UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Amendment No. 1
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended
July 31, 1999
Commission File Number: 0-26439
KidsToysPlus.com, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada, 98-0203927
- ------------------------ ------------------------
(Place of Incorporation) (IRS Employer ID Number)
1000-355 Barrard Street Vancouver, British Columbia V6C 2G8
-----------------------------------------------------------
(Address of registrant's principal executive office)
(250) 877-566-1212
-------------------------------
(Registrant's telephone number)
Indicate by check mark whether the registrant has (1) filed all reports required
to be filed by Section 13 of 15(d) of the Securities 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 ___
Number of Shares of Common Stock, $0.001 Par Value Outstanding
at September 30, 1999
9,968,084
<PAGE>
KIDSTOYSPLUS.COM, INC.
For the Quarter Ended
July 31, 1999
INDEX TO FORM 10-QSB
<TABLE>
Page
----
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Balance Sheets:
- July 31, 1999 and April 30, 1999..............................................................1
Statements of Operations:
- For the Three Months Ended July 31, 1999 and
Period February 4, 1999 to July 31, 1999......................................................2
Statement of Changes in Stockholders' Equity
- July 31, 1999.................................................................................3
Statements of Cash Flow:
- For the Three Months Ended July 31, 1999 and
Period February 4, 1999 to July 31, 1999......................................................4
Notes to Financial Statements ...........................................................................5
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations............................................................12
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.............................................................................17
ITEM 2. CHANGES IN SECURITIES.........................................................................17
ITEM 3. DEFAULTS UPON SENIOR SECURITIES...............................................................17
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.............................................17
ITEM 5. OTHER INFORMATION.............................................................................17
ITEM 6. EXHIBITS AND REPORTS ON FROM 8-K..............................................................17
</TABLE>
-i-
<PAGE>
ITEM 1. FINANCIAL STATEMENTS:
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
(Unaudited - Prepared by Management)
(Expressed in US dollars)
JULY 31, 1999
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
BALANCE SHEET
(Expressed in US dollars)
(Unaudited - Prepared by Management)
================================================================================
<TABLE>
(Audited)
July 31, April 30,
1999 1999
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current
Cash and cash equivalents $ 187,686 $ 221,924
Prepaid expenses 10,000 8,312
-----------------------------
$ 197,686 $ 230,236
===============================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities $ 22,278 $ 2,000
Due to related party - 1,100
-----------------------------
22,278 3,100
-----------------------------
Stockholders' equity Capital stock (Note 5)
Authorized
25,000,000 Common shares with a par value of $0.001
Issued
9,968,084 Common shares 9,968 9,968
Additional paid-in capital 239,274 239,274
Stock subscriptions receivable (Note 7) (5,500) (5,500)
Deficit, accumulated during the development stage (68,334) (16,606)
-----------------------------
175,408 227,136
$ 197,686 $ 230,236
===============================================================================================================
</TABLE>
History and organization of the Company (Note 1)
On behalf of the Board:
Director Director
- ----------------------------- ---------------------------------
The accompanying notes are an integral part of these financial statements.
