SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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

September 30, 2013

 

o	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from			to
Commission file number:	000-52754

 

MONARCH INVESTMENT PROPERTIES, INC.

(Exact name of registrant as specified in its charter)

 

Nevada		84-1251553
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

1801 North Military Trail, Suite 204, Boca Raton, FL		33431
(Address of principal executive offices)		(Zip Code)

 

(561) 391-6117

(Registrant’s telephone number, including area code)

 

Comstock Tailings Company, Incorporated

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes    o No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

x Yes    o 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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the exchange act.

 

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Small reporting company	x

 

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

 

The number of shares outstanding of the registrant’s common stock as of November 15, 2013 was 16,168,733.

TABLE OF CONTENTS
				Page
PART I.		FINANCIAL INFORMATION
Item 1.		Financial Statements.
		Condensed Balance Sheets as of September 30, 2013 (Unaudited) and June 30, 2013.		4
		Condensed Statements of Operations for the Three Months Ended September 30, 2013 and 2012 (Unaudited).		5
		Condensed Statements of Changes in Stockholders’ Deficiency for the Three Months Ended September 30, 2013 (Unaudited).		6
		Condensed Statements of Cash Flows for the Three Months Ended September 30, 2013 and 2012 (Unaudited).		7
		Notes to the Unaudited Condensed Financial Statements as of September 30, 2013 and 2012.		8
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations.		12
Item 3.		Quantitative and Qualitative Disclosures About Market Risk.		16
Item 4.		Controls and Procedures.		17
PART II.		OTHER INFORMATION
Item 1.		Legal Proceedings.		17
Item 1A.		Risk Factors.		17
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds.		17
Item 3.		Defaults Upon Senior Securities.		17
Item 4.		Mine Safety Disclosures.		17
Item 5.		Other Information.		18
Item 6.		Exhibits.		18
		SIGNATURES		19

 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

 

This report contains forward-looking statements. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include our status as a shell company as well as other risks including, but are not limited to:

 

	●	our lack of an operating business and dependence on a related party to pay our operating expenses,
	●	our inability to close a reverse merger or other business combination with an operating entity,
	●	our need for additional capital,
	●	our auditors have expressed doubt about our ability to continue as a going concern,
	●	conflicts of interest which may impact our officers and directors,
	●	potential dilution to our stockholders,
	●	control by our management,
	●	risks associated with dependence on a single business unit, and
	●	the lack of liquidity of an investment in our common stock.

 

Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements and readers should carefully review this report in its entirety, as well as the risks described in Item 1A. - Risk Factors appearing in our Annual Report on Form 10-K for the year ended June 30, 2013. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. These forward-looking statements speak only as of the date of this report, and you should not rely on these statements without also considering the risks and uncertainties associated with these statements and our business.

 

OTHER PERTINENT INFORMATION

 

Unless specifically set forth to the contrary, when used in this report the terms “Monarch,” the “Company,” “we,” “us,” “ours,” and similar terms refers to Monarch Investment Properties, Inc., a Nevada corporation. When used herein, the terms “fiscal 2013” refers to the fiscal year ending June 30, 2013 and “fiscal 2012” refers to the fiscal year ended June 30, 2012. 

 PART I. FINANCIAL INFORMATION

 

ITEM 1.        FINANCIAL STATEMENTS

 

MONARCH INVESTMENT PROPERTIES, INC.

CONDENSED BALANCE SHEETS

 

		September 30, 2013 (Unaudited)				June 30, 2013
ASSETS
CURRENT ASSETS
Cash		$	91			$	38
Total Current Assets			91				38
TOTAL ASSETS		$	91			$	38
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
CURRENT LIABILITIES
Accounts payable and accrued expenses		$	27,411			$	26,967
Affiliated party debt			557,632				534,365
Convertible judgment debt payable, affiliated party			274,996				268,945
Total Current Liabilities			860,039				830,277
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ DEFICIENCY
Preferred stock, $0.01 par value, 25,000,000 shares authorized, no shares issued and outstanding			—				—
Common stock, $.001 par value, 100,000,000 shares authorized, 16,168,733 shares issued and outstanding, respectively			16,169				16,169
Additional paid-in capital			2,834,341				2,834,341
Accumulated deficit			(3,710,458	)			(3,680,749	)
Total Stockholders’ Deficiency			(859,948	)			(830,239	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY		$	91			$	38

   

See accompanying notes to the unaudited condensed financial statements

MONARCH INVESTMENT PROPERTIES, INC.

