SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 2000
Commission File Number 000-30933
Monarch Media and Entertainment Group, Inc.
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(Exact name of registrant as specified in its corporate charter)
NEVADA 88-0436489
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
200 - 604 Columbia Street, New Westminster, B.C. Canada V3M 1A5
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(Address of principal executive offices)
(604) 523 2888
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has 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 registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
X Yes No
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State the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding as of November 30, 2000
------------ ----------------------------------------
Common Stock 23,444,349
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC.
(A Development Stage Company)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
September 30, 2000
(Unaudited)
ASSETS
Current Assets
Cash $ 9,125
Accounts receivable 8,094
Loan receivable, related party 52,795
---------
70,014
---------
Other Assets
Deferred development and software 129,576
---------
Total Other Assets 129,576
---------
Total Assets $ 199,590
=========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable $ 24,620
Due to stockholders 400
---------
Total Current Liabilities 25,020
---------
Stockholders' Equity (Deficit)
Common stock, $.001 par value. Authorized
50,000,000 shares; issued and outstanding
23,444,349 shares at September 30, 2000 23,444
Additional paid in capital 220,112
Deficit accumulated during the development stage (67,273)
Aggregate translation adjustment (1,713)
---------
Net Stockholders' Equity 174,570
---------
Total Liabilities and Stockholders'
Equity (Deficit) $ 199,590
=========
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC.
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
For the Three Months and Nine Months Ended September 30, 2000 and 1999
and From Inception (December 30, 1997) to September 30, 2000
(Unaudited)
From
Inception
Three Months Ended Nine Months Ended Through
September, 30 September 30, September 30,
------------------- -----------------
2000 1999 2000 1999 2000
------------------- ----------------- -------------
Net Sales $ - $ - $ - $ - $ -
Cost of Sales - - - - -
---------- ---------- ---------- ---------- -----------
- - - - -
---------- ---------- ---------- ---------- -----------
Expenses:
Professional services 18,783 5,765 30,403 17,295 66,585
Other, selling, general and
administrative expenses 848 - 1,323 - 1,359
---------- ---------- ---------- ---------- -----------
19,631 5,765 31,726 17,295 67,944
---------- ---------- ---------- ---------- -----------
Loss from Operations (19,631) (5,765) (31,726) (17,295) (67,944)
Other Income (Expense)
Interest income 221 - 671 - 671
---------- ---------- ---------- ---------- -----------
221 - 671 - 671
---------- ---------- ---------- ---------- -----------
Net (Loss) (19,410) (5,765) (31,055) (17,295) (67,273)
Other Comprehensive (Loss) Income
Foreign currency translation
adjustment (185) - (1,713) - (1,713)
Comprehensive (Loss) $ (19,595) $ (5,765) $ (32,768) $ (17,295) $ (68,986)
========== ========== =========== =========== ==========
Net Loss per Share $ (.001) $ (.000) $ (.001) $ (.002) $ (.006)
========== ========== =========== =========== ==========
Weighted average shares
outstanding 23,444,349 13,122,100 22,008,858 11,466,639 11,259,143
========== ========== =========== =========== ==========
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC.
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIODS ENDED SEPTEMBER 30, 2000 AND 1999
AND FROM INCEPTION (DECEMBER 30, 1997) TO SEPTEMBER 30, 2000
(Unaudited)
From
Inception
Nine Months Ended Through
September 30, September 30,
----------------------
2000 1999 2000
---------- ---------- -------------
Cash Flows from (for) Operating Activities:
Net income (loss) $ (31,055) $ (17,295) $ (67,273)
---------- ---------- -------------
Adjustments to reconcile net loss to
net cash used by operating activities:
Common stock issued for pro-
fessional services rendered - 11,017 13,122
(Increase) in receivables (9,745) - (59,745)
Decrease in prepaid expenses 1,689 - 1,689
(Increase) in software and deferred
development costs (73,176) - (73,176)
Increase in accounts payable 23,639 6,278 23,639
(Decrease) Increase in due to stock-
holders (952) 53,850 (952)
---------- ---------- -------------
Net Adjustments (58,545) 71,145 (95,423)
---------- ---------- -------------
Net Cash (Used) by
Operating Activities (89,600) 53,850 (162,696)
---------- ---------- -------------
Cash Flows From Investing Activities:
Cash acquired during acquisition 98,473 - 98,473
---------- ---------- -------------
Net Cash Provided by Investing
Activities 98,473 - 98,473
---------- ---------- -------------
Cash Flows From Financing Activities:
Proceeds from sales of stock - - 75,000
---------- ---------- -------------
Net Cash Provided by
Financing Activities - - 75,000
---------- ---------- -------------
Effect of Exchange Rate on Cash (1,652) - (1,652)
Net increase (decrease) in cash 7,221 53,850 9,125
Cash at beginning of year 1,904 - -
---------- ---------- -------------
Cash at end of period $ 9,125 $ 53,850 $ 9,125
========== ========== =============
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC.
