<PAGE>
U. S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File No. 002-97690-D
KARA INTERNATIONAL, INC.
(Name of Small Business Issuer in its Charter)
NEVADA 87-0421191
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(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
9005 Cobble Canyon Lane
Sandy, Utah 84093
--------------------------------
(Address of Principal Executive Offices)
Issuer's Telephone Number: (801) 942-0555
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Sections 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.
(1) Yes X No (2) Yes X No
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Not applicable.
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practicable date:
February 28, 1997
2,048,804
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* Does not include 750,000 shares authorized to be
issued by the Board of Directors on February 28, 1997.
See the heading "Business Development" of Item 1 of
the Registrant's Annual Report on Form 10-KSB for the
year ended December 31, 1996, which is being
simultanteously filed with the Securities and Exchange
Commission and which is incorporated herein by
reference.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The Financial Statements of the Registrant required to be filed with
this 10-QSB Quarterly Report were prepared by management, and commence on the
following page, together with Related Notes. In the opinion of management,
the Financial Statements fairly present the financial condition of the
Registrant.
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<TABLE>
KARA INTERNATIONAL, INC.
[A Development Stage Company]
CONDENSED BALANCE SHEETS
[Unaudited]
<CAPTION>
ASSETS
March 31, December 31,
1996 1995
<S> <C> <C>
CURRENT ASSETS:
Cash $ 590 $ 613
Total Current Assets 590 613
OTHER ASSETS - -
$ 590 $ 613
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Advance from shareholder $ 81 $ 81
Total Current Liabilities 81 81
STOCKHOLDERS' EQUITY:
Common stock 2,049 2,049
Capital in excess of par value 1,120,128 1,120,128
Deficit accumulated during the
development stage (1,121,668) (1,121,645)
Total Stockholders' Equity 509 532
$ 590 $ 613
</TABLE>
NOTE: The balance sheet at December 31, 1995 was taken from the
audited financial statements at that date and condensed.
<TABLE>
KARA INTERNATIONAL, INC.
[A Development Stage Company]
CONDENSED STATEMENTS OF OPERATIONS
[Unaudited]
<CAPTION>
For the Three For the Period
Months Ended From January 1,
March 31, 1989 Through
March 31,
1996 1995 1996
<S> <C> <C> <C>
REVENUE $ - $ - $ -
EXPENSES:
General and administration 23 - 1,390
Interest expense - - 161,459
23 - 162,849
LOSS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND DISCONTINUED
OPERATIONS (23) - (162,849)
CURRENT INCOME TAX EXPENSE - - -
DEFERRED INCOME TAX EXPENSE - - -
(LOSS) BEFORE DISCONTINUED
OPERATIONS (23) - (162,849)
(LOSS) FROM OPERATIONS OF
DISCONTINUED SUBSIDIARY NET
OF NO TAX EFFECT - - (27,426)
GAIN ON DISPOSAL OF DISCONTINUED
SUBSIDIARY - - 203,390
NET LOSS $ (23) $ - $ 13,115
</TABLE>
<TABLE>
KARA INTERNATIONAL, INC.
[A Development Stage Company]
CONDENSED STATEMENTS OF CASH FLOWS
[Unaudited]
<CAPTION>
For the Three For the Period
Months Ended From January 1,
March 31, 1989 Through
March 31,
1996 1995 1996
<S> <C> <C> <C>
Cash Flows from Operating
Activities:
Net (loss) $ (23) $ - $ 13,115
Adjustments to reconcile net
income to net cash used by
operating activities:
Non-cash expenses (income) - - (14,505)
Changes in assets and
liabilities:
Advances from
shareholder - - -
Net Cash Flows used by
Operating Activities (23) (-) (1,390)
Cash Flows from Investing
Activities - - -
Net Cash Flows used by
Investing Activities - - -
Cash Flows from Financing
Activities:
Proceeds from common stock
issuance - - -
Advances by shareholders - - 1,980
Net Cash Flows Provided by
Financing Activities - - 1,980
Net Increase (Decrease) in Cash (23) (-) 5
Cash at Beginning of Period 613 - -
Cash at End of Period $ 590 $ - $ 590
</TABLE>
Supplemental schedule of Non-cash Investing and Financing
Activities:
For the three months ended March 31, 1996
None
For the period ended March 31, 1995:
The Company issued 1,899,048 shares of common stock in
re-payment of advances made by shareholders in the amount of $1,899.
