UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[xx] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
--------------------------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-21178
UNITED TEXTILES & TOYS CORP.
(Exact name of registrant as specified in its charter)
Delaware 13-3626613
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
448 West 16th Street, New York, New York 10011
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(Address of principal executive offices) (Zip Code)
(212) 675-6666
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) has filed all reports required to be filed by
section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [xx] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
Common stock, par value $.001 per share: 978,805 shares outstanding as of
June 30, 1997.
<PAGE>
MULTIMEDIA CONCEPTS INTERNATIONAL, INC.
INDEX
<TABLE>
<CAPTION>
Page
PART 1. Financial Information
ITEM 1 .......Financial Statements:
<S> <C>
Consolidated balance sheets as of June 30, 1997 (Unaudited)
and September 30, 1996 .................................................. 4
Consolidated statements of operations (Unaudited) for the
three months ended June 30, 1997 and June 30, 1996, and
for the nine months ended
ended June 30, 1997 and June 30, 1996 ................................... 6
Consolidated statements of cash flows for the nine months ended June 30, 1997
and June 30, 1996 ....................................................... 7
Notes to consolidated financial statements .................................. 9
ITEM 2 ......Management's discussion and analysis of financial condition
and results of operations ............................................... 10
PART 2 Other Information
Signatures ........................................................................... 14
</TABLE>
<PAGE>
PART I - Financial Information
ITEM 1. Financial Statements and Supplementary Data
UNITED TEXTILES & TOYS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
June 30, March 31,
1997 1997
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents ...................................... $ 152,725 $ 144,668
Accounts receivable - net of allowances for doubtful accounts of
$32,013 for June 30, and March 31, 1997, respectively ........ 168,661 181,420
Inventories .................................................... 7,397,533 7,124,035
Prepaid expenses and other current assets ...................... 179,051 252,901
Loans and advances - officer ................................... 87,303 123,600
TOTAL CURRENT ASSETS ............................................. 7,985,273 7,826,624
PROPERTY AND EQUIPMENT - NET ..................................... 2,403,881 2,478,706
OTHER ASSETS:
Security deposits .............................................. 7,220 7,220
Deferred financing costs ....................................... 260,564 324,797
267,784 332,017
TOTAL ASSETS ..................................................... $10,656,938 $10,637,347
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
UNITED TEXTILES & TOYS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, March 31,
1997 1997
CURRENT LIABILITIES:
<S> <C> <C>
Borrowings under financing agreement ............................... $ 4,826,063 $ 4,438,875
Accounts Payable ................................................... 3,477,741 3,318,472
Accrued expenses and other current liabilities ..................... 362,116 510,447
Due to affiliates .................................................. 966,000 804,000
Current portion of notes payable ................................... 100,000 141,666
TOTAL CURRENT LIABILITIES ............................................ 9,731,920 9,213,460
LONG-TERM LIABILITES:
Notes payable, net of current portion .............................. 75,000 100,000
Deferred rent liability ............................................ 135,672 126,925
210,672 226,925
MINORITY INTERESTS IN SUBSIDIARIES ................................... 2,503,560 2,007,180
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, $.01 par value, 10,000,000 shares authorized: and
9,788,050 and 2,188,050 shares issued and outstanding for June 30,
and March 31, 1997, respectively ................................. 97,881 97,881
Additional paid-in capital ......................................... 7,048,950 7,048,950
Common stock subscribed ............................................ 150,000 150,000
Retained earnings (deficit) ........................................ (9,086,045) (8,107,049)
(1,789,214) (810,218)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ........................... $ 10,656,938 $ 10,637,347
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
UNITED TEXTILES & TOYS CORP. AND SUBSIDIARIES
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
June 30, June 30,
1997 1996
<S> <C> <C>
NET SALES ................................................... $ 3,369,479 $ 3,488,820
COSTS AND EXPENSES:
Cost of sales ............................................. 2,344,951 2,522,436
Operating expenses ........................................ 2,147,488 1,832,661
Depreciation and amortization ............................. 139,345 151,174
Interest and other income ................................. (3) --
Interest expense .......................................... 213,074 182,149
4,844,855 4,688,420
(LOSS) BEFORE MINORITY INTERESTS ............................ (1,475,376) (1,199,600)
