonable rules and regulations not
in conflict with the applicable law for the inspection thereof.
7.2 Seal. The corporate seal shall be in such form as the Board of
Directors may from time to time determine. In the event that it is inconvenient
at any time to use the corporate seal of the corporation, the words "Seal" or
"Corporate Seal" enclosed in parenthesis or scroll shall be deemed the corporate
seal of the corporation.
ARTICLE 8.
The Bylaws of the corporation may be altered, amended, or repealed and
new Bylaws may be adopted by the Board of Directors at any regular or special
meeting of the Board of Directors.
ARTICLE 9.
INDEMNIFICATION OF OFFICERS AND DIRECTORS: INSURANCE
(a) This corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a Director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
Director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith in a manner reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that a person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) The corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor by reason of the fact he is or was a Director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a Director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
corporation unless and only to the extent that the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the court of
Chancery or such other court shall deem proper.
(c) To the extent that a Director, officer, employee or agent of the
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) The indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be effective upon the corporation only as
authorized in the specific case upon a determination that indemnification of the
Director, officer, employee or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in subsections (a) and (b)
of this section. Such determination shall be made (i) by the Board of Directors
by a majority vote of a quorum consisting of Directors who were not parties to
such action, suit or proceeding, or (ii) if such a quorum is not obtainable, or,
even if obtainable a quorum of disinterested Directors so directs, by
independent legal counsel in a written opinion, or (iii) by the affirmative vote
of a majority of the shares entitled to vote thereon.
(e) Expenses incurred in defending a civil or criminal action, suit
or proceeding may be paid by the corporation in advance of the final disposition
of such action, suit or proceeding as authorized by the Board of Directors in
the specific case upon receipt of an undertaking by or on behalf of the
Director, officer, employee or agent to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified by the
corporation as authorized in this section.
(f) The indemnification provided by this section shall not be deemed
exclusive of any other rights, to which those seeking indemnification may be
entitled under any Agreement, vote of stockholders, or disinterested Directors
or otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a Director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
(g) The corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a Director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a Director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the corporation would have the power to indemnify him
against such liability under the provisions of this section.
ARTICLE 10.
COMMITTEES
10.1 Executive Committee. (a) The Board of Directors may by
resolution adopted by a majority of the entire Board, designate an Executive
Committee of three or more Directors. Each member of the Executive Committee
shall hold office until the first meeting of the Board of Directors after the
annual meeting of Shareholders next following his election and until his
successor member of the Executive Committee is elected, or until his death,
resignation or removal, or until he shall cease to be a Director.
(b) During the intervals between the meetings of the Board of
Directors, the Executive Committee may exercise all of the powers of the Board
of Directors in the management of the business affairs of the corporation;
provided, however, that the Executive Committee shall not have the power to
amend or repeal any resolution of the Board of Directors that by its terms shall
not be subject to amendment or repeal by the Executive Committee, and the
Executive Committee shall not have the authority of the Board of Directors in
reference to (i) amending the Articles of Incorporation or Bylaws of the
corporation; (ii) adopting a plan of merger or consolidation; (iii) the sale,
lease, exchange or other disposition of all or substantially all of the property
and assets of the corporation; or (iv) a voluntary dissolution of the
corporation or a revocation of any such voluntary dissolution.
(c) The Executive Committee shall meet from time to time on call of
the President or of a majority of the members of the Executive Committee.
Meetings of the Executive Committee may be held at such place or places, within
or without the State of Delaware as the Executive Committee shall determine or
as may be specified or fixed in the respective notices or waivers of such
meetings. The Executive Committee may fix its own rules of procedure, including
provision for notice of its meetings. It shall keep a record of its proceedings
and shall report these proceedings to the Board of Directors at the meeting
thereof held next after they have been taken, and all such proceedings shall be
subject to revision or alteration by the Board of Directors except to the extent
that action shall have been taken pursuant to or in reliance upon such
proceedings prior to any such revision or alteration.
(d) The Executive Committee shall act by majority vote of its
members.
(e) The Board of Directors, by resolution adopted in accordance with
paragraph (a) of this section, may designate one or more Directors as alternate
members of any such committee, who may act in the place and stead of any absent
member or members at any meeting of such committee.
10.2 Other Committees. The Board of Directors, by resolution adopted
by a majority of the entire Board, may designate one or more additional
committees, each committee to consist of one or more of the Directors of the
corporation, which shall have such name or names and shall have and may exercise
such powers of the Board of Directors in the management of the business and
affairs of the corporation, except the powers denied to the Executive Committee,
as may be determined from time to time by the Board of Directors.
10.3 Removal. The Board of Directors shall have power at any time to
remove any member of any committee, with or without cause, and to fill vacancies
in and to dissolve any such committee.
Restatement and Amendment
as of August 2, 1996
/s/ Steven M. Szekely
Steven M. Szekely, Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27
Article 5
The schedule contains summary financial information extracted from Monarch
Avalon, Inc.'s unaudited financial statements for the quarter ended July 31,
1997, and is qualified in its entirety by reference to such financial statements
and the notes thereto.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Apr-30-1998
<PERIOD-START> May-01-1997
<PERIOD-END> Jul-31-1997
<CASH> 1,665
<SECURITIES> 148
<RECEIVABLES> 1,097
<ALLOWANCES> 334
<INVENTORY> 2,152
<CURRENT-ASSETS> 5,396
<PP&E> 4,553
<DEPRECIATION> 3,934
<TOTAL-ASSETS> 6,064
<CURRENT-LIABILITIES> 1,365
<BONDS> 0
0
0
<COMMON> 527
<OTHER-SE> 4,699
<TOTAL-LIABILITY-AND-EQUITY> 6,064
<SALES> 1,628
<TOTAL-REVENUES> 1,628
<CGS> 1,178
<TOTAL-COSTS> 1,907
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (256)
<INCOME-TAX> 0
<INCOME-CONTINUING> (256)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (256)
<EPS-PRIMARY> (.16)
<EPS-DILUTED> (.16)
</TABLE>
