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EX-32.1 - SECTION 906 CERTIFICATION - Monster Arts Inc.ex321sec906.txt
EX-31.1 - SECTION 302 CERTIFICATION - Monster Arts Inc.ex311sec302.txt

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

           |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended March 31, 2011

                                       OR

          |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                 For the transition period from ______ to ______

                        Commission file number   000-53266

                                MONSTER OFFERS
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

              Nevada                                          26-1548306
-------------------------------                           -------------------
(State or other jurisdiction of                           (I.R.S. Employer
incorporation or organization)                            Identification No.)

                  4056 Valle Del Sol, Bonsall, CA  92003
               Mail Delivery - P.O. Box 1092, Bonsall, CA  92003
              ---------------------------------------------------
               (Address of principal executive offices)(Zip Code)
         Issuer's telephone number, including area code:  (760) 208-4905

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. Yes |X| No |_|

Indicate by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of
the Exchange Act (Check one).

Large accelerated filer     |_|                  Accelerated filer          |_|
Non-accelerated filer       |_|                  Smaller Reporting Company  |X|
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act).     Yes |_| No |X|

As of May 18, 2011, the registrant's outstanding common stock consisted
of 60,888,707 shares, $0.001 par value.  Authorized - 75,000,000 shares.

                                      1

Table of Contents Monster Offers Index to Form 10-Q For the Quarterly Period Ended March 31, 2011 Part I. Financial Information Page Item 1. Financial Statements Balance Sheets 3 Statements of Operations 4 Statements of Cash Flows 5 Notes to Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 19 Item 3. Quantitative and Qualitative Disclosures About Market Risk 27 Item 4T. Controls and Procedures 27 Part II Other Information Item 1. Legal Proceedings 31 Item 1A. Risk Factors 31 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 31 Item 3 -- Defaults Upon Senior Securities 31 Item 4 -- Submission of Matters to a Vote of Security Holders 33 Item 5 -- Other Information 33 Item 6. Exhibits 33 Signatures 35 2
Part I. Financial Information Item 1. Financial Statements Monster Offers (A Development Stage Company) Balance Sheets March 31, December 31, 2011 2010 (Unaudited) (Audited) ------------- ------------- ASSETS Current assets Cash $ 3,915 $ 36,531 Accounts receivable 8,271 6,352 Prepaid stock compensation 116,292 51,667 ------------- ------------- Total current assets 128,478 94,550 Other assets Unamortized financing fees 4,509 5,296 License 450,000 - ------------- ------------- Total other assets 454,509 5,296 ------------- ------------- TOTAL ASSETS $ 582,987 $ 99,846 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities Accounts payable $ 35,759 $ 10,800 Accrued interest 5,373 1,831 Convertible notes payable, net of unamortized discount of $40,527 and $44,363, respectively 152,915 99,899 ------------- ------------- Total current liabilities 194,047 112,530 ------------- ------------- Total liabilities 194,047 112,530 Stockholders' equity (deficit) Common stock, $0.001 par value, 75,000,000 shares authorized, 60,888,707 and 60,888,707 shares issued and outstanding as of 3/31/11 and 12/31/10, respectively 60,889 60,289 Additional paid-in capital 629,400 469,032 Treasury stock 12,000,000 and 12,000,000 shares as of 3/31/11 and 12/31/10, respectively - - Common stock receivable (8,400) (8,400) Common stock payable 450,974 - Accumulated deficit during development stage (743,923) (533,605) ------------- ------------- Total stockholders' equity (deficit) 388,940 (12,684) ------------- ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 582,987 $ 99,846 ============= ============= The accompanying notes are an integral part of these financial statements. 3
Monster Offers (A Development Stage Company) Statements of Operations (Unaudited) Inception For the three months ended (February 23, 2007) March 31, to March 31, 2011 2010 2011 ---------------- ---------------- ---------------- REVENUES Commission revenue $ 8,000 $ - $ 8,777 Commission revenue - related party 2,000 - 328,247 Services - related party 623 65,000 73,824 ---------------- ---------------- ---------------- Total Revenues 10,623 65,000 410,848 Cost of goods Commission paid- related party - - 249,828 ---------------- ---------------- ---------------- Total cost of goods - - 249,828 ---------------- ---------------- ---------------- Gross profit 10,623 65,000 161,020 EXPENSES Advertising 1,535 - 27,313 Audit fees 13,830 - 32,830 Expenses of spinoff 200 - 5,810 General & administrative 34,631 19,271 202,899 Professional fees 11,370 25 31,978 Officer compensation 35,500 - 95,500 Consulting services 97,317 - 507,935 ---------------- ---------------- ---------------- Total operating expenses 194,383 19,296 904,265 Other expenses Interest expense (3,542) - (5,373) Financing fees (23,016) - (34,915) Debt forgiveness - - 5,610 Refund of expense - - 34,000 ---------------- ---------------- ---------------- Total other expenses (26,558) - 678 ---------------- ---------------- ---------------- Net income (loss) $ (210,318) $ 45,704 $ (743,923) ---------------- ---------------- ---------------- Net loss per share- basic and diluted (0.00) 0.00 Weighted average number of common shares outstanding - basic and diluted 60,748,707 32,460,000 The accompanying notes are an integral part of these financial statements. 4
Monster Offers (A Development Stage Company) Statements of Cash Flows (Unaudited) Inception For the three months ended (February 23, 2007) March 31, to March 31, 2011 2010 2011 ---------------- ---------------- ---------------- OPERATING ACTIVITIES Net income (loss) $ (210,318) $ 45,704 $ (743,923) Adjustments to reconcile net income (loss) to net cash used by operating activities: Financing fees 23,016 - 34,915 Common shares issued for services 97,317 - 508,086 Changes in operating assets and liabilities: Decrease(increase) in accounts receivable (1,919) (61,943) (8,271) Decrease(increase) in unamortized financing fees 787 - (4,509) Increase in accounts payable 24,959 25 35,759 Increase in accrued interest 3,542 - 5,373 ---------------- ---------------- ---------------- Net cash used by operating activities (62,616) (16,214) (172,570) FINANCING ACTIVITIES Proceeds from convertible notes payable 30,000 - 118,000 Proceeds from issuance of common stock - 1,000 57,500 Contributed capital - - 985 ---------------- ---------------- ---------------- Net cash provided by financing activities 30,000 1,000 176,485 ---------------- ---------------- ---------------- NET CHANGE IN CASH (32,616) (15,214) 3,915 ---------------- ---------------- ---------------- CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 36,531 18,190 - ---------------- ---------------- ---------------- CASH AND CASH EQUIVALENTS - END OF PERIOD $ 3,915 $ 2,976 $ 3,915 ================ ================ ================ SUPPLEMENTAL DISCLOSURES: Interest paid $ - $ - $ - Income taxes paid $ - $ - $ - Non-cash investing and financing activities: Increase in prepaid stock compensation $ 156,000 $ - $ 207,667 Stock issued for purchase of license $ 450,000 $ - $ - The accompanying notes are an integral part of these financial statements. 5
Monster Offers (A Development Stage Company) Notes to the Financial Statements NOTE 1 - FINANCIAL STATEMENTS The accompanying financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at March 31, 2011 and for all periods presented have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 2010 audited financial statements. The results of operations for the period ended March 31, 2011 are not necessarily indicative of the operating results for the full year. NOTE 2 - GOING CONCERN These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. Since inception (February 23, 2007) through March 31, 2011, the Company recognized an accumulated deficit during development stage of approximately $743,923 The Company's ability to continue as a going concern is contingent upon the successful completion of additional financing arrangements and its ability to achieve and maintain profitable operations. Management plans to raise equity capital to finance the operating and capital requirements of the Company. Amounts raised will be used for further development of the Company's services, to provide financing for marketing and promotion, to secure additional property and equipment, and for other working capital purposes. While the Company is devoting its best efforts to achieve the above plans, there is no assurance that any such activity will generate funds that will be available for operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty. 6
