SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[x] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
[ ] Transitional Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended June 30, 1998
Commission File No. 0-23208
MONARCH INVESTMENT PROPERTIES, INC.
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(Name of small business issuer in its charter)
IRON HOLDING CORP.
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(Former Name of Issuer)
Nevada 84-1251553
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(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
82-17 153rd Ave.
Suite 202
Howard Beach, N.Y. 11414
(718) 641-1098
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(Address, including zip code and telephone number, including area
code, of registrant's executive offices)
Securities registered under Section 12(b) of the Exchange Act:
none
Securities registered under to Section 12(g) of the Exchange Act:
Common Stock
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(Title of class)
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
Company was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
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Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure
will be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment to this
Form 10-KSB. X
-----
(Continued on Following Page)
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Issuer's revenues for its most recent fiscal year: $ -0-.
State the aggregate market value of the voting stock held by non-
affiliates, computed by reference to the price at which the stock
was sold, or the average bid and asked prices of such stock, as of
a specified date within the past 60 days: As of September 30, 1998:
$239,172.
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date: As of
September 30, 1998 there were 668,733 shares of the Company's
common stock issued and outstanding.
Documents Incorporated by Reference: none
This Form 10-KSB consists of 50 pages.
Exhibit Index is Located at Page 45.
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TABLE OF CONTENTS
FORM 10-KSB ANNUAL REPORT
MONARCH INVESTMENT PROPERTIES, INC., F/K/A IRON HOLDINGS CORP.
PAGE
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Facing Page
Index
PART I
Item 1. Description of Business..................... 4
Item 2. Description of Property..................... 9
Item 3. Legal Proceedings........................... 10
Item 4. Submission of Matters to a Vote of
Security Holders........................ 10
PART II
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters......... 11
Item 6. Management's Discussion and Analysis of
Financial Condition and Results of
Operations.............................. 11
Item 7. Financial Statements........................ 16
Item 8. Changes in and Disagreements With
Accountants on Accounting
and Financial Disclosure................ 38
PART III
Item 9. Directors, Executive Officers, Promoters
and Control Persons; Compliance with
Section 16(a) of the Exchange Act....... 38
Item 10. Executive Compensation...................... 39
Item 11. Security Ownership of Certain Beneficial
Owners and Management................... 41
Item 12. Certain Relationships and Related
Transactions............................ 41
PART IV
Item 13. Exhibits and Reports of Form 8-K............ 42
SIGNATURES............................................. 44
EXHIBIT INDEX ......................................... 45
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
History
Monarch Investment Properties, Inc. (the "Company") was
incorporated under the laws of the State of Nevada on May 13, 1988,
under the name Comstock Tailings Company, Incorporated, for the
purpose of engaging in the acquisition and development of minerals,
metals and other natural resource products and the related
operations applicable to such activities. Until September 1993 and
other than issuing shares to its original shareholders, the Company
never commenced activities relating to its original business
purpose. In September 1993, the Board of Directors of the Company
elected to change the Company's principal business purpose to a
"shell" corporation engaged in seeking out and acquiring another
business entity or opportunity. Applicable thereto, the Company
filed a registration statement on Form 10-SB with the Securities
and Exchange Commission on or about January 12, 1994, which
registration statement became effective in August 1994.
Relevant thereto, on or about March 31, 1997, the Company
successfully consummated a merger with Iron Holdings Corp. ("Old
IHC"), a New York corporation. The terms of the transaction
involved the Company issuing an aggregate of 4,500,000 shares of
its "restricted" Common Stock (pre reverse split) to the former
shareholders of Old IHC in exchange for all of the issued and
outstanding stock of Old IHC. Old IHC did not survive the
transaction. The Company also changed its name to Iron Holdings
Corp. As a result of this transaction, Anthony Gurino, among
others, assumed his respective positions, replacing all of former
management. Thereafter, the Company did elect to change the
Company's fiscal year from December 31 to June 30, in order to
establish continuity between Old IHC and the Company's financial
reporting requirements. On June 29, 1998, the Company's
shareholders approved the change of the Company's name to its
present name.
Old IHC was incorporated on October 3, 1996 in the State of
New York. On January 8, 1997, Old IHC entered into an agreement
and acquired all of the shares of Iron Eagle Contracting and
Mechanical, Inc., a New York corporation ("IECM"). The effective
date of this acquisition was October 3, 1996. It operated all of
its business through this subsidiary, which business is
construction contracting engaged in pipe work including gas and
water mains as well as steel installation, primarily in the New
York City metropolitan area. As a result of the reorganization
described above herein, Old IHC ceased to exist following the
merger. The Company is presently a publicly traded holding company
whose Common Stock commenced trading on the OTC Bulletin Board
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operated by the National Association of Securities Dealers, Inc.
("NASD") on June 26, 1997.
Subsequent to the closing of the merger, the Company was a
holding company for three wholly owned subsidiary companies,
including IECM. IECM engaged in two lines of business since its
incorporation in December 1995. Its principal business has been
construction contracting. The other business line has been the
development and sale of residential real estate. However, due to
this company incurring significant losses from operations, it
ceased operations in June 1998. The other two subsidiary
companies, L.W. Plaza Realty Corp. ("LWP") and Tahoe Realty Corp.
("Tahoe"), each a New York corporation, were dormant until April
1998. At that time, Tahoe commenced business activities, engaging
in real estate acquisition, development and management activities.
LWP remains dormant as of the date of this report, but is expected
to commence business by being the entity which acquires the
apartment building discussed hereinbelow.
Description of Business
On June 29, 1998, the Company's shareholders and Directors
approved a reverse split of its issued and outstanding Common
Stock, effective July 31, 1998, whereby one share of Common Stock
was issued in exchange for every 10 shares then issued and
outstanding. This reverse stock split was adopted by a majority of
the Company's voting Common Stock. All references to the number of
issued and outstanding shares of the Company's Common Stock
included in this report have been adjusted to reflect this reverse
stock split, except as stated therein.
As stated above, to date, the Company's previous business, the
contracting business, generated insufficient gross profits and in
some instances, significant losses. While the circumstances that
have led to these disappointing results have varied from contract
to contract, the principal deficiencies have arisen from jobs being
under bid or being poorly managed in the field. In addition, for
one major contract, extended delays due to inclement weather
conditions during the last calendar quarter of 1997 caused
significant cost overruns. These overruns were the result of
inefficiencies which included additional payroll and equipment
costs due to idle labor and machinery.
During the time in which the Company was engaged in the
contracting business, it also commenced a real estate development
business, which has been a significant success. In 1996, Old IHC
acquired undeveloped land in Ozone Park, Queens, New York. The
cost of the land acquisition was $320,000. During 1997, the
Company built and sold five two-family homes on Albert Road on the
Ozone Park property. As of the date of this report, the Company
has sold all five of these homes, ranging in sales prices from
$320,000 through $330,000. The total cost to the Company for both
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the land and materials necessary to complete construction of all
five homes was approximately $1,200,000. The performance of the
Albert Road project is summarized as follows:
Sales $1,642,450
Costs 1,264,249
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Gross Profit $ 378,201
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Albert Road was the only project that was managed in the field
by Anthony Gurino, President of the Company. In part, the success
of Albert Road was achieved by using non-union labor, an option
which was not available on many of its contracting jobs. At this
stage, the Company has ceased to bid any further contracting work
due to the discontinued operations of IECM.
The Company is now seeking to do what it has done best by
following up the success of the Albert Road project with other real
estate development and rental projects, including the following:
Tahoe Street Development Project
Tahoe Street involves the development and sale of eight two-
family homes. The project is virtually adjacent to the Albert Road
project and is being managed by Anthony Gurino using non-union
labor. Construction began in June 1998 and is expected to be
completed by March 1999. The purchase price of this property was
$400,000, $200,000 of which the Company paid at closing, with the
balance being financed by the unaffiliated seller, with interest
accruing at the rate of 10% thereon. This obligation will be
repaid by the Company as each home is sold. Proceeds from sales
and total costs to develop the property, including administrative
and financing costs, are estimated to be approximately $2,870,000
and $2,310,000, respectively. To date, two of the homes have been
pre-sold for an aggregate of $705,000, with the Company receiving
deposits totalling $150,000 pursuant to the applicable contracts.
The acquisition and development of this property has been financed
from the pre-sale of the two homes and private loans. While no
assurances can be provided, it is anticipated that the first home
will close on or about October 15, 1998.
Hegeman Street Project
On September 5, 1998, the Company closed on a contract to
acquire real estate in Brooklyn, New York, on which it plans to
build six single-family homes. The total acquisition cost for the
real estate was $230,000, including permits and plans. The Company
paid $65,000 down, with the balance of the $165,000 carried back by
the seller on two notes, including one note in the principal amount
of $110,000, with interest accruing at the rate of 7% per annum and
the second note in the principal amount of $55,000 accruing
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interest at the rate of 10.5% per annum. Each note will become due
upon the earlier of 2 years, or upon closing of the sale of the
residential homes. The Company is seeking to obtain a $250,000
construction loan commitment to finance the project. Construction
is scheduled to commence in early calendar 1999 and is expected to
take approximately six months to complete.
