SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 0-21178
UNITED TEXTILES & TOYS CORP.
(Exact name of registrant as specified in its charter)
Delaware 13-3626613
(State or other jurisdiction
of Incorporation or organization) (I.R.S. Employer Identification No.)
448 West 16th Street, New York, New York 10011
(Address of principal executive offices)
(212) 675-6666
(Registrant's telephone number, including area code)
Mister Jay Fashions International, Inc,
(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 Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes [X] No [ ]
State the number of shares of each of the issuer's classes of common equity
outstanding as of the latest practicable date: Common Stock, $.001 per share:
978,807 shares outstanding as of September 30, 1997.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
<PAGE>
UNITED TEXTILES & TOYS CORP. AND SUBSIDIARY
CONTENTS
<TABLE>
<CAPTION>
Page
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<S> <C>
Consolidated balance sheets as of September 30, 1997 (unaudited) ..... 3
and March 31, 1997
Consolidated statements of operations (unaudited) for the three months 5
ended September 30, 1997 and 1996 and for the six months ended
September 30, 1997 and 1996
Consolidated statements of cash flows (unaudited) for the six months . 6
ended September 30, 1997 and 1996
Notes to consolidated financial statements ........................... 7
ITEM 2 Management's discussion and analysis of financial condition and
results of operations
PART 2 Other Information
</TABLE>
<PAGE>
UNITED TEXTILES & TOYS CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
September 30, March 31,
1997 1997
(Unaudited) (Note 1)
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents ............... $ 180,497 $ 144,668
Accounts receivable-net ................. 488,128 181,420
Inventories ............................. 8,237,740 7,124,035
Prepaid expenses and other current assets 239,483 252,901
Loans and advances-officer .............. 170,799 123,600
----------- -----------
Total current assets ............ 9,316,647 7,826,624
----------- -----------
PROPERTY AND EQUIPMENT-NET ............... 2,566,275 2,478,706
----------- -----------
OTHER ASSETS:
Deposits and other assets ............... 438,694 332,017
----------- -----------
Total assets .................... $12,321,616 $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
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, March 31,
1997 1997
(Unaudited) (Note 1)
CURRENT LIABILITIES:
<S> <C> <C>
Borrowings under financing agreement ............. $ 5,634,234 $ 4,438,875
Accounts payable ................................. 5,795,253 3,318,472
Accrued expenses and other current liabilities ... 227,444 510,447
Due to affiliates ................................ 1,276,235 804,000
Current portion of notes payable ................. 100,000 141,666
------------ ------------
Total current liabilities ................ 13,033,166 9,213,460
------------ ------------
LONG-TERM LIABILITIES:
Notes payable, net of current portion ............ 50,000 100,000
Deferred rent liability .......................... 135,672 126,925
------------ ------------
Total long-term liabilities .............. 185,672 226,925
------------ ------------
Total liabilities ........................ 13,218,838 9,440,385
------------ ------------
MINORITY INTEREST IN SUBSIDIARY ................... 1,324,453 2,007,180
------------ ------------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 10,000 shares
authorized; 9,788,050 shares issued
and outstanding ................................ 97,881 97,881
Additional paid-in capital ....................... 7,048,950 7,048,950
Common stock subscribed .......................... 150,000 150,000
Retained earnings (deficit) ...................... (9,518,506) (8,107,049)
------------ ------------
Total stockholders' equity ............... (2,221,675) (810,218)
------------ ------------
Total liabilities and stockholders' equity $ 12,321,616 $ 10,637,347
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
<PAGE>
UNITED TEXTILES & TOYS CORP. AND SUBSIDIARY
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
---------------------------------------------------------------------------------
1997 1996 1997 1996
---------------------- -----------------------------
<S> <C> <C> <C> <C>
NET SALES ....................... $ 4,347,013 $ 3,910,081 $ 7,716,495 $ 7,398,901
-----------
COSTS AND EXPENSES:
Cost of sales .................. 2,665,830 2,881,301 4,826,424 5,403,737
Operating expenses ............. 1,967,776 1,921,160 4,274,946 3,753,821
Depreciation and amortization .. 139,344 150,931 278,690 302,105
Interest and other income ...... -- (35,502) -- (35,502)
Interest expense ............... 217,545 188,533 430,619 370,682
Total costs and expenses 4,990,495 5,106,423 9,810,679 9,794,843
-----------
(LOSS) BEFORE
MINORITY INTERESTS ............. (643,482) (1,196,342) (2,094,184) (2,395,942)
-----------
Minority interest in net losses
of subsidiary ................. 211,021 368,583 682,727 741,867
-----------
NET (LOSS) ...................... $ (432,461) $ (827,759) $(1,411,457) $(1,654,075)
===========
Net loss per common share
before minority interest ....... $ (.066) $ (.20) $ (.21) $ (.55)
Minority interest in net loss of
subsidiary .................... .022 .06 .07 .17
-----------
Net loss per common share ....... $ (.044) $ (.14) $ (.14) $ (.38)
=========== ===========
Weighted average number of
common share and share
equivalents outstanding ....... 9,788,050 5,888,050 9,788,050 4,304,443
