Registration No. ____________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________________________________
POST-EFFECTIVE AMENDMENT NO.1
TO FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
__________________________________________________________________
Kids Stuff, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-29334 34-1843520
(State or other jurisdiction (Commission File No.) (I.R.S.
of incorporation) Employer
Identification
No.)
4450 Belden Village Street, N.W., Suite 406, Canton, Ohio 44718
(Address of principal executive offices) (zip code)
__________________________________________________________________
Executive Employment Agreement, dated December 1, 1997, by and
between William L. Miller and Duncan Hill, Inc.
(Full Titles of the Plan)
__________________________________________________________________
William L. Miller
Chairman of the Board and Chief Executive Officer
Kids Stuff, Inc.
4450 Belden Village Street, N.W., Suite 406
Canton, Ohio 44718
Telephone number: (330) 492-8090
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
_______________________________________________
Copy To:
David G. LeGrand, Esq.
Dinsmore & Shohl LLP
Star Bank Center
175 South Third Street
Columbus, Ohio 43215
(614) 628-6880
Fax: (614) 628-6890
Approximate date of proposed commencement of sales hereunder:
As soon as practicable after the effective date of this
Registration Statement.
If the only securities being registered on this form are
being offered pursuant to dividend or interest reinvestment plans,
please check the following box. [ ]
If any of the securities being registered on this form are to
be offered on a delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933, other than the securities
offered only in connection with dividend or interest reinvestment
plans, check the following box. [x]
If this form is filed to register additional securities for
an offering pursuant to Rule 462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and
list the Securities Act registration statement number of the
earlier effective registration statement for the same offering.[ ]
If delivery of the prospectus is expected to be made pursuant
to Rule 434, please check the following box. [ ]
<PAGE>
PROSPECTUS
50,000 Shares
KIDS STUFF, INC.
Common Stock
_______________
William L. Miller, the "Selling Stockholder," is offering for
sale pursuant to this Resale Prospectus 50,000 shares (the
"Shares") of the common stock without par value ("Common Stock")
of Kids Stuff, Inc. (the "Company"). The Selling Stockholder
originally acquired the Shares from the Company June 3, 1998,
pursuant to the terms of an Employment Agreement, dated December
1, 1997, by and between Selling Stockholder and Duncan Hill, Inc.,
which owns approximately 80% of the issued and outstanding voting
securities of the Company ("Duncan Hill"), and the addendum
thereto. The Company will not receive any proceeds from the sale
of the Shares hereunder.
The Shares may be sold by the Selling Stockholder in one or
more transactions, in negotiated transactions or otherwise, at
prices then prevailing or at negotiated prices. The Selling
Stockholder will effect such transactions by selling Shares
through broker-dealer(s) which may act as agents or principals.
Such broker-dealer(s) may receive compensation in the form of
discounts, concessions or commissions from the Selling Stockholder
and/or the purchasers of the Shares for whom such broker-dealers
may act as agents or to whom they sell as principal, or both. In
effecting sales, brokers or dealers engaged by the Selling
Stockholder may arrange for other brokers or dealers to
participate. Commissions or discounts which may be received by
brokers or dealers are not expected to exceed those customary in
the type of transactions involved. The Selling Stockholder and
any persons who act as broker-dealers in connection with the sale
of the Shares offered hereby might be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act of 1933,
as amended (the "Securities Act"), and any commissions received by
them, and any profit on the resale of the Shares as principal, may
under certain circumstances be deemed to be underwriting discounts
and commissions under the Securities Act.
The Company is paying certain of the expenses of registering
the shares of Common Stock under the Securities Act, estimated to
be $6,000 in the aggregate, consisting of all costs incurred in
connection with the preparation of the registration statement. In
addition, the Selling Stockholder will pay or assume accounting
expenses, brokerage commissions or underwriting discounts incurred
in the sale of his securities, which expenses, commissions or
discounts are not being paid or assumed by the Company.
The Common Stock is quoted on the OTC Bulletin Board under
the symbol "KDST". On June 2, 1998, the closing price of the
Common Stock on the OTC Bulletin Board was 3-9/16 per share.
