SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
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.
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(Exact Name of Small Business Issuer as Specified in its Charter)
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<CAPTION>
<S> <C>
Delaware 13-3835325
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
</TABLE>
1385 Broadway, Suite 814, New York, New York 10018
(Address of Principal Executive Offices)
(212) 391-1111
(Registrant's Telephone Number, Including Area Code)
N/A
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(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 Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that 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 of each of the issuer's classes of common equity
outstanding as of the latest practicable date: Common Stock, $0.001 per share:
3,005,000 shares outstanding as of July 31, 2000.
<PAGE>
MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
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TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page Number
Item 1. FINANCIAL STATEMENTS
<S> <C> <C> <C>
Consolidated Balance Sheets as of June 30, 2000 (unaudited)
and March 31, 2000 3-4
Consolidated Statements of Operations (unaudited) for the
Three Months Ending June 30, 2000 and 1999 5
Consolidated Statements of Cash Flows (unaudited) for
the Three Months Ended June 30, 6-7 2000 and June 30,
1999 6-7
Notes to Financial Statements (unaudited) 8-11
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 12-13
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1
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MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of June 30, 2000 and March 31, 2000
<TABLE>
<CAPTION>
June 30, March 31,
2000 2000
(Restated)
(Note 5)
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents ................................... $ 351,568 $ 1,109,166
Accounts receivable ......................................... 243,175 556,591
Advances to supplier ........................................ 575,661 737,145
Prepaid expenses and other current assets
5,689 5,689
Investment in affiliates .................................... 570,552 570,552
----------- -----------
Total current assets ................................ 1,746,645 2,979,143
----------- -----------
FURNITURE, FIXTURES AND EQUIPMENT
Furniture, fixtures and equipment ........................... 72,789 72,789
Accumulated depreciation on furniture, fixtures and equipment
(69,096) (68,861)
----------- -----------
Furniture, fixtures and equipment - Net
3,693 3,928
----------- -----------
OTHER ASSETS:
Due from affiliates ........................................... 1,014,818 1,014,818
Advances to equity affiliate .................................. 140,000 140,000
Deposits and other assets ..................................... 28,961 28,961
----------- -----------
Total other assets .................................. 1,183,779 1,183,779
----------- -----------
Total assets ........................................ $ 2,934,117 $ 4,166,850
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
2
<PAGE>
MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of June 30, 2000 and March 31, 2000
<TABLE>
<CAPTION>
June 30, March 31,
2000 2000
(Restated)
(Note 5)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable $ 93,664 $ 998,469
Accrued expenses and other current liabilities
128,991 128,754
Due to affiliates
129,817 481,239
----------- -----------
Total current liabilities
352,472 1,608,462
----------- -----------
Total liabilities
352,472 1,608,462
----------- -----------
MINORITY INTERST IN SUBSIDIARIES (Note 3)
(157,197) (151,266)
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value; 10,000,000 shares authorized; 3,005,000 shares
issued and outstanding at June 30, 2000 and March 31, 1999 respectively
3,005 3,005
Additional paid-in capital
5,852,005 5,852,005
Retained earnings (Deficit)
(3,116,168) (3,145,356)
----------- -----------
Total stockholders' equity
2,738,842 2,709,654
----------- -----------
Total liabilities and stockholders' equity ........................... $ 2,934,117 $ 4,166,850
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
3
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MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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Three Months Ended
June 30, June 30,
2000 1999
(Restated)
(Note 5)
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Net sales ............................................................ $1,405,751 $ 989,235
---------- ----------
Cost of sales
1,190,833 690,795
---------- ----------
Gross profit
214,918 298,440
---------- ----------
Operating expenses:
Operating expenses
193,257 171,639
Depreciation and amortization 235 235
---------- ----------
Total operating expenses
193,492 171,874
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Operating income (loss)
21,426 126,566
---------- ----------
Other income:
Interest and other income
1,831 20,613
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Income before Minority interests
23,257 147,179
---------- ----------
Minority interest in net (loss) of consolidated subsidiary (Note 3)
5,931 8,031
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Net income ........................................................... $ 29,188 $ 155,210
========== ==========