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIODS ENDED SEPTEMBER 30, 2000 AND 1999
AND FROM INCEPTION (DECEMBER 30, 1997) TO SEPTEMBER 30, 2000
(Unaudited)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
From
Inception
Through
September 30,
2000 1999 2000
------ ------- -------------
Cash paid during the year for interest $ - $ - $ -
======= ======= =======
Cash paid during the year for income taxes $ - $ - $ -
======= ======= =======
SUPPLEMENTAL DISCLOSURE OF NON CASH INVESTING AND FINANCING ACTIVITIES
Assets and Liabilities Acquired in Acquisition
Receivables $ 1,315
Prepaid expenses 1,720
Deferred development and software 56,400
Accounts payable (1,097)
Other payables (1,376)
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC.
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIODS ENDED SEPTEMBER 30, 2000 AND 1999
AND FROM INCEPTION (DECEMBER 30, 1997) TO SEPTEMBER 30, 2000
(Unaudited)
Deficit Equity
Accumulated Adjustment
Additional During the From Foreign
Common Stock Paid-in Development Currency
----------------------------
Shares Amount Capital Stage Translation Total
----------- ------------ ----------- ------------ ------------ ---------
Issuance of shares of
common stock during
1997, for professional
services rendered 2,105,300 $ 2,105 $ - $ - $ - $ 2,105
Net loss for 1997 - - - (2,105) - (2,105)
----------- ------------ ----------- ------------ ------------ ---------
Balance, December 31, 1997 2,105,300 2,105 - (2,105) - -
Net loss for 1998 - - - (11,017) - (11,017)
----------- ------------ ----------- ------------ ------------ ---------
Balance, December 31,
1998 2,105,300 2,105 - (13,122) - (11,017)
Issuance of shares of
common stock during
1999 for professional
services rendered 11,016,800 11,017 - - - 11,017
Issuance of shares of
common stock for cash
on December 1, 1999 at
$.0125 per share 6,000,000 6,000 69,000 - - 75,000
Net loss for 1999 - - - (23,096) - (23,096)
----------- ------------ ----------- ------------ ------------ ---------
Balance, December 31,
1999 19,122,100 19,122 69,000 (36,218) - 51,904
Issuance of shares of
common stock on
March 31, 2000 for
all shares of Intuitech
Marketing, Inc. at
$.036 per share 4,322,249 4,322 151,112 - - 155,434
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC.
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIODS ENDED SEPTEMBER 30, 2000 AND 1999
AND FROM INCEPTION (DECEMBER 30, 1997) TO SEPTEMBER 30, 2000
(Unaudited)
Deficit Equity
Accumulated Adjustment
Additional During the From Foreign
Common Stock Paid-in Development Currency
----------------------------
Shares Amount Capital Stage Translation Total
----------- ------------ ----------- ------------ ------------ ---------
Aggregate Adjustment
resulting from trans-
lation of financial state-
ments into U.S. dollars - - - - (1,713) (1,713)
Net loss through September
30, 2000 - - - (31,055) - (31,055)
----------- ------------ ----------- ------------ ------------ ---------
Balance, September 30,
2000 23,444,349 $ 23,444 $ 220,112 $ (67,273) $ (1,713) $174,570
=========== ============ =========== ============ ============ =========
Page 9
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
AND FROM INCEPTION (DECEMBER 30, 1997) TO SEPTEMBER 30, 2000
(Unaudited)
NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF
- ------------------------------------------------------------------------------
PRESENTATION
- ------------
Interim financial statements
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements of Monarch Media & Entertainment Group, Inc.
and its subsidiary reflect all adjustments, consisting of normal recurring
accruals, necessary to present fairly their financial position as of September
30, 2000, and their results of operations for the nine and three months ended
September 30, 2000 and 1999, and from inception to September 30, 2000, changes
in stockholders' equity for the nine months ended September 30, 2000 and cash
flows for the nine months ended September 30, 2000 and 1999, and from inception
to September 30, 2000. Pursuant to rules and regulations of the Securities and
Exchange Commission (the "SEC"), certain information and disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted from these condensed
consolidated financial statements unless significant changes have taken place
since the end of the most recent fiscal year. Accordingly, these unaudited
condensed consolidated financial statements should be read in conjunction with
the audited financial statements, notes to financial statements and the other
information in the Annual Report on Form 10-SB for the year ended December 31,
1999 (the "10-SB") previously filed by Monarch Media and Entertainment Group,
Inc. with the SEC.