__________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
____________
The date of this Prospectus is June 3, 1998.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended ("Exchange Act"),
and in accordance therewith files reports, proxy statements and
other information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy statements and other
information concerning the Company can be inspected and copied at
the Public Reference Room of the Commission, Room 1024, 450 Fifth
Street, NW, Washington, D.C. and at the Commission's regional
offices at 500 West Madison Street, 14th Floor, Chicago, Illinois
60661 and Two World Trade Center, Suite 1300, New York, New York
10048. Copies of this material can be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, NW,
Washington, D.C. 20549, at prescribed rates. The Commission also
maintains an Internet website at http://www.sec.gov from which
copies of documents electronically filed with the Commission may
also be obtained.
The Company has filed with the Commission in Washington,
D.C., a Registration Statement on Form S-8 (the "Registration
Statement") under the Securities Act, with respect to the Shares
offered by this Prospectus. This Prospectus, which constitutes a
part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement and the
exhibits thereto. For further information with respect to the
Company and the Shares, reference is made to the Registration
Statement and the exhibits incorporated therein by reference or
filed as a part thereof. Statements made in this Prospectus as to
the contents of any contract, agreement or other document referred
to are not necessarily complete; with respect to each such
contract, agreement or other document filed or incorporated by
reference as an exhibit to the Registration Statement, reference
is made to the exhibit for a complete description of the matter
involved, and each such statement shall be deemed qualified in its
entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the
Commission are hereby incorporated by reference: (i) the
Certificate of Incorporation of the Registrant, and the
certificate of amendment thereto, contained as an exhibit to the
Company's Form 10-KSB, dated April 1, 1998; (ii) the Bylaws of the
Company, contained as an exhibit to the Company's Form 10-KSB,
dated April 1, 1998; (iii) the Form 10-KSB, dated April 1, 1998;
(iv) the Form 10-QSB, dated May 15, 1998.
All documents filed by the Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the
date of this Prospectus and prior to the termination of the
offering of the Shares covered by this Prospectus shall be deemed
to be incorporated by reference into this Prospectus and to be a
part hereof from the date of filing of such documents.
Any statement contained in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a
part of this Prospectus.
The Company will provide without charge to each person to
whom a Prospectus is delivered upon written or oral request of
such person, a copy of any or all documents incorporated herein by
reference (other than exhibits to such documents unless such
exhibits are specifically incorporated by reference into such
documents). Requests for copies should be directed to William L.
Miller, Chief Executive Officer, Kids Stuff, Inc., 4450 Belden
Village Street, N.W., Suite 406, Canton, Ohio, 44718, telephone:
(330) 492-8090.
TABLE OF CONTENTS
Available Information ii
Incorporation of Certain Documents by Reference ii
Risk Factors 1
The Company 7
Selling Stockholder 8
Plan of Distribution 8
Indemnification 9
No person is authorized to give any information or make any
representations other than those contained or incorporated by
reference in this Prospectus, in connection with the offering
referred to herein and, if given or made, such information or
representation must not be relied upon as having been authorized
by the Company or the Selling Stockholder. This Prospectus does
not constitute an offer to sell or a solicitation of any offer to
buy the securities registered hereby in any jurisdiction to any
person to whom it is unlawful to make such offer or solicitation
in such jurisdiction. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of the
Company since the date hereof or that the information contained or
incorporated by reference herein is correct as of any time
subsequent to its date.
RISK FACTORS
An investment in the securities offered hereby is speculative
and involves a high degree of risk and substantial dilution and
should only be purchased by investors who can afford to lose their
entire investment. Each prospective investor should carefully
consider the following risk factors inherent in, and affecting the
business of, the Company and this Offering, together with the
other information in this Prospectus, before making an investment
decision.
History of Operating and Net Losses. Despite a gain of
$50,097 for the year ended December 31, 1997, the Company
experienced significant losses for the years ended December 31,
1996 and 1995. For 1996 the Company incurred an operating loss of
$527,125 and a net loss of $521,640. For 1995 the Company
incurred an operating loss of $545,602 and a net loss of $536,992.