-1-
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
(Expressed in US dollars)
(Unaudited - Prepared by Management)
================================================================================
<TABLE>
Three Month Period from
Period February 4,
Ended 1999 to
July 31, 1999 July 31, 1999
--------------------------------------------------------------------------------------------- ----------------
<S> <C> <C>
INTEREST INCOME $ 1,951 $ 2,506
-------------- --------------
EXPENSES
Consulting fees 30,177 36,277
Legal and accounting 15,136 19,060
Management fees - 2,800
Meals and entertainment 714 714
Office and miscellaneous 2,561 5,631
Printing 2,128 2,128
Rent - 500
Telephone 544 1,311
Travel and related 2,399 2,399
-------------- --------------
53,679 70,840
-------------- --------------
Loss for the period $ (51,728) $ (68,334)
============================================================================================= ================
Basic and fully diluted loss per share $ (0.01) $ (0.01)
============================================================================================= ================
Weighted average shares outstanding 9,968,084 7,455,201
============================================================================================= ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
-2-
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Expressed in US dollars)
(Unaudited - Prepared by Management)
================================================================================
<TABLE>
============================================================================================================================
Deficit,
Common Shares Issued Stock Accumulated
------------------------------ Additional Sub- During the
Paid in scriptions Development
Number Amount Capital Receivable Stage Total
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, February 4,
1999 - $ - $ - $ - $ - $ -
Shares issued for cash
at $0.001 per share 100,000 100 - - - 100
Shares subscribed for
cash at $0.001 per
share 5,500,000 5,500 - (5,500) - -
Shares issued for cash
at $0.01 per share 3,960,000 3,960 35,640 - - 39,600
at $0.50 per share 408,084 408 203,634 - - 204,042
Loss for the period - - - - (68,334) (68,334)
-------------- -------------- -------------- ------------- -------------- --------------
Balance, July 31,1999 9,968,084 $ 9,968 $ 239,274 $ (5,500) $ (68,334) $ 175,408
============================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
(Expressed in US dollars)
(Unaudited - Prepared by Management)
PERIOD FROM INCORPORATION ON FEBRUARY 4, 1999 TO JULY 31, 1999
================================================================================
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the period $ (68,334)
Changes in other operating assets and liabilities
Increase in prepaid expenses (10,000)
Increase in accounts payable and accrued liabilities 22,278
--------------
22,278
Net cash used in operating activities (56,056)
---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital stock issued for cash 243,742
Cash and cash equivalents, end of period $ 187,686
=========================================================================================================
Cash paid during the period for interest $ -
=========================================================================================================
Cash paid during the period for income taxes $ -
=========================================================================================================
</TABLE>
Supplemental disclosure for non-cash operating, financing and investing
activities (Note 9).
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in US dollars)
(Unaudited - Prepared by Management)
JULY 31, 1999
================================================================================
1. HISTORY AND ORGANIZATION OF THE COMPANY
The Company was incorporated on February 4, 1999 under the laws of the
state of Nevada. The Company currently has no operations and, in accordance
with SFAS #7, is considered a development stage company.
In the opinion of management, the accompanying financial statements contain
all adjustments necessary (consisting only of normal recurring accruals) to
present fairly the financial information contained therein. These
statements do not include all disclosures required by generally accepted
accounting principles and should be read in conjunction with the audited
financial statements of the Company for the period ended April 30, 1999.
The results of operations of the period from incorporation on February 4,
1999 to July 31, 1999 are not necessarily indicative of the results to be
expected for the year ending January 31, 2000.
2. GOING CONCERN
The Company's financial statements are prepared using the generally
accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities in
the normal course of business. However, the company has no current source
of revenue. Without realization of additional capital, it would be unlikely
for the Company to continue as a going concern. It is management's plan to
seek additional capital through a private placement.
---------------------------------------------------------------------------
July 31,
1999
---------------------------------------------------------------------------
Deficit accumulated during the development stage $ (68,334)
Working capital surplus 175,408
===========================================================================
3. SIGNIFICANT ACCOUNTING POLICIES
Cash and cash equivalents
Cash and cash equivalents include highly liquid investments with original
maturities of three months or less.
Revenue recognition
Revenues from products and services are recognized at the time the goods
are shipped or services provided to the customer, with an appropriate
provision for returns and allowances.
Fiscal year-end
The fiscal year end of the Company is January 31.
-5-
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in US dollars)
(Unaudited - Prepared by Management)
JULY 31, 1999
================================================================================
3. SIGNIFICANT ACCOUNTING POLICIES (cont'd.....)
Stock-based compensation
FASB Statement No. 123, "Accounting for Stock-Based Compensation",
encourages, but does not require, companies to record compensation cost for
stock-based employee compensation plans at fair value. The Company has
chosen to account for stock-based compensation using Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees".
Accordingly, compensation cost for stock options is measured as the excess,
if any, of the quoted market price of the Company's stock at the date of
the grant over the amount an employee is required to pay for the stock.
Income taxes
Income taxes are provided in accordance with Statement of Financial
Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes". A
deferred tax asset or liability is recorded for all temporary differences
between financial and tax reporting and net operating loss carryforwards.
Deferred tax expenses (benefit) results from the net change during the year
of deferred tax assets and liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all
of the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates
on the date of enactment.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Reporting comprehensive income
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income", is effective for years beginning after December 15,
1997. The primary objective of this statement is to report and disclose a
measure ("Comprehensive Income") of all changes in equity of a company that
result from transactions and other economic events of the period other than
transactions with owners. The Company does not anticipate that the
statement will have significant impact on its future financial statements.
