MASTER GLAZIERS KARATE INTERNATIONAL INC, DEF 14A, 1997-02-21

MASTER GLAZIERS KARATE INTERNATIONAL INC
DEF 14A, 1997-02-21
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SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )

[X] Filed by Registrant
[ ] Filed by a Party other than the Registrant

Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12

MASTER GLAZIER'S KARATE INTERNATIONAL, INC.
(Name of Registrant As Specified in its Charter)

KENNETH KLIESCH, SECRETARY, MASTER GLAZIER'S KARATE INTERNATIONAL, INC.
(Name of Person(s) Filing the Proxy Statement)

Payment of Filing Fee (Check the appropriate box):

[X] No Fee Required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
N/A
2) Aggregate number of securities to which transaction applies:
N/A
3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11:(1)
N/A
4) Proposed maximum aggregate value of transaction:
N/A

(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.

[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and date of its filing.

1) Amount Previously Paid:
N/A
2) Form, Schedule or Registration Statement No.:
N/A
3) Filing Party:
N/A
4) Date Filed:
N/A

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MASTER GLAZIER'S KARATE INTERNATIONAL, INC.
377 Hoes Lane
Piscataway Centre
Piscataway, New Jersey 08854

----------------------------------------

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 25, 1997

-----------------------------------------

To the Stockholders of Master Glazier's Karate International, Inc.:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of Master Glazier's Karate International, Inc., a Delaware corporation
(the "Company"), will be held on March 25, 1997, at the Company's offices at
9:00 a.m., local time, and thereafter as it may from time to time be adjourned,
for the purposes stated below:

1. To elect three (3) directors to the Board of the Company for a one (1)
year term;

2. To ratify the appointment of Moore Stephens, P.C. as the Company's
independent certified public accountants;

3. To effect a reverse stock split of the Company's issued common stock,
par value $.0001 per share ("Common Stock"), on the basis of one (1) new
share of Common Stock for each five (5) shares of Common Stock
outstanding (the "Reverse Stock Split");

4. To amend the Company's Certificate of Incorporation to increase the
number of authorized shares of Common Stock from 15,000,000 shares to
40,000,000 shares;

5. To approve the sale by the Company and its five (5) wholly owned
subsidiaries (collectively, hereinafter referred to as the
"Subsidiaries") of substantially all of the assets of the Subsidiaries
to the following purchasers: Central Bergen Karate, Inc., Southern
Bergen Karate, Inc., Northern Bergen Karate, Inc., Northern Nassau
Karate, Inc., and Central Nassau Karate, Inc. for an aggregate purchase
price of $505,000 in cash and promissory notes (the "Sale Transaction");
and

6. To transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.

All Stockholders are cordially invited to attend the Annual Meeting. Only
those Stockholders of record at the close of business on January 29, 1997 are
entitled to notice of and to vote at the Annual Meeting and any adjournments
thereof. The stock transfer books will not be closed. A complete list of
stockholders entitled to vote at the Annual Meeting will be available at the
Meeting.

BY ORDER OF THE BOARD OF DIRECTORS
OF MASTER GLAZIER'S KARATE INTERNATIONAL, INC.

/s/ Mark Glazier
February 19, 1997 Mark Glazier, President

WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE DATE AND SIGN THE
ENCLOSED FORM OF PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE TO AMERICAN
STOCK TRANSFER & TRUST COMPANY, 40 WALL STREET, NEW YORK, NEW YORK 10005.

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MASTER GLAZIER'S KARATE INTERNATIONAL, INC.
377 Hoes Lane
Piscataway Centre
Piscataway, New Jersey 08854

PROXY STATEMENT

INTRODUCTION

This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Master Glazier's Karate International,
Inc., a Delaware corporation (the "Company"), for use at the annual meeting of
the Company's stockholders to be held at the Company's offices on March 25, 1997
at 9:00 a.m., local time, and at any adjournments thereof (the "Annual
Meeting").

The Annual Meeting has been called to consider and take action on the
following proposals:

1. To elect three (3) directors to the Board of the Company for a one (1)
year term;

2. To ratify the appointment of Moore Stephens, P.C. as the Company's
independent certified public accountants;

4. To amend the Company's Certificate of Incorporation to increase the
number of authorized shares of Common Stock from 15,000,000 shares to
40,000,000 shares (the "Common Stock Proposal");

6. To transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.

The Company's Board of Directors has taken unanimous affirmative action
with respect to each of the foregoing proposals and recommends that the
Stockholders vote in favor of each of the proposals. Only holders of record of
common stock, $.0001 par value ("Common Stock"), of the Company at the close of
business on January 29, 1997 (the "Record Date") will be entitled to vote at the
Annual Meeting.

The principal executive offices of the Company are located at 377 Hoes
Lane, Piscataway Centre, Piscataway, New Jersey 08854 and its telephone number
is (908) 981-0077. The approximate date on which

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this Proxy Statement, the proxy card and other accompanying materials are first
being sent or given to Stockholders is February 19, 1997. The Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1995, including
audited financial statements, and Quarterly Reports on Form 10-QSB for the
quarters ended March 31, June 30 and September 30, 1996 are being sent to
stockholders together with this Proxy Statement.

Voting at the Annual Meeting

The Board of Directors of the Company has fixed the close of business on
January 29, 1997 as the record date (the "Record Date") for the determination of
stockholders entitled to notice of and to vote at the Annual Meeting. At the
close of business on the Record Date, there were 10,350,000 shares of the
Company's common stock, $.0001 par value (the "Common Stock"), issued and
outstanding, each of which is entitled to one (1) vote at the Annual Meeting.
The Company has approximately 550 holders of record.

The presence in person or by proxy of holders of record of a majority of
the shares outstanding and entitled to vote as of the Record Date shall be
required for a quorum to transact business at the Annual Meeting. If a quorum
should not be present, the Annual Meeting may be adjourned until a quorum is
obtained. The nominees to be selected as a Director named in Proposal 1, and the
ratification of the selection of the Company's auditors identified in Proposal
2, must receive a plurality of the eligible votes cast at the Annual Meeting
with respect to such proposals. The affirmative vote of the holders of a
majority of the issued and outstanding shares of common stock of the Company is
necessary to approve and consent to (i) the Reverse Stock Split, (ii) the Common
Stock Proposal, and (iii) the Sale Transaction. Accordingly, an abstention or
broker non-votes with respect to Proposals 1 and 2 will have no effect on the
outcome of the voting on these proposals and will have the effect as a negative
vote on Proposals 3, 4 and 5. Brokers who hold shares in street name, may vote
on behalf of beneficial owners with respect to Proposals 1, 2, 3 and 4. The
Board of Directors recommends voting FOR Proposals 1, 2, 3, 4 and 5. Unless
otherwise instructed, proxies solicited by the Board of Directors will be voted
FOR Proposals.

In order to vote in favor of or against any of the proposals at the Annual
Meeting, stockholders may attend the Annual Meeting or deliver executed proxies
to the Secretary of the Company at 377 Hoes Lane, Piscataway Centre, Piscataway,
NJ 08854 on or before the date of the Annual Meeting. Stockholders attending the
meeting may abstain from voting by marking the appropriate boxes designated as
Abstain on the Proxy. Abstentions shall be counted separately and shall be used
for purposes of calculating a quorum.

It is not anticipated that any other matters will be brought before the
Annual Meeting.

Proxy Solicitation

The expense of preparing, printing and mailing this Proxy Statement,
exhibits and the proxies solicited hereby will be borne by the Company. In
addition to the use of the mails, proxies may be solicited by officers and
directors and regular employees of the Company, without additional remuneration,
by personal interviews, telephone, telegraph or facsimile transmission. The
Company will also request brokerage firms, nominees, custodians and fiduciaries
to forward proxy materials to the beneficial owners of shares of capital stock
held of record and will provide reimbursements for the cost of forwarding the
material in accordance with customary charges.

Proxies given by stockholders of record for use at the Annual Meeting may
be revoked at any time prior to the exercise of the powers conferred. In
addition to revocation in any other manner permitted by law,

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stockholders of record giving a proxy may revoke the proxy by an instrument in
writing, executed by the stockholder or his attorney authorized in writing or,
if the stockholder is a corporation, under its corporate seal, by an officer or
attorney thereof duly authorized, and deposited either at the corporate
headquarters of the Company at any time up to and including the last business
day preceding the day of the Annual Meeting, or any adjournment thereof, at
which the proxy is to be used, or with the chairman of such Annual Meeting on
the day of the Annual Meeting or adjournment thereof, and upon either of such
deposits the proxy is revoked.

ALL PROXIES RECEIVED WILL BE VOTED IN ACCORDANCE WITH THE CHOICES SPECIFIED
ON SUCH PROXIES. PROXIES WILL BE VOTED IN FAVOR OF A PROPOSAL IF NO CONTRARY
SPECIFICATION IS MADE. ALL VALID PROXIES OBTAINED WILL BE VOTED AT THE
DISCRETION OF THE BOARD OF DIRECTORS WITH RESPECT TO ANY OTHER BUSINESS THAT MAY
COME BEFORE THE ANNUAL MEETING.

None of the matters to be acted on at the Annual Meeting give rise to any
statutory right of a Stockholder to dissent and obtain the appraisal of or
payment for such Stockholder's shares.

PROPOSAL ONE

TO ELECT THREE (3) DIRECTORS TO SERVE FOR ONE YEAR AND UNTIL THEIR
SUCCESSORS HAVE BEEN DULY ELECTED AND QUALIFIED

Under the certificate of incorporation of the Company ("Certificate of
Incorporation"), the Board of Directors of the Company is required to be
comprised of a minimum of one to a maximum of ten directors, with all directors
elected by the stockholders each year at the annual stockholders meeting. The
Company's board presently consists of two (2) directors whose terms expire at
the Annual Meeting. Officers are elected annually by and serve at the discretion
of the Board of Directors.

The Board has nominated three (3) candidates to serve as directors two (2)
of whom are currently directors. The names and biographical summaries of the
three (3) persons who have been nominated by the Board of Directors to stand for
election at the Annual Meeting have been provided below for your information.
The Board of Directors has proposed that these persons be elected at the Annual
Meeting to serve until the next annual meeting of stockholders. The Proxies will
be voted for the election of the three (3) nominees listed below as directors of
the Company unless otherwise specified on the form provided. The vote of a
majority of the capital stock, present and constituting a quorum at the Annual
Meeting, will be necessary to elect the directors listed below. If, for any
reasons, any of the nominees shall be unable or unwilling to serve, the Proxies
will be voted for a substitute nominee who will be designated by the Board of
Directors at the Annual Meeting. Stockholders may abstain from voting by marking
the appropriate boxes on the enclosed Proxy. Abstentions shall be counted
separately and shall be used for purposes of calculating quorum.

