UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
---------
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended June 30, 1998 Commission File Number 0-23236-NY
MASTER GLAZIER'S KARATE INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-3234110
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
500 N. Broadway, Suite 240
Jericho, New York 11753
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (516) 932-2201
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
As of August 15, 1998 there were 4,070,002 shares of $.0001 par value common
stock outstanding.
Transitional Small Business Disclosure Format
Yes No X
<PAGE>
MASTER GLAZIER'S KARATE INTERNATIONAL, INC. AND SUBSIDIARIES
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INDEX TO FORM 10-QSB
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Item 1: Financial Statements:
Consolidated Balance Sheet..................................... 1.....2
Consolidated Statements of Operations.......................... 3
Consolidated Statements of Cash Flows.......................... 4
Notes to Consolidated Financial Statements..................... 5
Item 2:Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 6
Signature Page................................................... 7
. . . . . . . . .
<PAGE>
Item 1: Financial Statements
MASTER GLAZIER'S KARATE INTERNATIONAL, INC. AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1998.
[UNAUDITED]
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Assets:
Current Assets:
Cash and Cash Equivalents $ 688,987
Cash Held in Escrow 933
Marketable Securities 165,000
Accounts Receivable - Net 80,722
Inventory 507,317
Prepaid Expenses and Miscellaneous Receivables 8,313
Notes Receivable - Current Portion 102,646
Accrued Interest 7,703
-----------
Total Current Assets 1,561,621
Property and Equipment:
Office Equipment 72,903
Furniture and Fixtures 84,854
Leasehold Improvements 103,385
Vehicles 32,558
-----------
Total - At Cost 293,700
Less: Accumulated Depreciation 186,927
Property and Equipment - Net 106,773
-----------
Other Assets:
Loan Receivable - Officer 346,070
Security Deposits 74,649
Notes Receivable - Long-Term 93,334
-----------
Total Other Assets 514,053
Total Assets $ 2,182,447
===========
The Accompanying Notes are an Integral Part of These Financial Statements.
1
<PAGE>
MASTER GLAZIER'S KARATE INTERNATIONAL, INC. AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1998.
[UNAUDITED]
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Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts Payable and Accrued Expenses $ 223,837
Deferred Revenue 134,100
-----------
Total Current Liabilities 357,937
Long-Term Liability:
Deferred Revenue 59,934
Total Liabilities 417,871
Commitments and Contingencies --
Stockholders' Equity:
Preferred Stock, No Par Value; 1,000,000 Shares Authorized --
Common Stock, $.0001 Par Value; 40,000,000 Shares
Authorized, 4,070,002 Issued and Outstanding 407
Paid-in Capital 8,237,831
Unrealized Holding Loss (8,500)
Accumulated Deficit (6,465,162)
Total Stockholders' Equity 1,764,576
Total Liabilities and Stockholders' Equity $ 2,182,447
===========
The Accompanying Notes are an Integral Part of These Financial Statements.
2
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MASTER GLAZIER'S KARATE INTERNATIONAL, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF OPERATIONS
[UNAUDITED]
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Three months ended Six months ended
June 30, June 30,
-------- --------
1 9 9 8 1 9 9 7 1 9 9 8 1 9 9 7
------- ------- ------- -------
Net Sales $ 132,030 $ 176,245 $ 323,920 $ 366,826
----------- ----------- ---------- -----------
Cost and Expenses:
Cost of Accessories Sold 19,831 9,136 31,151 16,954
Salaries and Payroll Taxes 156,493 142,877 299,734 286,088
Rent Expense 23,975 39,265 65,292 80,264
Other General and
Administrative Expenses 126,346 92,251 195,155 201,001
----------- ----------- ---------- -----------
Total Costs and Expenses 326,645 283,529 591,332 584,307
----------- ----------- ---------- -----------
[Loss] from Operations (194,615) (107,284) (267,412) (217,481)
----------- ----------- ---------- -----------
Other Income [Expense]:
Interest Income 10,464 69,136 41,592 89,630
Lease Cancellation Fee -- -- -- (76,707)
Gain on Sale of Securities -- 6,600 -- 8,437
----------- ----------- ---------- -----------
Other Income - Net 10,464 75,736 41,592 21,360
----------- ----------- ---------- -----------
[Loss] Before Federal and
State Taxes (184,151) (31,548) (225,820) (196,121)
Provision for Income Taxes -- -- -- --
----------- ----------- ---------- -----------
Net [Loss] $ (184,151)$ (31,548) $ (225,820) $ (196,121)
=========== =========== ========== ===========
Net [Loss] Per Share $ (.05)$ (.01) $ (.06) $ (.05)
=========== =========== ========== ===========
Weighted Average Shares
Outstanding 4,070,000 4,070,000 4,070,000 4,070,000
=========== =========== ========== ===========
The Accompanying Notes are an Integral Part of These Financial Statements.