Calculation of basic and diluted common share and share equivalents:
Basic and diluted income per common share and share equivalents
$ .01 $ .05
========== ==========
Weighted average number of common shares outstanding ................. 3,005,000 3,005,000
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
4
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MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Increase (Decrease) in Cash
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<CAPTION>
Three Months Ended
June 30, June 30,
2000 1999
(Restated)
(Note 5)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) ..................................................... $ 29,188 155,210
--------- -------
Adjustments to reconcile net loss to cash (used) provided for operating
activities:
Depreciation and amortization
235 235
Minority interests in net losses of subsidiaries
(5,931) (8,031)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable
313,416 452,727
(Increase) decrease in advances to supplier
161,484 (77,800)
(Increase) decrease in Merchandise inventories
-- (21,000)
(Increase) decrease in prepaid expenses and other current assets
-- (101)
(Increase) decrease in deposits and other assets
-- (6,000)
Increase (Decrease) in accounts payable
(904,805) 55,306
Increase (Decrease) in accrued expenses and liabilities
237 13
--------- -------
Total adjustments
(435,364) 395,349
--------- -------
Net cash provided by operating activities
(406,176) 550,559
--------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in property and equipment -- --
--------- -------
Investment in affiliates -- --
--------- -------
Net cash provided by (used for) investing activities
$ -- $ --
--------- -------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
5
<PAGE>
MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
Three Months Ended
June 30, June 30,
2000 1999
(Restated)
(Note 5)
CASH FLOWS FROM FINANCING ACTIVITIES:
<S> <C> <C>
Loans and advances-affiliates ................... $ (351,422) $ (153,000)
----------- -----------
Net cash provided by financing activities
(351,422) (153,000)
----------- -----------
NET INCREASE (DECREASE) IN CASH
(757,598) 397,559
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Cash, beginning of period ......................... 1,109,166 984,999
----------- -----------
Cash, end of period ............................... $ 351,568 $ 1,382,558
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid $ -- $ --
=========== ===========
Taxes paid $ -- $ --
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
6
<PAGE>
MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted
accounting principles for interim financial information and
the instruction to Form 10-QSB. Accordingly, they do not
include all the information and footnotes required by
generally accepted accounting principles for more complete
financial statements. In the opinion of management, the
interim financial statements include all adjustments
considered necessary for a fair presentation of the Company's
financial position and the results of its operations for the
three months ended June 30, 2000 and are not necessarily
indicative of the results to be expected for the fiscal year.
For further information, refer to the Company's Annual report
on Form 10-KSB for the twelve months ended March 31, 2000, as
filed with the Securities and Exchange Commission.
In December 1997, the Company's Board of Directors voted to
change the end of the Company's fiscal year from September
30th to March 31st.
NOTE 2 - DESCRIPTION OF COMPANY:
Multimedia Concepts International, Inc. (the "Company") is a
Delaware corporation which was organized in June 1994 under
the name U.S. Food Corporation. The Company changed its name
to American Eagle Holdings Corporation in April 1995 and then
to its present name in June 1995. The Company was initially
formed as a holding company for the purpose of forming an
integrated clothing design, manufacturing, and distribution
operation. In June 1994, the Company acquired 55% of the
outstanding shares of common stock of American Eagle
Industries Corp., which acquired 100% of the outstanding
shares of Match II, Inc. The Company also acquired 34% of the
issued and outstanding common stock of Multi Media Publishing
Corp. in June 1995.
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, Inc.) or effect the dissolution thereof.
These subsidiaries had ceased operations in September 1996. In
January 1997, in accordance with the vote of its shareholders,
the Company terminated its financing and business
relationships with these subsidiaries.
7
<PAGE>
MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
NOTE 2 - DESCRIPTION OF COMPANY (continued):
In December 1996, the shareholders also authorized the Company
to dispose of its 34% interest in an unconsolidated
subsidiary, Multi Media Publishing Corp., which had no
revenues or operations. In January 1997, in accordance with
the vote of its shareholders, the Company terminated all
business relationships with this entity; however, it intends
to seek the return of certain funds it had advanced.
In January 1997, the Company formed a new wholly-owned
subsidiary, U.S. Apparel Corp. ("U.S. Apparel"), which is
engaged in the design and manufacture of a line of T-shirts
and other tops, predominately for men. U.S. Apparel began
operations in January 1997.
On January 2, 1998, the Company acquired 3,571,429 shares of
the outstanding common stock of United Textiles and Toys Corp.