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

 

		Three Months Ended
		September 30,
		2013				2012
Revenue		$	—			$	—
General and Administrative expenses			7,190				8,547
Loss from operations			(7,190	)			(8,547	)
Other (expense) income:
Interest expense, affiliated parties			22,519				17,249
Net Loss		$	(29,709	)			(25,796	)
Net loss per common share:
Basic and fully diluted		$	(0.00	)		$	(0.00	)
Weighted average number of common shares outstanding:
Basic			16,168,733				16,168,733
Fully diluted			16,168,733				16,168,733

  

See accompanying notes to the unaudited condensed financial statements

MONARCH INVESTMENT PROPERTIES, INC.

CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIENCY

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2013

(Unaudited)

 

						Common Stock								Additional								Total
		Preferred								Par Value				Paid-In				Accumulated				Stockholders’
		Shares				Shares				Amount				Capital				Deficit				Deficiency
Balance at June 30, 2013			—				16,168,733			$	16,169			$	2,834,341			$	(3,680,749	)		$	(830,239	)
Net Loss																			(29,709	)			(29,709	)
Balance at September 30, 2013			—				16,168,733			$	16,169			$	2,834,341			$	(3,710,458	)		$	(859,948	)

  

See accompanying notes to the unaudited condensed financial statements

MONARCH INVESTMENT PROPERTIES, INC.

CONDENSED STATEMENT OF CASH FLOWS

(Unaudited)

 

		Three Months Ended
		September 30,
		2013				2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss		$	(29,709	)		$	(25,796	)
Adjustments to reconcile net loss to net cash used in operating activities:
Changes in operating assets and liabilities:
Increase (decrease) in accounts payable and accrued expenses			444				(2,482	)
Increase in affiliated party debt			17,967				15,337
Increase in convertible judgment debt payable			6,051				3,663
Total adjustments			24,462				16,518
Net cash used in operating activities			(5,247	)			(9,278	)
CASH FLOWS FROM INVESTING ACTIVITIES:			—				—
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in affiliated party debt			5,300				9,500
Net cash provided by financing activities			5,300				9,500
NET INCREASE IN CASH			53				222
CASH - BEGINNING OF PERIOD			38				428
CASH - END OF PERIOD		$	91			$	650
SUPPLEMENTAL CASH FLOW DATA:
Cash paid for interest		$	—			$	—
Cash paid for income taxes		$	—			$	—

 

See accompanying notes to the unaudited condensed financial statements

Monarch Investment Properties, Inc.

Notes to Unaudited Condensed Financial Statements

September 30, 2013 and 2012

 

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 flow at September 30, 2013 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. These financial statements should be read in conjunction with the audited financial statement for the years ended June 30, 2013 and 2012 included in the Annual Report filed with the Securities and Exchange Commission on Form 10-K.

 

The results of operations for the period ended September 30, 2013 are not necessarily indicative of the operating results for the full year.

 

Note 2 – Significant Accounting Policies

 

The significant accounting policies are summarized as follows:

 

Use of Estimates

 

Management of Monarch has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates.

 

Fair Value of Financial Instruments

 

Fair value estimates and assumptions and methods used to estimate the fair value of the Company’s assets and liabilities are made in accordance with the requirements of the Financial Accounting Standards Board (the “FASB”), Accounting Standards Codification (“ASC”) Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”).

 

ASC 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows: Level 1 are observable inputs such as quoted prices in active markets; Level 2 are inputs other than the quoted prices in active markets that are observable either directly or indirectly; and Level 3 are unobservable inputs in which there is little or no market data, which require the Company to develop its own assumptions. This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value.

