UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[xx] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
--------------------------------------------
or
[ ] 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 registrant as specified in its charter)
Delaware 13-3835325
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
448 West 16th Street, New York, New York 10011
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(212) 675-6666
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) has 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 [xx] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
Common stock, par value $.001 per share: 3,005,000 shares outstanding as of
June 30, 1997.
<PAGE>
MULTIMEDIA CONCEPTS INTERNATIONAL, INC.
INDEX
<TABLE>
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<S> <C>
Page
PART 1. Financial Information
ITEM 1. Financial Statements:
Consolidated balance sheets as of June 30, 1997 (Unaudited)
and September 30, 1996 3
Consolidated statements of operations (Unaudited) for the
three months ended June 30, 1997 and June 30, 1996, and
for the nine months ended June 30, 1997 and June 30, 1996 5
Consolidated statements of cash flows for the nine months ended June 30, 1997
and June 30, 1996 6
Notes to consolidated financial statements 7
ITEM 2. Management's discussion and analysis of financial condition
and results of operations 9
PART 2. Other information 12
Signatures 13
</TABLE>
<PAGE>
PART I Financial Information
ITEM 1 - Financial Information
MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
June 30, September 30,
1997 1996
( Unaudited)
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents ........................... $ 274,685 $ 1,262
Accounts receivable ................................. 74,957 1,191,510
Advances to supplier ................................ 537,656 --
Inventories ......................................... 611,272 38,090
Due from affiliate .................................. 64,815 450,815
Loan receivable-officer ............................. 1,115,709 1,470,141
---------- ----------
Total current assets ........................ 2,679,094 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 ...................... 15,412 10,912
---------- ----------
13,949 18,449
---------- ----------
OTHER ASSETS:
Security deposits ................................... 50 --
Investment in convertible preferred stock (Note 3) .. 4,221,490 3,696,490
Advances to equity investee ......................... 140,000 120,000
Due from affiliate ( Note 4) ........................ 966,000 320,000
---------- ----------
5,327,540 4,136,490
---------- ----------
Total assets ................................ $8,020,583 $7,796,757
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
<TABLE>
<CAPTION>
<PAGE>
MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable ................................. $ 740,735 $ 286,066
Accrued expenses and other liabilities ........... 53,826 56,017
------------ ------------
Total current liabilities ................ 794,561 342,083
------------ ------------
MINORITY INTEREST IN SUBSIDIARY (Note 1) .......... -- --
------------ ------------
STOCKHOLDERS' 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) ...................... (2,657,761)
(2,429,109)
Unrealized loss on investment .................... (3,221,227)
(3,221,227)
7,226,022 7,454,674
------------ ------------
Total liabilities and stockholders' equity $ 8,020,583 $ 7,796,757
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE>
MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
--------- ---------- ---------- -------
<S> <C> <C> <C> <C>
NET SALES ................... $ 1,041,435 $ 1,466,454 $ 1,261,755 $ 3,439,896
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Cost of sales .............. 757,886 2,179,993 903,442 4,789,593
Operating expenses ......... 126,329 307,367 620,595 760,552
Interest expense ........... -- 26,922 -- 67,870
----------- ----------- ----------- -----------
884,215 2,514,282 1,524,037 5,618,015
----------- ----------- ----------- -----------
OPERATING INCOME (LOSS) ..... 157,220 (1,047,828) (262,282) (2,178,119)
----------- ----------- ----------- -----------
OTHER INCOME:
Interest income ............ 654 21,636 33,630 33,569
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE
MINORITY INTERESTS ......... 157,874 (1,026,192) (228,652) (2,144,550)
Minority interests ......... -- -- -- --
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE
PROVISION (CREDIT) FOR
INCOME TAXES ............... 7,784 (1,026,192) (228,652) (2,144,550)
Provision for income taxes . -- -- -- --
----------- ----------- ----------- -----------
NET INCOME (LOSS) ........... $ 157,784 $(1,026,192) $ (228,652) $(2,144,550)
=========== =========== =========== ===========
INCOME (LOSS)
PER COMMON SHARE (Note 5) ... $ .05 $ (.02) $ (.08) $ (.83)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING
(Note 5) ................... 3,005,000 1,800,000 3,005,000 2,592,007
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE>
MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
1997 1996
INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net (loss) .........................................................................$ (228,652) $(2,144,550)
Adjustments to reconcile net (loss) to net cash
(used for) operating activities:
Depreciation ......................................................................4,500 4,404
Amortization of excess of costs over
net assets acquired .............................................................-- 1,500
Change in assets and liabilities:
(Increase) decrease in accounts receivable ........................................1,116,553 (127,002)
(Increase) in advances to supplier ................................................(537,656) --
(Increase)Decrease in inventories .................................................(573,182) 1,155,189
(Increase) in security deposits ...................................................(50) --
