SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2000
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)
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<CAPTION>
<S> <C>
Delaware 13-3626613
----------------------------------------------------------------------- --------------------------------------------
(State or Other Jurisdiction of Incorporation or Organization) (IRS Employer Identification No.)
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1385 Broadway, Suite 814, New York, New York 10018
(Address of Principal Executive Offices)
(212) 391-1111
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value
(Title of Class)
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 [ ]
Check if no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB [ ].
The Registrant's revenues for its fiscal year ended March 31, 2000 were
$814 .
The aggregate market value of the voting stock on July 24, 2000
(consisting of Common Stock, par value $0.01 per share) held by non-affiliates
was approximately $58,698 based upon the closing price for such Common Stock on
said date ($.06), as reported by a market maker. On such date, there were
4,550,234 shares of Registrant's Common Stock outstanding.
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
The statements which are not historical facts contained in this Annual
Report are forward looking statements that involve risks and uncertainties,
including , but not limited to instability of revenues, future losses, decrease
in subsidiary's same store sales and unpredictable operating results. The
Company's actual results may differ materially from the results discussed in any
forward looking statement. Unless otherwise indicated, all references to the
number of our shares of common stock give effect to the 1 for 10 reverse stock
split effected in March 1997.
General
United Textiles & Toys Corp. (formerly known as Mister Jay Fashions
International, Inc.) (the "Company") is a Delaware corporation which was
organized in March 1991 and commenced operations in October 1991. The Company
formerly designed, manufactured, and marketed a variety of lower priced women's
dresses, gowns, and separates (blouses, camisoles, jackets, skirts, and pants)
for special occasions and formal events. In April 1998, the Company ceased all
operating activities.
On January 2, 1998, the Company issued 3,571,429 shares of common stock,
par value $0.01 per share (the "Common Stock"), to Multimedia Concepts
International, Inc. ("Multimedia"), at a price of $0.28 per share ($0.01 above
the closing price on December 31, 1997) as payment for $1 million loaned by
Multimedia to the Company. Multimedia is a company of which Ilan Arbel (the
Company's president) is president and a director. As a result of the
transaction, the Company became a subsidiary of Multimedia, which owns
78.5% of the outstanding shares of the Company's Common Stock.
Cessation of Business Operations
On April 15, 1998, the Company ceased operating its textile business.
Prior to the cessation of its textile business, the Company designed,
manufactured, and marketed a variety of lower priced women's dresses, gowns, and
separates (blouses, camisoles, jackets, skirts, and pants) for special occasions
and formal events. The Company marketed its products under its Mister Jay
Fashions International, Lady Helene, Mister Jay Separates, and Junior for Mister
Jay labels. The Company sold its products in the United States primarily through
specialty retail clothing stores and, to a lesser extent, to department stores.
Most of the Company's products were purchased by women for weddings, parties,
dances, and other events requiring formal attire.
<PAGE>
Ownership of the Company
At fiscal year end March 31, 2000, 3,571,934 (or 78.5%) of the Company's
shares of Common Stock were owned by Multimedia, the Company's parent. The
president, chief executive officer, and a director of Multimedia is Ilan Arbel
who is also the president, chief executive officer and a director of the
Company. Multimedia is a Delaware corporation and public company which was
organized in 1994. It is owned approximately 62% by U.S. Stores Corp., a company
of which Mr. Arbel is the president and a director. U.S. Stores Corp. is owned
100% by American Telecom PLC ("ATPLC"), a British public corporation, which is
owned approximately 80% by Europe American Capital Foundation ("EACF"), a
Liechtenstein trust, which is the parent corporation also of Frampton
Industries, Ltd. ("Frampton") and ABC Fund, Ltd. ("ABC"), entities affiliated
with the Company.
The following chart depicts the Company's approximate ownership
structure:
Europe American Capital Foundation
/ / || \\
/ / \/ \\
Frampton Industries (>50%) American Telecom PLC (80%) ABC Fund, Ltd. (>50%)
(100%)
||
\/
U.S. Stores Corp.
(62.0%)
||
\/
Multimedia Concepts International, Inc.
(79.0%)
||
\/
United Textiles & Toys Corp.
Ownership of Play Co. Toys & Entertainment Corp.
Until July 1996, the Company was the majority shareholder of American Toys,
Inc. ("Atoys"), the then majority shareholder of Play Co. By corporate
resolution dated June 1, 1996, the Company authorized Atoys to spin-off (the
"Spin-off Distribution") to its stockholders the Play Co. shares of common stock
owned by Atoys. The Spin-off Distribution was effected in August 1996.
<PAGE>
Recent Developments
At March 31, 2000, the Company's percentage of ownership in Play Co. was
reduced to 21.69%. Accordingly, the Company has elected to deconsolidate the
accounts of Play Co., and account for its investment in Play Co. on the equity
method of accounting. Under the equity method, the original investment is
recorded at cost, and is adjusted periodically to recognize the investor's share
of the earnings or losses of the investee subsequent to the date of acquisition.
Under this method of accounting, the investment generally cannot be reduced
below zero, when the investee has operating losses that exceed the investment,
at which point the use of the equity method is suspended.
The Company will resume accounting for the investment in Play Co. under the
equity method when Play Co. subsequently reports net income and the net income
exceeds the Company's accumulated share of Play Co.'s net losses not recognized
during the period of discontinuance of the equity method.
In January 1998, the Company issued 3,571,429 shares of its common stock to
Multimedia Concepts International, Inc. ("Multimedia"), a company of which the
Company's President is also President, Chief Executive Officer, and a Director.
The issuance of these common shares at a price of $.028 per share ($0.01 above
the closing price on December 31, 1997) represented a conversion into equity of
a $1,000,000 loan owned by the Company to Multimedia. As a result of this
transaction, Multimedia owns 78.5% of the outstanding shares of common stock of
the Company, effectively making the Company a subsidiary of Multimedia.
On January 20, 1998, U.S. Stores Corp. ("U.S. Stores") acquired 1,465,000
shares of Multimedia's common stock. U.S. Stores was incorporated on November
10, 1997. The Company's President is also President and a Director of U.S.
Stores.
<PAGE>
After this transaction, U.S. Stores held an aggregate of 1,868,000 shares
of Multimedia's common stock, or 62% of the outstanding shares, effectively
making Multimedia a subsidiary of U.S. Stores.
