UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
---------
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended September 30, 1996
Commission File Number 0-23236-NY
MASTER GLAZIER'S KARATE INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-3234110
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Piscataway Center
377 Hoes Lane
Piscataway, New Jersey 08854
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (908) 354-2349
--------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
As of November 15, 1996 there were 5,350,000 shares of $.0001 par value common
stock outstanding.
Transitional Small Business Disclosure Format
Yes No X
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MASTER GLAZIER'S KARATE INTERNATIONAL, INC. AND SUBSIDIARIES
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INDEX TO FORM 10-QSB
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Item 1: Financial Statements:
Consolidated Balance Sheet..................................... 1.....2
Consolidated Statements of Operations.......................... 3
Consolidated Statements of Stockholders' Equity................ 4
Consolidated Statements of Cash Flows.......................... 5
Notes to Consolidated Financial Statements..................... 6.....7
Item 2:Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 8
Signature Page................................................... 9
. . . . . . . . . . . . . .
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Item 1: Financial Statements
MASTER GLAZIER'S KARATE INTERNATIONAL, INC. AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1996.
[UNAUDITED]
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<S> <C>
Assets:
Current Assets:
Cash and Cash Equivalents $ 1,082,236
Accounts Receivable - Net 76,533
Inventory 66,365
Miscellaneous Receivables 11,484
Prepaid Expenses 33,296
-----------
Total Current Assets 1,269,914
Property and Equipment:
Office Equipment 120,001
Furniture and Fixtures 197,466
Leasehold Improvements 1,227,012
Auto and Trucks 50,326
-----------
Total 1,594,805
Less: Accumulated Depreciation 380,117
Property and Equipment - Net 1,214,688
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Other Assets:
Investment in Limited Partnership 1,500,000
Security Deposits 96,278
Start-Up Costs 13,755
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Total Other Assets 1,610,033
Total Assets $ 4,094,635
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The Accompanying Notes are an Integral Part of These Financial Statements.
1
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MASTER GLAZIER'S KARATE INTERNATIONAL, INC. AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1996.
[UNAUDITED]
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<S> <C>
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts Payable and Accrued Expenses $ 135,639
Deferred Revenue 214,894
-----------
Total Current Liabilities 350,533
Long-Term Liability:
Deferred Revenue 107,744
Total Liabilities 458,277
Commitments and Contingencies --
Stockholders' Equity:
Common Stock, $.0001 Par Value; 15,000,000 Shares
Authorized, 5,350,000 Issued and Outstanding 535
Paid-in Capital 7,387,992
Accumulated [Deficit] (3,752,169)
Total Stockholders' Equity 3,636,358
Total Liabilities and Stockholders' Equity $ 4,094,635
===========
The Accompanying Notes are an Integral Part of These Financial Statements.
2
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MASTER GLAZIER'S KARATE INTERNATIONAL, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF OPERATIONS
[UNAUDITED]
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Nine months ended Three months ended
September 30, September 30,
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1 9 9 6 1 9 9 5 1 9 9 6 1 9 9 5
------- ------- ------- -------
<S> <C> <C> <C> <C>
Sales $ 1,229,623 $ 950,937 $ 442,484 $ 330,683
----------- ----------- ---------- -----------
Cost and Expenses:
Cost of Accessories Sold 89,006 69,025 25,600 28,147
Salaries and Payroll Taxes 820,002 671,519 239,417 226,451
Rent Expense 433,903 320,377 153,050 107,368
Other General and Administrative
Expenses 821,073 677,919 271,741 239,577
----------- ----------- ---------- -----------
Total Costs and Expenses 2,163,984 1,738,840 689,808 601,543
----------- ----------- ---------- -----------
[Loss] from Operations (934,361) (787,903) (247,324) (270,860)
----------- ----------- ---------- -----------
Other Income [Expense]:
Interest Income 62,018 170,929 18,054 52,664
Bad Debt Expense (11,340) (16,435) (3,170) (9,000)
Dividend Income 3,304 -- 524 --
Gain on Sale of Securities 438,527 -- (9,832) --
----------- ----------- ---------- -----------
Other Income - Net 492,509 154,494 5,576 43,664
----------- ----------- ---------- -----------
Net [Loss] $ (441,852)$ (633,409) $ (241,748) $ (227,196)
=========== =========== ========== ===========
Net [Loss] Per Share $ (.08)$ (.12) $ (.05) $ (.04)
=========== =========== ========== ===========
Weighted Average Shares
Outstanding 5,350,000 5,350,000 5,350,000 5,350,000
=========== =========== ========== ===========
The Accompanying Notes are an Integral Part of These Financial Statements.