 

As of September 30, 2013 the Company has no assets or liabilities which it measures and carries on its balance sheet at fair value on a recurring basis. Management has estimated the fair values of cash, accounts payable and accrued expenses to be approximately their respective carrying values reported on these statements because of their short maturities.

 

Statements of Cash Flows

 

For the purposes of the statements of cash flows we consider all highly liquid investments purchased with a remaining maturity of three months or less to be cash equivalents.

 

Reclassifications

 

Certain Reclassifications have been made to the prior periods to conform to the current period presentation.

 

New Accounting Pronouncements

 

Management does not anticipate that the adoption of recently issued accounting pronouncements will have a material impact on the Company’s results of operations, financial position, or cash flow.

Monarch Investment Properties, Inc.

Notes to Unaudited Condensed Financial Statements

September 30, 2013 and 2012

 

Note 3 – Going Concern

 

As reflected in the accompanying financial statements, the Company incurred a net loss of $29,709 and a negative cash flow from operations of $5,247 for the three months ended September 30, 2013, has an accumulated deficit of $3,710,458 and a stockholders’ deficiency of $859,948 at September 30, 2013. The ability of the Company to continue as a going concern is dependent upon its ability to obtain financing and achieve profitable operations. The financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The Company is currently being funded by its majority shareholder.

 

Note 4 – Accounts Payable and Accrued Expenses

 

Accounts payable and accrued expenses consist of:

 

		September 30, 2013				June 30, 2013
Legal fees		$	5,700			$	6,102
Accounting and Auditing			9,000				9,900
Miscellaneous, other			12,711				10,965
Total accounts payable and accrued expenses		$	27,411			$	26,967

 

Note 5 – Convertible Judgment Debt Payable, Affiliated Party

 

Listed below is a summary of the transactions related to the judgment (the “JJFN Judgment”) obtained by JJFN Holdings, Inc. (“JJFN”) against us in November 2004. Unpaid portions of the JJFN Judgment bear interest at the statutory interest rate of 9% per annum:

 

Original judgment		$	1,100,000
Interest 1999 through June 2005			643,500
Partial payment made November 2004			(155,000	)
Balance, June 30, 2005			1,588,500
Interest June 2005 through June 2006			77,902
Amount exchanged for Common Stock			(1,500,000	)
Balance, June 30, 2006			166,402
Interest July 2006 through June 2007			14,657
Balance, June 30, 2007			181,059
Interest July 2007 through June 2008			14,648
Balance, June 30, 2008			195,707
Interest July 2008 through June 2009			14,647
Balance, June 2009			210,354
Interest July 2009 through June 2010			14,648
Balance, June 2010			225,002
Interest July 2010 through June 2011			14,647
Balance, June 2011			239,649
Interest July 2011 through June 2012			14,648
Balance, June 30, 2012			254,297
Interest July 2012 through June, 2013			14,648
Balance, June 30, 2013			268,945
Interest July, 2013 through September, 2013			6,051
Balance, September 30, 2013		$	274,996

Monarch Investment Properties, Inc.

Notes to Unaudited Condensed Financial Statements

September 30, 2013 and 2012

 

Note 5 – Convertible Judgment Debt Payable, Affiliated Party (continued)

 

At September 30, 2013, the judgment payable with accrued interest is $274,996 and is convertible at $0.10 per share into Common Stock.

 

Note 6 – Affiliated Party Debt

 

An affiliated or related party is generally defined as (i) any person that holds 10% or more of the Company’s securities and their immediate families, (ii) the Company’s management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Company, or (iv) anyone who can significantly influence the financial and operating decisions of the Company. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.

 

To date, our operations have been funded by Strategic Capital Resources, Inc. (“Strategic”), which is an entity controlled by one of our executive officers, who is also our majority stockholder. Listed below is a summary of the debt we owe to Strategic.

 

		Three Months Ended September 30, 2013				Year Ended June 30, 2013
Due to major stockholder/creditor, beginning of year		$	534,365			$	448,903
Additional borrowings			23,267				85,462
Balance End of period		$	557,632			$	534,365

 

Additional borrowing for the three months ended September 30, 2013 comprised of $5,300 of cash advances, interest on debt of $16,467, and management fees of $1,500 for the use of office space, as well as for administrative and management services provided by Strategic.

