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 December 31, 1999
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 Small Business Issuer as Specified in its Charter)
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Delaware 13-3835325
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
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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
(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 February 25, 2000.
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MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION Page Number
Item 1. FINANCIAL STATEMENTS
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Consolidated Balance Sheets as of December 31, 1999
(unaudited) March 31, 1999 3
Consolidated Statements of Operations (unaudited) for the three
months ended December 31, 1999 and 1998 4
Consolidated Statement of Cash Flows (unaudited) for the nine
ended December 31, 1999 and 1998 5
Notes to Financial Statements (unaudited) 6-9
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS 14
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 14
Item 3. DEFAULTS UPON SENIOR SECURITIES 14
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 14
Item 5. OTHER INFORMATION 14
Item 6. EXHIBITS AND REPORTS ON FORM 8-K 14
Signatures 15
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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 BALANCE SHEETS
As of December 31, 1999 and March 31, 1999
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Dec. 31, March 31,
1999 1999
-------------------- -------------
(Unaudited) (Note 1)
ASSETS
CURRENT ASSETS:
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Cash and cash equivalents .......................................................... $ 13,378,193 $ 1,110,966
Advances to supplier ............................................................... 626,160 474,572
Accounts receivable ................................................................ 985,422 692,266
Inventories ........................................................................ 14,255,841 11,595,284
Notes receivable - affiliate ....................................................... 650,000 --
Prepaid expenses and other current assets .......................................... 652,395 1,315,851
------------ ------------
Total current assets ..................................................... 30,548,011 15,188,939
PROPERTY AND EQUIPMENT-NET ......................................................... 7,316,185 5,350,285
OTHER ASSETS:
Advances to equity investee ........................................................ 140,000 140,000
Due from affiliates ................................................................ -- 136,662
Deposits and other assets .......................................................... 4,476,451 2,783,430
------------ ------------
Total assets ............................................................. $ 42,480,647 $ 23,599,316
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ................................................................... $ 28,316,301 $ 9,653,563
Accrued expenses and other liabilities ............................................. 1,500,520 689,580
Current portion of notes payable and capital lease obligations ..................... 848,774 1,352,197
Due to affiliates .................................................................. 34,448 423,888
------------ ------------
Total current liabilities ..................................................... 30,700,043 12,119,228
LONG-TERM LIABILITIES:
Borrowings under financing agreement ............................................... 54,170 7,814,666
Note payable and current lease obligations, net of current portion ................. 1,257,091 585,681
Deferred rent liability ............................................................ 135,060 126,769
------------ ------------
Total long-term liabilities .............................................. 1,446,321 8,527,116
------------ ------------
Total liabilities ........................................................ 32,146,364 20,646,344
MINORITY INTEREST IN SUBSIDIARIES (Note 3) ......................................... 10,253,010 1,003,700
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value; 10,000,000 shares authorized, 3,005,000 shares issued
Additional paid-in capital ......................................................... 13,102,005 13,102,005
Retained earnings (Deficit) ........................................................ (13,023,737) (11,155,738)
------------ ------------
Total stockholders' equity .................................................... 81,273 1,949,272
------------ ------------
Total liabilities and stockholders' equity ............................... $ 42,480,647 $ 23,599,316
============ ============
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MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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<CAPTION>
For the Three Months Ended For the Nine Months Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1999 1998 1999 1998
Restated Restated
(Note 6) (Note 6)
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REVENUES, net sales ........................... $ 17,373,081 $ 15,275,152 $ 31,920,239 $ 29,254,456
Cost of sales ................................. 10,046,011 8,907,103 18,281,083 17,087,346
------------ ------------ ------------ ------------
Gross profit .................................. 7,327,070 6,368,049 13,639,156 12,167,110
Operating expenses:
Operating expenses ........................ 6,195,937 4,277,500 14,211,539 9,990,277
Litigation and settlement expense ........ 183,464 -- 270,206 --
Depreciation expense ...................... 320,918 325,210 774,135 707,891
------------ ------------ ------------ ------------
Total operating expenses ............ 6,700,319 4,602,710 15,255,880 10,698,168
------------ ------------ ------------ ------------
OPERATING INCOME (LOSS) ....................... 626,751 1,765,339 (1,616,724) 1,468,942
OTHER INCOME
Interest and other income ................... 24,522 3,649 45,145 63,930
INTEREST EXPENSE:
Interest and finance charges .................. 307,870 221,860 823,453 517,172