Monster Offers (A Development Stage Company) Notes to the Financial Statements NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting ------------------- These financial statements are prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America. Cash and Cash Equivalents ------------------------- The Company considers all short-term investments with a maturity of three months or less at the date of purchase to be cash equivalents. As of March 31, 2011 and December 31, 2010, there are no cash equivalents. Use of Estimates ----------------- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Advertising ------------ Advertising costs are expensed when incurred. The Company incurred advertising expenses of $1,535 and $0 for the quarters ended March 31, 2011 and March 31, 2010, respectively. For the period since inception on February 23, 2007 through the quarter ended March 31, 2011, the Company has incurred advertising expenses of $27,313. Revenue Recognition ------------------- In accordance with ASC 605 and SEC Staff Accounting Bulletin 104, fee revenue is recognized in the period that the Company's advertiser customer generates a sale or other agreed-upon action on the Company's affiliate marketing networks or as a result of the Company's services, provided that no significant Company obligations remain, collection of the resulting receivable is reasonably assured, and the fees are fixed or determinable. All transactional services revenues are recognized on a gross basis in accordance with the provisions of ASC Subtopic 605-45, due to the fact that the Company is the primary obligor, and bears all credit risk to its customer, and publisher expenses that are directly related to a revenue-generating event are recorded as a component of commission paid-related party. 7
Monster Offers (A Development Stage Company) Notes to the Financial Statements Earnings per Share ------------------- Historical net (loss) per common share is computed using the weighted average number of common shares outstanding. Diluted earnings per share include additional dilution from common stock equivalents, such as stock issuable pursuant to the exercise of securities or other contracts to issue common stock that were exercised or converted into common stock or resulted in the issuance of common stock that shared in the earnings of the entity. Accounts receivable ------------------- Accounts receivable are stated at the amount management expects to collect from balances outstanding at year end. Management provides for probable uncollectible amounts through a charge to earnings and a credit to an allowance based on its assessment of the current status of individual accounts. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the valuation allowance. As of March 31, 2011 and December 31, 2010, we have $8,271 and $6,352 in accounts receivable and no amounts charged to allowance for doubtful accounts. Fair Value of Financial Instruments ----------------------------------- The carrying amounts of the financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities, approximate fair value due to the short maturities of these financial instruments. The notes payable are also considered financial instruments whose carrying amounts approximate fair values. 8
Monster Offers (A Development Stage Company) Notes to the Financial Statements Stock-based compensation ------------------------ The Company records stock based compensation in accordance with the guidance in ASC Topic 718 which requires the Company to recognize expenses related to the fair value of its employee stock option awards. This eliminates accounting for share-based compensation transactions using the intrinsic value and requires instead that such transactions be accounted for using a fair-value-based method. The Company recognizes the cost of all share-based awards on a graded vesting basis over the vesting period of the award. ASC 505, "Compensation-Stock Compensation", establishes standards for the accounting for transactions in which an entity exchanges its equity instruments to non-employees for goods or services. Under this transition method, stock compensation expense includes compensation expense for all stock-based compensation awards granted on or after January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of ASC 505. Income Taxes ------------ The provision for income taxes is the total of the current taxes payable and the net of the change in the deferred income taxes. Provision is made for the deferred income taxes where differences exist between the period in which transactions affect current taxable income and the period in which they enter into the determination of net income in the financial statements. Recent Accounting Pronouncements -------------------------------- We have examined all recent accounting pronouncements and believe that none of them will have a material impact on the financial statements of our company. 9
Monster Offers (A Development Stage Company) Notes to the Financial Statements NOTE 4 - STOCKHOLDERS' EQUITY (DEFICIT) Common Stock The Company is authorized to issue 75,000,000 shares of its $0.001 par value common stock. On February 23, 2007, a shareholder contributed capital of $400 for incorporating fees. On December 11, 2007, the Company issued 16,875,000 shares of its common stock to its founder for $11,250 in cash. The Founder then transferred these shares to an outside party for the same price on December 31, 2007. On December 15, 2007, a shareholder contributed capital of $585 for registration fees. The Company was a subsidiary of Tropical PC, Inc. On December 31, 2007, the record shareholders of Tropical PC, Inc. received a spin off dividend of one (1) common share, par value $0.001, of Monster Offers common stock for every share of Tropical PC, Inc. common stock owned for a total 1,215,000 (post- split) common shares issued. Of these 1,215,000 shares, 900,000 were returned and cancelled to the Company. On December 31, 2007, the Company issued 11,250,000 shares of its common stock pursuant to a Regulation D 506 offering for $33,750 in cash. On December 21, 2009, the Company authorized the sale of 20,250,000 unregistered restricted common shares in exchange for $13,500. $12,500 was received in December 2009, with a subscription receivable of $1,000 paid in January 2010. In August 2010, the Company reached a mutually agreeable understanding with a non-affiliated shareholder to cancel 1,500,000 (post-split) unregistered common shares he owns. These unregistered restricted shares were issued in a private offering with the understanding that the shareholder would purchase these shares and provide technical expertise to the company. Since the services were not delivered to the company's satisfaction, it has been agreed that these 1,500,000 unregistered common shares will be canceled and returned to the Company. 10
Monster Offers (A Development Stage Company) Notes to the Financial Statements On August 30, 2010, the Company authorized the issuance of 12,000,000 shares of restricted common stock, as per an Asset Exchange Agreement whereby an officer/director of the Company is to receive these shares of restricted common stock in exchange for cash of $8,000 and a computer software program called the Social Network Action Platform (SNAP). This software program was essential in order to launch the Company's website, www.monsteroffers.com. Until such time as the company can complete a thorough evaluation of the intangible acquired, as of September 30, 2010, the Company placed a nominal value on the software, based at par value $0.001 of the stock to be issued for this software. A total of $8,000 has been recorded as common stock receivables as of March 31, 2011. On September 1, 2010, the Company authorized the sale of 825,000 unregistered restricted common shares to three shareholders in exchange for entering into consulting agreements and cash of $550. The services of these consultants was necessary for the launch of the Company's website by integrating the recently acquired software into the site. A total fair value of $351,550 was placed by expensing the normal hourly rate charged by these consultants for the services rendered during the quarter. A total of $150 was received from one consultant and has been reduced from total consulting expense. A total of $400 has been recorded as common stock receivable as of March 31, 2011. On November 3, 2010, the Company issued 86,207 shares of its common stock as part of an S-8 registration with the SEC for legal and administrative services. These shares were issued for services, and expensed at the market stock price of $0.57 per share, for a total expense of $32,948. On November 18, 2010, Monster Offers issued 187,500 unregistered restricted shares in exchange for Investor and Public Relations services as part of a service agreement dated November 10, 2010. The shares were issued at a market value of $0.63 per share for a total consulting expense of $78,338. On November 18, 2010, the Company's Board of Directors approved a one-half- for-one (0.5:1) common stock dividend (the "dividend"), of the Company's issued and outstanding common stock, par value $0.001, with a record date of December 1, 2010 and a payment date of December 2, 2010. Each shareholder received a dividend of one (1) common share for every two (2) shares owned on the record date. As of the date the dividend was declared, there were 40,192,470 shares issued and outstanding. After the dividend, 60,288,707 shares were issued and outstanding. All shares contained herein are calculated post-split. 11
