UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
----------
Amendment No. 1
---------------
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 20, 2004
MONACO GROUP INC.
-----------------
(Exact name of registrant as specified in its charter)
Delaware 0 - 50752 98-0404764
-------- --------- ----------
(State or other jurisdiction of (Commission File (I.R.S. Employer
incorporation or organization) Number) Identification Number)
20A Voyager Court South, Etobicoke, Ontario, Canada, M9W 5M7
------------------------------------------------------------
(Address of principal executive offices)
(416) 213-0028
--------------
(Registrant's telephone number)
ITEM 2.01. ACQUISITION OR DISPOSITION OF ASSETS
- -----------------------------------------------
On July 1, 2004, Monaco Group Inc., a Delaware corporation (the "Company"),
entered into a Share Purchase Agreement with Amton Inc., a New York corporation
("Amton") (the "Share Purchase Agreement"). Under the terms of the Share
Purchase Agreement, Amton will sell to the Company all of the issued and
outstanding shares of Bayshore Foods Inc., an Ontario corporation ("Bayshore"),
in consideration of a note payable in the amount of $350,000 Canadian dollars
and 400,000 shares of the common stock of the Company ("Transaction").
On August 20, 2004, the parties closed the Transaction.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
- --------------------------------------------
(a) Financial statements of business acquired.
The financial statements required by this item are included herein.
BAYSHORE FOODS INC.
REPORT AND FINANCIAL STATEMENTS
JULY 31, 2004 (UNAUDITED), APRIL 30, 2004 AND 2003
(Stated in Canadian Dollars)
--------------------------
BATEMAN, GRAHAM, LOOK HONG
CHARTERED ACCOUNTANTS
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Directors of
Bayshore Foods Inc.
We have audited the balance sheets of Bayshore Foods Inc. as at April 30, 2004
and 2003 and the statements of earnings, cash flows and stockholders' deficiency
for the years then ended. 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.
Except as explained in the following paragraph, we conducted our audits in
accordance with Canadian generally accepted auditing standards and the standards
of the Public Company Accounting Oversight Board (United States of America).
Those standards require that we plan and perform an audit to obtain reasonable
assurance 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.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at April 30, 2004 and 2003
and the results of its operations and the changes in its cash flows for the
years then ended in accordance with Canadian generally accepted accounting
principles.
Newmarket, Ontario /s/ Bateman, Graham, Look Hong
June 7, 2004 Chartered Accountants
COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA-U.S REPORTING CONFLICT
----------------------------------------------------------------------
In the United States of America, reporting standards for auditors require the
addition of an explanatory paragraph (following the opinion paragraph) when
there is substantial doubt about a company's ability to continue as a going
concern. The accompanying financial statements have been prepared on the basis
of accounting principles applicable to a going concern which assumes the
realization of assets and discharge of liabilities in the normal course of
business. As discussed in Note 1 to the accompanying financial statements, the
Company is in the business of processing food products and has not achieved
positive cash flows and has a working capital deficiency, which raises
substantial doubt about the Company's ability to continue as a going concern.
The accompanying financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Our report to the directors dated June 7, 2004 is expressed in accordance with
Canadian reporting standards which do not permit a reference to such uncertainty
in the auditors' report when the uncertainty is adequately disclosed in the
financial statements.
Newmarket, Ontario /s/ Bateman, Graham, Look Hong
June 7, 2004 Chartered Accountants
BAYSHORE FOODS INC.
-------------------
BALANCE SHEETS
July 31, 2004 (Unaudited), April 30, 2004 and 2003
(Stated in Canadian Dollars)
--------------------------
(Unaudited)
July 31, April 30,
ASSETS 2004 2004 2003
------ -------------- -------------- --------------
Current
Cash $ - $ - $ 3,870
Accounts receivable 132,365 21,153 4,735
Inventory - Notes 2 and 3 13,166 17,585 -
Prepaid expenses - 540 1,864
-------------- -------------- --------------
145,531 39,278 10,469
Fixed assets - Notes 2 and 4 - - 637
Other assets - Notes 2 and 5 7,576 7,726 5,385
Future income tax recovery - Notes 2 and 9 1,100 1,100 -
-------------- -------------- --------------
$ 154,207 $ 48,104 $ 16,491
============== ============== ==============
LIABILITIES
-----------
Current
Bank loan - Note 6 $ 18,231 $ 13,613 5,000
Accounts payable and accrued liabilities 139,235 10,017 5,870
Advances from shareholder - Note 7 - 30,171 10,572
Due to related party - Note 8 - - 9,822
-------------- -------------- --------------
157,466 53,801 31,264
-------------- -------------- --------------
STOCKHOLDER'S DEFICIENCY
------------------------
Capital stock
Authorized
Unlimited number of voting Class A shares,
redeemable at $0.10 per share
Unlimited number of Class B shares, non-voting,
non-cumulative dividend of 6% per annum,
redeemable and retractable
Unlimited number of Class C shares, non-voting
Unlimited number of voting common shares
Issued
200 common shares (April 30, 2004: 200;
April 30, 2003: 200) 200 200 200
Deficit (3,459) (5,897) (14,973)
-------------- -------------- --------------
(3,259) (5,697) (14,773)
-------------- -------------- --------------
$ 154,207 $ 48,104 $ 16,491
============== ============== ==============
<FN>
Nature and Continuance of Operations - Note 1
</FN>
Approved by the Board of Directors:
Director Director
- ---------------------------- ----------------------------
SEE ACCOMPANYING NOTES
BATEMAN, GRAHAM, LOOK HONG
CHARTERED ACCOUNTANTS
BAYSHORE FOODS INC.
