UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended
October 31, 1999
Commission File Number: 0-26439
KidsToysPlus.com, Inc.
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(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
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(Address of registrant's principal executive office)
1-877-566-1212
-------------------------------
(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 October 31, 1999 9,968,084
<PAGE>
KIDSTOYSPLUS.COM, INC.
For the Quarter Ended
October 31, 1999
INDEX TO AMENDMENT NO. 1 TO FORM 10-QSB
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Page
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Balance Sheets:
- October 31, 1999 and July 31, 1999.........................................................1
Statements of Operations:
- For the Three Months Ended October 31, 1999 and
Period February 4, 1999 to October 31, 1999................................................2
Statement of Changes in Stockholders' Equity
- For the Period February 4, 1999 to October 31, 1999........................................3
Statements of Cash Flow:
- For the Three Months Ended October 31, 1999 and
Period February 4, 1999 to October 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...........................................................................18
ITEM 1. LEGAL PROCEEDINGS............................................................................18
ITEM 2. CHANGES IN SECURITIES........................................................................18
ITEM 3. DEFAULTS UPON SENIOR SECURITIES..............................................................19
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS............................................19
ITEM 5. OTHER INFORMATION............................................................................19
ITEM 6. EXHIBITS AND REPORTS ON FROM 8-K.............................................................19
</TABLE>
-i-
<PAGE>
ITEM 1. FINANCIAL STATEMENTS:
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
BALANCE SHEET
(Expressed in US dollars)
(Unaudited - Prepared by Management)
================================================================================
<TABLE>
(Audited)
October 31, April 30,
1999 1999
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current
Cash and cash equivalents $ 81,947 $ 221,924
Prepaid expenses 18,885 8,312
Due from related party 424 -
------------- ------------
101,256 230,236
Capital assets (Note 5) 9,034 -
------------- ------------
$ 110,290 $ 230,236
================================================================================================ ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities $ 34,316 $ 2,000
Due to related party - 1,100
------------- ------------
34,316 3,100
------------- ------------
Stockholders' equity Capital stock (Note 6)
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 8) (5,500) (5,500)
Deficit, accumulated during the development stage (167,768) (16,606)
------------- ------------
75,974 227,136
$ 110,290 $ 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>
Period from
Three Month Six Month February 4,
Period Ended Period Ended 1999 to
October 31, October 31, October 31,
1999 1999 1999
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME $ 1,458 $ 3,409 $ 3,964
-------------- --------------- ---------------
EXPENSES
Amortization 86 86 86
Consulting fees 48,390 78,567 85,167
Insurance 397 397 397
Legal and accounting 7,923 23,059 26,983
Management fees - - 2,800
Meals and entertainment 1,114 1,828 1,828
Office and miscellaneous 15,474 18,035 21,105
Printing 394 2,522 2,522
Registration and filing fees 5,303 5,303 5,303
Rent 3,683 3,683 3,683
Telephone 4,213 4,757 5,524
Transfer agent 35 35 35
Travel and related 6,806 9,205 9,205
Website design 7,094 7,094 7,094
-------------- --------------- ---------------
100,912 154,571 171,732
-------------- --------------- ---------------
Loss for the period $ (99,454) $ (151,162) $ (167,768)
==============================================================================================================================
Basic and fully diluted loss per share $ (0.01) $ (0.01) $ (0.02)
==============================================================================================================================
Weighted average shares outstanding 9,968,084 9,968,084 8,311,443
==============================================================================================================================
</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 - - - - (167,768) (167,768)
-------------- -------------- -------------- ------------- -------------- --------------
Balance, October 31,
1999 9,968,084 $ 9,968 $ 239,274 $ (5,500) $ (167,768) $ 75,974
=============================================================================================================================
</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 OCTOBER 31, 1999
================================================================================
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the period $ (167,768)
Items not affecting cash
Amortization 86
Changes in other operating assets and liabilities
Increase in prepaid expenses (18,885)
Increase in due from related party (424)
Increase in accounts payable and accrued liabilities 34,316
-------------
Net cash used in operating activities (152,675)
-------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of capital assets (9,120)
CASH FLOWS FROM FINANCING ACTIVITIES
Capital stock issued for cash 243,742
Cash and cash equivalents, end of period $ 81,947
=================================================================================================
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 10)
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)
OCTOBER 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 October 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.