The increase in revenues for 1997 is attributed to the acquisition
of The Natural Baby Catalog and decreased selling expenses as a
percentage of net sales. A substantial portion of the losses for
1996 and 1995 are associated with the establishment and
development of the Jeannie's Kids Club Catalog, beginning in July,
1995. The Company believes that in order to achieve profitability
with respect to its two current children's catalogs, the
membership of Jeannie's Kids Club will need to reach a sustainable
level of 45,000 members. Currently, there are approximately
34,000 members. There can be no assurances that the Company will
increase the membership of Jeannie's Kids Club to profitable
levels or that the Company will not continue to incur net losses
in the future. Additionally, while the Company estimates that
through the consolidation of the operations of The Natural Baby
Catalog, it can save $200,000 in direct labor costs and $450,000
in general and administrative costs, there can be no assurance
that these estimates can be achieved or sustained.
Uncertainty as to Future Operating Results. The Company's
revenue growth and future profitability will depend on its ability
to integrate and grow The Natural Baby Catalog operations, to
increase catalog sales, to expand the membership of Jeannie's Kids
Club and to monitor and control costs effectively. In 1997, the
Company consolidated the warehouse, telemarketing, data processing
and administrative functions of The Natural Baby Catalog into the
operations of the Company and intends to maintain its growth.
Also, the Company intends to focus marketing efforts on expanding
Jeannie's Kids Club membership, because it believes that there is
a substantial market for this type of home shopping service. The
Company also plans to test and develop new methods of customer
acquisition. There can be no assurance that the Company will
operate profitability in the future, since its future operating
results depend on a number of factors, including general economic
conditions, the success in attracting and retaining new customers
and the level of competition.
Services Provided to Havana. Since 1997, the Company has
provided administrative and fulfillment services to an affiliate,
The Havana Group, Inc. ("Havana"). Effective January 1, 1998,
Havana entered into an agreement with the Company in which the
Company provides administrative functions to Havana at an annual
cost of $206,100, consisting of $34,000 for accounting and payroll
services; $51,600 for administration and human resource
management; $34,900 for data processing; $32,200 for office
equipment and facilities use; $38,100 for merchandising and
marketing services and $15,300 for purchasing services. The
Company will provide fulfillment services to Havana at a cost of
$2.40 per order processed. Havana also is obligated to pay the
Company an amount equal to 5% of Havana's 1998 pre-tax profits.
These fees are based on the actual costs to Havana for such
services in 1997. There can be no assurance that these fees will
provide an accurate estimate of the 1998 costs to the Company of
providing such services to Havana.
Costs Increases in Postage and Paper. Postal rates and paper
costs affect the cost of the Company's order fulfillment and
catalog and promotional mailings. The Company relies heavily on
the rate structure of the United States Postal Services ("USPS")
and strives for discounts for bulk mailings. Like others in the
catalog industry, the Company passes along a significant portion
of its shipping and handling expense, but does not pass along
costs of preparing and mailing catalogs and other promotional
materials. In recent years, the USPS has increased its rate for
both the mailing of catalogs and packages. In January 1995, the
price of paper available to the Company increased 95%, resulting
in increased catalog production costs and contributing to
operating loses in 1995. Although paper prices decreased in 1996,
any future significant increases in postal rates or paper costs
could have a material adverse effect on the Company's business,
financial condition and results of operation, unless the Company
is successful in developing new methods for acquiring new
customers so that it need not rely upon catalog circulation as the
sole method to acquire new customers.
Need to Develop New Methods for Acquiring New Customers.
Historically, the Company has relied upon catalog circulation as
the sole method to acquire new customers. Because of the
relatively short life of the acquired customer (prenatal to age
three) and the increasing costs of catalog mailings, the Company
believes that its future growth and profitability will be largely
dependent upon the Company's ability to develop alternative
customer acquisition programs.
Fluctuations in Operating Results. The Company's operating
results may vary from quarter-to-quarter depending on the number
of catalogs mailed during the quarter and the relative
profitability of the mailing lists used for the catalog mailings.
The relative profitability of the mailing lists used for a
particular mailing is determined by the mailing list mix between
the Company's existing in-house lists and lists rented from
outside sources. Some rental lists turn-out to be profitable (or
more profitable) and others do not. On occasion, a rental list
which has proven to be profitable in the past may experience an
inexplicable short-term unsatisfactory result. Since 1994, the
Company has experienced a quarterly fluctuation of approximately
105% on one occasion, quarterly fluctuations of between 45% and
65% on three occasions, and fluctuations of between 10% and 30% on
four occasions.