 

The loan amount due is payable on demand and bears interest at 12% per annum. Interest is due and added to the payable amount on the first day of each month. Interest was expensed for the three months ended September 30, 2013 in the amount of $16,467. Management believes that the terms of the loan were made on equal or better terms than were available elsewhere.

 

Note 7 – Income Taxes

 

FASB ASC 740 - Income Taxes, provides for the recognition and measurement of deferred income tax benefits based on the likelihood of their realization in future years. A valuation allowance must be established to reduce deferred income tax benefits if it is more likely than not that, a portion of the deferred income tax benefits will not be realized. Therefore, a valuation allowance equal to the potential deferred tax benefit has been established in full, resulting in no deferred tax benefit as of the balance sheet dates.

 

Note 8 – Stockholders’ Deficiency

 

Preferred Stock and Common Stock

 

The Company is authorized to issue 100,000,000 shares of common stock, $0.001 par value, and 25,000,000 shares of preferred stock, $0.01 par value.

 

Preferred Stock

 

The preferred stock may be issued in one or more series, with the rights of each series, including voting rights, to be determined by the Board of Directors prior to each issuance to the full extent permitted by Nevada law. No shares of preferred stock have been issued. 

Monarch Investment Properties, Inc.

Notes to Unaudited Condensed Financial Statements

September 30, 2013 and 2012

 

Note 8 – Stockholders’ Deficiency (continued)

 

Common Stock

 

The common stock may be issued at any time, without stockholder approval and the Board of Directors is able to determine all of the terms of those shares, including but not limited to the following:

 

	(i)	the voting rights, if any, except that the issuance of preferred stock or series common stock which entitles holders thereof to more than one vote per share requires the affirmative vote of the holders of a majority of the combined voting power of the then outstanding shares of the Company’s capital stock entitled to vote generally in the election of directors;
	(ii)	the dividend rate and preferences, if any, which that preferred stock or common stock will have compared to any other class; and
	(iii)	the redemption and liquidation rights and preferences, if any, which that preferred stock or common stock will have compared to any other class.

 

The holders of common stock are entitled to one vote per share on matters on which they are entitled to vote. At September 30, 2013 there were 16,168,733 shares of common stock outstanding.

 

Common Stock Purchase Warrant

 

There were 1,100,000 common stock warrants as of September 30, 2013. Each warrant is exercisable into one share of the Company’s common stock. A summary of the status of the warrants as of September 30, 2013 and June 30, 2013 and the changes are presented below:

 

		September 30, 2013								June 30, 2013
		Number of Shares				Weighted Average Exercise Price				Number of Shares				Weighted Average Exercise Price
Outstanding at beginning of period			1,100,000			$	0.001				1,100,000			$	0.001
Warrants granted			—				—				—				—
Outstanding at end of period			1,100,000			$	0.001				1,100,000			$	0.001

 

The following additional information relates to warrants outstanding as of September 30, 2013:

 

Exercise Price		Number of Warrants Outstanding and Exercisable		Weighted Average Exercise Price		Weighted Average Remaining Life (Years)
$   0.001		1,100,000		$   0.001		9.6

 

Note 9 – Earnings (Loss) Per Share

 

Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share are computed assuming the exercise or conversion of common stock equivalent shares, if dilutive, consisting of unissued shares under options and warrants. Since the 1,100,000 shares under outstanding warrants and the potential conversion of the $274,996 convertible debt into 2,749,960 shares of common stock are both anti-dilutive due to the Company’s net loss, no diluted per share amounts are presented.

 

Note 10 – Litigation, Claims, and Assessments

 

From time to time in the normal course of business the Company will be involved in litigation. The Company’s management has determined any asserted or unasserted claims to be immaterial to the financial statements. 

Monarch Investment Properties, Inc.

Notes to Unaudited Condensed Financial Statements

September 30, 2013 and 2012

 

Note 11 – Subsequent Events 

 

The Company believes that is has reached an Agreement in principle, for a business combination with The 360 Agency, LLC.