<TABLE>
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October 31,
1999
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<S> <C>
Deficit accumulated during the development stage $ (167,768)
Working capital surplus 66,940
=======================================================================================
</TABLE>
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.
Capital assets
Capital assets are recorded at cost and amortization is being provided for
annually as follows:
Computer equipment 30% declining balance
Office furniture and fixtures 20% declining balance
5
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in US dollars)
(Unaudited - Prepared by Management)
OCTOBER 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)
OCTOBER 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)
OCTOBER 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 ASSETS
<TABLE>
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Accumulated Net Book
Cost Amortization Value
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Computer equipment $ 2,408 $ 30 $ 2,378
Office furniture and fixtures 6,712 56 6,656
---------- ------------ -----------
$ 9,120 $ 86 $ 9,034
=====================================================================================================================
</TABLE>
6. 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.
8
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in US dollars)
(Unaudited - Prepared by Management)
OCTOBER 31, 1999
================================================================================
6. CAPITAL STOCK (cont'd.....)
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.
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.
7. 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.
9
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in US dollars)
(Unaudited - Prepared by Management)
OCTOBER 31, 1999
================================================================================
7. STOCK-BASED COMPENSATION (cont'd.....)
The following is a summary of the stock options during the period:
<TABLE>
--------------------------------------------------------------------------------------------
Weighted
Average
Number Exercise
of Shares Price
--------------------------------------------------------------------------------------------
<S> <C> <C>
Granted during the period 2,000,000 $ 0.175
----------- ------------
Balance at October 31, 1999 2,000,000 $ 0.175
============================================================================================
</TABLE>
The following is a summary of the status of options outstanding at October
31, 1999:
<TABLE>
==================================================================================================================
Outstanding Options Exercisable Options
----------------------------------------------- -------------------------------------------------
Weighted
Average
Remaining
Number Contractual Exercise Exercise
Life Price Number Price
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1,000,000 5.5 years $ 0.10 1,000,000 $ 0.10
1,000,000 5.5 years 0.25 1,000,000 0.25
==================================================================================================================
</TABLE>
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:
-----------------------------------------------------------------------
October 31,
1999
-----------------------------------------------------------------------
Risk-free interest rate 7.0 %
Expected life of options 6 years
Expected volatility 0.001%
Expected dividend yield 0.0%
=======================================================================
10
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in US dollars)
(Unaudited - Prepared by Management)
OCTOBER 31, 1999
================================================================================
8. 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 October 31, 1999,
$100 of the proceeds have been received. The remaining $5,500 is due from
the president of the Company.
9. RELATED PARTY TRANSACTION
The Company paid $2,800 in management fees and $30,000 in consulting fees
to a director of the Company and accrued $12,000 in consulting fees to a
director of the Company during the period.
10. SUPPLEMENTAL DISCLOSURE FOR NON-CASH OPERATING, FINANCING AND INVESTING
ACTIVITIES
The significant non-cash transactions for the period ended October 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.
11. INCOME TAXES
The Company's total deferred tax asset at October 31, 1999 is as follows:
Tax benefits of net operating loss carryforward $ 63,752
Valuation allowance (63,752)
------------
$ -
============
The Company has a net operating loss carryforward of approximately
$167,768. The valuation allowance increased to $63,752 for the period ended
October 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 provide 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 July 31, 1999 to October 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 financial statements and the related notes, as
well as statements detailed in the Company's Securities and Exchange Commission
filings.
Results of Operations
Period from February 4, 1999 (inception) to October 31, 1999
We were incorporated on February 4, 1999 and had no results of operations prior
to that date.
Revenues. We anticipate we will launch our web site and commence our operations
during our fiscal quarter ending January 31, 2000. During the period since our
inception on February 4, 1999 to October 31, 1999, we did not generate any
revenues from our operations. We had interest income in the amount of $3,409.