Competition. The mail order catalog business is highly
competitive. The Company's catalogs compete with other mail order
catalogs and retail stores, including department stores, specialty
stores, discount stores and mass merchants. Many of the Company's
competitors have greater financial, distribution and marketing
resources than the Company. There can be no assurance that the
Company will be able to compete effectively with existing or
potential competitors.
Upon its introduction of Jeannie's Kids Club Catalog in July,
1995, the Company experienced a competitive reaction which
resulted in three other children's catalogs refusing to exchange
with, or rent their mailing lists to, the Company. There can be
no assurance that such a competitive reaction will not occur with
respect to children's catalogs from which The Natural Baby Catalog
rents mailing lists, or that such an occurrence would not have an
adverse effect upon the profitability of The Natural Baby Catalog.
Dependence Upon Key Personnel; Need for Additional Personnel.
The success of the Company is highly dependent upon the continued
services of William L. Miller, the Company's Chairman of the Board
and Chief Executive Officer, and Jeanne E. Miller, the Company's
President. Mr. Miller, one of the co-founders of the Company's
parent, is principally responsible for the strategic planning and
development of the Company. Mr. Miller, however, is not required
to devote his full time attention to managing the affairs of the
Company. Mrs. Miller, the other co-founder of the Company's
parent, Duncan Hill, is primarily responsible for the merchandise
selection, design and production of the catalog. Both Mr. and
Mrs. Miller have entered into five-year employment agreements with
the Company. However, if the employment by the Company of either
Mr. or Mrs. Miller is either terminated or not renewed, or if
either of them is unable to perform his or her duties, there could
be a material adverse effect upon the business of the Company
until a suitable replacement was found. The Company will attempt
to obtain a $1 million key man life insurance policy on each of
Mr. and Mrs. Miller, who are husband and wife.
The Natural Baby Catalog was founded by Jane Martin and
reflects her beliefs and philosophy. Mrs. Martin will continue to
be primarily responsible for the merchandise selection, design and
production of the Natural Baby Catalog pursuant to a two year
consulting agreement with the Company. If her consulting
engagement with the Company is either terminated or not renewed,
or if she is unable to perform her duties, there could be a
material adverse effect upon the business of the Company until a
suitable replacement was found.
The success of the Company's future growth and profitability
will depend, in part, on the Company's ability to recruit and
retain additional qualified personnel over time, including a
suitable candidate to succeed Mr. Miller, who is 60 years of age,
as Chief Executive Officer. There can be no assurance, however,
that the Company will be able to retain such additional qualified
personnel, once recruited, or recruit other qualified personnel.
Lack of Independent Appraiser. The Company did not engage an
independent appraiser in connection with its acquisition of The
Natural Baby Catalog. Since independent valuations of such
business were not conducted, the Company may have paid, upon the
closing of the acquisition of The Natural Baby Catalog, a purchase
price in excess of its fair value.
Potential Product Liability. While the Company endeavors to
sell safe products, there is a possibility that someone could
claim personal injury or property damage resulting from the use of
products purchased from the Company. Although the Company does
not manufacture its products, as a seller of products, the Company
is exposed to potential liability. The Company maintains product
liability insurance for itself. Currently, the amount of coverage
is $1 million per occurrence, $2 million in the aggregate and an
umbrella with identical limits of coverage. Although the Company
believes that its present insurance coverage is sufficient for its
current level of business operations, there is no assurance that
such insurance will be available to the Company in the future or
that it will continue to be sufficient for the Company's purposes.
A partially or completely uninsured successful claim against the
Company or a successful claim in excess of the liability limits or
relating to an injury excluded under the policy could have a
material adverse effect on the Company.
The Company's Chief Executive Officer is Not Required to Work
Full Time; Potential Conflict of Interest. William L. Miller, is
a co-founder of the Company's parent, Duncan Hill, which has other
operating subsidiaries. Mr. Miller is currently the President of
Duncan Hill and its other subsidiaries, as well as Chairman of the
Board of Directors and Chief Executive Officer of the Company Mr.