Monster Offers (A Development Stage Company) Notes to the Financial Statements On November 18, 2010, the Company received 12,000,000 shares of its common stock in exchange for its "Lead Generation Business Segment" in a transaction with the Company's former officer, Scott J. Gerardi. These shares have no value and been returned to treasury stock as of December 31, 2010. On January 21, 2011, the Company issued 400,000 unregistered shares in exchange for public relations and communications consulting services in accordance with an agreement dated January 21, 2011. The shares were valued at a market value of $0.26 per share, totaling $104,000. The total value was allocated between consulting expense and prepaid consulting expense based on a prorated portion of services performed during the quarter ended March 31, 2011 and the remaining portion of the term of the agreement. On January 21, 2011, the Company also issued 200,000 free-trading shares in exchange for consulting services in accordance with an agreement entered into on January 21, 2011. The shares were valued at a market value of $0.26 per share, totaling $52,000. The total value was allocated between consulting expense and prepaid consulting expense based on a prorated portion of services performed during the quarter ended March 31, 2011 and the remaining portion of the term of the agreement. On February 7, 2011, the Company entered into an agreement for business strategy and planning, market analysis, and marketing consulting services. In accordance with the terms of the agreement, 50,000 unregistered restricted shares of common stock will be exchanged for the services provided by the consultant. The shares will be earned in proportion to the pro-rated amount of time of the services performed over the term of the agreement and, in accordance with ASC 505-50, will be revalued and expensed at each interim financial statement date. The pro-rated number of shares, totaling 6,286 shares, were valued at a market value of $0.155 per share as of March 31, 2011, totaling $974, and an expense was recognized. As of March 31, 2011 the shares have not yet been issues and thus have been recorded as stock payable. On March 14, 2011, the Company entered into a Strategic Alliance and Licensing agreement with SSL5. As part of the agreement, the Company agreed to issue 3,000,000 unregistered restricted shares as consideration for an exclusive license of SSL5 existing intellectual property. The transaction was valued at the market value of $0.15 per share for a total of $450,000, and recorded as stock payable. See Note 7 for further details of the agreement. As of March 31, 2011 and December 31, 2010, the Company has 60,888,707 and 60,288,707 shares of its common stock issued and outstanding, respectively. 12
Monster Offers (A Development Stage Company) Notes to the Financial Statements Stock Options On March 14, 2011, as part of the Strategic Alliance and Licensing agreement mentioned above, the Company entered into a consulting agreement with SSL5, providing stock options and a seat on the Monster Offers board of directors to develop ongoing product strategy and development services. In accordance with the terms of the agreement, the Consulting company is entitled to purchase a total of 2,000,000 unregistered restricted shares of the Company over the term of the agreement of two years. Upon the completion of each 6-month period, a total of 500,000 shares will become vested and available for purchase by the Consultant. The exercise price of these shares will be at $0.001 per share, or par value. In the event the Company is sold or merged with another company, all remaining unvested shares will become fully vested immediately prior to any such transaction. A pro-rated portion of the unvested stock options for the service period from March 14 to March 31, 2011, totaling 41,667 shares, have been valued at $4,968 using the Black-Scholes option pricing model based upon the following assumptions: term of 2 years, risk free interest rate of 0.61%, a dividend yield of 0% and a volatility rate of 143%. 13
Monster Offers (A Development Stage Company) Notes to the Financial Statements NOTE 5 - DRAWDOWN EQUITY FINANCING AGREEMENT On December 29, 2010, the Company entered into a drawdown equity financing agreement and registration rights agreement (collectively the "Agreements") with Auctus Private Equity Fund, LLC ("Auctus"), the selling stockholder. In accordance with the Agreements, Auctus has committed, subject to certain conditions, to purchase up to $10 million of the Company's common stock over a term of up to two years. Although the Company is not mandated to sell shares under the Agreements, the Agreements give the Company the option to sell to Auctus shares of common stock at a per share purchase price equal to 97% of the lowest closing bid price during the five trading days following the Company's delivery of notice to Auctus (the "Notice"). At its option, the Company may set a floor price under which Auctus may not sell the shares which were the subject of the Notice. The floor shall be 75% of the average closing bid price of the stock over the preceding ten days prior to the Notice and can be waived at the discretion of the Company. The maximum amount of Common Stock that the Company can sell pursuant to any Notice is the greater of: (i) an amount of shares with an aggregate maximum purchase price of $500,000 or (ii) 200% of the average daily trading volume based on 20 days preceding the drawdown notice date. Auctus is not required to purchase the shares, unless the shares which are subject to the Notice have been registered for resale and are freely tradable in accordance with the federal securities, including the Securities Act of 1933, as amended, laws and except for conditions outside of Auctus' control. At the assumed offering price of $0.26 per share, we will be able to receive up to $1,950,000 in gross proceeds, assuming the sale of the entire 7,500,000 shares being registered hereunder pursuant to the Drawdown Equity Financing Agreement. We would be required to register 30,961,538 additional shares to obtain the balance of $10,000,000 under the Drawdown Equity Financing Agreement at the assumed offering price of $0.26. Management believes the Company will require $500,000 over the next six months through this Drawdown Equity Financing Agreement. There is uncertainty as to whether we will ever receive the full $10 million available under the equity line agreement. It is unlikely, that we will be required to register more shares, unless management identifies a major acquisition or opportunity for the Company. As the Company currently has 60,888,707 shares issued and outstanding, with 75,000,000 shares of common stock authorized, the Company would need to authorize additional shares of its Common Stock should the Company obtain the entire $10,000,000. 14
Monster Offers (A Development Stage Company) Notes to the Financial Statements The Company is obligated to file with the U.S. Securities and Exchange Commission (the "SEC") a registration statement on Form S-1, within 30 days from the date of the Agreements and to use all commercially reasonable efforts to have such registration statement declared effective by the SEC within 120 days of filing. The Company has agreed to pay Auctus an aggregate amount of $7,500 as an origination fee with respect to the transaction. This is a non-refundable origination fee equal to Two Thousand Five Hundred ($2,500) Dollars which was paid upon execution of the Drawdown Equity Financing Facility term sheet and Five Thousand ($5,000) Dollars in cash which will be taken out of the proceeds of the first Drawdown. As of March 31, 2011, there have been no sales of common stock in accordance with this agreement. NOTE 6 - CONVERTIBLE NOTES PAYABLE On November 9, 2010, the Company entered into an agreement with Asher Enterprises, Inc., a Delaware corporation, an accredited investor, whereby Asher Enterprises loaned the Company the aggregate principal amount of $53,000 together with any interest at the rate of eight percent (8%) per annum, until the maturity date of July 18, 2011. The original issue discount note, as described in ASC 480-55, may not be prepaid in whole or in part. If the Note is not paid in full with interest on the maturity date, the note holder has the right to convert this Note into restricted common shares of the Company. The conversion price shall equal the "Variable Conversion Price" (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower). The "Variable Conversion Price" shall mean 61% multiplied by the Market Price (representing a discount rate of 39%). "Market Price" means the average of the lowest three (3) Trading Prices for the Common Stock during the ten (10) Trading Day period ending one Trading Day prior to the date the Conversion Notice is sent by the Holder to the Borrower via facsimile. The original issue discount note is for $53,000 and a discount of $13,178 remains as of March 31, 2011. For the quarter ended March 31, 2011 and year ended December 31, 2010, $11,295 and $9,413 had been amortized and expensed, respectively. 15