-------------------
STATEMENTS OF EARNINGS
for the three months ended July 31, 2004 (Unaudited) and
for the years ended April 30, 2004 and 2003
(Stated in Canadian Dollars)
--------------------------
(Unaudited)
Three months
ended Year ended
July 31, April 30,
2004 2004 2003
-------------- -------------- --------------
Sales $ 168,836 $ 251,408 $ 349,848
Cost of sales 149,501 205,255 296,421
-------------- -------------- --------------
Gross profit 19,335 46,153 53,427
-------------- -------------- --------------
Commissions - 3,829 -
Other - 1,008 -
-------------- -------------- --------------
- 4,837 -
-------------- -------------- --------------
19,335 50,990 53,427
-------------- -------------- --------------
Expenses
Advertising and promotion - 2,766 2,541
Amortization 150 924 711
Bank charges and interest 290 465 1,145
Cash discounts given - 786 2,988
Cash discounts received - (2,195) (5,545)
Freight 2,322 7,040 100
Insurance 162 2,512 1,700
Interest 46 448 540
Management fees - - 9,822
Office and general 1,062 2,092 1,588
Product design - 3,557 37,138
Professional fees 10,031 4,691 8,169
Telephone 263 2,349 22
Travel 2,571 17,579 7,481
-------------- -------------- --------------
16,897 43,014 68,400
-------------- -------------- --------------
Income (loss) before future income taxes 2,438 7,976 (14,973)
Future income tax (recovery) - (1,100) -
-------------- -------------- --------------
Net income (loss) for the period $ 2,438 $ 9,076 $ (14,973)
=============== =============== ===============
SEE ACCOMPANYING NOTES
BATEMAN, GRAHAM, LOOK HONG
CHARTERED ACCOUNTANTS
BAYSHORE FOODS INC.
-------------------
STATEMENTS OF CASH FLOWS
for the three months ended July 31, 2004 (Unaudited) and
for the years ended April 30, 2004 and 2003
(Stated in Canadian Dollars)
--------------------------
(Unaudited)
Three
months
ended Year ended
July 31, April 30,
2004 2004 2003
-------------- -------------- --------------
Cash Flows from Operating Activities
Net income (loss) for the period $ 2,438 $ 9,076 $ (14,973)
Items not involving cash:
Amortization and depreciation 150 924 711
Future income taxes - (1,100) -
Changes in non-cash working capital items:
Accounts receivable (111,212) (16,418) (4,735)
Inventory 4,419 (17,585) -
Prepaid expenses 540 1,324 (1,864)
Accounts payable and accrued liabilities 129,218 4,147 5,870
-------------- -------------- --------------
25,553 (19,632) (14,991)
-------------- -------------- --------------
Cash Flows from Investing Activities
Purchase of fixed assets - - (750)
Addition to other assets - (3,265) (5,983)
Proceeds on disposal of fixed assets - 637 -
-------------- -------------- --------------
- (2,628) (6,733)
-------------- -------------- --------------
Cash Flows from Financing Activities
Increase in bank loan 4,618 8,613 5,000
Advances from shareholder (30,171) 19,599 10,572
Due from (to) related party - (9,822) 9,822
Proceeds from issuance of capital stock - - 200
-------------- -------------- --------------
(25,553) 18,390 25,594
-------------- -------------- --------------
Net (decrease) increase in cash - (3,870) 3,870
Cash, beginning of period - 3,870 -
-------------- -------------- --------------
Cash, end of period $ - $ - $ 3,870
============== ============== ==============
Supplemental Cash Flow Information:
Cash paid for
Interest $ 46 $ 448 $ 540
============== ============== ==============
Income taxes $ - $ - $ -
============== ============== ==============
SEE ACCOMPANYING NOTES
BATEMAN, GRAHAM, LOOK HONG
CHARTERED ACCOUNTANTS
BAYSHORE FOODS INC.
-------------------
STATEMENT OF STOCKHOLDERS' DEFICIENCY
for the three months ended July 31, 2004 (Unaudited) and the
period May 6, 2002 to April 30, 2003 and the year ended April 30, 2004
(Stated in Canadian Dollars)
--------------------------
Common
Stock Accumulated
Number Amount Deficit Total
------------ ------------ ------------ ------------
Capital stock issued
For cash - at $1.00 200 $ 200 $ - $ 200
Net loss for the period - - (14,973) (14,973)
------------ ------------ ------------ ------------
Balance, as at April 30, 2003 200 200 (14,973) (14,773)
Net earnings for the year - - 9,076 9,076
------------ ------------ ------------ ------------
Balance, as at April 30, 2004 200 200 (5,897) (5,697)
Net earnings for the period - - 2,438 2,438
------------ ------------ ------------ ------------
Balance, as at July 31, 2004 (Unaudited) 200 $ 200 $ (3,459) $ (3,259)
============ ============ ============ =============
SEE ACCOMPANYING NOTES
BATEMAN, GRAHAM, LOOK HONG
CHARTERED ACCOUNTANTS
BAYSHORE FOODS INC.
