SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) of the
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SECURITIES ACT OF 1934
For the Quarterly period ended June 30, 2001
Commission File Number 0-27599
ENTERTECH MEDIA GROUP, INC.
---------------------------
(Exact Name of Registrant as Specified in Its Charter)
Nevada 88-0222729
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(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
50 West Liberty Street, Suite 880, Reno, NV 89501
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (775) 324-6655
Common Stock, Par Value $0.001 Per Share
(Title of Class)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
[X] Yes [ ] No
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
22,900,000
NUMBER OF COMMON STOCK SHARES OUTSTANDING
-----------------------------------------
On July 24, 2001
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Traditional Small Business Disclosure Format (Check One):
[X] Yes [ ] No
ITEM 1. Financial Statements
ENTERTECH MEDIA GROUP, INC.
AND SUBSIDIARIES
A DEVELOPMENT STAGE ENTERPRISE
BALANCE SHEETS
ASSETS
June 30, December 31,
2001 2000
(Unaudited) (Audited)
---------- ----------
Current Assets:
Cash and cash equivalents $ 29,765 $ 40,292
Advances 2,195 11,064
Other Receivables 8,000 7,570
---------- ----------
Total Current Assets 39,960 58,926
---------- ----------
Property, Plant, & Equipment:
Vehicle -- 57,000
Equipment 29,050 21,930
Film Library 336,090 --
Website Development 63,440 5,600
---------- ----------
428,580 84,530
Less: Accumulated Depreciation 25,728 7,419
---------- ----------
Total Property, Plant & Equipment 402,852 77,111
---------- ----------
Other Assets
Deposits 5,250 10,000
Advances on Film Rights 385,372 348,134
Investments-Subsidiaries 336,727 --
Investments in Securities 9,606 440
---------- ----------
Total Other Assets 736,955 358,574
---------- ----------
TOTAL OTHER ASSETS $1,179,767 $ 494,611
========== ==========
The accompanying Notes are an integral part of these financial statements
F-1
ENTERTECH MEDIA GROUP, INC.
AND SUBSIDIARIES
A DEVELOPMENT STAGE ENTERPRISE
LIABLITIES AND STOCKHOLDERS' EQUITY
Jun 30 December 31,
2001 2000
(Unaudited) (Audited)
----------- -----------
Current Liabilities:
Accounts Payable $ 84,075 $ 6,175
Charge Accounts 3,040 1,759
Other Current Liabilities 223 --
----------- -----------
Total Current Liabilities 87,338 7,934
Long Term Liabilities:
Loan from Whyteburg 55,883 464,380
Deferred Income 250,000 100,000
Deposit-Pink Motel 2,500 52,500
Plaza/Parkinson Loan 225,000 874
Don King 150,000 --
Other Long-term Liabilities 21,647 --
----------- -----------
Total Long Term Liabilities 705,030 617,754
----------- -----------
Total Liabilities $ 792,368 $ 625,688
----------- -----------
Stockholders' Equity:
Common Stock ($0.001 par value) 100,000,000
Shares authorized; 22,010,000 issued and outstand-
ing on December 31, 2000, and 22,400,000 issued and 22,400 11,030
outstanding on June 30, 2001
Additional Paid In Capital 2,247,467 537,723
Retained Earnings (deficit) Accumulated Before the
Development Stage (57,391) (57,391)
Deficit Accumulated During the Development Stage (1,824,802) (622,439)
----------- -----------
Total Stockholders' Equity $ 387,399 $ (131,077)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,179,767 $ 494,611
=========== ===========
The accompanying Notes are an integral part of these financial statements
F-2
ENTERTECH MEDIA GROUP, INC.
