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

December 31, 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)

 

N/A

(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).

o 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 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 January 31, 2014 was 16,168,733. 

TABLE OF CONTENTS
				Page
PART I.		FINANCIAL INFORMATION
Item 1.		Financial Statements.
		Condensed Balance Sheets as of December 31, 2013 (Unaudited) and June 30, 2013.		4
		Condensed Statements of Operations for the Three and Six Months Ended December 31, 2013 and 2012 (Unaudited).		5
		Condensed Statements of Changes in Stockholders’ Deficiency for the Six Months Ended December 31, 2013 (Unaudited).		6
		Condensed Statements of Cash Flows for the Six Months Ended December 31, 2013 and 2012 (Unaudited).		7
		Notes to the Condensed Unaudited Financial Statements as of December 31, 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.		15
Item 4.		Controls and Procedures.		15
PART II.		OTHER INFORMATION
Item 1.		Legal Proceedings.		16
Item 1A.		Risk Factors.		16
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.		17
Item 6.		Exhibits Index.		17
SIGNATURES				18
EXHIBITS
Exhibit 17.1		Amendment to Letter of Intent Dated February 24, 2014		19
Exhibit 31.1		Section 302 Certification of Principal Executive Officer.		20
Exhibit 31.2		Section 302 Certification of Principal Financial Officer.		22
Exhibit 32		Section 906 Certification of Officers.		23

 

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,” “Company,” “we,” “us,” “ours,” and similar terms refers to Monarch Investment Properties, Inc., a Nevada corporation.

 

PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS.

 

MONARCH INVESTMENT PROPERTIES, INC.

CONDENSED BALANCE SHEETS

 

		December 31, 2013 (Unaudited)				June 30, 2013 (1)
ASSETS
CURRENT ASSETS
Cash		$	139			$	38
Total Current Assets			139				38
TOTAL ASSETS		$	139			$	38
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
CURRENT LIABILITIES
Accounts Payable and Accrued expenses		$	30,978			$	26,967
Convertible judgment debt payable, affiliated party			281,286				268,945
Affiliated party debt			584,526				534,365
Total Current Liabilities			896,790				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			(3,747,161	)			(3,680,748	)
Total Stockholders’ Deficiency			(896,651	)			(830,238	)
TOTAL LIABILITIES & STOCKHOLDERS’ DEFICIENCY		$	139			$	38

 

(1)   Derived from audited financial statements

 

See accompanying notes to the condensed unaudited financial statements

 

MONARCH INVESTMENT PROPERTIES, INC.

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

 

		Three Months Ended								Six Months Ended
		December 31,								December 31,
		2013				2012				2013				2012
Revenue		$	—			$	—			$	—			$	—
General and Administrative expenses			13,620				5,266				20,810				17,623
Loss from operations			(13,620	)			(5,266	)			(20,810	)			(17,623	)
Other (expense) income:
Interest expense, affiliated parties			(23,084	)			(15,741	)			(45,603	)			(35,203	)
Net Loss		$	(36,704	)		$	(21,007	)		$	(66,413	)		$	(52,826	)
Net loss per common share:
Basic and fully diluted		$	(0.00	)		$	(0.00	)		$	(0.00	)		$	(0.00	)
Weighted average number of common shares outstanding:
Basic			16,168,733				16,168,733				16,168,733				16,168,733
Fully diluted			16,168,733				16,168,733				16,168,733				16,168,733

 

See accompanying notes to the condensed unaudited financial statements

 

MONARCH INVESTMENT PROPERTIES, INC.

CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIENCY

FOR THE SIX MONTHS ENDED DECEMBER 31, 2013

(Unaudited)

 

						Common Stock								Additional								Stockholders’
		Preferred								Par Value				Paid-In				Accumulated				Deficiency
		Shares				Shares				Amount				Capital				Deficit				Total
Balance at June 30, 2013							16,168,733			$	16,169			$	2,834,341			$	(3,680,748	)		$	(830,238	)
Net Loss																			(66,413	)			(66,413	)
Balance at December 31, 2013			—				16,168,733			$	16,169			$	2,834,341			$	(3,747,161	)		$	(896,651	)

 

See accompanying notes to the condensed unaudited financial statements

 

MONARCH INVESTMENT PROPERTIES, INC.

