UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2 TO
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
KIDSTOYSPLUS.COM, INC.
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(Name of Small Business Issuer in our charter)
Nevada 98-0203927
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
1000 - 355 Burrard Street
Vancouver, B.C. V6C 2G8
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (604) 682-4755
Securities to be registered under Section 12(b) of the Act:
None
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Title of each class to be so registered Name of each exchange on which
each class is to be registered
Securities to be registered under Section 12(g) of the Act:
Common Shares
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(Title of Class)
Not Applicable
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(Title of Class)
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TABLE OF CONTENTS
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Page
PART I
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ITEM 1 DESCRIPTION OF BUSINESS.............................................................................1
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..............21
ITEM 3 DESCRIPTION OF PROPERTY............................................................................26
ITEM 4 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.....................................26
ITEM 5 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS......................................27
ITEM 6 EXECUTIVE COMPENSATION.............................................................................28
ITEM 7 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.....................................................29
ITEM 8 DESCRIPTION OF SECURITIES..........................................................................30
PART II
ITEM 1 MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND OTHER RELATED
STOCKHOLDER MATTERS .............................................................................30
ITEM 2 LEGAL PROCEEDINGS..................................................................................31
ITEM 3 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS......................................................31
ITEM 4 RECENT SALES OF UNREGISTERED SECURITIES............................................................31
ITEM 5 INDEMNIFICATION OF DIRECTORS AND OFFICERS..........................................................32
PART F/S
PART III
ITEM 1. INDEX TO EXHIBITS....................................................................................1
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NOTE REGARDING FORWARD LOOKING STATEMENTS
Except for statements of historical fact, certain information contained herein
constitutes "forward-looking statements," including without limitation
statements containing the words "believes," "anticipates," "intends," "expects"
and words of similar import, as well as all projections of future results. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results or achievements of the Company
to be materially different from any future results or achievements of the
Company expressed or implied by such forward-looking statements. Such factors
include, but are not limited to the following: the Company's lack of an
operating history, the Company's lack of revenues and unpredictability of future
revenues; the Company's lack of functional operating systems, distribution
infrastructure and web site; the seasonality of the toy industry; the Company's
future capital requirements to develop our operating systems, distribution
facilities, web site and administrative support systems; intense competition
from established competitors with greater resources; the Company's reliance on
internally developed systems and system development risks; the risks of system
failure; the Company's dependence on the Internet and continued growth of online
commerce; the uncertainty of participating in developing a market; the Company's
reliance on merchandise suppliers and third parties and lack of agreements with
such third parties; the risks associated with rapidly changing technology;
intellectual property risks; risks associated with online commerce security; the
risks associated with governmental regulations and legal uncertainties; and the
other risks and uncertainties described under "Description of Business - Risk
Factors" in this Form 10-SB. Certain of the forward looking statements contained
in this registration statement are identified with cross-references to this
section and/or to specific risks identified under "Description of Business -
Risk Factors".
PART I
ITEM 1 DESCRIPTION OF BUSINESS
History of the Registrant
Kidstoysplus.com Inc. was organized and incorporated under the laws of the State
of Nevada on February 4, 1999. The Company's principal office is located at 1000
- - 355 Burrard Street, Vancouver, B.C., V6C 2G8. We anticipate that our principal
office will be relocated to 2924 Cliffe Avenue, Courtney, B.C V9N 7J3 once our
permanent office space is finished and equipped. The Company's URL is
www.kidstoysplus.com.
We organized Kidstoysplus to develop and operate a retail web site on the
Internet specializing in 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.
Business of the Registrant
General Overview
We plan to operate a retail web site on the Internet specializing in children's
products and to offer information about children's toys, entertainment products
and other related topics of interest to children and their parents. We intend to
initially target the collectable toy (including die cast metal toys, limited
edition collectable dolls, collectable toy cars and other collectable items) and
hobby item (including train sets, remote control planes and cars, models and
other hobby products) segments of the children's toy market. In the future, we
may expand our product offerings to include other toys and children's products.