===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE>
UNITED TEXTILES & TOYS CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
September 30,
1997 1996
--------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss ............................................. $(1,411,457) $(1,654,075)
Adjustments to reconcile net loss to net cash
(used for) operating activities:
Depreciation and amortization ....................... 278,690 302,105
Minority interest in net loss of subsidiary ......... (682,727) (741,867)
Compensatory options and stock issued by subsidiary . -- 16,000
Deferred rent ....................................... 8,747 (20,821)
Changes in assets and liabilities:
(Increase) in accounts receivable ................... (306,708) (153,956)
(Increase) in merchandise inventories ............... (1,113,705) (2,510,581)
Decrease in prepaid expenses and other current assets 13,418 247,090
(Increase) in deposits and other assets ............. (106,677) --
Increase in accounts payable ........................ 2,476,781 2,197,689
(Decrease) in accrued expenses and other
current liabilities ................................ (283,003) (295,070)
Net cash (used for) operating activities ............. (1,126,641) (2,613,486)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets ............................ (366,259) (231,477)
Advances to affiliate ................................ 472,235 562,123
Loans and advances to officer ........................ (47,199) (86,227)
----------- -----------
Net cash provided by investing activities .... 58,777 244,419
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under financing agreement ............. 1,195,359 2,077,947
Payments on notes payable ............................ (91,666) --
Investment by minority shareholders .................. -- 321,329
----------- -----------
Net cash provided by financing activities .... 1,103,693 2,399,276
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS ............. 35,829 30,209
CASH AND CASH EQUIVALENTS, BEGINNING .................. 144,668 75,573
----------- -----------
CASH AND CASH EQUIVALENTS, END ........................ $ 180,497 $ 105,782
=========== ===========
SUPPLEMENTAL INFORMATION:
Interest paid ........................................ $ 430,619 $ 370,682
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
<PAGE>
UNITED TEXTILES & TOYS CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1- BASIS OF PRESENTATION:
The interim accompanying consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-QSB. Accordingly, they do
not include all the information and footnotes required by generally accepted
accounting principles for more complete financial statements. In the opinion of
management, the interim financial statements include all adjustments considered
necessary for a fair presentation of the Company's financial position and the
results of its operations for the six months ended September 30, 1997. 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 as filed with the Securities and Exchange Commission.
Operating results for the six month period ended September 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 Toys' stockholders. The Spin-Off
Distribution was affected in August 1996.
The Company owns 2,489,581 shares or 61% of the Play Co. common stock
outstanding. The Company acquired an additional 70,000 shares of common stock in
September 1997 to increase its ownership percentage to 61% from 59%.
NOTE 2- MINORITY INTERESTS:
The minority interest in Play Co. Toys & Entertainment Corp. represents the
minority shareholders portion (39%) of Play Co.'s equity at September 30, 1997.
The minority interest as reflected in the accompanying consolidated balance
sheet consists of Play Co.'s Series E Preferred Stock only. Due to operating
losses of Play Co., the minority interest in common stock has been written down
to zero.
<PAGE>
Note 3- EARNINGS PER SHARE:
Earnings (loss) per share has been computed on the basis of the
weighted average number of common shares and common share equivalents
outstanding during each period presented.
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.
For the three months ended September 30, 1997 compared to the three months
ended September 30, 1996
Consolidated sales increased to $4,347,013 from $3,910,081, an increase
of $436,932 or 11%, when comparing the three months ended September 30, 1997 to
the three months ended September 30, 1996. The increase was attributed to
increased sales in Play Co.'s stores.
Consolidated cost of sales were $2,665,830 for the three months ended
September 30, 1997 as compared to $2,881,301 for the three months ended
September 30, 1996. This decrease of $ 215,471 or 7% was due to management's
efforts to better control costs.
Consolidated operating expenses for the three months ended September 30,
1997 aggregated $1,967,776 as compared to $1,921,160 for the three months ended
September 30, 1996. This increase of $46,616 or 2% was due to an increase in
payroll and related expenses.
During the three months ended September 30, 1997, non-cash depreciation and
amortization expenses were $139,344 as compared to $150,931 for the three months
ended September 30, 1996. This represented a decrease of $11,587 or 8%. The
decrease is due to reduced levels of depreciation of fixed assets.
Consolidated interest expense for the three months ended September 30, 1997
was $217,545 as compared to $188,533 for the three months ended September 30,
1996. This represented an increase of $29,012 or 15%, and is attributable to
increased levels of borrowing in the three months ended September 30, 1997.
