U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 0-26676
MULTIMEDIA CONCEPTS INTERNATIONAL, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 13-3835325
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
448 West 16th Street, New York, NY 10011
(Address of principal executive offices)
(212) 675-6666
(Issuer's telephone number)
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Common Stock, $.001 par value. 3,005,000 shares outstanding as of December
31, 1996
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MULTIMEDIA CONCEPTS INTERNATIONAL, INC.
INDEX
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Page(s)
PART 1. Financial Information
ITEM 1. Financial Statements
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Consolidated Condensed Balance Sheets - December 31, 1996 (Unaudited)
and September 30, 1996 3.
Consolidated Condensed Statements of Operations (Unaudited) -
Three Months Ended December 31, 1996 and 1995 4.
Consolidated Condensed Statements of Cash Flows (Unaudited) -
Three Months Ended December 31, 1996 and 1995 5.
Notes to Interim Consolidated Condensed Financial Statements (Unaudited) 6 - 8.
ITEM 2. Management's Discussion an Analysis of Financial Condition
and Results of Operations 9 - 10.
PART 2. Other Information 11.
SIGNATURES 12.
Financial Data Schedule - Exhibit 27 13.
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- ASSETS -
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<CAPTION>
December 31, September 30,
1996 1996
(unaudited)
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $1,115,724 $491,262
Accounts receivable - 1,191,510
Inventories 30,000 38,090
Due from affiliate 95,815 450,815
Loan receivable - officer 1,368,390 1,470,141
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TOTAL CURRENT ASSETS 2,609,929 3,641,818
FIXED ASSETS:
Furniture and fixtures 11,547 11,547
Machinery and equipment 17,814 17,814
29,361 29,361
Less: accumulated depreciation 12,412 10,912
16,949 18,449
OTHER ASSETS:
Investment in convertible preferred stock (Note 3) 4,221,490 3,696,490
Advances to equity investee 120,000 120,000
Due from affiliate (Note 4) 620,000 320,000
4,961,490 4,136,490
$7,588,368 $7,796,757
- LIABILITIES AND SHAREHOLDERS' EQUITY -
CURRENT LIABILITIES:
Accounts payable $ 250,516 $ 286,066
Accrued expenses and other liabilities 54,204 56,017
TOTAL CURRENT LIABILITIES 304,720 342,083
MINORITY INTEREST IN SUBSIDIARY (Note 1) - -
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COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, $.001 par value; 10,000,000 shares authorized,
3,005,000 shares issued and outstanding 3,005 3,005
Additional paid-in capital 13,102,005 13,102,005
Retained earnings (deficit) (2,600,135) (2,429,109)
Unrealized loss on investment (3,221,227) (3,221,227)
7,283,648 7,454,674
$7,588,368 $7,796,757
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The accompanying notes are an integral part of
these consolidated financial statements.
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MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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<CAPTION>
For the Three For the Three
Months Ended Months Ended
December 31, 1996 December 31, 1995
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NET SALES $ - $ 83,031
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COSTS AND EXPENSES:
Cost of sales - 72,910
Operating expenses 183,050 229,085
183,050 301,995
(LOSS) FROM OPERATIONS (183,050) (218,964)
OTHER INCOME (EXPENSE):
Interest expense - (24,738)
Interest and other income 12,024 3,814
12,024 (20,924)
(LOSS) BEFORE MINORITY INTERESTS (171,026) (239,888)
Minority interests (Note 1) - -
---------------- ---------
(LOSS) BEFORE PROVISION (CREDIT) FOR
INCOME TAXES (171,026) (239,888)
Provision (credit) for income taxes - -
---------------- --------
NET (LOSS) $(171,026) $(239,888)
(LOSS) PER COMMON SHARE (Note 5) $(.06) $(.10)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING (Note 5) 3,005,000 2,406,739
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The accompanying notes are an integral part of these
consolidated financial statements.