Disclosure about segments of an enterprise and related information
Statement of Financial Accounting Standards No. 131, "Disclosure About
Segments of an Enterprise and Related Information", is effective for years
beginning after December 15, 1997. This statement requires use of the
"management approach" model for segment reporting. The management approach
model is based on the way a company's management organizes segments within
the company for making operating decisions and assessing performance.
Reportable segments are based on products and services, geography, legal
structure, management structure, or any other manner in which management
disaggregates a company. The Company does not anticipate that the adoption
of the statement will have a significant impact on its financial statements
other than potentially providing more financial statement disclosures.
-6-
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in US dollars)
(Unaudited - Prepared by Management)
JULY 31, 1999
================================================================================
3. SIGNIFICANT ACCOUNTING POLICIES (cont'd.....)
Employer's disclosures about pensions and other post-retirement benefits
Statement of Financial Standards No. 132, "Employers' Disclosures About
Pensions and Other Postretirement Benefits," standardizes the disclosure
requirements for pensions and other postretirement benefits. This statement
requires additional information on changes in benefit obligations and fair
values of plan assets. It revises prior standards and is effective for
years beginning after December 15, 1997. Because the Company does not
currently have any significant employee benefit plans nor intends to
initiate any in the near-term, there should not be an impact on its
financial statements.
Accounting for derivative instruments and hedging activities
In June 1998, the Financial Accounting standards Board issued Statements of
Financial Accounting Standards No. 133 "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133") which establishes
accounting an reporting standards for derivative instruments and for
hedging activities. SFAS 133 is effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. The Company does not anticipate that
the adoption of the statement will have a significant impact on its
financial statements.
Reporting on costs of start-up activities
In April 1998, the American Institute of Certified Public Accountant's
issued Statement of Position 98-5 "Reporting on the Costs of Start-Up
Activities" ("SOP 98-5") which provides guidance on the financial reporting
of start-up costs and organization costs. It requires costs of start-up
activities and organization costs to be expensed as incurred. SOP 98-5 is
effective for fiscal years beginning after December 15, 1998 with initial
adoption reported as the cumulative effect of a change in accounting
principle. The Company does not anticipate that the adoption of the
statement will have a significant impact on its financial statements.
Foreign currency translation
The Company accounts for foreign currency transactions and translation of
foreign currency financial statements under Statement of Financial
Accounting Standards No. 52, "Foreign Currency Translation" ("SFAS 52").
Transaction amounts denominated in foreign currencies are translated at
exchange rates prevailing at transaction dates. Carrying values of monetary
assets and liabilities are adjusted at each balance sheet date to reflect
the exchange rate at that date. Non monetary assets and liabilities are
translated at the exchange rate on the original transaction date. Gains and
losses from restatement of foreign currency monetary and non-monetary
assets and liabilities are included in income. Revenues and expenses are
translated at the rates of exchange prevailing on the dates such items are
recognized in earnings.
Loss per share
Loss per share is based on the weighted average number of common shares
outstanding during the period.
-7-
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in US dollars)
(Unaudited - Prepared by Management)
JULY 31, 1999
================================================================================
4. FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and cash equivalents,
accounts payable and accrued liabilities and due to related party. Unless
otherwise noted, it is management's opinion that the Company is not exposed
to significant interest, currency or credit risks arising from these
financial instruments. The fair value of these financial instruments
approximate their carrying values, unless otherwise noted.
5. CAPITAL STOCK
Common shares
The common shares of the Company are of the same class, voting and entitle
shareholders to dividends. Upon liquidation, dissolution or wind-up,
shareholders are entitled to the residual business proceeds of the Company
after all of its debts, obligations and liabilities are settled.
Additional paid-in capital
The excess of proceeds received for common shares over their par value of
$0.001, less share issue costs, is credited to additional paid in capital.
Escrow shares
Included in issued capital stock are 3,960,000 common shares held in escrow
pursuant to a pooling agreement. Under the terms of the agreement, shares
will be released from escrow as follows:
i) 25% of the shares on October 6, 1999.
ii) the remaining shares pro-rata over nine months, starting October
6, 1999.