On February 28, 1998, American Telecom Corporation ("American Telecom")
acquired 100% of the outstanding common shares of U.S. Stores. American Telecom
was incorporated on July 18, 1997. The Company's President is also President and
a Director of American Telecom. After this transaction, American Telecom
effectively obtained beneficial voting control of the Company.
In April 1998, American Telecom exchanged all of its outstanding common
shares with American Telecom, PLC, a publicly traded company in Great Britian.
After this transaction, American Telecom effectively became a subsidiary of
American Telecom, PLC. Additionally, as part of this transaction, American
Telecom, PLC acquired 100% of the outstanding common shares of U.S. Stores,
thereby effectively making U.S. Stores a direct subsidiary of American Telecom,
PLC and the Company.
ITEM 2. DESCRIPTION OF PROPERTY
Until April 1998, the Company subleased 20,000 square feet of industrial
space at 448 West 16th Street, New York, New York, at an approximate rate of
$12,500 per annum. It is at this location that the Company housed its
administrative offices, factory, and warehouse. In April 1998, in connection
with the Company's cessation of its textile operations, the Company moved its
administrative offices to 1410 Broadway, Suite 1602, New York, New York 10018
and vacated its former office, factory, and warehouse space at 448 West 16th
Street. The office space at this location was leased to U.S. Apparel Corp. (a
subsidiary of Multimedia, the Company's parent), and pursuant to an oral
agreement with U.S. Apparel Corp., the Company paid no remuneration for its use
of the premises. The president of the Company is also the president of U.S.
Stores Corp. and Multimedia. On July 1, 1999, the Company vacated 1410 Broadway
and relocated, with Multimedia (its parent) and U.S. Apparel Corp. (the named
tenant on the lease), to 1385 Broadway, Suite 814, New York, New York 10018.
Pursuant to an oral agreement with U.S. Apparel Corp., the Company pays no
remuneration for its use of the premises.
ITEM 3. LEGAL PROCEEDINGS
Neither the Company's officers, directors, affiliates, nor owners of record
or beneficially of more than five percent of any class of the Company's Common
Stock is a party to any material proceeding adverse to the Company or has a
material interest in any such proceeding adverse to the Company or its parent or
subsidiary.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's securities were quoted on the Nasdaq SmallCap Stock
Market until August 28, 1997, at which time Nasdaq delisted the Company's
securities. The following table sets forth representative high and low bid
quotes as reported by the OTC Bulletin Board whereon the Company's securities
are quoted, during the periods stated below (quotes prior to August 28, 1997 are
reported by Nasdaq). Bid quotations reflect prices between dealers, do not
include resale mark-ups, mark-downs, or other fees or commissions, and do not
necessarily represent actual transactions.
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Common Stock (1) (2)
Calendar Period Low High
1998
<S> <C> <C>
01/01/98 - 03/31/98 0.27 0.75
04/01/98 - 06/30/98 0.25 0.30
07/01/98 - 09/30/98 0.20 0.40
10/01/98 - 12/31/98 0.15 0.21
1999
01/01/99 - 03/31/99 0.15 0.25
04/01/99 - 06/30/99 0.22 0.37
07/01/99 - 09/30/99 0.25 0.69
10/01/99 - 12/31/99 0.25 1.38
2000
01/01/00 - 03/31/00 0.25 1.47
04/01/00 - 07/24/00 0.06 0.47
----------------------------------
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(1) Reflects the 1 for 10 reverse stock split effected in March 1997.
(2) The Company's Common Stock was delisted from the Nasdaq SmallCap Stock
Market on August 28, 1997.
As of July 24, 2000, there were approximately 15 holders of record of
the Company's Common Stock, although the Company believes that there are
approximately 1,600 additional beneficial owners of shares of Common Stock held
in street name. As of July 24, 2000, the number of outstanding shares of the
Company's Common Stock was 4,550,234.
Recent Sales of Unregistered Securities
The Company sold no unregistered securities during the fiscal year
ended March 31, 2000.
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following table summarizes certain selected financial data and is
qualified in its entirety by the more detailed financial statements contained
elsewhere in this document:
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2000 1999
(Restated)
Balance Sheet Data:
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Working capital (deficiency) $ (155,588) $ (49,904)
Total assets 210,880 216,629
Total current liabilities 206,735 76,392
Stockholders' equity 4,145 140,237
Operating Data:
Net sales - -
Cost of sales - -
Total operating expenses 136,906 237,877
Net income (loss) (136,092) (567,473)
Income (loss) per common share $ (.03)
(0.12)
Weighted average shares outstanding 4,550,234 4,550,234
------------------------------------------------------
</TABLE>
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.
United Textiles & Toys Corp.'s (the "Company") board of directors voted to
cease all manufacturing activities as of March 31, 1998 due to continuing
losses.
For the year ended March 31, 2000 compared to the year ended March 31, 1999
Operating expenses were $136,906 for the year ended March 31, 2000 as
compared to $237,877 for the year ended March 31, 1999. This represented a
decrease of $100,971 or 42%. The decrease can be attributed to a cessation of
operations as of March 31, 1998.
<PAGE>
The Financial statements for the year ended March 31, 1999 contain certain
restatements of amounts previously reported.
These restatements were the result of the Company's decision to
deconsolidate the accounts of Play Co. as of March 31, 2000. At March 31, 1999,
the Company's percentage of ownership in Play Co. was 45.2%. Although the
Company at that date owned less than 51% of Play Co.'s outstanding common stock,
the Company still exercised prerogative of control over Play Co. and
consolidated the accounts of Play Co. into the Company.
At March 31, 2000, the Company's percentage of ownership in Play Co. was
reduced to 21.69%. Accordingly, the Company has elected to deconsolidate the
accounts of Play Co., and account for its investment in Play Co. on the equity
method of accounting. Under the equity method, the original investment is
recorded at cost, and is adjusted periodically to recognize the investor's share
of the earnings or losses of the investee subsequent to the date of acquisition.
Under this method of accounting, the investment generally cannot be reduced
below zero, when the investee has operating losses that exceed the investment,
at which point the use of the equity method is suspended.
The Company will resume accounting for the investment in Play Co. under the
equity method when Play Co. subsequently reports net income and the net income
exceeds the Company's accumulated share of Play Co.'s net losses not recognized
during the period of discontinuance of the equity method.