(Decrease) increase in accounts payable ...........................................454,669 (142,134)
(Decrease) increase in accrued expenses and
other liabilities ...............................................................(2,191) 166,975
----------- -----------
Net cash (used for) operating activities ........................................233,991 (1,085,618)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Reduction in loans receivable-officer ..............................................(170,568) (73,914)
Advances to affiliates .............................................................-- (809,658)
Advances to equity investee ........................................................(20,000) (285,000)
----------- -----------
Net cash provided by investing activities .......................................(190,568) (1,168,572)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from sale of common stock and warrants ................................-- 3,944,861
Increase in loans received from affiliate ..........................................(260,000) (989,500)
Net cash provided by and (used for) financing activities ........................(260,000) 2,955,361
NET DECREASE IN CASH AND CASH EQUIVALENTS ...........................................(216,577) 701,171
Cash and cash equivalents, at beginning of year ....................................491,262 2,207
Cash and cash equivalents, at end of year ..........................................$ 274,685 $ 703,378
SUPPLEMENTAL INFORMATION:
Taxes paid .........................................................................$ -- $ --
Interest paid ......................................................................-- --
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE>
MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1- BASIS OF PRESENTATION:
The consolidated financial statements include the accounts of Multimedia
Concepts International, Inc. ("the Company") and the following subsidiaries;
American Eagle Industries Corp., "Industries" (55% owned) and its wholly-owned
subsidiary, Match ll, Inc. as well as U.S. Apparel Corp. (wholly-owned). 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 1996, the Company formed a new subsidiary, Video On-Line USA, Inc.,
in order to pursue a certain acquisition. No acquisition 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 shareholders, the Company terminated all business relationships
with this entity but intends to seek the return of certain funds that it had
advanced.
In January 1997, the Company formed a new wholly-owned subsidiary, U.S.
Apparel Corp., which is engaged in the design and manufacture of a line of
T-shirts and other tops, predominately for men. The Company began operations
through this subsidiary in January 1997.
The accompanying consolidated financial statements reflect the elimination
of all intercompany transactions and balances. 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 June 30,
1997, the statements of operations and statements of cash flows for the nine
month periods ended June 30, 1997 and 1996.
<PAGE>
MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1- BASIS OF PRESENTATION: (continued)
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 herein.
The results of operations for the nine month period ended June 30, 1997
should not be regarded as necessarily indicative of the results that may be
expected for the full year.
Note 2- GOING CONCERN UNCERTAINTY:
The accompanying financial statements have been prepared 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
two of its operating subsidiaries and terminated all financing for 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.
In January 1997, the Company formed a new subsidiary which took over the
operations of one of the ceased operations. Although there can be no assurance,
management believes that the new subsidiary can conduct its business at a lower
cost of operations. During the three months ended June 30, 1997, this subsidiary
recorded sales of $1,041,435 and has also received a vendor number which will
allow it to do business with a significant discount store chain.
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.,( "Play Co.").
<PAGE>
MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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.
Note 4- DUE FROM AFFILIATE:
As of June 30,1997 and September 30, 1996, United Textiles & Toys Corp., an
entity in which the chief operating officer of the Company is the President, was
indebted to the Company in the aggregate of $966,000 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. in June 1994. In June 1994, American Eagle acquired 100% of the
issued and outstanding shares of common stock of Match ll, 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 designed and manufactured a line of private label knit tops
predominately for men and boys, including two types of T-shirts and two types of
polo shirts, as well as a lightweight denim jacket.
<PAGE>
Match II sold its own brand of ladies tops and coordinates under the trade name
"Match II". The Match II garments were sold nationally in boutiques and
specialty chain stores.
MMP is a development stage entity with no operations.
U.S. Apparel Corp. initiated operations in January 1997. The Company
designs and manufactures a line of T-shirts and other tops predominately for the
mens market. During the three months ended June 30, 1997, U.S. Apparel Corp.
recorded sales of approximately $1,041,435.
As of the year ended September 30, 1996, the Company ceased all operations of
American Eagle and its subsidiary Match ll, 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
June 30, 1997 and September 30, 1996, (ii) Statements of operations for the
three months ended June 30, 1997 and June 30, 1996, as well as the six months
ended June 30, 1997 and June 30, 1996 and (iii) Statements of cash flows for the
nine months ended June 30, 1997 and June 30, 1996.