-------------------
NOTES TO THE FINANCIAL STATEMENTS
July 31, 2004 (Unaudited)
April 30, 2004 and 2003
(Stated in Canadian Dollars)
--------------------------
Note 1 Nature of Business
------------------
The Company was incorporated on May 6, 2002 under the provisions of
the Ontario Business Corporation Act, Ontario, Canada and is in the
business of processing food products.
These financial statements have been prepared on a going concern
basis. As at July 31, 2004, the Company has a working capital
deficiency of $11,935 and has accumulated $3,459 of losses since
inception which has been funded primarily by reliance on short-term
creditors. The Company's ability to continue as a going concern is
dependent upon the ability of the Company to generate profitable
operations in the future and/or to obtain the necessary financing to
meet its obligations and repay its liabilities arising from normal
business operations when they come due.
These financial statements do not give effect to any adjustments which
would be necessary should the Company be unable to continue as a going
concern and therefore be required to realize its assets and discharge
its liabilities in other than the normal course of business and at
amounts different from those reflected in the accompanying
consolidated financial statements.
Note 2 Summary of Significant Accounting Policies
------------------------------------------
These financial statements have been prepared in accordance with
generally accepted accounting principles in Canada and are stated in
Canadian dollars and conform in all material respects with accounting
principles generally accepted in the United States of America. Because
a precise determination of many assets and liabilities is dependent
upon future events, the preparation of financial statements for a
period necessarily involves the use of estimates which have been made
using careful judgement. Actual results may differ from these
estimates.
The financial statements have, in management's opinion, been properly
prepared within reasonable limits of materiality and within the
framework of the significant accounting policies summarized below:
Inventory
---------
Inventory is valued at the lower of cost and net realizable value.
Cost is determined using the average cost method.
Fixed Assets
------------
Fixed assets are stated at cost. Amortization is provided on the
diminishing balance basis over the estimated useful lives of the
assets. The percentage used is as follows:
Computer equipment 30%
One-half of annual amortization is charged on net assets acquired
during the fiscal year.
Other Assets
------------
Trademarks are stated at cost. Cost includes both government fees and
representation costs. Amortization is calculated on the straight-line
basis over 10 years which is the estimated useful life of the
trademark. This method and estimated useful life are reviewed
annually.
BATEMAN, GRAHAM, LOOK HONG
CHARTERED ACCOUNTANTS
BAYSHORE FOODS INC.
- -------------------
NOTES TO THE FINANCIAL STATEMENTS
July 31, 2004 (Unaudited)
April 30, 2004 and 2003
(Stated in Canadian Dollars) - Page 2
--------------------------
Note 2 Summary of Significant Accounting Policies - (cont'd)
------------------------------------------
Revenue Recognition
-------------------
Revenue is recognized when the customer has accepted delivery of the
products and ultimate collection is reasonably assured. The Company
ships goods based on the customer approved purchase order at prices
negotiated and approved by the Company.
Foreign Currency
----------------
The company's functional currency is the Canadian dollar. Monetary
assets and liabilities denominated in foreign currencies are
translated into Canadian dollars at the exchange rate in effect at the
balance sheet date. Non-monetary assets and liabilities and expenses
are translated at exchange rates in effect at the time of each
transaction. Gains and losses on translation are included in the
results from operations.
Financial Instruments
---------------------
The carrying value of cash, accounts receivable and accounts payable
and accrued liabilities approximate fair value because of the
short-term maturity of these instruments. Unless otherwise noted, it
is management's opinion that the Company is not exposed to significant
interest, currency or credit risks arising from these financial
instruments.
Basic and Diluted Loss Per Share
--------------------------------
Basic income (loss) per share is computed by dividing the loss for the
period by the weighted average number of common shares outstanding
during the period. The Company has had 200 shares outstanding since
inception and basic income (loss) per share has not been provided as
it would not be meaningful.
Income Taxes
------------
The Company records income taxes in accordance with the Canadian
Institute of Chartered Accountants' recommendations for accounting for
income taxes. Under these recommendations current income taxes
recognize the estimated income taxes payable for the current period.
Future income tax assets and liabilities are recognized for temporary
differences between the tax basis and the accounting basis of assets
and liabilities, as well as for the benefits of losses available to be
carried forward to future years for tax purposes that are more likely
than not to be realized.
Design Costs
------------
Package design costs are written off in the year incurred as product
development.
BATEMAN, GRAHAM, LOOK HONG
CHARTERED ACCOUNTANTS
BAYSHORE FOODS INC.
- -------------------
NOTES TO THE FINANCIAL STATEMENTS
July 31, 2004 (Unaudited)
April 30, 2004 and 2003
(Stated in Canadian Dollars) - Page 3
--------------------------
Note 3 Inventory
---------
Inventory is comprised of the following:
(Unaudited)
July 31,
2004 2004 2003
-------------- -------------- --------------
Packaging materials $ 6,628 $ 16,571 $ -
Finished goods 6,538 1,014 -
-------------- -------------- --------------
$ 13,166 $ 17,585 $ -
============== ============== ==============
Note 4 Fixed Assets
------------
(Unaudited)
July 31, 2004 April 30,
Accumulated 2004 2003
Cost Amortization Net Net Net
----------- ------------- ------------ ------------ ------------
Computer equipment $ - $ - $ - $ - $ 637
=========== ============= ============ ============ ============
Note 5 Other Assets
------------
(Unaudited)
July 31, 2004 April 30,
Accumulated 2004 2003
Cost Amortization Net Net Net
----------- ------------- ------------ ------------ ------------
Trademarks $ 9,248 $ 1,672 $ 7,576 $ 7,726 $ 5,385
=========== ============= ============ ============ ============
Note 6 Bank Loan
---------
Bank loan consists of the following:
(Unaudited)
July 31, April 30,
2004 2004 2003
-------------- -------------- --------------
Bank balance less outstanding cheques $ 18,231 $ 8,613 $ -
Operating line of credit - 5,000 5,000
-------------- -------------- --------------
$ 18,231 $ 13,613 $ 5,000
============== ============== ==============
Note 7 Advances from Shareholder
-------------------------
Advances from shareholder are unsecured, non-interest bearing and have
no fixed terms of repayment.