KARA INTERNATIONAL, INC.
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Condensed 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, 1996 and for all periods presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested that
these condensed financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's December
31, 1995 audited financial statements. The results of operations for the
period ended March 31, 1996 are not necessarily indicative of the operating
results for the full year.
Organization - The Company was incorporated in the State of Nevada under the
name of R & D Connections on April 22, 1985. The Company completed a public
offering of common stock during 1986. On September 22, 1986, the Company
acquired all of the outstanding shares of Kara Incorporated, a Utah
corporation, that manufactured and marketed candy, and changed its name to
Kara International, Inc. [the Company]. From September 1986, the Company
commenced operating the business of marketing and developing confectionery
products. The Company abandoned its subsidiary operation during the last
quarter of 1988. The Company is not currently engaged in any business
activity, but is seeking potential investments or business acquisitions and
consequently is considered a development stage company as defined in SFAS No.
7. The Company has, at the present time, not paid any dividends and any
dividends that may be paid in the future will depend upon the financial
requirements of the Company and other relevant factors.
Accounting Estimates - The preparation of the financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities, the disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amount of revenues and
expenses during the reporting period. Actual results could differ from those
estimated.
Stock Split - During January 1995, the Board of Directors authorized a 1 for
250 reverse stock split of the issued and outstanding common shares of the
Company. The Company retained the authorized shares at 50,000,000 shares with
the par value at $.001 per share. The financial statements for all periods
presented have been restated to reflect the effect of the common stock split.
NOTE 2 - RELATED PARTY TRANSACTIONS
Rent - The Company has not had a need to rent office space. An officer of the
Company is allowing the Company to use his address, as needed, at no expense
to the Company.
Advance from Shareholder - At March 31, 1996 and December 31, 1995 the unpaid
balance owing a shareholder/officer was $81.
Stock Issued - In January, 1995, the Company issued 1,899,048 shares to
shareholders and officers to reduce shareholder advances.
Management Compensation - During the periods presented the Company did not pay
any compensation to its officers and directors.
NOTE 3 - DISCONTINUED OPERATIONS
On September 22, 1986, the Company acquired all of the outstanding shares of
Kara Incorporated, a Utah corporation, by the issuance of 35,967 (restated)
shares of the Company stock to the shareholders of Kara Incorporated in a tax
free reorganization wherein Kara Incorporated became a wholly-owned subsidiary
of the Company. The business combination was accounted for using the purchase
method of accounting. The investment in the subsidiary was recorded in the
financial statements based on the net asset value of the subsidiary at June
30, 1986, which was $146,992. Kara Incorporated manufactured and marketed
candy. The Company operated its subsidiary candy company through 1988. During
the last quarter of 1988, the Company abandoned and discontinued all of its
candy manufacturing and marketing operations. All of the assets of the company
were foreclosed and used to satisfy liabilities. At the point in time when the
company discontinued its operations, there were 69,762 shares of common stock
issued and outstanding. The Company also had certain notes payable that were
not satisfied from the discontinued operation. During 1994, in settlement of a
judgment from the court, the Company issued 80,000 shares of common stock to
satisfy the notes payable including principal of $270,000 and accrued interest
of $161,459. The discontinued operations have been segregated on the
Statements of Operations. There was a $203,390 gain recorded during 1989 for
the disposal of the discontinued operations.
NOTE 4 - COMMON STOCK
Public Stock Offering - The Company previously completed a public offering of
10,615 shares of its authorized but unissued common stock. The offering was
registered on Form S-18 in accordance with the Securities Act of 1933. Total
proceeds of the offering amounted to $265,360 and stock offering costs of
$68,251 were offset against capital in excess of par value.
Debt Cancellation - During November, 1994, the Company issued 80,000 shares of
common stock as payment in full for a judgment related to a note payable of
$270,000 and related accrued interest of $161,459.
Officer/Shareholder- In January, 1995, the Company issued 1,899,048 shares of
common stock to shareholders and officers to repay previous advances made by
the shareholders.