The homes will be offered for sale at $199,000 each and will
be eligible for FHA/VA approved mortgages. If the Company
commences marketing of the sale of these homes, net profits for the
project are projected to be approximately $200,000. However, the
Company is also reviewing the possibility of constructing 3 family
homes as opposed to single family homes and thereafter, co-owning
these homes upon completion of construction and renting the same.
If this scenario is undertaken, it is estimated that the Company
will rent each home at the rate of $900 per month, with the Company
maintaining these properties as landlord. As of the date of this
report, the architect retained by the Company is reviewing the
feasibility of this proposal. It is anticipated that a decision as
to how to proceed will be made in October 1998.
Apartment Building
The Company is evaluating the prospect of acquiring a 34 unit
apartment building in Manhattan, on which the Company will assume
management. The total acquisition price is $2,685,000. The
Company has received a $2 million mortgage commitment from Lehman
Holdings, Inc. The $685,000 balance of the acquisition price would
be payable in cash at closing. In order to acquire this property,
management has received a verbal commitment from private financing
sources to provide $600,000 in exchange for a 60% interest in this
building, with the Company retaining the balance of the 40%
interest in consideration for the Company serving as the managing
partner of the project. Based on current rentals and expenses, the
building is expected to generate $125,000 of annual cash flow after
debt service on the new mortgage. The Company would then consider
whether to continue to develop the real estate rental subsidiary,
possibly developing it into a Real Estate Investment Trust
("REIT"), or other alternatives, including providing for the
private investors to convert their interest in the project into
stock of the Company. As of the date of this report, no
discussions in this regard have occurred.
Other Events
Effective December 24, 1997, the Company entered into a letter
of intent with CRT Corporation ("CRT"), a privately held Nevada
corporation, whereby the Company agreed in principle to acquire all
of the issued and outstanding shares of CRT, in exchange for
issuance by the Company of previously unissued "restricted" common
stock. Simultaneous thereto, the Company intended to unwind the
merger which took place on or about March 31, 1997 with Iron
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Holdings Corp., a New York corporation ("Old Iron"). The Company
intended to cancel all of the shares previously issued to the
shareholders of Old Iron aggregating 4,500,000 shares as part of
the material terms of unwinding this transaction.
The relevant terms of the proposed CRT transaction required
the Company to issue to the CRT shareholders an aggregate of
8,748,000 "restricted" common shares, representing 80% of the
Company's then outstanding common stock, in exchange for all of the
issued and outstanding shares of CRT. This transaction was subject
to satisfaction of certain conditions, including completion of due
diligence activities, the approval of the transaction by the
Company's and CRT shareholders and confirmation of the financial
condition of CRT by presentation of CRT audited financial
statements. However, management elected not to consummate this
proposed transaction and adopted the revised business plan outlined
in detail under "Item 1, DESCRIPTION OF BUSINESS" above herein.
In August 1997, the Company executed a contract to purchase
the Lindenwood Shopping Center located in Lindenwood, Queens. This
contract was subsequently extended on September 29, 1997. The
proposed purchase price of the shopping center was Eight Million
Dollars ($8,000,000) and the Company tendered a non-refundable
deposit of $400,000 pursuant to the terms of the relevant contract.
The balance of the closing price was scheduled to be tendered on or
about December 31, 1997. Prior to the proposed closing date,
management recognized that the Company did not have sufficient cash
available to allow it to close this acquisition. In response,
management met with various parties in order to attempt to raise
the necessary cash, or alternatively, generate interest in the
property in order to allow the transaction to close by having these
non-affiliated parties acquire the shopping center for their own
account and allow the Company to recover its deposit. When
management entered into the contract, they had a verbal commitment
from investment bankers to raise up to $2 million in additional
equity capital. Unfortunately, these investment bankers advised
the Company of their inability to successfully raise this capital
subsequent to execution of the applicable contract. The
transaction was closed by the Company assigning its rights under
the applicable contract to a third party in exchange for receipt by
the Company of a promissory note in the principal amount of
$400,000, the amount originally deposited by the Company with the
initial owners. The Company did not retain any interest in the
shopping center. The assignment of this contract was authorized by
the Company's shareholders. See "Part I, Item 4, SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS" below herein.
During the fiscal year ended June 30, 1998, the Company made
an offer to acquire approximately 1.3 acres of land in Queens, New
York adjacent to the Belle Harbor Yacht Club for a purchase price
of $1,100,000, which offer was preliminarily accepted. Approval of
the contract was provided by the association's Board, but
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subsequently denied by the association's members. Management is
maintaining lines of communication with the association in the
hopes that they will change their position. If the Company is able
to acquire this property, of which there can be no assurance, the
project would involve the construction of 11 single-family homes,
each having an estimated sales price of $389,000. While no
assurances can be provided, net profits for the project are
projected to be $750,000.
Employees
The Company presently has two (2) part-time employees,
including its President and Secretary, Anthony Gurino, and one
administrative assistant. See "Item 9, DIRECTORS, EXECUTIVE
OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION
16(a) OF THE EXCHANGE ACT." The Company intends to employ
additional persons on an "as needed" basis, depending upon the
number of projects in which the Company is involved. Many of these
persons are retained on a contractor basis. As of the date of this
report, there are 15 subcontractors presently working on Company
projects. Management believes that its relationship with its
employees is satisfactory. No employee is a member of any union.
Competition
The Company will compete with publicly and privately held
companies in the development of residential and commercial real
estate projects. There are numerous other entities engaged in
these types of business endeavors who have greater resources, both
financial and otherwise, than the resources presently available to
the Company.
Trademarks
The Company does not utilize any trademarks or patent rights
in its business.
Government Regulations
The Company is subject to certain governmental regulations
relating to obtaining construction permits for its construction
activities. To date, management believes that the Company is in
full compliance with all applicable regulations. The Company is
not subject to any other extraordinary governmental regulations.
ITEM 2. DESCRIPTION OF PROPERTY
Facilities. The Company presently leases approximately 1,000
square feet of executive office space at 82-17 153rd Ave., Suite
202, Queens, N.Y. 11414, at an aggregate cost of $400 per month
pursuant to a month-to-month verbal lease. It is anticipated that
the Company's present premises will be adequate to meet the
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Company's needs for the foreseeable future. The Company's telephone
number is (718) 641-1098 and facsimile number is (718) 843-4240.
See "Item 1, DESCRIPTION OF BUSINESS" above for a description of
other real property under contract to the Company and which the
Company is considering for acquisition.
ITEM 3. LEGAL PROCEEDINGS
As a result of the prior business of the Company discussed
hereinabove, the bonding company has taken back four contracts due
to non-performance by the Company. These contracts shall be re-bid
to other entities. The Company may be liable for any costs
necessary to complete these projects in excess of the original
contract amount. However, management believes that there will not
be any significant liability to the Company due to costs incurred
by the Company for which it will not be paid. There are no other
material legal proceedings which are pending or have been
threatened against the Company of which management is aware.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fiscal year ended June 30, 1998, the Company's
shareholders undertook three separate actions by consent of a
majority of the Company's shareholders pursuant to the laws of the
State of Nevada including the following:
(i) On or about December 24, 1997, holders of a majority of
the issued and outstanding common stock of the Company approved,
among other matters, the terms of the proposed reverse merger
between the Company and CRT Corporation and the assignment of the
Lindenwood Shopping Center Contract to Purchase Real Estate to JLG
Holdings, Inc. However, subsequent thereto, management of the
Company elected not to proceed with the proposed CRT Transaction.
See "Item 1, DESCRIPTION OF BUSINESS."
(ii) On or about June 29, 1998, holders of a majority of the
issued and outstanding common stock of the Company approved a
reverse stock split, effective July 31, 1998, whereby one (1) share
of common stock was issued in exchange for every ten (10) shares of
common stock then issued and outstanding. In addition, an
amendment to the Company's Articles of Incorporation was approved,
changing the name of the Company from "Iron Holdings Corp." to
"Monarch Investment Properties, Inc.; and
(iii) 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. Mr. Sommeso
subsequently tendered a letter of resignation as a director of the
Company to the Company.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
(a) Market Information. The Company's common stock was
approved for trading on the OTC Bulletin Board operated by the
National Association of Securities Dealers on June 26, 1997. Prior
to that date none of the Company's securities were traded. The
initial price of the Company's common stock at June 26, 1997, was
$1.00 bid, $1.50 asked. The Company's common stock presently
trades under the symbol "MIPR".
The following table sets forth the range of high and low bid
prices as reported on the OTC Bulletin Board operated by the NASD
for each calendar quarter commencing June 30, 1997. The
information provided has been stated without adjustment for the
reverse stock split undertaken by the Company which was effective
July 31, 1998:
Quarter Ended Bid Price
Low High
_______ _______
June 30, 1997 $1.00 $1.50
September 30, 1997 2.75 7.00
December 31, 1997 0.125 3.8125
March 31, 1998 0.25 1.00
June 30, 1998 0.0625 0.5625
(b) Holders. There are 12 holders of the Company's Common
Stock, not including those persons who held their stock in "street
name."
