U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-QSB
Quarterly Report Under
the Securities Exchange Act of 1934
For Quarter Ended: September 30, 1998
Commission File Number: 0-23208
MONARCH INVESTMENT PROPERTIES, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 84-1251553
------ ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
88-09 103rd Ave.
Ozone Park, New York 11417
- -------------------- -----
(Address of principal executive office) (Zip Code)
(718) 323-4537
(Issuer's Telephone Number)
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 .
----
The number of shares of the registrant's only class of common stock
issued and outstanding, as of September 30, 1998, was 668,733
shares.
Page One of Twenty Pages
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS.
The unaudited financial statements for the three month period
ended September 30, 1998 are attached hereto.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with
the Financial Statements and notes thereto included herein. In
connection with, and because it desires to take advantage of, the
"safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995, the Company cautions readers regarding certain
forward looking statements in the following discussion and
elsewhere in this report and in any other statement made by, or on
the behalf of the Company, whether or not in future filings with
the Securities and Exchange Commission. Forward looking statements
are statements not based on historical information and which relate
to future operations, strategies, financial results or other
developments. Forward looking statements are necessarily based
upon estimates and assumptions that are inherently subject to
significant business, economic and competitive uncertainties and
contingencies, many of which are beyond the Company's control and
many of which, with respect to future business decisions, are
subject to change. These uncertainties and contingencies can
affect actual results and could cause actual results to differ
materially from those expressed in any forward looking statements
made by, or on behalf of, the Company. The Company disclaims any
obligation to update forward looking statements.
Overview
Monarch Investment Properties, Inc., f/k/a Iron Holdings
Corp., f/k/a Comstock Tailings Company, Incorporated, (the
"Company"), was incorporated under the laws of the State of Nevada
on May 13, 1988. On March 31, 1997, pursuant to the terms of an
Agreement and Plan of Reorganization, the Company acquired all of
the issued and outstanding securities of Iron Holdings Corp., a New
York corporation ("Old Iron"), including its wholly owned
subsidiary company, Iron Eagle Contracting & Mechanical, Inc.
("IECM"), in exchange for 4,500,000 "restricted" common shares of
the Company. As a result, the Company was the surviving entity,
with one wholly owned subsidiary company, IECM, which was the sole
operating company as of the date of the transaction. As part of
the terms of the aforesaid transaction, the Company amended its
Articles of Incorporation, changing its name to Iron Holdings Corp.
In June 1998, the Company (i) changed its name to its present name
pursuant to the affirmative consent of a majority of the holders of
the Company's common stock; and (ii) undertook a reverse split of
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its issued and outstanding Common Stock, whereby one share of
Common Stock was issued in exchange for every 10 shares then issued
and outstanding.
IECM was a construction contractor engaged in pipe work,
including gas and water mains, as well as steel installation,
primarily for city and state infrastructure construction. IECM
commenced operations in January 1996 and spent most of fiscal year
1996 bidding on potential jobs. It also purchased and developed a
tract of real estate in Ozone Park, New York, on which it has built
and sold five (5) two-family homes. As of the date of this report,
IECM has ceased operations due to its incurring significant losses
from operations. Following is a description of the proposed new
business plan adopted by the Company and which is presently being
implemented as a result of the discontinuation of IECM's business.
Plan of Operation
The Company's plan of operation for the next twelve months is
as follows:
The Company plans to continue and complete construction of its
Tahoe Project, which consists of the construction and sale of eight
two-family homes in the Ozone Park section of Queens, New York.
The Company has obtained preliminary approval from a bank for a
$1.2 million construction loan for this project. In addition, the
note receivable which had a balance of approximately $115,000 at
September 30, 1998 was prepaid in full in October 1998 and these
funds are also to be used for construction costs associated with
this project.
The Company had also planned to construct six single-family
homes on the Hegeman Street Project in Brooklyn, New York.
However, during the three month period ended September 30, 1998, it
entered into a contract to sell this property to an unaffiliated
party. The terms of this agreement provide for a sale price of
$288,000. This sale is anticipated to close by the end of December
1998. The Company acquired this property in September 1998 for a
purchase price of $230,000.
Once the Tahoe Project is completed, management intends to
seek to acquire assets or shares of an entity actively engaged in
business which generates revenues, in exchange for its securities.