3
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MASTER GLAZIER'S KARATE INTERNATIONAL, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
[UNAUDITED]
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Unrealized
Holding
Loss on Total
Common Stock Paid-in Accumulated Marketable Stockholders'
Shares Amount Capital [Deficit] Securities Equity
<S> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1995 5,350,000 535 $7,387,992 (3,310,317) 345,507 $4,423,717
Realized Gain on Marketable
Securities -- -- -- -- (345,507) (345,507)
Net [Loss] for the Nine Months
Ended September 30, 1996 -- -- -- (441,852) -- (441,852)
------- -------- -------- --------- -------- --------
Balance - September 30, 1995 5,350,000 535 $7,387,992 (3,752,169) -- $3,636,358
========== === ========== ========== ====== ==========
The Accompanying Notes are an Integral Part of These Financial Statements.
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4
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MASTER GLAZIER'S KARATE INTERNATIONAL, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF CASH FLOWS
[UNAUDITED]
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Nine months ended
September 30,
1 9 9 6 1 9 9 5
------- -------
<S> <C> <C>
Operating Activities:
Net [Loss] $ (441,852) $ (633,409)
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Adjustments to Reconcile Net [Loss] to Net Cash
[Used for] Operating Activities:
Depreciation and Amortization 135,440 74,734
Bad Debt Expense 11,340 16,435
Gain on Sale of Securities Available for Sale (438,527) --
Changes in Operating Assets and Liabilities:
[Increase] Decrease in:
Accounts Receivable (28,590) (36,959)
Interest Receivable -- 20,000
Startup Costs (10,800) (15,117)
Inventory 25,750 (25,506)
Prepaid Expenses 4,332 (14,173)
Security Deposits (4,000) (17,857)
Miscellaneous Receivable 6,907 (11,014)
Increase [Decrease] in:
Accounts Payable and Accrued Expenses (102,732) (31,217)
Deferred Revenue 3,123 928
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Total Adjustments (397,757) (39,746)
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Net Cash - Operating Activities (839,609) (673,155)
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Investing Activities:
Purchase of Securities Available for Sale (426,750) --
Purchase of Property and Equipment (356,648) (242,185)
Investment in Limited Partnership (1,500,000) --
Proceeds from Sales of Securities Available for Sale 1,477,582 --
Investment in Joint Venture -- 500,000
Note Receivable - Joint Venture -- 500,000
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Net Cash - Investing Activities (805,816) 757,815
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Net [Decrease] Increase in Cash and Cash Equivalents (1,645,425) 84,660
Cash and Cash Equivalents - Beginning of Periods 2,727,661 3,653,084
---------- -----------
Cash and Cash Equivalents - End of Periods $1,082,236 $ 3,737,744
========== ===========
The Accompanying Notes are an Integral Part of These Financial Statements.
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5
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MASTER GLAZIER'S KARATE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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[1] Summary of Significant Accounting Policies
Significant accounting policies of Master Glazier's International, Inc. and
subsidiaries are set forth in the Company's Form 10-KSB for the year ended
December 31, 1995 as filed with the Securities and Exchange Commission.
[2] Basis of Reporting
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10- QSB. Accordingly, they do not include all
of the information and disclosures required by generally accepted accounting
principles for completed financial statements. In the opinion of management,
such statements include all adjustments [consisting only of normal recurring
items] which are considered necessary for a fair presentation of the financial
position of the Company at September 30, 1996 and the results of their
operations and their cash flows for the nine month periods ended September 30,
1996 and 1995. It is suggested that these financial statements be read in
conjunction with the financial statements and notes for the year ended December
31, 1995 included in the Master Glazier's Karate International, Inc. Form
10-KSB.
Loss per share data for the three and nine months ended September 30, 1996 and
1995 were not adjusted for the exercise of options and warrants outstanding
since their assumed exercise would be anti-dilutive.
[3] New Karate Centers
In April 1995, the Company signed a lease for a new Karate School in Hicksville,
New York. The term of the lease is for ten years, at an annual rental beginning
at $57,000 during the first year, and ending at $77,685 in the final year.
In August 1995, the Company signed a lease for a new Karate School in Ramsey,
New Jersey. The term of the lease is for five years, with two additional five
year renewal period. The annual rental begins at $68,894 during the first year
and ends at $104,208 in the fifteenth year.
[4] Termination of Joint Venture
On June 1, 1995, pursuant to a termination agreement between Master Glazier's
Karate International, Inc. ["MGK" or the "Company"], United Leisure Corporation
["ULC"], and Planet Kids Learning Centers, Inc. ["Planet Kids"], the Company
terminated its Joint Venture Agreement dated June 24, 1994 with Planet Kids.
In connection with such termination, ULC will purchase the 500 shares of Common
Stock of Planet Kids owned by MGK for $500,000. In addition, MGK will be granted
an option to purchase up to 150,000 shares of Common Stock of ULC at any time
during the five-year period ending May 31, 2000. Also, pursuant to the
termination agreement, ULC will purchase, for value plus accrued interest, the
$500,000 Note Payable owed MGK by Planet Kids. Finally, MGK will provide
consulting services to ULC, as requested by ULC, for the period from June 1,
1995 to May 31, 1996.
In the first quarter of 1996, the Company sold the shares above and those
acquired upon the exercise of the aforementioned option resulting in a gain of
$448,359.