The results of operations for the nine and three months ended September 30,
2000 are not necessarily indicative of the results of operations for the full
year ending December 31, 2000.
Organization and Operations
Monarch Media and Entertainment Group, Inc. and its wholly owned subsidiary,
Intuitech Marketing, Inc. (collectively the "Company"), a development stage
enterprise, operates in the business of acquiring and enhancing existing
software technologies and products so that they can be reintroduced to the
market place. Specifically, the Company's primary business is providing M2D
Services to publishers of magazines and trade journals. M2D Services, or
magazines to digital, is the process of creating a new product for publishers
by repackaging the back issues of their magazines or trade journals into an
electronic format and presenting them on a CD-ROM or DVD using Intuitech's P2D
Technology. Digital Archive refers to the new product created using M2D Services
that may contain as few as one or as many as hundreds of back issues of a
publication.
Page 10
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
AND FROM INCEPTION (DECEMBER 30, 1997) TO SEPTEMBER 30, 2000
(Unaudited)
NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF
- ------------------------------------------------------------------------------
PRESENTATION
- ------------
In April 2000, Monarch Media and Entertainment Group, Inc. ("Monarch
Media") acquired all of the outstanding common stock of Intuitech Marketing,
Inc. ("Intuitech") by issuing 4,322,249 shares of its common stock. In
connection with the legal form of the transaction, Intuitech became a wholly
owned subsidiary of Monarch Media. Monarch Media, as the acquiror, did not
record goodwill or any other intangible asset for this acquisition as the
combination was done at the fair market value of Intuitech's assets.
The following summarized pro forma (unaudited) information assumes the
acquisition had occurred on January 1, 1999:
2000 1999
------------ ------------
Net Loss for Nine Months $ (35,725) $ (20,374)
============ ============
Earnings per share:
Basic
Net Loss $ (0.002) $ (.001)
============ ============
Risks and Uncertainties
Since December 1999, Intuitech, and more recently the Company, has been
primarily engaged in directing, supervising, and coordinating research and
development efforts in the continuing development of its products, marketing its
products and raising funds.
There is no assurance that the Company's research, development, and
marketing activities will be successful, that the Company will have commercially
acceptable products, or that the Company will achieve significant sales of such
products. The Company has incurred net losses and has an accumulated deficit at
September 30, 2000. In addition, the Company operates in an environment of
rapid change in technology and is dependent upon its ability to obtain
additional funding and execute its business plan. If the Company is unable to
successfully bring its technologies to commercialization, it is unlikely that
the Company could continue as a business.
These conditions raise substantial doubt about the Company's ability to
continue as a going concern. The financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of liabilities that may result from the outcome of this
uncertainty.
Page 11
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
AND FROM INCEPTION (DECEMBER 30, 1997) TO SEPTEMBER 30, 2000
(Unaudited)
NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF
- ------------------------------------------------------------------------------
PRESENTATION - Continued
- ------------
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash balances and instruments with
maturities of three months or less at the time of purchase.
Concentrations of Credit Risk
The Company maintains cash balances at various banks, one is located in
Hendersonville, Tennessee. Accounts at this institution are insured by the
Federal Deposit Insurance Corporation up to $100,000. The other bank deposit
accounts are maintained in one bank in Canada. Accounts at the bank are insured
by the Canadian Deposit Insurance Corporation (CDIC) up to $60,000 (Canadian
currency) per bank. The Company's cash balances, at times, may exceed insured
limits.
Fair Value of Financial Instruments
In accordance with the Statement of Financial Accounting Standards No. 107,
Disclosures about Fair Value of Financial Instruments ("SFAS No. 107"), the
carrying amounts reported in the balance sheet for cash and cash equivalents
approximate those assets' fair values. Active markets for the Company's other
financial instruments that are subject to the fair value disclosure requirements
of SFAS No. 107 do not exist and there are no quoted market prices for these
instruments. Accordingly, it is not practicable to estimate the fair values of
such financial instruments because of (1) the limited information available to
the Company, and (2) the significance of the cost to obtain independent
appraisals for this purpose.