Miller's employment agreement with the Company provides that he
shall be permitted to devote such time to managing the various
other Duncan Hill entities as he deems appropriate. Accordingly,
Mr. Miller cannot devote his full-time attention to managing the
operations of the Company. Thus, a conflict of interest could
potentially develop to the extent that Mr. Miller is not able to
devote his full time attention to a matter that would otherwise
require the full time attention of a business' chief executive
officer. Because the businesses of Duncan Hill's other
subsidiaries in no way relate to the children's catalog business
of the Company, the Company does not believe that there is a
reasonable potential for any other type of conflicts of interest,
such as competition for business opportunities. Thus the Company
and Duncan Hill have not adopted any procedure for dealing with
conflicts of interest.
Limited Number of Management Personnel. There are currently
only two executive officers of the Company, who are husband and
wife. In addition, one of those two officers, the Chief Executive
Officer, will not be devoting his full time attention to the
management of the Company. Thus, there can be no assurance that,
if the Company grows, the current management team will be able to
continue to properly manage the Company's affairs. Further, there
can be no assurance that the Company will be able to identify
additional qualified managers on terms economically feasible to
the Company.
Potential Adverse Effect of the Severance Compensation
Applicable to the Company's Two Executive Officers. Each of the
employment agreements for the Company's two executive officers
provides for severance compensation to be paid to them in all
instances other than the executive's termination for cause. The
minimum amount of such severance will be equal to the sum of the
executive's salary and bonus paid in the year preceding the year
when such severance is to be paid ("base severance"). The maximum
amount of such severance is equal to the base severance multiplied
by 2.99. The payment of any severance compensation under any of
the two employment agreements within the foreseeable future would
likely have a materially adverse impact upon the Company.
Assuming that severance payments were due to each of the executive
officers as of the date of the Prospectus under the immediately
preceding sentence, the amount of the severance payment to each of
Mr. Miller and Mrs. Miller would be $299,000 and $194,350,
respectively. There can be no assurance that the payment of any
such severance compensation at any time in the future would not
have a materially adverse impact upon the Company.
Control by Parent and Parent's Controlling Stockholders.
Duncan Hill, the Company's parent, owns approximately 57% of the
Company's outstanding Common Stock and 100% of the Company's
outstanding Series A Preferred Stock (5,000 shares) which has the
same voting privileges as the Common Stock. As a result, Duncan
Hill will remain in a position to effectively elect all of the
directors of the Company and control its affairs and policies.
William L. Miller and Jeanne E. Miller, his wife, the Company's
respective Chief Executive Officer and President, each
respectively own 53.9% and 9.7% of the shares of the outstanding
common stock of Duncan Hill, and thus are in a position to
exercise effective control over the affairs of the Company through
their effective control over the affairs of Duncan Hill. Ultimate
voting control by the Millers may discourage certain types of
transactions involving an actual or potential control of the
Company, including transactions in which the public holders of the
Common Stock might receive a premium for their shares over
prevailing market prices.
The Board of Directors Consists of One Outside Director. The
Board of Directors consists of three members, two of which
(William L. Miller and Jeanne E. Miller) are insiders and
principal stockholders. Mr. and Mrs. Miller are also husband and
wife. Accordingly, such individuals will be in a position to
control the actions and decisions of the Board of Directors.
Limitation on Director Liability. As permitted by Delaware
law, the Company's certificate of incorporation limits the
liability of directors of the Company from monetary damages from a
breach of a director's fiduciary duty except for liability in
certain instances. As a result of the Company's charter provision
and Delaware law, stockholders may have limited rights to recover
against directors for breach of fiduciary duty.
Data Processing and/or Telephone Systems May Adversely Affect
the Company's Business. The Company's ability to effectively
promote products, manage inventory, efficiently purchase, sell and
ship products, and maintain cost-effective operations are each
dependent upon the accuracy, capability and proper utilization of
the Company's data processing and telephone systems. The Company
will need to enhance the capacity and capabilities of these
systems from time to time to support its anticipated growth and
remain competitive, commencing with the intended replacement of
the Company's current computer hardware and system software. The
Company's telemarketing, customer service and management
information systems functions are housed in a single facility
located at its headquarters. The Company has a disaster recovery
program through its computer and telephone systems vendors. The
Company also creates a back-up tape for off-site storage of its
customer list and computer information. However, a significant
disruption or loss affecting the telephone or computer systems or
any significant damage to the Company's headquarters could have a
material adverse effect on the Company's business.