Amortization of debt issuance costs ........... 58,097 73,032 174,889 127,434
------------ ------------ ------------ ------------
Total interest expense ................ 365,967 294,892 998,342 644,606
INCOME (LOSS) BEFORE MINORITY INTERESTS
285,306 1,474,096 (2,569,921) 888,266
------------ ------------ ------------ ------------
Minority interests (Note 3) .................. 43,954 (577,184) 2,885,841 105,167
------------ ------------ ------------ ------------
NET INCOME (LOSS) ............................. 329,260 896,912 315,920 993,433
Effect of non-cash dividends on preferred stock
799,402 477,973 2,183,919 1,229,752
------------ ------------ ------------ ------------
Net income (loss) applicable to common shares
$ (470,142) $ 418,939 $ (1,867,999) $ (236,319)
============ ============ ============ ============
Basic and diluted income (loss) per common
Share ...................................... $ (.16) $ .14 $ (.62) $ (.08)
============ ============ ============ ============
Weighted average number of common shares
Outstanding ................................ 3,005,000 3,005,000 3,005,000 3,005,000
============ ============ ============ ============
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<PAGE>
MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Increase (Decrease) in Cash
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Nine Months Ended
----------------------------------------
Dec. 31, Dec. 31,
1999 1998
------------------- -----------------
Restated
(Note 6)
CASH FLOWS FROM OPERATING ACTIVITIES:
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Net income (loss) ................................................................. $ (1,867,999) $ (236,319)
Adjustments to reconcile net loss to cash (used) provided for operating activities:
Amortization of debt issuance cost ............................................. 174,889 --
Depreciation and amortization .................................................. 774,135 707,891
Deferred rent .................................................................. 8,291 13,654
Minority interests in net losses of subsidiaries ............................... (2,885,841) (105,167)
Changes in assets and liabilities:
(Increase) decrease in advances to suppliers ...................................... (151,588) --
(Increase) decrease in accounts receivable ........................................ (293,156) 119,159
(Increase) in merchandise inventories ............................................. (2,660,557) (2,984,709)
(Increase ) decrease in prepaid expenses and other current assets ................. 663,456 (1,552,841)
(Increase) decrease in deposits and other assets .................................. (1,693,021) 173,429
Increase in accounts payable ...................................................... 5,062,208 4,534,300
Increase in accrued expenses and other liabilities ................................ 810,940 822,417
------------ ------------
Total adjustments ....................................................... (190,244) 1,728,133
------------ ------------
Net cash provided by operating activities ............................... (2,058,243) 1,491,814
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment ................................................ (2,740,035) (2,300,169)
Advance to affiliate .............................................................. (650,000) --
------------ ------------
Net cash provided by (used for) investing activities .................... (3,390,035) (2,300,169)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of preferred stock of subsidiary ........................... 25,560,792 --
Net borrowings under financing agreement of subsidiary ............................ (7,760,496) 2,309,017
Repayment of notes payable ........................................................ 167,987 (824,005)
Loans received from (repaid to) affiliate - net ................................... (252,778) (94,797)
------------ ------------
Net cash provided by (used for) financing activities .................... 17,715,505 1,390,215
NET INCREASE (DECREASE) IN CASH ................................................... 12,267,227 581,860
Cash, beginning of period ......................................................... 1,110,966 1,635,058
------------ ------------
Cash, end of period ............................................................... $ 13,378,193 $ 2,216,918
============ ============
Supplemental disclosure of cash flow information:
Interest paid ..................................................................... $ 823,453 $ 644,806
Taxes paid ........................................................................ $ -- $ --
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MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
(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 nine months ended December 31, 1999 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 year ended March 31, 1999,
as filed with the Securities and Exchange Commission.
NOTE 2 - DESCRIPTION OF COMPANY:
Multimedia Concepts International, Inc. (the "Company") is a
Delaware corporation which was organized in June 1994 as a
holding company for the purpose of forming an integrated clothing
design, manufacturing, and distribution operation.
In February 1997, the Company formed a 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 and boys.
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 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
April 1998, having sustained continuous losses, it discontinued
operating activities.
<PAGE>
NOTE 2 - DESCRIPTION OF COMPANY (continued):
In September 1999, United Textiles sold 55,000 shares of
Play Co. Toys & Entertainment Corp. ("Play Co.") common stock on
the open market reducing its ownership of Play Co., as of
December 31, 1999, to 43.9%. Play Co. is a retailer which sells
toys and educational, electronic, and interactive games. Through
its ownership of United Textiles, which at December 31, 1999 had
a percentage of ownership of 43.9% and was still considered to
exercise prerogative of control over Play Co., the Company also
effectively maintains prerogative of control over Play Co.