The Company has no particular acquisitions in mind and has held
only preliminary negotiations regarding such an acquisition, but as
of the date of this report, no definitive agreement has been
reached with any prospective merger or acquisition candidate.
The Company's new business plan proposes to seek, investigate
and, if such investigation warrants, acquire an interest in
business opportunities presented to it by persons or firms who or
which desire to seek the perceived advantages of an Exchange Act
3
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registered corporation. The Company will not restrict its search
to any specific business, industry, or geographical location and
the Company may participate in a business venture of virtually any
kind or nature. This discussion of the proposed business is
purposefully general and is not meant to be restrictive of the
Company's virtually unlimited discretion to search for and enter
into potential business opportunities. Management anticipates that
it may be able to participate in only one potential business
venture because the Company has nominal assets and limited
financial resources. See "Financial Statements." This lack of
diversification should be considered a substantial risk to
shareholders of the Company because it will not permit the Company
to offset potential losses from one venture against gains from
another.
The Company may seek a business opportunity with entities
which have recently commenced operations, or which wish to utilize
the public marketplace in order to raise additional capital in
order to expand into new products or markets, to develop a new
product or service, or for other corporate purposes. The Company
may acquire assets and establish wholly owned subsidiaries in
various businesses or acquire existing businesses as subsidiaries.
The Company anticipates that the selection of a business
opportunity in which to participate will be complex and extremely
risky. Due to general economic conditions, rapid technological
advances being made in some industries and shortages of available
capital, management believes that there are numerous firms seeking
the perceived benefits of a publicly registered corporation. Such
perceived benefits may include facilitating or improving the terms
on which additional equity financing may be sought, providing
liquidity for incentive stock options or similar benefits to key
employees, providing liquidity (subject to restrictions of
applicable statutes), for all shareholders and other factors.
Potentially, available business opportunities may occur in many
different industries and at various stages of development, all of
which will make the task of comparative investigation and analysis
of such business opportunities extremely difficult and complex.
The analysis of new business opportunities will be undertaken
by, or under the supervision of, Anthony Gurino, the Company's sole
officer and director. Mr Gurino is a not professional business
analyst and has limited experience in this regard. Management
intends to concentrate on identifying preliminary prospective
business opportunities which may be brought to its attention
through present associations of the Company's officer and director,
or by the Company's shareholders. In analyzing prospective
business opportunities, management will consider such matters as
the available technical, financial and managerial resources;
working capital and other financial requirements; history of
operations, if any; prospects for the future; nature of present and
expected competition; the quality and experience of management
4
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services which may be available and the depth of that management;
the potential for further research, development, or exploration;
specific risk factors not now foreseeable but which then may be
anticipated to impact the proposed activities of the Company; the
potential for growth or expansion; the potential for profit; the
perceived public recognition of acceptance of products, services,
or trades; name identification; and other relevant factors.
Officers and directors of the Company expect to meet personally
with management and key personnel of the business opportunity as
part of their investigation. To the extent possible, the Company
intends to utilize written reports and personal investigation to
evaluate the above factors. The Company will not acquire or merge
with any company for which audited financial statements cannot be
obtained within a reasonable period of time after closing of the
proposed transaction.
Management of the Company, while not especially experienced in
matters relating to the new business of the Company, shall rely
upon their own efforts and, to a much lesser extent, the efforts of
the Company's shareholders, in accomplishing the business purposes
of the Company. Other than the Company's legal counsel and
independent accountant, it is not anticipated that any outside
consultants or advisors will be utilized by the Company to
effectuate its business purposes described herein. However, if the
Company does retain such an outside consultant or advisor, any cash
fee earned by such party will need to be paid by the prospective
merger/acquisition candidate, as the Company has insufficient cash
assets with which to pay such obligation. There have been no
contracts or agreements with any outside consultants and none are
anticipated in the future.
The Company will not restrict its search for any specific kind
of firms, but may acquire a venture which is in its preliminary or
development stage, which is already in operation, or in essentially
any stage of its corporate life. It is impossible to predict at
this time the status of any business in which the Company may
become engaged, in that such business may need to seek additional
capital, may desire to have its shares publicly traded, or may seek
other perceived advantages which the Company may offer. However,
the Company does not intend to obtain funds in one or more private
placements to finance the operation of any acquired business
opportunity until such time as the Company has successfully
consummated such a merger or acquisition.