Page 12
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
AND FROM INCEPTION (DECEMBER 30, 1997) TO SEPTEMBER 30, 2000
(Unaudited)
NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF
- ------------------------------------------------------------------------------
PRESENTATION - Continued
- ------------
Software and Deferred Development Costs
The Company accounts for the costs of developing software products to be
used internally in accordance with Statement of Position 98-1, Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use which
allows for costs incurred during the application development stage to be
capitalized upon the establishment of technological feasibility and subsequently
reported on the balance sheet at the lower of unamortized cost or net realizable
value. Capitalized costs are amortized based on current and future revenue for
each product with an annual minimum equal to the straight-line amortization over
the remaining estimated economic life of the product.
Asset Impairment
The Company reviews its intangibles and other long-lived assets periodically
in accordance with Statement of Financial Accounting Standard ("SFAS") No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of, to determine potential impairment by comparing the carrying
value of the assets with estimated undiscounted future cash flows expected to
result from the use of the assets, including cash flows from disposition. Based
on this analysis, if the sum of the expected future undiscounted net cash flow
is less than its carrying value, the Company would determine whether an
impairment loss should be recognized. At September 30, 2000, it was determined
that there were no asset impairments.
Income Taxes
The Company accounts for income taxes by the asset/liability approach in
accordance with the provisions of SFAS No. 109, Accounting for Income Taxes.
Under this pronouncement, deferred income taxes, if any, reflect the estimated
future tax consequences when reported amounts of assets and liabilities are
recovered or paid. Deferred income tax assets and liabilities are determined
based on differences between the financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that are
scheduled to be in effect when the differences are expected to reverse. The
provision for income taxes, if any, represents the total income taxes paid or
payable for the current year, plus the change in deferred taxes during the year.
The tax benefits related to operating loss carryforwards are recognized if
management believes, based on available evidence, that it is more likely than
not that they will be realized.
Page 13
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
AND FROM INCEPTION (DECEMBER 30, 1997) TO SEPTEMBER 30, 2000
(Unaudited)
NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF
- ------------------------------------------------------------------------------
PRESENTATION - Continued
- ------------
Net Loss per Share
In February, 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings per Share ("SFAS
No. 128"). SFAS No. 128 simplifies the standards for computing earnings per
share ("EPS") and was effective for financial statements issued for periods
ending after December 15, 1997, with earlier application not permitted. Upon
adoption, all prior EPS data was restated.
Basic EPS is determined using net income divided by the weighted average
shares outstanding during the period. Diluted EPS is computed by dividing net
income by the weighted average shares outstanding, assuming all dilutive
potential common shares were issued.
Since the Company has no common shares that are potentially issueable, such
as stock options, convertible preferred stock, and warrants, basic and diluted
earnings per share are the same.
Translation of Foreign Currencies
The financial position and results of operations of the Company's foreign
subsidiaries are measured generally using local currencies as the functional
currency. Assets and liabilities of these subsidiaries are translated into U.S.
dollars at the exchange rate in effect at each year-end. Income and expense
items are translated at average exchange rates for the year. The resulting
translation adjustments are recorded in the foreign currency translation
adjustment account. In the event of a divestiture of a foreign subsidiary, the
related foreign currency translation results are reversed from equity to income.
Foreign currency exchange gains and losses are included in net income.
New Accounting Standards
In June, 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS
130"). SFAS No. 130 establishes standards for reporting and presentation of
comprehensive income and its components in a full set of general-purpose
financial statements. This statement does not, however, require a specific
format for the disclosure but requires the Company to display an amount
representing total comprehensive income for the period in its financial
statements. Comprehensive income is determined by adjusting net income by other
items not included as a component of net income, such as the unrealized gain
(loss) on certain marketable securities. During the periods presented, the
Company had the additional component of a foreign currency translation
adjustment in computing comprehensive income.
Page 14
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
AND FROM INCEPTION (DECEMBER 30, 1997) TO SEPTEMBER 30, 2000
(Unaudited)
NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF
- ------------------------------------------------------------------------------
PRESENTATION - Continued
- ------------
In June, 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information ("SFAS No. 131"). SFAS No. 131 establishes
standards for the manner in which public business enterprises report information
about operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports issued to shareholders. This statement also requires that a
public business enterprise report financial and descriptive information about
its reportable operating segments. The Company is currently not in formal
business operations and does not have any reportable operating segments.