Stock options
Pursuant to Consulting Agreements effective May 1, 1999, the Company
granted options to directors and employees to acquire up to 1,000,000
common shares at an exercise price of $0.10 per share and up to 1,000,000
common shares at an exercise price of $0.25 per share. The options expire
the earlier of:
i) May 15, 2005.
ii) thirty days after the termination of the consultant (except for
death or disability).
iii) one year after termination of the consultant due to death or
disability.
Effective May 19, 1999, the Company approved a Stock Option Plan for
officers, employees and consultants of the Company. The Company has
reserved 1,500,000 common shares of its unissued share capital for this
plan. No options have been granted under the plan. The plan provides for
vesting of options granted pro-rata over four years from the date of grant.
The exercise price of options granted under the plan will be as follows:
i) not less than the fair market value per common share at the date
of grant.
ii) not less than 110% of the fair market value per common share at
the date of grant for options granted to shareholders owning
greater than 10% of the Company.
-8-
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in US dollars)
(Unaudited - Prepared by Management)
JULY 31, 1999
================================================================================
5. CAPITAL STOCK (cont'd.....)
Options granted under the plan will expire the earlier of:
i) ten years from the date of grant.
ii) five years from the date of grant for options granted to
shareholders owning greater than 10% of the Company.
iii) the termination of the officer, employee or consultants.
iv) three months after the termination of the officer, employee or
consultant other than by cause, death or disability.
v) one year after the date of termination of the officer, employee
or consultant due to death or disability.
6. STOCK-BASED COMPENSATION
On May 1, 1999, options to acquire 1,000,000 common shares of the Company
exercisable at a price of $0.10 per share and 1,000,000 common shares
exercisable at $0.25 per share were granted to directors and employees of
the Company. These options expire on May 15, 2005. The weighted fair value
of these options was $ Nil.
The following is a summary of the stock options during the period:
--------------------------------------------------------------------------
Weighted
Average
Number Exercise
of shares Price
--------------------------------------------------------------------------
Granted during the period 2,000,000 $ 0.175
--------- -----------
Balance at July 31, 1999 2,000,000 $ 0.175
==========================================================================
The following is a summary of the status of options outstanding at July 31,
1999:
<TABLE>
=============================================================================================================
Outstanding Options Exercisable Options
-------------------- -------------------
Weighted Average
Remaining Exercise Exercise
Number Contractual Life Price Number Price
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1,000,000 5.8 years $ 0.10 1,000,000 $ 0.10
=============================================================================================================
1,000,000 5.8 years $ 0.25 1,000,000 $ 0.25
</TABLE>
-9-
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in US dollars)
(Unaudited - Prepared by Management)
JULY 31, 1999
================================================================================
6. STOCK-BASED COMPENSATION (cont'd.....)
The Company applies Accounting Principles Board Opinion No. 25 in
accounting for its stock option plan which follows the intrinsic value
based method for accounting for compensation resulting from the granting of
options. There was no compensation expense incurred based on options
granted. Since the fair value of these options was $Nil upon granting, net
loss and loss per share would not have been adjusted had compensation cost
been recognized on the basis of fair value pursuant to Statement of
Financial Accounting Standards No. 123. The fair value or each option
granted is estimated on the grant date using the Black Scholes Model.
The assumptions used in calculating fair value are as follows:
======================================================================
July 31,
1999
----------------------------------------------------------------------
Risk-free interest rate 7.0 %
Expected life of options 6 years
Expected volatility 0.001 %
Expected dividend yield 0.0 %
======================================================================
7. STOCK SUBSCRIPTIONS RECEIVABLE
Pursuant to a Stock Subscription Agreement dated March 9, 1999, the Company
issued 5,600,000 shares for proceeds of $5,600. As at July 31, 1999, $100
of the proceeds have been received. The remaining $5,500 is due from the
president of the Company.
8. RELATED PARTY TRANSACTION
The Company paid $2,800 in management fees and $15,000 in consulting fees
to a director of the Company and accrued $6,000 in consulting fees to a
director of the Company during the period.
9. SUPPLEMENTAL DISCLOSURE FOR NON-CASH OPERATING, FINANCING AND INVESTING
ACTIVITIES
The significant non-cash transactions for the period ended July 31, 1999
consisted of the Company issuing 5,500,000 common shares in the amount of
$5,500 in exchange for a stock subscription receivable.