CONDENSED STATEMENT OF CASH FLOWS

(Unaudited)

 

		Six Months Ended
		December 31,
		2013				2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss		$	(66,413	)		$	(52,826	)
Adjustments to reconcile net loss to net cash used in operating activities:
Changes in operating assets and liabilities:
Increase (decrease) in accrued expenses and other current liabilities			4,011				1,574
Increase in affiliated party debt			39,262				30,879
Increase in convertible judgment debt payable			12,341				7,324
Total adjustments			55,614				39,777
Net cash used in operating activities			(10,799	)			(13,049	)
CASH FLOWS FROM INVESTING ACTIVITIES:			—				—
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in affiliated party debt			10,900				13,750
Net cash provided by financing activities			10,900				13,750
NET INCREASE IN CASH			101				701
CASH - BEGINNING OF PERIOD			38				428
CASH - END OF PERIOD		$	139			$	1,129
SUPPLEMENTAL CASH FLOW DATA:
Cash paid for interest		$	—			$	—
Cash paid for income taxes		$	—			$	—

 

See accompanying notes to the condensed unaudited financial statements

 

Monarch Investment Properties, Inc.

Notes to Condensed Unaudited Financial Statements

December 31, 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 December 31, 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 December 31, 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 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 December 31, 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.

 

Note 3 - Going Concern

 

As reflected in the accompanying financial statements, the Company incurred a net loss of $66,413, negative cash flow from operations of $10,799 for the six months ended December 31, 2013, has an accumulated deficit of $3,747,161 and a stockholders’ deficiency of $896,651 at December 31, 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.

 

Note 4 - Accrued Expenses and Other Current Liabilities

 

Accrued expenses and other current liabilities consist of: 

 

		December 31, 2013				June 30, 2013
Legal fees		$	—			$	6,102
Accounting and  Auditing			6,500				9,900
SEC Filing - Miscellaneous, other			24,478				10,965
Total Accrued expenses and other current liabilities		$	30,978			$	26,967

 

Note 5 - Convertible Judgment Debt Payable, Affiliated Party

 

Listed below is a summary of the transactions related to the JJFN Judgment obtained by JJFN Holdings, Inc. against us in November 2004. Unpaid portions of the JJFN Judgment bear simple 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 30, 2013			14,648
Balance, June 30, 2013			268,945
Interest July 1, 2013 through December 31, 2013			12,341
Balance, December 31, 2013		$	281,286

 

At December 31, 2013, the judgment payable with accrued interest is $281,286. The remaining $281,286 of convertible debt and interest is convertible at $0.10 per share.

 

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 shareholder. Listed below is a summary of the debt we owe to Strategic.

 

		Six Months Ended December 31, 2013				Year Ended June 30, 2013
Due to major shareholder/creditor, beginning of year		$	534,365			$	448,903
Additional borrowings			50,161				85,462
End of period		$	584,526			$	534,365

 

Additional borrowing for the six months ended December 31, 2013 comprised of $10,900 of cash advances, interest on Debt of $33,260, and Management Fees of $6,000 for the use of office space storage, 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 and six months ended December 31, 2013 in the amount of $16,235 and $17,025. 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, $ .001 par value, and 25,000,000 shares of preferred stock, $ .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.

 

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 December 31, 2013 there were 16,168,733 shares of common stock outstanding.

 

Common Stock Purchase Warrant

 

There were 1,100,000 common stock warrants available for issuance as of December 31, 2013. A summary of the status of the warrants as of December 31, 2013 and June 30, 2013 and the changes are presented below:

 

		December 31, 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 December 31, 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				.5

 

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 $281,286 convertible debt into 2,812,860 shares 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.

 

Note 11 - Recent Developments

 

On November 29, 2013 the Board of Directors elected Robert Licopoli Chief Executive Officer.

 

The election of Mr. Licopoli as Chief Executive Officer was taken in connection with the entry into a Letter of Intent to merge with The 360 Agency, LLC.