 

The 360 Agency, LLC and affiliates are engaged in the business of Sports Management, Consulting, Sports Products, Promotions and Sales, as well as business management, mergers and acquisitions.

 

The 360 Agency, LLC is headquartered in New York City and the management team has more than 50 years of experience in that industry.

 

We will file an 8-K with a copy of the formally executed Letter of Intent if and when it is executed.

 

There can be no assurance that a Letter of Intent will be executed, a merger agreement finalized or that the transaction will close and/or be successful.

 

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

The following discussion and analysis presents a review of the operating results of the Company for the three months ended September 30, 2013 and September 30, 2012, respectively, and the financial condition of the Company at September 30, 2013. The discussion and analysis should be read in conjunction with the financial statements and accompanying notes included herein, as well as the Company’s audited financial statements for the years ended June 30, 2013 and 2012 contained in our Annual Report on Form 10-K for the year ended June 30, 2012 as previously filed with the Securities Exchange Commission.

 

Overview

 

We are considered a “shell company” under Federal securities laws. Our management and majority shareholder are not in the business of acquiring, promoting or dealing in shell companies. Our management, majority shareholders and affiliates have control of our company as a result of a lawsuit filed against our company and its principals. This lawsuit resulted in in the JJFN Judgment, of which as portion was converted to equity, thereby giving our management and majority shareholders control of our company. It was never the intent of management to get involved in public shell companies other than the possibility of operating or participating in the future operations of those companies.

 

Our business plan is to seek to acquire assets or shares of an entity actively engaged in business which generates revenues in exchange for our securities. We will not restrict our search to any specific business, industry, or geographical location and we may participate in a business venture of virtually any kind or nature. This discussion of the proposed business is purposefully general and is not meant to be restrictive of our virtually unlimited discretion to search for and enter into potential business opportunities. Management anticipates that it may be able to participate in only one potential business venture because we have nominal assets and limited financial resources. This lack of diversification should be considered a substantial risk to our stockholders because it will not permit us to offset potential losses from one venture against gains from another.

 

Plan of Operations

 

We currently plan to investigate and, if such investigation warrants, acquire a target company or business seeking the perceived advantages of being a publicly held corporation and, to a lesser extent that desires to employ our funds in its business. Our principal business objective for the next 12 months and beyond will be to achieve long-term growth potential through a combination with a business rather than immediate, short-term earnings. We will not restrict our potential candidate target companies to any specific business, industry or geographical location and, thus, may acquire any type of business.

 

The analysis of new business opportunities will be undertaken by or under the supervision of Mr. David Miller, our President. As of the date of this filing, we are not a party to any definitive agreement with any party. In our efforts to analyze potential acquisition targets, we may consider the following kinds of factors:

 

	●	potential for growth, indicated by new technology, anticipated market expansion or new products;

	●	competitive position as compared to other firms of similar size and experience within the industry segment as well as within the industry as a whole;

	●	strength and diversity of management, either in place or scheduled for recruitment;

●

capital requirements and anticipated availability of required funds, to be provided by us or from operations, through the sale of additional securities, through joint ventures or similar arrangements or from other sources;

	●	the cost of participation by us as compared to the perceived tangible and intangible values and potentials;

	●	the extent to which the business opportunity can be advanced;

	●	the accessibility of required management expertise, personnel, raw materials, services, professional assistance and other required items; and

●

other relevant factors.

 

In applying the foregoing criteria, no one of which will be controlling, our management will attempt to analyze all factors and circumstances and make a determination based upon reasonable investigative measures and available data. Potentially available business opportunities may occur in many different industries, and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex. Due to the limited capital we have available for investigation, we may not discover or adequately evaluate adverse facts about the opportunity to be acquired.

 

The manner in which we participate in an opportunity will depend upon the nature of the opportunity, our respective needs and desires as well as those of the promoters of the opportunity, and the relative negotiating strength of us and such promoters.

