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, 1997 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) 981-0077
--------------------
(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 14, 1997 there were 4,070,000 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
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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 Cash Flows.......................... 4.....
Notes to Consolidated Financial Statements..................... 5.....
Item 2:Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 6.....
Signature Page................................................... 7.....
. . . . . . . . . . . . . .
<PAGE>
Item 1: Financial Statements
MASTER GLAZIER'S KARATE INTERNATIONAL, INC. AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1997.
[UNAUDITED]
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Assets:
Current Assets:
Cash and Cash Equivalents $ 1,799,800
Marketable Securities Available for Sale at Fair Value 403,000
Accounts Receivable - Net 170,523
Inventory 36,088
Prepaid Expenses and Miscellaneous Receivables 59,025
Notes Receivable - Current Portion 74,667
-----------
Total Current Assets 2,543,103
Property and Equipment:
Office Equipment 52,952
Furniture and Fixtures 84,254
Leasehold Improvements 100,209
Auto and Trucks 32,558
-----------
Total 269,973
Less: Accumulated Depreciation 162,939
Property and Equipment - Net 107,034
-----------
Other Assets:
Investment in Limited Partnership 1,208,000
Security Deposits 53,457
Notes Receivable - Long-Term 186,666
-----------
Total Other Assets 1,448,123
Total Assets $ 4,098,260
===========
The Accompanying Notes are an Integral Part of These Financial Statements.
1
<PAGE>
MASTER GLAZIER'S KARATE INTERNATIONAL, INC. AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1997.
[UNAUDITED]
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Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts Payable and Accrued Expenses $ 170,589
Deferred Revenue 321,179
-----------
Total Current Liabilities 491,768
Long-Term Liability:
Deferred Revenue 128,482
-----------
Total Liabilities 620,250
Commitments and Contingencies --
-----------
Stockholders' Equity:
Preferred Stock, No Par Value, 1,000,000 Shares Authorized --
Common Stock, $.0001 Par Value; 40,000,000 Shares
Authorized, 4,070,000 Issued and Outstanding 407
Paid-in Capital 8,236,831
Accumulated Deficit (4,759,228)
----------
Total Stockholders' Equity 3,478,010
----------
Total Liabilities and Stockholders' Equity $ 4,098,260
===========
The Accompanying Notes are an Integral Part of These Financial Statements.
2
<PAGE>
MASTER GLAZIER'S KARATE INTERNATIONAL, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF OPERATIONS
[UNAUDITED]
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<TABLE>
Six months ended Three months ended
June 30, June 30,
-------- --------
1 9 9 7 1 9 9 6 1 9 9 7 1 9 9 6
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Sales $ 366,826 $ 787,139 $ 176,245 $ 397,000
----------- ----------- ---------- -----------
Cost and Expenses:
Cost of Accessories Sold 16,954 63,406 9,136 40,688
Salaries and Payroll Taxes 286,088 580,585 142,877 306,804
Rent Expense 80,264 280,853 39,265 150,310
Other General and Administrative
Expenses 201,001 557,502 92,251 316,463
----------- ----------- ---------- -----------
Total Costs and Expenses 584,307 1,482,346 283,529 814,265
----------- ----------- ---------- -----------
[Loss] from Operations (217,481) (695,207) (107,284) (417,265)
----------- ----------- ---------- -----------
Other Income [Expense]:
Interest Income 89,630 46,744 69,136 17,859
Gain on Sale of Securities 8,437 448,359 6,600 --
Lease Cancellation Fee (76,707) -- -- --
----------- ----------- ---------- -----------
Other Income - Net 21,360 495,103 75,736 17,859
----------- ----------- ---------- -----------
Net [Loss] $ (196,121) $ (200,104) $ (31,548) $ (399,406)
=========== =========== ========== ===========
Net [Loss] Per Share $ (.05) $ (.04) $ (.01) $ (.08)
=========== =========== ========== ===========
Weighted Average Shares
Outstanding 4,070,000 5,350,000 4,070,000 5,350,000
=========== =========== ========== ===========
The Accompanying Notes are an Integral Part of These Financial Statements.