The Company's investment in Play Co. at cost at March 31, 1999 was
$383,986. The Company's allocable share of Play Co.'s losses as of March 31,
1999 was $1,127,301. Accordingly, the investment in Play Co. was reduced to zero
on the restated financial statements as of March 31, 1999. For the year ended
March 31, 2000, the Company's allocable share of Play Co.'s net loss was
$3,439,321.
Liquidity and Capital Resources
At March 31, 2000, working capital deficit was $155,588 as compared to a
working capital deficit of $49,904 as of March 31, 1999. This change in working
capital is mainly due to the Company not recording any operating revenues as a
result of the cessation of operation as of March 31, 1998..
For the year ended March 31, 2000, operating activities used funds of
$26,992 as compared to the year ended March 31, 1999 in which $198,375 was used
by operating activities. This decrease in funds used by operating activities was
due primarily to increases in accounts payable and accrued expenses at March 31,
2000.
Play Co. used $3,324 in investing activities for the year ended March 31,
2000 as compared to providing $75,918 for the year ended March 31, 1999. The
decrease is due primarily to a decrease in officer loans repayment.
<PAGE>
Financing activities generated funds of $30,408 during the year ended March
31, 2000 as compared to a generation of $112,723 in funds during the year ended
March 31, 1999. The primary element in the generation of financing funds was the
repayment of funds from affiliated companies.
Trends Affecting Liquidity, Capital Resources and Operations
Since the Company is ostensibly a holding company, there are no trends that
will affect liquidity, capital resources, and operations.
Year 2000
The Company in 1999 upgraded its computer system by installing a year
2000 upgrade to its software.
Although the Company has not experienced any problems related to the year
2000 issues, the possibility still exists that such problems might arise during
the calendar year. However, the effect, if any, of year 2000 problems on the
Company's results of operations cannot be estimated with any degree of certainty
if the Company or its affiliated companies, or service providers are not fully
compliant.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
See attached Financial Statements.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS
Officers and Directors
The following table sets forth the names, ages, and titles of all
directors and officers of the Company:
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Name Age Position
<S> <C> <C>
Ilan Arbel 48 Chief Executive Officer, President, and Director
Rivka Arbel 47 Vice President and Director
Allean Goode 68 Secretary, Treasurer, and Director
Moses Mika 81 Director
</TABLE>
All directors are elected at an annual meeting of the Company's
shareholders and hold office for a period of one year or until the next annual
meeting of stockholders or until their successors are duly elected and
qualified. Vacancies on the board of directors may be filled by the remaining
directors. Officers are appointed annually by, and serve at the discretion of,
the board of directors. There are no family relationships between or among any
officers or directors of the Company except that Rivka Arbel is the
sister-in-law of Ilan Arbel and Moses Mika is the father of Mr. Arbel.
As permitted under the Delaware General Corporation Law, the Company's
Certificate of Incorporation eliminates the personal liability of the directors
to the Company or any of its shareholders for damages caused by breaches of said
directors' fiduciary duties. As a result of such provision, stockholders may be
unable to recover damages against directors for actions which constitute
negligence or gross negligence or are in violation of their fiduciary duties.
This provision in the Company's Certificate of Incorporation may reduce the
likelihood of derivative and other types of shareholder litigation against
directors.
Ilan Arbel has been the president, chief executive officer, and a director
of the Company since 1991. Mr. Arbel was the president, chief executive officer,
and a director of Atoys from February 1993 until July 1993 at which time he
resigned as president thereof. In March 1995, Mr. Arbel was reelected president
of Atoys, a position he held, with his directorship, until July 1996. Mr. Arbel
was the president, secretary, and a director of Multimedia from inception until
June 12, 1995. He was reelected a director in August 1995 and president in May
1996. Since its inception, in February 1997, Mr. Arbel has been the president
and a director of U.S. Apparel. From May 1993 to April 1997, Mr. Arbel was a
director of the Company (from June 1994 until his April 1997 resignation, he was
chairman). Since 1989, he has been the sole officer and director of Europe
America Capital Corp., a company involved in investments and finance in the
United States and Europe. Since 1993, he has been the president of European
Ventures Corp., a company involved in investments and finance in the United
States and Europe. Mr. Arbel is a graduate of the University Bar Ilan in Israel
and has B.A. degrees in Economics, Business, and Finance.
<PAGE>
Moses Mika was appointed director of the Company in March 1998. He has been
a director of the Company since March 1998 and a director of Toys since May
1998. Mr. Mika is the president of H.D.S. Capital Corp. and the majority
shareholder of European Ventures Corp. Mr. Mika has been retired since 1989.
Allean Goode has been secretary, treasurer, and a director of the Company
since September 1992. Ms. Goode was appointed secretary and treasurer of
Multimedia in March 1998. Ms. Goode was assistant secretary of the Company from
May 1993 until approximately May 1995. From 1991 until September 1992, Ms. Goode
acted as an independent contractor performing bookkeeping services for the
Company Ms. Goode was secretary, treasurer, and a director of Atoys from
February 1993 until July 1996. From 1981 until 1991, Ms. Goode was employed as
office manager and bookkeeper of Via West Sportswear, a New York based
manufacturer of sportswear.
Rivka Arbel has been a director of the Company since September 29, 1992.
Since March 1996, she has been a vice president of the Company Since 1986, Ms.
Arbel has been president and a director of Amigal, Ltd., a producer of men's and
women's wear in Israel. Ms. Arbel is the sister-in-law of Ilan Arbel, the
Company's president and chief executive officer.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers, directors, and persons who beneficially own more than
ten percent of a registered class of the Company's equity securities to file
reports of securities ownership and changes in such ownership with the
Securities and Exchange Commission ("SEC"). Officers, directors, and greater
than ten percent beneficial owners also are required by rules promulgated by the
SEC to furnish the Company with copies of all Section 16(a) forms they file.
No person (a "Reporting Person") who during the fiscal year ended March 31,
2000 was a director, officer, or beneficial owner of more than ten percent of
the Company's Common Stock (which are the only classes of equity securities of
the Company registered under ss.12 of the Securities Exchange Act of 1934),
failed to file on a timely basis reports required by ss.16 of the Act during the
most recent fiscal year except as follows: (i) Ilan Arbel, (ii) Rivka Arbel,
(iii) Allean Goode, (iv) Moses Mika , (v) Multimedia, (vi) American Telecom PLC,
(vii) U.S. Stores Corp., and (viii) Europe American Capital Foundation. The
foregoing is based solely upon a review by the Company of (i) Forms 3 and 4
during the most recent fiscal year as furnished to the Company under Rule
16a-3(e) under the Act, (ii) Forms 5 and amendments thereto furnished to the
Company with respect to its most recent fiscal year, and (iii) any
representation received by the Company from any reporting person that no Form 5
is required, except as described herein.