 

It is likely that we will acquire our participation in a business opportunity through the issuance of common stock or other securities. Although the terms of any such transaction cannot be predicted, it should be noted that in certain circumstances the criteria for determining whether or not an acquisition is a so-called “tax free” reorganization under Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the “Code”), depends upon the issuance to the stockholders of the acquired company of at least 80% of the common stock of the combined entities immediately following the reorganization. If a transaction were structured to take advantage of these provisions rather than other “tax free” provisions provided under the Code, all prior stockholders would in such circumstances retain 20% or less of the total issued and outstanding shares. Under other circumstances, depending upon the relative negotiating strength of the parties, prior stockholders may retain substantially less than 20% of the total issued and outstanding shares. This could result in substantial additional dilution to the equity of those who were our stockholders prior to such reorganization.

 

Our present stockholders will likely not have control of a majority of our voting shares following a reorganization transaction. As part of such a transaction, our current directors may resign and new directors may be appointed without any vote by stockholders.

 

In the case of an acquisition, the transaction may be accomplished upon the sole determination of our management without any vote or approval by stockholders. In the case of a statutory merger or consolidation directly involving our company, it will likely be necessary to call a stockholders’ meeting and obtain the approval of the holders of a majority of the outstanding shares. The necessity to obtain such stockholder approval may result in delay and additional expense in the consummation of any proposed transaction and will also give rise to certain appraisal rights to dissenting stockholders. Most likely, management will seek to structure any such transaction so as not to require stockholder approval if possible.

 

It is anticipated that the investigation of specific business opportunities and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require substantial management time and attention and substantial cost for accountants, attorneys and others. If a decision is made not to participate in a specific business opportunity, the costs theretofore incurred in the related investigation would not be recoverable. Furthermore, even if an agreement is reached for the participation in a specific business opportunity, the failure to consummate that transaction may result in our loss of the related costs incurred.

 

Going Concern

 

We are a shell company. We do not have any revenue generating operations and have an accumulated deficit of approximately $3,710,458 at September 30, 2013. At September 30, 2013 we had minimal cash, no other assets and our total liabilities were approximately $860,039. The report of our independent registered public accounting firm on our financial statements for the year ended June 30, 2013 contains an explanatory paragraph regarding our ability to continue as a going concern. The Company has incurred operating losses and will have to obtain additional capital to sustain operations. Our ability to continue as a going concern is dependent upon our ability to obtain the necessary financing to meet our obligations when they become due or to consummate a business combination with an operating company that has profitable operations. There are no assurances that we will continue as a going concern.

 

Financial Condition and Changes

 

Cash

 

We have minimal cash and are dependent in the short term on affiliated parties to continue to infuse capital to meet our obligations. There is no assurance that this funding will continue.

Accounts Payable and Accrued Expenses

 

Accrued expenses at September 30, 2013 and June 30, 2013 consisted primarily of professional fees. Listed below is a summary of the transactions related to accounts payable and accrued expenses:

 

		September 30, 2013				June 30, 2013
Legal Fees		$	5,700			$	6,102
Accounting & Auditing			9,000				9,900
Miscellaneous, other			12,711				10,965
Total Accounts Payable & Accrued Expenses		$	27,411			$	26,967

 

Convertible Judgment Debt Payable, Affiliated Party

 

Listed below is a summary of the transactions related to the JJFN Judgment obtained against us in November 2004.

 

Unpaid portions of the JJFN Judgment bear interest at the rate of 9% per annum:

 

Original judgment		$	1,100,000
Interest 1999 through June 2005			643,500
Partial payment made November 2004			(155,000	)
Balance, June 30, 2005			1,588,500
Interest June 2005 through June 2006			77,902
Amount exchanged for Common Stock			(1,500,000	)
Balance, June 30, 2006			166,402
Interest July, 2006 through June 2007			14,657
Balance, June 30, 2007			181,059
Interest July, 2007 through June 2008			14,648
Balance, June 30, 2008			195,707
Interest July, 2008 through June 2009			14,647
Balance, June 2009			210,354
Interest July, 2009 through June 2010			14,648
Balance, June 2010			225,002
Interest July, 2010 through June 2011			14,647
Balance, June 2011			239,649
Interest July, 2011 through June 2012			14,648
Balance, June 30,  2012			254,297
Interest July, 2012 through June 2013			14,648
Balance, June 30, 2013			268,945
Interest July, 2013 through September, 2013			6,051
Balance, September 30, 2013		$	274,996