Monster Offers (A Development Stage Company) Notes to the Financial Statements On December 1, 2010, an additional convertible note payable in the amount of $35,000 was entered into with Asher Enterprises with identical terms as the note entered into on November 9, 2010, the maturity date being August 29, 2011, with interest accruing at 8% per annum. If the Note is not paid in full with interest on the maturity date, the note holder has the same right to convert this Note into restricted common shares of the Company with the same discount as the note described above. The original issue discount note is for $35,000 and a discount of $12,432 remains as of March 31, 2011. For the quarter ended March 31, 2011 and year ended December 31, 2010, $7,459 and $2,486 had been amortized and expensed, respectively. On January 27, 2011, a third convertible note payable in the amount of $30,000 was entered into with Asher Enterprises with identical terms as the note entered into on November 9, 2010, the maturity date being October 31, 2011, with interest accruing at 8% per annum. If the Note is not paid in full with interest on the maturity date, the note holder has the same right to convert this Note into restricted common shares of the Company with the same discount as the note described above. The original issue discount note is for $30,000 and a discount of $14,917 remains as of March 31, 2011. For the quarter ended March 31, 2011, $4,262 had been amortized and expensed. NOTE 7 - STRATEGIC ALLIANCE & LICENSING AGREEMENT On March 14, 2011, Monster Offers (the "Company") entered into Strategic Alliance and Licensing Agreement with SSL5, a Nevada corporation. SSL5 has developed technology services pertaining to a mobile financial services platform, which provides secure person-to-person mobile money transfer services. Monster Offers and SSL5 formed a strategic alliance with respect to the integration, use and commercialization of Monster Offers and SSL5 Existing Intellectual Property to create new and derivative intellectual property to introduce to various markets. Monster Offers obtained a license of the Existing SSL5 Intellectual Property for the exclusive use of the strategic alliance. As consideration for this license, Monster Offers issued 3,000,000 of its unregistered restricted shares to SSL5. These shares were valued at the market rate of $0.15 per share, for a total of $450,000. Monster Offers and SSL5 plan to establish a new company as a 100% owned subsidiary of Monster Offers, in the State of Nevada, and to contribute the license of the Existing SSL5 Intellectual Property into the new subsidiary for its use and future development of new and derivative intellectual property. Any new and derivative intellectual property developed in conjunction with this Strategic Alliance and Licensing Agreement shall be owned exclusively by the new subsidiary. As of March 31, 2011, the subsidiary entity had not yet been established. 16
Monster Offers (A Development Stage Company) Notes to the Financial Statements As further consideration, the Company entered into a consulting agreement with SSL5, providing stock options and a seat on the Monster Offers board of directors to develop ongoing product strategy and development services. In accordance with the terms of the agreement, the Consulting company is entitled to purchase a total of 2,000,000 unregistered restricted shares of the Company over the term of the agreement of two years. Upon the completion of each 6-month period, a total of 500,000 shares will become vested and available for purchase by the Consultant. The exercise price of these shares will be at $0.001 per share, or par value. In the event that the Company is sold or merged with another company, all remaining unvested shares will become fully vested immediately prior to any such transaction. A pro-rated portion of the unvested stock options for the service period from March 14 to March 31, 2011, totaling 41,667 shares, have been valued at $4,968 using the Black-Scholes option pricing model based upon the following assumptions: term of 2 years, risk free interest rate of 0.61%, a dividend yield of 0% and a volatility rate of 142%. NOTE 8 - RELATED PARTY TRANSACTIONS For the three months ended March 31, 2011 and 2010, the Company received $2,623 and $65,000, respectively, from customers in which one of the Company's shareholders had ownership or was an affiliate, for work performed by subcontractors who are also related parties. The Company does not lease or rent any property. Office services are provided without charge by a director. Such costs are immaterial to the financial statements and, accordingly, have not been reflected therein. The officers and directors of the Company are involved in other business and may, in the future, become involved in other business opportunities. If a specific business opportunity becomes available, such persons may face a conflict in selecting between the Company and their other business interests. The Company has not formulated a policy for the resolution of such conflicts. As discussed in Note 4, on August 5, 2010, the Company entered into an Asset Exchange Agreement whereby an officer/director of the Company received 12,000,000 shares of restricted common stock in exchange for cash of $8,000 and a computer software program with no assigned value, called the Social Network Action Platform (SNAP). 17
Monster Offers (A Development Stage Company) Notes to the Financial Statements As discussed in Note 4, on November 18, 2010, the Company received 12,000,000 shares of its common stock in exchange for its "Lead Generation Business Segment" in a transaction with the Company's former officer, Scott J. Gerardi. On November 18, 2010, an officer/director of the Company contributed a software program to the Company that was developed for use by DrHealthSHares.com, a Web 3.0 social commerce solution for health and wellness that empowers like-minded collaborators to harness the collective knowledge and experience of the social crowd to improve the depth, breadth, and value of health information. The Company placed a nominal value on the software. NOTE 9 - SUBSEQUENT EVENTS On or about April 25, 2011, the Company entered into an agreement with Asher Enterprises, Inc., a Delaware corporation, an accredited investor, whereby Asher Enterprises loaned the Company the aggregate principal amount of $40,000 together with any interest at the rate of eight percent (8%) per annum, until the maturity date of January 27, 2012. This Note may not be prepaid in whole or in part. If the Note is not paid in full with interest on the maturity date, the note holder has the right to convert this Note into restricted common shares of the Company. The conversion price equals the "Variable Conversion Price" (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower). The "Variable Conversion Price" equals 61% multiplied by the Market Price (representing a discount rate of 39%). "Market Price" is the average of the lowest three (3) Trading Prices for the Common Stock during the ten (10) Trading Day period ending one Trading Day prior to the date the Conversion Notice is sent by the Holder to the Borrower. 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Item 2. - Management's Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Information The Company from time to time may make written or oral "forward-looking statements" including statements contained in this report and in other communications by the Company, which are made in good faith by the Company pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements of the Company's plans, objectives, expectations, estimates and intentions, which are subject to change based on various important factors (some of which are beyond the Company's control). The following factors, in addition to others not listed, could cause the Company's actual results to differ materially from those expressed in forward looking statements: the strength of the domestic and local economies in which the Company conducts operations, the impact of current uncertainties in global economic conditions and the ongoing financial crisis affecting the domestic and foreign banking system and financial markets, including the impact on the Company's suppliers and customers, changes in client needs and consumer spending habits, the impact of competition and technological change on the Company, the Company's ability to manage its growth effectively, including its ability to successfully integrate any business which it might acquire, and currency fluctuations. All forward-looking statements in this report are based upon information available to the Company on the date of this report. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law. Critical Accounting Policies ---------------------------- There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations", included in our Annual report for the fiscal year ended December 31, 2010. 19