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
Executive Compensation
Summary of Cash and Certain Other Compensation
The following provides certain information concerning all Plan and Non-Plan
(as defined in Item 402 (a)(ii) of Regulation S-B) compensation awarded or paid
by the Company during the years ended March 31, 1999, 1998, and 1997 to each of
the named executive officers of the Company.
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SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
Awards Payouts
Securities
Restricted Underlying All Other
Stock Award(s) Options/ LTIP Compen-sation
($) SARs Payouts ($)
Name and Principal Year Salary Bonus(#) ($) Other Annual
Position Compen-sation
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ilan Arbel (2)
President, CEO,
and Director 2000 $39,000 -- -- -- -- -- --
1999 -- -- -- -- -- -- --
1998 -- -- -- -- -- -- --
</TABLE>
<PAGE>
----------------------
(1) No bonuses were paid during the periods herein stated.
(2) Mr. Arbel became the chief executive officer of the Company in February
1991. Mr. Arbel does not receive any compensation from the Company for being an
officer or director.
Employment Agreements
In May 1996, the Company entered into five year employment agreements
with each of Mr. Arbel and Rivka Arbel. Pursuant to such agreements, Mr. Arbel
and Mrs. Arbel were granted options to purchase an aggregate of 300,000 and
40,000 shares, respectively, of the Company's Common Stock at a purchase price
equal to the average bid price for the Company's Common Stock as reported on the
Nasdaq SmallCap Stock Market, for a period of ninety days ending five days prior
to exercise. Such options were exercised in their entirety. See "Certain
Relationships and Related Transactions."
1992 Stock Option Plan
In 1992, the Company adopted a Stock Option Plan (the "SOP"). The board
believes that the SOP is desirable to attract and retain executives and other
key employees of outstanding ability. Under the SOP, options to purchase an
aggregate of not more than 15,000 shares of Common Stock may be granted from
time to time to key employees, officers, directors, advisors, and independent
consultants to the Company and its subsidiaries.
<PAGE>
The board of directors is charged with administration of the SOP and is
generally empowered to interpret it, prescribe rules and regulations relating
thereto, determine the terms of the option agreements, amend them with the
consent of the optionee, determine the employees to whom options are to be
granted, and determine the number of shares subject to each option and the
exercise price thereof. The per share exercise price for incentive stock options
("ISOs") will not be less than 100% of the fair market value of a share of the
Common Stock on the date the option is granted (110% of the fair market value on
the date of grant of an ISO if the optionee owns more than 10% of the Common
Stock of the Company).
Options will be exercisable for a term determined by the board which
will not be less than one year. Options may be exercised only while the original
grantee has a relationship with the Company or a subsidiary of the Company which
confers eligibility to be granted options or up to ninety (90) days after
termination at the sole discretion of the board. In the event of termination due
to retirement, the Optionee, with the consent of the board, shall have the right
to exercise his option at any time during the thirty-six (36) month period after
such retirement. Options may be exercised up to thirty-six (36) months after
death or total and permanent disability. In the event of certain basic changes
in the Company, including a change in control of the Company (as defined in the
Plan) in the discretion of the board, each option may become fully and
immediately exercisable. ISOs are not transferable other than by will or the
laws of descent and distribution. Options may be exercised during the holder's
lifetime only by the holder or the guardian or legal representative of the
holder.
Options granted pursuant to the SOP may be designated as ISOs, with the
attendant tax benefits provided under Section 421 and 422A of the Internal
Revenue Code of 1986. Accordingly, the SOP provides that the aggregate fair
market value (determined at the time an ISO is granted) of the Common Stock
subject to ISOs exercisable for the first time by an employee during any
calendar year (under all plans of the Company and its subsidiaries) may not
exceed $100,000. The Board may modify, suspend or terminate the SOP, provided,
however, that certain material modifications affecting the SOP must be approved
by the shareholders, and any change in the SOP that may adversely affect an
optionee's rights under an option previously granted pursuant to same requires
the consent of the optionee.
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's outstanding Common Stock as of July 24, 2000 (on
which date there were 4,550,235 shares outstanding), by (i) each beneficial
owner of 5% or more of the Company's Common Stock, (ii) each of the Company's
executive officers, directors, and key employees, and (iii) all executive
officers, directors, and key employees as a group:
<TABLE>
<CAPTION>
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Name and Address Number of Shares Percent of Common Stock
of Beneficial Owner Beneficially Owned1 Beneficially Owned2
------------------- ------------------ ------------------
------------------------------------------------------- ----------------------------------- ------------------------------------
<S> <C> <C> <C>
Multimedia Concepts International, Inc.
1385 Broadway, Suite 814
New York, New York 10018 3,571,429 78.5%
------------------------------------------------------- ----------------------------------- ------------------------------------
Ilan Arbel (3)
c/o United Textiles & Toys Corp.
1385 Broadway, Suite 814 3,571,429 78.5%
New York, New York 10018
------------------------------------------------------- ----------------------------------- ------------------------------------
U.S. Stores Corp.(4)
1385 Broadway, Suite 814
New York, New York 10018 3,694,579 81.2%
------------------------------------------------------- ----------------------------------- ------------------------------------
American Telecom, PLC (5)
8-13 Chiswell Street
London EC 1Y 4UP 3,694,579 81.2%
------------------------------------------------------- ----------------------------------- ------------------------------------
Europe American Capital Foundation (6)
Box 47
Tortola British Virgin Islands 4,114,579 90.4%
------------------------------------------------------- ----------------------------------- ------------------------------------
Allean Goode
c/o United Textiles & Toys Corp.
1385 Broadway, Suite 814 -- --
New York, New York 10018
------------------------------------------------------- ----------------------------------- ------------------------------------
Rivka Arbel
c/o United Textiles & Toys Corp.
1385 Broadway, Suite 814 -- --
New York, New York 10018
------------------------------------------------------- ----------------------------------- ------------------------------------
Moses Mika
c/o United Textiles & Toys Corp.