</TABLE>
3
<PAGE>
MASTER GLAZIER'S KARATE INTERNATIONAL, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF CASH FLOWS
[UNAUDITED]
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Six months ended
June 30,
1 9 9 7 1 9 9 6
------- -------
Operating Activities:
Net [Loss] $ (196,121) $ (200,104)
---------- -----------
Adjustments to Reconcile Net [Loss] to Net Cash
[Used for] Operating Activities:
Depreciation and Amortization 19,974 89,984
Bad Debt Expense -- 8,170
Gain on Sale of Securities Available for Sale -- (448,359)
Gain on Sale of Assets (1,836) --
Changes in Operating Assets and Liabilities:
[Increase] Decrease in:
Accounts Receivable (92,740) (25,222)
Startup Costs -- (10,368)
Inventory 5,500 18,894
Prepaid Expenses and Miscellaneous Receivable (42,851) 731
Deposits (14,363) (4,000)
Miscellaneous Receivable -- (3,154)
Increase [Decrease] in:
Accounts Payable and Accrued Expenses (5,354) (53,340)
Deferred Revenue 92,880 18,303
---------- -----------
Total Adjustments (38,790) (408,361)
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Net Cash - Operating Activities (234,911) (608,465)
---------- -----------
Investing Activities:
Purchase of Securities Available for Sale (403,000) (426,750)
Purchase of Property and Equipment (1,943) (345,446)
Investment in Limited Partnership -- (1,500,000)
Proceeds from Securities Available for Sale -- 1,337,414
Proceeds from Sale of Assets 232,000 --
Proceeds from Notes Receivable 18,667 --
---------- -----------
Net Cash - Investing Activities (154,276) (934,782)
---------- -----------
Financing Activities:
Proceeds from Stock Exchange Agreement 900,000 --
Stock Issuance Costs (43,789) --
---------- -----------
Net Cash - Financing Activities 856,211 --
---------- -----------
Net Increase [Decrease] in Cash and Cash Equivalent 467,024 (1,543,247)
Cash and Cash Equivalents - Beginning of Periods 1,332,776 2,727,661
---------- -----------
Cash and Cash Equivalents - End of Periods $1,799,800 $ 1,184,414
========== ===========
The Accompanying Notes are an Integral Part of These Financial Statements.
4
<PAGE>
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, 1996 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, 1997 and the results of their operations and
their cash flows for the six month periods ended June 30, 1997 and 1996. It is
suggested that these financial statements be read in conjunction with the
financial statements and notes for the year ended December 31, 1996 included in
the Master Glazier's Karate International, Inc. Form 10-KSB.
[3] Joint Venture
On June 1, 1995 pursuant to a termination agreement, the Company terminated it's
joint venture agreement with Planet Kids Learning Centers. In connection with
such termination, the Company received it's original $500,000 investment and
$500,000 loan plus accrued interest. In addition, the Company was granted an
option to purchase up to 150,000 shares of common stock of United Leisure
Corporation [the parent company of Planet Kids Learning Centers] at $.01 per
share, during any time until May 31, 2000. In return for the option the Company
agreed to perform consulting services from June 1, 1995 through May 31, 1996.
During November 1995, the Company fully exercised it's option and purchased
150,000 shares of United Leisure Corporation for $1,500. The fair value of the
common shares was $337,500 at December 31, 1995. In February 1996, the Company
sold the shares resulting in a realized gain of $448,359.
[4] Limited Partnership
On March 4, 1996, the Company entered into a limited partnership agreement with
HEP II, L.P. a limited partnership, to license ancillary rights to motion
pictures. The Company has a 49.50% interest in HEP II and does not have any
personal liability to any of the partners, creditors or debts of the
partnership. The Company contributed $1,500,000 to the capital of the
partnership and will receive interest at 7% to be paid quarterly. During 1996,
the Company earned interest of $87,500 on their capital contribution and
received a partnership distribution of $292,000.
For the year ended December 31, 1996, the general partner waived the allocation
of the net loss to the limited partners and agreed to absorb HEP II, L.P.'s
entire loss incurred for the year ended December 31, 1996. There was no
significant activity for the six months ended June 30, 1997 for HEP II.