Results of Operations --------------------- Overview of Current Operations ------------------------------ Monster Offers ("the Company") was incorporated in the State of Nevada on February 23, 2007, under the name Tropical PC Acquisition Company. On December 11, 2007, the Company amended its Articles of Incorporation changing its name to Monster Offers. The Company was originally incorporated as a wholly owned subsidiary of Tropical PC, Inc., a Nevada corporation. Tropical PC was incorporated September 22, 2004. On December 11, 2007, the Company amended its Articles of Incorporation changing its name from Tropical PC Acquisition Corporation to Monster Offers. Our Business ------------ Monster Offers is a daily deal aggregator, collecting daily deals from multiple sites in local communities across the U.S. and Canada. Focused on providing innovation and utility for Daily Deal consumers and providers, the company collects and publishes thousands of daily deals and allows consumers to organize these deals by geography or product categories, or to personalize the results using keyword search. We utilize proprietary technology that we have developed, acquired, and/or licensed to deploy our products and services. Our primary services include the aggregation and promotion of Daily Deals to consumers via our primary website; www.monsteroffers.com which provides search capabilities for users to quickly find Daily Deals based on filtering algorithms, zip code, predictive text search by city, and by user preferences. The Company earns fees from data reporting services, traffic generation, and from our affiliate partners via marketing services including the online promotion of its affiliate partners daily deals through its website www.monsteroffers.com, selling of industry data and analysis reports, and executing internet and social marketing campaigns for customers. Our affiliate program partners are also offered search result placement and other benefits including the ability to participate in early release or beta programs for new innovations that the Company offers. Current and potential customers include media and content publishers, advertisers, direct marketers, and advertising agencies seeking to increase brand impressions, sales, and customer contact through online marketing initiatives. Our customers also utilize our products and services to analyze the competitive landscape within their target markets. All transactional services revenues are recognized on a gross basis. 20
Marketing Strategy ------------------ The Monster Offers website generates page views from consumers searching the Internet for Daily Deals and other relevant information. As users search through the various deals that are presented via the website, they click on specific partner deals for additional information and are directed to our partner websites whereby they can purchase an advertised deal or offer directly. In these instances, the information about the user and the Monster Offers referral to a partner website is tracked and the affiliate partner then pays Monster Offers a fee, typically a percentage of the total transaction that occurs on the partner website. Monster Offers also earns fees from other content providers and advertisers based on the volume of traffic the Monster Offers site generates and the number of times content is displayed to potential consumers. Monster Offers has also recently entered the mobile money payment market via a strategic alliance and exclusive license to technology developed by SSL5. Monster Offers plans to add significant ease-of-use functionality for the consumer to its website and to expand its affiliate partner network further leveraging this new technology in 2011. Email Marketing --------------- Websites that we own or are digitally produced for clients are promoted by the engagement of opt-in email marketing companies. In other words, opt-in emails are sent to users who have requested to receive marketing messages from a particular email partner/website. These partners currently market to multiple consumer and/or business databases that they own or are managed by them under a list management agreement. Search Engine Marketing ----------------------- We utilize search engine marketing companies to direct consumers to websites. Funds are placed in an open account with each provider and are spent on a Cost-Per-Click auction basis. Google, Yahoo, and FaceBook are the primary providers of this service. Affiliate Marketing ------------------- We engage affiliate network destinations where online affiliates can promote various client offers and promotions through Daily Deal applications. These traffic publishers choose, manage, and execute marketing cost per action client campaigns. They are also provided with real-time commission tracking. 21
Software Development -------------------- We utilize the services of outsourced contractors for the development of our software technology. We also utilize the services of technology consultants to assist in the development of our strategic product development roadmap, and the ongoing management of all software development outsourced contractors. As the Company continues to grow, we may hire direct employees to fill various technology management, development, testing and quality control roles as needed. Competition ----------- The Daily Deal advertising and marketing industry is highly competitive. Management believes that the ability to provide innovative consumer and business solutions that fulfill unmet industry needs is a competitive advantage. A number of companies are active in specific aspects of our business. As a Daily Deal provider, Monster Offers would face competition from a growing list of other Daily Deal providers including Groupon, Living Social, Travelzoo, and literally hundreds of smaller start-up companies who continue to emerge in the Daily Deal market. These companies all aim to offer online "Daily Deals" directly to the consumer. Rather than compete with all of these companies, the Monster Offers business model is to "aggregate" the Daily Deals that are offered by these companies into a single website making it easier and more convenient for the consumer to search and purchase the deals that they seek. As a Daily Deal aggregator, Monster Offers does face a growing number of other companies with a similar aggregation model including Yipit, thedealmap, 8coupons, and others. Monster Offers plans to leverage its latest innovations in mobile banking and money sharing technology with prospective competitors to turn competitors into partners, therefore reducing any substantial direct competition in the Daily Deal industry. Recent Event ------------ On March 14, 2011, Monster Offers entered into Strategic Alliance and Licensing Agreement with SSL5, a Nevada corporation. SSL5 has developed technology services pertaining to a mobile financial services platform, which provides secure person-to-person mobile money transfer services. Monster Offers and SSL5 formed a strategic alliance with respect to the integration, use and commercialization of Monster Offers and SSL5 Existing Intellectual Property to create new and derivative intellectual property to introduce to various markets. Monster Offers obtained a license of the Existing SSL5 Intellectual Property for the exclusive use of the strategic alliance. As consideration for this license, Monster Offers will issue 3,000,000 of its unregistered restricted shares to SSL5. 22