BATEMAN, GRAHAM, LOOK HONG
CHARTERED ACCOUNTANTS
BAYSHORE FOODS INC.
- -------------------
NOTES TO THE FINANCIAL STATEMENTS
July 31, 2004 (Unaudited)
April 30, 2004 and 2003
(Stated in Canadian Dollars) - Page 4
--------------------------
Note 8 Related Party Transactions
--------------------------
(Unaudited)
July 31, April 30,
2004 2004 2003
-------------- -------------- --------------
Due to related party $ - $ - $ 9,822
============== ============== ==============
The company included here is owned by a former shareholder of Bayshore
Foods Inc. These advances are unsecured, non-interest bearing with no
fixed terms of repayment.
Note 9 Future Tax Assets
-----------------
At April 30, 2004, the Company has operating losses available to
offset future income for tax purposes of $13,192, which expire in
2010.
During the year ended April 30, 2004, management of the Company
determined that it was more likely than not that the benefit of these
losses will be realized and the future tax asset has been recognized
in the financial statements as follows after applying the enacted
corporate income tax rates:
(Unaudited)
July 31, April 30,
2004 2004 2003
-------------- -------------- --------------
Tax benefit of net losses carried forward $ 2,050 $ 2,500 $ 3,600
Tax cost of other timing differences (1,400) (1,400)
Valuation allowance for future income tax asset 450 - (3,600)
-------------- -------------- --------------
$ 1,100 $ 1,100 $ -
============== ============== ==============
BATEMAN, GRAHAM, LOOK HONG
CHARTERED ACCOUNTANTS
(b) Pro forma financial information.
The financial statements required by this item are included herein.
MONACO GROUP INC.
-----------------
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004
(Stated in US Dollars)
(Unaudited)
---------
MONACO GROUP INC.
-----------------
PRO FORMA CONSOLIDATED BALANCE SHEET
June 30, 2004
(Stated in US Dollars)
(Unaudited)
---------
(Note 1) (Note 1) Sweet Valley Bayshore
Monaco Sweet Valley Bayshore Consolidation Consolidation
Group Foods Foods And Pro Forma And Pro Forma
ASSETS Inc. Inc. Inc. Adjustments Adjustments
- ------ -------------- -------------- -------------- -------------- --------------
Current
Cash $ 1,297 $ 33,437 $ - $ ( 33,437 $ 5,360
Accounts receivable 83,923 469,085 15,432 ( 469,085) 108,477
Inventory - 210,926 12,829 - 55,133
Prepaid expenses - 22 394 - ( 394)
Tax receivable - 12,587 - ( 12,587) 2,315
-------------- -------------- -------------- -------------- --------------
85,220 726,057 28,655 ( 515,109) 170,891
Capital assets 190,400 - 78,273 -
Future income tax recovery - - 803 46
Trademarks - - 5,637 - 394,363
Goodwill - 169,982 - 677,136 414,280
-------------- -------------- -------------- -------------- --------------
$ 85,220 $ 1,086,439 $ 35,095 $ 240,300 $ 979,580
============== ============== ============== ============== ==============
LIABILITIES
- -----------
Current
Bank Loan $ - $ - $ 9,932 $ - $ ( 9,932)
Accounts payable and accruals 88,486 692,801 7,308 ( 680,161) 81,153
Loans from related party 20,000 - - - -
Advances from related party 22,598 - 22,011 272,848 96,177
Long term debt - current portion - 46,628 - - -
-------------- -------------- -------------- -------------- --------------
131,084 739,429 39,251 ( 407,313) 167,398
Long term debt 31,011
Advances from related party - 422,880 - ( 422,880) 269,999
Future taxes - - - 26,112 138,027
-------------- -------------- -------------- -------------- --------------
131,084 1,193,320 39,251 ( 804,081) 575,424
-------------- -------------- -------------- -------------- --------------
(continued)
- -----------
Sweet Bayshore
Valley Foods Pro Forma
Foods Inc. Consolidated
ASSETS Notes Notes Balance Sheet
- ------ -------------- -------------- --------------
Current
Cash (5b) (3) $ 6,657
Accounts receivable (5b)(5e) (3) 207,832
Inventory (3) 278,888
Prepaid expenses (3) 22
Tax receivable (5b) (3) 2,315
--------------
495,714
Capital assets (2) 268,673
Future income tax recovery (3) 849
Trademarks (5d) 400,000
Goodwill (2) (3) 1,261,398
--------------
$ 2,426,634
==============
LIABILITIES
- -----------
Current
Bank Loan (3) $ -
Accounts payable and accruals (5b, c & e) (3) 189,587
Loans from related party 20,000
Advances from related party (5a) (3) 413,634
Long term debt - current portion 46,628
--------------
669,849
Long term debt 31,011
Advances from related party (5b) (5aiii) 269,999
Future taxes 164,139
--------------
1,134,998
--------------
SEE ACCOMPANYING NOTES
MONACO GROUP INC.