 

A copy of the executed Letter of Intent was filed as an Exhibit to our Form 8K filed with the SEC on December 13, 2013.

 

Note 12 - Subsequent Events

 

On February 24, 2014 the Company and The 360 Agency, LLC amended the Letter of Intent dated December 6, 2013 to extend the closing date to March 7, 2014.

 

*** This Space Intentionally Left Blank ***

 

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 and six months ended December 31, 2013 and 2012, respectively, and the financial condition of the Company at December 31, 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, 2013 as previously filed with the Securities Exchange Commission.

 

Overview

 

We have virtually no operating history and due to the uncertain nature of the markets we address or intend to address, it is difficult to predict our future results of operations. 

 

Our Business Strategy

 

Our current business plan is to serve as a vehicle for the acquisition of or merger or consolidation with a target business. We intend to effect a business combination with a target business which we believe has significant growth potential. The business combination may be with a financially stable, mature company or a company that is in its early stages of development or growth.

 

Going Concern

 

We are a shell company. We do not have any revenue generating operations and have an accumulated deficit of approximately $3.7 million at December 31, 2013. At December 31, 2013 we had minimal cash, no other assets and our total liabilities were approximately $897,000. 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 based upon 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 and repay our liabilities when they become due and to consummate a business combination with an operating company. 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.

 

Accrued Expenses and Other Current Liabilities

 

Accrued expenses at December 31, 2013 and June 30, 2013 consisted primarily of professional fees. Listed below is a summary of the transactions related to accrued expenses and other current liabilities:

 

		December 31, 2013				June 30, 2013				Increase/(Decrease)
Legal fees		$	—			$	6,102			$	(6,102	)
Accounting fees			6,500				9,900				(3,400	)
SEC Filing, Miscellaneous, other			24,478				10,965				13,513
Total Accrued Expenses and Other Current Liabilities		$	30,978			$	26,967			$	4,011

 

*** This Space Intentionally Left Blank ***

Convertible Judgment Debt Payable, Affiliated Party

 

Listed below is a summary of the transactions related to the JJFN Judgment obtained by JJFN Holdings against us in November 2004. Unpaid portions of the JJFN Judgment bear simple 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 2012			254,297
Interest July 2012 through June 30, 2013			14,648
Balance, June 2013			268,945
Interest July 2013 through December 31, 2013			12,341
Balance, December 31, 2013		$	281,286

 

Affiliated Party Debt

 

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

 

Balance,  June 30, 2013		$	534,365
Interest			33,260
Management Fee			6,000
Advances			10,900
Balance, December 31, 2013		$	584,525

 

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.

 

$1,500 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.

  

*** This Space Intentionally Left Blank ***

 

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.

 

Three Months Ended December 31, 2013 Compared to the Three Months Ended December 31, 2012

 

General and Administrative Expenses were $13,620 for the three months ended December 31, 2013, as compared to $5,266 for the three months ended December 31, 2012, an increase of $8,354.

 

The increase of General and Administrative Expenses of $8,354 for the three months was primarily as a direct result of the increased costs associated with SEC reporting requirements, as well as the entry into the Letter of Intent with The 360 Company.

 

Interest Expense was $23,084 for the three months ended December 31, 2013, compared to $15,741 for the three months ended December 31, 2012, an increase of $7,343. The increase was the result of additional loans and higher loan balances at December 31, 2013 compared to 2012, resulting in higher interest expense for the three months ended December 31, 2013.

 

As a result of the foregoing, we incurred net losses of $36,704 and $21,007 for the three months ended 2013 and 2012, respectively.

 

Six Months Ended December 31, 2013 Compared to the Three Months Ended December 31, 2012

 

General and Administrative Expenses were $20,810 for the six months ended December 31, 2013, as compared to $17,623 for the six months ended December 31, 2012, an increase of $3,187.

