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 June 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 August 15, 1996 there were 5,350,000 shares of $.0001 par value common
stock outstanding.
Transitional Small Business Disclosure Format
Yes No X
<PAGE>
MASTER GLAZIER'S KARATE INTERNATIONAL, INC. AND SUBSIDIARIES
- ------------------------------------------------------------------------------
INDEX TO FORM 10-QSB
- ------------------------------------------------------------------------------
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
. . . . . . . . . . . . . .
<PAGE>
<TABLE>
Item 1: Financial Statements
MASTER GLAZIER'S KARATE INTERNATIONAL, INC. AND SUBSIDIARIES
- ------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1996.
[UNAUDITED]
- ------------------------------------------------------------------------------
<S> <C>
Assets:
Current Assets:
Cash and Cash Equivalents $ 1,184,414
Marketable Securities Available for Sale at Fair Value 140,250
Accounts Receivable - Net 76,335
Inventory 73,221
Miscellaneous Receivables 21,545
Prepaid Expenses 36,897
-----------
Total Current Assets 1,532,662
Property and Equipment:
Office Equipment 114,803
Furniture and Fixtures 197,466
Leasehold Improvements 1,221,012
Auto and Trucks 50,326
-----------
Total 1,583,607
Less: Accumulated Depreciation 334,665
Property and Equipment - Net 1,248,942
-----------
Other Assets:
Investment in Limited Partnership 1,500,000
Security Deposits 96,278
Start-Up Costs 13,323
-----------
Total Other Assets 1,609,601
Total Assets $ 4,391,205
===========
The Accompanying Notes are an Integral Part of These Financial Statements.
1
</TABLE>
<PAGE>
<TABLE>
MASTER GLAZIER'S KARATE INTERNATIONAL, INC. AND SUBSIDIARIES
- ------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1996.
[UNAUDITED]
- ------------------------------------------------------------------------------
<S> <C>
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts Payable and Accrued Expenses $ 185,031
Deferred Revenue 224,879
-----------
Total Current Liabilities 409,910
Long-Term Liability:
Deferred Revenue 112,939
Total Liabilities 522,849
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] (3,510,421)
Unrealized Holding Loss on Marketable Securities (9,750)
-----------
Total Stockholders' Equity 3,868,356
Total Liabilities and Stockholders' Equity $ 4,391,205
===========
The Accompanying Notes are an Integral Part of These Financial Statements.
2
</TABLE>
<PAGE>
<TABLE>
MASTER GLAZIER'S KARATE INTERNATIONAL, INC. AND SUBSIDIARIES
- ------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
[UNAUDITED]
- ------------------------------------------------------------------------------
Six months ended Three months ended
June 30, June 30,
-------- --------
1 9 9 6 1 9 9 5 1 9 9 6 1 9 9 5
------- ------- ------- -------
<S> <C> <C> <C> <C>
Sales $ 787,139 $ 620,254 $ 397,000 $ 323,369
----------- ----------- ---------- -----------
Cost and Expenses:
Cost of Accessories Sold 63,406 40,878 40,688 21,420
Salaries and Payroll Taxes 580,585 445,068 306,804 228,667
Rent Expense 280,853 213,009 150,310 104,372
Other General and Administrative
Expenses 549,332 438,342 311,738 252,222
----------- ----------- ---------- -----------
Total Costs and Expenses 1,474,176 1,137,297 809,540 606,681
----------- ----------- ---------- -----------
[Loss] from Operations (687,037) (517,043) (412,540) (283,312)
----------- ----------- ---------- -----------
Other Income [Expense]:
Interest Income 43,964 118,265 17,859 57,998
Bad Debt Expense (8,170) (7,435) (4,725) (6,685)
Dividend Income 2,780 -- -- --
Gain on Sale of Securities 448,359 -- -- --
----------- ----------- ---------- -----------
Other Income - Net 486,933 110,830 13,134 51,313
----------- ----------- ---------- -----------
Net [Loss] $ (200,104)$ (406,213) $ (399,406) $ (231,999)
=========== =========== ========== ===========
Net [Loss] Per Share $ (.04)$ (.08) $ (.08) $ (.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
</TABLE>
<PAGE>
<TABLE>
MASTER GLAZIER'S KARATE INTERNATIONAL, INC. AND SUBSIDIARIES
- ------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
[UNAUDITED]
- ------------------------------------------------------------------------------
Unrealized
Holding
Loss on Total
Common Stock Paid-in AccumulatedMarketableStockholders'
Shares Amount Capital [Deficit] Securities Equity
<S> <C> <C> <C> <C> <C> <C>
Balance - December 31, $9955,350,$00 535 $7,387,99$(3,310,317)345,507 $4,423,717
Realized Gain on Marketable
Securities -- -- -- -- (345,507) (345,507)
Unrealized Holding Loss on
Marketable Securities -- -- -- -- (9,750) (9,750)
Net [Loss] for the Six Months
Ended June 30, 1996 -- -- -- (200,104) -- (200,104)
-------- -------- -------- --------- -------- --------
Balance - June 30, 19965,350,000 $ 535 $7,387,99$(3,510,42$)(9,750) $3,868,356
========= ======== ==================== ====== ==========
The Accompanying Notes are an Integral Part of These Financial Statements.