-----------------
PRO FORMA CONSOLIDATED BALANCE SHEET
June 30, 2004
(Stated in US Dollars)
(Unaudited)
---------
(Note 1) (Note 1) Sweet Valley Bayshore
Monaco Sweet Valley Bayshore Consolidation Consolidation
Group Foods Foods And Pro Forma And Pro Forma
Inc. Inc. Inc. Adjustments Adjustments
-------------- -------------- -------------- -------------- --------------
SHAREHOLDERS' EQUITY
- --------------------
Share capital 4,447 22 146 ( 22) ( 146)
1,500 400
Paid in capital 81,203 - - 936,000 399,600
Deficit (131,514) ( 106,903) ( 4,302) 106,903 4302
-------------- -------------- -------------- -------------- --------------
( 45,864) ( 106,881) ( 4,156) 1,044,381 404,156
-------------- -------------- -------------- -------------- --------------
$ 85,220 $ 1,086,438 $ 35,095 $ 204,300 $ 979,580
============== ============== ============== ============== ==============
(continued)
- -----------
Sweet Bayshore
Valley Foods Pro Forma
Foods Inc. Consolidated
Notes Notes Balance Sheet
-------------- -------------- --------------
SHAREHOLDERS' EQUITY
- --------------------
Share capital 6,347
(5a) (5a)
Paid in capital (5a) (5a) 1,416,803
Deficit ( 131,514)
--------------
1,291,636
--------------
$ 2,426,634
==============
SEE ACCOMPANYING NOTES
MONACO GROUP INC.
-----------------
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
for the year ended December 31, 2003
(Stated in US Dollars)
(Unaudited)
---------
(Note 1 & 7) Pro Forma
Monaco Sweet Valley Bayshore Consolidated
Group Foods Foods Statement
Inc. Inc. Inc. of Operations
-------------- -------------- -------------- --------------
Revenue
Sales $ 48,834 $ 3,017,049 $ 253,186 $ 3,319,059
Cost of sales 46,997 2,447,020 212,987 2,707,004
-------------- -------------- -------------- --------------
Gross profit 1,837 570,029 40,199 612,065
Other - - 1,788 1,788
-------------- -------------- -------------- --------------
1,837 570,029 41,987 613,853
-------------- -------------- -------------- --------------
General and Administrative Expenses
Advertising and promotion - - 2,148 2,148
Accounting and audit fees 5,200 31,217 5,564 41,981
Amortization - 77,481 569 78,050
Bad debt - 4,312 - 4,312
Cash discounts given (received) -net - - (1,822) (1,822)
Commissions - 1,059 - 1,059
Consulting fees 57,500 - - 57,500
Equipment leasing - 26,904 - 26,904
Filing and regulatory fees 2,184 - - 2,184
Interest and bank charges 87 10,078 1,107 11,272
Insurance - 5,170 431 5,601
Legal fees 19,320 - 6,370 25,690
Management fees - 43,122 - 43,122
Office and general expenses 179 45,485 700 46,364
Product design - - 27,342 27,342
Rent - 106,927 - 106,927
Repairs and maintenance - 11,344 - 11,344
SEE ACCOMPANYING NOTES
Storage and freight - 20,586 761 21,347
Telephone expenses - 3,456 300 3,756
Transfer agent fees 745 - - 745
Travel - - 8,390 8,390
Wages - 167,901 - 167,901
-------------- -------------- -------------- --------------
85,215 555,042 51,860 692,117
-------------- -------------- -------------- --------------
Earnings (loss) before the following ( 83,378) 14,987 ( 9,873) ( 78,264)
Investment tax credit earnings - 13,369 - 13,369
Future income tax recovery - - 765 765
-------------- -------------- -------------- --------------
Net income (loss) for the year $ ( 83,378) $ 28,356 $ ( 9,108) $ ( 64,130)
============== ============== ============== ==============
Pro forma loss per share $ ( 0.01)
==============
Weighted average number of shares 6,224,340
==============
SEE ACCOMPANYING NOTES
MONACO GROUP INC.
-----------------
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
for the six months ended June 30, 2004
(Stated in US Dollars)
(Unaudited)
---------
(Note 1 & 7) (Note 5e) Pro Forma
Monaco Sweet Valley Bayshore Sweet Valley Consolidated
Group Foods Foods Pro Forma Statement
Inc. Inc. Inc. Adjustments of Operations
-------------- -------------- -------------- -------------- --------------
Revenue
Sales $ 194,429 $ 2,559,428 $ 82,203 $ (80,342) $ 2,755,718
Cost of sales 191,538 2,177,939 65,377 (80,342) 2,354,512
-------------- -------------- -------------- -------------- --------------
Gross profit 2,891 381,489 16,826 - 401,206
Other - - 1,713 1,713
-------------- -------------- -------------- -------------- --------------
2,891 381,489 18,539 - 402,919
-------------- -------------- -------------- -------------- --------------
General and Administrative Expenses
Advertising and promotion - - 665 665
Accounting and audit fees 5,850 19,528 2,401 27,779
Amortization - 29,833 349 30,182
Cash discounts given (received) - net - - (388) (388)
Commissions - 5,694 - 5,694
Equipment leasing - 28,631 - 28,631
Filing and regulatory fees 3,845 - - 3,845
Interest and bank charges 1,263 22,309 383 23,955
Insurance - - 1,491 1,491
Legal fees 39,227 - - 39,227
Office and general expenses 217 37,229 1,008 38,454
Product design - - 1,048 1,048
Rent - 60,736 - 60,736
Repairs and maintenance 9,474 - 9,474
Storage and freight 9,360 4,570 13,930
Telephone expenses - 1,588 1,449 3,037
Transfer agent fees 625 - - 625
Travel - - 6,719 6,719
SEE ACCOMPANYING NOTES
Wages - 106,809 - 106,809
-------------- -------------- -------------- -------------- --------------
51,027 331,191 19,695 - 401,913
-------------- -------------- -------------- -------------- --------------
Net income (loss) for the period ( 48,136) 50,298 ( 1,156) - 1,006
============== ============== ============== ============== ==============
Pro forma earnings per share $ 0.00
==============
Weighted average number of shares 6,346,500
==============
SEE ACCOMPANYING NOTES
Monaco Group Inc.