Monster Offers plans to establish a new company (NewCo) as a 100% owned subsidiary of Monster Offers, in the State of Nevada, and to contribute the license of the Existing SSL5 Intellectual Property into the NewCo for its use and future development of new and derivative intellectual property. Any new and derivative intellectual property developed in conjunction with this Strategic Alliance and Licensing Agreement shall be owned exclusively by NewCo. As further consideration, Monster Offers agreed to provide SSL5 with a consulting agreement, stock options, and a seat on the Monster Offers board of directors to develop ongoing product strategy and development services. Results of Operations for the quarter ended March 31, 2011 ---------------------------------------------------------- Revenues -------- During the three month period ended March 31, 2011, the Company generated $10,623 in revenues as compared to $65,000 for the same period last year. Management does not expect to receive any significant related party revenues through the end of its fiscal year. Additionally, the drop of revenues was accounted by management's decision to shift its business focus from affiliate marketing to building a social media commerce division. Management believes this decision will benefit the Company in the long-term. There can be no assurances that the Company can be profitable or that the Company will not incur operating losses in the future. For the three months ending March 31, 2011, the Company experienced general and administrative expenses of $34,631 as compared to general and administrative expenses of $19,271 for the same period last year. For the three months ending March 31, 2011, the Company expensed advertising fees of $1,535 as compared to no advertising fees for the same period last year. For the three months ending March 31, 2011, the Company expensed consulting compensation of $97,317 as compared to no consulting compensation for the same period last year. Total expenses for the quarter ending March 31, 2011 were $194,383 versus $19,296 for the same period last year. The increase in expenses for the period ending March 31, 2011 was primarily due to the issuance of unregistered restricted common shares to two shareholders in exchange for entering into consulting agreements. The services of these consultants was necessary for the Company's business. A valuation of $156,000 was placed on these shares by expensing the normal hourly rate charged by these consultants for the services rendered during the quarter as contributed capital. 23
For the three months ended March 31, 2011, the Company had $(210,318) in net losses as compared to net income of $45,704 for the same period last year. Since the Company's inception, on February 23, 2007, the Company had a net loss of $(743,923). Plan of Operation ----------------- Management does not believe that the Company will be able to generate any significant profit during the coming year. Management believes that general and administrative costs as well as building its infrastructure will most likely curtail any significant profits. Notwithstanding, the Company anticipates it will continue to generate losses and therefore it may be unable to continue operations in the future. Originally, management anticipated a need to raise $475,000 to fully implement its business plan. After careful consideration and a detailed analysis by new management, the Company now expects it will need to raise $5,000,000 to forward its business plan, and Monster Offers would have to issue debt or equity or enter into a strategic arrangement with a third party. There can be no assurance that additional capital will be available to Monster Offers, especially with the current economic environment. We recently entered into a Drawdown agreement with Auctus Private Equity Fund, LLC Pursuant to the Drawdown Agreement, which has a total drawdown amount of ten million dollars ($10,000,000), Monster Offers has the right to sell to Auctus at its sole discretion and Auctus has the obligation to purchase through advances to the Company, the Company's common stock through Draw-Down Notices issued by the Company. The number of shares of common stock that Auctus shall purchase shall be determined by dividing the dollar amount raised, which may or may not equal the entire amount of the advance by the purchase price. As the Company currently has 60,888,707 shares issued and outstanding, with 75,000,000 shares of common stock authorized, the Company would need to authorize additional shares of its Common Stock should the Company obtain the entire $10,000,000. Based on current cash on hand of $3,915 as of March 31, 2011, current assets of $128,478 and $194,047 in current liabilities, management is concerned that Monster Offers may not have sufficient funds to meet its financial obligations for the next twelve months. Management believes it has sufficient cash reserves to keep the Company operational through the second quarter. Management will need to obtain outside funding to keep the Company operational beyond the second quarter. There are no assurances that management will be able to secure outside funding. Management anticipates that the Company will need to spend a minimum of $15,000 over the next twelve months to pay for audit and legal fees to keep the company fully reporting. Failure to secure additional funding can result in the company being fully reporting, but not operational. The Company will require additional funds to build its business infrastructure. In the event the Company requires additional funds, the Company will have to seek loans or equity placements to cover such cash needs. There are no assurances additional capital will be available to the Company on acceptable terms. 24
If the Company falls short of capital to keep the Company fully reporting, our sole officer/director has agreed to donate funds to the operations of the Company, in order to keep it fully reporting for the next twelve (12) months, without seeking reimbursement for funds donated. No agreement exists that our sole officer/director will continue to donate funds to the operations of the Company for the next twelve months; therefore, there is no guarantee that he will continue to do so in the future. Going Concern ------------- Going Concern - The Company has recognized an accumulated deficit since inception of $743,923. Although the Company has recognized total revenues of $410,848 with gross profits of $161,020, the Company's ability to continue as a going concern is contingent upon the successful completion of additional financing arrangements and its ability to achieve and maintain profitable operations. The financial statements have been prepared assuming the Company will continue to operate as a going concern which contemplates the realization of assets and the settlement of liabilities in the normal course of business. No adjustment has been made to the recorded amount of assets or the recorded amount or classification of liabilities which would be required if the Company were unable to continue its operations. (See Financial Footnote 2) Summary of any product research and development that we will perform for the term of our plan of operation. ---------------------------------------------------------------------------- We do not anticipate performing any additional significant product research and development under our current plan of operation. Expected purchase or sale of plant and significant equipment ------------------------------------------------------------ We do not anticipate the purchase or sale of any plant or significant equipment; as such items are not required by us at this time. Significant changes in the number of employees ---------------------------------------------- As of March 31, 2011, we did not have any employees. We are dependent upon our sole officer and director for our future business development. As our operations expand we anticipate the need to hire additional employees, consultants and professionals; however, the exact number is not quantifiable at this time. 25
Liquidity and Capital Resources ------------------------------- The Company has limited financial resources available, which has had an adverse impact on the Company's liquidity, activities and operations. These limitations have adversely affected the Company's ability to obtain certain projects and pursue additional business. Without realization of additional capital, it would be unlikely for the Company to continue as a going concern. In order for the Company to remain a Going Concern it will need to find additional capital. Additional working capital may be sought through additional debt or equity private placements, additional notes payable to banks or related parties (officers, directors or stockholders), or from other available funding sources at market rates of interest, or a combination of these. The ability to raise necessary financing will depend on many factors, including the nature and prospects of any business to be acquired and the economic and market conditions prevailing at the time financing is sought. No assurances can be given that any necessary financing can be obtained on terms favorable to the Company, or at all. As of March 31, 2011, our current assets were $128,478 and our current liabilities were $194,047. As of March 31, 2011, our total assets were $582,987 compared to total assets of $99,846 as of December 31, 2010. Total assets as of March 31, 2011 consisted of $3,915 in cash, $8,271 in accounts receivable, $116,292 