UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
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FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended March 31, 1996 Commission File Number 0-23236-NY
MASTER GLAZIER'S KARATE INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-3234110
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Piscataway Center
377 Hoes Lane
Piscataway, New Jersey 08854
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (908) 354-2349
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570 North Broad Street, Suite 16, Elizabeth, New Jersey 07208
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of 15(d) of the Securities and Exchange Act of 1934
during the preceding 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 X No
As of May 15, 1996 there were 5,350,000 shares of $.0001 par value common stock
outstanding.
Transitional Small Business Disclosure Format
Yes No X
MASTER GLAZIER'S KARATE INTERNATIONAL, INC. AND SUBSIDIARIES
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INDEX TO FORM 10-QSB
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Page
Financial Statements:
Consolidated Balance Sheet..................................... 1.....2
Consolidated Statements of Operations.......................... 3
Consolidated Statements of Stockholders Equity................. 4
Consolidated Statements of Cash Flows.......................... 5
Notes to Consolidated Financial Statements..................... 6.....7
Management's Discussion and Analysis of Financial Condition.... 8
Liquidity and Capital Resources................................ 9
. . . . . . . . . . . . . .
MASTER GLAZIER'S KARATE INTERNATIONAL, INC. AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1996.
[UNAUDITED]
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Assets:
Current Assets:
Cash and Cash Equivalents $ 1,564,152
Marketable Securities Available for Sale at Fair Value 141,000
Accounts Receivable - Net 53,109
Inventory 111,900
Miscellaneous Receivables 24,665
Prepaid Expenses 41,636
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Total Current Assets 1,936,462
Property and Equipment:
Office Equipment 104,658
Furniture and Fixtures 177,892
Leasehold Improvements 1,207,534
Auto and Trucks 50,326
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Total 1,540,410
Less: Accumulated Depreciation 279,794
Property and Equipment - Net 1,260,616
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Other Assets:
Investment in Limited Partnership 1,500,000
Security Deposits 92,278
Start-Up Costs 12,508
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Total Other Assets 1,604,786
Total Assets $ 4,801,864
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The Accompanying Notes are an Integral Part of These Financial Statements.
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MASTER GLAZIER'S KARATE INTERNATIONAL, INC. AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1996.
[UNAUDITED]
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Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts Payable and Accrued Expenses $ 215,549
Deferred Revenue 209,750
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Total Current Liabilities 425,299
Long-Term Liability:
Deferred Revenue 108,053
Total Liabilities 533,352
Commitments and Contingencies --
Stockholders' Equity:
Common Stock, $.0001 Par Value; 15,000,000 Shares
Authorized, 5,350,000 Issued and Outstanding 535
Paid-in Capital 7,387,992
Accumulated [Deficit] (3,111,015)
Unrealized Holding Loss on Current Marketable Securities (9,000)
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Total Stockholders' Equity 4,268,512
Total Liabilities and Stockholders' Equity $ 4,801,864
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The Accompanying Notes are an Integral Part of These Financial Statements.
2
MASTER GLAZIER'S KARATE INTERNATIONAL, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF OPERATIONS
[UNAUDITED]
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Three months ended
March 31,
1 9 9 6 1 9 9 5
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Sales $ 390,139 $ 296,885
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Cost and Expenses:
Cost of Accessories Sold 22,718 19,458
Salaries and Payroll Taxes 273,781 216,401
Rent Expense 130,543 108,637
Other General and Administrative Expenses 237,594 186,120
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Total Costs and Expenses 664,636 530,616
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[Loss] from Operations (274,497) (233,731)
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Other Income [Expense]:
Interest Income 26,105 60,267
Bad Debt Expense (3,445) (750)
Dividend Income 2,780 --
Gain on Sale of Securities 448,359 --
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Other Income - Net 473,799 59,517
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Income [Loss] Before Federal and State Taxes 199,302 (174,214)
Provision for Income Taxes -- --
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Net Income [Loss] $ 199,302 $ (174,214)
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Net Income [Loss] Per Share $ .04 $ (.03)
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Weighted Average Shares Outstanding 5,350,000 5,350,000
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The Accompanying Notes are an Integral Part of These Financial Statements.