Expenses. We incurred expenses of $171,731 related primarily to organizing our
corporation, raising financing, filing a registration statement with the
Securities and Exchange Commission, developing our web site technologies and
establishing our warehouse and service center in Courtenay, British Columbia,
Canada. Since our inception to October 31, 1999, we paid consulting fees in the
amount of $85,167, which primarily consisted of fees paid to Reticular
Consulting, our web site developer, and Albert R. Timcke,
12
<PAGE>
our President. We also paid consulting fees to Axel Miedbrodt our Operations
Manager, and Pat Morris our corporate communications consultant, since our
inception to October 31, 1999. We paid legal and accounting fees of $26,983
since our inception to October 31, 1999, related to the preparation of our
filings with the Securities and Exchange Commission, documents and statements
for our financing activities and other legal and accounting matters. We incurred
other expenses of $50,157 related to developing our web site and establishing
our warehouse and service facilities in Courtenay, including office and moving
expenses of $21,105, travel expenses of $9,205, printing expenses of $2,522,
rent expenses of $3,683, web design & programming expenses of $7,094, and
telephone expenses of $5,524 (installation and set-up of our new North American
toll free order numbers and fax lines) and miscellaneous expenses of $1,114. We
also paid registration & filing fees of $5,338 related to our Standard and Poors
filing ($3,975) and other business registration fees and related expenses.
Several of the expenses related to establishing our warehouse and service
facilities and filing fees are non-recurring expenses. We anticipate, however,
that our operating and administrative expenses will increase during our fourth
quarter and into our next fiscal year as we launch our web site and hire
additional personnel for our operations.
Net Loss. We had a loss of $167,768 for the fiscal period ended October 31,
1999.
Three Month Fiscal Period Ended October 31, 1999
During the fiscal three month period ended October 31, 1999, we began the
process of establishing our principal business offices and our customer service
center and distribution facility.
Revenues. We anticipate we will launch our web site and commence our operations
during our fiscal quarter ending January 31, 2000. During our fiscal quarter
ended October 31, 1999, we did not generate any revenues from our operations. We
had interest income in the amount of $1,458.
Expenses. We incurred expenses of $100,912 related primarily to developing our
web site technologies and establishing our warehouse and service center in
Courtenay, British Columbia, Canada. During the fiscal quarter, we paid
consulting fees in the amount of $48,390, which included fees paid to Reticular
Consulting, our web site developer, Axel Miedbrodt our Operations Manager, Pat
Morris our corporate communications consultant, and Albert R. Timcke, our
President. We paid legal and accounting fees of $7,923 during the fiscal quarter
ending October 31, 1999 related to the preparation of our filings with the
Securities and Exchange Commission and other legal and accounting matters. We
incurred other expenses of $44,116 related to establishing our warehouse and
service facilities in Courtenay, including office and moving expenses of
$15,474, travel expenses of $6,806, printing expenses of $394, rent expenses of
$3,683, web design & programming expenses of $7,094, and telephone expenses of
$4,213 (installation and set-up of our new North American toll free order
numbers and fax lines) and miscellaneous expenses of $1,114. We also paid
registration & filing fees of $5,338 related to our Standard and Poors filing
($3,975) and other business registration fees and related expenses. Several of
the expenses related to establishing our warehouse and service facilities and
filing fees are non-reoccurring expenses. We anticipate, however, that our
operating and administrative expenses will increase during our fourth quarter
and into our next fiscal year as we launch our web site and hire additional
personnel for our operations.
Net Loss. We had a loss of $99,454 for the fiscal period ended October 31, 1999.
Plan of Operation
Subsequent to our fiscal quarter ended October 31, 1999, we experienced delay in
the development of our web site technologies and the closing of an anticipated
private placement financing. Our delay in development of our technologies and
our inability to close our private placement resulted in a delay in acquiring
inventory for the launch of our website. As such, we were unable to launch our
web site or acquire inventory prior to the Christmas retail season as planned.
We are in the process of entering into arrangements to participate in the
affiliate programs of other Internet toy retailers such as Amazon.com and eToys.