NOTE 3 - MINORITY INTEREST:
The Company owns a majority interest, 78.5%, in United
Textiles, which in turn owns a controlling interest, 43.9%, in
Play Co., who in turn owns 58.4% of Toys International.com, Inc.
("Toys") The minority interest liability represents the minority
shareholders' portion, 21.5%, of United Textiles' equity, 56.1%
of Play Co.'s equity at December 31, 1999, and 41.6% of Toys
equity at December 31, 1999.
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, 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. At December 31, 1999, U.S. Stores owned 67.7% of the
Company.
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.
<PAGE>
NOTE 5 - SALE OF SHARES BY PLAY CO.'S SUBSIDIARY -
TOYS INTERNATIONAL.COM, INC.
On November 19, 1999, Toys, a subsidiary of Play Co.,
completed an initial public offering (the "Offering") on the SMAX
segment of the Frankfurt Stock Exchange in Germany. The Offering
was underwritten by Concord Effekten AG ("Concord") of Frankfurt,
Germany. Toys sold 2 million shares, or a 16.7% interest, in the
Offering for net proceeds of approximately $23.3 million. The
Offering was priced at 13 Euros per share, or approximately US
$13.52 per share. Play Co. retained majority ownership of Toys
(58.4%) and, as a result, will continue to consolidate Toys'
operations in its financial statements. No gain or loss was
recorded on the sales of Toys' shares in the public offering or
in earlier private placements per Staff Accounting Bulletin No.
84.
NOTE 6 - CREDIT FACILITY:
On December 31, 1999, Play Co. had $54,170 outstanding under
its revolving credit facility with FINOVA Capital Corporation
("FINOVA") and $6,990,395 available under the credit facility.
During December, at Play Co.'s request, FINOVA agreed to reduce
the maximum borrowing level of the credit facility from $11.3
million to $9.3 million and to terminate a $2 million standby
letter of credit ("L/C") that previously helped support the
credit facility. The termination of the L/C allowed the Play Co.
access to a $2 million certificate of deposit which previously
was restricted and was used as collateral for the L/C by the
issuing bank. The amount outstanding at December 31, 1999
represented the interest accrued during the month of December
1999 as the principal balance was paid down to zero during the
December quarter.
As of December 31, 1999, the FINOVA credit line is presented
as a short term liability since the credit facility expires
August 3, 2000, or within less than one year of the December 31,
1999 balance sheet date.
NOTE 7 - YEAR 2000 UPDATE:
Subject to continued monitoring of third party suppliers,
the Company's year 2000 program ("Program") is complete, and no
material problems have arisen since the end of calendar year
1999. The Program addressed the issue of computer programs and
embedded computer chips being unable to distinguish between the
year 1900 and the year 2000. All of the Company's business
computer systems are year 2000 ready.
<PAGE>
NOTE 8 - RESTATEMENT OF FINANCIAL STATEMENTS - December 31, 1998:
The consolidated financial statements for the three months
ended December 31, 1998 have been restated to reflect a
restatement by Play Co. of its dividend attributable to the
beneficial conversion feature of its Series E preferred stock.
This restatement resulted in a reduction of income of $121,796
for the three months ended December 31, 1998 and in an increase
of $52,397 to the loss for the nine months ended December 31,
1998.
<PAGE>
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 December 31, 1999 compared to three months ended
December 31, 1998
Consolidated sales for the three months ended December 31, 1999 were
$17,373,081. Consolidated sales for the three months ended December 31, 1998
were $15,275,152. The increase of $2,097,929, or 13.7%, is primarily due to
sales contributions from Play Co.'s new stores and Play Co.'s Internet
operations in the United States and Germany.
Consolidated cost of sales for the three months ended December 31, 1999
was $10,046,011, or 57.8% of sales, as compared to the three months ended
December 31, 1998 in which the cost of sales was $8,907,103, or 58.3% of sales.
The increase of $1,138,908, or 12.8%, is primarily associated with the opening
of new stores by Play Co.
Consolidated operating expenses (excluding litigation and settlement
expenses and depreciation and amortization expenses) were $6,195,937, or 35.7%
of sales, for the three months ended December 31, 1999 as compared to the three
months ended December 31, 1998 in which the operating expenses were $4,277,500,
or 28% of sales. The increase of $1,918,437, or 44.8%, is primarily due to an
increase in payroll and related expenses as well as an increase in rent expense
associated with the opening of new retail stores by Play Co.