(c) Dividends. The Company has not paid any dividends on its
Common Stock since its inception. The Company does not foresee that
the Company will have the ability to pay a dividend on its Common
Stock in the fiscal year ended June 30, 1999.
ITEM 6. 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
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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.
On June 29, 1998, the Company changed its name to its present name
pursuant to the affirmative consent of a majority of the holders of
the Company's common stock.
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.
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The Company also plans to commence and complete construction of the
Hegeman Street Project in Brooklyn, New York, which consists of six
single-family homes.
Funding of the real estate development projects and of
administrative operations is expected from two sources. First, the
Company is seeking to raise additional capital through either a
private placement or public offering of its debt or equity. The
terms and amount of such offering are as yet undetermined. There
can be no assurance that such offering will be successfully
completed.
Second, the Company anticipates that the note receivable which
had a balance of $215,000 at June 30, 1998, will be repaid well
before its specified maturity date of December 31, 2002. The
debtor prepaid $100,000 of principal in August of 1998 and has
express an intent to repay the balance within the next year.
The Company also anticipates utilizing proceeds from the sale
of homes constructed in the Tahoe Project to fund development of
the Hegeman Street Project and subsequent projects.
The Company does not anticipate any significant purchases or
sales of equipment or any significant changes in number of
employees during the next twelve months.
A more complete description of the Company's recently adopted
revised business plan is described in "Part I, Item 1, Description
of Business" above.
Liquidity and Capital Resources
Relating to the Company's assets and liabilities, during the
fiscal year ended June 30 1998, cash increased from $1,157 at June
30, 1997, to $134,644 at June 30 1998, as a result of proceeds
received from issuance of stock and funds received on the note
receivable.
Outstanding long term notes aggregating $1,300,000 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 will
include registration rights and anti-dilutive provisions.
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Mr. Anthony Gurino, President and a Director of the Company,
has also loaned the Company $141,578. 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 connection with the acquisition of the property being
developed by Tahoe, the Company executed a $200,000 purchase money
mortgage. The mortgage calls for quarterly payments of interest at
10% per annum with the entire unpaid balance of principal and any
accrued interest due April 14, 2002. The note is secured by the
property located in Queens, New York.
The Company also has three demand notes outstanding to
unaffiliated parties. The notes are demand notes, which have an
original principal balances totaling $225,000.
In August 1997, the Company executed a contract to purchase
the Lindenwood Shopping Center located in Lindenwood, Queens. This
contract was subsequently extended on September 29, 1997. The
proposed purchase price is Eight Million Dollars ($8,000,000) and
the Company tendered a non-refundable deposit of $400,000 pursuant
to the terms of the relevant contract. The balance of the closing
price was scheduled to be tendered on or about December 31, 1997.
Prior to the proposed closing date, management recognized that the
Company did not have sufficient cash available to allow it to close
this acquisition. In response, management met with various parties
in order to attempt to raise the necessary cash, or alternatively,
generate interest in the property in order to allow the transaction
to close by having these non-affiliated parties acquire the
shopping center for their own account and allow the Company to
recover its deposit. When management entered into the contract,
they had a verbal commitment from investment bankers to raise up to
$2 million in additional equity capital. Unfortunately, these
investment bankers advised the Company of their inability to
successfully raise this capital subsequent to execution of the
applicable contract. The transaction was closed by the Company
assigning its rights under the applicable contract to a third party
in exchange for receipt by the Company of a promissory note in the
principal amount of $400,000, the amount originally deposited by
the Company with the initial owners. The Company did not retain
any interest in the shopping center.
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
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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 $2,870,000 and $2,310,000,
respectively. To date, two of the homes have been pre-sold for an
aggregate price of $705,000, with the Company receiving deposits
totalling $150,000. The acquisition and development of this
property has been financed from pre-sale of the two homes and
private loans. While no assurances can be provided, it is
anticipated that the first home will close on or about October 15,
1998.
In order to best implement the Company's new business plan
described herein, management has recognized the necessity of
raising additional capital, either debt or equity, in order to
accomplish the Company's stated objectives. While it is the
intention of management to undertake raising additional capital in
the near future, the Company does not have any agreement or
understanding with any investment banking or venture capital firm
wherein there is any agreement by these entities to raise the
Company any additional capital and there can be no assurances that
the Company will obtain such an agreement in the future. Failure
of the Company to raise additional capital will have a negative
impact on the ability of the Company to expand according to its new
business plan.
Trends
The Company's principal revenues to date have been from its
bid construction business. However, as a result of unanticipated
increased costs, the construction costs associated with these
construction projects has far exceeded management's expectation,
resulting in significant losses to the Company from operations. In
response thereto, management has elected to discontinue the
business of IECM and implement a new business plan as described
herein. This was done because it is unlikely that the Company
could continue to operate without the protection afforded by US
bankruptcy laws. The Company's business plan which it has adopted
in this regard is described under "Plan of Operation" above, as
well as under "Part I, Item 1, Description of Business." There can
be no assurances that the operations of the Company will generate
profits in the near future, or at all.
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 fiscal year ended June 30 1998.
15
<PAGE>
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
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.
ITEM 7. FINANCIAL STATEMENTS
16
<PAGE>
MONARCH INVESTMENT PROPERTIES, INC.
(formerly IRON HOLDINGS CORP.)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Independent Auditors' Report F-2
Consolidated balance sheets as of June 30, 1998 and 1997 F-3 - F-4
Consolidated statements of operations for the year ended
June 30, 1998, and for the six-month period ended
June 30, 1997, and for the period October 3, 1996
(date of incorporation) through December 31, 1996,
and of its predecessor, Iron Eagle Contracting and
Mechanical, Inc., for the period December 7, 1995
(date of incorporation) through October 2, 1996 F-5
Consolidated statements of stockholders' equity (deficit)
for the year ended June 30, 1998, and for the six-month
period ended June 30, 1997, and for the period October 3,
1996 (date of incorporation) through December 31 1996,
and of its predecessor, Iron Eagle Contracting and
Mechanical, Inc. for the period December 7, 1995
(date of incorporation) through October 2, 1996 F-6
Consolidated statements of cash flows for the year ended
June 30, 1998, and for the six-month period ended June 30,
1997, and for the period October 3, 1996 (date of
incorporation) through December 31, 1996, and of its
predecessor, Iron Eagle Contracting and Mechanical, Inc.,
for the period December 7, 1995 (date of incorporation)
through October 2, 1996 F-7
Notes to consolidated financial statements F-9 - F-21
F-1
17
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Monarch Investment Properties, Inc.
(formerly Iron Holdings Corp.)
Howard Beach, New York
We have audited the accompanying consolidated balance sheets of Monarch
Investment Properties, Inc. (formerly Iron Holdings Corp.) as of June 30,
1998 and 1997, and the related consolidated statements of operations,
stockholders' equity (deficit), and cash flows for the year ended June 30,
1998, and for the six-month period ended June 30, 1997, and for the period
October 3, 1996 (date of incorporation) through December 31, 1996. We have
also audited the statements of operations, stockholders' equity (deficit) and
cash flows of its predecessor, Iron Eagle Contracting and Mechanical, Inc.,
for the period December 7, 1995 (date of incorporation) through October 2,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Monarch
Investment Properties, Inc. (formerly Iron Holdings Corp.) as of June 30,
1998 and 1997, and the results of its consolidated operations and its
consolidated cash flows for the year ended June 30, 1998, the six-month
period ended June 30, 1997, and for the period October 3, 1996 (date of
incorporation) through December 31, 1996, and the operations and cash flows
of its predecessor, Iron Eagle Contracting and Mechanical, Inc., for the
period December 7, 1995 (date of incorporation) through October 2, 1996, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 13 to the
financial statements, the Company has suffered recurring losses from
operations and has net capital deficiency that raise substantial doubt
about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 13. The financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
HORTON & COMPANY, L.L.C.
September 22, 1998
Wayne, New Jersey
F-2
18
<PAGE>
<TABLE>
MONARCH INVESTMENT PROPERTIES, INC.
(formerly IRON HOLDINGS CORP.)
CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
June 30,
----------------------
1998 1997
---------- ----------
<S> <C> <C>
Current assets:
Cash $ 134,644 $ 1,157
Current portion of note receivable 100,000 -
Real estate under development 498,947 -
Prepaid expenses and other assets 10,191 -
Officer's loan receivable - 8,500
---------- ----------
Total current assets 743,782 9,657
---------- ----------
Property and equipment, at cost:
Construction and transportation equipment 182,709 190,210
Office furniture and equipment 17,223 34,794
---------- ----------
199,932 225,004
Less accumulated depreciation 82,739 50,488
---------- ----------
117,193 174,516
---------- ----------
Other assets:
Note receivable, net of current portion 115,000 -
Intangibles - 76,664
Security deposits 20,000 -
Deferred income taxes - 51,015
Net assets from discontinued operations - 1,071,237
---------- ----------
135,000 1,198,916
---------- ----------
$ 995,975 $1,383,089
========== ==========
<FN>
See notes to consolidated financial statements
</TABLE>
F-3
19
<PAGE>
<TABLE>
MONARCH INVESTMENT PROPERTIES, INC.