AND SUBSIDIARIES
A DEVELOPMENT STAGE ENTERPRISE
STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended
-------------------------- -------------------------- Inception
Jun 30, Jun 30, Jun 30, Jun 30, to
2001 2000 2001 2000 06/30/01
(Unaudited) (Audited) (Unaudited) (Audited) (Unaudited)
----------- ----------- ----------- ----------- -----------
Net Sales $ 73,100 $ 32,645 $ 99,911 $ 32,645 $ 154,724
Cost of Sales
Gross Profit
Operating Expenses:
General and administrative expenses 103,890 337,982 259,216 632,602 1,953,369
Research and development -- -- -- -- --
Depreciation and amortization -- -- -- -- 76,220
Total Operating Expenses 103,890 337,982 259,216 632,602 2,029,589
Loss from Operations (30,790) (305,337) (159,305) (599,957) (1,874,865)
----------- ----------- ----------- ----------- -----------
Other Income (Expense):
Other Income -- 338 -- 338 338
Forgiveness of debt -- -- -- -- --
Organizational Costs -- -- -- -- --
Interest Income -- -- -- -- --
Dividend Income -- -- -- -- --
Interest Expense -- -- -- -- --
Loss on disposition of Fixed Assets or
Securities -- -- -- -- --
Total Other Income and Expense -- 338 -- 338 338
Net Loss $ (30,790) $ (304,999) $ (159,305) $ (599,619) $(1,874,527}
=========== =========== =========== =========== ===========
Loss per Common Share $ .01 $ (0.03) $ (.01) $ (.03) $ --
The accompanying Notes are an integral part of these financial statements.
F-3
ENTERTECH MEDIA GROUP, INC.
AND SUBSIDIARIES
A DEVELOPMENT STAGE ENTERPRISE
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996, 1997, 1998, 1999, 2000 & SIX MONTHS ENDED
JUNE 30, 2001 (UNAUDITED)
Accum.
Additional Deficit
COMMON STOCK Paid-in Retained Development
Shares Amount Capital Earnings Stage
--------- ---------- ---------- ------------ -----------
Balance January 1, 1995, 2,063,749 $ 10,319 $ 45,822 $ (56,141) --
Retroactive restatement of par value in
common stock -- (8,255) 8,255 -- --
Retroactive restatement of 6 for 1 reverse
stock split -- (1,720) 1,720 -- --
Restated Balance, January 1, 1995, 343,958 344 55,797 (56,141) --
Issue of shares of common stock for services
on May 22, 1995 recorded at no value 39,375 39 (39) -- --
Balance, December 31, 1995 383,333 383 55,758 (56,141) --
Net profit for the years ending
December 31, 1996 and 1997 -- -- -- -- --
Issue of shares of common stock for services
on July 31, 1998 116,667 117 1,133 -- --
Net Income (Loss) for year ending December
31, 1998 -- -- -- (1,250) --
Balance December 31, 1998 500,000 500 56,891 (57,291) --
Issue of shares of common stock for services
on April 21, 1999, recorded at invoice amount 400,000 400 600 -- --
Sale of shares of common stock for cash on
April 22, 1999 10,000,000 10,000 271,966 -- --
Issue of shares of common stock for services
valued at $13,000, Oct & Dec,'99 130,000 130 12,870 -- --
The accompanying Notes are an integral part of these financial statements.
F-4
AND SUBSIDIARIES
A DEVELOPMENT STAGE ENTERPRISE
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996, 1997, 1998, 1999, & 2000 & SIX MONTHS ENDED
JUNE 30, 2001 (UNAUDITED)
Accum.
Additional Deficit
COMMON STOCK Paid-in Retained Development
Shares Amount Capital Earnings Stage
---------- ---------- ---------- ---------- -----------
Capital contributed from shareholder -- -- 195,396 -- --
Net income (loss) for year ending
December 31, 1999 -- -- -- -- (327,819)
Balance December 31, 1999 11,030,000 11,030 537,723 (57,391) (327,819)
Stock issued for cash 10,970,000 10,970 493,332 -- --
Stock issued for services 10,000 10 9,990 -- --
Settlement of Debt -- -- 1,637,263 -- --
Net Loss for year ending
December 31, 2000 -- -- -- -- (1,387,741)
Balance December 31, 2000 22,010,000 22,010 2,678,308 (57,391) (1,715,000)
Shares issued for services 115,000 115 11,385 -- --
Shares issued to Katsnelson 500,000 500 -- -- --
Net Loss for quarter ended
March 31, 2001 -- -- -- -- (128,515)
Balance, March 31, 2001 22,625,000 22,625 2,689,693 (57,391) (1,843,515)
Katsnelson shares returned to treasury,
Returned to treasury 5/16/2001 (500,000) (500) -- -- --
Issued to Volkermyr 10/16/2000 1,000,000 1,000 -- -- --
Volkermyr shares returned to treasury,
Returned to treasury 5/16/2001 (1,000,000) (1,000) -- -- --
Shares issued for services 275,000 275 -- -- --
Net Loss for quarter ended
June 30, 2001 -- -- -- -- (30,790)
Balance, June 30, 2001 22,400,000 22,400 2,689,693 (57,391) (1,874,305)
---------- ---------- ---------- ---------- -----------
The accompanying Notes are an integral part of these financial statements.