Biographical Summaries of Nominees for the Board of Directors

Mark Glazier, has been President and Chairman of the Board of the Company
since its inception and Chief Financial Officer of the Company since April 1996.
He attended the American University in Washington, D.C. and also served as the
Business Manager and Instructor at the Jhoon Rhee Institute, a karate school
located in Kensington, MD, from 1981 - 1983. From 1984 to 1986, Mr. Glazier was
a partner in, and Business Manager and Head Instructor of, USA Karate Institute,
Inc. located in Bethesda and Gaithersburg, MD. Mr. Glazier subsequently opened
USA Karate and Fitness, Inc. in 1986 and provided management to a number of
martial art companies, including Tiger Schulman, Korean Martial Art Centers
(located in New Jersey) and Pan American

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Tae Kwon Do (located in New Jersey). Mr. Glazier then opened the Company's
Hasbrouck Heights location in 1987, its Whitehall and Bethlehem location in
1990, the Hackensack location in 1992 and the Paramus location in 1993. Mr.
Glazier is a master in both karate and tae kwon do.

Richard A. Schechtman, has been a Director of the Company since its
inception. Since September 1988, Mr. Schechtman has been the store manager of
Dinette Gallery/All America Oak Furniture, a furniture store located in Yonkers,
New York. From July 1986 to September 1988, Mr. Schechtman was a top sales
representative of such store. Mr. Schechtman graduated in 1983 from University
of Michigan with a Bachelors of Arts degree in Psychology.

Marc Zwetchenbaum, has served as general counsel since 1983 to Retail
Recruiters/Spectra Professional Search International, Inc., a franchiser of
personnel placement firms. Additionally, Mr. Zwetchkenbaum has served as outside
counsel for Jan-Pro, a national commercial cleaning franchisor, as well as
outside counsel for two major fitness corporations. He is a member of the
Massachusetts, Rhode Island and Washington, D.C. bar associations. Marc
Zwentchkenbaum, received his B.A., cum laude, from American University in 1979,
and received his J.D. from the University of Miami School of Law in 1982.

Mark Glazier is the brother-in-law of Mr. Schechtman. Except for such
relationship, there are no family relationships among any of the directors or
executive officers of the Company.

The Board of Directors unanimously recommends a vote FOR the election of
Messrs. Glazier, Schechtman, and Zwentchkenbaum. Unless otherwise instructed or
unless authority to vote is withheld, the enclosed proxy will be voted FOR the
election of the above listed nominees.

Directors and Executive Officers

Certain information concerning the Directors and Executive Officers of the
Company is set forth below:

Name Age Position(s) Held with Company
---- --- -----------------------------
Mark Glazier 34 Chairman of the Board of Directors, President and
Chief Financial Officer

Donald Southerton(1) 42 Vice President of Operations

Richard A. Schechtman 34 Director

Kenneth Kliesch 53 Secretary

Larry Kaufman(2) 52 Chief Financial Officer and Secretary

- ------------
(1) Donald Southerton's employment was terminated on August 30, 1996
(2) Larry Kaufman's employment was terminated on April 15, 1996

Biographical Summaries

See "Biographical Summaries of Nominees for the Board of Directors" above for
biographical summaries of

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Messrs. Glazier, Schechtman and Zwentchkenbaum.

Donald Southerton, has been the Vice-President of Operations since
September, 1995. Mr. Southerton has an extensive background in the martial arts
industry. From 1975 to 1995, he operated a chain of martial arts studios in New
York. Mr. Southerton is on the board of directors of Educational Funding
Company, the nation's largest martial arts tuition billing company. He has also
served as a board member of U.S. Martial Arts Schools with more than 1200
affiliates worldwide. Mr. Southerton's employment was terminated by the Company
on August 30, 1996.

Kenneth Kliesch, has been the Secretary of the Company since April, 1996
and has been the Director of Marketing and Merchandise Manager since 1992. From
1988 to 1992, Mr. Kliesch owned and operated a Sir Speedy Printing franchise in
Hoboken, N.J. From 1972 to 1988, Mr. Kliesch served as the Advertising Manager
of United States Testing Co., Inc., a nationwide laboratory testing company.

All directors hold office until the next annual meeting of stockholders and the
election and qualification of their successors. Officers are elected annually by
the Board of Directors and, subject to existing employment agreements, serve at
the discretion of the Board.

There are no family relationships among any of such persons, except that Mark
Glazier, the Company's President and Chief Executive Officer, is married to Mr.
Schechtman's sister.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent
(10%) of a registered class of the Company's equity securities, to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of common stock and other equity securities of the Company.
Officers, directors and greater than ten percent shareholders are required by
SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file.

To the Company's knowledge, based solely on its review of the copies of
such reports furnished to the Company during the years ended December 31, 1994
and December 31, 1995 all Section 16(a) filing requirement applicable to its
officers, directors and greater than ten percent beneficial owners were
satisfied.

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COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

Summary Compensation Table

The following table shows all the cash compensation paid or to be paid by the
Company to the Chief Executive Officer, certain of the Company's executive
officers and another employee who received in excess of $100,000 in annual
salary and bonus, for the fiscal years ended December 31, 1995, 1994 and 1993:

<TABLE>
<CAPTION>
Long-Term Compensation
------------------------------
Awards Payouts
--------------- ------------
Annual Compensation Securities
------------------- Underlying All Other
Name and Principal Position Year Salary ($) Bonus Options/SARs(#) Compensation
(a) (b) (c) (d) (g) (i)
- --------------------------- ---- ---------- ----- --------------- ------------
<S> <C> <C> <C> <C> <C>
Mark Glazier, President 1995 $284,549 1,000,000
and Chairman of the Board 1994 $282,700
1993 $249,673

All Executive Officers 1995 $346,440 1,000,000
as a Group (1 person) 1994 $282,700
1993 $249,673
</TABLE>

Employment Agreement

On March 30, 1993, the Company entered into an employment agreement for a
five (5) year term (the "Employment Term") with Mark Glazier, President and
Chairman of the Board of the Company. Pursuant to such employment agreement, Mr.
Glazier received an annual salary of $260,000 per annum for the 1993 calendar
year with annual ten percent (10%) increases, effective January 1, 1994. In
addition, Mr. Glazier will have the option (the "Option") during the Employment
Term to purchase up to twenty percent (20%) of the Company's Common Stock, so
long as the Company achieves certain pre-tax earnings targets. If the Company
achieves, earnings before interest, amortization, depreciation and the payment
of taxes during the Employment Term, of not less than $500,000, $1,000,000 or
$2,000,000 during any fiscal year, then Mr. Glazier shall have the right to
purchase from the Company shares of Common Stock equal to 5%, 10% and 20%
respectively, of the Company's

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Outstanding Common Stock which shall be issued to him by the Company.
"Outstanding Common Stock" means, as of December 31, of the relevant fiscal
year, the number of shares of Common Stock issued and outstanding, excluding all
shares of Common Stock issuable upon exercise of warrants, options or any other
security exercisable or exchangeable for, or convertible into, shares of Common
Stock. For the purposes of calculating whether Mr. Glazier is entitled to
receive shares of Common Stock pursuant to the Option, the Company's earnings
shall be calculated at the conclusion of each fiscal year during the employment
term. The purchase price for the shares of Common Stock purchasable pursuant to
the Option shall be equal to $.50 per share. The Company does not anticipate
that such shares will be registered when issued nor have any rights with respect
to the registration thereof been granted by the Company to Mr. Glazier. Such
shares will be considered "restricted securities" under Rule 144, but other
restrictions on transfer will not limit the transfer thereof by Mr. Glazier. The
employment agreement also provides for the use by Mr. Glazier of a Company car
and for bonuses and other incentive compensation as the Board of Directors deems
appropriate, based upon the Company's operating performance or other reasonable
criteria. The criteria to be used to determine the amount as Mr. Glazier's
bonuses and other incentive compensation has not yet been set by the Board of
Directors. It should be noted that Mr. Glazier will be involved in determining
the bonus policies for the Company's employees. Although he will not directly
participate in determining the amount of his own bonus, the policies instituted
by the Company may influence his bonus. Such bonuses and other compensation may
be substantial.

On May 16, 1995, the Company issued to Mark Glazier, the Company's
President, Chairman of the Board and founder, 1,000,000 options to purchase
1,000,000 shares of Common Stock (the "Options") at an exercise price of $.30
per share at any time prior to May 16, 2000. The Options were issued to Mr.
Glazier pursuant to the terms of his employment agreement as a bonus for fiscal
years ended 1993 and 1994.

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PRINCIPAL STOCKHOLDERS AND STOCK OWNERSHIP OF MANAGEMENT

The following table sets forth, as of the Record Date, certain information
with regard to the beneficial ownership of outstanding shares of the Common
Stock by (i) each person known by the Company to beneficially own five percent
or more of the outstanding shares of the Company's Common Stock; (ii) each
director and executive officer individually; and (iii) all executive officers
and directors of the Company as a group.

Number of Shares Percentage (%)
Name and Address of Common Stock of Class
of Beneficial Owner Beneficially Owned(1) Outstanding (2)
- ------------------- --------------------- ---------------
Mark Glazier (3) 4,917,667(4) 43.3%
c/o Master Glazier's
Karate International, Inc.
377 Hoes Lane
Piscataway, NJ 08854

Richard A. Schechtman(5) -- --
98 Heritage Drive
New City, NY 10956

Fair Lane, LLC(6) 1,500,000 14.5%
6900 N. Andrews Avenue
Suite 500
Fort Lauderdale, FL 33309

Kenneth Kliesch(7) -- --
c/o Master Glazier's
Karate International, Inc.
377 Hoes Lane
Piscataway, NJ 08854

Directors and Officers
as a Group (4 persons) 4,917,667(4) 43.3%
------------

(1) Beneficial ownership as reported in the table above has been determined in
accordance with Instruction (4) to Item 403 of Regulation S-B of the
Securities Exchange Act.

(2) Percentage of Class based upon 10,350,000 shares of Common Stock outstanding
on the Record Date.

(3) Mr. Glazier is the Chairman of the Board, President and Chief Financial
Officer of the Company.

(4) Includes 1,000,000 shares of Common Stock issuable to Mr. Glazier upon the
exercise of an option held by him at an exercise price of $.30 per share.
Excludes 5,333,334 shares of Common Stock issuable to Mr. Glazer upon the
exercise of an option issued to Mr. Glazier in December 1996. Such option is
exercisable commencing on April 17, 1997 at an exercise price of $.0001 per
share. See "Certain Transactions".