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MASTER GLAZIER'S KARATE INTERNATIONAL, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
[UNAUDITED]
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Unrealized
Holding Gain
[Loss] on
Non-Current Total
Common Stock Paid-in AccumulatedMarketableStockholders'
Shares Amount Capital [Deficit] Securities Equity
Balance-December 31, $9955,350,$00 535 $7,387,99$(3,310,31$)345,507 $4,423,717
Net Income for the Three Months
Ended March 31, 1996 -- -- -- 199,302 -- 199,302
Realized Gain on Marketable
Securities -- -- -- -- (345,507) (345,507)
Unrealized Holding Loss on
Marketable Securities -- -- -- -- (9,000) (9,000)
-------- -------- -------- --------- --------- --------
Balance-March 31, 1996 5,350,000$ 535 $7,387,99$(3,111,01$)(9,000) $4,268,512
================= ==================== ====== ==========
The Accompanying Notes are an Integral Part of These Financial Statements.
4
MASTER GLAZIER'S KARATE INTERNATIONAL, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF CASH FLOWS
[UNAUDITED]
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Three months ended
March 31,
1 9 9 6 1 9 9 5
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Operating Activities:
Net Income [Loss] $ 199,302 $ (174,214)
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Adjustments to Reconcile Net [Loss] to Net Cash
[Used for] Operating Activities:
Depreciation and Amortization 35,118 24,287
Bad Debt Expense 3,455 750
Gain on Sale of Securities Available for Sale (448,359) --
Changes in Operating Assets and Liabilities:
[Increase] Decrease in:
Accounts Receivable 2,719 (27,676)
Interest Receivable -- (10,000)
Startup Costs (9,553) --
Inventory (19,785) (11,922)
Prepaid Expenses (4,008) (29,589)
Miscellaneous Receivable (6,274) (4,429)
Increase [Decrease] in:
Accounts Payable and Accrued Expenses (22,822) (44,314)
Deferred Revenue (1,712) 6,225
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Total Adjustments (471,221) (96,668)
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Net Cash - Operating Activities (271,919) (270,882)
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Investing Activities:
Purchase of Securities Available for Sale (426,750) --
Purchase of Property and Equipment (302,254) (19,968)
Investment in Limited Partnership (1,500,000) --
Proceeds from Sales of Securities Available for Sale 1,337,414 --
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Net Cash - Investing Activities (891,590) (19,968)
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Net [Decrease] in Cash and Cash Equivalents (1,163,509) (290,850)
Cash and Cash Equivalents - Beginning of Periods 2,727,661 3,653,084
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Cash and Cash Equivalents - End of Periods $1,564,152 $ 3,362,234
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The Accompanying Notes are an Integral Part of These Financial Statements.
5
MASTER GLAZIER'S KARATE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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[1] Summary of Significant Accounting Policies
Significant accounting policies of Master Glazier's International, Inc. and
subsidiaries are set forth in the Company's Form 10-KSB for the year ended
December 31, 1995 as filed with the Securities and Exchange Commission.
[2] Basis of Reporting
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10- QSB. Accordingly, they do not include all
of the information and disclosures required by generally accepted accounting
principles for completed financial statements. In the opinion of management,
such statements include all adjustments [consisting only of normal recurring
items] which are considered necessary for a fair presentation of the financial
position of the Company at March 31, 1996 and the results of their operations
and their cash flows for the three month periods ended March 31, 1996 and 1995.
It is suggested that these financial statements be read in conjunction with the
financial statements and notes for the year ended December 31, 1995 included in
the Master Glazier's Karate International, Inc. Form 10-KSB.
Earnings per share for the three months ended March 31, 1996 were not adjusted
for the exercise of options and warrants outstanding since their assumed
exercise would be anti-dilutive.
No income tax provision was required for the three months ended March 31, 1996
due to the application of net operating loss carryforwards.
[3] New Karate Centers
In April, 1995, the Company signed a lease for a new Karate School in
Hicksville, New York. The term of the lease is for ten years, at an annual
rental beginning at $57,000 during the first year, and ending at $77,685 in the
final year.
In August 1995, the Company signed a lease for a new Karate School in Ramsey,
New Jersey. The term of the lease is for five years, with two additional five
year renewal period. The annual rental begins at $68,894 during the first year
and ends at $104,208 in the fifteenth year.