F-5
ENTERTECH MEDIA GROUP, INC. AND SUBSIDIARIES
A DEVELOPMENT STAGE ENTERPRISE
STATEMENTS OF CASH FLOWS
Six Months Ended (Inception) to
June June June
30, 2001 30, 2000 30,2001
(Unaudited) (Unaudited) (Unaudited)
----------- ----------- -----------
Reconciliation of Net Loss to Net Cash
Operating Activities:
Net Loss $ (159,306) (599,619) $(1,874,866)
Adjustments to Reconcile Net Loss to
Net Cash Provided by (Used in)
Operating Activities:
Depreciation -- -- 76,220
Stock for services -- -- 24,000
(Increase) Decrease in: -- --
Advances and Receivables -- (69,420) (261,691)
Increase in Other Assets -- -- (933,404)
Organizational Costs -- (6,414)
Accounts Payable -- 9,162 102,053
Other Current Liabilities -- -- --
Net Cash Provided (Used) by
Operating Activities (159,306) (659,877) (2,874,102)
----------- ----------- -----------
Investment Activities:
Investment in securities -- -- (9,606)
Investment in plant and equipment 17,190 (30,967) (92,490)
Investment in Film Library (17,190) (208,011) (336,090)
Investment in Subsidiaries 388,768 -- 388,768
Net Cash Provided by (Used in)
Investment Activities 388,768 (238,978) (49,418)
----------- ----------- -----------
Financing Activities:
Common Stock (380,663) -- 2,248,254
Deferred Income -- 52,500 250,000
Increase in long term debt 55,883 796,792 455,030
----------- ----------- -----------
Net Cash Provided (Used) in
Financing Activities (324,780) 849,292 2,953,284
----------- ----------- -----------
Increase (Decrease) in Cash and Cash
Equivalents (95,318) (49,565) 29,764
Cash at Beginning of Period 125,082 12,946 --
----------- ----------- -----------
Cash at End of Period $ 29,764 $ (36,619) $ 29,764
=========== =========== ===========
The accompanying Notes are an integral part of these financial statements.
F-6
ENTERTECH MEDIA GROUP, INC.
AND SUBSIDIARIES
A DEVELOPMENT STAGE ENTERPRISE
(FORMERLY ARMAS INTL. MFG. CO., INC.)
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2001, & DECEMBER 31, 2000, 1999, 1998 AND 1997
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS AND ORGANIZATION:
EnterTech Media Group, Inc. and Subsidiaries (formerly Armas Intl. Mfg. Co.,
Inc. d.b.a. Inter-Link Communications Group, Inc.), hereafter referred to as the
Company, is a Nevada Corporation and a Development Stage Enterprise as defined
by FASB's Statements of Financial Accounting Standards ("SFAS") 7. Since the
beginning of 1999, the Company devoted all of its efforts to establishing a new
business. Planned principal operations to produce and distribute films have
commenced, production rights have been secured and services contracted out.
The Company was incorporated November 17, 1986, under the name Stones Stores,
Inc. The Company changed its name in 1987 to Stone International, Inc., and
again in 1990 to Armas Intl. Mfg. Co., Inc. The Company became inactive in 1989
and remained inactive until 1999. On April 22, 1999, the Company changed its
name to EnterTech Media Group, Inc., and authorized capital stock of 100,000,000
shares with a par value of $.001 per share (following a 6 to 1 reverse split in
October 1998). These financial statements reflect the changes made in the
Company's name and the par value of common stocks retroactively. See also Note
2.