1385 Broadway, Suite 814 -- --
New York, New York 10018
------------------------------------------------------- ----------------------------------- ------------------------------------
Officers and Directors as a Group 78.5%
(4 persons) 3,571,429
------------------------------------------------------- ----------------------------------- ------------------------------------
</TABLE>
<PAGE>
(footnotes from previous page)
(1) Unless otherwise noted, all of the shares shown are held by individuals
or entities possessing sole voting and investment power with respect to such
shares. Shares not outstanding but deemed beneficially owned by virtue of the
right of an individual or entity to acquire them within 60 days, whether by the
exercise of options or warrants, are deemed outstanding in determining the
number of shares beneficially owned by such person or entity.
(2) The "Percent of Common Stock Beneficially Owned" is calculated by
dividing the "Number of Shares Beneficially Owned" by the sum of (i) the total
outstanding shares of Common Stock of the Company, and (ii) the number of shares
of Common Stock that such person or entity has the right to acquire within 60
days, whether by exercise of options or warrants. The "Percent of Common Stock
Beneficially Owned" does not reflect shares beneficially owned by virtue of the
right of any person, other than the person named and affiliates of said person,
to acquire them within 60 days, whether by exercise of options or warrants.
(3) Ilan Arbel is the president and a director of each of Multimedia, a
publicly traded company which is the parent of the Company (owning 78.5% of
same) and U.S. Stores Corp., a private company which is the parent of Multimedia
(owning 62% of same).
(4) U.S. Stores Corp. is the parent of Multimedia, owning 62% of same, and
accordingly is a beneficial owner of the shares of Common Stock owned by
Multimedia. U.S. Stores Corp. also owns 123,150 shares of the Company's Common
Stock in street name.
(5) American Telecom, PLC is a British corporation and the parent of U.S.
Stores Corp., owning 100% of same, and accordingly is a beneficial owner of the
shares of Common Stock owned by U.S. Stores Corp.
(6) EACF is a Liechtenstein trust and the parent of American Telecom, PLC,
owning 80% of same, and accordingly is a beneficial owner of the shares of
Common Stock owned by American Telecom, PLC. EACF is also the record owner of
420,000 shares of Common Stock.
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Multimedia Concepts International, Inc.
On January 2, 1998, the Company issued 3,571,429 shares of its Common
Stock to its parent, Multimedia, a company of which the Company's president is
president and a director, at a price of $0.28 per share ($0.01 above the closing
price on December 31, 1997) as payment for $1 million loaned by Multimedia to
the Company. As a result of the transaction, the Company became a subsidiary of
Multimedia, which owns 78.5% of the outstanding shares of Common Stock of the
Company. Multimedia is a Delaware corporation and public company which was
organized in 1994. Multimedia is owned approximately 62% by U.S. Stores Corp., a
company of which Mr. Arbel is the president and a director. U.S. Stores Corp. is
owned 100% by ATPLC, a British public corporation, which is owned approximately
80% by EACF, Liechtenstein trust, which is the parent corporation also of
Frampton and ABC, entities affiliated with the Company under common control.
<PAGE>
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following financial statements of the Company are included as Part
II, Item 7:
<TABLE>
<CAPTION>
<S> <C>
Balance Sheets as of March 31, 2000 and March 31, 1999 F-2
Statements of Operations for the years ended March 31, 2000
and March 31, 1999 F-4
Statement of Changes in Stockholders' Equity for the years
ended March 31, 2000 and March 31, 1999 F-5
Statements of Cash Flows for the years ended March 31, 2000
and March 31, 1999 F-6
Notes to Financial Statements F-7
</TABLE>
(b) During its last fiscal 2000 quarter, the Company filed no Forms 8-K.
(c) All exhibits, except those designated with an asterisk (*), which are
filed herewith, have previously been filed with the Commission either in
connection with the Company's Registration Statement on Form SB-2, under file
No. 33-55548-NY or as indicated by the reference herein and, pursuant to 17
C.F.R. ss.230.411, are incorporated by reference herein. Exhibits previously
filed but not as part of the SB-2 Registration Statement are incorporated herein
by reference to the appropriate document.
<TABLE>
<CAPTION>
<S> <C>
3.1 Certificate of Incorporation of the Company filed March 19, 1991.
3.2 Amendment to Certificate of Incorporation of the Company, filed in December, 1992.
3.3 By-Laws of the Company.
3.9 Certificate of Amendment to Certificate of Incorporation of the Company, filed in March 1997.
4.1 Specimen Common Stock Certificate.
10.1 the Company's Incentive Stock Option Plan.
10.65 Compensation agreement between the Company, Ilan Arbel and Rivka Arbel. (filed as an exhibit to
Form 10-KSB for the transition period of October 1, 1994 to March 31, 1995 and incorporated herein
by reference).
16.01 Letter on change in certifying accountant (filed as an exhibit to Form 8-K/A, dated May 14, 1997
and incorporated herein by reference).
16.02 Letter on change in certifying accountant (filed as an exhibit to Form 8-K, dated July 21, 1997 and
incorporated herein by reference).
27.01* Financial Data Schedule
</TABLE>
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized this 24th day of July 2000.
United Textiles & Toys Corp.
By: /s/ Ilan Arbel
Ilan Arbel, President,
Chief Executive Officer, and Director
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Registrant, in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/Ilan Arbel Chief Executive Officer, 7/24/00
Ilan Arbel President, and Director Date
/s/Allean Goode Secretary, Treasurer, and 7/24/00
Allean Goode Director Date
/s/Moses Mika Director 7/24/00
Moses Mika Date
/s/Rivka Arbel Vice President and Director 7/24/00
Rivka Arbel Date
</TABLE>
<PAGE>
UNITED TEXTILES & TOYS CORP.
(A Subsidiary of Multimedia Concepts International, Inc.)
TABLE OF CONTENTS
March 31, 2000 and March 31, 1999
<TABLE>
<CAPTION>
Page
<S> <C>
Report of Independent Certified Public Accountant F-1
Financial Statements:
Balance Sheets as of March 31, 2000 and March 31, 1999 (restated) F-2
Statements of Operations for the years ended March 31, 2000
and March 31, 1999 (restated) F-4
Statement of Changes in Stockholders' Equity for the two years
in the period ended March 31, 2000 F-5
Statements of Cash Flows for the years ended March 31, 2000
and March 31, 1999 (restated) F-6
Notes to Financial Statements F-7
</TABLE>
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
Board of Directors United Textiles & Toys Corp.
We have audited the accompanying balance sheets of United Textiles & Toys Corp.