(5) Director.

(6) Excludes 3,000,000 shares of Common Stock issuable to Fair Lane, LLC upon
the exercise of an option issued to Fair Lane, LLC in December 1996. Such
option is exercisable commencing April 17, 1997 at an exercise price of
$.0001 per share.

(7) Mr. Kliesch is the Secretary of the Company.

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RECENT DEVELOPMENTS

On October 18, 1996, the Company entered into convertible preferred stock
subscription agreements (the "Agreements") with each of Mark Glazier (the
Registrant's President and Chairman of the Board), Fair Lane, LLC., Cristine
Cowan, Euro Translation Limited and CRC Partners, Ltd. (collectively, the
"Subscribers") pursuant to which the Subscribers purchased an aggregate of
750,000 shares of the Registrant's Series A Preferred Stock (the "Preferred
Stock") for $1.20 per share. The shares of Preferred Stock were convertible at
any time after April 18, 1997 into twenty (20) shares of the Registrant's Common
Stock so long as the Company amended its Certificate of Incorporation to
authorize a sufficient number of shares of Common Stock. Each share of Preferred
Stock had ten (10) votes per share on matters presented to the shareholders for
a vote.

On December 26, 1996, the Company entered into a Stock Exchange Agreement
(the "Stock Exchange Agreement") with Mark Glazier, Fair Lane, LLC, Cristine
Cowan, Euro Translation Limited and CRC Partners, Ltd. (collectively, the
"Preferred Stockholders") pursuant to which the Preferred Stockholders exchanged
an aggregate of 750,000 shares of the Company's Series A Preferred Stock (the
"Preferred Stock") for 5,000,000 shares (the "Common Shares") of common stock of
the Company, par value $.0001 per share (the "Common Stock"), and 10,000,000
options (the "Investor Options") each exercisable to purchase one (1) share of
Common Stock. The Investor Options become exercisable on April 17, 1997 at an
exercise price of $.0001 per share so long as not less than 30,000,000 shares of
Common Stock are authorized for issuance. As a result of the transaction, there
are currently no shares of Series A Preferred Stock issued and outstanding.

CERTAIN TRANSACTIONS

On September 1, 1987, Mr. Glazier acquired all of the outstanding shares of
Common Stock of Richard Raciti, Inc. ("Richard Raciti") for $9,907. Richard
Raciti was incorporated on October 26, 1986 and operated a karate studio prior
to the acquisition by Mr. Glazier. In September 1987, Mr. Glazier changed the
name from Richard Raciti, Inc. to U.S.A. Karate & Fitness, Inc. and commenced
operating a Karate Center in Hasbrouck Heights, NJ. In March 1993, this location
was converted from a Karate Center into the Aerobics Center and changed its name
to Body Motion Women's Aerobics, Inc. ("Body Motion"). Karate students were
afforded the opportunity to transfer to the Company's Karate Center in
Hackensack, NJ. Body Motion was sold by the Company in April 1994.

On January 22, 1990, Mr. Glazier incorporated Allentown Karate Associates,
Inc., a Pennsylvania corporation ("Allentown Karate"). In January 1990, Mr.
Glazier purchased 45 shares of Class A Voting Common Stock of Allentown Karate
for $1149, Scott Van Dine, an instructor with the Company, purchased 45 shares
of Class B Non-Voting Common Stock of Allentown Karate for $1148 and Allentown
Karate commenced operating a Karate Center in Whitehall, PA.

On August 28, 1990, Mr. Glazier incorporated Bethlehem Karate, Inc., a
Pennsylvania corporation ("Bethlehem Karate"). In August 1990, Mr. Glazier
purchased 40 shares of Class A Voting Common Stock and 50 shares of Class B
Non-Voting Common Stock of Bethlehem Karate for $5,000, Jordan Belfort, formerly
the President and principal stockholder of the Underwriter, purchased 10 shares
of Class A Voting Common Stock and 100 shares of Class B Non-Voting Common Stock
of Bethlehem

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Karate for $40,000, and Bethlehem Karate commenced operating a Karate Center in
Bethlehem, PA. In July 1991, Mr. Belfort made a capital contribution of $20,000
to Bethlehem Karate, and simultaneously therewith, Mr. Glazier surrendered, as a
corresponding capital contribution, 10 shares of Class B NonVoting Common Stock
of Bethlehem Karate to be retained as treasury shares. In December 1992, Mr.
Belfort made an additional capital contribution of $100,000 to Bethlehem Karate,
and simultaneously therewith, Mr. Glazier surrendered, as a corresponding
capital contribution, 30 shares of Class A Voting Common Stock of Bethlehem
Karate to be retained as treasury shares. As a result of these transactions, Mr.
Glazier held 10 shares of Class A Voting Common Stock and 40 shares of Class B
Non-Voting Common Stock of Bethlehem Karate and Mr. Belfort held 10 shares of
Class A Voting Common Stock and 100 shares of Class B Non-Voting Common Stock of
Bethlehem Karate. Mr. Glazier and Mr. Belfort in December 1992 entered into a
Voting Trust Agreement, pursuant to which Mr. Glazier acquired the right to vote
all shares of Voting Common Stock held by Mr. Belfort on all matters on which
stockholders were entitled to vote. Mr. Glazier retains the right to vote the
shares of the Company held by Mr. Belfort until the earlier of (i) the date on
which Mr. Belfort transfers or sells his shares to the public and (ii) December
1, 1998. However, on September 17, 1993, Mr. Belfort sold all share of Common
Stock held by him to MG Holdings, Inc., a Delaware corporation wholly owned by
Mr. Glazier, and therefore, the Voting Trust Agreement was simultaneously
canceled.

On July 2, 1991, Mr. Glazier incorporated Master Glazier's Karate
International, Inc., a New Jersey corporation ("MGKI-NJ"). In August 1992, Mr.
Glazier purchased 100 shares of Common Stock of MGKI-NJ for $33,188 and MGKI-NJ
commenced providing management, marketing and financial advisory services to the
Karate Centers.

In July 1992, Mr. Glazier made a non-interest bearing loan of $64,984 to
the Company and, in January 1993, Mr. Glazier loaned $100,000 to the Company in
exchange for an 8% promissory note.

On August 25, 1992, Mr. Glazier incorporated Paramus Karate, Inc., a New
Jersey corporation ("Paramus Karate"). In August 1992, Mr. Glazier purchased 100
shares of Common Stock of Paramus Karate for $1.00. In May 1993, Paramus Karate
commenced operating as a Karate Center in Paramus, NJ.

On September 16, 1992, Mr. Glazier incorporated Hackensack Karate, Inc., a
New Jersey corporation ("Hackensack Karate"). In September 1992, Mr. Glazier
purchased 100 shares of Common Stock of Hackensack Karate for $1.00. In December
1992, Hackensack Karate commenced operating a Karate Center in Hackensack, NJ.

On January 1, 1993, Mark Glazier, the Company's President and founder,
loaned $100,000 to MGKI-NJ in exchange for an 8% promissory note due upon
demand. As a result of the merger of MGKI-NJ with and into the Company, the
Company assumed the obligation to repay such note by operation of law. This loan
was repaid by the Company in October 1993, utilizing a portion of the proceeds
from the Company's initial public offering of securities.

The Company was incorporated on March 23, 1993. None of the Company's
securities were issued prior to March 31, 1993. As of that date, the Company
purchased 45 shares of Class B NonVoting Common Stock of Allentown Karate from
Scott Van Dine, an instructor with the Company, and delivered 55,000 shares of
the Company's Common Stock as payment therefor. As a result of such transaction,
the shares of Class B Non-Voting Common Stock repurchased from Mr. Van Dine were
canceled, Mr. Van Dine became the sole stockholder of the Company and Mr.
Glazier became the sole

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shareholder of Allentown Karate.

In April, 1993, Mr. Glazier transferred (i) 100 shares of Common Stock of
Body Motion, representing all of the outstanding shares of capital stock of Body
Motion, for 10 shares of Class B NonVoting Common Stock of Bethlehem Karate,
(ii) 45 shares of Class A Common Voting Stock of Allentown Karate, representing
all of the outstanding shares of capital stock of Allentown Karate, for 10
shares of Class A Voting Common Stock of Bethlehem Karate, (iii) 100 shares of
Common Stock of Hackensack Karate, representing all of the outstanding shares of
capital stock of Hackensack Karate, for 10 shares of Class A Voting Common Stock
of Bethlehem Karate and (iv) 100 shares of Common Stock of Paramus Karate,
representing all of the outstanding shares of capital stock of Paramus Karate,
for 10 shares Class A Voting Common Stock of Bethlehem Karate. As a result of
such transactions, Mr. Glazier owned an aggregate of 40 shares of Class A Voting
Common Stock and 50 shares of Class B Non-Voting Common Stock of Bethlehem
Karate, Mr. Belfort owned an aggregate of 10 shares of Class A Voting Common
Stock and 100 shares of Class B Non-Voting Common Stock of Bethlehem Karate, and
Bethlehem Karate held all of the outstanding capital stock of Body Aerobics,
Allentown Karate, Hackensack Karate and Paramus Karate.

Effective as of June 25, 1993, Bethlehem Karate and MGKI-NJ were merged
with and into the Company. Pursuant to the terms of the merger, each outstanding
share of Bethlehem Karate was entitled to receive 7,500 shares, and each
outstanding share of MGKI-NJ was entitled to receive 1,500 shares, of the
Company's Common Stock.

On the effective date of the merger, Mr. Glazier received an aggregate of
675,000 shares of the Company's Common Stock in exchange for 40 shares of Class
A Voting Common Stock and 50 shares of Class B Non-Voting Common Stock of
Bethlehem Karate as well as 150,000 shares of the Company's Common Stock in
exchange for 100 shares of Common Stock of MGKI-NJ. In addition, Mr. Belfort
received an aggregate of 825,000 shares of the Company's Common Stock in
exchange for 10 shares of Class A Voting Common Stock and 100 shares of Class B
Non-Voting Common Stock of Bethlehem Karate. Effective as of June 26, 1993, the
Company effected a 1.81818-for-one stock split with respect to the shares of its
Common Stock.