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MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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<CAPTION>
For the Three For the Three
Months Ended Months Ended
December 31, 1996 December 31, 1995
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net (loss) $ (171,026) $(239,888)
Adjustments to reconcile net (loss) to net cash
(used for) operating activities:
Depreciation of fixed assets 1,500 1,469
Amortization of excess of costs over net assets acquired - 500
Change in assets and liabilities:
Decrease in accounts receivable 1,191,510 574,440
Decrease (increase) in inventories 8,090 44,000
(Increase) in loan to supplier - (335,000)
Decrease (increase) in prepaid expenses and other current assets - 5,500
(Decrease) in accounts payable (35,550) (131,557)
Decrease (increase) in accrued expenses and other liabilities (1,813) (1,722)
Net cash provided by (used for) operating activities 992,711 (82,258)
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans to officers (423,249) (8,616)
Net cash (used for) investing activities (423,249) (8,616)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from sale of common stock and warrants - 3,796,964
Loans received from (repaid to) affiliate 55,000 (989,500)
Net cash provided by financing activities 55,000 2,807,464
NET INCREASE IN CASH AND CASH EQUIVALENTS 624,462 2,716,590
Cash and cash equivalents, at beginning of period 491,262 2,207
------------ --------------
CASH AND CASH EQUIVALENTS, AT END OF PERIOD $1,115,724 $2,718,797
SUPPLEMENTAL INFORMATION:
Taxes paid $ - $ -
Interest paid - -
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The accompanying notes are an integral part of these
consolidated financial statements.
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MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION:
The consolidated financial statements include the accounts of Multimedia
Concepts International Inc. ("the Company") and its 55% owned subsidiary,
American Eagle Industries Corp. "Industries" and its wholly owned subsidiary,
Match II, Inc. Through September 30, 1995 losses applicable to the minority
shareholders exceeded their interest in Industries, which was reduced to zero,
and as such, excess losses were charged against the operations of the Company.
Future earnings attributable to the minority interest in Industries, if any,
will first be credited to the operations of the Company, to the extent that such
excess losses were previously absorbed by the Company. Industries began
operations in August 1994.
In May of 1996, the Company formed a new subsidiary, Video On-Line USA, Inc., in
order to pursue a certain acquisition. No acquisition agreement was ever entered
into and this subsidiary is currently inactive.
In December 1996, the Company held a special meeting of its shareholders who
authorized the Company to sell or dispose of its shares in American Eagle
Industries Corp. (and its= subsidiary Match II) or effect the dissolution
thereof. These subsidiaries had ceased operations as of September 30, 1996. In
December 1996, in accordance with the vote of its shareholders, the Company
terminated its financing and business relationships with these subsidiaries.
In December 1996, the shareholders also authorized the Company to dispose of its
34% interest in an unconsolidated subsidiary, Multi Media Publishing Corp. which
has no revenues or operations. In December 1996, in accordance with the vote of
its stockholders, the Company terminated all business relationships with this
entity but intends to seek the return of certain funds it has advanced.
In January 1997, the Company formed a new wholly-owned subsidiary, U.S. Apparel
Corp., which company will design and manufacture a line of T-shirts and other
tops, predominately for men. The Company hopes to begin operations through this
subsidiary in early 1997.
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All intercompany transactions and balances have been eliminated on
consolidation.
In the opinion of management the accompanying unaudited consolidated financial
statements contain all adjustments necessary to present fairly the financial
position of the Company as of December 31, 1996, the statements of operations
and the statements of cash flows for the three month periods ended December 31,
1996 and 1995.
The accounting policies followed by the Company and its subsidiaries are set
forth in Note 2 to the Company=s consolidated financial statements included in
the Annual Report on Form 10-KSB for the year ended September 30, 1996, which is
incorporated herein by reference. Specific reference is made to this report for
a description of the Company=s securities and the notes to consolidated
financial statements included therein.