In June, 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities. However, the effective date for this pronouncement was
delayed for one year from the original effective date of fiscal years beginning
after June 15, 1999. Since the Company does not deal in derivative instruments
or hedging activities, it is anticipated that this pronouncement will have no
impact on the Company's financial statements.
NOTE 2- RELATED PARTY TRANSACTIONS
- ----------------------------------
Software and Development Costs
In December 1999 Intuitech purchased developed software for $34,390 from
Helikon Technologies, Inc., a company related at that time by common ownership
and management.
In February 2000 Intuitech entered into a verbal agreement with Helikon
Technologies, Inc. (Helikon), a company related at that time by common ownership
and management, whereas Helikon is to develop software for Intuitech. As of
September 30, 2000 Intuitech has paid $95,186 for the progression of the
software development (see Note 4).
Consulting Fees
Intuitech Marketing, Inc. paid Tom Williams, a stockholder/officer for
performing consulting services. During the six months (from acquisition to
September 30, 2000) ended September 30, 2000 Intuitech paid $8,992 for these
services and there is no amount due for these services.
Page 15
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
AND FROM INCEPTION (DECEMBER 30, 1997) TO SEPTEMBER 30, 2000
(Unaudited)
NOTE 2- RELATED PARTY TRANSACTIONS - Continued
- ----------------------------------
Related Party Receivables
Notes Receivable at September 30, 2000 and 1999, were due from the
following related parties:
2000 1999
------------ ------------
Note receivable from Dominion
Game Marketing, Inc., related
by common director/officer,
1% interest $ 50,000 $ -
Notes receivable from
stockholder/officer, 1% interest 2,795 -
------------ ------------
$ 52,795 $ -
============ ============
Due to the short-term nature of the notes receivable, the recording of any
discount to reflect a market value rate of interest is immaterial to these
financial statements (see Note 4).
NOTE 3 - UNUSED FINANCING
- -------------------------
The Company entered into a convertible loan agreement on September 22, 2000
for $40,000 to be drawn as needed. The term of the loan agreement is for three
years and must be paid in full on or by September 22, 2003. The loan bears
interest of 7% per annum and is payable to the lender on demand or at the term
of the loan. The lender at anytime may convert all or a portion of the loan
into common stock at a conversion rate of one share for every 5 cents of the
loan balance. As of September 30, 2000 the loan agreement had an available
balance of $40,000 to be drawn when needed.
NOTE 4 - SUBSEQUENT EVENTS
- ------------------------------
On October 5, 2000 the Company received $40,000 of borrowed funds from the
loan agreement dated September 22, 2000 (See Note 3).
The Company entered into a convertible loan agreement on December 2, 2000
for $27,000 to be drawn as needed. The term of the loan agreement is for three
years and must be paid in full on or by September 22, 2003. The loan bears
interest of 7% per annum and is payable to the lender on demand or at the term
of the loan. The lender at anytime may convert all or a portion of the loan
into common stock at a conversion rate of one share for every 5 cents of the
loan balance. As of December 4, 2000 the loan agreement had an available
balance of $27,000 to be drawn when needed.
Page 16
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
AND FROM INCEPTION (DECEMBER 30, 1997) TO SEPTEMBER 30, 2000
(Unaudited)
NOTE 4 - SUBSEQUENT EVENTS - Continued
- --------------------------
Intuitech formalized its verbal software development agreement of February
2000 with Helikon into a written agreement in November 2000. The agreement
specifies the approximate cost of the software development to be $134,648
(expressed in Canadian dollars).
The Company entered into a loan agreement with Dominion Game Marketing,
Ltd. ("Dominion") on October 1, 2000, to extend the due date of a $50,000 loan
to Dominion. The terms of the loan agreement extend the due date of the loan to
June 30, 2001 and revise the interest rate to 7% per annum.
Page 17
Item 2. Management's Discussion and Analysis or Plan of Operation.
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the Company's results
of operations and financial condition. The discussion should be read in
conjunction with the financial statements and notes thereto.
Monarch's business, through is subsidiary Intuitech Marketing Inc., is
providing M2D Services to publishers of magazines and trade journals. M2D
Services, or magazines to digital, is the process of creating a new product for
publishers by repackaging the back issues of their magazines or trade journals
into an electronic format and presenting them on a CD-ROM or DVD using
Intuitech's P2D Technology. Digital Archive referrers to the new product
created using M2D Services that may contain as few as one or as many as hundreds
of back issue of a publication.
