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 September 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.
---------------------------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
<TABLE>
<CAPTION>
<S> <C>
Delaware 13-3835325
-------------------------------------------- --------------------------------------------
(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
--------------------------------------------------
(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 November 10, 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>
Consolidated Balance Sheets as of September 30, 2000 (unaudited) and
March 31, 2000 3
Consolidated Statements of Operations (unaudited) for the three
and six months ended September 30, 2000 and 1999 5
Consolidated Statement of Cash Flows (unaudited) for the six
months ended September 30, 2000 and 1999 6
Notes to Financial Statements (unaudited) 7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 10
PART II. OTHER INFORMATION 12
</TABLE>
<PAGE>
MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of September 30, 2000 and March 31, 2000
<TABLE>
<CAPTION>
Sept. 30, March 31,
2000 2000
(Unaudited) (Note 1)
(Restated)
(Note 6)
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents ...................................... $ 132,953 $ 1,109,166
Accounts receivable ............................................ 0 556,591
Advances to supplier ........................................... 575,661 737,145
Prepaid expenses and other current assets ...................... 5,689 5,689
Investment in affiliates ....................................... 528,000 570,552
----------- -----------
Total current assets ................................. 1,242,303 2,979,143
----------- -----------
FURNITURE, FIXTURES AND EQUIPMENT
Furniture, fixtures and equipment ........................... 72,789 72,789
Accumulated depreciation on furniture, fixtures and equipment (69,332) (68,861)
----------- -----------
Furniture, fixtures and equipment - Net ..................... 3,457 3,928
----------- -----------
OTHER ASSETS:
Due from affiliates ............................................ 1,017,054 1,014,818
Advances to equity investee .................................... 140,000 140,000
Deposits and other assets ...................................... 28,961 28,961
----------- -----------
Total other assets ................................... 1,186,015 1,183,779
----------- -----------
Total assets ......................................... $ 2,431,775 $ 4,166,850
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
3
<PAGE>
MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
As of September 30, 2000 and March 31, 2000
Sept. 30, March 31,
2000 2000
----------- -----------
(Unaudited) (Note 1)
(Restated)
(Note 6)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable ............................................................... $ 23,020 $ 998,469
Accrued expenses and other liabilities ......................................... 123,060 128,754
Due to affiliates .............................................................. 9,239 481,239
----------- -----------
Total current liabilities ................................................. 155,319 1,608,462
----------- -----------
Total liabilities ......................................................... 155,319 1,608,462
----------- -----------
MINORITY INTEREST IN SUBSIDIARIES (Note 3) ..................................... (176,382) (151,266)
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value; 10,000,000 shares authorized, 3,005,000 shares
issued and outstanding at September 30, 2000 and March 31, 2000 respectively ... 3,005 3,005
Additional paid-in capital ..................................................... 5,852,005 5,852,005
Retained earnings (Deficit) .................................................... (3,402,172) (3,145,356)
----------- -----------
Total stockholders' equity ........................................... 2,452,838 2,709,654
----------- -----------
Total liabilities and stockholders' equity ........................... $ 2,431,775 $ 4,166,850
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
4
<PAGE>
MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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<CAPTION>
For the Three Months Ended For the Six Months Ended
--------------------------- --------------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
(Restated) (Restated)
(Note 6) (Note 6)
<S> <C> <C> <C> <C>
REVENUES, net sales ...................... $ 113,337 $ 181,540 $ 1,519,088 $ 1,170,774
Cost of sales ............................ 129,370 180,162 1,320,203 870,957
----------- ----------- ----------- -----------
Gross profit ............................. (16,033) 1,378 198,885 299,817
Operating expenses:
Operating expenses ..................... 270,342 152,187 463,598 323,825
Depreciation expense
235 253 470 488
----------- ----------- ----------- -----------
Total operating expenses ....... 270,577 152,440 464,068 324,313
----------- ----------- ----------- -----------
OPERATING INCOME (LOSS) .................. (286,610) (151,062) (265,183) (24,496)
----------- ----------- ----------- -----------
OTHER INCOME
Interest and other income
748 -- 2,578 20,613
----------- ----------- ----------- -----------
INTEREST EXPENSE:
Interest and finance charges ............. 19,326 -- 19,326 --
----------- ----------- ----------- -----------
Total interest expense ......... 19,326 -- 19,326 --
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE MINORITY INTERESTS
(305,188) (151,062) (281,931) (3,883)
----------- ----------- ----------- -----------
Minority interests (Note 3)
19,184 8,065 25,115 16,096
----------- ----------- ----------- -----------