In view of the NASDAQ Industry Panels initial decision regarding the
rejection of the Company's listing application, on September 17, 1993, MG
Holdings, Inc., a Delaware corporation wholly-owned by Mr. Glazier ("MG
Holdings"), and Mr. Belfort entered into a Stock Purchase Agreement, pursuant to
which MG Holdings purchased one million five hundred thousand (1,500,000) shares
of Common Stock from Mr. Belfort. As consideration for such shares of Common
Stock, MG Holdings delivered a promissory note to Mr. Belfort in the aggregate
principal amount of $3,750,000, bearing interest at the rate of four percent
(4%) per annum and due and payable on September 20, 1995. Simultaneously
therewith, Mr. Belfort and Mr. Glazier canceled the Voting Trust Agreement. As a
result, Mr. Belfort does not hold any shares of capital stock of the Company,
nor does he have any rights to acquire shares of capital stock of the Company.

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In connection with the execution by the Company of the lease for the Karate
Center located in Hackensack, Mr. Glazier has agreed to personally guarantee the
Company's obligations thereunder. In exchange for such guarantees, the Company
has agreed to indemnify Mr. Glazier with respect to any loss he may incur in
connection therewith.

On October 24, 1996 the Company received a partnership distribution of
$379,500 from HEP II, a limited partnership in which the Company is an investor.
In April 1996, the Company invested $1,500,000 in HEP II for the purpose of
making two (2) motion pictures.

In connection with the sale of substantially all of the assets of two (2)
of the Company's karate centers, the Great Neck location and the Hicksville
location, the Company paid $76,375 to two (2) of its landlords to secure the
consent of such landlords to the assignment of the leases by the Company to the
purchasers of such karate schools. In addition, the Company remains a guarantor
of certain of the Purchaser's obligations under the Hicksville lease. See "The
Sales Transaction."

PROPOSAL TWO

TO RATIFY THE SELECTION OF THE FIRM OF MOORE STEPHENS, P.C. AS
INDEPENDENT PUBLIC ACCOUNTANTS FOR THE COMPANY

The Board of Directors concluded that the continued engagement of Moore
Stephens, P.C. as the Company's independent public accountants for the 1996
fiscal year was in the best interests of the Company. The Board of Directors
recommends that Stockholders ratify its choice of Moore Stephens, P.C.

The Board of Directors unanimously recommends a vote FOR the ratification of the
selection of Moore Stephens, P.C. as independent public accountants for the
Company. Unless marked to the contrary, proxies received from stockholders will
be voted in favor of the proposed amendment.

PROPOSAL THREE

REVERSE STOCK SPLIT

General. The stockholders of the Company are being asked to approve a
one-for-five reverse stock split of the Common Stock of the Company (the
"Reverse Stock Split") which may be considered a modification or exchange of
securities invoking the requirements of Item 12 of Rule 14a-101 of the
Securities Exchange Act of 1934. In compliance therewith, the Company has
attached hereto its Annual Report on Form 10-KSB for the year ended December 31,
1995 which is incorporated by reference herein.

The Board of Directors believes that it would be in the best interests of
both the Company and its stockholders to effect the Reverse Stock Split of one
share of newly issued share of Common Stock ("New Common Stock") for each five
(5) shares of the Company's presently issued and outstanding Common Stock. This
amendment has been adopted by the Board of Directors subject to approval of the
Company's stockholders. Approval will require the affirmative vote of the
holders of a majority of the outstanding shares of Common Stock. The Board of
Directors reserves the right, notwithstanding

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stockholder approval and without further action by the stockholders, not to
proceed with the Reverse Stock Split, if, at any time prior to filing the
amendment with the Secretary of State of the State of Delaware, the Board of
Directors, in its sole discretion, determines that the Reverse Stock Split is no
longer in the best interests of the Company and its stockholders.

The Company is authorized to issue 15,000,000 shares of Common Stock,
$.0001 par value, of which 10,350,000 shares were issued and outstanding at the
close of business on the Record Date. As proposed and if effected, the Reverse
Stock Split would reduce the number of issued and outstanding shares to
approximately 2,070,000. The proposed Reverse Stock Split would not affect any
stockholder's proportionate equity interest in the Company. Neither the par
value of the Common Stock nor any rights presently accruing to holders of Common
Stock would be affected by this transaction.

To effect this one-for-five reverse stock split of the Common Stock of the
Company, shareholder approval is sought to amend Article Fourth of the Company's
Certificate of Incorporation relating to the authorized capital stock with the
following:

"FOURTH: The total number of shares of stock which the corporation
shall have the authority to issue is sixteen million (16,000,000)
shares, fifteen million (15,000,000) of which shall be shares of
common stock, $.0001 par value per share, and one million (1,000,000)
of which shall be shares of preferred stock, $.0001 par value per
share.

Each five (5) shares of the corporation's common stock, $.0001 par
value per share, issued and outstanding as of the close of business on
the date of this Certificate of Amendment is filed shall be converted
into one (1) share of the corporation's common stock, $.0001 par value
per share, so that each share of the corporation's common stock issued
and outstanding is hereby converted and reclassified. No fractional
interests resulting from such conversion shall be issued, but in lieu
thereof, stockholders who ostensibly would be entitled to receive
fractional shares because they hold a number of shares not evenly
divisible by five (5) will be entitled, upon surrender to the Exchange
Agent of certificates representing such shares, to receive one (1)
additional share of common stock for any fractional share they may be
entitled to."

Reasons for the Proposed Stock Split. The Company's Common Stock is traded on
The Nasdaq SmallCap Market ("Nasdaq"). Under the rules of Nasdaq in order to
qualify for continued quotation of securities on Nasdaq, the Company, among
other things, must have either (i) $2,000,000 in assets, $1,000,000 in
stockholder equity and a minimum bid price of $1.00 per share (the " Minimum Bid
Requirement") or alternatively (ii) $2,000,000 in total capital and surplus, and
$1,000,000 in market value of public float (the "Capital/Market Value
Requirement"). On January 17, 1997, the Company's Common Stock had a closing bid
price of $.50 per share.

On August 21, 1996, the Staff of Nasdaq advised the Company that the
Company failed to satisfy the Minimum Bid Requirement and the Capital/Market
Value Requirement with respect to its shares of Common Stock. The Company was
then provided 90 days to comply with either of such requirements in order to
continue the listing of its Common Stock on Nasdaq. Failure to do so would
result in delisting the Company's shares of Common Stock. On November 5, 1996,
the Staff notified the

<PAGE>
Company that it had satisfied the Capital/Market Value Requirement, and
therefore, granted continued listing of the Company's Common Stock.

The Board of Directors believes that a Reverse Stock Split will, among
other things, enable the Company to meet the Minimum Bid Requirement as well.
Furthermore, a relatively low stock price may affect not only the liquidity of
the Company's Common Stock, but also its ability to raise additional capital
through the sale of equity securities. Thus, the Company believes that the
expected increase in trading price is expected to be attractive to the financial
community, the investing public, and to users of the Company's services.

The Board of Directors is hopeful that a decrease in the number of shares
of Common Stock outstanding, as a consequence of the proposed Reverse Stock
Split, and the anticipated corresponding increase price per share will stimulate
interest in the Company's Common Stock and possibly promote greater liquidity
for the Company's Common stockholders with respect to those shares presently
held by them. However, the possibility does exist that such liquidity could be
adversely affected by the reduced number of shares which would be outstanding if
the proposed Reverse Stock Split is effected.

If, in the future, the Company is unable to satisfy either the Minimum Bid
Requirement or the Capital/Market Requirement, trading, if any, in the Company's
securities would be conducted in the over-the-counter market in what are
commonly referred to as the "pink sheets", or the NASD Electronic Bulletin
Board. As a result, an investor may find it more difficult to dispose of, or to
obtain accurate quotation as to the price of, the securities of the Company. In
addition, if the securities are removed from Nasdaq, they could be subject to
rules that impose additional sales practice requirements on broker-dealers who
sell such securities.

Management of the Company is not aware of any present efforts of any
persons to accumulate Common Stock or to obtain control of the Company, and the
proposed Reverse Stock Split is not intended to be an anti-takeover device. The
amendment is being sought solely to enhance the image of the Company, its
corporate flexibility, and to price the Common Stock in the price range that
would meet the Minimum Bid Requirement and be more acceptable to the brokerage
community, and to investors generally.

Exchange of Stock Certificates. If the Reverse Stock Split is approved by the
Company's stockholders, the Company will instruct its transfer agent to act as
its exchange agent (the "Exchange Agent") and to act for holders of Common Stock
in implementing the exchange of their certificates.

Commencing on the effective date of the Reverse Stock Split (the "Effective
Date"), stockholders will be notified and requested to surrender their
certificates representing shares of Common Stock to the Exchange Agent in
exchange for certificates representing New Common Stock. One share of New Common
Stock will be issued in exchange for each five (5) presently issued and
outstanding shares of Common Stock. Beginning on the Effective Date, each
certificate representing shares of the Company's Common Stock will be deemed for
all corporate purposes to evidence ownership of shares of New Common Stock.

Liquidation of Fractional Shares. No scrip or fractional certificates will be
issued in connection with the Reverse Stock Split. Stockholders who ostensibly
would be entitled to receive fractional shares because they hold a number of
shares of Common Stock not evenly divisible by five (5) will be entitled, upon
surrender to the Exchange Agent of certificates representing such shares, to
receive one

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<PAGE>
(1) additional share of Common Stock for any fractional share they may be
entitled to. Stockholders may now hold "odd lots" as a result of the Reverse
Stock Split and as such may be subject to increased transaction costs on the
sale of their Common Stock.

Stockholders are encouraged to surrender their certificates to the Exchange
Agent for certificates evidencing whole shares of the Common Stock due them for
fractional interests.

Federal Income Tax Consequences. The Reverse Stock Split should not result in
the recognition of gain or loss (except in the case of additional shares
received for fractional shares as described below). The holding period of the
shares of New Common Stock will include the stockholders' respective holding
periods for the shares of Common Stock exchanged therefore, provided that the
shares of Common Stock were held as a capital asset. The adjusted basis of the
shares of New Common Stock will be the same as the adjusted basis of the Common
Stock exchanged therefore, reduced by the basis applicable to the receipt of
additional shares in lieu of fractional shares described below.

A stockholder who receives additional shares in lieu of fractional shares
will be treated as if the Company would issue additional shares to him. Such
stockholder should generally recognize gain or loss, as the case may be,
measured by the difference between the number of additional shares received and
the basis of his old Common Stock applicable to such fractional shares had they
actually been issued. Such gain or loss shall be a capital gain or loss (if such
stockholder's Common Stock was held as a capital asset), any such capital gain
or loss shall generally be long-term capital gain or loss to the extent such
stockholder's holding for his Common Stock exceeds twelve months.