The results of operations for the three month period ended December 31, 1996,
should not be regarded as necessarily indicative of the results that may be
expected for the full year.
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MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 2 - GOING CONCERN UNCERTAINTY:
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles, which contemplate continuation of the
Company as a going concern. However, the Company has sustained substantial
operating losses since inception, has realized negative gross margins on the
products it has sold, and as of September 30, 1996 (the fiscal year end) ceased
operations in both of its operating subsidiaries and terminated all financing of
these subsidiaries. Further, the Company has been late in remitting certain
payroll withholding taxes.
In view of the above mentioned matters, the Company=s existence is dependent
upon establishing new operations which in turn is dependent on the Company=s
ability to meet its future obligations and the success of such future
operations. Management of the Company believes that actions presently being
taken, as discussed below, will provide the opportunity for the Company to
continue in existence.
Subsequent to the balance sheet date, in January 1997, the Company formed a new
subsidiary which will take over the operations of one of the former
subsidiaries. Although there can be no assurance, management believes that the
new subsidiary can conduct its business at a lower cost of operations. In
addition, during January 1997, this subsidiary received orders aggregating
approximately $600,000 in sales and also received a vendor number which will
allow them to do business with a significant discount chain store.
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NOTE 3 - INVESTMENT IN PREFERRED STOCK:
In connection with an employment agreement entered into with an executive
officer, in May 1996 the Company granted an option to such officer to acquire
2,900,000 common stock purchase warrants at a price of $2.50 per warrant (market
value), payable either in cash or other securities. Since the warrants were
issued at market value, no compensation was reflected. As of May 1996, the
officer had purchased these warrants with payment being made through the
transfer of 528,000 shares of convertible preferred stock in another publicly
traded company, Play Co. Toys & Entertainment Corp., APlay Co@. The Company had
valued this preferred stock at $6,917,717, the deemed fair value based upon such
factors as dilution, lack of marketability, etc. This investment has been
reflected as a non-current asset based upon the intent of management and at the
year ended September 30, 1996 was written down further to fair value, in
accordance with SFAS No. 115.
In December 1996, this officer transferred an additional 75,000 shares of
convertible preferred stock in Play Co to further reduce amounts owed by him to
the Company.
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MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 4 - DUE FROM AFFILIATE:
As of December 31 and September 30, 1996, Mister Jay Fashions International,
Inc., an entity in which the chief operating officer of the Company is the
President, was indebted to the Company in the aggregate amount of $620,000 and
$320,000, respectively. The Company has agreed to not request repayment of such
amount until after April 1, 1998. This loan bears interest at an annual rate of
8%.
NOTE 5 - EARNINGS (LOSS) PER SHARE:
Earnings (loss) per share has been computed on the basis of the weighted average
number of common shares and common equivalent shares outstanding during each
period presented.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of significant factors
which have affected the registrant's financial position and operations.
Multimedia Concepts International, Inc. (the "Company") is a Delaware
corporation which was organized in June 1994 under the name U.S. Food
Corporation; its name was changed to its present name in June 1995. The Company
acquired fifty-five (55%) percent of the capital stock of American Eagle
Industries Corp. ("American Eagle") in June, 1994. In June 1994, American Eagle
acquired 100% of the issued and outstanding shares of common stock of Match II,
Inc. The Company also acquired thirty-four (34%) percent of the issued and
outstanding capital stock of Multi Media Publishing Corp. ("MMP"), in June 1995.
American Eagle designs and manufactures a line of private label knit tops
predominantly for men and boys, including two types of t-shirts (one with a
pocket and one without) and two types of polo shirts (one with a button collar
and one without). American Eagle also manufactures a lightweight denim jacket.
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Match II sells its own brand name of ladies tops and coordinates under the
tradename "Match II". The Match II garments are sold nationally in boutique
stores and specialty chain stores.
MMP is a development stage entity, with no operations.