[5] Asset Purchase Agreement
During March 1997, the Company completed its closing on the sale of
substantially all of the assets of five of its karate centers located in New
Jersey and New York to Tiger Shulmann's Karate ["TSK"]. In consideration for the
purchase of the assets, TSK paid the Company an aggregate of $505,000 at
closing, consisting of $225,000 in cash, and an aggregate of $280,000 in three
promissory notes.
. . . . . . . . . . . . .
5
<PAGE>
Item 2:
MASTER GLAZIER'S KARATE INTERNATIONAL, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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For the Six Months Ended June 30, 1997 as Compared to Six Months Ended
June 30, 1996
The Company's sales for the six months ended June 30, 1997 were $366,826. The
sales include membership and other goods sold at two of the Company's Karate
Centers. The amount of other goods sold at the Karate Centers amounted to
$33,381.
At June 30, 1996, the Company had sales of $787,139. The sales resulted
primarily from memberships sold at the Karate Centers; $63,406 resulted from the
sale of other goods.
The $420,313 decrease in sales is primarily attributed to the sale of the assets
of five of the Karate Centers and the subsequent closing of operations.
The net [loss] for the six months ended June 30, 1997 and 1996 was $(196,121)
and $(200,104), respectively. The net loss at June 30, 1996 includes a gain on
sales of marketable securities of $448,359. In addition, the Company incurred a
nonrecurring expense of $76,707 for the cancellation of a lease during 1997.
General and administrative expenses decreased by $849,289 for the six month
period ended June 30, 1997 compared to June 30, 1996. The decrease was based on
the decrease in operating expenses pertaining to the five karate centers which
were sold.
The major components of general and administrative expenses for the periods
discussed are as follows:
June 30,
1 9 9 7 1 9 9 6
Salaries and Payroll Taxes $ 286,088 $ 580,585
Rent 80,264 280,853
Other General and Administrative Expenses 201,001 557,502
---------- ----------
Totals $ 567,353 $1,418,940
------ ========== ==========
Liquidity and Capital Resources
Cash and cash equivalents increased for the six months ended June 30, 1997 by
$467,024 and decreased for the six months ended June 30, 1996 by $(1,543,247).
Cash and cash equivalents utilized for operations for the six months ended June
30, 1997 and 1996 was $234,911 and $(608,465), respectively.
Cash and cash equivalents from investing activities for the six months ended
June 30, 1997 and 1996 was $(154,276) and $(934,782), respectively. During 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.
Cash and cash equivalents from financing activities for the six months ended
June 30, 1997 was $856,211. This was a result of the proceeds from the Stock
Exchange Agreement.
On March 25, 1997, the Company's stockholders approved a one-for-five reverse
stock split of its common stock.
In July 1997, 2,000,000 options to purchase common stock were exercised at an
exercise price of $.0001 per share.
6
<PAGE>
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: August 11, 1997 By: /s/ Mark Glazier
----------------
Mark Glazier, Chief Financial Officer and
President
7
<PAGE>
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: August 11, 1997 By:
Mark Glazier, Chief Financial Officer and
President
7
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet and the consolidated statement of operations filed
as part of the quarterly report on Form 10-Q and is qualified in its entirety
by reference to such quarterly report on Form 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,799,800
<SECURITIES> 403,000
<RECEIVABLES> 170,523
<ALLOWANCES> 0
<INVENTORY> 36,088
<CURRENT-ASSETS> 2,543,103
<PP&E> 269,973
<DEPRECIATION> 162,939
<TOTAL-ASSETS> 4,098,260
<CURRENT-LIABILITIES> 170,589
<BONDS> 0
0
0
<COMMON> 407
<OTHER-SE> 3,477,603
<TOTAL-LIABILITY-AND-EQUITY> 4,098,260
<SALES> 366,826
<TOTAL-REVENUES> 366,826
<CGS> 16,594
<TOTAL-COSTS> 584,307
<OTHER-EXPENSES> (12,923)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (89,630)
<INCOME-PRETAX> (196,121)
<INCOME-TAX> 0
<INCOME-CONTINUING> (196,121)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (196,121)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