-10-
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in US dollars)
(Unaudited - Prepared by Management)
JULY 31, 1999
================================================================================
10. INCOME TAXES
The Company's total deferred tax asset at July 31, 1999 is as follows:
Tax benefits of net operating loss carryforward $ 25,967
Valuation allowance (25,967)
--------------
$ -
==============
The Company has a net operating loss carryforward of approximately $68,334.
The valuation allowance increased to $25,967 for the period ended July 31,
1999 since the realization of the operating loss carryforwards are
doubtful. It is reasonably possible that the Company's estimate of the
valuation allowance will change. The operating loss carryforwards will
expire in the 2006 fiscal year.
12. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may incorrectly
recognize the year 2000 as some other date, resulting in errors. The
effects of the Year 2000 Issue may be experienced before, on, or after
January 1, 2000 and, if not addressed, the impact on operations and
financial reporting may range from minor errors to significant systems
failure which could affect an entity's ability to conduct normal business
operations. It is not possible to be certain that all aspects of the Year
2000 Issue affecting the Company, including those related to the efforts of
customers, suppliers, or other third parties, will be fully resolved.
-11-
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Except for disclosures that report the Company's historical results, the
statements set forth in this section contain forward-looking statements. Words
or phrases "will likely result", "are expected to", "will continue", "is
anticipated", "estimate", "project or projected", or similar expressions are
intended to identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 (the Reform Act).
Actual results could differ materially form those projected in forward-looking
statements. Additional information and factors that could cause actual results
to differ materially from those in the forward-looking statements are set forth
in this Form 10-QSB, and in the section entitled "Risk Factors" in the Company's
Form 10-SB on file with the Securities and Exchange Commission. The Company
desires to take advantage of certain provisions in the Private Securities
Litigation Reform Act of 1995, that provided a safe harbor for forward-looking
statements made by or on behalf of the Company. The Company hereby cautions
stockholders, prospective investors in the Company, and other readers to not
place undue reliance on these forward-looking statements, which can only address
known events as of the date of this report.
General Overview
Kidstoysplus.com Inc. was organized and incorporated under the laws of the State
of Nevada on February 04, 1999 and has not commenced operations of its business.
Kidstoysplus.com was organized to develop and operate a retail web site on the
Internet specializing in marketing children's products that will initially
include children's toys, collectable toy items and hobby related products. In
the future, we may offer books, music, story line CD's, audio-tapes, movies,
video games and educational products on our web site. We believe that by
combining expertise in children's products, Internet web site development and
marketing and a commitment to excellent customer service through Internet
retailing, we will be able to deliver a unique shopping experience to consumers.
The following discussion and analysis explains our results of operations for the
three month interim period from April 30, 1999 to July 31, 1999, our financial
condition and our plan of operation for the next twelve months. You should
review our discussion and analysis of financial condition and our plan of
operation in conjunction with our audited financial statements and the related
notes, as well as statements detailed in the Company's Securities and Exchange
Commission filings.
Results of Operations
Fiscal Quarter Ended July 31, 1999
We were incorporated on February 4, 1999 and had no results of operations prior
to that date.
Revenues. We anticipate we will not commence our operations until the fiscal
quarter ending January 31, 2000. We generated no revenues from operations the
fiscal quarter ended July 31, 1999. We had interest income in the amount of
$1951.
Expenses. We incurred expenses of $53,679 related primarily to developing our
web site technologies and implementing our business plan, including $30,177 in
consulting fees paid to Reticular Consulting for development of our web site
technologies and to Albert R. Timcke, our President. We paid legal and
accounting fees of $15,136 related to the audit of our financial statements for
the period from our inception in February 4, 1999 to April 30, 1999 and the
preparation of our Form 10-SB filed with the Securities and Exchange Commission.
We incurred other expenses of $8,346, including office expenses of $2,561,
travel expenses of $2,399 printing expenses of $2,128 and miscellaneous expenses
of $1,258. We anticipate our
-12-
<PAGE>
operating and administrative expenses will increase as we develop our
Kidstoysplus.com Website and begin marketing our business.
Net Loss. We had a loss of $51,728 for the fiscal period ended July 31, 1999.