6
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MASTER GLAZIER'S KARATE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #2
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[5] Limited Partnership
On March 4, 1996, the Company entered into a limited partnership agreement to
license ancillary rights to motion pictures. The Company contributed $1,500,000
to the capital of the partnership. The contribution shall be returned to the
Company in the event that an additional $1,500,000 in capital is not contributed
by additional limited partners within sixty days after the effective date of the
agreement. Interest equal to 7% will be paid quarterly on capital contributions
to the partnership.
At September 30, 1996, the Limited Partnership had limited operations.
[6] Subsequent Event
On October 18, 1996, the Company entered into convertible preferred stock
subscription agreements with a number of subscribers whereby the subscribers
purchased an aggregate of 750,000 shares of the Company's Series A preferred
stock for $1.20 per share. Each share of preferred stock may be converted at any
time after April 18, 1997 into 20 shares of the Company's common stock so long
as the Company has authorized a sufficient number of shares of common stock.
. . . . . . . . . . . . .
7
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Item 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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For the Nine Months Ended September 30, 1996 as Compared to Nine Months Ended
September 30, 1995
The Company's sales for the nine months ended September 30, 1996 were
$1,229,623. The sales include membership and other goods sold at six of the
Company's Karate Centers. The seventh location at Ramsey was opened at the end
March 1996 and there was an increase in sales. The amount of other goods sold at
the Karate Centers amounted to $115,868.
At September 30, 1995, the Company had sales of $950,937. The sales resulted
primarily from memberships sold at the Karate Centers; $108,258 resulted from
the sale of other goods.
The increase in sales is primarily attributed to an increase in same store sales
and the opening of two additional locations.
The net [loss] for the nine months ended September 30, 1996 and 1995 was
$441,852 and $633,409, respectively.
Other general and administrative expenses increased by $143,154 for the nine
month period ended September 30, 1996 compared to September 30, 1995.
The major components of general and administrative expenses for the periods
discussed are as follows:
September 30,
1 9 9 6 1 9 9 5
Salaries and Payroll Taxes $ 820,002 $ 671,519
Rent 433,903 320,377
Other Operating Expenses 821,073 677,919
---------- ----------
Totals $ 2,074,978 $1,669,815
------ =========== ==========
The increase in salaries and payroll taxes and rent during the nine months ended
September 30, 1996 is attributable to expenses incurred for the operations of
two additional centers.
The Company's other operating expenses have increased due to the opening of two
new centers and an intensified advertising campaign.
Liquidity and Capital Resources
Cash and cash equivalents decreased for the nine months ended September 30, 1996
by $1,645,425 and increased for the nine months ended September 30, 1995 by
$84,660. Cash and cash equivalents utilized for operations for the nine months
ended September 30, 1996 and 1995 was $839,609 and $673,155, respectively.
Cash and cash equivalents applied to investing activities for the nine months
ended September 30, 1996 and 1995 was $805,816. The Company entered into a
limited partnership agreement to license ancillary rights to motion pictures.
Cash and cash equivalents provided by investing activities for the nine months
ended September 30, 1995 was $757,815. The Company contributed $1,000,000 to the
capital of a joint venture.
8
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SIGNATURE
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Pursuant to the requirements of the Securities Exchange Act of 1994, the
Registrant has duly caused this report on form 10-QSB to be signed on its behalf
by the undersigned thereunto duly authorized.
Master Glazier's Karate International, Inc.
Date: November 15, 1996 By: /s/ Mark Glazier
----------------
Mark Glazier, Chief Financial Officer
9
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SIGNATURE
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Pursuant to the requirements of the Securities Exchange Act of 1994, the
Registrant has duly caused this report on form 10-QSB to be signed on its behalf
by the undersigned thereunto duly authorized.
Master Glazier's Karate International, Inc.
Date: November 15, 1996 By:
Mark Glazier, Chief Financial Officer
9
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
this schedule contains summary financial information extracted from the
consolidated balance sheet and the consolidated statement of operations and is
qualified in its entirety by reference to such financial statement.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> dec-31-1996
<PERIOD-END> sep-30-1996
<CASH> 1,082,236
<SECURITIES> 0
<RECEIVABLES> 76,533
<ALLOWANCES> 0
<INVENTORY> 66,365
<CURRENT-ASSETS> 1,269,914
<PP&E> 1,594,805
<DEPRECIATION> 380,117
<TOTAL-ASSETS> 4,094,635
<CURRENT-LIABILITIES> 350,533
<BONDS> 0
0
0
<COMMON> 535
<OTHER-SE> 4,094,635
<TOTAL-LIABILITY-AND-EQUITY> 4,094,635
<SALES> 1,229,623
<TOTAL-REVENUES> 1,229,623
<CGS> 89,006
<TOTAL-COSTS> 2,074,978
<OTHER-EXPENSES> 430,491
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 62,018
<INCOME-PRETAX> (441,852)
<INCOME-TAX> 0
<INCOME-CONTINUING> (441,852)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (441,852)
<EPS-PRIMARY> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