(formerly IRON HOLDINGS CORP.)
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' DEFICIT
<CAPTION>
June 30,
----------------------
1998 1997
---------- ----------
<S> <C> <C>
Current liabilities:
Notes payable $ 225,000 $ -
Current portion of long-term debt
from business combination 112,500 262,500
Accounts payable and accrued expenses 143,563 136,155
Deposits 100,000 -
Officer's loans payable 141,578 -
---------- ----------
Total current liabilities 722,641 398,655
Long-term debt from business combination,
net of current portion 987,500 1,050,000
Long-term debt 200,000 -
Net liabilities from discontinued operations 363,698 -
---------- ----------
2,273,839 1,448,655
---------- ----------
Stockholders' deficit:
Common stock, par value $.001 per share
500,000,000 shares authorized
500,000 shares issued and outstanding in 1997 - 500
668,733 shares issued and outstanding in 1998 669 -
Additional paid-in capital 1,031,779 32,500
Accumulated deficit (2,310,312) (98,566)
---------- ----------
(1,277,864) (65,566)
---------- ----------
$ 995,975 $1,383,089
========== ==========
<FN>
See notes to consolidated financial statements
</TABLE>
F-4
20
<PAGE>
<TABLE>
MONARCH INVESTMENT PROPERTIES, INC.
(formerly IRON HOLDINGS CORP.)
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
(Predecessor)
Six-month October 3, 1996 December 7, 1995
Year ended period ended through through
June 30, 1998 June 30, 1997 December 31, 1996 October 2, 1996
------------- ------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Revenues $ - $ - $ - $ -
Operating expenses 232,964 50,443 - -
Interest expense 96,367 57,769 30,267 -
------------- ------------- ----------------- ---------------
Loss from
continuing
operations
before income
taxes (329,331) (108,212) (30,267) (-)
Deferred income
tax benefit
(expense) (51,015) 39,815 11,200 -
------------- ------------- ----------------- ---------------
Loss from
continuing
operations (380,346) (68,397) (19,067) (-)
Income (loss) from
discontinued
operations, net
of tax effect (1,831,400) 27,755 (38,857) (177,076)
------------- ------------- ----------------- ---------------
Net loss $ (2,211,746) $ (40,642) $ (57,924) $ (177,076)
============= ============= ================= ===============
Loss per share data:
Continuing
operations (.59) (.14) (.04) -
Discontinued
operations (2.79) .05 (.09) (.39)
------------- ------------- ----------------- ---------------
Net loss
per share $ (3.38) $ (.09) $ (.13) $ (.39)
============= ============= ================= ===============
<FN>
See notes to consolidated financial statements
</TABLE>
F-5
21
<PAGE>
<TABLE>
MONARCH INVESTMENT PROPERTIES, INC.
(formerly IRON HOLDINGS CORP.)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
For the year ended June 30, 1998, and for the six-month period ended
June 30, 1997, and for the period October 3, 1996 (date of incorporation)
through December 31, 1996, and of its predecessor, Iron Eagle Contracting and
Mechanical, Inc. for the period December 7, 1995 (date of incorporation)
through October 2, 1996
<CAPTION>
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit
------- ------ ---------- ------------
<S> <C> <C> <C> <C>
Common stock issued at inception, as
restated for reverse
acquisition accounting 450,000 $ 450 $1,249,550 $ -
Net loss for the period December 7,
1995 through October 2, 1996 - - - (177,076)
------- ------ ---------- ------------
Balances, October 2, 1996 450,000 450 1,249,550 (177,076)
Recapitalization for purchase
business combination,
October 3, 1996 - - (1,249,550) 177,076
Net loss for the period
October 3, 1996 through
December 31, 1996 - - - (57,924)
------- ------ ---------- -----------
Balances, December 31, 1996 450,000 450 4,050 (57,924)
Common stock issued in
reverse acquisition 50,000 50 450 -
Stock options exercised - - 28,000 -
Net loss for the period
January 1, 1997 through
June 30, 1997 - - - (40,642)
------- ------ ---------- -----------
Balances, June 30, 1997 500,000 500 32,500 (98,566)
Issuance of stock 168,733 169 999,279 -
Net loss for year ended
June 30, 1998 - - - $(2,211,746)
------- ------ ---------- -----------
Balance, June 30, 1998 668,733 $ 669 $1,031,779 $(2,310,312)
======= ====== ========== ===========
<FN>
See notes to consolidated financial statements
</TABLE>
F-6
22
<PAGE>
<TABLE>
MONARCH INVESTMENT PROPERTIES, INC.
(formerly IRON HOLDINGS CORP.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
(Predecessor)
Six-month October 3, 1996 December 7, 1995
Year ended period ended through through
June 30, 1998 June 30, 1997 December 31, 1996 October 2, 1996
------------- ------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Net loss $ (2,211,746) $ (40,642) $ (57,924) $ (177,076)
------------- ------------- ----------------- ---------------
Adjustments to reconcile
net loss to net cash
used in operating
activities of
continuing operations:
(Income) loss from
discontinued operations 1,831,400 (27,755) 38,857 177,076
Amortization 62 18,645 - -
Write-off of
deferred charges 35,112 - - -
Changes in assets and
liabilities, net of
effects of business
combination:
Decrease (increase)
in real estate under
development (298,947) - - -
Decrease (increase) in
prepaid expenses and
other assets (10,191) - - -
Decrease (increase) in
deferred tax asset 51,015 (39,815) (11,200) -
Decrease (increase) in
security deposits (20,000) - - -
Increase (decrease) in
accounts payable and
accrued expenses 7,408 105,888 30,267 -
Increase (decrease) in
deposits 100,000 - - -
------------- ------------- ----------------- ---------------
Total adjustments 1,695,859 56,963 57,924 177,076
------------- ------------- ----------------- ---------------
Net cash provided by
(used in) operating
activities of
continuing operations (515,887) 16,321 - -
------------- ------------- ---------------- ----------------
Cash flow from investing
activities:
Intangible expenditures - (5,600) - -
Proceeds from note
receivable (215,000) - - -
Advances made to officer - (8,500) - -
------------- ------------- ---------------- ----------------
Net cash used in
investing activities
of continuing
Operations (215,000) (14,100) - -
------------- ------------- ---------------- ----------------
F-7
23
<PAGE>
MONARCH INVESTMENT PROPERTIES, INC.
(formerly IRON HOLDINGS CORP.)
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
<CAPTION>
(Predecessor)
Six-month October 3, 1996 December 7, 1995
Year ended period ended through through
June 30, 1998 June 30, 1997 December 31, 1996 October 2, 1996
------------- ------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Cash flows from
financing activities:
Principal payments under
loan agreements (212,500) - - -
Proceeds from notes
payable 225,000 - - -
Proceeds from issuance
of stock 1,041,000 28,000 - -
Advances from officer 150,078 - - -
------------- ------------- ----------------- ---------------
Net cash provided by
financing activities
of continuing
operations 1,203,578 28,000 - -
------------- ------------- ----------------- ---------------
Cash used in
discontinued operations (339,204) (29,064) - -
------------- ------------- ----------------- ---------------
Net increase in cash 133,487 1,157 - -
Cash, beginning of
period 1,157 - - -
------------- ------------- ----------------- ---------------
Cash, end of period $ 134,644 $ 1,157 $ - $ -
============= ============= ================= ===============
<FN>
See notes to consolidated financial statements
</TABLE>
F-8
24
<PAGE>
MONARCH INVESTMENT PROPERTIES, INC.
(formerly IRON HOLDINGS CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended June 30, 1998, and for the six-month period ended
June 30, 1997, and for the period October 3, 1996 (date of incorporation)
through December 31, 1996, and of its predecessor, Iron Eagle Contracting
and Mechanical, Inc., for the period December 7, 1995
(date of incorporation) through October 2, 1996
1. Summary of significant accounting policies
This summary of significant accounting policies of Monarch Investment
Properties, Inc. (formerly Iron Holdings Corp.) (the "Company") is
presented to assist in understanding the financial statements. The
consolidated financial statements and notes are representations of the
Company's management, which is responsible for their integrity and
objectivity. These accounting policies conform to generally accepted
accounting principles and have been consistently applied in the
preparation of the financial statements.
Use of estimates
The preparation of consolidated financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amount of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of consolidated financial statements, and the reported amounts
of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Basis of presentation
On March 31, 1997, pursuant to the terms of a plan merger, Comstock
Tailings Company, Incorporated ("Comstock") acquired all of the
outstanding common stock Iron Holdings Corp. ("Old IHC") and its
wholly-owned subsidiary, Iron Eagle Contracting & Mechanical, Inc.