(A subsidiary of Multimedia Concepts International, Inc.) as of March 31, 2000
and 1999 and the related statements of operations, stockholders' equity, and
cash flows for each of the two years in the period ended March 31, 2000 and
1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based upon our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 7, the Company restated its previously issued 1999
financial statements.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of United Textiles & Toys Corp. at
March 31, 2000 and March 31, 1999, and the result of its operations and its cash
flows for each of the two years in the period ended March 31, 2000 and 1999 in
conformity with generally accepted accounting principles.
Melville, New York
July 20, 2000
F-1
<PAGE>
UNITED TEXTILES & TOYS CORP.
(A Subsidiary of Multimedia Concepts International, Inc.)
BALANCE SHEET
As of March 31, 2000 and March 31, 1999
<TABLE>
<CAPTION>
March 31, March 31,
2000 1999
------------------- -----------------
(Restated)
(Note 7)
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash $ 750 $ 658
Accounts receivables-net - 20,242
Prepaid expenses and other current assets 5,689 5,588
Investment in affiliated companies (Note 1) 44,708 -
------ ------
-
Total current assets 51,147 26,488
------ ------
FURNITURE, FIXTURES AND EQUIPMENT
Furniture, fixtures and equipment 38,152 38,152
Accumulated depreciation on furniture, fixtures and equipment (38,152) (38,152)
------ ------
Furniture, fixtures and equipment - Net
0 0
------ ------
OTHER ASSETS
Due from affiliates 152,513 182,921
Deposits and other assets 7,220 7,220
------ ------
Total other assets 159,733 190,141
------ ------
Total Assets $ 210,880 $ 216,629
====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
F-2
<PAGE>
UNITED TEXTILES & TOYS CORP.
(A Subsidiary of Multimedia Concepts International, Inc.)
BALANCE SHEET
As of March 31, 2000 and March 31, 1999
<TABLE>
<CAPTION>
March 31, March 31,
2000 1999
------------------------- ------------------
(Restated)
(Note 7)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable $ 53,062 $ 7,524
Accrued expenses and other current liabilities 75,228 31,807
Due to Officer 78,445 37,061
------ ------
Total current liabilities
206,735 76,392
------ ------
Total liabilities 206,735 76,392
------ ------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; 10,000,000 shares authorized, 4,550,234 shares
issued and outstanding at March 31, 2000 and 4,550,234 shares issued and
outstanding at March 31, 1999 4,550 4,550
Additional paid-in capital 8,142,281 8,142,281
Retained earnings (Deficit) (8,142,686) (8,006,594)
----------- -----------
Total stockholders' equity 4,145 140,237
----------- -----------
Total liabilities and stockholders' equity 210,880 $ 216,629
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
F-3
<PAGE>
UNITED TEXTILES & TOYS CORP.
(A Subsidiary of Multimedia Concepts International, Inc.)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Years Ended
-------------------------------------------
March 31, March 31,
2000 1999
------------------- -------------------
(Restated)
(Note 7)
Operating expenses:
<S> <C> <C>
Operating expenses $ 136,906 $ 237,877
------- -------
Total operating expenses 136,906 237,877
------- -------
Operating income (loss) (136,906) (237,877)
Other income:
Interest and other income 814 54,390
------- -------
Net loss before loss on investment in subsidiary (136,092) (183,487)
------- -------
Loss on investment in subsidiary - (383,986)
------- -------
Net loss $ (136,092) $ (567,473)
========= =========
Calculation of basic and diluted common share and share equivalents:
Basic and diluted loss per common share and share equivalent $ (.03) $ (.12)
========= =========
Weighted average number of common shares outstanding 4,550,234 4,550,234
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
F-4
<PAGE>
UNITED TEXTILES & TOYS CORP.
(A Subsidiary Multimedia Concepts International, Inc.)
STATEMENT OF CHANGES IN STOCKHOLDERS' (DEFICIT) EQUITY
<TABLE>
<CAPTION>
Additional
Common Stock Paid-In Accumulated
Shares Amount Capital Deficit
---------------- --------------- ------------------ ---------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1998 4,550,234 $ 4,550 $ 8,142,281 $ (7,439,121)
Net loss for the year ended
March 31, 1999 (Note 7 )
(567,473)
---------------- --------------- ------------------ ---------------------
Balance, March 31, 1999 4,450,234 4,550 8,142,281 (8,006,594)
Net loss for the year ended
March 31, 2000
(136,092)
---------------- -- --------------- -- ------------------ -- ---------------------
4,450,234 $ 4,550 $ 8,142,281 $ 8,142,686
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
UNITED TEXTILES & TOYS CORP.
(A Subsidiary of Multimedia Concepts International, Inc.)
STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
For the Years Ended
March 31, March 31,
2000 1999
--------- ----------
(Restated)
(Note 7)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss ............................................................................. (136,092) (567,473)
Adjustments to reconcile net loss to cash (used) provided for operating activities:
Equity in loss of subsidiary ......................................................
-- 383,986
Changes in assets and liabilities:
Decrease in Accounts Receivable .................................................... 20,242
37,578
Increase (decrease) in prepaid expenses and other current assets ................... (101) --
Increase (decrease) in accounts payable ............................................ 45,538 6,914
Increase (decrease) in accrued expenses and other liabilities ...................... 43,421 (59,380)
--------- ---------
Total adjustments .......................................................... 109,100 369,098
--------- ---------
Net cash provided (used) by operating activities ........................... (26,992) (198,375)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in subsidiaries ........................................................ (44,708) (100,000)
Loans (made to) officer ............................................................ 41,384 175,918
--------- ---------
Net cash (used for) investing activities ................................... (3,324) 75,918
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Loans and advances - affiliates
30,408 112,723
--------- ---------
Net cash provided by (used for) investing activities
30,408 112,723
--------- ---------
NET INCREASE (DECREASE) IN CASH ...................................................... 92 (9,734)
--------- ---------
Cash, beginning of period ............................................................ 658 10,392
--------- ---------
Cash, end of period
$ 750 $ 658
========= =========
Supplemental disclosure of cash flow information:
Interest paid $ - $ -
========= =========
Taxes paid ........................................................................... $ 2,152 $ 2,150
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
F-7
<PAGE>
UNITED TEXTILES & TOYS CORP.