 

		2013				2012
Accounting Fees		$	6,000			$	8,020
Consulting			2,650				1,925
Management Fees			6,000				3,000
Edgarization			3,297				3,103
Stock Transfer Fees			250				1,056
Miscellaneous Fees			2,613				519
TOTAL		$	20,810			$	17,623

 

The increase in General and Administrative Expenses of $3,187 for the six months was primarily as a direct result of increased costs associated with SEC reporting requirements.

 

Interest Expense was $45,603 for the six months ended December 31, 2013, compared to $35,203 for the six months ended December 31, 2012, an increase of $10,400. The increase was the result of additional advances on loan balances higher at December 31, 2013 compared to 2012, resulting in higher interest expense for the six months ended December 31, 2013.

 

As a result of the foregoing, we incurred net losses of $66,413 and $52,826 for the six months ended 2013 and 2012, respectively.

 

Liquidity and Capital Resources

 

Liquidity is the ability of a company to generate adequate amounts of funds to meet its obligations. At December 31, 2013, our cash balance was $139 and we had a working capital deficit of $896,651.

 

Accounts Payable and SEC Reporting obligations, Accrued expenses, which consist primarily of professional accounting fees, increased $4,011 for the six months ended December 31, 2013.

 

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 December 31, 2013 represents post-judgment interest.

 

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 cash 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 our 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.

 

Recent Developments

 

On November 29, 2013 the Board of Directors elected Robert Licopoli Chief Executive Officer.

 

The election of Mr. Licopoli as Chief Executive Officer was taken in connection with the entry into a Letter of Intent to merge with The 360 Agency, LLC.

 

A copy of the executed Letter of Intent was filed as an Exhibit to our Form 8K filed with the SEC on December 13, 2013.

 

On February 24, 2014 the Company and The 360 Agency, LLC amended the Letter of Intent dated December 6, 2013 to extend the closing date to March 7, 2014.

 

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 December 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.

 

The Company does not have exposure to many market risks, such as potential loss arising from adverse change in market rates and prices, such as foreign currency exchange and interest rates. We do not hold any derivatives or other financial instruments for trading or speculative purposes.

 

ITEM 4. CONTROLS AND PROCEDURES.

 

Disclosure Controls and Procedures

 

Our Chief Executive Officer and 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 Chief Executive Officer and our principal financial and accounting officer, 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 December 31, 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 Chief Executive Officer and principal financial and accounting officer 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.

 

Management’s Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2013. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. Our management has concluded that, as of December 31, 2013 our internal control over financial reporting is effective based on this criteria.

 

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. If any of those risks actually occur, our business could be harmed. In connection with our preparation of this quarterly report, management has reviewed and considered these risk factors and has determined that the following risk factors should be read in connection with the existing risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2013. Please also refer to the other information about us contained in this Form 10-Q, including our financial statements and related notes.

 

Deterioration of economic conditions could negatively impact our Company.

 

Our Company may be adversely affected by changes in domestic and/or international economic conditions, including changes in inflation, or deflation, interest or exchange rates, availability of capital markets and the effects of governmental initiatives to manage economic conditions.

 

Deterioration of national and global economic conditions could, among other things:

 

	●	Impair our ability to access additional funds,
	●	Make it more difficult or costly for us to obtain financing in order to execute our business plan,
	●	Impair our efforts to identify potential investors and business combination opportunities,
	●	Significantly affect our ability to issue shares or debt securities to complete a business combination.

 

We are unsure of the duration and severity of this economic crisis. If the crisis persists or worsens and economic conditions remain weak over a long period, the likelihood of the crisis will have a significant impact on our Company.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

None

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

 

None

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

N/A

 

ITEM 5. OTHER INFORMATION.

 

None

 

ITEM 6. EXHIBITS.

 

17.1	-	Amendment to Letter of Intent Dated February 24, 2014
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	-	Certification 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.
(Registrant)
Date:		March 3, 2014
By:	/s/	David Miller
David Miller
President and Co-Chief Executive Officer
Date:		March 3, 2014
By:	/s/	Robert Licopoli
Robert Licopoli
Co-Chief Executive Officer
Date:		March 3, 2014
By:	/s/	Philip Bloom
Philip Bloom
Treasurer and Chief Financial Officer
(Principal Financial and Accounting Officer)