For the three months ended September 30, 1997, subsequent to the adjustment
for minority interest in the net loss of Play Co., the Company reported a
consolidated net loss of $432,461 or $.044 per common share. For the three
months ended September 30, 1996, subsequent to the minority interest adjustment,
the Company reported a consolidated net loss of $827,759 or $.14 per common
share. The weighted average number of common shares and share equivalents
outstanding used in the computation of loss per common share for the three
months ended September 30, 1997 and September 30, 1996 was 9,788,050 shares and
5,888,050 shares, respectively.
For the six months ended September 30, 1997 compared to the six months
ended September 30, 1996
Consolidated sales increased to $7,716,495 from $7,398,901, an increase of
$317,594 or 4%, when comparing the six months ended September 30, 1997 to the
six months ended September 30, 1996. The increase was attributable to increased
sales in Play Co.'s stores.
Consolidated cost of sales for the six months ended September 30, 1997 was
$4,826,424 as compared to $5,403,737 for the six months ended September 30,
1996. This decrease of $577,313 or 11% was due to management's efforts to better
control costs.
Consolidated operating expenses for the six months ended September 30, 1997
was $4,274,946 as compared to $3,753,821 for the six months ended September 30,
1996. This increase of $521,125 was due to increased rent expense and an
increase in payroll and related expenses.
Non-Cash depreciation and amortization for the six months ended September
30, 1997 was $278,690 as compared to $302,105 for the six months ended September
30, 1996. The decrease of $23,415 or 8% was due to reduced levels of
depreciation of fixed assets.
Consolidated interest expense was $430,619 for the six months ended
September 30, 1997 as compared to $370,682 for the six months ended September
30, 1996. This represented an increase of $59,937 or 16%, and is due to
increased levels of borrowings in the six months ended September 30, 1997.
For the six months ended September 30, 1997, subsequent to the adjustment
for minority interest in the net loss of Play Co., the Company reported a
consolidated net loss of $1,411,457 or $.14 per common share. For the six months
ended September 30, 1996, subsequent to the minority interest adjustment, the
Company reported a consolidated net loss of $1,654,075 or $.38 per common share.
The weighted average number of common shares and share equivalents outstanding
used in the computation of loss per common share for the six months ended
September 30, 1997 and September 30, 1996 respectively was 9,788,050 shares and
4,304,443 shares.
<PAGE>
Liquidity and Capital Resources
At September 30, 1997, the Company reported cash and cash equivalents
of $180,497, negative working capital of $3,716,519, and a current ratio of
.71:1. 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 six months ended September 30, 1997, the Company used
$1,126,641 of cash in its operating activities. In the comparable six month
period ended September 30, 1996, the Company used $2,613,486 in it operating
activities.
The Company reported an inflow of funds in its investing activities of
$58,777 in the six months ended September 30, 1997 as compared to an inflow of
$244,419 for the six months ended September 30, 1996.
The Company generated $1,103,693 from its financing activities in the
six months ended September 30, 1997 as compared to the generation of $2,399,276
in the six months ended September 30, 1996.
As a result of these activities, the Company had a net increase in cash and
cash equivalents of $35,829 in the six months ended September 30, 1997.
Play Co. has filed a registration statement with the Securities and
Exchange Commission for an initial public offering for the Company's Series E
preferred shares. The offering is being led by West America Securities Corp. on
a best efforts basis with an objective of raising net proceeds to Play Co. of
approximately $2.5 million. However, there can be no assurance that this
offering will be consummated.
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, its ability to purchase products at favorable prices in favorable
items as well as increased competition and changes in consumer preferences.
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 toys 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 Play Co.'s business strategy will enable
it to compete in the retail toy industry.
Management knows of no other trends reasonably expected to have a 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.
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:
Exhibits: None
Reports on Form 8-K:
On July 21, 1997, United Textiles & Toys Corp. filed a Form 8-K with the
Securities and Exchange Commission. The Form 8-K reported an Item 4 Change in
Registrant's Certifying Accountant.
<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: November 19, 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 September 30, 1997 and is qualified in its
entirety by reference to such statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> mar-31-1998
<PERIOD-END> sep-30-1997
<CASH> 180,497
<SECURITIES> 0
<RECEIVABLES> 488,128
<ALLOWANCES> 0
<INVENTORY> 8,237,740
<CURRENT-ASSETS> 9,316,647
<PP&E> 5,708,973
<DEPRECIATION> 3,142,698
<TOTAL-ASSETS> 12,321,616
<CURRENT-LIABILITIES> 13,033,166
<BONDS> 0
0
0
<COMMON> 97,881
<OTHER-SE> (2,319,556)
<TOTAL-LIABILITY-AND-EQUITY> 12,321,616
<SALES> 4,347,013
<TOTAL-REVENUES> 4,347,013
<CGS> 2,665,830
<TOTAL-COSTS> 2,665,830
<OTHER-EXPENSES> 2,107,120
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 217,545
<INCOME-PRETAX> (432,461)
<INCOME-TAX> 0
<INCOME-CONTINUING> (432,461)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (432,461)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