Notes to the Pro Forma Consolidated Financial Statements
June 30, 2004
(Stated in US Dollars)
(Unaudited) - Page 1
---------
Note 1 Basis of Presentation
---------------------
The accompanying unaudited pro forma consolidated balance sheet and
unaudited consolidated statement of operations give effect to the
acquisition of:
i) substantially all the assets and business of Sweet Valley
Foods Inc. ("Sweet Valley") by a wholly-owned subsidiary of
Monaco Group Inc., a Delaware corporation ("Monaco") effective on
July 1, 2004 pursuant to an asset purchase agreement dated May
25, 2004 and an amended agreement dated June 21, 2004; and
ii) all the capital stock of Bayshore Foods Inc. ("Bayshore") by
Monaco Group Inc., a Delaware corporation ("Monaco") on August
20, 2004 pursuant to an asset purchase agreement dated July 1,
2004.
The unaudited pro forma consolidated financial statements of Monaco
included herein have been prepared by management of Monaco in
accordance with the accounting principles generally accepted in the
United States of America. They have been prepared from information
derived from the December 31, 2003 audited financial statements of
Monaco, the June 30, 2004 unaudited financial statements of Monaco:
i) the April 30, 2004 audited financial statements of Bayshore
and the October 31, 2003 and August 19, 2004 interim unaudited
financial statements of Bayshore, together with other information
available to the corporations. In the opinion of management of
Monaco, these unaudited pro forma consolidated financial
statements include all adjustments necessary for fair
presentation of the acquisition of the Bayshore assets by Monaco
as described below. The financial statements of Bayshore have
been converted from Canadian dollars to US dollars. Balance sheet
amounts at the rate of exchange in effect at April 30, 2004 of 1
US dollar equals 1.3707 Canadian dollars and at August 19, 2004
of 1 US dollar equals 1.2963 Canadian dollars. Revenues and
expenses for the twelve months ended October 31, 2003 and the six
months ended April 30, 2004 at the average rate of exchange in
effect for the period of 1 US dollar equals 1.4377 Canadian
dollars and 1 US dollar equals 1.3229 Canadian dollars,
respectively.
ii) the December 31, 2003 audited financial statements of Sweet
Valley and the June 30, 2004 unaudited financial statements of
Sweet Valley, together with other information available to the
corporations. In the opinion of management of Monaco, these
unaudited pro forma consolidated financial statements include all
adjustments necessary for fair presentation of the acquisition of
the Sweet Valley assets by Monaco as described below. The
financial statements of Sweet Valley have been converted from
Canadian dollars to US dollars. Balance sheet amounts at the rate
of exchange in effect at June 30, 2004 of 1 US dollar equals
1.3404 Canadian dollars. Revenues and expenses for the twelve
months ended December 31, 2003 and for the six months ended June
30, 2004 at the average rate of exchange in effect for the period
of 1 US dollar equals 1.3914 Canadian dollars and 1 US dollar
equals 1.3419 Canadian dollars, respectively.
In preparing the pro forma consolidated financial statements, no
adjustments have been made to reflect the additional costs or savings
that could result from combining the operations of Monaco, Sweet
Valley and Bayshore.
The unaudited pro forma consolidated financial statements should be
read in conjunction with the historical financial statements and notes
thereto referred to above. The unaudited pro forma consolidated
Monaco Group Inc.
Notes to the Pro Forma Consolidated Financial Statements
June 30, 2004
(Stated in US Dollars)
(Unaudited) - Page 2
---------
balance sheet gives effect to the acquisitions of Bayshore and the
Sweet Valley assets as if it had occurred on June 30, 2004. The
unaudited pro forma consolidated statements of operations gives effect
to the acquisitions of Bayshore and the Sweet Valley assets as if it
had occurred at the start of the fiscal period beginning on January 1,
2003. These unaudited pro forma financial statements are not
necessarily indicative of the financial position or results of
operations, which would have resulted if the combination and related
transactions had actually occurred on those dates.