As of the year ended September 30, 1996, the Company ceased all operations of
American Eagle and its= subsidiary Match II, due to substantial recurring
operating losses. In addition, in December 1996, the Company terminated all
business relationships with MMP, its= unconsolidated subsidiary (see Note 1 of
Notes to consolidated financial statements).
The financial information presented herein includes: (i) Balance sheets as of
December 31, 1996 and September 30, 1996, (ii) Statements of operations for the
three month periods ended December 31, 1996 and 1995 and (iii) Statements of
cash flows for the three month periods ended December 31, 1996 and 1995.
Results of Operations
Sales for the three months ended December 31, 1996 were $-0-. Sales for the
three months ended December 31, 1995 were $83,031. The reduction in sales to no
sales resulted from the Company=s decision to terminate operating activities in
its two operating subsidiaries as described above. The operations will be
reflected as discontinued operations in future periods.
Overhead costs decreased from approximately $229,000 to $183,000 when comparing
the quarters ended December 31, 1996 and 1995. Management believes the decrease
is due to the reduction in certain costs that vary in accordance with the
reduction in sales.
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For the three months ended December 31, 1995 the Company reflected a loss of
$239,888 or $.10 per share. This loss was due to low gross margins on low sales,
which amount was insufficient to cover the quarterly overhead. For the three
months ended December 31, 1996 the Company reflected a loss of $171,026 or $.06
per share. This loss was due to the suspension of operations as described below.
Liquidity and Capital Resources
At September 30, 1996, the fiscal year end, the Company reflected cash of
$491,262, working capital of $3,299,735 and shareholders= equity of $7,454,674.
At December 31, 1996 the Company reflected cash of $1,115,724, working capital
of $2,305,209 and shareholders= equity of $7,283,648.
The Company=s auditors issued a going concern uncertainty opinion on the
financial statements for the year ended September 30, 1996. The reasons for this
uncertainty include substantial operating losses and the fact that as of
September 30, 1996 the Company ceased all the activities of its two operating
subsidiaries (see Note 1 of Notes to the consolidated financial statements).
Unless the Company can re-establish operations and those future operations are
profitable, the Company may be unable to continue in existence. See Note 2 of
Notes to financial statements as regards management=s plans to restore
operations.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There are no material legal proceedings against the Company or in which any of
their property is subject.
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports:
(a) Exhibits
See Notes to Financial Statements, Note 5 regarding computation of per
share earnings
(b) Reports on Form 8-K
None
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SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: February 12, 1997 MULTIMEDIA CONCEPTS INTERNATIONAL, INC.
By: /s/ Ilan Arbel
Ilan Arbel, President
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MULTIMEDIA CONCEPTS INTERNATIONAL, INC AND SUBSIDIARIES
EXHIBIT 27
FINANCIAL DATA SCHEDULE
ARTICLE 5 OF REGULATION S-X
The schedule contains summary financial information extracted from the
consolidated financial statements for the three months ended December 31, 1996
and is qualified in its entirety by reference to such statements.
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<CAPTION>
<S> <C>
Period type 3 Mos.
Fiscal year end September 30, 1997
Period start October 1, 1996
Period end December 31, 1996
Cash 1,115,724
Securities 0
Receivables 0
Allowances 0
Inventory 30,000
Current assets 2,609,929
PP&E 29,361
Depreciation 12,412
Total assets 7,588,368
Current liabilities 304,720
Bonds 0
Common 3,005
Preferred mandatory 0
Preferred 0
Other SE 7,280,643
Total liability and equity 7,588,368
Sales 0
Total revenues 0
CGS 0
Total costs 0
Other expenses 183,050
Loss provision 0
Interest expense 0
Income pretax (171,026)
Income tax 0
Income continuing (171,026)
Discontinued 0
Extraordinary 0
Changes 0
Net income (171,026)
EPS primary (.06)
EPS diluted (.06)
</TABLE>
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