("United Textiles"), a company of which the Company's
President is also President, Chief Executive Officer, and a
Director. The issuance of these shares at a price of $0.28 per
share ($0.01 above the closing price on December 31, 1997) was
made in conjunction with a conversion into equity of United
Textiles' $1,000,000 debt owed to the Company for a loan made
by the Company. As a result of this transaction, the Company
owns 78.5% of the outstanding shares of common stock of United
Textiles, effectively making United Textiles a subsidiary of
the Company.
United Textiles was a company engaged in the design,
manufacturing, and marketing of a variety of lower priced
women's dresses, gowns, and separates for special occasions
and formal events. In March 1998, United Textiles, having
sustained continuous losses, discontinued operating
activities.
NOTE 3 - MINORITY INTEREST:
The Company owns a majority interest (78.5%) in United
Textiles. The minority interest liability represents the
minority shareholders' portion (21.5%) of United Textiles'
equity.
NOTE 4 - INVESTMENT BY U.S. STORES CORP.:
On January 20, 1998, U.S. Stores Corp. ("U.S. Stores")
acquired 1,465,000 shares of the Company's common stock.
U.S. Stores was incorporated on November 10,
8
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MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
NOTE 4 - INVESTMENT BY U.S. STORES CORP. (continued):
1997. The Company's President is also President and a
Director of U.S. Stores.
After this transaction, U.S. Stores held an aggregate
of 1,868,000 shares of the Company's common stock, or 63% of
the outstanding shares, effectively making the Company a
subsidiary of U.S. Stores.
On February 28, 1998, American Telecom Corporation ("American
Telecom") acquired 100% of the outstanding common shares of
U.S. Stores. American Telecom was incorporated on November 10,
1997. The Company's President is also President and a Director
of American Telecom. After this transaction, American Telecom
effectively obtained beneficial control of the Company and its
subsidiaries.
In April 1998, American Telecom, in a transaction in which
shares were exchanged, exchanged all of its outstanding common
shares with American Telecom, PLC, a publicly traded company
in Great Britain. After this transaction, American Telecom
effectively became a subsidiary of American Telecom, PLC.
Additionally, as part of this transaction, American Telecom,
PLC acquired 100% of the outstanding common shares of U.S.
Stores, thereby effectively making U.S. Stores a direct
subsidiary of American Telecom, PLC.
NOTE 5 - RESTATEMENT OF AMOUNTS PREVIOUSLY REPORTED
The financial statements for the three months ended June 30,
1999 contain certain restatements of amounts previously
reported.
These restatements were the result of the decision by the
Company's subsidiary, United Textiles and Toys Corp. ("UTT"),
to deconsolidate the accounts of Play Co. as of March 31,
2000. At March 31, 1999, UTT's percentage of ownership in Play
Co. was 45.2%. Although UTT at that date owned less than 51%
of Play Co.'s outstanding common stock, UTT still exercised
prerogative of control over Play Co. and consolidated the
accounts of Play Co. into UTT.
At March 31, 2000, UTT's percentage of ownership in
Play Co. was reduced to 21.69%. Accordingly, UTT elected to
deconsolidate the accounts of Play Co., and account for its
investment in Play Co. on the equity method of accounting.
Under the equity method, the original investment is recorded
at cost, and is adjusted periodically to recognize the
investor's share of the earnings or losses of
9
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MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
NOTE 5 - RESTATEMENT OF AMOUNTS PREVIOUSLY REPORTED (continued)
the investee subsequent to the date of acquisition. Under this
method of accounting, the investment generally cannot be
reduced below zero, when the investee has operating losses
that exceed the investment, at which point the use of the
equity method is suspended. UTT will resume accounting for the
investment in Play Co. under the equity method when Play Co.
subsequently reports net income and the net income exceeds the
Company's accumulated share of Play Co.'s net losses not
recognized during the period of discontinuance of the equity
method.
In 1997, the Company acquired 803,070 shares of Play Co.'s
Series E convertible preferred stock. These shares were
acquired from an affiliated company as repayment for
outstanding loans made to that company by Multimedia. In April
2000, the Company converted these preferred shares into Play
Co. common stock at the conversion rate of one share of
preferred for six shares of common stock. As a result of this
conversion, the Company at April 2000 owned 4,818,420 shares
of Play Co.'s common stock. At June 30, 2000, the Company held
a 10.3% minority interest in Play Co. As this investment in
Play Co. amounts to less than 20%, the Company has accounted
for this investment on the "cost basis" method.