3
<PAGE>
MASTER GLAZIER'S KARATE INTERNATIONAL, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF CASH FLOWS
[UNAUDITED]
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Six months ended
June 30,
1 9 9 8 1 9 9 7
------- -------
Operating Activities:
Net [Loss] $ (225,820) $ (196,121)
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Adjustments to Reconcile Net [Loss] to Net Cash
[Used for] Operating Activities:
Depreciation and Amortization 14,794 19,974
[Gain] on Sale of Assets -- (1,836)
Changes in Assets and Liabilities:
[Increase] Decrease in:
Accounts Receivable (66,225) (92,740)
Inventory (494,987) 5,500
Prepaid Expenses (73) (42,851)
Increase [Decrease] in:
Accounts Payable and Accrued Expenses 66,711 (5,354)
Deferred Revenue (68,559) 92,880
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Total Adjustments (548,339) (24,427)
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Net Cash - Operating Activities (774,159) (220,548)
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Investing Activities:
Purchase of Securities Available for Sale -- (403,000)
Loans to Officer (396,070) --
Officer Loan Repayment 50,000 --
Purchase of Property and Equipment (13,111) (1,943)
Proceeds from Sale of Assets 25,000 232,000
Payments Received on Notes Receivable 9,354 18,667
Security Deposits (21,193) (14,363)
---------- -----------
Net Cash - Investing Activities (346,020) (168,639)
---------- -----------
Financing Activities:
Proceeds from Stock Exchange Agreement -- 900,000
Stock Issuance Costs -- (43,789)
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Net Cash - Financing Activities -- 856,211
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Net [Decrease] Increase in Cash and Cash Equivalents (1,120,179) 467,024
Cash and Cash Equivalents - Beginning of Periods 1,809,166 1,332,776
---------- -----------
Cash and Cash Equivalents - End of Periods $ 688,987 $ 1,799,800
========== ===========
The Accompanying Notes are an Integral Part of These Financial Statements.
4
<PAGE>
MASTER GLAZIER'S KARATE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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[1] Summary of Significant Accounting Policies
Significant accounting policies of Master Glazier's International, Inc. and
subsidiaries are set forth in the Company's Form 10-KSB for the year ended
December 31, 1997 as filed with the Securities and Exchange Commission.
[2] Basis of Reporting
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10- QSB. Accordingly, they do not include all
of the information and disclosures required by generally accepted accounting
principles for completed financial statements. In the opinion of management,
such statements include all adjustments [consisting only of normal recurring
items] which are considered necessary for a fair presentation of the financial
position of the Company at June 30, 1998, and the results of its operations for
the three and six months then ended and its cash flows for the six months then
ended. It is suggested that these financial statements be read in conjunction
with the financial statements and notes for the year ended December 31, 1997
included in the Master Glazier's Karate International, Inc.
Form 10-KSB.
Earnings per share for the six months ended June 30, 1998 were not adjusted for
the exercise of options and warrants outstanding since their assumed exercise
would be anti-dilutive.