Minority interests in net loss of consolidated subsidiaries 496,380 373,284
(LOSS) BEFORE PROVISION (CREDIT) FOR INCOME TAXES ........... (978,996) (826,316)
(Credit) provision for income taxes ....................... -- --
(NET LOSS) .................................................. $ (978,996) $ (826,316)
(LOSS) EARNINGS PER COMMON AND DILUTIVE COMMON
EQUIVALENT SHARE
Net loss before minority interest and income tax benefit .. $ (.15) $ (.40)
Minority interest in net loss ............................. .05 .13
Net loss .................................................. $ (.10) $ (.27)
WEIGHTED AVERAGE NUMBER OF COMMON AND DILUTIVE
SHARES OUTSTANDING ........................................ 9,788,050 3,006,732
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
UNITED TEXTILES & TOYS CORP. AND SUBSIDIARIES
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the three Months Ended
June 30, June 30,
1997 1996
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net (loss) .......................................................... $ (978,996) $ (826,316)
Adjustments to reconcile net (loss) to net cash (used for ) operating
activities:
Depreciation and amortization ................................... 139,345 151,174
Minority interest in net losses of subsidiaries ................. 496,380 (126,964)
Deferred rent ................................................... 8,747 (20,825)
Compensatory stock and options issued by subsidiaries ........... 16,000
Change in assets and liabilities:
Decrease (increase) in accounts receivable ...................... 12,759 (66,830)
Decrease (increase) in merchandise inventories .................. (273,498) (1,159,686)
Decrease in prepaid expenses and other current assets ........... 73,850 174,069
(Decrease) increase in accounts payable ......................... 159,269 1,333,025
(Decrease) in accrued expenses .................................. (148,331) (174,553)
Net cash (used for) operating activities ...................... (510,475) (947,226)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets ............................................ (64,520) (86,904)
Advances repaid by affiliate ........................................ -- 95,000
Loans and advances - officer ........................................ 36,297 --
Net cash (used for) investing activities ...................... (28,223) 8,096
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
UNITED TEXTILES & TOYS CORP. AND SUBSIDIARIES
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
June 30, June 30,
1997 1996
----
CASH FLOWS FROM FINANCING ACTIVITIES:
<S> <C> <C>
Notes Payable .............................. $ (66,666) $ --
Net borrowings under financing agreement ... 387,188 853,768
Loans and advances from affiliates ......... 162,000 --
Decrease in deferred financing costs ....... 64,233 --
546,755 1,100,088
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS ................................ 8,057 160,958
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 144,668 75,573
CASH AND CASH EQUIVALENTS AT END OF YEAR ..... $ 152,725 $ 236,531
SUPPLEMENTAL DEISCLOSURES OF CASH FLOW
INFORMATION:
Interest paid ............................ $ 213,074 $ 182,149
Taxes paid
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
UNITED TEXTILES & TOYS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION:
The interim accompanying unaudited condensed financial
statements have been prepared in accordance with generally
accepted accounting principles ("GAAP") for interim financial
information and with the instructions to Form 10-QSB.
Accordingly, they do not include all of the information and
footnotes required by GAAP for complete financial statements.
In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair
presentation have been included. For further information,
management suggests that the reader refer to the audited
financial statements for the year ended March 31, 1997
included in its Annual Report on Form 10-KSB. Operating
results for the three month period ended June 30, 1997 are not
necessarily indicative of the results of operations that may
be expected for the year ending March 31, 1998.
Until July 1996, the Company was the majority shareholder of
American Toys, Inc. ("American Toys") now known as U.S. Wireless
Corporation). Since American Toys was then the majority
shareholder of Play Co. Toys & Entertainment Corp. ("Play Co."),
the Company indirectly held the majority of Play Co. shares. By
corporate resolution dated June 1, 1996, the Company authorized
its subsidiary American Toys, to spin-off ("the spin-off
Distribution")the Play Co. common stock owned by American Toys to
American Toy's stockholders. The Spin-off Distribution was
effected in August 1996.
The Company owns 7,258,742 (2,419,581 after the 1-for-3
reverse stock split) shares, or 59.0%, of the Play Co. common
stock outstanding including 578,742 (192,914 after reverse
split) shares of Play Co. common stock issued to the Company
in August 1996 as a result of the Spin-off Distribution.
NOTE 2 - MINORITY INTERESTS:
The minority interest in Play Co. Toys & Entertainment Corp.
represents the minority shareholders' portion (41.0%) of Play
Co.'s equity at June 30, 1997. The minority interest as
reflected in the consolidated balance sheet consists of Play
Co.'s Series E Preferred Stock only. Due to operating losses
of Play Co., the minority interest in its common stock has
been written down to zero.