Plan of Operation
We anticipate we will have no sales until at least November 1999. We anticipate
our operating activities during the next few months will focus primarily on:
(i) establishing strategic relationships with technology developers and
consultants, fulfillment vendors, toy manufacturers, merchandisers and
distributors;
(ii) development of the necessary computer infrastructure and systems
required to operate and develop the Kidstoysplus.com Website;
(iii) staffing and equipping our distribution facility;
(iv) securing a server for the Kidstoysplus.com Website;
(v) installing internal system hardware and software for our distribution
and customer service facilities;
(vi) installing and equipping our customer service operations office;
(vii) installing communications support systems;
(viii) developing and establishing an inventory management system;
(ix) developing operating and management procedures and policies;
(x) testing Kidstoysplus internal operating, distribution and customer
service systems;
(xi) testing our web site software;
(xii) developing or licensing content for the Kidstoysplus.com Website;
(xiii) promoting the initial launch of our web site;
(xiv) finalizing the Kidstoysplus virtual store concept; and
(xv) hiring and training customer service and distribution personnel.
After the initial test launch of our web site, we intend to focus on (i)
debugging its systems; (ii) recruiting and training additional qualified
operational and sales personnel; (iii) intensifying promotional efforts for the
Kidstoysplus.com Website and brand name; (iv) building market awareness and
attracting customers to the Kidstoysplus.com Website; (v) refining our
distribution and fulfillment operations strategy; (vi) actively marketing
merchandise through our Kidstoysplus.com Website; (vii) expanding the product
line and mix of products available on the Kidstoysplus.com Website; (viii)
developing strategic relationships with additional fulfillment vendors; (ix)
expanding the content on the Kidstoysplus.com Website to appeal to our target
markets; and (x) developing functional cross marketing programs and marketing
information systems for our client base.
Capital Requirements
We anticipate it will need the following financing to implement our business
plan and to meet our financial obligations through our fiscal year ending
January 31, 2000, and our next two fiscal quarters ending July 31, 2000.
-13-
<PAGE>
<TABLE>
PERIOD
------
Fiscal Quarter Ended
--------------------
October 31, January 31, April 30, July 31,
DESCRIPTION 1999 2000 2000 2000
- ----------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Company set-up and legal exp. $ 30,000 $ 20,000
Office and administration $ 25,000 $ 30,000 $ 40,000 $ 40,000
Web site design and posting $ 100,000
Web maintenance and software upgrades $ 75,000 $ 30,000 $ 30,000
Establish warehouse and office facilities $ 25,000 $ 20,000 $ 20,000 $ 20,000
Company marketing expense - begin $ 100,000 $ 100,000 $ 300,000
Selective product inventory for $ 100,000 $ 200,000 $ 600,000
Christmas 1999 - Beginning Inv. 2000
Working capital $ 25,000 $ 100,000 $ 100,000 $ 100,000
Totals $ 205,000 $ 445,000 $ 490,000 $1,090,000
</TABLE>
Liquidity and Capital Resources
As of July 31, 1999, we had working capital of $175,408. We had cash or cash
equivalents of $187,686 and prepaid expenses in the amount of $10,000. We had
accounts payable and accrued liabilities in the amount of $22,278. We anticipate
that our working capital is sufficient to satisfy our cash requirements only
through our fiscal quarter ending January 31, 2000. We anticipate we will be
required to raise addition financing in the amount of approximately $2,000,000
during the next three fiscal quarters ending July 31, 2000 and to implement our
business plan and to meet our anticipated cash requirements. We anticipate that
we will begin to raise additional capital through the private placement of
equity and/or debt during the fiscal quarters ending January 31, 2000 and April
30, 2000. We are in the process of commencing a private placement of our common
stock to raise up to $2.5 million at $1.25 per share. We cannot assure you we
will successfully complete such private placement in a timely manner, if at all.
We believe our estimates of our capital requirements to be reasonable. The
capital requirements are only estimates and can change for many different
reasons, some of which are beyond our control. We are a development stage
company and are the process of designing our Kidstoysplus.com Website design and
establishing a warehouse facility. The cost for procuring a test inventory for
the 1999 Christmas season will be dependant on our ability to purchase such
inventory on acceptable terms and our ability to enter into arrangements with
fulfillment vendors. We may seek a credit facility and/or
manufacturer/distributor financing to secure adequate inventory. We currently
have no arrangements for such procurement or for financing to acquire our
initial inventory, and there can be no assurance that we will successful acquire
a product line or financing on terms acceptable to us, if at all.