Prior to 1995, all books and records were destroyed. Federal income tax
returnshave been prepared for the years ending December 31, 1998 and 1997 based
on these financial statements.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION:
The accompanying consolidated financial statements include the accounts of
EnterTech Media Group, Inc., and its wholly owned subsidiary, EnterTech Limited
(along with EnterTech Limited's subsidiaries, EnterTech Picture Corporation and
EnterTech Releasing Corporation). See also Notes 2 and 3. All significant
intercompany balances and transactions have been eliminated.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally accepted
accounting principals requires management to make estimates and assumptions that
affect certain reported accounts and disclosures. Accordingly, actual results
could differ from these estimates.
REVENUE RECOGNITION:
Revenues on motion pictures are recognized on show dates under both percentage
of receipts and flat fee arrangements. Nonrefundable guarantees are deferred and
recognized as revenue as show dates occur. Outright sales of motion pictures are
recognized as revenue as of date of sale.
PRODUCTION COSTS:
Production costs of motion pictures are capitalized as inventory and amortized
using the individual-film-forecast method.
PROPERTY AND EQUIPMENT:
Property and Equipment are recorded at cost and depreciated over their useful
lives using the straight-line method.
EARNINGS PER SHARE:
The earnings per share calculation is based on the weighted average number of
shares outstanding during the period: 6,670,000 shares in 2000 and 1999; 431,944
shares in 1998; and 383,333 shares in 1997.
F-7
ENTERTECH MEDIA GROUP, INC.
AND SUBSIDIARIES
A DEVELOPMENT STAGE ENTERPRISE
(FORMERLY ARMAS INTL. MFG. CO., INC.)
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2001,& DECEMBER 31, 2000, 1999, 1998 AND 1997
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
INVENTORIES:
Inventories are stated at the lower of cost or market. Film costs are segregated
between current and non-current assets. Unamortized cost of films released,
completed films not released and television films in production under contract
of sale are current assets. All other capitalized film costs are classified as
non-current assets.
ORGANIZATIONAL COSTS:The Company has adopted Statement of Position ("SOP) 98-5
"Reporting on the Costs of Start-up Activities" issued in April 1998 by the
Accounting Standards Executive Committee of the American Institute of Certified
Public Accountants. Pursuant to SOP 98-5, organizational costs are expensed as
incurred instead of being capitalized and amortized.
DIVIDEND POLICY:
The Company has not paid dividends and any dividends that may be paid in the
future will depend upon the financial requirements of the Company and other
relevant factors.
INCOME TAXES:
The Company adopted Financial Accounting Statement No. 109, "Accounting for
Income Taxes," which requires recognition of deferred tax liabilities and assets
for the expected future tax consequences of events that have been included in
the financial statements or tax returns. The Company made the required
calculation based upon the difference between financial statements and tax bases
of assets and liabilities using tax rates in effect for the year in which the
differences were expected to reverse.
CASH EQUIVALENTS:
The Company records as cash equivalents all highly liquid short-term investments
with original maturities of three months or less.
NOTE 2 - OPERATING LOSS CARRYFORWARD:
A deficit of $57,391 reflected on the financial statements from prior losses
will not be available as a net operating loss carry forward because of change in
ownership and business purpose. The current period loss of $132,185 will be
available to offset future taxable income for 15 years.
NOTE 3 - BUSINESS ACQUISITIONS:
On April 22, 1999, the Company acquired EnterTech Limited, a Nevada Corporation,
in a business combination accounted for as a combination of entities under
common control. EnterTech Limited had previously been known as EnterTech Media
Group, but exchanged names with the Company in conjunction with the business
combination. EnterTech Limited, which plans to engage in film production and
distribution, became a wholly-owned subsidiary of the Company through the
exchange of 10,000,000 shares of the Company's common stock for all of the
outstanding stock of EnterTech Limited. The acquisition has been accounted for
as a combination of entities under common control, which is similar to a pooling
of interests. Accordingly, the accompanying financial statements are restated
for all periods presented to give effect to the combination. Assets and
liabilities are reflected at their original cost bases using the pooling of
interests method.
F-8
ENTERTECH MEDIA GROUP, INC.
AND SUBSIDIARIES
A DEVELOPMENT STAGE ENTERPRISE
(FORMERLY ARMAS INTL. MFG. CO., INC.)