NOTE 6- Year 2000
The Company in 1999 upgraded its computer system by installing
a year 2000 upgrade to its software.
Although the Company has not experienced any problems related
to the year 2000 issues, the possibility still exists that
such problems might arise during the calendar year. However,
the effect, if any, of year 2000 problems on the Company's
results of operations cannot be estimated with any degree of
certainty if the Company or its affiliated companies, or
service providers are not fully compliant.
10
<PAGE>
ITEM II. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Statements contained in this report which are not historical facts may
be considered forward looking information with respect to plans, projections, or
future performance of the Company as defined under the Private Securities
Litigation Act of 1995. These forward looking statements are subject to risks
and uncertainties which could cause actual results to differ materially from
those projected.
Three months ended June 30, 2000 compared to the three months ended June
30, 1999:
Consolidated sales for the three months ended June 30, 2000 were
$1,405,751. The consolidated sales for the three months ended June 30, 1999
amounted to $989,255. All sales were from U.S. Apparel.
Consolidated cost of sales for the three months ended June 30, 2000 was
$1,190,833, or 85% of sales as compared to $690,795 or 70% of sales for the
three months ended June 30, 1999.
Consolidated operating expenses were $193,257, or 14% of sales, for the
three months ended June 30, 2000, compared to $171,639, or 17% of sales for the
three months ended June 30, 1999.
Consolidated depreciation and amortization expense not included in the
consolidated operating expenses for the three months ended June 30, 2000 and
June 30, 1999 was $235.
For the three months ended June 30, 2000, subsequent to the adjustment
for the minority interest in the net income of subsidiaries, the Company
reported consolidated net income of $29,188, or $.01 per common share, as
compared to $155,210 or $.05 per common share for the three months ended June
30, 1999.
Liquidity and Capital Resources
At June 30, 2000, the Company reported cash and cash equivalents of
$351,568, working capital of $1,394,173, and stockholders' equity of $2,738,842.
At June 30 2000, the Company reported cash and cash equivalents of
$1,109,166, working capital of $1,370,681, and stockholders' equity of
$2,709,654.
11
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ITEM II. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
Liquidity and Capital Resources (continued)
The Company has generated operating losses for the past several years
and has historically financed those losses and its working capital requirements
through loans. There can be no assurance that the Company or any of its
subsidiaries will be able to generate sufficient revenues or have sufficient
controls over expenses and other charges to achieve profitability.
During the three months ended June 30, 2000, operating activities used
funds in the amount of $406,176. The Company's consolidated net income was
$29,188, after adjustment for the minority interest in the net income of
subsidiaries.
The Company used $351,422 in financing activities.
As a result of these operating, investing, and financing activities,
the Company reported a consolidated decrease in cash of $757,958.
Year 2000
The Company in 1999 upgraded its computer system by installing a year
2000 upgrade to its software.
Although the Company has not experienced any problems related to the
year 2000 issues, the possibility still exists that such problems might arise
during the calendar year. However, the effect, if any, of year 2000 problems on
the Company's results of operations cannot be estimated with any degree of
certainty if the Company or its affiliated companies, or service providers are
not fully compliant
Trends Affecting Liquidity, Capital Resources and Operations
U.S. Apparel's sales are generated from short-term purchase orders from
customers who place orders on an as-needed basis. U.S. Apparel typically
manufactures its products upon receipt of orders from customers and delivers
finished goods within four weeks of receipt of an order. In anticipation of
reorders from customers, U.S. Apparel generally manufactures 10% more goods than
are ordered by such customers.
U.S. Apparel has been able to purchase raw materials from a variety of
suppliers.
Inflation and Seasonality
The impact of inflation on the Company's results of operations has not
been significant. Each subsidiary attempts to pass on increased costs by
increasing product prices over time. U.S. Apparel's operations are generally not
seasonal and are generally spread throughout the year.
12
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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, on this 8th day of August 2000.
MULTIMEDIA CONCEPTS INTERNATIONAL, INC.
By: /s/ Ilan Arbel
----------------------------
Ilan Arbel
President
By: /s/ Allean Goode
------------------
Allean Goode
Treasurer