Acquisition of Opportunities
In implementing a structure for a particular business
acquisition, the Company may become a party to a merger,
consolidation, reorganization, joint venture, or licensing
agreement with another corporation or entity. It may also acquire
stock or assets of an existing business. On the consummation of a
transaction, it is probable that the present management and
5
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shareholders of the Company will no longer be in control of the
Company.
It is anticipated that any securities issued in any such
reorganization would be issued in reliance upon exemption from
registration under applicable federal and state securities laws.
In some circumstances, however, as a negotiated element of its
transaction, the Company may agree to register all or a part of
such securities immediately after the transaction is consummated or
at specified times thereafter. If such registration occurs, of
which there can be no assurance, it will be undertaken by the
surviving entity after the Company has successfully consummated a
merger or acquisition and the Company is no longer considered a
"shell" company. Until such time as this occurs, the Company 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 the Company's securities may
have a depressive effect on the value of the Company's securities
in the future.
While the actual terms of a transaction to which the Company
may be a party cannot be predicted, it may be expected that the
parties to the business transaction will find it desirable to avoid
the creation of a taxable event and thereby structure the
acquisition in a so-called "tax-free" reorganization under Sections
368(a)(1) or 351 of the Internal Revenue Code (the "Code"). In
order to obtain tax-free treatment under the Code, it may be
necessary for the owners of the acquired business to own 80% or
more of the voting stock of the surviving entity. In such event,
the shareholders of the Company, would retain less than 20% of the
issued and outstanding shares of the surviving entity, which would
result in significant dilution in the equity of such shareholders.
As part of the Company's investigation, officers and directors
of the Company will meet personally with management and key
personnel, may visit and inspect material facilities, obtain
independent analysis of verification of certain information
provided, check references of management and key personnel, and
take other reasonable investigative measures, to the extent of the
Company's limited financial resources and management expertise.
The manner in which the Company participates in an opportunity will
depend on the nature of the opportunity, the respective needs and
desires of the Company and other parties, the management of the
opportunity and the relative negotiation strength of the Company
and such other management.
With respect to any merger or acquisition, negotiations with
target company management is expected to focus on the percentage of
the Company which the target company shareholders would acquire in
exchange for all of their shareholdings in the target company.
Depending upon, among other things, the target company's assets and
liabilities, the Company's shareholders will in all likelihood hold
6
<PAGE>
a substantially lesser percentage ownership interest in the Company
following any merger or acquisition. The percentage ownership may
be subject to significant reduction in the event the Company
acquires a target company with substantial assets. Any merger or
acquisition effected by the Company can be expected to have a
significant dilutive effect on the percentage of shares held by the
Company's then shareholders.
The Company will participate in a business opportunity only
after the negotiation and execution of appropriate written
agreements. Although the terms of such agreements cannot be
predicted, generally such agreements will require some specific
representations and warranties by all of the parties thereto, will
specify certain events of default, will detail the terms of closing
and the conditions which must be satisfied by each of the parties
prior to and after such closing, will outline the manner of bearing
costs, including costs associated with the Company's attorneys and
accountants, will set forth remedies on default and will include
miscellaneous other terms.
Liquidity and Capital Resources
Relating to the Company's assets and liabilities, during the
three month period ended September 30, 1998, cash decreased from
$134,644 at June 30, 1998, to $64,168 at September 30, 1998,
primarily as a result of the Company incurring operating expenses
of $70,495 without generating any revenues.
Outstanding long term notes aggregating $1,467,500 are also
owed to unaffiliated parties, including a $1.1 million note payable
which arose from the acquisition of Old IHC's acquisition of IECM,
which bears interest at the prime rate, plus 1%. Interest is
payable in monthly installments. Principal is payable in $25,000
quarterly installments commencing January 1999 and ending January
2010. Additional principal payments will be due consisting of 25%
of the gross proceeds of any private placement or public offering
the company successfully completes. The note is secured by all of
the issued and outstanding shares of Iron Eagle, all corporate
assets of Monarch, 30,000 shares of post-split common stock of
Monarch and 1.1 million warrants to purchase Monarch's common stock
exercisable at $.001 for a seven year period. Such warrants
include registration rights and anti-dilutive provisions.