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2001, & DECEMBER 31, 2000, 1999, 1998 AND 1997
NOTE 4 - PRIVATE PLACEMENT:
On March 31, 1999, EnterTech Limited (then known as EnterTech Media Group as
discussed in Note 2) offered a minimum of 1,500,000 shares and a maximum of
5,000,000 shares of its common stock in units of 25,000 at a price of $1.00
pershare pursuant to a Private Placement Memorandum. Subsequently, this private
placement was cancelled.
NOTE 5 - DEPOSIT ON FILM PRODUCTION:
The Company has accepted a deposit of $100,000 that is to be used for production
costs of a film. The deposit is to be repaid from the final budget and no later
than the first day of principal photography.
NOTE 6 - UNCERTAINTY REGARDING GOING CONCERN:
The Company's financial statements have been prepared assuming that the Company
will continue as a going concern. The Company's ability to continue as a going
concern is dependent on attaining future profitable operations. If operations do
not become profitable, then substantial doubt exists about the Company's ability
to continue as a going concern. The financial statements do not include any
adjustment that might result from the outcome of this uncertainty.
F-9
ITEM 2: Management's Discussion and Analysis or Plan of Operation
Plan of Operation
Statements contained herein that are not historical facts are
forward-looking statements as that term is defined by the Private Securities
Litigation Reform Act of 1995. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, the
forward-looking statements are subject to risks and uncertainties that could
cause actual results to differ from those projected. The Company cautions
investors that any forward-looking statements made by the Company are not
guarantees of future performance and that actual results may differ materially
from those in the forward-looking statements. Such risks and uncertainties
include, without limitation: well established competitors who have substantially
greater financial resources and longer operating histories, regulatory delays or
denials, the Company's ability to compete as a start-up company in a highly
competitive market, and access to sources of capital.
The Company continued with its efforts to build a Feature Film library
during the second quarter of 2001. In April it executed an agreement to acquire
the rights to a library of some 900 hours of feature films and television
programming masters that are now considered to be Public Domain.
The Company had been developing a relationship with WorldNet Resource
Group during the first quarter of 2001 quarter and in March of 2001 the
controlling shareholders executed a letter of intent whereby WorldNet Resource
Group would acquire a controlling stake in EnterTech Media Group. This did not
lead to a definitive acquisition agreement and was terminated in May of 2001.
As previously reported the Company formed EnterTech Home Entertainment,
inc., a wholly owned subsidiary in order to develop a Video and Television sales
business. EnterTech Home Entertainment was active in the market place and
achieved its goal of starting to contribute revenues to the Company from the
fourth quarter of 2000. Early in 2001 general management decided that the
funding requirements for EnterTech Home Entertainment identified by the
management would be more likely to be raised if this division was a separate
corporate entity and therefore the management team of EnterTech Home
Entertainment formed a stand alone company in February 2001 called Blue Steel
Releasing. Although their have been discussions between the two companies these
have not yet led to any definitive agreement Blue Steel's proposed terms of an
agreement relating to the Video release of two of EnterTech's titles are likely
to be accepted in the very near future.
Management continued to arrange funding for the Company by way of
shareholders loans.
Management continues to expect that its efforts and strategy will
deliver revenues and profitability to the company within the next year and looks
forward to having its shares listed on the OTC Bulletin Board in the near
future.
PART II
Other Information
ITEM 1: Legal Proceedings
The Company is not party to, and none of the Company's property is
subject to, any pending or threatened legal, governmental, administrative or
judicial proceedings.
ITEM 2: Changes in Securities and Use of Proceeds
None.
ITEM 3: Defaults Upon Senior Securities
None
ITEM 4: Submission of Matters to a Vote of Security Holders
2
No matters have been submitted to a vote of the security holders during
the period covered by this report through the solicitation of proxies or
otherwise.
ITEM 5: Other Information
None.
ITEM 6: Exhibits and Reports on Form 8-K
A. Exhibits
(2) Plan of acquisition, reorganization, liquidation or succession:
NONE.
(3) (i) Articles of Incorporation *
(ii) By-laws *
(27) Financial Data Schedule.
* Incorporated by reference from the Registrant's Form 10-SB.
B. Reports on Form 8-K.
The Registrant did not file reports on Form 8-K during the quarter
covered by this report.
Signatures
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: August 13, 2001.
ENTERTECH MEDIA GROUP, INC.
By /s/ Mark Tolner
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Mark Tolner
President
3