No Dissenter's Rights. Under Delaware law, stockholders are not entitled to
dissenter's rights of appraisal with respect to the Reverse Stock Split.

PROPOSAL FOUR

INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK OF THE COMPANY

The Board of Directors has voted to amend the Certificate of Incorporation
to increase the number authorized shares of Common Stock from 15,000,000 shares,
par value $.0001 per share, to 40,000,000 shares, par value $.0001 per share,
subject to the approval of the majority of the stockholders of the Company (the
"Common Stock Proposal"). The Board of Directors determined that such amendment
is advisable and directed that the proposed amendment be considered at the
Annual Meeting of Shareholders. The affirmative vote of the holders of a
majority of the outstanding shares of Common Stock of the Company is required to
approve the Common Stock Proposal.

To effect this increase in the number of authorized shares of Common Stock
of the Company, shareholder approval is sought to amend Article Fourth of the
Company's Certificate of Incorporation relating to the authorized capital stock
with the following:

"FOURTH: The total number of shares of stock which the corporation
shall have authority to issue is 41,000,000, 40,000,000 of which are
common shares, par value of $.0001 per share, and 1,000,000 of which
are preferred shares, par value $.0001 per share.

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<PAGE>
There are no present agreements, understandings, or arrangements for the
issuance of the additional shares of Common Stock that would be authorized by
the above described Amendment, except that the approval of the Common Stock
Proposal will enable the holders of the Investor Options to exercise such
options for up to 10,000,000 shares of Common Stock. In the event that the
Investor Options are exercised, the current stockholders will experience
substantial dilution of their investment. See "Recent Developments."

Reasons For Proposed Increase in Authorized Shares. The Board of Directors
believes that this increase is desirable for a number of reasons. The Board of
Directors believes that by increasing the number of authorized shares, the
Company will be afforded greater flexibility to raise additional funds, to
compensate employees and consultants and to make strategic acquisitions, if and
when the opportunity arises. In addition, in connection with a private placement
of the Company's securities, the Company issued options to purchase an aggregate
of 10,000,000 shares of common Stock (or 2,000,000 shares should the Reverse
Stock Split be approved by the Company's stockholders) during the two (2) year
period commencing on April 17, 1997, or such later date as the Company increases
its number of authorized shares of Common Stock to not less than 30,000,000
shares. See "Recent Developments." Accordingly, an increase in the number of
shares of Common Stock will also enable the Subscribers to exercise such
options.

The Board of Directors recommends that stockholders vote "FOR" the
foregoing amendment to the Company's Certificate of Incorporation to increase
the number of authorized shares of Common Stock from 15,000,000 shares to
40,000,000 shares.

PROPOSAL FIVE

THE SALE TRANSACTION

THE COMPANY AND THE SUBSIDIARIES

The Company, which was incorporated on March 22, 1993, manages and operates
Master Glazier Karate Centers (the "Karate Centers") located in New Jersey, New
York and Pennsylvania through its several wholly-owned subsidiaries (the
"Subsidiaries"). The Company was formed to acquire and operate several companies
engaged in the martial arts instruction service business which it now operates
through its Subsidiaries. The Company's Subsidiaries are the successors to the
businesses operated by several companies with which the Company has merged or
which the Company has acquired. The Company presently operates seven (7) Karate
Centers.

The principal executive offices of the Company and the Subsidiaries are
located at 377 Hoes Lane, Piscataway Centre, Piscataway, New Jersey 08854. Their
telephone number is (908) 981-0077.

THE PURCHASERS

Northern Bergen Karate, Inc., a New Jersey corporation, Central Bergen
Karate, Inc., a New Jersey corporation, Southern Bergen Karate, Inc., a New
Jersey corporation, Northern Nassau Karate, Inc., a New York corporation, and
Central Nassau Karate, Inc., a New York corporation (collectively,

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<PAGE>
the "Purchasers" or "Tiger Schulmann's Karate") were formed in 1996. They were
created specifically for the purpose of engaging in the Sale Transaction.
Pending the successful completion of the Sale Transaction, the Purchasers will
own and operate the Karate Centers under the trade name "Tiger Schulmann's
Karate" , a registered trademark of UAK Management, Inc. ("UAK"). UAK will
provide management services to the Purchasers. The principal executive offices
of the Purchasers are located at c/o UAK Management, Inc., 40 Eisenhower Drive,
Paramus, New Jersey, telephone number (201) 368- 0707. Following consummation of
the Sale Transaction, the Purchasers' entire business will consist of owning and
operating the Karate Centers.

THE ASSET PURCHASE AGREEMENTS

The following is a summary of the material provisions of the Purchase
Agreements and is qualified in its entirety by reference to the complete text of
the Purchase Agreements, a copy of which is attached (including exhibits
thereto, but excluding schedules) as an exhibit hereto. Terms which are not
otherwise defined in the summary or elsewhere in this Proxy Statement shall have
the meanings set forth in the Purchase Agreements.

THE SALE

Upon the terms and subject to the conditions of the Purchase Agreements,
effective on the Closing Date, (i) the Company and the Subsidiaries will sell
and transfer, and the Purchasers will purchase and acquire, the Assets (as
described below) and (ii) the Company and the Subsidiaries will transfer and
delegate to the Purchasers, and the Purchasers will assume and agree to pay,
perform and discharge (the extent not paid, performed or discharged prior to the
Closing Date) the Assumed Liabilities (as described below).

ASSETS

The Assets being transferred pursuant to the Purchase Agreements include
all of the right, title and interest of the Company and the Subsidiaries in and
to (i) all Equipment (as defined in the Purchase Agreements), and (ii)
contracts, agreements and commitments specified in the Purchase Agreements,
including, but not limited to, the lease agreements for the leased five (5)
Karate Centers' premises, including leasehold improvements, subject to the
approval of their respective lessors.

LIABILITIES

The Assumed Liabilities include all liabilities and obligations of the
Subsidiaries and the Company which relate to the leases, agreements contracts
and commitments transferred to the Purchasers under the Purchase Agreements. The
Purchasers will not assume any liabilities or obligations of the Subsidiaries
and the Company other than the Assumed Liabilities.

CONSIDERATION

In consideration for the purchase of the Assets, the Purchasers will pay to
the Company an aggregate of $505,000 at the Closing, consisting of $225,000 in
cash (the "Cash")(which is currently being held in escrow) and an aggregate of
$280,000 in three promissory notes (the "Notes"; the Cash and Notes are
hereinafter referred to collectively as the "Purchase Price"), and will assume
all of the Assumed Liabilities. The Purchase Price for each school is $100,000,
except for the Great Neck location,

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<PAGE>
the purchase price is $105,000. Northern Bergen Karate, Inc. has paid $5,000 in
cash into escrow and will deliver a promissory note to Ramsey Karate Center,
Inc. in the amount of $95,000 on the Closing Date; Central Bergen Karate, Inc.
has paid $100,000 in cash into escrow; Southern Bergen Karate, Inc. has paid
$100,000 in cash into escrow; Northern Nassau Karate, Inc. will deliver a
promissory note to Great Neck Karate, Inc. in the amount of $105,000 on the
Closing Date; and Central Nassau Karate, Inc. has paid $20,000 in cash into
escrow and will deliver a promissory note to Hicksville Karate, Inc. in the
amount of $80,000 on the Closing Date. The Purchase Price was determined by
negotiation between the Company and the Purchasers. The Company did not utilize
an appraisal or other independent determination of asset value nor did the
Company obtain a fairness opinion.

The three Notes are in the aggregate principal amount of $280,000 and do
not bear interest. The Notes are to be repaid in monthly installments over a
thirty (30) month period following the Closing Date. The Company and the
Subsidiaries will receive a security interest in all the Assets being
transferred to the Purchasers pursuant to the Purchase Agreements as collateral
for the obligations set forth in the Notes. The Notes are also to be personally
guaranteed by Daniel Schulmann, President of UAK Management, Inc. Management of
the Company is well acquainted with Mr. Schulmann and believes that he possesses
substantial experience in the operation of martial arts instruction centers.
Management believes that repayment in full of the outstanding principal amount
of the Notes is probable and, if such repayment should not be forthcoming, that
the pledged collateral and personal guarantee provided by Mr. Schulmann will in
all likelihood enable the Company to receive the full principal amount thereof.

In connection with the sale of the Great Neck location and the Hicksville
location, the Company paid $76,375 to two (2) of its landlords to secure the
consent of such landlords to the assignment of the leases by the Company to the
purchasers of such karate schools. In addition, the Company remains a guarantor
of certain of the Purchaser's obligations under the Hicksville lease.

THE CLOSING

It is anticipated that the sale and transfer of the Assets to, and the
assumption of the Assumed Liabilities by, the Purchasers will take place at such
time as the Company, the Subsidiaries and the Purchasers agree in writing. In
any event, the Closing is to occur on or before March 31, 1997, unless extended
by the Company to no later than May 31, 1997. (See "THE ASSET PURCHASE AGREEMENT
- -- Conditions to Closing.") The date of the Closing is referenced to herein as
the "Closing Date." Pending the Closing, the Assets will be operated and managed
by the Purchasers, pursuant to the terms of individual Operating Agreements by
and among the Subsidiaries and each of the Purchasers dated the same date of the
Purchase Agreements (the "Operating Agreements"). The Purchase Agreements are
subject to the satisfaction of certain customary conditions including the
approval of a majority of stockholders of the Company. In the event that the
Sales Transaction fails to close, the Subsidiaries and the Purchasers will
return to their positions prior to the signing of the Purchase Agreements and
the Operating Agreements, except for assets of two (2) of the Subsidiaries
(Ramsey and Hackensack) which will be sold to the Purchasers on identical terms
as stated herein. See "THE ASSET PURCHASE AGREEMENTS-Consideration." In essence,
the Assets would be returned to the Subsidiaries, and the Cash previously placed
in escrow by the Purchasers would be returned to same.

REPRESENTATIONS AND WARRANTIES

<PAGE>
The Purchase Agreement contains certain representations and warranties of
the parties relating to, among other things: (i) their organization and good
standing; (ii) the execution, delivery and performance of the Purchase
Agreement; (iii) the legality, validity and enforceability thereof against the
parties, and the non-contravention of, and lack of conflict with, the Articles
of Incorporation or by-laws of the parties, the terms of any lien or any
contract of agreement to which any of the parties is bound, or any provision of
any statute, law, ordinance or administrative rule or regulation, license or
order of any governmental authority or any judicial, administrative or
arbitration order, award, judgement, writ, injunction or decree; (iv) the
receipt of requisite consents and approvals; (v) title to the Assets; (vi) the
condition of the Assets; and (vii) the absence of litigation and other legal
proceedings.