EARNINGS PER SHARE:
Earnings (loss) per share has been computed on the basis of
the weighted average number of common shares and common
equivalent shares outstanding during each period presented.
<PAGE>
ITEM-2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Statements contained in this report which are not historical facts may be
considered forward looking information with respect to plans, projections, or
future performance of the Company as defined under the Private Securities
Litigation Reform Act of 1995. These forward looking statements are subject to
risks and uncertainties which could cause actual results to differ materially
from those projected.
The following is management's discussion and analysis of significant factors
which have affected the registrant's financial position.
Consolidated sales decreased from $3,488,820 to $3,369,479, a decrease of
$119,341 or 3.4%, when comparing the three months ended June 30, 1997 to June
30, 1996. This decrease was primarily due to a decrease in Play Co.'s sales
($3,142,813) which was attributed to decreased wholesale sales, primarily to
military bases.
Consolidated cost of sales decreased from $2,522,436 for the three months ended
June 30, 1996 to $2,344,951 for the three months ended June 30, 1997. This
decrease of $177,485 or 7.0% was due to management's efforts to better control
manufacturing costs.
Consolidated operating expenses for the three months ended June 30, 1997
aggregated $2,147,888 as compared to $1,832,661 for the three months ended June
30, 1996. This increase of $314,827 or 17.2% . The primary reasons for this
increase were an increase in rent expense and payroll and related expenses.
During the three months ended June 30, 1997, non-cash depreciation and
amortization expenses were $139,345 as compared to $151,174 for the three months
ended June 30, 1996. This represented a decrease of $11,829 or 7.8%.
Consolidated interest expense for the three months ended June 30, 1997 was
$213,074 as compared to $182,149 for the three months ended June 30, 1996. This
represented an increase of $30,925 or 17.0%. This increase was due to the
increased level of borrowings in the June 1997 period than in the June 1996
period.
For the three months ended June 30, 1997, subsequent to the adjustment for the
minority interest in the net loss of consolidated subsidiaries, the Company
reflected a consolidated net loss of $978,996 or $.10 per share. For the three
months ended June 30, 1996, subsequent to the minority interest adjustment, the
Company reported a net loss of $826,316 or $.27 per share. The weighted average
number of common shares outstanding used in the computation of loss per common
share at June 30, 1977 was 9,788,050 as compared to 3,006,732 shares for the
three months ended June 30, 1996.
<PAGE>
Liquidity and Capital Resources
At June 30, 1997, the Company reported cash and cash equivalents of $152,725,
negative working capital of $1,746,647 and a current ratio of .81:1. At June 30,
1996, the Company reported cash and cash equivalents of $144,668, negative
working capital of $1,386,836 and a current ratio of .85:1. The Company has
generated operating losses for the past several years and there can be no
assurance that the Company will be able to generate sufficient revenues or have
sufficient controls over expenses and other charges to achieve profitability.
During the three months ended June 30, 1997, the Company used $510,475 of cash
in its operating activities compared to $947,226 used in operations for the
three months ended June 30, 1996.
The Company used $28,223 of cash in its investing activities during the three
months ended June 30, 1997 as compared to an inflow of $8,096 in cash during the
three months ended June 30, 1996.
The Company generated $546,755 from its financing activities in the three months
ended June 30, 1997 as compared to the generation of $ 1,100,088 in the three
months ended June 30, 1996.
As a result of these activities, the Company had a net increase in cash and cash
equivalents of $8,057 in the three months ended June 30, 1997 as compared to an
increase in cash and cash equivalents of $236,531 in the three months ended June
30, 1996.
New Accounting Standards
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of long-lived Assets and long-lived Assets to be Disposed Of,"
requires that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed for impairments whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The Company is in the process of analyzing the impact of this
statement and does not believe that it will have a material impact on the
Company's financial position or results of operations. The Company anticipates
adopting the provisions of this statement for the fiscal year 1998.
Statement of Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," established financial accounting and reporting standards for
stock-based employee compensation plans and certain other transactions involving
the issuance of stock. The Company will continue to apply the current accounting
policy under Accounting Principles Board Opinion No. 25 and will include the
necessary disclosures in its fiscal 1998 financial statements.