[4] Termination of Joint Venture
On June 1, 1995, pursuant to a termination agreement between Master Glazier's
Karate International, Inc. ["MGK" or the "Company"], United Leisure Corporation
["ULC"], and Planet Kids Learning Centers, Inc. ["Planet Kids"], the Company
terminated its Joint Venture Agreement dated June 24, 1994 with Planet Kids.
In connection with such termination, ULC purchased the 500 shares of Common
Stock of Planet Kids owned by MGK for $500,000. In addition, MGK was granted an
option to purchase up to 150,000 shares of Common Stock of ULC at any time
during the five-year period ending May 31, 2000. Also, pursuant to the
termination agreement, ULC purchased, for value plus accrued interest, the
$500,000 Note Payable owed MGK by Planet Kids. Finally, MGK will provide
consulting services to ULC, as requested by ULC, for the period from June 1,
1995 to May 31, 1996.
In the first quarter of 1996, the Company sold the shares above and those
acquired upon the exercise of the aforementioned option resulting in a gain of
$448,359.
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MASTER GLAZIER'S KARATE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #2
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[5] Limited Partnership
On March 4, 1996, the Company entered into a limited partnership agreement to
license ancillary rights to motion pictures. The Company contributed $1,500,000
to the capital of the partnership. The contribution shall be returned to the
Company in the event that an additional $1,500,000 in capital is not contributed
by additional limited partners within sixty days after the effective date of the
agreement. Interest equal to 7% will be paid quarterly on capital contributions
to the partnership.
At March 31, 1996, the Limited Partnership had not yet commenced operations.
. . . . . . . . . . . . .
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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For the Three Months Ended March 31, 1996 as Compared to Three Months Ended
March 31, 1995
The Company's sales for the three months ended March 31, 1996 were $390,139. The
sales include membership and other goods sold at six of the Company's Karate
Centers. The seventh location at Ramsey was opened at the end of the quarter
ended March 31, 1996 and, therefore, had an insignificant impact on sales. The
amount of other goods sold at the Karate Centers amounted to $45,703.
At March 31,1995, the Company had sales of $296,885. The sales resulted
primarily from memberships sold at the Karate Centers; $38,614 resulted from the
sale of other goods.
The $93,254 increase in sales is primarily attributed to an increase in same
store sales and the opening of the sixth location in Hicksvile, Long Island.
The net income [loss] for the three months ended March 31, 1996 and March 31,
1995 was $199,302 and $(174,214), respectively. The increase is attributable to
the gain on sales of marketable securities of $448,359.
General and administrative expenses increased by $130,760 for the three month
period ended March 31, 1996 compared to March 31, 1995.
The major components of general and administrative expenses for the periods
discussed are as follows:
March 31,
1 9 9 6 1 9 9 5
Salaries and Payroll Taxes $ 273,781 $ 216,401
Rent 130,543 108,637
Office Expense and Other Expenses 237,594 186,120
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Totals $ 641,918 $ 511,158
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The increase in salaries and payroll taxes and rent during the three months
ended March 31, 1996 is attributable to expenses incurred for the operations of
two additional centers.
The Company's other operating expenses have increased due to the opening of two
new centers and an intensified advertising campaign.
Liquidity and Capital Resources
Cash and cash equivalents decreased for the three months ended March 31, 1996 by
$(1,163,509) and decreased for the three months ended March 31, 1995 by
$(290,850). Cash and cash equivalents utilized for operations for the three
months ended March 31, 1996 and 1995 was $(271,919) and $(270,882) respectively.
Cash and cash equivalents for investing activities for the three months ended
March 31, 1996 and March 31, 1995 was ($891,590) and $(19,968) respectively. The
Company entered into a limited partnership agreement to license ancillary rights
to motion pictures. The Company contributed $1,500,000 to the capital of the
partnership [See Note 5].
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SIGNATURE
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Pursuant to the requirements of the Securities Exchange Act of 1994, the
Registrant has duly caused this report on form 10-QSB to be signed on its behalf
by the undersigned thereunto duly authorized.
Master Glazier's Karate International, Inc.
Date: May 15, 1996 By: /s/ Mark Glazier
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Mark Glazier, Chief Financial Officer
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