CERTAIN COVENANTS

The Purchase Agreement contains certain covenants and agreements of the
parties that are customary for transactions similar to the Sale Transaction and
include the agreement, among other things: (i) by all parties to not publicly
reveal any information relating to the operation of the Assets which is not
specifically already a matter of public record; (ii) by the Buyer to maintain
and operate the Assets in accordance with past practice; and (iii) by the
Company, the Subsidiaries and Mark Glazier, in his individual capacity, to not
take any action that could result in the creation or acquisition of a competing
business similar to the facilities transferred thereby, except for investments
by the Company, the Subsidiaries or Mark Glazier in securities traded on a
national stock exchange or the over-the-counter market which do not exceed five
(5%) percent of the total outstanding shares of such securities.

CONDITIONS TO CLOSING

The obligations of the parties to consummate the Sale Transaction on the
Closing Date shall be subject to the prior satisfaction, or waiver, of certain
conditions including: (i) receipt of all necessary consents and/or approvals to
the Sales Transaction, including the approval of the Company's stockholders
(except for the sale of the assets of Ramsey and Hackensack which do not require
such consent) as well as any Landlord's consents; and (ii) the absence of any
actual or threatened suit, action or proceeding to restrain, enjoin or otherwise
prevent the consummation of the Sale Transaction, or any other action, suit,
claim, investigation or proceeding against the parties.

INDEMNIFICATION

The Company and its Subsidiaries have agreed to jointly indemnify, defend
and hold harmless the Purchaser and its respective directors, officers,
employees, shareholders and any Affiliates of the foregoing, and their
successors and assigns (collectively, the "Buyer Group") from and against any
and all losses, liabilities, expenses, claims, Liens or other obligations of any
nature whatsoever (hereinafter individually, a "Loss" and collectively,
"Losses") suffered or incurred by the Buyer Group which, directly or indirectly,
arise out of, result from or relate to (i) the operation of the business prior
the signing date of the Purchase Agreements, (ii) any material inaccuracy in or
any breach of any repre sentation or warranty of the Company or its Subsidiaries
contained in the Purchase Agreements or in any other document contemplated by
the Purchase Agreements and (iii) any claim brought by a shareholder of the
Company.

(b) The Buyer has agreed to indemnify, defend and hold harmless the Company
and its Subsidiaries and their respective directors, officers, employees, and
shareholders, and any Affiliates of

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the foregoing, and their successors and assigns from and against any and all
Losses suffered or incurred by them which, directly or indirectly, arise out of,
result from or relate to (i) any inaccuracy in or any breach of any
representation or warranty of the Buyer contained in the Purchase Agreements and
(ii) the operation of the Assets following the date hereof.

(c) The obligations of the Company and its Subsidiaries to indemnify,
defend and hold harmless the Purchaser pursuant to the Purchase Agreements and
other related documents shall not exceed the amount of the Purchase Price paid
by the Purchaser (See "THE ASSET PURCHASE AGREEMENTS-Consideration"), other than
the obligations to indemnify the Purchaser for Losses relating to any tax
liabilities or any action initiated by the United States Securities and Exchange
Commission or other securities authority involving the transactions contemplated
thereby (which shall not be so limited as provided herein).

(d) The Company and its Subsidiaries have agreed to indemnify, defend and
hold harmless the Purchaser and its respective directors, officers, employees,
shareholders and any Affiliates of the foregoing, and their successors and
assigns from and against any losses arising from the refund of any money paid to
the Company and its Subsidiaries by any client thereof, transferred under the
Purchase Agreements to the Purchaser, under a student contract with the Company
or any of its Subsidiaries if it is determined the loss is not the fault of the
Purchasers. A claim shall not be determined to be the fault of the Purchaser if
it results from the initial change in instructors, instructional style or
schedule of instruction, or a conflict in personalities between the instructor
and the student. A claim based on the intentional misconduct or negligence of
the Purchaser, its employees or independent contractors shall be considered to
be the fault of the Purchaser.

TERMINATION

The Purchase Agreements may be terminated (i) upon written consent of the
parties, (ii) by the Company or its Subsidiaries, in the event that the
conditions contained in Article VII have not been satisfied by the Closing Date;
provided however, that the Company and its Subsidiaries shall reimburse
Purchaser for its expenses in an amount not to exceed $200,000 if the Company's
failure to close is as a result of the Company's failure to receive the
Shareholder Approval or (iii) by the Purchaser, in the event that the Closing
has not occurred by May 31, 1997 as a result of the Company's or its
Subsidiaries' inability to close (such date being the "Termination Date").

BACKGROUND AND REASONS FOR THE SALES TRANSACTION

During the two year period following the Company's initial public offering
in 1993, the Company pursued an aggressive expansion program. The Company long
believed that by increasing the number of students and overall revenues it would
reduce its overhead costs per student. This would enable the Company to operate
profitably. However, after some time, it became apparent to management that
despite having ample capital, the Company was incapable of training and
developing a sufficient number of instructors skilled in the Company's style of
martial arts in order to staff the opening of several new Karate Centers.

The Company then aggressively pursued acquiring existing martial arts
centers. However, because of the Company's unique style of martial arts
instruction and the fragmented, "mom and pop" nature of the martial arts
industry, it was difficult to identify numerous appropriate acquisition
candidates. The Company discussed potential transactions with a limited number
of acquisition targets,

22
<PAGE>
including UAK Management, Inc. (d/b/a "Tiger Schulmann's Karate"). After
unsuccessful attempts at negotiating an acceptable acquisition transaction and
for the reasons set forth below, the Company refocused its attention to
divesting its unprofitable Karate Centers. During the past two fiscal years
ending December 1995 and 1994, the Company recorded a net loss of $1,081,242 and
$1,045,789, respectively, and for the nine months ended September 30, 1996, the
Company recorded a net loss of $441,852. It is anticipated that the Company will
also incur a net loss for the year ended December 31, 1996.

Since the Company has been unable to operate profitably, and because the
Company could neither expand its business internally (by training and developing
an adequate number of instructors) or by acquiring other martial arts
instruction centers, management believes that the sale of unprofitable Karate
Centers is in the best interests of the Company's stockholders.

Having been in the martial arts industry for many years, management was
intimately familiar with significant players in the industry. Once the decision
was made by the Company's Board of Directors to pursue a divestiture strategy,
the Company then considered a variety of possible purchasers. After some
deliberation, the Company determined that given the substantial potential
liability to the Company from pre-paid student contracts and from real estate
leases, the Company elected to pursue purchasers with extensive experience in
teaching the martial arts as well as purchasers with substantial financial
means.

The Company believes that Tiger Schulmann's Karate is an ideal purchaser.
Tiger Schulmann has been instructing students in the martial arts since 1982 and
currently operates 30 martial arts centers in Pennsylvania, New Jersey and New
York. Because Tiger Schulmann has had unparalleled success in opening and
operating martial arts instruction centers over the last fifteen years, the
Company believes that Tiger Schulmann is well suited to assume the on-going
obligations at the Karate Centers.

Following the closing of the Sales Transaction, the Company anticipates
using the proceeds from the Sales Transaction to acquire an alternative
business. However, no definitive agreement or arrangement have been made
regarding such a transaction.

RECOMMENDATION OF THE BOARD OF DIRECTORS

The Board of Directors believes that the Sale Transaction is fair to and in
the best interests of the Company and its stockholders. Accordingly, the Board
of Directors has unanimously approved the Sale Transaction and recommends to the
Company's stockholders that they vote FOR the approval of the Sale Transaction.

In reaching its conclusions, the Board of Directors considered, among other
things, the following material factors:

(1) A range of alternative strategic options (including sales of
assets or the entire Company and elimination or reduction of costs) out of which
options the Sales Transaction presented the best opportunity to the Company to
enhance shareholder value, all as more fully described under "THE SALE
TRANSACTION -- Background and Reasons for the Sale Transaction."

(2) Information concerning the financial performance, condition,
business operations and prospects of the Company. See "THE SALE TRANSACTION --
Background and Reasons for the

<PAGE>
Sale Transaction" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS."

(3) The relatively small number of potential acquirors, due in great
measure to the necessity of finding a purchaser that it is skilled in managing
high-volume, high-expense martial arts centers as well as providing exceptional
martial arts instruction to the Company's existing students and would be willing
to undertake operations in the difficult New York/ New Jersey market, and the
inability of the Company to negotiate with any of such potential acquirors a
definite agreement with terms more favorable than the Sale Transaction.

(4) The proposed terms and structure of the Sale Transaction and the
terms and conditions of the Purchase Agreements. In this regard the Board also
considered the ability of the Company to terminate the Purchase Agreements, upon
the occurrence or non-occurrence of certain events (including upon the failure
of the Company's stockholders to approve the transaction), as described more
fully under the captions "THE ASSET PURCHASE AGREEMENT -- Termination."

(5) The ability to consummate the Sale Transaction without
restricting, limiting or altering the rights of the stockholders of the Company.
See "THE SALE TRANSACTION -- Interests of Certain Persons in the Sale
Transaction" and "Effect of the Sale Transaction on the Company's Stockholders."

(6) The perceived motivation of the Purchasers and their executives
and the Purchasers' financial condition, which factors underscored the
Purchasers' earnest intent to consummate the Sale Transaction and demonstrated
the Purchasers' financial ability to assume the obligations and liabilities
associated with the Purchasers' assumption of the Subsidiaries' leases, as well
as the Purchasers' assumption of the assigned student contracts.

(7) The recommendation of the Company's management to enter into the
Sale Transaction.

(8) The extensive experience of the Purchasers' management Company,
UAK Management, Inc., in martial arts instruction center operations, which
provided the Company with a high level of comfort as to the ability of the
Purchasers to operate the Karate Centers profitably and therefore meet its
payment obligations under the Notes.

(9) The offer by Daniel Schulmann, the principal of Tiger Schulmann's
Karate, to personally guarantee payment to the Company of the Notes of the
Purchasers.

(10) The offer by Daniel Schulmann, the principal of Tiger Schulmann's
Karate, to personally guarantee certain of the Purchasers' obligations under
certain of the assigned leases.

(11) The opportunity to materially reduce overhead expenses and
potential liabilities as a result of the sale of the Karate Centers.

In light of these factors and the consideration to be received in
connection with the Sale Transaction, the Board determined that the Sale
Transaction was in the best interests of the Company and its stockholders. The
Board took into account the fact that only a relatively small number of parties
expressed interest in acquiring the Karate Centers, it was reasonably unlikely
that the Company would

24
<PAGE>
receive, in the foreseeable future, offers to engage in alternative transactions
on terms more favorable to the Company and its stockholders than those offered
by the Purchasers.