In connection with the acquisition of the property in
Brooklyn, New York, the Company executed two mortgages totalling
$167,500. Each Mortgage and accrued interest thereon is payable
upon the sale of the applicable property, which is expected to
close prior to December 31, 1998. The first mortgage of $112,500
calls for interest to accrue at the rate of 7% per annum. The
second mortgage of $55,000 provides for interest to accrue at the
rate of 10.5% per annum.
7
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The Company also has six demand notes outstanding to
unaffiliated parties. The notes are demand notes, which have an
original principal balances totaling $335,425.
Mr. Anthony Gurino, President and a Director of the Company,
has loaned the Company $35,878. This loan is provided to the
Company on an interest free basis and is due upon demand. This
obligation is a verbal agreement between the Company and Mr.
Gurino.
In September 1997, Tahoe Realty Corp. ("Tahoe"), a wholly
owned subsidiary of the Company, entered into a contract to
purchase vacant land in Queens, N.Y. consisting of approximately
two acres, for $400,000. In April 1998, the Company purchased the
property and began to clear the land for construction. The Company
intends to build eight two-family houses. The purchase was
financed by borrowing $200,000 from unaffiliated parties at 12% to
15% interest with the seller receiving a $200,000 mortgage at 10%
interest. Principal is payable on all of the loans as the houses
are sold. Construction began in June 1998 and is expected to be
completed by March 1999. Proceeds from sales and total costs to
develop the property, including administrative and financing costs,
are estimated to be approximately $2,700,000 and $2,300,000,
respectively. The Company sold one home in October 1998 for
$350,000 and has another sale for $355,000 scheduled to close in
December 1998. In addition, the Company has four additional homes
under contracts of sale totalling $1,302,000.
Trends
As described above herein under "Plan of Operation",
management is considering seeking out another business entity with
which to merge or acquire, in order to increase shareholder
liquidity and Company performance. As of the date of this report,
management has held discussions with various potential candidates
in this regard, but no definitive agreement has been reached with
any third party and no assurances can be provided that the Company
will successfully consummate a merger or acquisition of any other
company or assets.
Inflation
Although the operations of the Company are influenced by
general economic conditions, the Company does not believe that
inflation had a material effect on the results of operations during
the three month period ended September 30, 1998.
Year 2000 Disclosure
Many existing computer programs use only two digits to
identify a year in the date field. These programs were designed
and developed without considering the impact of the upcoming change
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in the century. If not corrected, many computer applications could
fail or create erroneous results by or at the Year 2000. As a
result, many companies will be required to undertake major projects
to address the Year 2000 issue. The Company presently owns less
than $20,000 worth of computers. It utilizes outside contractors
for the bulk of its computer work. These consultants have advised
the Company that they have made all necessary revisions to their
software to avoid any potential problems arising in the year 2000.
Relevant to the Company's computers, management is in the process
of retaining outside computer consultants to assist the Company in
insuring that its computers will not fail in 2000. However, as of
the date of this report, the Company does not have available a
definitive cost applicable to any service to be undertaken on its
computer software to avoid any problems in this regard. While no
assurances can be provided, management believes that such cost will
not be material to the Company.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS - None
ITEM 2. CHANGES IN SECURITIES - NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS -
On or about August 10, 1998, holders of a majority of the
issued and outstanding common stock of the Company removed Dennis
Sommeso as a director of the Company pursuant to the laws of the
State of Nevada. Mr. Sommeso subsequently tendered a letter of
resignation as a director of the Company to the Company.
ITEM 5. OTHER INFORMATION - NONE.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K -
(a) Exhibits
EX-27 Financial Data Schedule
(b) Reports on Form 8-K - NONE
9
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SIGNATURES
Pursuant to the requirements of Section 12 of the
Securities and Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
MONARCH INVESTMENT PROPERTIES, INC.
(Registrant)
Dated: November 23, 1998 By: s/Anthony E. Gurino
-------------------------------------
Anthony E. Gurino, President
10
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MONARCH INVESTMENT PROPERTIES, INC.
(formerly IRON HOLDINGS CORP.)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----------
Consolidated balance sheets as of
September 30, 1998 and June 30, 1998 F-2 - F-3
Consolidated statements of operations
for the three-month periods ended September
30, 1998 and 1997 F-4
Consolidated statements of cash flows for the
three-month periods ended September 30, 1998
and 1997 F-5
Notes to consolidated financial statements F-6 - F-8
F-1
11
<PAGE>
<TABLE>
MONARCH INVESTMENT PROPERTIES, INC.