("Iron Eagle"), in exchange for 4,500,000 unregistered shares of
Comstock's common stock. As a result of the transaction, the former
shareholders of Old IHC received shares representing an aggregate of
90% of Comstock's outstanding common stock, resulting in a change in
control of Comstock. As a result of the merger, Comstock was the
surviving entity, Old IHC (a holding company) ceased to exist and Iron
Eagle (the operating company) became the wholly-owned subsidiary of
Comstock. Simultaneously therewith, Comstock amended its articles of
incorporation to reflect a change in Comstock's name to Iron Holdings
Corp. and subsequently to Monarch Investment Properties, Inc.
("Monarch"). References to the "Company" refer to Monarch together
with the predecessor companies, Old IHC and Iron Eagle.
Reclassifications
Certain reclassifications have been made to the 1997 and 1996 financial
statements to conform to the 1998 presentation.
F-9
25
<PAGE>
1. Summary of significant accounting policies (continued)
Basis of presentation (continued)
The acquisition of Iron Eagle has been accounted for as a reverse
acquisition. Under the accounting rules for a reverse acquisition,
Iron Eagle is considered the acquiring entity. As a result, historical
financial information for periods prior to the date of the transaction
are those of Iron Eagle or of Old IHC and Iron Eagle, its wholly-owned
subsidiary. However, the capital structure of Iron Eagle has been
retroactively restated to reflect the number of shares received by Old
IHC shareholders in the acquisition and the Company's par value. Under
purchase method accounting, balances and results of operation of IHC
will be included in the accompanying consolidated financial statements
from the date of the transaction, March 31, 1997. The Company recorded
the assets and liabilities (excluding intangibles) at their historical
cost bases which was deemed to approximate fair market value. The
reverse acquisition is treated as a non-cash transaction except to the
extent of cash acquired, since all consideration given was in the form
of stock.
Effective October 3, 1996, Old IHC acquired Iron Eagle Contracting and
Mechanical, Inc. ("Iron Eagle") in a business combination accounted for
as a purchase. The results of operations of Iron Eagle is included in
the accompanying consolidated financial statements since the date of
acquisition. The total cost of the acquisition was $1,312,500, which
exceeded the fair value of the net assets of Iron Eagle by $239,576.
The excess was being amortized on the straight-line method over ten
years. Such intangible assets were written-off upon determination to
discontinue operations of Iron Eagle (Note 12). As the predecessor
company, the results of operations of Iron Eagle have also been
presented for the period prior to its acquisition by Old IHC.
Principles of consolidation
The accompanying consolidated financial statements include the accounts
of Monarch Investment Properties, Inc. ("Monarch") for the year ended
June 30, 1998, and for the six-month period ended June 30, 1997, and for
the period October 3, 1996 (date of incorporation) through December 31,
1996, and of its predecessor, Iron Eagle Contracting and Mechanical, Inc.
("Iron Eagle"), for the period December 7, 1995 (date of incorporation)
through October 2, 1996. Intercompany transactions and balances have
been eliminated in consolidation. As discussed more thoroughly in Note
12, Iron Eagle Contracting and Mechanical, Inc. is presented as a
discontinued operation.
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.
concurrent with the business combination described above. Iron Holdings
Corp. changed its name to Monarch Investment Properties, Inc. on June 29,
1998. Prior to such business combination, IHC had not engaged in any
operations or generated any revenue.
F-10
26
<PAGE>
1. Summary of significant accounting policies (continued)
History and business activity (continued)
Old IHC was incorporated in the State of New York on October 3, 1996.
Effective October 3, 1996, it acquired all the shares of Iron Eagle in a
business combination described above. Iron Eagle Contracting and
Mechanical, Inc. was incorporated On December 7, 1995, and began
operations on December 29, 1995.
Old IHC was a holding company which had no operations and conducted
business solely through its wholly-owned construction subsidiary, Iron
Eagle Contracting and Mechanical, Inc. Old IHC ceased to exist as a
result of its merger with Comstock.
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 12, 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.
Construction revenue and cost recognition
Discontinued construction operations recognized revenue from
construction contracts on the percentage-of-completion method measured
by the percentage of costs incurred to date to estimated total costs for
each contract.
Contract costs include all direct material and labor costs and those
indirect costs related to contract performance, such as indirect labor,
supplies, tools, repairs, and depreciation costs. Provisions for
estimated losses on uncompleted contracts are made in the period in
which such losses are determined. Changes in job performance, job
conditions, and estimated profitability, including those arising from
contract penalty provisions, and final contract settlements may result
in revisions to costs and income and are recognized in the period in
which the revisions are determined. Profit incentives are included in
revenues when their realization is reasonably assured. An amount equal
to contract costs attributable to claims is included in revenues when
realization is probable and the amount can be reliably estimated.
General and administrative costs are charged to expense as incurred.
F-11
27
<PAGE>
1. Summary of significant accounting policies (continued)
Fair value of financial instruments
The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards ("SFAS") No. 107, "Disclosure about Fair
Value of Financial Instruments". The carrying value of all financial
instruments, including long-term and short-term debt, cash and temporary
cash investments, approximates their fair value at year end.
Concentration of credit risk and major contracts
Financial instruments, which potentially subject the Company to
concentration of credit risk, consist principally of contract
receivables, which are included in net assets or net liabilities from
discontinued operations, and note receivable (Note 2).
The Company's discontinued construction operations had significant
concentrations of revenue and receivables in individual contracts during
each of the periods presented in the financial statements. The Company's
policies with respect to construction activities generally did not
require collateral to support contract receivables.
Real estate under contract
Iron Eagle developed a tract of real estate in Ozone Park, New York, on
which it built five two-family homes. Construction was completed in
January 1997. Four of the five homes were sold during the six-month
period ended June 30, 1997 and the last home was sold during the year
ended June 30, 1998. Proceeds from the sale of homes was $1,642,450
with total costs of $1,264,249 resulting in a gross profit of $378,201.
Tahoe Realty Corp. purchased vacant land in Queens, New York for
$400,000. The Company is in the process of building eight two-family
homes on the tract of land. Construction began in June 1998. Through
the report date, the Company had two houses under contracts of sale
totaling $705,000, and had received deposits totaling $150,000.
Proceeds from sales and total costs to develop the property,
including administrative and financing costs, are estimated to be
approximately $2,870,000 and $2,310,000, respectively.
Property and equipment
Property and equipment are carried at cost. Depreciation of property
and equipment is provided on the straight-line method over the following
estimated useful lives:
Years
Construction and transportation equipment 5
Office furniture and equipment 5
Total depreciation expense was, $65,573, $32,437, $15,762 and $38,289
for year ended June 30, 1998, the six-month period ended June 30, 1997,
the period October 3, 1996 through December 31, 1996, and the period
December 7, 1995 through October 2, 1996, respectively.
F-12
28
<PAGE>
1. Summary of significant accounting policies (continued)
Property and equipment (continued)
Maintenance, repairs and renewals which neither materially add to the
value of the equipment nor appreciably prolong its life are charged to
expense as incurred. Gains or losses on dispositions of equipment are
included in income.
Amortization of intangibles
Intangibles consisted of deferred costs, customer lists, restrictive
covenants, organizational costs and goodwill which principally arose
from the acquisition of Iron Eagle (Note 1). These intangibles were
amortized over a period of five to ten years. Amortization expense
totalled $38,488, $18,905 and $38,748 for the six-month period ended
June 30, 1997, for the period October 3, 1996 through December 31, 1996
and for the period December 7, 1995 through October 2, 1996,
respectively. All intangibles were written off during the year ended
June 30, 1998 as a result of discontinuing the operations of Iron Eagle
(Note 12).
Accounting standards changes
In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 121 "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("SFAS
121") which is effective for the fiscal years beginning December 15,
1995. The Company has adopted SFAS 121 for the fiscal year Beginning
July 1, 1996. However, its adoption has not had any material impact on
the Company's consolidated financial position. SFAS 121 provides
additional guidance on when long-lived assets should be reviewed for
possible impairment, how impairment losses should be measured and when
such losses should be recognized. In addition to long-lived assets,
SFAS 121 amended the accounting standards for valuing real estate assets
to the lower of cost or fair value less cost to sell (for certain assets
the lower cost of fair value) from the lower of cost or net realizable
values.
In June 1997, the Financial Accounting Standards Board issued "Reporting
Comprehensive Income" ("SFAS 130") which is effective for years beginning
after December 15, 1997. This statement establishes standards for
reporting and display of comprehensive income and its components in a
full set of general-purpose financial statements. Comprehensive income
consists of foreign currency translation adjustments, unrealized gain
and losses on certain investments in debt and equity securities and
minimum pension liability adjustments. The Company currently has no
items of comprehensive income and therefore is not required to adopt
SFAS 130.