The Company has, in its capacity as sole stockholder of the Subsidiaries,
approved the Sale Transaction and has authorized the Subsidiaries's consummation
thereof, contingent on the approval by the Company's stockholders of the Sale
Transaction.

INTERESTS OF CERTAIN PERSONS IN THE SALE TRANSACTION

In considering the recommendation of the Board with respect to the Sale
Transaction, stockholders should be aware that Mark Glazier, the Company's
President and Chairman of the Board, stands to indirectly benefit from the Sale
Transaction. One of the leases that would be assigned to the Purchasers requires
Mr. Glazier to personally guarantee the payment of rent under the lease. Should
the Sale Transaction be consummated, Mr. Glazier would no longer be personally
liable for such rent payments on the remaining terms of the lease of the
Hackensack location. Mr. Glazier would have been liable for payment of rent to
the landlord, not to exceed $5,000, for which the Company had agreed to
indemnify Mr. Glazier in full.

The Board of Directors was aware of the foregoing and considered it, among
other matters, in approving the Purchase Agreements and the Sale Transaction.
Other than as described above, the Board of Directors is not aware of any
potential conflicts of interest management may have in relation to Sale
Transaction.

REGULATORY APPROVALS

No state or Federal regulatory approval is required in connection with the
Sale Transaction.

ACCOUNTING TREATMENT

The Sale Transaction will be accounted for as a sale of certain assets and
a transfer of certain liabilities. The sum of the consideration to be received
by the Company and the liabilities to be assumed by the Purchasers was
materially less than the book value of the assets to be sold at the time that
the Purchase Agreement was signed. The Sale Transaction results in a loss of
approximately $ 421,000. Despite the loss, management believes the prospect of
significant proceeds presents the shareholders with their best opportunity to
realize a return on their investment. See "BACKGROUND AND REASONS FOR THE SALE
TRANSACTION."

The Company expects that its accountants, Moore Stephens, P.C., will be
present at the Annual Meeting and will be available to respond to reasonable and
appropriate questions.

CERTAIN INCOME TAX CONSEQUENCES

The Company expects to incur a loss for income tax purposes with respect to
the Sale Transaction. The Sale Transaction will not result in any direct federal
or state income tax consequences to the stockholders of the Company. However,
shareholders of the Company are advised to consult with the individual tax
attorneys and/or accountants in order to determine the tax consequences of the
anticipated receipt of return of capital distributions. The taxable effect of
these distributions will vary among shareholders, and will be based in part on a
shareholder's basis in his, her or its common stock of

25
<PAGE>
the Company.

EFFECT OF THE SALE TRANSACTION ON THE COMPANY'S STOCKHOLDERS

If the Sale Transaction is consummated, the stockholders of the Company
will retain their equity interest in the Company. Such sale will not result in
any issuance of any capital stock by the Company nor will it change the rights
of the Company's stockholders.

USE OF PROCEEDS OF THE SALE TRANSACTION

Of the expected net proceeds of the Sale Transaction, the Company
anticipates utilizing approximately $150,000 to pay existing obligations,
accounts payable and operating expenses, including the salaries of the Company's
executive officers; $50,000 to be set aside for the refunding of certain
pre-paid student contracts; with the remaining net proceeds to be utilized for
working capital needs, potential expansion and/or acquisitions of other
businesses, as well as the expenses and costs incurred in connection with the
Sale Transaction and other matters, including legal fees. See "THE SALE
TRANSACTION -- Background and Reasons for the Sale Transaction" and "ADDITIONAL
INFORMATION ABOUT THE COMPANY." Prior to their intended use, the Company will
invest available funds in U.S. Treasury and other short term obligations.

<PAGE>
MASTER GLAZIER'S KARATE INTERNATIONAL, INC.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
[UNAUDITED]

The following pro forma consolidated balance sheet as of September 30,
1996, and the consolidated statements of operations for the nine months then
ended and the year ended December 31, 1995, give effect to the following:

The sale by the Company and its five [5] wholly-owned subsidiaries of
substantially all of the assets of the five subsidiaries to the purchasers for
an aggregate price of $505,000 in cash and promissory notes. The purchasers will
own and operate the karate centers under the trade name "Tiger Schulman's
Karate."

A reverse stock split of the Company's issued common stock, par value $.0001 per
share, on the basis of one new share of common stock for each five [5] shares of
common stock outstanding.

The amendment of the Company's Certificate of Incorporation to increase the
number of authorized shares of common stock from 15,000,000 shares to 40,000,000
shares.

The pro forma consolidated balance sheet assumes the sale of assets was
consummated on September 30, 1996. The pro forma consolidated statements of
operations give effect to this transaction, as if it had occurred at the
beginning of the earliest period presented. These pro forma consolidated
financial statements may not be indicative of the results that actually would
have occurred if the sale of assets had taken place on the dates indicated.

<PAGE>
MASTER GLAZIER'S KARATE INTERNATIONAL, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1996.
[UNAUDITED]

Pro Forma
Historical Pro Forma As Adjusted
September 30, Adjustments for September 30,
1996 Divestment [1] 1996
------------- --------------- -------------
Assets:
Current Assets:
Cash and Cash Equivalents $1,082,236 $ 148,625 $1,230,861
Accounts Receivable 76,533 -- 76,533
Inventory 66,365 -- 66,365
Miscellaneous Receivables 11,484 -- 11,484
Prepaid Expenses 33,296 -- 33,296
Notes Receivable -- 110,000 110,000
---------- ----------- ----------
Total Current Assets 1,269,914 258,625 1,528,539
---------- ----------- ----------
Property and Equipment:
Office Equipment 120,001 (28,640) 91,361
Furniture and Fixtures 197,466 (107,356) 90,110
Leasehold Improvements 1,227,012 (1,062,178) 164,834
Auto and Trucks 50,326 -- 50,326
---------- ----------- ----------
Totals - At Cost 1,594,805 (1,198,174) 396,631
Less: Accumulated Depreciation 380,117 (215,050) 165,067
---------- ----------- ----------
Property and Equipment - Net 1,214,688 (983,124) 231,564
---------- ----------- ----------
Other Assets:
Investment in a Limited
Partnership 1,500,000 -- 1,500,000
Security Deposits 96,278 (57,681) 38,597
Start-Up Costs 13,755 -- 13,755
Notes Receivable -- 170,000 170,000
---------- ----------- ----------
Total Other Assets 1,610,033 112,319 1,722,352
---------- ----------- ----------
Total Assets $4,094,635 $ (612,180) $3,482,455
========== =========== ==========

See Notes to Pro Forma Consolidated Financial Statements.

<PAGE>
MASTER GLAZIER'S KARATE INTERNATIONAL, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1996.
[UNAUDITED]

Pro Forma
Historical Pro Forma As Adjusted
September 30, Adjustments for September 30,
1996 Divestment [1] 1996
------------- --------------- -------------
Liabilities and Stockholders'
Equity:
Current Liabilities:
Accounts Payable and Accrued
Expenses $ 135,639 $ -- $ 135,639
Deferred Revenue 214,894 (126,716) 88,178
----------- --------- -----------
Total Current Liabilities 350,533 (126,716) 223,817

Long-Term Liability:
Deferred Revenue 107,744 (64,040) 43,704
----------- --------- -----------
Total Liabilities 458,277 (190,756) 267,521
----------- --------- -----------

Commitments and Contingencies -- -- --
----------- --------- -----------
Stockholders' Equity:
Common Stock, $.0001 Par
Value, 15,000,000 Shares,
40,000,000 As Adjusted [3],
Authorized, 10,350,000
Issued and Outstanding,
2,070,000 As Adjusted [2] 535 -- 207
Paid-in Capital 7,387,992 -- 7,388,320
Accumulated [Deficit] (3,752,169) (421,424) (4,173,593)
----------- --------- -----------
Total Stockholders' Equity 3,636,358 (421,424) 3,214,934
----------- --------- -----------
Total Liabilities and
Stockholders' Equity $ 4,094,635 $(612,180) $ 3,482,455
=========== ========= ===========

See Notes to Pro Forma Consolidated Financial Statements.

<PAGE>
MASTER GLAZIER'S KARATE INTERNATIONAL, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1996.
[UNAUDITED]

Pro Forma
Historical Pro Forma As Adjusted
September 30, Adjustments for September 30,
1996 Divestment [1] 1996
------------- --------------- -------------
Sales $ 1,229,623 $ (708,440) $ 521,183
----------- ----------- ---------
Cost of Expenses:
Cost of Accessories Sold 89,006 (59,700) 29,306
Salaries and Payroll Taxes 820,002 (404,715) 415,287
Rent Expenses 433,903 (327,738) 106,165
Other General and
Administrative Expenses 821,073 (521,989) 299,084
----------- ----------- ---------
Total Costs and Expenses 2,163,984 (1,314,142) 849,842
----------- ----------- ---------

[Loss] from Operations (934,361) 605,702 (328,659)
----------- ----------- ---------
Other Income [Expense]:
Interest Income 62,018 -- 62,018
Bad Debt Expense (11,340) -- (11,340)
Dividend Income 3,304 -- 3,304
Gain on Sale of Securities 438,527 -- 438,527
----------- ----------- ---------

Other Income - Net 492,509 -- 492,509
----------- ----------- ---------
[Loss] Income from Continuing
Operations $ (441,852) $ 605,702 $ 163,850
=========== =========== =========
[Loss] Income from Continuing
Operations Per Share $ (.08) $ .08
=========== =========
Weighted Average Number of
Shares Outstanding 5,350,000 2,070,000
=========== =========

See Notes to Pro Forma Consolidated Financial Statements.

<PAGE>
MASTER GLAZIER'S KARATE INTERNATIONAL, INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
[UNAUDITED]

[1] To reflect the sale of assets of Hicksville Karate, Inc., Great Neck Karate,
Inc., Ramsey Karate Center, Inc., Hackensack Karate, Inc. and Paramus Karate
to the purchasers for an aggregate price of $505,000 consisting of $225,000
in cash and an aggregate of $280,000 in promissory notes and to reflect
receipt of cash and notes. Also, to reflect the cancellation fees of $76,375
pertaining to two operating leases.

[2] To reflect a one-for-five reverse stock split of the common stock of the
Company.

[3] To reflect the amendment of the Company's Certificate of Incorporation to
increase the number of authorized shares of common stock from 15,000,000
shares, par value $.0001 per share to 40,000,000 shares, par value $.0001
per share.