(A Subsidiary of Multimedia Concepts International, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. DESCRIPTION OF COMPANY
United Textiles & Toys Corp. (the "Company" or "United Textiles") is a
Delaware corporation which was organized in March 1991 and commenced operations
in October 1991. The Company engaged in the design, manufacturing and marketing
of a variety of lower priced women's dresses, gowns and separates for special
occasions and formal events. The Company's products were sold primarily in
retail clothing and department stores through the United States.
As a result of continuing losses, the Company's Board of Directors voted to
discontinue operating activities as of March 31, 1998.
Until July 1996, the Company was the majority shareholder of American Toys,
Inc. ("American Toys"). 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.'s 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 shares owned by American Toys to American
Toy's stockholders. The Spin-off Distribution was effected in August 1996.
Nature of Relationship with Affiliates:
As described in the footnotes following, the Company engages in
transactions with affiliated entities, many of which are under common control.
These entities and the nature of the affiliates are as follows:
Affiliates Under Common Control
Name of Entity and Nature of Affiliation
Multimedia Concepts International, Inc. ("Multimedia"): Majority
stockholder of UTTC. Multimedia currently owns 78.5% of the outstanding common
shares of the Company's common stock. The president and director of Multimedia
is Ilan Arbel, who is also the president and director of the Company.
Europe American Capital Foundation ("EACF"): Foundation which is the sole
stockholder/beneficiary of Frampton Industries, Ltd. and ABC Fund, Ltd., and the
majority stockholder of American Telecom, PLC.
<PAGE>
UNITED TEXTILES & TOYS CORP.
(A Subsidiary of Multimedia Concepts International, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. DESCRIPTION OF COMPANY (continued)
Nature of Relationship with Affiliates (continued):
Europe American Capital Corporation ("EACC"): Entity of which Ilan Arbel
and/or his relatives is/are officer(s) and/or director(s).
Frampton Industries, Ltd. ("Frampton"): Entity which is wholly owned by
EACF.
American Telecom PLC: Entity 80% owned by EACF.
ABC Fund, Ltd. ("ABC"): Entity which is wholly owned by EACF.
U.S. Stores Corp. ("U.S. Stores"): A private company whose president is
Ilan Arbel, who is also a director. Parent company of Multimedia.
Other Affiliates
Name of Entity and Nature of Affiliation
ZD Group, L.L.C. ("ZD"): ZD is a New York Trust, the beneficiary of which
is a member of the family of the Company's president.
European Ventures Corp. ("EVC"): Parent company of Shopnet.com. Ilan Arbel
is the president. Moses Mika is the majority shareholder.
Shopnet.com ("Shopnet"): The chairman of the Company is the president and a
director of Shopnet.
Breaking Waves, Inc. ("BWI"): This entity is a wholly owned subsidiary of
Shopnet, and also owns 11% of the Company's common stock (Note 12). The
president of BWI is also the chairman of the board of the Company and a relative
of Ilan Arbel.
<PAGE>
UNITED TEXTILES & TOYS CORP.
(A Subsidiary of Multimedia Concepts International, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. DESCRIPTION OF COMPANY (continued)
Nature of Relationship with Affiliates (continued):
The following chart graphically depicts the Company's ownership structure
Europe American Capital Foundation
/ / || \\
/ / \/ \\
Frampton Industries (100%) American Telecom PLC (80%) ABC Fund, Ltd. (100%)
(100%)
||
\/
U.S. Stores Corp.
(62.0%)
||
\/
Multimedia Concepts International, Inc.
(78.5%)
||
\/
United Textiles & Toys Corp.
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
a. Use of Estimates:
The preparation of 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, revenues and expenses and
disclosure of contingent assets and liabilities at
the date of the financial statements. Actual amounts
could differ from those estimates.
b. Concentration of Credit Risk:
Financial instruments that potentially subject the
Company to concentrations of credit risk consist
primarily of cash and affiliated company receivables.
<PAGE>
UNITED TEXTILES & TOYS CORP.
(A Subsidiary of Multimedia Concepts International, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
b. Concentration of Credit Risk (continued):
The Company maintains, at this time, deposits in
federally insured financial institutions.
c. Fair value of Financial Instruments:
The carrying amount of the Company's financial
instruments, consisting of cash, accounts receivable,
accounts payable and borrowings that approximate
their fair value.
d. Fixed Assets and Depreciation:
Furniture and fixtures are recorded at cost.
Depreciation is provided using the straight-line
method over the estimated useful lives (3 years) of
the related assets. Maintenance and repairs are
charged to operations as incurred.
e. Statements of Cash Flows:
For purposes of the statements of cash flows, the
Company considers all highly liquid investments
purchased with an original maturity of three months
or less to be cash equivalents.
f. Income Taxes:
The Company accounts for income taxes in accordance
with Statement of Financial Standards (SFAS) No. 109,
"Accounting for Income Taxes." Deferred income taxes
are recognized upon the differences between financial
statement and income tax bases of assets and
liabilities using enacted rates in effect for the
year in which the differences are expected to
reverse. Valuation allowances are established, when
necessary, to reduce the deferred tax assets to the
amount expected to be realized. The provision for
income taxes represents the tax payable for the
period and the change during the period in deferred
tax assets and liabilities, including the effect of
change in the valuation allowance, if any.
<PAGE>
UNITED TEXTILES & TOYS CORP.
(A Subsidiary of Multimedia Concepts International, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
g. Net Loss Per Share:
During the three-month period ended December 31,
1997, the Company adopted the provisions of SFAS No.
123, "Earnings Per Share," which requires the
disclosure of "basic" and "diluted" earnings (loss)
per share. Basic earnings (loss) per share is
computed by dividing net income (loss), by the
weighted average number of common shares outstanding.
Diluted earnings (loss) per share is similar in
calculation except that the weighted average number
of common shares is increased to reflect the effects
of potential additional shares that would result from
the exercise of stock options or other convertible
instruments. For the year ended March 31, 2000, there
is no difference between basic and diluted loss per
common share.
The following summarizes the components of the basic
and diluted loss per common share and share
equivalents:
<TABLE>
<CAPTION>
Years Ended March 31,
2000 1999
(Restated)
(Note 7)
<S> <C> <C>
Net loss applicable to common shares $ (.03) $ (.12)
========= =============
</TABLE>
h. Impairment of Long-Lived Assets:
SFAS 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 impairment whenever
events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable.
The Company adopted SFAS No. 121 effected April 1,
1998. There was no impact of such adoption on the
Company's financial condition and results of
operations.
<PAGE>
UNITED TEXTILES & TOYS CORP.