(formerly IRON HOLDINGS CORP.)
CONSOLIDATED BALANCE SHEETS
<CAPTION>
ASSETS
(unaudited)
September 30, June 30,
1998 1998
----------- -----------
<S> <C> <C>
Current assets:
Cash $ 64,168 $ 134,644
Current portion of note receivable 115,000 115,000
Real estate under development 1,071,928 498,947
Prepaid expenses and other assets 6,725 10,191
----------- -----------
Total current assets 1,257,821 758,782
----------- -----------
Property and equipment, at cost:
Construction and transportation
equipment 182,709 182,709
Office furniture and equipment 17,223 17,223
----------- -----------
199,932 199,932
Less accumulated depreciation 92,339 82,739
----------- -----------
107,593 117,193
----------- -----------
Other assets:
Security deposits 20,000 20,000
----------- -----------
20,000 20,000
----------- -----------
$ 1,385,414 $ 895,975
=========== ===========
<FN>
See notes to consolidated financial statements
F-2
12
<PAGE>
MONARCH INVESTMENT PROPERTIES, INC.
(formerly IRON HOLDINGS CORP.)
CONSOLIDATED BALANCE SHEETS
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
(unaudited)
September 30, June 30,
1998 1997
----------- -----------
<S> <C> <C>
Current liabilities:
Notes payable $ 335,426 $ 225,000
Current portion of long-term debt
from business combination 75,000 112,500
Current portion of long-term debt 167,500 0
Accounts payable and accrued expenses 354,243 143,563
Deposits 200,000 100,000
Officer's loan payable 35,878 41,578
----------- -----------
Total current liabilities 1,168,047 622,641
----------- -----------
Long-term debt from business
combination, net of current portion 1,025,000 987,500
Long-term debt 200,000 200,000
Net liabilities from discontinued
operations 363,698 363,698
----------- -----------
2,756,745 2,173,839
----------- -----------
Stockholders' equity (deficit):
Common stock, par value $.001 per
share, 500,000,000 shares
authorized, 668,733 shares issued
and outstanding 669 669
Additional paid-in capital 1,031,779 1,031,779
Accumulated deficit (2,403,779) (2,310,312)
----------- -----------
(1,371,331)
(1,277,864)
----------- -----------
$ 1,385,414 $ 895,975
=========== ===========
<FN>
See notes to consolidated financial statements
</TABLE>
F-3
13
<PAGE>
<TABLE>
MONARCH INVESTMENT PROPERTIES, INC.
(formerly IRON HOLDINGS CORP.)
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
(Unaudited)
Three-month period ended
September 30,
------------------------
1998 1997
----------- ----------
<S> <C> <C>
Revenues $ 0 $ 0
----------- ----------
Operating expenses (70,495) (26,004)
Interest expense (22,972) (32,952)
----------- ----------
Loss from continuing operations
before income taxes (93,467) (58,956)
Deferred income tax benefit 0 21,813
----------- ----------
Loss from continuing operations (93,467) (37,143)
Income from discontinued operations,
net of tax effect 0 86,033
----------- ----------
Net income (loss) $ (93,467) $ 48,890
=========== ==========
Income (loss) per share data:
Continuing operations $ (.14) $ (.07)
Discontinued operations 0 .16
----------- ----------
Net income (loss) per share $ (.14) $ .09
=========== ==========
<FN>
See notes to consolidated financial statements
</TABLE>
F-4
14
<PAGE>
<TABLE>
MONARCH INVESTMENT PROPERTIES, INC.