Note 2 Acquisition of Sweet Valley's Assets and Business
-------------------------------------------------
Pursuant to an Asset Purchase Agreement dated May 25, 2004, and an
Amended Agreement dated June 21, 2004, a wholly-owned subsidiary of
Monaco acquired substantial all of the assets and business of Sweet
Valley. The acquisition has been accounted for using the purchase
method of accounting. Under this method, the shares issued are valued
at the fair value, agreed to by the purchaser and the vendor at
arms-length, of the assets and liabilities acquired determined at July
1, 2004 based on the unaudited working capital of Sweet Valley as
follows:
July 1, 2004
Fair Value
Acquired
--------------
Inventory $ 210,948
Capital assets 268,673
Goodwill 847,118
Assumed liabilities ( 77,639)
--------------
Fair value of 100% interest acquired $ 1,249,100
Future income taxes ( 26,112)
--------------
$ 1,222,988
==============
Consideration paid
Cash $ 272,848
Accounts payable 12,640
Shares issued at fair value - Note 5a(i) 937,500
==============
The carrying values of the assets and liabilities of Sweet Valley as
presented in the June 30, 2004 historical financial statements
approximate their fair values.
The expenses relating to the accounts payable portion that form part
of the Consideration paid noted above were incurred by a subsidiary of
Monaco subsequent to June 30, 2004. These accounts payable were not
previously accrued on Monaco's consolidated balance sheet as at June
30, 2004.
Monaco Group Inc.
Notes to the Pro Forma Consolidated Financial Statements
June 30, 2004
(Stated in US Dollars)
(Unaudited) - Page 3
---------
Note 3 Acquisition of Bayshore
-----------------------
Pursuant to a Share Purchase Agreement dated July 1, 2004, Monaco
acquired all of the capital stock of Bayshore. The acquisition has
been accounted for using the purchase method of accounting. Under this
method, the promissory note and the shares issued are valued at the
fair value, agreed to by the purchaser and the vendor at arms-length,
of the assets and liabilities acquired determined at August 20, 2004
based on the unaudited assets and liabilities of Bayshore as follows:
August 20,
2004
Fair Value
Acquired
---------------
Cash $ 5,360
Other current assets 194,186
Future income tax recovery 849
Trademarks 400,000
Goodwill 414,280
Assumed liabilities ( 206,649)
---------------
Fair value of 100% interest acquired $ 808,026
Future taxes ( 138,027)
---------------
$ 669,999
===============
Consideration paid
Promissory Note ($350,000 Canadian Dollars) $ 269,999
Shares issued at fair value - Note 5a(iii) 400,000
===============
The carrying values of the assets and liabilities of Bayshore as
presented in the August 19, 2004 historical financial statements
approximate their fair values.
Monaco Group Inc.
Notes to the Pro Forma Consolidated Financial Statements
June 30, 2004
(Stated in US Dollars)
(Unaudited) - Page 4
---------
Note 4 Share Capital
-------------
Authorized: 10,000,000 common shares, par value $0.001 per share
Pro forma Common Shares Issued:
Common shares Additional
Number Paid-in
of Shares Par Value Capital Deficit Total
----------- ----------- ----------- ----------- -----------
Monaco common shares at June 30, 2004 4,446,500 $ 4,447 $ 81,203 $ (131,514) $ ( 45,864)
Sweet Valley shares issued at June 30, 2004 30 22 - ( 106,903) (106,851)
Bayshore shares issued at April 30, 2004 200 154 - ( 4,302) ( 3,948)
Adjustments ( 230) ( 176) - 111,205 110,799
Issued pursuant to purchase agreement - Note 5a(i) 1,500,000 1,500 936,000 - 937,500
Issued pursuant to purchase agreement - Note 5a(iii) 400,000 400 399,600 - 400,000
----------- ----------- ----------- ----------- -----------
7,346,500 $ 7,347 $1,316,803 $ (131,514) $1,291,636
=========== =========== =========== =========== ===========
The number of shares issued and outstanding is that of Monaco.
Subsequent to June 30, 2004, Monaco increased its authorized common
stock to 15,000,000 shares, and authorized 4,000,000 preferred stock
at $0.001 par value.
Monaco Group Inc.
Notes to the Pro Forma Consolidated Financial Statements
June 30, 2004
(Stated in US Dollars)
(Unaudited) - Page 5
---------
Note 5 Pro Forma Adjustments
---------------------
The unaudited pro forma consolidated financial statements include the
following pro forma adjustments:
a) Subsequent to June 30, 2004, Monaco completed the following
transactions:
i) Purchased substantially all the assets and business of Sweet
Valley for $270,610 cash ("Cash Amount") and 750,000
exchangeable shares of a subsidiary of Monaco that are
exchangeable for 1,500,000 shares of Monaco common stock at
a per share price of $0.625;
ii) Monaco was advanced $61,922 (CDN $83,000) from a shareholder
and $210,926 (CDN $282,725) from a related party to Sweet
Valley for a total of $272,848. These funds were used to pay
the Cash Amount for the Sweet Valley acquisition and $2,238
of the legal and accounting expenses incurred related to
this transaction; and
iii) Monaco completed the Purchased all the capital stock of
Bayshore for $269,999 promissory note ("Debt Amount") and
400,000 shares of Monaco common stock at a per share price
of $1.00
b) Pursuant to the Sweet Valley asset purchase agreement dated May
25, 2004, and the amended agreement dated June 21, 2004, one of
Monaco's wholly-owned subsidiaries purchased, effective July 1,
2004, substantially all the assets and business of Sweet Valley,
excluding cash and accounts receivable, and assumed no
liabilities except for a business loan in the amount of $77,639
(CDN $104,067) and the premise lease located 4055 Sladeview
Cres., Unit #4, Mississauga, Ontario.