[3] Asset Purchase Agreement
During March 1997, the Company completed its closing on the sale of
substantially all of the assets of five of its karate centers located in New
Jersey and New York to Tiger Shulmann's Karate ["TSK"]. In consideration for the
purchase of the assets, TSK paid the Company an aggregate of $505,000 at
closing, consisting of $225,000 in cash, and an aggregate of $280,000 in three
promissory notes.
[4] Other Events
On April 15, 1998, Master Glazier's Karate International, Inc. [the
"Registrant"] was advised by the NASDAQ Stock Market that it failed to meed the
continued listing requirements of the NASDAQ Stock Market.
In April 1998, the Registrant commenced operating a new vitamin and nutritional
supplement business [the "Supplement Business"] based in New York, the
Supplement Business intends to distribute, market and sell vitamins, nutritional
supplements and non-pharmaceutical over-the-counter products to both wholesale
and retail markets as well as acting as a fulfillment center for the
distribution of nutritional products, for the third party companies.
The Company has relocated its offices from Piscataway, New Jersey to Jericho,
New York. The Company entered into a 3-year lease with an initial annual rent of
$106,452 with 4% annual increases.
. . . . . . . . .
5
<PAGE>
Item 2:
MASTER GLAZIER'S KARATE INTERNATIONAL, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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Results of Operations
The Company's sales for the six months ended June 30, 1998 were $323,920. The
sales include membership and goods sold at two of the Company's Karate Centers
and revenues generated from the distribution of nutritional products. The amount
of revenues earned from membership tuition was $297,692.
At June 30, 1997, the Company had sales of $366,826. The sales resulted
primarily from memberships sold at the Karate Centers; $33,381 resulted from the
sale of other goods.
The net [loss] for the six months ended June 30, 1998 and 1997 was $(225,820)
and $(196,121), respectively.
The major components of general and administrative expenses for the periods
discussed are as follows:
June 30,
1 9 9 8 1 9 9 7
Salaries and Payroll Taxes $ 299,734 $ 286,088
Rent 65,292 80,264
Other General and Administrative Expenses 195,155 201,001
---------- ----------
Totals $ 560,181 $ 567,353
------ ========== ==========
Liquidity and Capital Resources
Cash and cash equivalents [decreased]/increased for the six months ended June
30, 1998 and 1997 by $(1,120,179) and $467,024, respectively. Cash and cash
equivalents utilized for operations for the six months ended June 30, 1998 and
1997 was $774,159 and $220,548, respectively.
Cash and cash equivalents from investing activities for the six months ended
June 30, 1998 and 1997 was $346,020 and $168,639, respectively. During 1998,
advances were made to an officer of the Company totaling $396,000.
Cash and cash equivalents from financing activities for the six months ended
June 30, 1997 was $856,211. This was a result of the net proceeds from the Stock
Exchange Agreement.
6
<PAGE>
SIGNATURE
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Pursuant to the requirements of the Securities Exchange Act of 1994, the
Registrant has duly caused this report on form 10-QSB to be signed on its behalf
by the undersigned thereunto duly authorized.
Master Glazier's Karate International, Inc.
Date: August 17, 1998 By: /s/ Mark Glazier
----------------
Mark Glazier, Chief Financial Officer
7
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet and the consolidated statement of operations and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-END> Jun-30-1998
<CASH> 688,987
<SECURITIES> 165,000
<RECEIVABLES> 80,722
<ALLOWANCES> 0
<INVENTORY> 507,317
<CURRENT-ASSETS> 1,561,621
<PP&E> 293,700
<DEPRECIATION> 186,927
<TOTAL-ASSETS> 2,182,447
<CURRENT-LIABILITIES> 357,937
<BONDS> 0
0
0
<COMMON> 407
<OTHER-SE> 1,764,576
<TOTAL-LIABILITY-AND-EQUITY> 2,182,447
<SALES> 323,920
<TOTAL-REVENUES> 323,920
<CGS> 31,151
<TOTAL-COSTS> 591,332
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (225,820)
<INCOME-TAX> 0
<INCOME-CONTINUING> (225,820)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (225,820)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
