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, 1997 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, 1997 there were 2,070,000 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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Item 1: 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.....
Item 2:Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 7
Signature Page................................................... 8
. . . . . . . . . . . . . .
Item 1: Financial Statements
MASTER GLAZIER'S KARATE INTERNATIONAL, INC. AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1997.
[UNAUDITED]
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Assets:
Current Assets:
Cash and Cash Equivalents $ 2,096,808
Cash Held in Escrow 225,000
Accounts Receivable - Net 55,551
Inventory 33,988
Prepaid Expenses and Miscellaneous Receivables 26,048
Notes Receivable - Current Portion 74,667
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Total Current Assets 2,512,062
Property and Equipment:
Office Equipment 52,952
Furniture and Fixtures 84,254
Leasehold Improvements 100,209
Vehicles 32,558
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Total - At Cost 269,973
Less: Accumulated Depreciation (152,952)
Property and Equipment - Net 117,021
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Other Assets:
Investment in Limited Partnership 1,208,000
Security Deposits 38,457
Notes Receivable - Long-Term 205,333
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Total Other Assets 1,451,790
Total Assets $ 4,080,873
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The Accompanying Notes are an Integral Part of These Financial Statements.
1
MASTER GLAZIER'S KARATE INTERNATIONAL, INC. AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1997.
[UNAUDITED]
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Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts Payable and Accrued Expenses $ 209,127
Deferred Revenue 254,719
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Total Current Liabilities 463,846
Long-Term Liability:
Deferred Revenue 63,680
Total Liabilities 527,526
Commitments and Contingencies --
Stockholders' Equity:
Preferred Stock, No Par Value; 1,000,000 Shares Authorized --
Common Stock, $.0001 Par Value; 40,000,000 Shares
Authorized, 2,070,000 Issued and Outstanding 207
Paid-in Capital 8,280,820
Accumulated Deficit (4,727,680)
Total Stockholders' Equity 3,553,347
Total Liabilities and Stockholders' Equity $ 4,080,873
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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 7 1 9 9 6
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Net Sales $ 190,581 $ 390,139
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Costs and Expenses:
Costs of Accessories Sold 7,817 22,718
Salaries and Payroll Taxes 143,211 273,781
Rent Expense 40,999 130,543
Other General and Administrative Expenses 108,750 241,039
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Total Costs and Expenses 300,777 668,081
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Loss from Operations (110,196) (277,942)
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Other Income [Expense]:
Interest Income 20,494 28,885
Lease Cancellation Fee (76,707) --
Gain on Sale of Assets 1,836 448,359
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Other [Expense] Income - Net (54,377) 477,244
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[Loss] Income Before Federal and State Taxes (164,573) 199,302
Provision for Income Taxes -- --
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Net [Loss] Income $ (164,573) $ 199,302
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Net [Loss] Income Per Share $ (.08) $ (.04)
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Weighted Average Shares Outstanding 2,070,000 5,350,000
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The Accompanying Notes are an Integral Part of These Financial Statements.
3
MASTER GLAZIER'S KARATE INTERNATIONAL, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
[UNAUDITED]
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Total
Common Stock Paid-in Accumulated Stockholders'
Shares Amount Capital Deficit Equity
Balance - December 31, 1996 2,070,000 $ 207 $8,280,820 $(4,563,107) $3,717,920
Net Loss for the three months
ended March 31, 1997 -- -- -- (164,573) (164,573)
--------- -------- -------- ----------- ---------
Balance - March 31, 1997 2,070,000 $ 207 $8,280,820 $(4,727,680 $3,553,347
========= ======== ========== =========== ==========
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 7 1 9 9 6
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Operating Activities:
Net [Loss] Income $ (164,573) $ 199,302
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Adjustments to Reconcile Net Income [Loss]
to Net Cash
[Used for] Operating Activities:
Depreciation and Amortization 9,987 35,118
Bad Debt Expense -- 3,455
Gain on Sale of Securities Available for Sale -- (448,359)
Gain on Sale of Assets (1,836) --
Changes in Operating Assets and Liabilities:
[Increase] Decrease in:
Accounts Receivable 22,232 2,719
Interest Receivable -- --
Start-Up Costs -- (9,553)
Inventory 7,600 (19,785)
Prepaid Expenses and Miscellaneous Receivable (9,874) (10,282)
Deposits 637 --
Increase [Decrease] in:
Accounts Payable and Accrued Expenses 33,184 (22,822)
Deferred Revenue (38,382) (1,712)
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Total Adjustments 23,548 (471,221)
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Net Cash - Operating Activities (141,025) (271,919)
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Investing Activities:
Purchase of Securities Available for Sale -- (426,750)
Purchase of Property and Equipment (1,943) (302,254)
Investment in Limited Partnership -- (1,500,000)
Proceeds from Securities Available for Sale -- 1,337,414
Proceeds from Sale of Asset 7,000 --
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Net Cash - Investing Activities 5,057 (891,590)
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Financing Activities:
Proceeds from Stock Exchange Agreement 900,000 --
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Net Increase [Decrease] in Cash and Cash Equivalents 764,032 (1,163,509)
Cash and Cash Equivalents - Beginning of Periods 1,332,776 2,727,661
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Cash and Cash Equivalents - End of Periods $2,096,808 $ 1,564,152
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Supplemental Schedule of Non-Cash Investing Activities:
During December 1996, the Company entered into Asset Purchase Agreements,
whereby the Company sold substantially all of the assets of five of its karate
centers and received $225,000 in cash [which was held in escrow] and $280,000 in
notes receivable. The $225,000 was released to the Company in April 1997.