c) The expenses relating to the $12,640 accounts payable portion
that forms part of the Consideration paid (see Note 2) for the
Sweet Valley transaction were incurred by a subsidiary of Monaco
subsequent to June 30, 2004. These accounts payable were not
previously accrued on Monaco's consolidated balance sheet as at
June 30, 2004.
d) Pursuant to the Bayshore share purchase agreement dated July 1,
2004, Monaco purchased, on August 20, 2004, all the capital stock
of Bayshore, including Bayshore's trademarks valued at $400,000
and goodwill valued at $276,253.
e) During the month of June 2004, a subsidiary of Monaco sold
products to the predecessor to Sweet Valley in the amount of
$80,342 (CDN $109,080). This amount has been eliminated from
Monaco's pro forma consolidated statement of operations for the
period ended June 30, 2004. As at June 30, 2004, a subsidiary of
Monaco had accounts receivable from Sweet Valley in the amount of
$83,434 (CDN $111,835). Pursuant to the Sweet Valley asset
purchase agreement, Monaco's subsidiary did not acquire the
accounts receivable and account payable of Sweet Valley as at
June 30, 2004, therefore, Sweet Valley's accounts receivable and
accounts payable as presented in Monaco's pro forma consolidated
balance sheet as at June 30, 2004 did not include these amounts
and no further elimination was done for Monaco's subsidiary's
accounts receivable from Sweet Valley as at June 30, 2004.
Monaco Group Inc.
Notes to the Pro Forma Consolidated Financial Statements
June 30, 2004
(Stated in US Dollars)
(Unaudited) - Page 6
---------
Note 6 Pro Forma Earnings Per Share
----------------------------
Pro forma earnings per share has been calculated using the historical
weighted average number of shares previously reported by Monaco
combined with the shares issued pursuant to the Sweet Valley and
Bayshore purchase agreements.
Note 7 Pro Forma Consolidated Statement of Operations Computation Bayshore
-------------------------------------------------------------------
The pro forma consolidated statement of operations for the twelve
months ended October 31, 2003 for Bayshore has been computed using the
audited financial statements of Bayshore for the year ended April 30,
2004 and the unaudited financial statements of Bayshore for the six
months ended April 30, 2004 and 2003 as stated in Canadian Dollars
(CD$) as follows:
(1) (2) (1) - (2) (3) (4)
Twelve
Year ended Six months Six months Six months months
Apr. 30, Apr.30, Oct. 31, Apr. 30, Oct. 31,
2004 2004 2003 2003 2003
-------------- -------------- -------------- -------------- --------------
Sales CD$ 251,408 CD$ 108,746 CD$ 142,663 CD$ 221,343 CD$ 364,006
Cost of Sales 205,255 86,487 118,768 187,443 306,211
-------------- -------------- -------------- -------------- --------------
Gross Profit 46,153 22,259 23,895 33,900 57,795
-------------- -------------- -------------- -------------- --------------
Commissions 3,829 2,189 1,640 - 1,640
Other 1,008 77 931 - 931
-------------- -------------- -------------- -------------- --------------
4,837 2,266 2,571 - 2,571
-------------- -------------- -------------- -------------- --------------
50,990 24,525 26,466 33,900 60,366
-------------- -------------- -------------- -------------- --------------
Expenses
Advertising and promotion 2,766 880 1,886 1,202 3,088
Amortization 924 462 462 356 818
Bank charges and interest 465 263 202 906 1,108
Cash discounts given 786 31 755 2,160 2,915
Cash discounts received (2,195) (544) (1,651) (3,883) (5,534)
Freight 7,040 6,046 994 100 1,094
Insurance 2,512 1,972 540 80 620
Interest 448 244 204 279 483
Office and general 2,092 1,333 759 248 1,007
Product design 3,557 1,387 2,170 37,139 39,309
Professional fees 4,691 3,176 1,515 15,643 17,158
Telephone 2,349 1,917 432 - 432
Travel 17,579 8,888 8,691 3,372 12,063
-------------- -------------- -------------- -------------- --------------
43,014 26,055 16,959 57,602 74,561
-------------- -------------- -------------- -------------- --------------
Income (loss) before the
following 7,976 (1,530) 9,507 (23,702) ( 14,195)
Future income tax recovery 1,100 - 1,100 - 1,100
-------------- -------------- -------------- -------------- --------------
Net income (loss) for the
period CD$ 9,076 CD$ (1,530) CD$ 10,607 CD$ (23,702) CD$ (13,095)
============== ============== ============== ============== ==============
(c) Exhibits
Exhibit Number Description
- -------------- -----------
10.4 Share Purchase Agreement dated July 1, 2004 By and Among
Monaco Group Inc. and Amton Inc. (incorporated by reference
from the Company's Current Report on Form 8-K filed with the
SEC on July 2, 2004).
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Monaco Group Inc.
-----------------
(Registrant)
/s/ Peter Nelipa
-------------------------------
Peter Nelipa
Chief Executive Officer
(Duly Authorized Officer)
Date: November 15, 2004
EXHIBIT INDEX
-------------
Exhibit Number Description
- -------------- -----------
10.4 Share Purchase Agreement dated July 1, 2004 By and Among
Monaco Group Inc. and Amton Inc. (incorporated by reference
from the Company's Current Report on Form 8-K filed with the
SEC on July 2, 2004).