During the three months ended December 31, 1999, Play Co. settled its
final store closing litigation. The litigation expense of $183,464 this quarter
represents an accrual by Play Co. to bring the total expense to $270,206, the
total amount expected to be paid out.
Consolidated depreciation and amortization expense included in the
operating expenses for the three months ended December 31, 1999 was $320,918.
The consolidated depreciation and amortization expense included in the operating
expenses for the three months ended December 31, 1998 was $325,210.
Consolidated interest expense for the three months ended December 31,
1999 was $365,967, or 2.1% of sales compared to $294,892, or 1.9% of sales, for
the period ended December 31, 1998. The increase is primarily due to a higher
average level of borrowing by Play Co. in the three months ended December 31,
1999.
For the three months ended December 31, 1999, subsequent to the
adjustment for the minority interest in the net loss of subsidiaries, the
Company reported a consolidated net loss of $470,142, or $0.16 per common share.
For the three months ended December 31, 1998, the Company reported restated
consolidated net income of $418,939, or $0.14 per common share.
<PAGE>
Nine months ended December 31, 1999 compared to the nine months ended
December 31, 1998
Consolidated sales for the nine months ended December 31, 1999 were
$31,920,239. Consolidated sales for the nine months ended December 31, 1998 were
$29,254,456. The increase of $2,665,783, or 9.1%, is primarily due to sales
contributions from Play Co.'s new stores and Play Co.'s Internet operations in
the United States and Germany.
Consolidated cost of sales for the nine months ended December 31, 1999
was $18,281,083, or 57.3% of sales, as compared to the nine months ended
December 31, 1998 in which the cost of sales was $17,087,346, or 58.4% of sales.
The increase of $1,193,737, or 7.0%, is primarily associated with the opening of
new stores by Play Co.
Consolidated operating expenses (excluding litigation and settlement
expenses and depreciation and amortization expenses) were $14,211,539, or 44.5%
of sales, for the nine months ended December 31, 1999 as compared to the nine
months ended December 31, 1998 in which the operating expenses were $9,990,277,
or 34.1% of sales. The increase of $4,221,262, or 42.3%, is primarily due to an
increase in payroll and related expenses as well as an increase in rent expense
associated with the opening of new retail stores by Play Co.
Litigation expenses of $270,206 represents an accrual by Play Co. to
cover the settlement of litigation expenses related to Play Co.'s store
closings.
Consolidated depreciation and amortization expense for the nine months
ended December 31, 1999 was $774,135. The consolidated depreciation and
amortization for the nine months ended December 31, 1998 was $707,891.
Consolidated interest expense for the nine months ended December 31,
1999 was $998,342 as compared to $644,606 for the nine months ended December 31,
1998. The increase is primarily due to a higher level of borrowing by Play Co.
in the nine months ended December 31, 1999.
For the nine months ended December 31, 1999, subsequent to the
adjustment for the minority interest in the net loss of subsidiaries, the
Company reported a consolidated net loss of $1,867,999, or $0.62 per common
share. For the nine months ended December 31, 1998, the Company reported a
restated consolidated net loss of $236,319, or $0.08 per common share.
Liquidity and Capital Resources
At December 31, 1999, the Company reported cash and cash equivalents of
$13,378,193, working capital deficit of $152,032, and stockholders' equity of
$81,683.
At March 31, 1999, the Company reported cash and cash equivalents of
$1,110,966, working capital of $3,069,711, and stockholders' equity of
$1,949,272.
<PAGE>
Play Co., and hence 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 nine months ended December 31, 1999, operating activities
used funds in the amount of $2,058,243 as compared to $1,491,814 provided by
operating activities in the nine months ended December 31, 1998.
The Company used $3,390,035 in investing activities in the nine months
ended December 31, 1999 as compared to a use of $2,300,169 in the nine months
ended December 31, 1998. The use is primarily due, in both periods, to the
Company's subsidiary's (Play Co.) purchase of property and equipment in relation
to new store openings and the issuance of a note receivable by Play Co. to an
affiliated company.
Financing activities provided $17,715,505 and $1,390,215 to the Company
during the nine months ended December 31, 1999 and December 31, 1998,
respectively. This increase is primarily due to the sale of Play Co.'s Series F
Stock and the sale of Play Co.'s subsidiary's (Toys) common stock.
As a result of these operating, investing, and financing activities,
the Company reported a consolidated increase in cash of $12,267,227 for the nine
months ended December 31, 1999 and an increase in cash of $581,860 for the nine
months ended December 31, 1998.