Stock Split - During January 1995, the Board of Directors authorized a 1 for
250 reverse stock split of all the issued and outstanding common shares of the
Company. The Company retained the authorized shares at 50,000,000 shares with
the par value at $.001 per share. The financial statements for all periods
presented have been restated to reflect the reverse split.
NOTE 5 - GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles which contemplate continuation of the
Company as a going concern. However, the Company has incurred losses since
inception, has expended most of its working capital and has not yet been
successful in establishing profitable operations. These factors raise
substantial doubt about the ability of the Company to continue as a going
concern. In this regard, management is proposing to raise additional funds
through loans and/or through additional sales of its common stock or through
the acquisition of another company by issuing common stock. There is no
assurance that the Company will be successful in raising this additional
capital.
The financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amounts and
classification of liabilities that might be necessary should the company be
unable to obtain additional financing or establish profitable operations.
NOTE 6 - CONTINGENCIES
During 1989, the Company discontinued the candy manufacturing and marketing
operations of its subsidiary. Management believes that the Company is not
liable for any existing liabilities related to its former operations and
subsidiary but the possibility exists that creditors and others seeking relief
from the subsidiary may also include the Company in claims and suits pursuant
to the parent subsidiary relationship which existed between the Company and
its subsidiary. The Company is not currently named in any such suits nor is it
aware of any such suits against is former subsidiary. It is the belief of
Management and their Counsel that the Company would be successful in defending
against any such claims and that no material negative impact on the financial
position of the Company would occur. Management and counsel further believe
that with the passage of time the likelihood of any such claims being raised
is becoming more remote and that various Statutes of Limitations should
provide adequate defenses for the Company. Consequently, the financial
statements do not reflect any accruals or allowances for any such claims.
The Company has approximately 340 shares of common stock outstanding for which
it is unable to identify a shareholder. The Company is contingently liable
should the unidentified shares someday be traded to a third party. The shares
are not included in the outstanding stock of the Company.
NOTE 7 - SUBSEQUENT EVENTS
Advances from Shareholder - Subsequent to March 31, 1996, a
shareholder/officer of the Company made advances totalling $4,668.
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
- --------------------------------------------------------------------
Plan of Operation.
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The Company has not engaged in any material operations
since its inception or during the quarterly period ended
September 30, 1996.
The Company's plan of operation for the next 12 months is
to continue to seek the acquisition of assets, properties or
businesses that may benefit the Company and its stockholders.
Management anticipates that to achieve any such acquisition, the
Company will issue shares of its common stock as the sole
consideration for such acquisition.
During the next 12 months, the Company's only foreseeable
cash requirements will relate to maintaining the Company in good
standing or the payment of expenses associated with reviewing or
investigating any potential business venture, which the Company
expects to pay from advances from management.
Results of Operations.
- ----------------------
The Company did not engage in any business activities during the
quarters ended March 31, 1996 and 1995, nor the year ended December 31, 1995.
General and administrative expenses for the three months ended March 31, 1996,
were $23, and none for the three months ended March 31, 1995.
Liquidity.
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During the period ended March 31, 1995, 1,899,048 shares of the
Company s unregistered and restricted common stock were issued in
consideration of advances by shareholders in the amount of $1,899. These
funds represented substantially all of the cash proceeds received by the
Company to defray expenses during these periods.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
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None; not applicable.
Item 2. Changes in Securities.
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None; not applicable.
Item 3. Defaults Upon Senior Securities.
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None; not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
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None; not applicable.
Item 5. Other Information.
- ----------------------------
None; not applicable.
Item 6. Exhibits and Reports on Form 8-K.
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(a) Exhibits.
Financial Data Schedule.
Form 10-KSB Annual Report for the year ended
December 31, 1996, filed simulataneously herewith,
is incorporated herein by reference.
(b) Reports on Form 8-K.
None.
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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.
KARA INTERNATIONAL, INC.
Date: By /s/ David C. Merrell
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David C. Merrell
Director and President
Date: By /s/ Michael C. Brown
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Michael C. Brown
Director and Secretary/Treasurer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000769346
<NAME> KARA INTERNATIONAL, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 590
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 590
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 590
<CURRENT-LIABILITIES> 81
<BONDS> 0
0
0
<COMMON> 2049
<OTHER-SE> (1540)
<TOTAL-LIABILITY-AND-EQUITY> 590
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 23
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (23)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (23)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