F-13
29
<PAGE>
1. Summary of significant accounting policies (continued)
Loss per share
Loss per share has been computed based on the weighted average number
of common shares outstanding. For the period prior to the reverse
acquisition discussed in the basis of presentation section above, the
number of common shares outstanding used in computing earnings per share
is the number of common shares received by the shareholders of Old IHC
in connection with such reverse acquisition (4,500,000 shares). For the
year ended June 30, 1998, the six-month period June 30, 1997, the period
October 3, 1996 through December 31, 1996, and the period December 7,
1995 through October 2, 1996, the weighted average number of shares used
in the calculation was 654,817, 475,140, 450,000 and 450,000,
respectively. Basic loss per common share does not include the effect
of common stock equivalents because the effect of such inclusion would
be to reduce loss per common share. 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 restatement of EPS for all prior periods
reported. Under the requirements of SFAS 128, the Company's basic loss
per share for the year ended June 30, 1998, the six-month period ended
June 30, 1997, the period October 3, 1996 through December 31, 1996, and
the period December 7, 1995 through October 2, 1996, remains the same.
2. Note receivable
Note receivable represents an unsecured loan receivable from an
unrelated corporation. The note bears interest at 8% which is payable
quarterly. The debtor repaid $100,000 of principal in August 1998.
Any unpaid principal balance and accrued interest are due on
December 31, 2002.
3. Notes payable
Notes payable consist of the following:
12% demand note payable to an individual,
with interest only payable monthly.
The note is unsecured. $100,000
15% demand note payable to an individual,
with interest only payable monthly.
The note is unsecured. 100,000
12% demand note payable to an individual,
with interest only payable monthly.
The note is unsecured. 25,000
--------
$225,000
========
F-14
30
<PAGE>
4. Long-term debt from business combination
Long-term debt from business combination arose from the acquisition of
the stock of Iron Eagle (Note 1). The note 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 offering 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
will include registration rights and anti-dilutive provisions.
Maturities of long-term debt from business combination are as follows:
Year ending June 30,
--------------------
1999 $ 112,500
2000 100,000
2001 100,000
2002 100,000
2003 100,000
Thereafter 587,500
-----------
$ 1,100,000
===========
5. Long-term debt
In connection with the acquisition of the property being developed by
Tahoe, the Company executed a $200,000 purchase money mortgage. The
mortgage calls for quarterly payments of interest at 10% per annum with
the entire unpaid balance of principal and any accrued interest due
April 14, 2002. The note is secured by the property which is located
in Queens, New York.
6. Officer's loans payable
Officer's loans payable represents unsecured, non-interest bearing
loans made to the Company by the officer.
F-15
31
<PAGE>
7. 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 judgement 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 $.01
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 stockholders, 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.
8. Income taxes
The Company has net operating losses available for carryforward to
offset future years' taxable income. The net operating losses of
$493,300 and $137,877 expire in the years ending June 30, 2013 and 2012,
respectively.
Deferred income taxes arise from temporary differences in reporting
assets and liabilities for income tax and financial accounting purposes
primarily resulting form net operating losses. The components of the
deferred tax asset and the related tax effects of the temporary
differences are as follows:
June 30,
---------------------
1998 1997
-------- --------
Deferred income tax asset resulting
from net operating loss carryforward $233,500 $146,255
Valuation allowance 233,500 -
-------- --------
Deferred income tax asset - 146,255
Less: portion included in net assets
from discontinued operations - 95,240
-------- --------
Deferred income tax asset from
continuing operations $ - $ 51,015
======== ========
F-16
32
<PAGE>
9. Supplemental cash flow information
The Company's non-cash investing and financing activities were as
follows:
Discontinued operations
During the period December 7, 1995 through October 2, 1996, the Company
purchased property and equipment totalling $81,747. The purchases were
financed as follows:
Property and equipment purchased $ 315,242
Long-term debt financing (45,145)
Equipment acquired through issuance of
stock and assumption of debt (188,350)
---------
Capital expenditures $ 81,747
=========
During the period December 7, 1995 through October 2, 1996, the
predecessor, Iron Eagle Contracting and Mechanical, Inc., acquired
certain net assets in exchange for 250,000 shares of the predecessor's
common stock:
Fair value of non-cash assets acquired $ 876,438
Liabilities assumed (376,438)
---------
Common stock issued in asset acquisition $ 500,000
=========
During the period October 3, 1996 through December 31, 1996, Old IHC
acquired all the shares of Iron Eagle Contracting and Mechanical, Inc.
as described in Note 1, in exchange for issuance of a $1,312,500 note
payable.
During the six-month period ended June 30, 1996, Iron Holdings Corp.
acquired all the shares of Old IHC and its wholly-owned subsidiary,
Iron Eagle Contracting and Mechanical, Inc., as described in Note 1,
in exchange for 4,5000,000 shares of Iron Holdings Corp. common stock.
Continuing operations
During the year ended June 30, 1998, the Company purchased a tract of
land for $400,000. The purchase was financed as follows:
Real estate purchased $ 400,000
Purchase money mortgage (200,000)
---------
Real estate under development (operating asset) $ 200,000
=========
Interest paid totalled $164,294, $13,362, $1,092 and $8,645 during the
year ended June 30, 1998, the six-month period ended June 30, 1997, the
period October 3, 1996 through December 31, 1996, and the period
December 7, 1995 through October 2, 1996, respectively.
F-17
33
<PAGE>
10. Commitments
Lease agreements
Tahoe leases office space on a month-to-month basis. The monthly rental
amount is $400. Rent expense was $10,500, $4,500, $2,250 and $10,125
for the year ended June 30, 1998, the six-month period ended June 30,
1997, the period October 3, 1996 through December 31, 1996, and the
period December 7, 1995 through October 2, 1996, respectively.
The Company leases one automobile under an operating lease expiring in
January 2000. The Company has an option to purchase the vehicle at the
end of the lease term at fair market value. The following is a schedule
of future minimum lease payments under the noncancellable operating
lease as of June 30, 1998:
Year ending June 30,
--------------------
1999 $ 9,240
2000 5,390
--------
Total minimum lease payments $ 14,630
========
Employee agreements
Effective May 13, 1997, the Company entered into an employment contract
with an individual who is an officer, stockholder and director. Annual
compensation under the contract totals $125,000 for the fiscal year
ending June 30, 1998 and gradually increases to $300,000 for the year
ending June 30, 2007. However, the Company is in the process of
revising this compensation arrangement. For the year ended June 30,
1998, compensation paid or accrued to this individual totalled $117,500.
Construction contracts
As a result of the discontinued operations of Iron Eagle Contracting and
Mechanical, Inc. (Note 12) 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. The financial statements include a provision for losses and
for additional costs to be incurred as a result of these contracts.
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.
F-18
34
<PAGE>
10. Commitments (continued)
Deposit on homes
Tahoe Realty, Inc. has contracted for the sale of a home it is
constructing which is located in Ozone Park, New York. Pursuant to
this contract, the Company has received a deposit of $100,000.
Concurrently, the Company executed a promissory note in order to utilize
the deposit for construction costs of the home. Construction must be
completed by November 1, 1998 per the written agreement. Interest on
the note is at 10% per annum. The note is secured by a confession of
judgment and collateralized by the real estate.
Hegeman Street Project
During September 1998, the Company acquired real estate in Brooklyn, New
York on which it plans to build six single-family homes. The total
acquisition cost for the real estate was $230,000, including permits and
plans. It is anticipated that the homes will be offered for sale at
$199,000 each and will be eligible for FHA/VA approved mortgages.
Profits for the project are projected to be approximately $200,000.
Construction is scheduled to commence in early calendar 1999 and is
expected to take approximately six months to complete.
11. Subsequent events
In connection with the renegotiation of terms on the long-term debt
from business combination (Note 4), Monarch agreed to issue the holder
of the note 1,100,000 warrants as additional collateral. Each warrant
is to be exercisable to purchase one share of the Company's common stock
at a price of $.001 per share over a period of seven years.
12. 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. (Note 10). The results of Iron Eagle have been reported
separately as a discontinued operation in the consolidated balance
sheets and consolidated statements of operations.