We believe that this will allow us to supplement the inventory that we intend to
offer and will allow us to commercially launch our web site to the public on or
before February 1, 2000. The affiliate programs of Amazon.com and eToys will
allow us to earn a fee based on the purchases originated from our web site.
13
<PAGE>
We currently anticipate that our web site will be launched prior to the end of
our fiscal year ending January 31, 1999. However, our ability to complete the
launch of our web site and to continue as a going concern will depend on our
ability to obtain financing prior to February 28, 2000.
We anticipate we will have no sales until at least February 1, 2000, when we
anticipate we will launch our web site. We anticipate our operating activities
during the next few months will focus primarily on:
(i) secure secondary financing for the purchase of an opening
inventory and to begin initial implementation of the company
marketing plan;
(ii) establish strategic relationships with fulfillment vendors, toy
manufacturers, merchandisers and distributors;
(iii) continue development our computer infrastructure and systems
required to operate and develop our web site;
(iv) complete installation or our internal system hardware and
software for our distribution and customer service facilities;
(v) develop our inventory management system;
(vi) continue testing Kidstoysplus internal operating, distribution
and customer service systems;
(vii) promoting the initial launch of our web site; and
(viii) hiring and training customer service and distribution personnel.
After the initial launch of our web site, we intend to focus on (i) debugging
our 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 the Company will need the following financing to implement our
business plan and to meet our financial obligations after our fiscal year ending
January 31, 2000, and during our next three fiscal quarters ending July 31,
2000.
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<TABLE>
PERIOD
- --------------------------------------------------------------------------------------------------------------------
Fiscal Quarter Ended
- --------------------------------------------------------------------------------------------------------------------
DESCRIPTION January 31, April 30, July 31, October 31
2000 2000 2000 2000
- ---------------------------------------------------------------- ------------------- --------------- ---------------
<S> <C> <C> <C> <C>
Accounting and legal expenses. $ 5,000 $15,000 $10,000 $10,000
Office and administration $20,000 $30,000 $40,000 $40,000
Web site design and posting $10,000 $50,000 $25,000 $10,000
Web maintenance and software upgrades $5,000 $10,000 $20,000
Warehouse and office facilities $2,000 $5,000 $20,000 $20,000
Company marketing expense $100,000 $100,000 $300,000
Selective product inventory for $20,000 $100,000 $100,000 $600,000
Beginning Inv. 2000
Working capital $10,000 $50,000 $50,000 $50,000
Totals $67,000 $355,000 $355,000 $1,050,000
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Liquidity and Capital Resources
As of October 31, 1999, we had working capital of $66,940. We had cash or cash
equivalents of $81,947 and prepaid expenses in the amount of $18,885. We had
accounts payable and accrued liabilities in the amount of $34,316.
We anticipate that our working capital is sufficient to satisfy our cash
requirements only through January 31, 2000. We anticipate we will be required
to raise financing of at least $50,000 by February 28, 2000 to meet our working
capital requirements for the beginning of the first quarter 2000 and to continue
as a going concern. Thereafter, we anticipate that we will be required to raise
(i) at least $500,000 during the fiscal quarter ending April 30, 2000 to meet
our anticipated cash requirements related to the launch of our web site and
selling merchandise, including acquiring inventory, marketing expenses, hiring
additional personnel and refining our web site and distribution center
technologies and (ii) at least an additional $1,500,000 prior to our fiscal year
ending January 31, 2001 to finance our operations and anticipated marketing
activities.
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, which we anticipate we will close a
portion of prior to December 31, 1999 to remove the going concern threat.
Thereafter, we anticipate that we will close the remaining portion of the
private placement during our fiscal quarter ending April 30, 2000 to finance our
on-going capital requirements through January 31, 2001. We cannot assure you we
will successfully complete any 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 in the process of finalizing the design of our web site and
completing the development of our warehouse and customer service facility. We
began testing our web site in mid-November 1999 and anticipate that we will
commercially launch our web site to the public beginning February 1. 2000 or
earlier, provided that we can adequate financing to obtain inventory. Reticular
Consulting and Palamar, a sub-contractor hired by Reticular Consulting, are
currently in the process of refining our web site and internal operating systems
for our anticipated launch. We are in the process of
15
<PAGE>
finalizing our product lines and making arrangements to purchase inventory,
pending our ability to obtain financing on reasonable terms. We are also
exploring the possibility of obtaining a credit facility and/or
manufacturer/distributor financing to acquire inventory. However, we currently
have no arrangements to procurement inventory or to finance the purchase of our
initial inventory.