<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

For the Nine Months Ended September 30, 1996 and Pro Forma Nine Months
Ended September 30, 1996.

For the purposes of managements's discussion and analysis the periods
referenced are the nine months ended September 30, 1996, (hereinafter referred
to as "Historical") and the pro forma adjusted period of September 30, 1996,
(hereinafter referred to as "Pro Forma"). The Pro Forma period takes into
consideration the effect of the sale of substantially all of the assets of five
(5) of the Company's wholly owned subsidiaries Great Neck Karate, Inc.,
Hicksville Karate, Inc., Paramus Karate, Inc., Hackensack Karate Inc., and
Ramsey Karate Centers (collectively hereinafter referred to as the
"Subsidiaries") and the Reverse Stock Split of the Company's issued common
stock.

On October 18, 1996, the Company entered into convertible stock
subscription agreements pursuant to which the subscribers purchased an aggregate
of 750,000 shares the Registrant's Series A Preferred Stock for $1.20 per share.
On December 26, 1996, the Company entered into a Stock Exchange Agreement with
the Subscribers pursuant to which all of the outstanding shares of Preferred
Stock were redeemed and cancelled by the Company in exchange for 5,000,000
shares of Common Stock and options to purchase 10,000,000 shares of Common
Stock. The Pro Forma adjusted balance sheet reflects the shares pertaining to
the Stock Exchange Agreements but does not reflect the cash proceeds of $900,000
received from the sale of Preferred Stock.

The Pro Forma balance sheet adjustment of $148,625 for cash reflects cash
proceeds of $225,000 from the sale of the assets of the Subsidiaries and a
$76,375 cost of cancellation of the Great Neck and Hicksville leases. The
$57,681 adjustment to security deposits reflects the forfeiture of certain
security deposits caused by the assignment of leases of the Subsidiaries to the
Purchasers. The $983,124 Pro Forma balance sheet adjustment for property and
equipment net of accumulated depreciation, reflects the sale of the assets of
the Subsidiaries.

The Company had a Pro Forma reduction in liabilities of $190,756. The
liability consisted of deferred revenue from prepaid membership tuition. This
debt was assumed in part by the Purchasers of the Subsidiaries.

On October 24, 1996 the Company received $379,500 which represents a
distribution of sales proceeds pertaining to its investment in a limited
partnership. These proceeds were not reflected in the Pro Forma financial
statements.

The Company had Historical and anticipates Pro Forma sales of $1,229,623
and $521,183 respectively. Sales were derived predominantly from membership
tuition. The $708,440 reduction in sales takes into account the loss of revenues
due to the closing of operations of the Company's Subsidiaries. Pro Forma sales
of $521,183 were derived from sales generated by the Allentown and Bethlehem
karate centers still in operation.

The Company anticipates a $1,314,142 reduction in operating expenses due to
the sale of the Subsidiaries assets. The major components of operating expenses
consists of the following:

32
<PAGE>
Historical Pro Forma
September 30, September 30,
1996 1996
------------- -------------
Cost of Accessories Sold $ 89,006 $ 29,306
Salaries and Payroll Taxes 820,002 415,287
Rent Expenses 433,903 106,165
Other General and Administrative Expenses 821,073 299,084
Total $2,163,984 $849,842

The anticipated reduction in rent and cost of goods sold of $327,738 and
$59,700, respectively, are directly attributable to expenses incurred in the
operations of the Subsidiaries. The $404,715 reduction in salaries and payroll
taxes is comprised of $290,782 of Subsidiaries operating expenses and $113,933
due to staff downsizing of the Company attributable to operations of the
Subsidiaries.

The Company anticipates that other general and administrative expenses
would be reduced on a Pro Forma basis by $521,989 of which $446,989 are directly
attributable to expenses of the subsidiaries and $75,000 are expenses incurred
by the Company attributable to operations of the subsidiaries. The Company
anticipates that further reductions in general and administrative expenses could
be realized as operations of the Subsidiaries are closed down.

The Pro Forma adjusted loss from operations of $328,659 as compared to a
historical loss of $934,361 directly reflects the effect of the sale of
substantially all of the assets of the Subsidiaries and the subsequent closing
of their operations. After taking into consideration other income including a
$438,527 gain on the sale of securities, the Company anticipates a Pro Forma net
gain from operations of $163,850 as compared to a historical net loss from
operations of $441,852.

The loss/gain per share from continuing operations historically and Pro
Forma are ($.08) and $.08 per share, respectively. The Pro Forma $.08 per share
gain reflects the effects of the sale of substantially all of the assets of the
Subsidiaries, the issuance of 5,000,000 shares of common stock pertaining to the
Stock Exchange Agreement, and the reverse stock split of the Company's issued
common stock on the basis of one (1) new share of common stock for each five (5)
shares of common stock outstanding.

PLANS FOR THE OPERATION OF THE COMPANY FOLLOWING THE SALE TRANSACTION

Following the closing of the Sale Transaction, the Company plans to
continue to operate its two (2) remaining Karate Centers while attempting to
identify potential purchasers of the remaining Karate Centers and to pursue the
acquisition of an alternative business. There can be no guarantee that the
Company will be successful in locating a purchaser who is interested in the
remaining Karate Centers.

The Company will continue to operate its remaining Karate Centers until it
can dispose of such Karate Centers. Revenues from continuing operations, and
proceeds received by the Company from payments made on outstanding promissory
notes will be applied to the payment of operational expenses, and working
capital needs. If the Company should sell its remaining Karate Centers,
management of the Company intends to utilize its note principal proceeds and its
then remaining revenues to make payment of any expenses related to the continued
existence of the Company. Management anticipates that the Company's cash inflows
would at such time consist of payments under the Note and the other promissory
notes that the Company will have received in its Karate Center dispositions.
Management of the Company has no present intention to liquidate or

33
<PAGE>
dissolve the Company, or to engage in a going private transaction.

After consummation of the Sale Transaction, the Company anticipates that
operations will result in minor cash flow and operating losses due to (i)
operating losses at Allentown Karate, Inc. and Bethlehem Karate, Inc., and (ii)
corporate overhead expenses. Operational cash flow shortages are expected to
mitigated by proceeds from repayment of the Note. See "PRO FORMA CONSOLIDATED
FINANCIAL INFORMATION." Upon the Closing of the Sales Transactions, the Company
will be able to refocus its energies on more profitable businesses, however, the
Company has no current arrangements or agreements to acquire an alternative
business.

OTHER PROPOSED ACTION

The Board of Directors does not intend to bring any other matters before the
meeting, nor does the Board of Directors know of any matters which other persons
intend to bring before the meeting. If, however, other matters not mentioned in
this Proxy Statement properly come before the Annual Meeting, the persons named
in the accompanying form of Proxy will vote thereon in accordance with the
recommendation of the Board of Directors.

STOCKHOLDER PROPOSALS AND SUBMISSIONS

If any Stockholder wishes to present a proposal for inclusion in the proxy
materials to be solicited by the Company's Board of Directors with respect to
the 1997 Annual Meeting of Stockholders, that proposal must be presented to the
Company's secretary prior to January 31, 1998.

WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE SIGN AND
RETURN THE ENCLOSED PROXY PROMPTLY. YOUR VOTE IS IMPORTANT. IF YOU ARE A
STOCKHOLDER OF RECORD AND ATTEND THE ANNUAL MEETING AND WISH TO VOTE IN PERSON,
YOU MAY WITHDRAW YOUR PROXY AT ANY TIME PRIOR TO THE VOTE.

MASTER GLAZIER'S KARATE INTERNATIONAL, INC.

February 19, 1997 By: /s/ Mark Glazier
Mark Glazier
President and Chief Financial Officer

<PAGE>
PROXY

MASTER GLAZIER'S KARATE INTERNATIONAL,(R), Inc.

THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

PLEASE CLEARLY INDICATE A RESPONSE BY CHECKING EITHER THE PROXY (THE "PROXY")
[FOR] OR [AGAINST] BOX NEXT TO EACH OF THE FIVE (5) PROPOSALS

The undersigned hereby appoint(s) Mr. Mark Glazier with the power of
substitution and resubstitution to vote any and all shares of capital stock of
Master Glazier's Karate International, Inc. (the "Company") which the
undersigned would be entitled to vote as fully as the undersigned could do if
personally present at the Annual Meeting of the Company, to be held on March 25,
1997, at 9:00 A.M. local time, and at any adjournments thereof, hereby revoking
any prior proxies to vote said stock, upon the following items more fully
described in the notice of any proxy statement for the Annual Meeting (receipt
of which is hereby acknowledged):

(Please Sign and Date the Proxy on the Reverse Side)

<PAGE>
A [X] Please mark your votes as in this example.

1. ELECTION OF DIRECTORS

FOR ALL nominees
listed at right WITHHOLD AUTHORITY Nominees:
EXCEPT as marked to to vote for ALL nominees Mark Glazier
the contrary below listed at right Richard Schechtman
Marc Zwetchenbaum
[ ] [ ]

(INSTRUCTION: To withhold authority to vote for any individual nominee strike
a line through the nominee's name below.)

________________________________________________________

FOR AGAINST ABSTAIN

2. RATIFY APPOINTMENT OF AUDITORS [ ] [ ] [ ]
Moore Stephens, P.C.

3. REVERSE STOCK SPLIT [ ] [ ] [ ]
Reverse Stock Split

4. INCREASE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK [ ] [ ] [ ]
Increase Number of Authorized Shares of Common Stock

5. THE SALE TRANSACTION [ ] [ ] [ ]
Approve the Sale Transaction

THIS PROXY WILL BE VOTED AS SPECIFIED ABOVE; UNLESS OTHERWISE INDICATED,
THIS PROXY WILL BE VOTED FOR ELECTION OF THE THREE (3) NOMINEES NAMED IN ITEM 1
AND FOR ITEMS 2, 3, 4 AND 5.

In his discretion, the Proxy is authorized to vote upon such other business
as may properly come before the meeting.

Please mark, sign, date and return this Proxy promptly using the
accompanying postage pre-paid envelope. THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF MASTER GLAZIER'S KARATE INTERNATIONAL(R), INC.

PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE.

Signature: ____________________ Signature if jointly owned: ____________________

Print name: __________________________________________ Dated: __________________

NOTE: Please sign exactly as the name appears on your stock certificate. When
shares of capital stock are held by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee, guardian, or
corporate officer, please include full title as such. If the shares of
capital stock are owned by a corporation, sign in the full corporate name
by an authorized officer. If the shares of capital stock are owned by a
partnership, sign in the name of the partnership by an authorized officer.