 

Affiliated Party Debt

 

To date, our operations have been funded by Strategic which is controlled by one of our executive officers and our majority stockholder. Listed below is a summary of the transactions related to the debt we owe to Strategic:

 

Balance,  June 30, 2013		$	534,365
Interest			16,467
Management Fee			1,500
Advances			5,300
Balance, September 30, 2013		$	557,632

The loan amount is payable on demand and bears interest at 12% per annum. Interest is due and added to the payable amount on the first day of each month. Management believes the terms on the loan were made on equal or better than terms available elsewhere.

 

$500 per month is charged by Strategic to our company for the ongoing maintenance of its files and records, preparation of work papers for the quarterly reviews, as well as the preparation of work papers for the year end audit for the outside auditors. This monthly payment also includes the preparation of quarterly reports of Form 10-Q, as well as the Annual Report on Form 10-K.

 

Results of Operations

 

We have generated no revenues since our fiscal year ended 1998 and will not generate revenues until, at the earliest, the completion of a business combination. There can be no assurance that we will be able to consummate a business combination on terms acceptable to us and our stockholders or at all.

 

The following tables provide information on our general and administrative expenses for the three months ended September 30, 2013 as compared to the three months ended September 30, 2012. 

 

		Three Months Ended September 30,
		2013				2012				Increase (Decrease)
Accounting Fees		$	2,000			$	5,020			$	(3,020	)
Consulting			1,170				650				520
Management Fees			1,500				1,500				—
Edgarization			1,447				800				647
Stock Transfer Fees			351				350				1
Miscellaneous Fees			722				227				495
TOTAL		$	7,190			$	8,547				1,357

 

General and administrative expenses decreased $1,357 respectively, for the three months ended September 30, 2013 from the comparable periods in fiscal 2012. Included in our general and administrative expenses in all periods is the management fee we pay Strategic. The decreases in our general and administrative expenses in the fiscal 2013 periods from the fiscal 2012 periods include:

 

●

Accounting fees decreased $3,020 for the three (3) months ended September 30, 2013 compared to 2012.

 

The Company has a fixed fee with its independent auditors so it is able to accrue with accuracy the quarterly fee to be charged.

 

●

Consulting fees increased $520 for the three (3) months ended September 30, 2013 compared to 2012.

 

We utilize a “Rent-A-CFO” to assist in the preparation of our quarterly financial statements, assist in complying with our reporting obligations.

 

The increase is due to the expansion of XBRL “tagging” requirements.

 

●

Edgarization and XBRL tagging requirements increased by $647 for the three (3) months ended September 30, 2013 compared to 2012 as a result of the XBRL “tagging” requirements.

 

●

Miscellaneous fees increased by $495 for the three (3) months ended September 30, 2013 compared to 2012 as a result of additional legal fees incurred to comply with the SEC reporting requirements.

 

●

We anticipate that our operating expenses may increase if and when a Letter of Intent is executed in connection with a business combination (See “Subsequent Events”).

 

●

Interest expense for the three (3) months ended September 30, 2013 increased $5,720 compared to 2012.

 

The increase is due to additional advances as well as higher loan balances.

Liquidity and Capital Resources

 

Liquidity is the ability of a company to generate sufficient cash to meet its needs for cash. At September 30, 2013, our cash balance was $91 and we had a working capital deficit of $859,948, as compared to cash on hand of $38 and a working capital deficit of $830,239 at June 30, 2013.

 

Accounts payable and accrued expenses, which consist primarily of professional and accounting fees, increased $444 at September 30, 2013 from June 30, 2013 which is attributable to ordinary operating expenses.

 

Convertible judgment debt payable, affiliated party represents amounts due under the JJFN Judgment which is convertible at the option of the holder into shares of our common stock based upon a conversion price of $0.10 per share. The increase from June 30, 2013 to September 30, 2013 represents post-judgment interest, at the statuary rate of 9%.