Results of Operations
Three Months Ended June 30, 1997 and June 30, 1996
Sales for the three months ended June 30, 1997 were $1,041,435 compared with
sales of $1,466,454 for the corresponding three month period ending June 30,
1996. This represented a decrease in sales of 29.0%. The decrease is
attributable to the cessation of operations in the prior period of both American
Eagle and its subsidiary Match ll, and reflects the operations in 1997 of the
Company's new subsidiary, U.S. Apparel Corp.
Cost of sales for the three months ended June 30,1997 were $757,886 or 73.0% of
sales, as compared to $2,179,993 or 149.0% of sales for the three months ended
June 30, 1997. The decrease is attributable to both the cessation of operations
of American Eagle and its subsidiary Match II and the start up of operations of
U.S. Apparel Corp. in 1997.
Operating expenses for the three months ended June 30, 1997 were $126,329 or
12.0% of sales. For the three months ended June 30,1996, operating expenses were
$307,367 or 21.0% of sales. This represented a decrease of 59.0% over the
previous three month period ending June 30, 1996. The decrease is due to
reduction in expenses associated with the cessation of operations of both
American Eagle and its subsidiary Match II.
For the three months ended June 30, 1997, the Company reported net income
of $157,784 or $.05 per common share. This loss was due to start up costs of
U.S. Apparel Corp. as well as costs associated with the cessation of operations
of the Company's two subsidiaries.
Nine Months Ended June 30, 1997 and June 30, 1996
Sales for the nine months ended June 30, 1997 were $1,261,755. The Company
through its new subsidiary, U.S. Apparel Corp. began operations in January 1997.
In the corresponding nine months ended June 30,1996, sales were $3,439,896.
<PAGE>
Cost of sales were $903,442 or 72.0% of sales as compared to $4,789,593 or
139.0% of sales for the nine months ended June 30, 1996. This decrease is due to
the cessation of operations of American Eagle and its subsidiary Match II in the
prior year, as well as being reflective of the operations of U.S. Apparel Corp.
Operating expenses for the nine months ended June 30, 1997 were $620,595 or
49.0% of sales as compared to $760,552 or 22.0% of sales for the nine months
ended June 30, 1996. This decrease of 18.0% is due to the cessation of
operations of American Eagle and its subsidiary Match ll in the prior year.
For the nine months ended June 30, 1997, the Company reported a loss of $228,652
or $.08 per common share. This loss was due to costs associated with the start
up of operations of the Company's new subsidiary, U.S. Apparel Corp.
Liquidity and capital resources
At September 30, 1996, the fiscal year end, the Company reported cash of
$491,262, working capital of $3,229,735 and shareholders' equity of $7,454,674.
At June 30, 1997, the Company reported cash of $274,685, working capital of
$1,884,533 and shareholders' equity of $7,226,022.
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 reestablish operations and those future operations are
profitable, the Company may be unable to continue in existence. See Note 2 of
Notes to the consolidated financial statements as regards management's plans to
restore operations.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings: None
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 on Form 8-K
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: August 14, 1997
Multimedia Concepts International, Inc.
(Registrant)
\s\ Ilan Arbel
Ilan Arbel
President
\s\ Allean Goode
Allean Goode
Treasurer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
MULTIMEDIA CONCEPTS INTERNATIONAL, INC.
EXHIBIT 27
FINANCIAL DATA SCHEDULE
ARTICLE 5 OF REGULATION S-X
The schedule contains summary financial information extracted from the financial
statements for the three months ended March 31, 1997 and is qualified in its
entirety by reference to such statements.
</LEGEND>
<CAPTION>
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> sep-30-1997
<PERIOD-END> apr-01-1997
<CASH> 274,685
<SECURITIES> 0
<RECEIVABLES> 74,957
<ALLOWANCES> 0
<INVENTORY> 202,402
<CURRENT-ASSETS> 2,270,224
<PP&E> 29,361
<DEPRECIATION> 15,412
<TOTAL-ASSETS> 7,611,713
<CURRENT-LIABILITIES> 794,561
<BONDS> 0
0
0
<COMMON> 3,005
<OTHER-SE> 6,814,147
<TOTAL-LIABILITY-AND-EQUITY> 7,611,713
<SALES> 1,041,435
<TOTAL-REVENUES> 1,042,089
<CGS> 1,166,756
<TOTAL-COSTS> 126,329
<OTHER-EXPENSES> 1,166,756
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (250,966)
<INCOME-TAX> (250,966)
<INCOME-CONTINUING> (250,966)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (250,966)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
<PAGE>
</TABLE>