Product Research and Development
We have recently engaged Retricular Consulting of Victoria, British Columbia to
develop our Kidstoysplus.com Website and anticipate that we will begin testing
our Kidstoysplus.com Website in the fiscal quarter ending January 31, 2000.
Under the terms of our agreement, we agreed to pay Retricular a consulting fee
of $3,000 per month for the initial planning stage of the development of our
Kidstoysplus.com Website. We anticipate we will enter into a definitive
development agreement in
-14-
<PAGE>
October 1999 with Retricular to complete the development of our web site, and we
will need to spend approximately $35,000 - $50,000 to complete development and
successfully launch our web site into commercial use. We also anticipate we will
spend approximately $75,000 - $100,000 to develop the technology related to our
customer service and support systems, inventory control systems, distribution
and logistical facilitation systems, accounting systems and other internal
control systems.
The cost for developing technology is expensive and the process will require
testing and refinement. Our commercial success will depend on our ability to
attract visitors and shoppers to our Kidstoysplus.com Website. This will require
us to develop and use increasing sophisticated technologies to generate, sustain
and maintain user interest and satisfaction. See "Note Regarding Forward Looking
Statements."
We are in the processing of developing the technologies, software and systems
for the Kidstoysplus.com Website and we have not entered into any agreements or
arrangements for the development of the technologies related to our internal
control and distribution systems. We do not anticipate that our technologies
will be ready for testing until at least November 1999. There can be no
assurance that we will successfully develop and test the technologies related to
Kidstoysplus.com Website or contemplated in our business plan on a timely basis,
if at all. Our inability to obtain additional financing or to develop the
Kidstoysplus.com Website and the support services prior to the end of 1999 would
have a materially adverse effect on our business and results of operations.
Acquisition of Plant and Equipment for Our Distribution Center and Customer
Service Center
We leased a distribution and warehouse and a corporate office/customer service
facility in Courtenay on Vancouver Island, British Columbia. Our distribution
facility is approximately 7,200 square feet, including office, warehouse and
delivery space for our distribution operations. Our corporate office/customer
service facility is approximately 3,200 square feet. We anticipate that the cost
of acquiring, finishing, furnishing and equipping our facilities will be
approximately $60,000 during the next twelve months. The rent for our
distribution facility is approximately $1,100 per month and the rent for our
corporate office/customer service facility is approximately $700 per month.
We also intend to acquire computer systems and to develop system software to
support our distribution and warehouse and customer service facility. We
anticipate that the cost of such equipment and systems will be approximately
$15,000 - $20,000 during the next twelve months.
Consultants and Employees
As of July 31, 1999, we engaged 3 consultants to assist us in product research
and development and marketing functions on a part- and full-time basis. We
intend to engage additional consultants to develop our internal operating and
information systems.
We have hired one employee to manage our distribution facility, and in addition,
we anticipate that we will hire 4 employees during 1999 to provide 1-800
consumer support services, 1 to providing marketing and sales support, 2 to
staff our distribution warehouse, 1 information systems employee and 2
administration employees.
The Company's success will depend in large part on our ability to attract and
retain skilled and experienced employees. The Company does not anticipate any of
our employees will be covered by a collective bargaining agreement. The Company
does not currently have any key man life insurance on any of our directors or
executive officers.
We have not entered into any agreements or arrangements with respect to product
inventory, distribution facilities, internal systems development, server
systems, human resource, credit facilities and other related needs. There can be
no assurance that we will be able to enter such agreements or arrangements on
acceptable terms, if at all. There can also be no assurance that we will be able
to develop our Kidstoysplus.com Website and our distribution systems in a timely
manner, if at all, or that the Company's projected costs and timing of such
development will be accurate. Any material delay in entering into
-15-
<PAGE>
arrangements or developing our Kidstoysplus.com Website or distribution systems
will have a material adverse effect on the Company's business and results of
operations.
