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 March 31, 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
PART 1 - FINANCIAL INFORMATION:
ITEM 1 - FINANCIAL STATEMENTS
Balance Sheets (Unaudited) for
March 31, 1997 and June 30, 1996 F-1
Statements of Operations (Unaudited) for the
three months ended March 31, 1997 and 1996 F-2
Statements of Operations (Unaudited) for the
six months ended March 31, 1997 and 1996 F-3
Statement of Stockholders' Equity (Unaudited) for
the six months ended March 31, 1997 F-4
Statements of Cash Flows (Unaudited) for the
six months ended March 31, 1997 and 1996 F-5
Notes to Financial Statements F-6 - F-__
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
PART II - OTHER INFORMATION
<PAGE>
PART I Financial Information
ITEM 1 - Financial Information
<TABLE>
<CAPTION>
MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, September 30,
1997 1996
( Unaudited)
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents ....................................................... $ 591,577 $ 491,262
Accounts receivable ............................................................. 220,320 1,191,510
Advances to supplier ............................................................ 537,656 --
Inventories ..................................................................... 30,000 38,090
Due from affiliate .............................................................. 64,815 450,815
Loan receivable-officer ......................................................... 1,032,537 1,470,141
------------ ------------
Total current assets .................................................... 2,476,905 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 .................................................. 13,912 10,912
------------ ------------
15,449 18,449
------------ ------------
OTHER ASSETS:
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) .................................................... 804,000 320,000
------------ ------------
5,165,490 4,136,490
Total assets ..................................................................... $ 7,657,844 $ 7,796,757
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ................................................................ $ 553,345 $ 286,066
Accrued expenses and other liabilities .......................................... 36,351 56,017
------------ ------------
Total current liabilities ............................................... 589,696 342,083
------------ ------------
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) ..................................................... (2,815,635) (2,429,109)
Unrealized loss on investment (3,221,227) (3,221,227)
7,068,148 7,454,674
Total labilities and stockholders' equity $7,657,844 $7,796,757
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements
-3-
<PAGE>
<TABLE>
<CAPTION>
MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
March 31, March 31, March 31, March 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
NET SALES ...................... $ 220,320 $ 1,890,411 $ 220,320 $ 1,973,442
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Cost of sales ................. 145,556 2,536,690 145,556 2,609,600
Operating expenses ............ 311,216 224,100 494,266 453,185
Interest expense .............. -- 16,210 -- 40,948
----------- ----------- ----------- -----------
456,772 2,777,000 639,822 3,103,733
----------- ----------- ----------- -----------
OPERATING LOSS ................. (236,452) (886,589) (419,502) (1,130,291)
----------- ----------- ----------- -----------
OTHER INCOME ................... 20,952 8,119 32,976 11,933
----------- ----------- ----------- -----------
(LOSS) BEFORE MINORITY INTERESTS (215,500) (878,470) (386,526) (1,118,358)
Minority interests ............ -- -- -- --
----------- ----------- ----------- -----------
(LOSS) BEFORE PROVISION (CREDIT)
FOR INCOME TAXES ............. (215,500) (878,470) (386,526) (1,118,358)
Provision for income taxes .... -- -- -- --
----------- ----------- ----------- -----------
NET (LOSS) ..................... $ (215,500) $ (878,470) $ (386,526) $(1,118,358)
=========== =========== =========== ===========
(LOSS) PER COMMON SHARE (Note 5) $ (.07) $ (.30) $ (.12) $ (.49)
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING
(Note 5) ...................... 3,005,000 2,929,725 3,005,000 2,303,798
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements
-4-
<PAGE>
<TABLE>
<CAPTION>
MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Six Months
Ended Ended
1997 1996
INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net (loss) ................................................ $ (386,526) $(1,118,358)
Adjustments to reconcile net (loss) to net cash
(used for) operating activities:
Depreciation ............................................. 3,000 2,937
Amortization of excess of costs over
net assets acquired .................................... -- 1,000
Change in assets and liabilities:
(Increase) decrease in accounts receivable ............... 971,190 (331,870)
(Increase) in advances to supplier ....................... (537,656) --
Decrease in inventories .................................. 8,090 1,135,189
(Decrease) increase in accounts payable .................. 267,279 (234,220)
(Decrease) increase in accrued expenses and
other liabilities ...................................... (19,666) 906
----------- -----------
Net cash (used for) operating activities ............... 305,711 (544,416)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Reduction in loans receivable-officer ..................... (87,396) 257,222
Advances to equity investee ............................... (20,000) (215,000)
----------- -----------
Net cash provided by investing activities .............. (107,396) 42,222
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from sale of common stock and warrants ....... -- 3,912,054
Reduction in loans received from affiliate ................ (98,000) (889,790)
----------- -----------
Net cash provided by and (used for) financing activities (98,000) 3,022,264
NET INCREASE IN CASH AND CASH EQUIVALENTS .................. 100,315 2,520,070
Cash and cash equivalents, at beginning of year ........... 491,262 2,207
----------- -----------
Cash and cash equivalents, at end of year ................. $ 591,577 $ 2,522,277
=========== ===========
SUPPLEMENTAL INFORMATION:
Taxes paid ................................................ $ -- $ --
Interest paid ............................................. -- --
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements
-5-
<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 ll) 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 March
31, 1997, the statements of operations and statements of cash flows for the six
month periods ended March 31, 1997 and 1996.
-6-
<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 six
month period ended March 31, 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 March 31,
1997, this subsidiary recorded sales of approximately $220,000 and also received
a vendor number which will allow it to do business with a significant discount
chain store.
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.".
-7-
<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 March 31,1997 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 of
$804,000 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.
-8-
<PAGE>
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 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.