Need to Keep Current With Technological Changes. The direct
marketing industry may be affected by ongoing technological
developments in distribution and marketing methods such as on-line
catalogs and Internet shopping. As a result, the Company's future
success will depend on its ability to keep pace with technological
developments and respond to new customer requirements. There can
be no assurance that the Company's current marketing methods will
remain competitive in light of future technological innovations.
Anti-Takeover Measures. The Company is subject to a Delaware
statute regulating business combinations that may serve to hinder
or delay a change in control of the Company, in addition to those
matters relating to control of the Company discussed immediately,
above. Also, pursuant to the Company's certificate of
incorporation, the Company's Board of Directors may from time to
time authorize the issuance of up to an additional 5,000,000
shares preferred stock in one or more series having such
preferences, rights and other provisions as the Board of Directors
may decide. Any such issuances of preferred stock could, under
certain circumstances, have the effect of delaying or preventing a
change in control of the Company and may adversely affect the
rights of the holders of the Company's Common Stock and the market
for those shares. There are no other provisions, however, in the
Company's certificate of incorporation or bylaws which would serve
to delay, defer, or prevent a takeover of the Company.
No Cash Dividends. The Company has never paid cash dividends
on its Common Stock and does not anticipate paying cash dividends
in the foreseeable future. The Company intends to retain future
earnings, if any, to finance its growth.
Possible Change of State Sales Tax Laws. Under current law,
catalog retailers are permitted to make sales in states where they
do not have a physical presence (e.g. offices) without collecting
sales tax. Congress, however, has the power to change these laws.
Since 1987, legislation has been introduced periodically in the
U.S. Congress which would permit states to require sales tax
collection by mail order companies. To date, this proposed
legislation has not been passed. Should Congress, however, pass
such legislation in the future, most states could be expected to
require sales tax collection by out-of-state mail order companies.
This would increase the cost of purchasing the Company's products
in those states and eliminate whatever competitive advantage that
the Company may currently enjoy with respect to in-state
competitors in terms of sales taxation, as well as increasing the
administrative and overhead costs to the company in connection
with the collection of such sales tax.
Institutional Credit Facility. Effective June 30, 1996, the
Company assumed Duncan Hill's liability under Duncan Hill's
$800,000 working line of credit facility provided by the United
National Bank and Trust Company (the "Bank") to the Company. The
Bank opened an $800,000 line of credit in the Company's name
effective December 31, 1996, and simultaneously terminated Duncan
Hill's line of credit. The $650,000 amount outstanding under
Duncan Hill's line of credit was transferred upon termination to
the line of credit opened in the Company's name. Almost all of
these borrowings were used to finance the Company's operations.
The line of credit is for an open term, payable upon demand. The
facility is secured by the assets of the Company, as well as the
assets of Duncan Hill and Havana. The repayment of the facility
is guaranteed by William Miller and Havana. The amount
outstanding under the facility as of March 18, 1998 is
approximately $732,000. Interest is charged at the rate of 1%
over prime.
It is the policy of the Bank to review the credit facility
annually, and to require that the Company maintain a zero balance
on the credit line for a period of thirty consecutive days
sometime during the course of each year. The Bank agreed to waive
the "zero balance" required for the 1997 loan year ending June 30,
1997, because the Company's cash flow would not allow it to comply
before then.
Regulatory Matters. The Company's business, and the catalog
industry in general, is subject to regulation by a variety of
state and federal laws relating to advertising and product safety
including, without limitation, the laws promulgated by the Federal
Trade Commission and by the Consumer Product Safety Commission.
The Company believes that it is in material compliance with
all applicable governmental rules and regulations. However, there
can be no assurance that any changes in such rules and regulations
will not adversely affect the Company's business or that continued
compliance with such rules and regulations will not adversely
affect the Company's financial position.
Trademark and Trade Names. The Company owns four federally
registered trademarks: "Perfectly Safe", "Perfectly Safe, The
Catalog For Parents Who Care" with logo; "Perfectly Safe
Guarantee" with logo; and logo. The Company plans to register its
mark, "Jeannie's Kids Club," as a unique identification of its
Jeannie's Kids Club Catalog. With the recent acquisition of The
Natural Baby Catalog, the Company acquired the ownership of the
trademark "The Natural Baby Co., Inc." with logo, which is a
federally registered trademark. There can be no assurance as to
the extent of the protection that will be provided to the Company
as a result of having such trademarks and trade names or that the
Company will be able to afford the expenses of any complex
litigation which may be necessary to enforce these proprietary
rights.