F-19
35
<PAGE>
12. Discontinued operations (continued)
Assets and liabilities of Iron Eagle which are recorded as discontinued
operations are as follows:
June 30,
----------------------
1998 1997
---------- ----------
Cash and cash equivalents $ 6,395 $ 163,820
Contracts receivable and costs
in excess of billings 684,261 1,337,629
Real estate under contract - 274,138
Other current assets - 113,264
Construction and transportation equipment-net - 84,000
Other assets - 579,563
---------- ----------
Total assets 690,656 2,552,414
Notes payable 75,000 425,000
Current portion of long-term debt 46,557 25,032
Accounts payable and accrued expenses 894,163 853,828
Other current liabilities 68,634 159,453
Long-term debt, net of current portion - 17,864
---------- ----------
Total liabilities 1,084,354 1,481,177
---------- ----------
Net assets (liabilities) from
discontinued operations $ (393,698) $1,071,237
========== ==========
Income (loss) from discontinued operations:
<TABLE>
<CAPTION>
(Predecessor)
Six-month October 3, 1996 December 7, 1995
Year ended period ended through through
June 30, 1998 June 30, 1997 December 31, 1996 October 2, 1996
------------- ------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Construction revenues $ 2,793,704 $ 3,722,546 $ 462,153 $ 981,230
Cost of construction
revenues 3,473,837 3,427,570 415,697 781,059
------------- ------------- ----------------- ---------------
Gross profit (loss) (680,133) 294,976 46,456 200,171
Operating expenses (829,824) (238,961) (162,420) (414,182)
Interest expense - - (1,093) (8,365)
Deferred tax (expense)
benefit (321,443) (28,260) 78,200 45,300
------------- ------------- ----------------- ---------------
Income (loss) from
discontinued operations $ (1,831,400) $ 27,755 $ (38,857) $ (177,076)
============= ============= ================= ===============
</TABLE>
F-20
36
<PAGE>
13. Going concern
The financial statements have been prepared assuming that the Company
will continue as a going concern. The Company has suffered losses from
operations and has a net capital deficiency that raises substantial doubt
about its ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the
outcome of this uncertainty.
The Company is seeking to raise additional capital through either a
private placement or public offering of its debt or equity. The terms
and amount of such offering are as yet undetermined. There can be no
assurance that such offering will be successfully completed.
F-21
37
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
Directors are elected for one-year terms or until the next
annual meeting of shareholders and until their successors are duly
elected and qualified. Officers continue in office at the pleasure
of the Board of Directors.
The Directors and Officers of the Company as of the date of
this report are as follows:
Name Age Position
_______________ ___ _____________________
Anthony E. Gurino 46 Chief Executive Officer,
President and Corporate
Secretary, Director
Mr. Dennis Sommeso was removed by the affirmative vote of
holders of a majority of the issued and outstanding common stock of
the Company in August 1998. Subsequent thereto, Mr. Sommeso
submitted his resignation as a director of the Company. The
Company's Board of Directors is presently seeking out two
additional, outside directors to be appointed to the Company's
Board of Directors. All Directors of the Company will hold office
until the next annual meeting of the shareholders and until
successors have been elected and qualified. Officers of the
Company are elected by the Board of Directors and hold office until
their death or until they resign or are removed from office. There
is no arrangement or understanding between the Company (or any of
its directors or officers) and any other person pursuant to which
such person was or is to be selected as a director or officer.
(b) Resumes:
Anthony E. Gurino is the President, Secretary and a Director
of the Company, positions he assumed in March 1997. Prior, from
October 1996 through March 1997, Mr. Gurino was President,
Secretary and a director of Iron Holdings Corp., a privately held
New York corporation engaged in the business of acquisition and
development of real estate holdings and public construction
projects. From 1979 through June 1996 he was President and fifty
percent owner of Ragtime Foods of New York, Inc. d/b/a Antonio's
Bakery in Ozone Park, New York, a wholesale bakery, and Ragtime
38
<PAGE>
Gourmet Supermarket in Howard Beach, New York. Mr. Gurino attended
Staten Island Community College where he majored in Business. He
devotes substantially all of his time to the business of the
Company.
ITEM 9B. COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires
the Company's officers, directors and person who own more than 10%
of the Company's Common Stock to file reports of ownership and
changes in ownership with the Securities and Exchange Commission.
All of the aforesaid persons are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms they
file. However, no changes in the securities holdings of any person
occurred during the fiscal year ended June 30, 1998 and as such, no
reports were required to be filed.
ITEM 10. EXECUTIVE COMPENSATION.
Remuneration
The following table reflects all forms of compensation for
services to the Company for the fiscal years ended June 30, 1997
and 1998 of the Chief Executive Officer of the Company.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term Compensation
____________________________
Annual Compensation Awards Payouts
_____________________ ____________________ _______
Securities
Other Under- All
Name Annual Restricted lying Other
and Compen- Stock Options/ LTIP Compen-
Principal Salary Bonus sation Award(s) SARs Payouts sation
Position Year ($) ($) ($) ($) (#) ($) ($)
__________ ____ ______ _____ ______ ________ _______ _______ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Anthony E.
Gurino 1997 $ 39,000 $5,000 $ 0 $ 0 $ 0 $ 0 $4,620
President & 1998 $ 56,500(3) - - - - - -
Director(1)(2)
_________________________
<F1>
(1) The information provided herein discloses the compensation
received by Mr. Anthony Gurino for the period indicated. However,
Mr. Gurino assumed his positions with the Company in March 1997, as
part of the reorganization of the Company with Old IHC. The
Company did not begin paying any salaries or other compensation to
Mr. Gurino until April 1997.
39
<PAGE>
<F2>
(2) It is not anticipated that any officer or director of the
Company will receive compensation exceeding $100,000 during the
fiscal year ending June 30, 1999, unless the Company's financial
condition improves dramatically.
<F3>
(3) This figure represents the actual wages paid by the Company
to Mr. Gurino during the fiscal year ended June 30, 1998. However,
the Company has accrued an additional $61,000 in salary which may
be paid to Mr. Gurino in the future. See "Part II, Item 7,
Financial Statements."
</TABLE>
The Company maintains a policy whereby the directors of the
Company may be compensated for out of pocket expenses incurred by
each of them in the performance of their relevant duties. The
Company did not reimburse any director for out of pocket expenses
during the fiscal year ended June 30, 1998.
In addition to the cash compensation set forth above, the
Company reimburses each executive officer for expenses incurred on
behalf of the Company on an out of pocket basis. The Company
cannot determine, without undue expense, the exact amount of such
expense reimbursement. However, the Company believes that such
reimbursements did not exceed, in the aggregate, $10,000 during the
fiscal year ended June 30, 1998.
In May 1997, the Company entered into an employment agreement
with Anthony Gurino, who is an officer, director and the principal
shareholder of the Company. Annual compensation under this
contract totals $125,000 in the fiscal year ending June 30, 1998,
gradually increasing to $300,000 in the fiscal year ending June 30,
2007. However, as of the date of this report, Mr. Anthony Gurino
has drawn less than 50% of his salaries due pursuant to the
agreement. As of the date of this report, the Company is in the
process of revising Mr. Gurino's annual compensation, wherein he
shall be paid a lower base salary, but shall receive performance
bonuses based upon the performance of the Company in the future.
Stock Plan
Effective April 21, 1997, the Company adopted the IRON
HOLDINGS CORP. 1997 NON-QUALIFIED STOCK OPTION PLAN (the "Plan"),
which reserved an aggregate of 100,000 shares of the Company's
Common stock for issuance thereunder. Subsequently, the Company
executed consulting agreements with 5 entities, granting each
entity options pursuant to the Plan, at an exercise price of $0.10
per share. As of the date of this Offering Memorandum, all of the
options to purchase shares reserved for issuance under the Plan
have been exercised. None of the options to purchase shares of the
Company's Common Stock under the Plan were issued in favor of any
member of management.
40
<PAGE>
There are no other bonus or incentive plans in effect, nor are
there any understandings in place concerning additional
compensation to the Company's officers.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
(a) and (b) Security Ownership of Certain Beneficial Owners
and Management.
The table below lists the beneficial ownership of the
Company's voting securities by each person known by the Company to
be the beneficial owner of more than 5% of such securities, as well
as by all directors and officers of the issuer. Unless otherwise
indicated, the shareholders listed possess sole voting and
investment power with respect to the shares shown.
Name and Amount and
Address of Nature of
Title of Beneficial Beneficial Percent of
Class Owner Ownership Class
Common Anthony E. Gurino(1) 200,000 29.9%
86-20 164th Avenue
Queens, NY 11414
Common Angelo Gurino, Sr. 200,000 29.9%
164-53 85th
Howard Beach, NY 11414
Common All Officers & 200,000 29.9%
Directors as a Group
(1 person)
________________
(1) Sole officer and director of the Company as of the date of
this report.
The balance of the Company's outstanding Common Shares are
held by 10 persons, not including those persons who hold their
shares in "street name."
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Mr. Anthony Gurino, President and a Director of the Company,
has loaned the Company $141,578. 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.
41
<PAGE>
Prior Financings
Effective April 21, 1997, the Company issued options to
purchase an aggregate of 280,000 shares of its Common Stock in
favor of Anchor Capital Management, Ltd. ("Anchor"), a corporation
organized under the laws of the Turks & Caicos Islands, with its
principal place of business located at Suite D18, Market Place,
Providenciales, Turks and Caicos Islands, B.W.I. The Company
relied upon the exemption from registration provided under
Regulation S, as promulgated under the Securities Act of 1933, as
amended, in issuing said options, as well as in expectation of
Anchor exercising all or any portion of its options.
In consideration for the issuance of the stock options
referenced above, the Company received consideration totalling
$28,000 (US). The exercise price of each option was established at
$15.00 per share, which was arrived at through arms length
negotiations between the Company and Anchor, as the Company's
Common Stock was not trading as of the date the option was issued.