NET INCOME (LOSS) ........................ $ (286,004) $ (142,997) $ (256,816) $ 12,213
=========== =========== =========== ===========
Basic and diluted income (loss) per common
Share ................................. $ (.10) $ (.05) $ (.09) $ .01
=========== =========== =========== ===========
Weighted average number of common shares
Outstanding ........................... 3,005,000 3,005,000 3,005,000 3,005,000
=========== =========== =========== ===========
</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
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<CAPTION>
Six Months Ended
Sept. 30, Sept. 30,
2000 1999
----------- -----------
(Restated)
(Note 6)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) ................................................................. $ (256,816) $ 12,213
----------- -----------
Adjustments to reconcile net loss to cash (used) provided for operating activities:
Depreciation and amortization
470 488
Minority interests in net losses of subsidiaries ............................... (25,115) (16,096)
Changes in assets and liabilities:
(Increase) decrease in advances to suppliers ...................................... 161,484 530,439
Decrease in accounts receivable ................................................... 556,592 (53,140)
(Increase) in merchandise inventories ............................................. -- 4,000
(Increase ) decrease in prepaid expenses and other current assets ................. -- (101)
(Increase) decrease in deposits and other assets .................................. -- (6,958)
Increase in accounts payable ...................................................... (975,470) (96,804)
Increase in accrued expenses and other liabilities ................................ (5,694) 13,323
----------- -----------
Total adjustments ....................................................... (287,733) 375,151
----------- -----------
Net cash provided by operating activities ............................... (544,549) 387,364
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in property and equipment ................................................ -- (2,463)
Investment in subsidiary .......................................................... 42,572 (42,572)
----------- -----------
Net cash provided by (used for) investing activities .................... 42,572 (45,035)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Loans and advances-affiliates ..................................................... (474,236) (193,000)
----------- -----------
Net cash provided by (used for) financing activities .................... (474,236) (193,000)
----------- -----------
NET INCREASE (DECREASE) IN CASH ................................................... (976,213) $ 149,329
----------- -----------
Cash, beginning of period ......................................................... 1,109,166 984,999
----------- -----------
Cash, end of period ............................................................... $ 132,953 $ 1,134,328
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid ..................................................................... $ -- $ --
=========== ===========
Taxes paid ........................................................................ $ 30,483 $ --
=========== ===========
</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
September 30, 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
six months ended September 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 year ended March 31, 2000, 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 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 February 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 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 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 April 1998, United Textiles, having
sustained continuous losses, discontinued operating
activities.
7
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MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
(Unaudited)
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, 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 - 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.
8
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MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
(Unaudited)
NOTE 6 - RESTATEMENT OF FINANCIAL STATEMENTS - September 30, 1999:
The financial statements for the three months ended September
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 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,
or approximately 79%, of Play Co.'s common stock. At September
30, 2000, the Company held a 10.3% minority interest in Play
Co. as a result of the conversion of a substantial amount of
Play Co.'s Series E convertible preferred stock into common
stock between April 2000 and September 2000. As this
investment in Play Co. amounts to less than 20%, the Company
has accounted for this investment on the "cost basis" method.
9
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MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
(Unaudited)
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 September 30, 2000 compared to three months ended September
30, 1999
Consolidated sales for the three months ended September 30, 2000 were
$113,337 Consolidated sales for the three months ended September 30, 1999 were
$181,540. The decrease of $68,203 or 38 % is primarily due to a decrease in
orders in the second fiscal quarter from the Company's primary customer.
Consolidated cost of sales for the three months ended September 30, 2000
was $ 129,370, or 114 % of sales, as compared to the three months ended
September 30, 1999 in which the cost of sales was $180,162, or 99.2 % of sales.