Match ll sold its own brand of ladies tops and coordinates under the
trade name "Match ll". The Match ll 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 March 31, 1997, U.S. Apparel Corp.
recorded sales of approximately $220,000.
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 March 31, 1997 and September 30, 1996, (ii) Statements of operations for
the three months ended March 31, 1997 and March 31, 1996, as well as the six
months ended March 31, 1997 and March 31, 1996 and (iii) Statements of cash
flows for the six months ended March 31, 1997 and March 31, 1996.
Results of Operations
Three Months Ended March 31, 1997 and March 31, 1996
Sales for the three months ended March 31, 1997 were $220,320 compared
with sales of $1,890,411 for the corresponding three month period ending March
31, 1996. This represented a decrease in sales of 88.3%. The decrease is
attributable to the cessation of operations as of September 30, 1996 of both
American Eagle and its subsidiary Match ll, and reflects the initiation of
operations in 1997 of the Company's new subsidiary, U.S. Apparel Corp. Cost of
-9-
<PAGE>
sales for the three months ended March 31,1997 were $145,656 or 66.1 % of
sales, as compared to $2,536,690 or 134.2% of sales for the three months ended
March 31, 1997. The decrease is attributable to both the cessation of operations
of American Eagle and its subsidiary Match ll and the start up of operations of
U.S. Apparel Corp. in January 1997.
Operating expenses for the three months ended March 31, 1997 were $311,216
or 136.2% of sales. For the three months ended March 31,1996, operating expenses
were $224,100 or 11.9% of sales. This represented an increase of 38.9% over the
previous three month period ending March 31, 1996. The increase is due to start
up expenses associated with the initiation of U.S. Apparel Corp. in the quarter
ended March 31, 1997.
For the three months ended March 31, 1997, the Company reported a loss of
$215,500 or $.07 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.
Six Months Ended March 31, 1997 and March 31, 1996
Sales for the six months ended March 31, 1997 were the same as reported
in the three months ended the same date. The Company through its new subsidiary,
U.S. Apparel Corp. began operations in January 1997. The sales for this period
were $220,320. In the corresponding six months ended March, 1996, sales were
$1,973,442.
Cost of sales were $145,656 or 66.1% of sales as compared to $2,609,600 or
132.2% of sales for the six months ended March 31, 1996. This decrease is due to
the cessation of operations of American Eagle and its subsidiary Match ll in
September 1996.
Operating expenses for the six months ended March 31, 1997 were $494,266 or
224.3% of sales as compared to $453,185 or 24.1% of sales for the six months
ended March 31, 1996. This increase of .09% is due to start up expenses
associated with the initiation of operations of U.S. Apparel Corp. in January
1997.
For the six months ended March 31, 1997, the Company reported a loss of
$386,526 or $.12 per common share. This loss was due to costs associated with
the cessation of operations of American Eagle Corp. and its subsidiary, Match
ll.
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 March 31, 1997, the Company reported cash of $591,577, working capital of
$1,887,209 and shareholders' equity of $7,068,148.
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.
-10-
<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
Via correspondence dated January 31, 1997, the Nasdaq Stock Market
informed the Company that it planned to delist the Company's securities from
quotation and trading on the Nasdaq Stock SmallCap Market, effective February
17, 1997. The Company requested, and was granted, an oral hearing to appeal the
Nasdaq determination. Thereafter, on March 6, 1997, the Company appeared before
the Nasdaq Listing Qualifications Panel for a hearing on the issues.
Notwithstanding the Company's arguments, the Listing Panel ordered that the
Company's securities be delisted effective March 20, 1997.
In or about March, 1997, Marlowe & Co. ("Marlowe"), a brokerage firm,
filed a 15c2-11 application with the NASD (National Association of Securities
Dealers) Regulation, Inc. wherein the broker requested that the Company's shares
be quoted and traded on the OTC Bulletin Board. Marlowe and the Company are
undergoing a comment process with NASD in order to effect the OTC Bulletin Board
Listing.
ITEM 6 - Exhibits and Reports on Form 8-K
Two reports on Forms 8-K were filed on May 15, 1997. In the first, the
sole item reported was the April 23, 1997 resignation of Alan Berkun as a
director of the Company. In the second, the sole item reported was the May 14,
1997 mutual termination of Lazar, Levine & Company LLP as auditors of the
Company. The resignation of Lazar, Levine & Company LLP was not due to any
discrepancies or disagreements between the Company and Lazar, Levine & Company
LLP on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure.
<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: July 14, 1997
Multimedia Concepts International, Inc.
(Registrant)
\s\ Ilan Arbel
Ilan Arbel
President
\s\ Allean Goode
Allean Goode
Treasurer
<PAGE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit 27.01
Financial Data Schedule
MULTIMEDIA CONCEPTS INTERNATIONAL, INC.
EXHIBIT
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> mar-31-1997
<CASH> 591,577
<SECURITIES> 0
<RECEIVABLES> 757,956
<ALLOWANCES> 0
<INVENTORY> 30,000
<CURRENT-ASSETS> 2,476,905
<PP&E> 29,361
<DEPRECIATION> 13,912
<TOTAL-ASSETS> 7,657,844
<CURRENT-LIABILITIES> 589,686
<BONDS> 0
0
0
<COMMON> 3,005
<OTHER-SE> 7,065,143
<TOTAL-LIABILITY-AND-EQUITY> 7,657,844
<SALES> 220,320
<TOTAL-REVENUES> 241,272
<CGS> 145,556
<TOTAL-COSTS> 145,556
<OTHER-EXPENSES> 311,216
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 215,500
<INCOME-TAX> (215,500)
<INCOME-CONTINUING> (215,500)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (215,500)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
<PAGE>
</TABLE>