Trends Affecting Liquidity, Capital Resources and Operations
As a result of its current merchandise mix, which emphasizes specialty
and educational toys, Play Co. enjoyed significant sales and gross profits in
fiscal year 1999.
Play Co.'s current sales efforts focus primarily on a defined
geographic segment consisting of the southern California area and the
Southwestern and Midwestern United States. Its future financial performance will
depend upon (i) continued demand for toys and hobby items and management's
ability to adapt to continuously changing customer preferences and the market
for such items, (ii) the general economic condition within Play Co.'s geographic
area, as same may be expanded, (iii) Play Co.'s ability to chose locations for
new stores, (iv) Play Co.'s ability to purchase product at favorable prices and
on favorable terms, and (v) the effects of increased competition.
The toy and hobby retail industry faces a number of potentially adverse
business conditions including price and gross margin pressures and market
consolidation. Play Co. competes with a variety of mass merchandisers,
superstores, and other toy retailers, including Toys-R-Us, Kay Bee Toy Stores,
Wal-Mart, and K-Mart. Competitors that emphasize specialty and educational toys
include Disney Stores, Warner Brothers Stores, Learning Smith, Lake Shore, Zainy
Brainy, and Noodle Kidoodle. There can be no assurance that Play Co.'s business
strategy will enable it to compete effectively in the toy industry or that Play
Co. will be able to generate sufficient revenues or have sufficient control over
expenses and other charges to increase profitability.
<PAGE>
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.
Year 2000 Update
Subject to continued monitoring of third party suppliers, the
Company's year 2000 program ("Program") is complete, and no material problems
have arisen since the end of calendar year 1999. The Program addressed the issue
of computer programs and embedded computer chips being unable to distinguish
between the year 1900 and the year 2000. All of the Company's business computer
systems are year 2000 ready.
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.
Play Co.'s operations are highly seasonal with approximately 30-40% of
its net sales falling within its third quarter, which coincides with the
Christmas selling season. Play Co. intends to open stores throughout the year,
but generally before the Christmas selling season, which will make its third
quarter sales an even greater percentage of the total year's sales.
U.S. Apparel's operations are generally not seasonal and are generally
spread throughout the year.
<PAGE>
PART II
Item 1. Legal Proceedings: The Company is not a party to any material litigation
and is not aware of any threatened litigation that would have a material adverse
effect on its business. Neither the Company's officers, directors, affiliates,
nor owners of record or beneficially of more than five percent of any class of
the Company's Common Stock is a party to any material proceeding adverse to the
Company or has a material interest in any such proceeding adverse to the
Company.
Item 2. Changes in Securities and Use of Proceeds: 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
(a) The following exhibits are filed with this Form 10-QSB for the quarter ended
December 31, 1999:
27.1 Financial Data Schedule
(b) During the quarter ended December 31, 1999, no reports on Form 8-K were
filed with the Securities and Exchange Commission.
<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, on this 29th day of February 2000.
MULTIMEDIA CONCEPTS INTERNATIONAL, INC.
By: /s/ Ilan Arbel
Ilan Arbel
President
By: /s/ Allean Goode
Allean Goode
Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27.1
FINANCIAL DATA SCHEDULE
ARTICLE 5 OF REGULATION S-X
This schedule contains summary financial information extracted from
Balance Sheet, Statement of Operations, Statement of Cash Flows and Notes
thereto incorporated in Part 1, Item 1, of this Form 10-QSB and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> mar-30-2000
<PERIOD-END> dec-31-1999
<CASH> 13,378,193
<SECURITIES> 0
<RECEIVABLES> 985,422
<ALLOWANCES> 0
<INVENTORY> 14,255,841
<CURRENT-ASSETS> 30,548,011
<PP&E> 12,217,139
<DEPRECIATION> (4,900,954)
<TOTAL-ASSETS> 42,480,647
<CURRENT-LIABILITIES> 30,700,043
<BONDS> 0
0
0
<COMMON> 3,005
<OTHER-SE> 78,268
<TOTAL-LIABILITY-AND-EQUITY> 42,480,647
<SALES> 31,920,239
<TOTAL-REVENUES> 31,965,384
<CGS> 18,281,083
<TOTAL-COSTS> 18,281,083
<OTHER-EXPENSES> 15,255,880
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 998,342
<INCOME-PRETAX> (1,867,999)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,867,999)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-BASIC> (0.62)
<EPS-DILUTED> (0.62)
</TABLE>