The Company has not yet sold any M2D Service. The Company's business plan
called for to the enhancement of the P2D Technology to be substantially complete
before the marketing phase began. Preparation for marketing the M2D Services
have been underway since July 2000 and the Company has been contacting
prospective clients since October 1, 2000.
The Company is a development Stage Company and has not yet begun to earn
revenues.
Cash Requirements
On September 30, 2000, the Company's consolidated financial statement shows a
cash position of $9,125. The Company borrowed $40,000 pursuant to a loan
agreement dated September 22, 2000 that was funded October 5, 2000. In
addition, we have borrowed an additional $27,000 pursuant to a loan agreement
dated December 6, 2000 and a further $10,000 pursuant to a loan agreement dated
December 10, 2000. We have also spent approximately $15,000 in legal fees for
aid in the re-filing of our Amended Form 10-SB.
We anticipate that we will need to raise additional working capital either
through borrowing additional funds, issuing addition equity capital, or by
generating income from operations.
The Company anticipates it will secure up to four (4) contracts for deliver
of its M2D Services before the end of the first quarter 2001. If successful,
the Company will not need to raise additional capital before September 2001. If
the Company is not successful in securing these projected sales amounts, it will
have sufficient cash to cover its operating costs until March 2001 at which time
it will need to raise additional cash by either debt or equity.
Summary of Research and Development
Although the Company has developed its product and performed initial tests
along with Beta runs, management feels the product is several months from full
commercialization. Until commercialization of the product is commenced, there
can be no assurance of future success. Additionally, although Beta versions of
the product do not show any operating problems, upon large-scale usage of the
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product, it would not be unusual for certain "bugs" to be found which would
require correction. This could slow further developments of the software.
The Company is planning products for the second phase of its evolution.
These new products will focus on two different areas, one area is in improving
productivity in creating PDF files from scanned images and the second area is
enhancing the products a publisher can market to it customers. In regards to
the productivity tools, we intend to conduct a feasibility study in regards to
(i) developing a "plug-in" for Adobe Capture or a standalone product which would
allow two scanned images of the same page to be integrated in producing one PDF
file and (ii) creating a PDF file which contains a single page partially
formatted in "normal" and part in "graphic with hidden text". The second set of
software products will enable the Company to greatly expand the number of
publications it can transfer at any given period of time.
In regards to the enhanced products that a publisher will be able to
market, we will analyze the feasibility of complementing the magazine archive
product with multi media content, (video, audio and or animations) research the
development of this type of product.
The Company will also analyze the feasibility of offering its M2D Services
in languages other than English.
As funding permits, the Company hopes to be able to develop a strong
software team that not only works on the M2D Services but also will be able to
develop software for licensing to other software firms. All future development
will be dependant on the Company's first product, and potentially upon the
Company's ability to generate further investment capital for expansion.
Expected Purchase or Sale of Plant and Equipment
The Company has all the equipment necessary at this stage. As the business
grows The Company will need to acquire computer equipment and specialized
software. The number and type of computers and related equipment the Company
will require will depend on an number of factors including, number of contracts
the Company is able to secure and whether it is prudent to subcontract a portion
of the work, such as the scanning process. If The Company is successful in
attaining the sales targets anticipated, spending between $25,000 and $75,000 on
equipment and software during the next 12 months.
Expected Changes in Number of Employees
We anticipate the number of employees growing as the business requires although
we have no current plans to hire staff with the exception of one additional
sales person.
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Forward-Looking Statements
When used in this Form 10-Q or other filings by the Company with the
Securities and Exchange Commission, in the Company's press releases or other
public or shareholder communications, or in oral statements made with the
approval of an authorized officer of the Company's executive officers, the words
or phrases "would be", "will allow", "intends to", "will likely result", "are
expected to", "will continue", "is anticipated", "estimate", "project", or
similar expressions are intended to identify "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995.
The Company cautions readers not to place undue reliance on any
forward-looking statements, which speak only as of the date made, and advises
readers that forward-looking statements involve various risks and uncertainties.
The Company does not undertake, and specifically disclaims any obligation to
update any forward-looking statements to reflect occurrences or unanticipated
events or circumstances after the date of such statement.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities and Use of Proceeds.
None
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to Vote of Security holders.
None.
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - None
(b) Reports on Form 8-K - None.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant has
caused this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MONARCH MEDIA AND ENTERTAINMENT GROUP, INC.
By: /s/Tom Williams
-------------------------
Tom Williams, President
Date: November 30, 2000