in prepaid stock compensation, $4,509 in unamortized financing fees and $450,000 in license ownership. As of March 31, 2011, our current and total liabilities were $194,047 compared to total liabilities of $112,530 as of December 31, 2010. Our liabilities consisted of $35,759 in accounts payable, $5,373 in accrued interest and $152,915 in a convertible note payable. Stockholders' equity increased from $(12,684) as of December 31, 2010 to $388,940 as of March 31, 2011. We have not generated positive cash flows from operating activities. For the three months ended March 31, 2011, net cash flow used in operating activities was $(62,616) compared to net cash flow used in operating activities of $(16,214) for the three months ended March 31, 2010. During the three month periods ended March 31, 2011 and March 31, 2010, net cash flow provided from financing activities was $30,000 and $1,000, respectively. The Company has no employment agreements in place with its officers, nor does the Company owe its officers any accrued compensation, as the Officers agreed to work for the company at no cost, until the company can become profitable on a consistent Quarter-to-Quarter basis. On March 14, 2011, the Company entered into a Strategic Alliance and Licensing agreement with SSL5. As part of the agreement, the Company agreed to issue 3,000,000 unregistered restricted shares as consideration for an exclusive license of SSL5 existing intellectual property. The transaction was valued at the market value of $0.15 per share for a total of $450,000. See Note 7 for further details of the agreement. 26
Off-Balance Sheet Arrangements ------------------------------ We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results or operations, liquidity, capital expenditures or capital resources that is material to investors. Critical Accounting Policies and Estimates ------------------------------------------ Revenue Recognition: We recognize revenue from product sales once all of the following criteria for revenue recognition have been met: pervasive evidence that an agreement exists; the services have been rendered; the fee is fixed and determinable and not subject to refund or adjustment; and collection of the amount due is reasonably assured. Item 3. Quantitative and Qualitative Disclosures about Market Risk. Not applicable. Item 4T. Controls and Procedures Evaluation of Disclosure Controls and Procedures ------------------------------------------------ Our disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in rules and forms adopted by the SEC, and that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures. Management, with the participation of the Chief Executive Officer and the Chief Financial Officer, who is also the sole member of our Board of Directors, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on such evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that, our disclosure controls and procedures were not effective. Our disclosure controls and procedures were not effective because of the "material weaknesses" described below under "Management's report on internal control over financial reporting," which are in the process of being remediated as described below under "Management Plan to Remediate Material Weaknesses." 27
Management's Report on Internal Control over Financial Reporting ---------------------------------------------------------------- Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting, as defined in rules promulgated under the Exchange Act, is a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer and affected by our Board of Directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Internal control over financial reporting includes those policies and procedures that: o pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; o provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and our Board of Directors; and o provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable, not absolute, assurance that the objectives of the control system are met and may not prevent or detect misstatements. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process, and it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Further, over time control may become inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2010. In making its assessment, management used the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Based on its assessment, management has concluded that we had certain control deficiencies described below that constituted material weaknesses in our internal controls over financial reporting. As a result, our internal control over financial reporting was not effective as of March 31, 2011. 28
A "material weakness" is defined under SEC rules as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of a company's annual or interim financial statements will not be prevented or detected on a timely basis by the company's internal controls. As a result of management's review of the investigation issues and results, and other internal reviews and evaluations that were completed after the end of quarter related to the preparation of management's report on internal controls over financial reporting required for this quarterly report on Form 10-Q, management concluded that we had material weaknesses in our control environment and financial reporting process consisting of the following: 1) lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; 2) inadequate segregation of duties consistent with control objectives; and 3) ineffective controls over period end financial disclosure and reporting processes. We do not believe the material weaknesses described above caused any meaningful or significant misreporting of our financial condition and results of operations for the quarter ended March 31, 2011. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods. Management Plan to Remediate Material Weaknesses ------------------------------------------------ Management is pursuing the implementation of corrective measures to address the material weaknesses described below. In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we have initiated, or plan to initiate, the following series of measures: We will create a position to segregate duties consistent with control objectives and will increase our personnel resources and technical accounting expertise within the accounting function when funds are available to us. We plan to appoint one or more outside directors to our board of directors who shall be appointed to an audit committee resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures such as reviewing and approving estimates and assumptions made by management when funds are available to us. 29
We believe the remediation measures described above will remediate the material weaknesses we have identified and strengthen our internal control over financial reporting. We are committed to continuing to improve our internal control processes and will continue to diligently and vigorously review our financial reporting controls and procedures. As we continue to evaluate and work to improve our internal control over financial reporting, we may determine to take additional measures to address control deficiencies or determine to modify, or in appropriate circumstances not to complete, certain of the remediation measures described above. Changes in Internal Control over Financial Reporting ---------------------------------------------------- There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. This quarterly report does not include an attestation report of the Corporation's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Corporation's registered public accounting firm pursuant to temporary rules of the SEC that permit the Corporation to provide only the management's report in this quarterly report. (c) Changes in internal controls over financial reporting ---------------------------------------------------------- There was no change in our internal controls over financial reporting that occurred during the period covered by this report, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting. 30