Trends Affecting Liquidity, Capital Resources and Operations
Play Co.'s sales efforts are focused primarily on a defined geographic segment,
consisting of individuals in the Southern California area. Play Co.'s future
financial performance will depend upon continued demand for the toys and hobby
items by individuals in Southern California, general economic conditions within
such geographic market area. Play Co.'s ability to choose locations for new
stores, Play Co.'s ability to purchase products at favorable prices in favorable
items as well as increased competition and changes in consumer preferences.
<PAGE>
The toy and hobby retail industry currently faces a number of potentially
adverse business conditions including price and gross margin pressures and
market consolidation and domination. The domination of the retail toy industry
by Toys R Us has resulted in increased price competition among various toy
retailers and declining gross margins for such retailers. Moreover, the
domination of Toys R Us has resulted in liquidation or bankruptcy of many toy
retailers throughout the United States, including the Southern California
market. There can be no assurance that Pay Co.'s business strategy will enable
it to compete in the retail toy industry.
Management knows of no other trends reasonably expected to have material impact
upon Play Co.'s operations or liquidity in the foreseeable future. Play Co.'s
operating history has been characterized by narrow profit margins and
accordingly, Play Co.'s earnings will depend significantly on its ability to
purchase its product on favorable terms, retail a large volume and variety of
products efficiently and to provide quality support services. Play Co.'s prices
are, in part , based on market surveys of its competitors' prices, primarily of
Toys R US. As a result, aggressive pricing policies, such as those used by Toys
R Us, have resulted in Play Co. reducing its retail prices on many items,
thereby reducing the available profit margin. Moreover, increases in expenses or
other charges to income may have a material adverse effect on Play Co.'s results
of operations. There can be no assurance that Play Co. will be able to generate
sufficient revenues or have sufficient controls over expenses and other charges
to increase profitability.
Management knows of no other trends reasonably expected to have a material
impact upon the Company's operations or liquidity in the foreseeable future
Other
The Company believes that its present financial resources as well as funds it
anticipates generating from operations and Play Co.'s line of credit will be
adequate to meet its needs for at least the ensuing twelve month period.
Inflation and Seasonality
During the past few years, inflation in the United States has been relatively
stable. In management's opinion, this is expected to continue for the
foreseeable future. However, should the American economy again experience double
digit inflation rates, as was the case in the past, the impact upon prices could
adversely affect the Company's operations.
Play Co.'s toy business is highly seasonal with a large portion of its revenues
and profits being derived during the months of November and December. United
Textiles & Toys Corp.'s business is not seasonal with women's apparel being sold
throughout the year.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings: None
ITEM 2 - Changes in Securities: None
ITEM 3 - Defaults Upon Senior Securities: None
ITEM 4 - Submission of Matters to a Vote of Security Holders: None
ITEM 5 - Other Information: None
ITEM 6 - Exhibits and Reports on Form 8-K
<PAGE>
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.
Dated: September 22, 1997
United Textiles & Toys Corp.
(Registrant)
/s/Ilan Arbel
Ilan Arbel
President
/s/Allean Goode
Allean Goode
Treasurer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
UNITED TEXTILES & TOYS CORP. AND SUBSIDIARIES
EXHIBIT 27
FINANCIAL DATA SCHEDULE
ARTICLE 5 OF REGULATION S-X
The schedule contains summary financial information extracted from the
financial statements for the three months ended June 30, 1997 and is qualified
in its entirety by reference to such statements.
</LEGEND>
<CAPTION>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> mar-31-1997
<PERIOD-END> jun-30-1997
<CASH> 152,725
<SECURITIES> 0
<RECEIVABLES> 200,674
<ALLOWANCES> 32,013
<INVENTORY> 7,397,533
<CURRENT-ASSETS> 7,985,273
<PP&E> 5,407,233
<DEPRECIATION> 3,003,352
<TOTAL-ASSETS> 10,656,938
<CURRENT-LIABILITIES> 9,731,920
<BONDS> 0
0
0
<COMMON> 97,881
<OTHER-SE> (1,887,095)
<TOTAL-LIABILITY-AND-EQUITY> 10,656,938
<SALES> 3,369,479
<TOTAL-REVENUES> 3,369,482
<CGS> 2,344,951
<TOTAL-COSTS> 2,344,951
<OTHER-EXPENSES> 2,286,833
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 139,345
<INCOME-PRETAX> (978,996)
<INCOME-TAX> 0
<INCOME-CONTINUING> (978,996)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (978,996)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