(formerly IRON HOLDINGS CORP.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
(Unaudited)
Nine-month period ended
September 30,
-------------------------
1998 1997
----------- -----------
<S> <C> <C>
Net income (loss) $ (93,467) $ 48,890
----------- -----------
Adjustments to reconcile net income to
net cash used in operating activities
of continuing operations:
(Income) loss from discontinued operations 0
(86,033)
Amortization and depreciation 9,663 6,668
Changes in assets and liabilities,
net of effects of business combination:
Decrease (increase) in real estate under development (572,981)
0
Decrease (increase) in prepaid expenses and
other assets 3,404
0
Decrease (increase) in deferred tax asset 0
(21,813)
Decrease (increase) in deposits 100,000
(420,000)
Increase (decrease) in accounts payable
and accrued expenses 210,680
(35,055)
----------- -----------
Total adjustments (249,234)
(556,233)
----------- -----------
Net cash used in operating activities
of continuing operations (342,701)
(507,343)
----------- -----------
Cash flows from financing activities:
Principal payments under loan agreements (2,465)
(212,500)
Proceeds from notes payable 280,390
0
Repayment of advances from officer (5,700)
0
Proceeds from issuance of stock 0 1,041,000
----------- -----------
Net cash provided by financing activities
of continuing operations 272,225 828,500
----------- -----------
Cash used in discontinued operations 0
(265,603)
----------- -----------
Net increase (decrease) in cash (70,476) 55,554
Cash, beginning of period 134,644 164,977
----------- -----------
Cash, end of period $ 64,168 $ 220,531
=========== ===========
<FN>
See notes to consolidated financial statements
</TABLE>
F-5
15
<PAGE>
MONARCH INVESTMENT PROPERTIES, INC.
(formerly IRON HOLDINGS CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998 and 1997
(Unaudited)
1. Summary of significant accounting policies
The accompanying unaudited financial statements have been prepared in
accordance with the instructions for Form 10-QSB and do not include all
of the information and footnotes required by generally accepted accounting
principles for the complete financial statements. In the opinion of
management, all adjustments, consisting only of normal recurring
adjustments considered necessary for a fair presentation, have been
included. Operating results for any quarter are not necessarily
indicative of the results for any other quarter or for the full year.
Principles of consolidation
The accompanying consolidated financial statements include the accounts
of Monarch Investment Properties, Inc. ("Monarch") and of its wholly-owned
subsidiaries, Iron Eagle Contracting and Mechanical, Inc. ("Iron Eagle"),
LW Plaza Realty Corp. and Tahoe Realty Corp., for the three-month periods
ended September 30, 1998 and 1997.
History and business activity
Monarch Investment Properties, Inc. was originally incorporated as Comstock
Tailings Company Incorporated on May 13, 1988, under the laws of the State
of Nevada. The name was changed to Iron Holdings Corp. on March 31, 1997.
Iron Holdings Corp. changed its name to Monarch Investment Properties, Inc.
on June 29, 1998.
Iron Eagle is a construction contractor engaged in pipe work including
gas and water mains as well as steel installation. The subsidiary
operates in the New York City metropolitan area. The Company has also
developed a tract of real estate in Ozone Park, New York, on which it
built and sold five two-family homes. As discussed more thoroughly in
Note 3, the operations of Iron Eagle were discontinued during the quarter
ended June 30, 1998.
On February 18, 1997, Monarch Investment Properties, Inc. (formerly Iron
Holdings Corp.) incorporated a wholly-owned subsidiary, LW Plaza Realty
Corp. The subsidiary is inactive and has not engaged in any operations or
generated any revenue.
During August 1997, Monarch Investment Properties, Inc. incorporated a
wholly-owned subsidiary, Tahoe Realty Corp. The subsidiary recently
commenced business in real estate acquisitions, development and management
activities. In April 1998, Tahoe purchased vacant land in Queens, New
York and is in the process of building eight two-family homes on it.
F-6
16
<PAGE>
1. Summary of significant accounting policies (continued)
Earnings and loss per share
Earnings and loss per share has been computed based on the weighted average
number of common shares outstanding. For the three-month periods ended
September 30, 1998 and 1997, the weighted average number of shares used in
the calculation was 668,700 and 524,726, respectively. Diluted loss per
share amounts are not presented because they are anti-dilutive.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards "Earnings Per Share", ("SFAS 128") which
require companies to present basic earnings per share ("EPS") and diluted
earnings per share, instead of the primary and fully diluted EPS that was
formerly required. The new standard requires additional informational
disclosures, and also makes certain modifications to the currently
applicable EPS calculations defined in Accounting Principles Board No.
15. The new standard is required to be adopted by all public
companies for reporting periods ending after December 15, 1997, and
requires reinstatement of EPS for all prior periods reported.