Brief History of Public Market; Market Volatility. The
Common Stock of the Company has been available to the public for
only twelve months. There can be no assurance that, following
this Offering, an active public trading market will be sustained
or that the Common Stock will be resold at or above the Offering
price. Additionally, the market price of the Company's securities
may trade below the Offering price in response to changes in the
general condition of the economy or the retail and catalog
business, as a whole, as well as in response to the Company's
periodic financial results which may fluctuate quarterly as a
result of several factors, including the timing of catalog
mailings and changes in the selection of merchandise offered and
sold.
Certain Implications of Trading Over-The-Counter; "Penny
Stock" Regulations. The Company's Common Stock is quoted over-the-counter
on the Nasdaq OTC Electronic Bulletin Board. An
investor may find it more difficult to dispose of, or obtain
quotations as to the price of the Company's securities trading
over-the-counter than he or she would, had the Company applied to
list its securities on a national securities exchange, such as the
Nasdaq SmallCap market.
The Securities and Exchange Commission has adopted "penny
stock" regulations which apply to certain securities traded over-the-counter.
The regulations generally define "penny stock" with
respect to a number of criteria including, without limitation, the
characteristic of having a market price of less than $5.00 for a
particular transaction. Subject to certain limited exceptions,
the rules for any transaction involving a "penny stock" require
the delivery by a broker-dealer, prior to a transaction involving
penny stock, of a risk disclosure document prepared by the
Commission that contains certain information describing the nature
and level of risk associated with investments in the penny stock
market. The broker-dealer also must disclose the commissions
payable to both the broker-dealer and the registered
representative and current quotations for the securities. Monthly
account statements must be sent by the broker-dealer disclosing
the estimated market value of each penny stock held in the account
or indicating that the estimated market value cannot be determined
because of the unavailability of firm quotes. In addition, the
rules imposed additional sales practice requirements on broker-dealers
who sell such securities to persons other than established
customers and institutional credited investors (generally
institutions with assets in excess of $5,000,000). These
practices require that, prior to the purchase, the broker-dealer
have determined that transactions in penny stocks were suitable
for the purchaser and obtained the purchaser's written consent to
the transaction.
The Company's Common Stock, as of the time of this Offering,
appears to fulfill some of the elements of "penny stock," thus it
cannot be assured that, at the time of any subsequent offering by
broker-dealers, the Common Stock will not be subject to the
additional risk disclosure documentation requirements of the
Securities and Exchange Commission with respect to "penny stock."
Future investors should be aware that the "penny stock" rules may
restrict the ability of broker-dealers to sell the Company's
securities, may affect the ability of investors to sell the
Company's securities in the secondary market, and may adversely
affect the price of the Company's securities.
Limits on Secondary Trading. Purchasers in this Offering and
future purchasers of the Company's securities in the secondary
market may be restricted or prohibited from re-selling the
securities in particular states as a result of applicable blue sky
laws. These restrictions may reduce the liquidity of the
securities and including their market price.
THE COMPANY
Kids Stuff, Inc. is a specialty direct marketer that
currently publishes three catalogs for children's products,
focusing on children ages prenatal to three years: "Perfectly
Safe, The Catalog for Parents Who Care ," "Jeannie's Kids Club"
and "The Natural Baby Catalog." The Company acquired the assets
and operations of "The Natural Baby Catalog" in July 1997 from The
Natural Baby Co., a mail order retailer of children's clothing and
toys. The purchase was funded from the proceeds of an initial
public offering.
"Perfectly Safe" and "Jeannie's Kids Club" emphasize
primarily children's hardgood products (i.e., products made from
materials other than fabric) and "The Natural Baby Catalog"
specializes in children's products made from natural fibers.
The Company is a subsidiary of Duncan Hill. Duncan Hill is
the developer and marketer of a designer line of smoking pipes,
tobacco and accessories, and also operates a pipe, tobacco and
cigar mail order catalog called, "Carey's Smoke Shop."
The Company, at March 31, 1998, employed 35 full-time and 15
part-time customer service telemarketing employees, and, during
1996 and 1997, processed over 708,497 telephone orders, catalog
requests and service requirements.