We cannot assure you that we will be able to obtain financing, a line of credit
or manufacturer/distributor financing in a timely manner or on acceptable terms,
if at all. If we are unable to obtain financing to purchase inventory, we intend
to launch our web site and offer the products of other Internet retailer through
their affiliate programs. There is a substantial risk that such a strategy will
adversely affect our ability to build value in our "Kidstoysplus" brand name,
which may have an adverse affect on our business and our ability to compete
effectively. We cannot assure you that we will successful launch our web site or
that we will ever be able to successfully compete against established
competitors.
Product Research and Development
Reticular Consulting of Victoria, British Columbia is developing our
Kidstoysplus.com web site and has assisted us with testing, which began in
November 1999. Our web site is anticipated to be ready for commercial launch on
or before February 1, 2000. Under the terms of our agreement with Reticular
Consulting, we pay Reticular a consulting fee of $3,000 per month for
development of our web site. We anticipate that we will need to spend
approximately $5,000 (between November 1, 1999 and January 31, 2000) to complete
development and to commericially launch our web site. We also anticipate that we
will spend approximately $75,000 - $100,000 complete development of 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 web site. 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 cannot assure you that we will successfully complete development and testing
of the technologies related to our web site or our internal systems on a timely
basis, if at all. Our inability to obtain additional financing prior to February
28, 1999 will adverse affect our ability to complete the commercial launch of
our web site and may have a materially adverse effect on our business and
results of operations.
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. 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
anticipate that we will spend approximately $60,000 during the next twelve
months improving our distribution and customer service facilities.
We also intend to acquire additional computer systems and to develop or license
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.
Personnel
As of October 31, 1999, we had four full time personnel. Albert R. Timcke, a
director and our President, assist with strategic corporate planning, financing
activities and product research and development. Axel Miedbrodt is our
Operational Manager and has been establishing our distribution and customer
service facilities. Pat Morris assists with our corporate communications and
marketing. Trish Reader of Reticular Consulting is a consultant that is
designing our web site and assisting us with developing our internal
16
<PAGE>
distribution and customer service systems. We also have two part-time
consultants, Brian C. Doutaz, a director and our Secretary and Treasurer, Gerald
W. Williams, who both assist us with general administrative management and
marketing functions. In the future, we may engage additional consultants to
assist us with the development or licensing of software and information systems
and the implementation of our business plan.
We anticipate we will hire up to seven employees during first and second
quarters of 2000, five to provide 1-800 consumer support services and to staff
our distribution warehouse and three to provide assist us with administration
functions.
Our success will depend in large part on our ability to attract and retain
skilled and experienced employees. We do not anticipate any of our employees
will be covered by a collective bargaining agreement. We do not maintain key man
life insurance on any of our directors or executive officers.
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
17
<PAGE>
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.
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
18
<PAGE>
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
(a) Exhibits
Exhibit No. Exhibit
----------- -------
27.1 Financial Data Schedule
19
<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: December 16, 1999
/s/ Albert R. Timcke
- ----------------------------------
Albert R. Timcke, Chairman of the Board of Directors,
President (principal executive officer and director)
Date: December 16, 1999
/s/ Brian C. Doutaz
- ----------------------------------
Brian C. Doutaz, Treasurer
(principal accounting officer)
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Exhibit
- ----------- -------
27.1 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-END> SEP-30-2000
<CASH> 81,947
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 101,256
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 110,290
<CURRENT-LIABILITIES> 34,316
<BONDS> 0
0
0
<COMMON> 9,968
<OTHER-SE> 239,274
<TOTAL-LIABILITY-AND-EQUITY> 110,290
<SALES> 0
<TOTAL-REVENUES> 1,458
<CGS> 0
<TOTAL-COSTS> 100,912
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (99,454)
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (99,454)
<EPS-BASIC> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