Reclassifications
Certain reclassifications have been made to the June 30, 1998 balance sheet
and the statement of operations for the nine-month period ended September
30, 1997, in order to conform to the September 30, 1998 presentation.
2. Stockholders' equity
Stock option plan
During May 1997, the Company established a non-qualified stock option
plan (the "Plan") to attract and retain qualified and competent persons
who are key employees, consultants, representatives, officers and
directors of the Company upon whose efforts and judgment the success of
the Company is largely dependent.
During May 1997, the Company awarded 100,000 post-split shares of the
Company's options to purchase common stock at an option price of $.10 per
share. All such options vest upon execution of the consulting agreement
and shall be exercisable for one year from such date. These options were
awarded to companies which are providing public relations service and
assistance in creating a secondary market for the Company's stock. All
options were exercised in July 1997 and 100,000 post-split shares of the
Company's common stock were issued.
Reverse stock split
On July 31, 1998, Monarch authorized a 1-for-10 reverse stock split to
existing shareholders resulting in a total of 668,733 shares issued and
outstanding. The capital structure of Monarch has been retroactively
restated for all periods presented to reflect to the above changes.
F-7
17
<PAGE>
3. Commitments and contingencies
Discontinued operations
During the quarter ended June 30, 1998, the Company made the
determination to discontinue the operations of the Iron Eagle
subsidiary. Iron Eagle was a construction contractor engaged
in pipe work including gas and water mains as well as steel
installation. Due to non-performance by Iron Eagle, the bonding
company has taken back the remaining four contracts which were in
process or which had been awarded. The results of Iron Eagle have
been reported separately as a discontinued operation in the
consolidated balance sheets and consolidated statements of operations.
As a result of the discontinued operations of Iron Eagle Contracting
and Mechanical, Inc. the bonding company has taken back four contracts
due to non-performance by the company. These contracts shall be re-bid
to other entities. Iron Eagle may be liable for any costs necessary to
complete these projects in excess of the original contract amounts.
Monarch is not a guarantor of the bonding liabilities incurred by its
subsidiary. Management believes that there will not be any significant
liability to the Company in excess of the provision, due to the costs
incurred for which it will not be paid.
Construction loan
The Company has preliminary approval for a $1.2 million construction
loan from a financial institution. The proceeds from the loan will be
used to complete the building of the remaining homes in Queens, New York.
Note receivable
During October 1998, the note receivable was paid in-full.
Real estate under contract
Tahoe Realty Corp. purchased vacant land in Queens, New York for
$400,000. The Company has completed two and is in the process of building
six additional two-family homes on the tract of land. Construction began
in June 1998. The Company sold one home in October 1998 for $350,000 and
has another sale for $355,000 scheduled to close in December 1998. In
addition, the Company has four additional homes under contracts of sale
totalling $1,302,000. Total proceeds from sales and total costs to
develop the property, including administrative and financing costs, are
estimated to be approximately $2,700,000 and $2,300,000,
respectively.
Hegeman Street Project
During September 1998, the Company acquired real estate in Brooklyn, New
York, on which it planned to build six, single-family homes. The total
acquisition cost for the real estate was $230,000, including permits and
plans. The Company has decided not to develop the property and currently
has a contract for sale in the amount of $288,000. The closing is
scheduled for November 1998.
F-8
18
<PAGE>
MONARCH INVESTMENT PROPERTIES, INC.
Exhibit Index to Quarterly Report on Form 10-QSB
For the Quarter Ended September 30, 1998
EXHIBITS Page No.
EX-27 Financial Data Schedule . . . . . . . . . . . 20
19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS FOR THE THREE MONTH PERIOD ENDED SEPTEMBER 30,
1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> SEP-30-1998
<CASH> 64,168
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,257,821
<PP&E> 199,932
<DEPRECIATION> 92,339
<TOTAL-ASSETS> 1,385,414
<CURRENT-LIABILITIES> 1,168,047
<BONDS> 2,756,745
0
0
<COMMON> 669
<OTHER-SE> (1,370,662)
<TOTAL-LIABILITY-AND-EQUITY> 1,385,414
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 70,495
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,972
<INCOME-PRETAX> (93,467)
<INCOME-TAX> 0
<INCOME-CONTINUING> (93,467)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (93,467)
<EPS-PRIMARY> (.14)
<EPS-DILUTED> 0
</TABLE>