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, 1996 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, 1997 and the results of their operations
and their cash flows for the three month periods ended March 31, 1997 and 1996.
It is suggested that these financial statements be read in conjunction with the
financial statements and notes for the year ended December 31, 1996 included in
the Master Glazier's Karate International, Inc. Form 10-KSB.
Earnings per share for the three months ended March 31, 1997 were not adjusted
for the exercise of options and warrants outstanding since their assumed
exercise would be anti-dilutive.
[3] Joint Venture
On June 1, 1995 pursuant to a termination agreement, the Company terminated it's
joint venture agreement with Planet Kids Learning Centers. In connection with
such termination, the Company received it's original $500,000 investment and
$500,000 loan plus accrued interest. In addition, the Company was granted an
option to purchase up to 150,000 shares of common stock of United Leisure
Corporation [the parent company of Planet Kids Learning Centers] at $.01 per
share, during any time until May 31, 2000. In return for the option the Company
agreed to perform consulting services from June 1, 1995 through May 31, 1996.
During November 1995, the Company fully exercised it's option and purchased
150,000 shares of United Leisure Corporation for $1,500. The fair value of the
common shares was $337,500 at December 31, 1995. In February 1996, the Company
sold the shares resulting in a realized gain of $448,359.
[4] Limited Partnership
On March 4, 1996, the Company entered into a limited partnership agreement with
HEP II, L.P. a limited partnership, to license ancillary rights to motion
pictures. The Company has a 49.50% interest in HEP II and does not have any
personal liability to any of the partners, creditors or debts of the
partnership. The Company contributed $1,500,000 to the capital of the
partnership and will receive interest at 7% to be paid quarterly. During 1996,
the Company earned interest of $87,500 on their capital contribution and
received a partnership distribution of $292,000.
For the year ended December 31, 1996, the general partner waived the allocation
of the net loss to the limited partners and agreed to absorb HEP II, L.P.'s
entire loss incurred for the year ended December 31, 1996. There was no
significant activity for the three months ended March 31, 1997 for HEP II.
[5] Asset Purchase Agreement
During March 1997, the Company completed its closing on the sale of
substantially all of the assets of five of its karate centers located in New
Jersey and New York to Tiger Shulmann's Karate ["TSK"]. In consideration for the
purchase of the assets, TSK paid the Company an aggregate of $505,000 at
closing, consisting of $225,000 in cash, and an aggregate of $280,000 in three
promissory notes.
. . . . . . . . . . . . .
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Item 2:
MASTER GLAZIER'S KARATE INTERNATIONAL, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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For the Three Months Ended March 31, 1997 as Compared to Three Months Ended
March 31, 1996
The Company's sales for the three months ended March 31, 1997 were $190,581. The
sales include membership and other goods sold at two of the Company's Karate
Centers. The amount of other goods sold at the Karate Centers amounted to
$14,322.
At March 31, 1996, the Company had sales of $390,139. The sales resulted
primarily from memberships sold at the Karate Centers; $45,703 resulted from the
sale of other goods.
The $199,558 decrease in sales is primarily attributed to the sale of the assets
of five of the Karate Centers and the subsequent closing of operations.
The net [loss] income for the three months ended March 31, 1997 and 1996 was
$(164,573) and $199,302, respectively. The decrease in net income is primarily
attributable to the gain on sales of marketable securities of $448,359 for the
three months ended March 31, 1996. In addition, the Company incurred a
nonrecurring expense of $76,707 for the cancellation of a lease during 1997.
General and administrative expenses decreased by $352,403 for the three month
period ended March 31, 1997 compared to March 31, 1996. The decrease was based
on the decrease in operating expenses pertaining to the five karate centers
which were sold.
The major components of general and administrative expenses for the periods
discussed are as follows:
March 31,
1 9 9 7 1 9 9 6
Salaries and Payroll Taxes $ 143,211 $ 273,781
Rent 40,999 130,543
Other General and Administrative Expenses 108,750 241,039
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Totals $ 292,960 $ 645,363
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Liquidity and Capital Resources
Cash and cash equivalents increased for the three months ended March 31, 1997 by
$764,032 and decreased for the three months ended March 31, 1996 by
$(1,163,509). Cash and cash equivalents utilized for operations for the three
months ended March 31, 1997 and 1996 was $141,025 and $271,919, respectively.
Cash and cash equivalents from investing activities for the three months ended
March 31, 1997 and 1996 was $5,057 and $(891,590), respectively. During 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.
Cash and cash equivalents from financing activities for the three months ended
March 31, 1997 was $900,000. This was a result of the proceeds from the Stock
Exchange Agreement.
7
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 20, 1997 By: /s/ Mark Glazier
---------------------------------
Mark Glazier, Chief Financial Officer
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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 20, 1997 By:
Mark Glazier, Chief Financial Officer
8