The Company was incorporated in July, 1996. The Company's
principal executive offices are located at 4450 Belden Village
Street, N.W., Suite 406, Canton, Ohio 44718. Its telephone number
at its principal executive office is (330) 492-8090.
SELLING STOCKHOLDER
The Selling Stockholder acquired the Shares on June 3, 1998,
pursuant to the terms of an Executive Employment Agreement between
Selling Stockholder and Duncan Hill, dated December 1, 1997, and
the addendum thereto, dated June 1, 1998.
The following table sets forth information as of March 31,
1998, with respect to beneficial ownership of Common Stock by the
Selling Stockholder and has been provided to the Company by the
Selling Stockholder(3):
Prior to After the
Offering Offering (2)
________ ____________
Shares Shares to Shares
Name of Selling Beneficially be Sold in Beneficially
Shareholder (1) Owned Percent Offering Owned Percent
________________ ________________ __________ __________________
William L. Miller 2,390,000 67.6% 50,000 2,340,000 66.2%
(1) Persons named in this table have sole voting and
investment power with respect to all Shares shown as
beneficially owned by them, subject to community
property laws, where applicable.
(2) The information provided in this column assumes that
the Selling Stockholder will offer for sale all Shares
beneficially owned by them, although there can be no
assurance that any of the Selling Stockholder will in
fact sell all or any specific portion of such Shares.
(3) This table does not include preferred stock, of which
Mr. Miller beneficially owns 5,000,000 shares, or 100%
of the Class A Nonvoting Preferred Stock.
PLAN OF DISTRIBUTION
General
The Company is paying certain of the expenses of registering
the shares of Common Stock under the Securities Act, estimated to
be $6,000 in the aggregate, consisting of all costs incurred in
connection with the preparation of the registration statement. In
addition, the Selling Stockholder will pay or assume accounting
expenses, brokerage commissions or underwriting discounts incurred
in the sale of his securities, which expenses, commissions or
discounts are not being paid or assumed by the Company.
The Shares may be sold by the Selling Stockholder in one or
more transactions, in negotiated transactions or otherwise, at
prices then prevailing or at negotiated prices. The Selling
Stockholder will effect such transactions by selling Shares
through broker-dealer(s) which may act as agents or principals.
Such broker-dealer(s) may receive compensation in the form of
discounts, concessions or commissions from the Selling Stockholder
and/or the purchasers of the Shares for whom such broker-dealers
may act as agents or to whom they sell as principal, or both. In
effecting sales, brokers or dealers engaged by the Selling
Stockholder may arrange for other brokers or dealers to
participate. Commissions or discounts which may be received by
brokers or dealers are not expected to exceed those customary in
the type of transactions involved. The Selling Stockholder and
any persons who act as broker-dealers in connection with the sale
of the Shares offered hereby might be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act of 1933,
as amended (the "Securities Act"), and any commissions received by
them, and any profit on the resale of the Shares as principal, may
under certain circumstances be deemed to be underwriting discounts
and commissions under the Securities Act.
The Selling Stockholder intends to sell his shares of Common
Stock through a broker-dealer in the over-the-counter market, or
otherwise, on terms and conditions and at prices determined at the
time of the sale by the Selling Stockholder. Expenses of any such
sale will be borne by the parties as they may agree.
INDEMNIFICATION
The Company's certificate of incorporation contains a
provision eliminating the personal monetary liability of directors
to the extent allowed under the General Corporation Law of the
State of Delaware. Under the provision, a stockholder is able to
prosecute an action against a director for monetary damages only
if he can show a breach of the duty of loyalty, a failure to act
in good faith, intentional misconduct, a knowing violation of law,
an improper personal benefit or an illegal dividend or stock
repurchase, as referred to in the provision, and not "negligence"
or "gross negligence" in satisfying his duty of care. In
addition, the provision applies only to claims against a director
arising out of his role as a director and not, if he is also an
officer, his role as an officer or in any other capacity or to his
responsibilities under any other law, such as the federal
securities laws. The provision, however, does not affect the
availability of seeking equitable relief against a director of the
Company. In addition, the Company's bylaws provide that the
Company will indemnify its directors, officers, employees and
other agents to the fullest extent permitted by Delaware law.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, the Company has been advised that, in
the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