Year 2000 Compliance
The Year 2000 Issue arises with the change in century and the potential
inability of information systems to correctly "rollover" dates to the new
century. To save on computer storage space, many systems were programmed with a
two-digit century (i.e. December 31, 1999 would appear as 12/31/99) assuming
that all years would be part of the 20th century. On January 1, 2000, systems
with this programming will default to 01/01/1900 instead of 01/01/2000, and
calculations using or reporting the date will not be correct and errors will
arise (the "Year 2000 Issue"). To prevent this from occurring, information
systems need to be updated to ensure they recognize dates during and after the
year 2000.
The potential exists that we are exposed to a risk that certain aspects of their
businesses will fail or suffer impairment as a result of internally operated or
externally contracted hardware or software systems and services not being able
to correctly "rollover" dates to the new century. The risk stems from our
reliance on certain hardware, software and services to carry out the daily
operation of our proposed businesses. The exposure may result from, amongst
other things, the use of computers, general software and servers for office
purposes and data storage; connections to and use of the services of Internet
Service Providers and telephone companies for office purposes.
We have only been developing our business during the last 6 months. We have
recently engaged Reticular Consulting to develop the technologies related to our
business and to outline the systems requirements of our Kidstoysplus.com Website
and our internal systems requirements for our order processing operations. We
anticipate that all of our computer and software systems including office
hardware, administrative general software, custom developed special purpose
software, servers and services of Internet Service Providers will be year 2000
compliant. We intend to back up all of our financial data and company records on
year 2000 compliant systems and do not anticipate any substantial disruption of
our internal operating systems as a result of the Year 2000 Issue.
We also depend on the year 2000 compliance of the computer systems of our third
party vendors, financial service providers and Internet Service Providers that
make the Internet functional. We cannot assure you that their systems are or
will be year 2000 compliant, and we are unable to assess the magnitude of the
risks such failures may have on our business. We are requesting information
related to the status of year 2000 compliance from potential third party
providers of inventory and services to the company and will only enter into
arrangements with third party vendors that affirmatively represent to us that
their systems are year 2000 compliant. However, we have not undertaken any other
measures to assure year 2000 compliance of our third party vendors and we cannot
assure you that such vendor systems will not experience disruptions as a result
of the Year 2000 Issue. Although we are relying primarily on systems developed
with current technology and on systems designed to be year 2000 compliant, we
may have to replace, upgrade or reprogram certain systems to ensure that all
interfacing technology will be year 2000 compliant when running jointly.
In the event that we incur expenses associated with resolving year 2000
compliance issues, we intend to expense the operating costs as they are incurred
and capitalize the capital costs as they are incurred. However, our purchases of
hardware and general and specific purpose software will be relatively recent,
and the more expensive hardware and general and specific software items that we
intend to purchase are generally covered under warranties that will extend over
the rollover period to January 1, 2000. As a result, we do not expect to incur
any major operating or capital expenditures that would have a material impact on
our financial condition or results of operations.
We do not currently anticipate any disruption in our operations as the result of
the Year 2000 Issue. Any failure of our material systems, our vendors' material
systems or the Internet to be year 2000 compliant may have a material adverse
effect on our business and results of operations.
-16-
<PAGE>
In the worst case scenario, the systems of our third-party vendors and the
Internet will fail as a result of year 2000. If such worst case scenario occurs,
we anticipate we will offer our inventory though traditional physical channels
and a retail location established at one distribution center until systems are
re-established for the Internet. Such a material failure would have a material
adverse effect on our business.
In order to protect against the possibility of any material disruption in our
operations as the result of the Year 2000 Issue we have taken the following
precautions:
- - developed, initiated and maintained procedures that ensure that the
information stored on the office computer hard drives are backed up on a
regular basis and stored safely;
- - copies of the source code for the special purpose software are maintained
in secure offsite locations by the developers of the software; and
- - implemented a policy of acquiring name brand hardware and retained
experienced consultants upon whose warranties we believe that we can rely.
Inflation
Our results of operations have not been affected by inflation and management
does not expect inflation to have a significant effect on our operations in the
future.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FROM 8-K
None
-17-
<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 thereto duly authorized.
KIDSTOYSPLUS.COM, INC.
(Registrant)
Date: October 26, 1999
/s/ Albert R. Timcke
- ---------------------------------------
Albert R. Timcke, Chairman of the Board of Directors,
President (principal
executive officer and director)
Date: October 26, 1999
/s/ Brian C. Doutaz
- ---------------------------------------
Brian C. Doutaz, Treasurer (principal
accounting officer)
-18-