 

Affiliated party debt increased $23,267 at September 30, 2013 as compared to June 30, 2013. This increase represents the accrual of the $500 monthly management fee for fiscal 2013, cash advances of $5,300 for our working capital needs, and interest of $16,467 on the amounts due Strategic.

 

To date, the Company’s operations have been funded by Strategic which is controlled by the Company’s President. We currently do not have sufficient working capital to meet any of our current or anticipated obligations for the next 12 months. We do not have any internal or external sources of capital and are dependent upon advances from Strategic for funds necessary to pay our operating expenses. Our ability to continue as a going concern depends on Strategic’s continued funding of our operating expenses and our ability to seek out potential merger and acquisition partners. If we are not able to access capital as necessary it is possible we will be unable to close an acquisition which will provide operating revenues to our company. In that event, the likelihood that we can continue as a going concern is doubtful and investors could lose their entire investment in our company.

 

Critical Accounting Policies

 

The significant accounting policies are summarized as follows:

 

Use of Estimates

 

Our management has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates.

 

Fair Value of Financial Instruments

 

The carrying amounts reported in the balance sheet for cash, accounts payable and accrued expenses, convertible judgment debt payable and stockholder payable approximate their fair market value based on the short-term maturity of these instruments. FASB ASC 820 requires disclosures about the fair value for all financial instruments, whether or not recognized, for financial statement purposes. Disclosures about fair value of financial instruments are based on pertinent information available to management as of March 31, 2013. Accordingly, the estimates presented in these statements are not necessarily indicative of the amounts that could be realized on disposition of the financial instruments.

 

Management has estimated the fair values of cash, accounts payable and accrued expenses to be approximately their respective carrying values reported on these statements because of their short maturities.

 

Our accounting policies and recent accounting pronouncements are described in Note 4 to our audited financial statements for the fiscal years ended June 30, 2013 and 2012 on Form 10-K filed with the SEC.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements, investments in special purpose entities or undisclosed borrowings or debt. Additionally, we are not a party to any derivative contracts or synthetic leases.

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

Not applicable to smaller reporting companies.

ITEM 4.

CONTROLS AND PROCEDURES.

 

Disclosure Controls and Procedures

 

Our President, who serves as our principal executive officer, and our Treasurer, who serves as our principal financial and accounting officer, are responsible for establishing and maintaining disclosure controls and procedures for us. Disclosure controls and procedures are controls and procedures designed to reasonably assure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, such as this report, is recorded, processed, summarized and reported within the time periods prescribed by SEC rules and regulations, and to reasonably assure that such information is accumulated and communicated to our management, including our President and our Treasurer, to allow timely decisions regarding required disclosure.

 

Our management does not expect that our disclosure controls or our internal controls will prevent all error and fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control systems are met. In addition, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the control. The design of any systems of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of these inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

 

As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of September 30, 2013, the end of the period covered by this report, our management concluded its evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. As of the evaluation date, our President and our Treasurer concluded that we maintain disclosure controls and procedures that are effective in providing reasonable assurance that information required to be disclosed in our reports under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods prescribed by SEC rules and regulations, and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting

 

There was no change in our internal control over financial reporting identified in connection with our evaluation that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

PART II. OTHER INFORMATION

 

ITEM 1.

LEGAL PROCEEDINGS.

 

None.

 

ITEM 1A.

RISK FACTORS.

 

You should carefully consider all the risks described as previously discussed on our June 30, 2013 Form 10-K, which constitute the material risks facing us.

 

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

None.

 

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.

 

None.

 

ITEM 4.

MINE SAFETY DISCLOSURES.

 

Not applicable to our company.

ITEM 5.

OTHER INFORMATION.

 

None.

 

ITEM 6.

EXHIBITS.

 

31.1	Certification of Principal Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002
31.2	Certification of Principal Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002
32.1	Certifications Pursuant to Section 906 of Sarbanes-Oxley Act of 2002

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.
MONARCH INVESTMENT PROPERTIES, INC.

 

Date:		November 20, 2013
By:	/s/	David Miller
		David Miller President, principal executive officer
Date:		November 20, 2013
By:	/s/	Philip Bloom
		Philip Bloom Treasurer, principal financial and accounting officer