The decrease of $50,792 or 28 % is primarily associated with the decrease in
sales for the quarter.
Consolidated operating expenses (excluding depreciation expense as of
September 30, 2000) were $ 270,342 compared to the quarter ended September 30,
1999 in which the operating expenses were $ 152,187.
Consolidated depreciation expense for the three months ended September 30,
2000 was $235. The consolidated depreciation and amortization expense included
in the operating expenses for the three months ended September 30, 1999 was
$253.
The Company's subsidiary, United Textiles & Toys, Co., incurred interest
expense of $19,326 in the three months ended September 30, 2000, as compared to
$ 0 in the three months ended September 30, 1999. The recognition of interest
expense was a result of an assessment by the State of New York on late filed
payroll tax returns in prior years.
For the three months ended September 30, 2000, subsequent to the adjustment
for the minority interest in the net loss of subsidiaries, the Company reported
a consolidated net loss of $ 286,004, or $.10 per common share. For the three
months ended September 30, 1999, the Company reported a restated consolidated
net loss of $142,997, or $ .05 per common share.
Six months ended September 30, 2000 compared to the six months ended
September 30, 199
Consolidated sales for the six months ended September 30, 2000 were
$1,519,088 . Consolidated sales for the six months ended September 30, 1999 were
$1,170,774. The increase of $348,314 or 30 % is primarily due to an increase in
sales in the first fiscal quarter related to the Company's primary customer.
10
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Consolidated cost of sales for the six months ended September 30, 2000 was
$1,320,203, or 87 % of sales, as compared to the six months ended September 30,
1999 in which the cost of sales was $ 870,957, or 74 % of sales. The increase of
$449,246 or 52 % is primarily associated with an increase in sales during the
first fiscal quarter.
Consolidated operating expenses (excluding depreciation) were $463,598, or
31% of sales, for the six months ended September 30, 2000 as compared to the six
months ended September 30, 1999 in which the operating expenses were $ 323,825,
or 28% of sales.
Consolidated depreciation expense for the six months ended September 30,
2000 was $470. The consolidated depreciation and amortization for the six months
ended September 30, 1999 was $ 488.
The Company's subsidiary, United Textiles & Toys, Co., incurred interest
expense of $19,326 in the six months ended September 30, 2000, as compared to $
0 in the six months ended September 30, 1999. The recognition of interest
expense was a result of an assessment by the State of New York on late filed
payroll tax returns in prior years.
For the six months ended September 30, 2000, subsequent to the adjustment
for the minority interest in the net loss of subsidiaries, the Company reported
a consolidated net loss of $ 256,816, or $ .09 per common share. For the six
months ended September 30, 1999, the Company reported a restated consolidated
net income of $ 12,213, or $.01 per common share.
Liquidity and Capital Resources
At September 30, 2000, the Company reported cash and cash equivalents of
$132,953, working capital of $1,086,984, and stockholders' equity of $2,452,838.
At March 31, 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.
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 six months ended September 30, 2000, operating activities used
funds in the amount of $544,549 as compared to $ 387,364 used by operating
activities in the six months ended September 30, 1999.
11
<PAGE>
The Company provided $42,572 in investing activities in the six months
ended September 30, 2000 as compared to a use of $45,035 in the six months ended
September 30, 1999.
Financing activities used $474,236 and $193,000 during the six months ended
September 30, 2000 and September 30, 1999, respectively.
As a result of these operating, investing, and financing activities, the
Company reported a consolidated decrease in cash of $976,213 for the six months
ended September 30, 2000 and an increase in cash of $149,329 for the six months
ended September 30, 1999.
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.
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.
U.S. Apparel's operations are generally not seasonal and are generally
spread throughout the year.
12
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings: None
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 September 30, 2000:
27.1 Financial Data Schedule
(b) During the quarter ended September 30, 2000, no reports on Form 8-K
were filed with the Securities and Exchange Commission.
13
<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 November 14, 2000.
MULTIMEDIA CONCEPTS INTERNATIONAL, INC.
By: /s/ Ilan Arbel
----------------------------
Ilan Arbel
President
By: /s/ Allean Goode
------------------
Allean Goode
Treasurer
14