PART II. OTHER INFORMATION Item 1 -- Legal Proceedings From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are not presently a party to any material litigation, nor to the knowledge of management is any litigation threatened against us, which may materially affect us. Item 1A - Risk Factors See Risk Factors set forth in Part I, Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2010 and the discussion in Item 1, above, under "Liquidity and Capital Resources." Item 2 -- Unregistered Sales of Equity Securities and Use of Proceeds On January 21, 2011, the Company issued 400,000 unregistered shares in exchange for public relations and communications consulting services in accordance with an agreement dated January 21, 2011. The shares will be issued pursuant to the exemption from registration provided by Section 4(2) of the Securities Act. We believed that Section 4(2) was available because the offer and sale did not involve a public offering and there was not general solicitation or general advertising involved in the offer or sale. The consultant is a financially sophisticated individual. Before he received these unregistered securities, he was known to us and our management, through pre-existing business relationships, as a long standing business associate. We did not engage in any form of general solicitation or general advertising in connection with this transaction. The Consultant was provided access to all material information, which he requested and all information necessary to verify such information and was afforded access to our management in connection with this transaction. The Consultant acquired these securities for investment and not with a view toward distribution, acknowledging such intent to us. He understood the ramifications of his actions. The shares of common stock issued contained a legend restricting transferability absent registration or applicable exemption. On January 21, 2011, the Company issued 200,000 free-trading shares in exchange for consulting services in accordance with an agreement entered into on January 21, 2011. We believed that Section 4(2) was available because the offer and sale did not involve a public offering and there was not general solicitation or general advertising involved in the offer or sale. The consultant is a financially sophisticated individual. Before he received these registered securities, he was known to us and our management, through pre-existing business relationships, as a long standing business associate. 31
We did not engage in any form of general solicitation or general advertising in connection with this transaction. The Consultant was provided access to all material information, which he requested and all information necessary to verify such information and was afforded access to our management in connection with this transaction. The Consultant acquired these securities for investment and not with a view toward distribution, acknowledging such intent to us. He understood the ramifications of his actions. The shares of common stock issued contained a legend restricting transferability absent registration or applicable exemption. On February 7, 2011, the Company issued 50,000 unregistered restricted shares of common stock in exchange for business strategy and planning, market analysis, and marketing consulting services as part of an agreement dated February 7, 2011. We believed that Section 4(2) was available because the offer and sale did not involve a public offering and there was not general solicitation or general advertising involved in the offer or sale. The consultant is a financially sophisticated individual. Before he received these unregistered securities, he was known to us and our management, through pre-existing business relationships, as a long standing business associate. We did not engage in any form of general solicitation or general advertising in connection with this transactions. The Consultant was provided access to all material information, which he requested and all information necessary to verify such information and was afforded access to our management in connection with this transaction. The Consultant acquired these securities for investment and not with a view toward distribution, acknowledging such intent to us. He understood the ramifications of his actions. The shares of common stock issued contained a legend restricting transferability absent registration or applicable exemption. On March 14, 2011, the Company entered into a Strategic Alliance and Licensing agreement with SSL5. As part of the agreement, the Company agreed to issue 3,000,000 unregistered restricted shares as consideration for an exclusive license of SSL5 existing intellectual property. The transaction was valued at the market value of $0.15 per share for a total of $450,000. Although the shares have yet to be issued, we believed that Section 4(2) was available because the offer and sale did not involve a public offering and there was not general solicitation or general advertising involved in the offer or sale. SSL5 is known to us and our management, through pre-existing business relationships, as a long standing business associate. We did not engage in any form of general solicitation or general advertising in connection with this transaction. SSL5 was provided access to all material information, which they requested and all information necessary to verify such information and was afforded access to our management in connection with this transaction. SSL5 will acquire these securities for investment and not with a view toward distribution, acknowledging such intent to us. He understood the ramifications of his actions. The shares of common stock to be issued will contain a legend restricting transferability. Item 3 -- Defaults Upon Senior Securities None. 32
Item 4 -- Submission of Matters to a Vote of Security Holders None. Item 5 -- Other Information None. Item 6 -- Exhibits Incorporated by Reference ------------------------- Filed Period Filing Exhibit Exhibit Description herewith Form ending Exhibit date ------------------------------------------------------------------------------- 3.1 Articles of Incorporation, SB-2 3.1 01/15/2008 as currently in effect ------------------------------------------------------------------------------- 3.2 Bylaws SB-2 3.2 01/15/2008 as currently in effect ------------------------------------------------------------------------------- 3.3 Amended Articles of SB-2 3.3 01/15/2008 Incorporation as currently in effect. ------------------------------------------------------------------------------- 10.1 Asset Exchange Agreement by 8-K 10.1 09/02/2010 and between Monster Offers and Prime Mover Global, LLC, dated August 5, 2010. ------------------------------------------------------------------------------- 10.2 Share Lock-Up Agreement with 8-K 10.2 09/02/2010 Scott J. Gerardi dated, August 6, 2010. ------------------------------------------------------------------------------- 10.3 Share Lock-Up Agreement with 8-K 10.3 09/02/2010 Powerhouse Development dated, August 6, 2010. ------------------------------------------------------------------------------- 10.4 Share Lock-Up Agreement with 8-K 10.4 09/02/2010 Paul Gain dated, August 6, 2010. ------------------------------------------------------------------------------- 10.5 Share Lock-Up Agreement with 8-K 10.5 09/02/2010 Jonathan W. Marshall, dated, August 6, 2010. ------------------------------------------------------------------------------- 10.6 Investor and Public Relations 8-K 10.9 11/19/2010 Agreement between Monster Offers and Emerging Growth Research, LLC, dated November 10, 2010. ------------------------------------------------------------------------------- 33
------------------------------------------------------------------------------- 10.7 Exchange and Hold Harmless 8-K 10.10 11/24/2010 Agreement with Scott J. Gerardi dated November 19, 2010. ------------------------------------------------------------------------------- 10.8 Drawdown Equity Financing 8-K 10.6 01/03/2011 Agreement between Monster Offers and Auctus Private Equity Fund, LLC dated December 23, 2010. ------------------------------------------------------------------------------- 10.9 Registration Rights Agreement 8-K 10.7 01/03/2011 between Monster Offers and Auctus Private Equity Fund, LLC dated December 23, 2010. ------------------------------------------------------------------------------- 10.10 Consulting Agreement with S-8 10.1 -1//27/2011 Christian R. Hansen, dated January 21, 2011 ------------------------------------------------------------------------------- 10.11 Investor and Public Relations 8-K 10.11 02/03/2011 Agreement between Monster Offers and Equititrend Advisors, LLC, dated January 21, 2011. ------------------------------------------------------------------------------- 10.12 Strategic Alliance and Licensing 8-K 10.12 03/16/2011 Agreement between Monster Offers and SSL5, dated March 14, 2011. ------------------------------------------------------------------------------- 23.1 Consent Letter from De Joya X Griffith & Company, LLC ------------------------------------------------------------------------------- 31.1 Certification of President X and Principal Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act ------------------------------------------------------------------------------- 31.2 Certification of President X and Principal Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act ------------------------------------------------------------------------------- 34
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 hereunto duly authorized. Monster Offers ------------------------ Registrant By: /s/ Paul Gain -------------------------------- Name: Paul Gain Title: Director and CEO Principal Executive, and Accounting Officer Dated: May 18, 2011 ------------ 35