(A Subsidiary of Multimedia Concepts International, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
i. Effect of New Accounting Pronouncements:
In June 1997, the FSAB issued SFAS No. 130,
"Reporting Comprehensive Income." This statement
establishes standards for reporting and display of
comprehensive income and its components (revenues,
expenses, gains and losses) in an entity's financial
statements. This statement requires an entity to
classify items of other comprehensive income by their
nature in a financial statement and display the
accumulated balance of other comprehensive income
separately from retained earnings and additional
paid-in-capital in the equity section of a statement
of financial position. This pronouncement, which is
effective for fiscal years beginning after December
15, 1997, was adopted by the Company during the
fiscal year ending March 31, 1999 without impact to
the financial statements for either of the years
ended March 31, 1999 or 1998.
Note 3. INVESTMENT BY MULTIMEDIA CONCEPTS INTERNATIONAL, INC.
On January 2, 1998, the Company issued 3,571,429 shares of its common stock
to Multimedia, a company of which the Company's President is also President,
Chief Executive Officer, and a Director. The issuance of these common shares at
a price of $.28 per share ($.01 above the closing price on December 31, 1997)
represented payment for $1,000,000 loaned to the Company by Multimedia.
As a result of this transaction, Multimedia owns 78.5% of the outstanding
shares of common stock of the Company, effectively making the Company a
subsidiary of Multimedia.
On January 20, 1998, U.S. Stores acquired 1,465,000 shares of Multimedia's
common stock. U.S. Stores was incorporated on November 10, 1997. The Company's
president is also President and Director of U.S. Stores. After this transaction,
U.S. Stores held an aggregate of 1,868,000 shares of Multimedia's common stock,
or 62%, of the outstanding shares, effectively making Multimedia a subsidiary of
U.S. Stores.
On February 28, 1998, American Telecom Corporation ("American Telecom")
acquired 100% of the outstanding common shares of U.S. Stores. American Telecom
was incorporated on July 18, 1997. The Company's President is also President and
a Director of American Telecom. After this transaction, American Telecom
effectively obtained beneficial voting control of the Company.
<PAGE>
UNITED TEXTILES & TOYS CORP.
(A Subsidiary of Multimedia Concepts International, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3. INVESTMENT BY MULTIMEDIA CONCEPTS INTERNATIONAL, INC.
(continued):
In April 1998, American Telecom exchanged all of its outstanding common
shares with American Telecom, PLC, a publicly traded company in Great Britain.
After this transaction, American Telecom effectively became a subsidiary of
American Telecom, PLC. Additionally, as part of this transaction, American
Telecom, PLC acquired 100% of the outstanding common shares of U.S. Stores,
thereby effectively making U.S. Stores a direct subsidiary of American Telecom,
PLC and the Company.
Note 4. FIXED ASSETS
Fixed assets consisted of the following:
<TABLE>
<CAPTION>
March 31
-----------------------------------
2000 1999
---- ----
<S> <C> <C>
Furniture, fixtures and equipment $ 38,152 $ 38,152
Less: Accumulated depreciation and
amortization (38,152) (38,152)
-------- --------
$ -- $ --
======== ========
</TABLE>
Note 5. INCOME TAXES
The Company has available at March 31, 2000, for federal income tax
purposes, a net operating loss carryforward of approximately $4,013,000 and
approximately $4,073,000 for state income tax purposes. The Federal and state
NOLs are available to offset future taxable income and expire at various times
through September 30, 2011. For Federal and state tax purposes, the Company's
tax year ends on September 30th.
Note 6. COMMITMENTS AND CONTINGENCIES
Operating Leases:
The Company, until June 1999, occupied space at 1410 Broadway, New York, NY
where it shared office space with its parent, Multimedia. It vacated these
premises and relocated along with Multimedia to 1385 Broadway, New York,
<PAGE>
UNITED TEXTILES & TOYS CORP.
(A Subsidiary of Multimedia Concepts International, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6. COMMITMENTS AND CONTINGENCIES (continued):
Operating Leases (continued):
NY. U.S. Apparel Corp, a wholly owned subsidiary of Multimedia is the prime
tenant on the lease and has allowed the Company and its parent, Multimedia, to
occupy space on a rent-free basis.
Year 2000:
The Company in 1999 upgraded its computer system by installing a year
2000 upgrade to its software.
Although the Company has not experienced any problems related to the year
2000 issues, the possibility still exists that such problems might arise during
the calendar year. However, the effect, if any, of year 2000 problems on the
Company's results of operations cannot be estimated with any degree of certainty
if the Company or its affiliated companies, or service providers are not fully
compliant.
Note 7. RESTATEMENT OF AMOUNTS PREVIOUSLY REPORTED
The Financial statements for the year ended March 31, 1999 contain certain
restatements of amounts previously reported.
These restatements were the result of the Company's decision to
deconsolidate the accounts of the Company as of March 31, 2000. At March 31,
1999, the Company's percentage of ownership in the Company was 45.2%. Although
the Company at that date owned less than 51% of the Company's outstanding common
stock, the Company still exercised prerogative of control over the Company and
consolidated the accounts of the Company into the Company.
At March 31, 2000, the Company's percentage of ownership in Play Co. was
reduced to 21.69%. Accordingly, the Company has elected to deconsolidate the
accounts of the Company, and account for its investment in Play Co. on the
equity method of accounting. Under the equity method, the original investment is
recorded at cost, and is adjusted periodically to recognize the investor's share
of the earnings or losses of the investee subsequent to the date of acquisition.
Under this method of accounting, the investment generally cannot be reduced
below zero, when the investee has operating losses that exceed the investment,
at which point the use of the equity method is suspended.
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UNITED TEXTILES & TOYS CORP.
(A Subsidiary of Multimedia Concepts International, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company will resume accounting for the investment in Play Co. under the
equity method when Play Co. subsequently reports net income and the net income
Note 7. RESTATEMENT OF AMOUNTS PREVIOUSLY REPORTED (continued):
exceeds the Company's accumulated share of Play Co.'s net losses not recognized
during the period of discontinuance of the equity method.
The Company's investment in Play Co. at cost was $383,986. The Company's
allocable share of Play Co.'s losses as of March 31, 1999 was $1,127,301.
Accordingly, the investment in Play Co. was reduced to zero on the restated
financial statements as of March 31, 1999. For the year ended March 31, 2000,
the Company's allocable share of Play Co.'s net loss was $3,439,321.