In August 1998, Anchor exercised options to purchase 68,733 shares
of the Company's Common Stock pursuant to the agreements, providing
the Company with a net aggregate of $1,030,995 in proceeds from the
exercise of the options. The remaining options expired in October
1997, without being exercised.
PART IV
Item 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
--------
The following Exhibits were filed with the Securities and
Exchange Commission in the Exhibits to Form 10-SB, filed on January
11, 1994 and are incorporated by reference herein:
3.1 Certificate and Articles of Incorporation
3.2 Bylaws
The following exhibits were filed with the SEC in the Exhibits
to the Company's Form 8-K dated April 15, 1997 and are incorporated
by reference herein:
2.0 Agreement and Plan of Share Exchange between the Company
and Iron Holdings Corp.
16.0 Letter of Resignation of Registrant's independent
certified accountant, Kish, Leake & Associates, P.C.
42
<PAGE>
The following exhibits are included herewith:
3.3 Amendment to Articles of Incorporation filed October 16,
1997
3.4 Amendment to Articles of Incorporation filed July 15,
1998
27 Financial Data Schedule
(b) Reports on Form 8-K
-------------------
The Company did not file any reports on Form 8-K during the
three month period ended June 30, 1998.
43
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on
October 6, 1998.
MONARCH INVESTMENT PROPERTIES, INC.
(Registrant)
By:/s/ Anthony Gurino
-------------------------------------
Anthony Gurino, President
In accordance with the Exchange Act, this report has been
signed below by the following persons on behalf of the registrant
and in the capacities indicated on October 6, 1998.
/s/ Anthony Gurino
- -------------------------------
Anthony Gurino, President,
Secretary & Director
44
<PAGE>
MONARCH INVESTMENT PROPERTIES, INC.
Exhibit Index to Annual Report on Form 10-KSB
For the Fiscal Year Ended June 30, 1998
EXHIBITS Page No.
EX-3.3 Certificate of Amendment to Articles of
Incorporation filed October 16, 1997. . . . 46
EX-3.4 Certificate of Amendment to Articles of
Incorporation filed July 15, 1998 . . . . . 49
EX-27 Financial Data Schedule . . . . . . . . . . 50
45
<PAGE>
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
(After Issuance of Stock)
IRON HOLDINGS CORP.
---------------------------------------------
Name of Corporation
We, the undersigned Anthony Gurino, President and
-------------------------------------------------
Dennis Sommeso, Assistant Secretary of IRON HOLDINGS CORP.
- --------------------------------------- ------------------------------------
Name of Corporation
do hereby certify:
That the Board of Directors of said corporation at a meeting duly
convened, held on the 10th day of March 19 97 , adopted a resolution
-------- ----------- ----
to amend the original articles as follows:
Article V is hereby amended to read as follows:
---
See annexed.
FILED
In the Office of the
Secretary of State of the
STATE OF NEVADA
JUL 15 1998
No. C3863-88
--------------
Dean Heller, Secretary of State
The number of shares of the corporation outstanding and entitled to vote
on an amendment to the Articles of Incorporation is 500,000 ; that the said
-----------
change(s) and amendment have been consented to and approved by a majority vote
of the stockholders holding at least a majority of each class of stock
outstanding and entitled to vote thereon.
s/Anthony Gurino
------------------------------------
President or Vice President
Anthony Gurino, President
s/Dennis Sommeso
------------------------------------
Secretary or Assistant Secretary
Dennis Sommeso, Assistant Secretary
State of New York )
-------------------- : ss.
County of Queens )
-------------------
On 13 October of 1997, personally appeared before me, a Notary
---------------------------
Public, Anthony E. Gurino and Dennis Sommeso , who acknowledged
---------------------------------------------------
that they executed the above instrument.
(Notary Stamp or Seal)
RICARDO J. MERCADO s/Ricardo J. Mercado
Notary Public, State of New York ------------------------------------
Qualified in Queens County
Commission Expires 12/31/98
-----------
46
<PAGE>
The following shall be inserted in the place and stead of Section
A to Article V of the Articles of Incorporation of Comstock
Tailings Company Incorporation, n/k/a Iron Holdings Corp:
A. Authorized Shares. The total number of shares of all classes which the
corporation shall have authority to issue is 525,000,000 of which 25,000,000
shall be Preferred Shares, par value $.01 per share, and 500,000,000 shall be
Common Shares, par value $.001 per share, and the designations, preferences,
limitations and relative rights of the shares of each class are as follows:
i. Preferred Shares. The corporation may divide and issue the
Preferred Shares in series. Preferred Shares of each series when
issued shall be designated to distinguish it from the shares of all
other series. The Board of Directors is hereby expressly vested
with authority to divide the class of Preferred Shares into series
and to fix and determine the relative rights and preferences of the
shares of any such series so established to the full extent
permitted by these Articles of Incorporation and the laws of the
State of Nevada in respect to the following:
(1) The number of shares to constitute such
series, and the distinctive designations thereof;
(2) The rate and preference of dividends, if
any, the time of payment of dividends, whether dividends
are cumulative and the date from which any dividend
shall accrue;
(3) Whether shares may be redeemed and, if so,
the redemption price and the terms and conditions of
redemption;
(4) The amount payable upon shares in event of
involuntary liquidation;
(5) The amount payable upon shares in event of
voluntary liquidation;
(6) Sinking fund or other provisions, if any,
for the redemption or purchase of shares;
(7) The terms and conditions on which shares may
be converted, if the shares of any series are issued
with the privilege of conversion;
(8) Voting powers, if any; and
(9) Any other relative rights and preferences of
shares of such series, including, without limitation,
any restriction on an increase in the number of shares
of any series theretofore authorized and any limitation
or restriction of rights or powers to which shares of
any further series shall be subject.
47
<PAGE>
ii. Common Shares.
(1) The rights of holders of the Common Shares to receive
dividends or share in the distribution of assets in the event of
liquidation, dissolution or winding up of the affairs of the
Corporation shall be subject to the preferences, limitations and
relative rights of the Preferred Shares fixed in the resolution or
resolutions which may be adopted from time to time by the Board of
Directors of the corporation providing for the issuance of one or
more series of the Preferred Shares.
(2) The holders of the Common Shares shall have unlimited
voting rights and shall constitute the sole voting group of the
corporation, except to the extent any additional voting groups or
groups may hereafter be established in accordance with the Colorado
Business Corporation Act, and shall be entitled to one vote for each
share of Common Shares held by them of record at the time for
determining the holders thereof entitled to vote.
The balance of Article V shall remain as stated.
48
<PAGE>
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
FILED (After Issuance of Stock)
In the Office of the
Secretary of State of the
STATE OF NEVADA
JUL 15 1998
No. C3863-88
--------------
Dean Heller, Secretary of State
IRON HOLDINGS CORP.
---------------------------------------------
Name of Corporation
We, the undersigned Anthony Gurino and
-------------------------------------------------
Anthony Gurino of IRON HOLDINGS CORP.
- --------------------------------------- ------------------------------------
Name of Corporation
do hereby certify:
That the Board of Directors of said corporation at a meeting duly
convened, held on the 29th day of June 19 98 , adopted a resolution
-------- ----------- ----
to amend the original articles as follows:
Article II is hereby amended to read as follows:
----
The name of the corporation is Monarch Investment Properties, Inc.
The number of shares of the corporation outstanding and entitled to vote
on an amendment to the Articles of Incorporation is 6,687,000 ; that the said
-----------
change(s) and amendment have been consented to and approved by a majority vote
of the stockholders holding at least a majority of each class of stock
outstanding and entitled to vote thereon.
IRON HOLDINGS CORP.
s/Anthony Gurino - President
------------------------------------
President or Vice President
Anthony Gurino
s/Anthony Gurino - Secretary
------------------------------------
Secretary or Assistant Secretary
Anthony Gurino
State of New York )
-------------------- : ss.
County of Queens )
-------------------
On 7/13/98 , personally appeared before me, a Notary
---------------------------
Public, Anthony Gurino , who acknowledged
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that they executed the above instrument.
SCOTT BARON s/Scott Baron
Notary Public, State of New York ------------------------------------
No. 01BA4933789 Signature of Notary
Qualified in Queens County
Commission Expires June 20, 1999
(Notary Stamp or Seal)
49
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FILED WITH FORM 10-KSB FOR THE YEAR
ENDED JUNE 30, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 134,644
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 743,782
<PP&E> 199,932
<DEPRECIATION> 82,739
<TOTAL-ASSETS> 995,975
<CURRENT-LIABILITIES> 722,641
<BONDS> 2,273,839
0
0
<COMMON> 669
<OTHER-SE> (1,278,533)
<TOTAL-LIABILITY-AND-EQUITY> 995,975
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 232,964
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 96,367
<INCOME-PRETAX> (329,331)
<INCOME-TAX> (51,015)
<INCOME-CONTINUING> (380,346)
<DISCONTINUED> (1,831,400)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,211,746)
<EPS-PRIMARY> (3.380)
<EPS-DILUTED> 0
</TABLE>