4
</TABLE>
<PAGE>
<TABLE>
MASTER GLAZIER'S KARATE INTERNATIONAL, INC. AND SUBSIDIARIES
- ------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
[UNAUDITED]
- ------------------------------------------------------------------------------
Six months ended
June 30,
1 9 9 6 1 9 9 5
<S> <C> <C>
------- -------
Operating Activities:
Net [Loss] $ (200,104) $ (406,213)
---------- -----------
Adjustments to Reconcile Net [Loss] to Net Cash
[Used for] Operating Activities:
Depreciation and Amortization 89,984 49,421
Bad Debt Expense 8,170 7,435
Gain on Sale of Securities Available for Sale (448,359) --
Changes in Operating Assets and Liabilities:
[Increase] Decrease in:
Accounts Receivable (25,222) (12,462)
Interest Receivable -- (20,000)
Startup Costs (10,368) (8,175)
Inventory 18,894 (16,731)
Prepaid Expenses 731 (17,701)
Security Deposits (4,000) (6,375)
Miscellaneous Receivable (3,154) (9,806)
Increase [Decrease] in:
Accounts Payable and Accrued Expenses (53,340) 1,752
Deferred Revenue 18,303 3,428
---------- -----------
Total Adjustments (408,361) (29,214)
---------- -----------
Net Cash - Operating Activities (608,465) (435,427)
---------- -----------
Investing Activities:
Purchase of Securities Available for Sale (426,750) --
Purchase of Property and Equipment (345,446) (122,808)
Investment in Limited Partnership (1,500,000) --
Proceeds from Sales of Securities Available for Sale 1,337,414 --
---------- -----------
Net Cash - Investing Activities (934,782) (122,808)
---------- -----------
Net [Decrease] in Cash and Cash Equivalents (1,543,247) (558,235)
Cash and Cash Equivalents - Beginning of Periods 2,727,661 3,653,084
---------- -----------
Cash and Cash Equivalents - End of Periods $1,184,414 $ 3,094,849
========== ===========
The Accompanying Notes are an Integral Part of These Financial Statements.
</TABLE>
5
<PAGE>
MASTER GLAZIER'S KARATE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
[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 June 30, 1996 and the results of their operations and
their cash flows for the six month periods ended June 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 six months ended June 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
<PAGE>
MASTER GLAZIER'S KARATE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #2
- ------------------------------------------------------------------------------
[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 June 30, 1996, the Limited Partnership had not yet commenced operations.
. . . . . . . . . . . . .
7
<PAGE>
Item 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- ------------------------------------------------------------------------------
For the Six Months Ended June 30, 1996 as Compared to Six Months Ended June 30,
1995
The Company's sales for the six months ended June 30, 1996 were $787,139. 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 $63,406.
At June 30, 1995, the Company had sales of $620,254. The sales resulted
primarily from memberships sold at the Karate Centers; $75,151 resulted from the
sale of other goods.
The $166,885 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 six months ended June 30, 1996 and 1995 was $200,104 and
$406,213, respectively.
Other general and administrative expenses increased by $110,990 for the six
month period ended June 30, 1996 compared to June 30, 1995.
The major components of general and administrative expenses for the periods
discussed are as follows:
June 30,
1 9 9 6 1 9 9 5
Salaries and Payroll Taxes $ 580,585 $ 445,068
Rent 280,853 213,009
Other Operating Expenses 549,332 438,342
---------- ----------
Totals $ 1,410,770 $1,096,419
------ =========== ==========
The increase in salaries and payroll taxes and rent during the six months ended
June 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 six months ended June 30, 1996 by
$1,543,247 and decreased for the six months ended June 30, 1995 by $558,235.
Cash and cash equivalents utilized for operations for the six months ended June
30, 1996 and 1995 was $608,465 and $435,427, respectively.
Cash and cash equivalents applied to investing activities for the six months
ended June 30, 1996 and 1995 was $934,782 and $122,808, respectively. 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 [See Note 5].
8
<PAGE>
SIGNATURE
- ------------------------------------------------------------------------------
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: August 15, 1996 By: /s/ Mark Glazier
----------------
Mark Glazier, Chief Financial Officer
9
<PAGE>
SIGNATURE
- ------------------------------------------------------------------------------
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: August 15, 1996 By:
Mark Glazier, Chief Financial Officer
9
<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> jun-30-1996
<CASH> 1,184,414
<SECURITIES> 140,250
<RECEIVABLES> 76,335
<ALLOWANCES> 0
<INVENTORY> 73,221
<CURRENT-ASSETS> 1,532,662
<PP&E> 1,583,607
<DEPRECIATION> 334,665
<TOTAL-ASSETS> 4,391,205
<CURRENT-LIABILITIES> 409,910
<BONDS> 0
0
0
<COMMON> 535
<OTHER-SE> 3,867,821
<TOTAL-LIABILITY-AND-EQUITY> 4,391,205
<SALES> 397,000
<TOTAL-REVENUES> 397,000
<CGS> 40,688
<TOTAL-COSTS> 768,852
<OTHER-EXPENSES> 4,725
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (17,859)
<INCOME-PRETAX> (399,406)
<INCOME-TAX> 0
<INCOME-CONTINUING> (399,406)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (399,406)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