We intend to fill a majority of our customer's orders through strategic
affiliations with "fulfillment vendors," who we anticipate will own, inventory
and ship products directly to our customers.
We are currently in the development stage of our business and are in the process
of entering into arrangements and agreements to implement our business plan. In
June 1999, we retained Reticular Consulting of Victoria, British Columbia to
design our web site, the "Kidstoysplus.com Website." We anticipate that the
Kidstoysplus.com Website will be posted on the Internet for initial viewing and
testing in late October to early November 1999. We
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leased an administrative office at 2924 Cliffe Avenue, Courtney, B.C. and a
distribution and warehouse facility at 4767 Headquarters Road, Courtney, B.C.
effective September 1, 1999. Both our administrative offices and our
distribution facility are located in the Comox Valley on Vancouver Island,
British Columbia.
We are currently negotiating with manufacturers, vendors and distributors to
secure inventory and to serve as fulfillment vendors for merchandise, and
anticipate we will enter into procurement arrangements for the merchandise
marketed and sold through the Kidstoysplus.com Website in late October 1999. We
are also in the process of negotiating with various consultants, companies and
individuals to provide other services required to launch the Kidstoysplus.com
Website, to process and ship orders, to market the Kidstoysplus.com Website, to
process credit card transactions, to staff our distribution facility and to
provide computer hardware and server capacity for the Kidstoysplus.com Website.
We anticipate that our warehouse, distribution and customer service facility
will be operational in late-October to early-November 1999. In November 1999, we
anticipate that we will launch phase one of our Kidstoysplus Website development
plan: the "Limited Launch Phase." In late October 1999, we plan to begin
procuring a limited inventory and finalizing arrangements with outside
fulfillment vendors. Based on our discussions with potential fulfillment
vendors, we plan to offer approximately 300-500 select items featuring popular
toys, collectable toys and hobby items for the 1999 Christmas season (beginning
in late November) to test our Kidstoysplus Website operating and software
systems during our Limited Launch Phase. Our operating and software systems are
anticipated to include shopping and browsing features; on-line ordering;
inventory management; accounting and billing controls; customer service and
support systems; search and link capabilities and statistical tracking and
analysis capabilities. We also intend to test and refine internal operational
and distribution systems, order processing, inventory management, procurement
systems, customer service procedures, logistical vendor strategies and human
resources requirements. We anticipate that the Limited Launch Phase will be
completed during the first quarter 2000.
Based on our discussions with potential fulfillment vendors, we anticipate our
Kidstoysplus Website will offer approximately 1000-1500 items after the Limited
Launch Phase when we become fully operational. We intend to increase our product
offerings by entering into additional strategic relationships with fulfillment
vendors and by participating in affiliate programs with other on-line retailers,
which will allow us to offer their inventory on our web site and to receive a
fee for each transaction we originate. We believe the breadth of the inventory
maintained by these fulfillment vendors will provide us with the ability to
offer a broad range of merchandise and to maintain high order fill rates. We
intend to update our site daily with inventory information received from our
fulfillment vendors, which will enable customers to check the availability of
products before ordering. Our systems are expected to electronically transmit
orders to our fulfillment vendors at least once daily. Orders are anticipated to
be shipped by these vendors using a Kidstoysplus.com label and invoice, in most
cases within a day after an order is placed with us. We plan to stock a limited
"in-house" inventory of products including products that are unavailable from
our fulfillment vendors, which may include collectibles, limited edition toys
and toys offered exclusively by manufacturers through Kidstoysplus.com. We will
ship our in-house inventory directly from our distribution facility to our
customers.
Although we have entered into lease agreements with respect to our offices and
our physical distribution facility, we have not completed the improvements
necessary to implement our Limited Launch Phase. We are in the process of
procuring fixtures and equipment for our office and distribution facilities and
completing the improvements to our offices. Our offices and physical
distribution facility are anticipated to be operational in late October 1999.
As of September 8, 1999, we have not finalized any agreements or arrangements
with respect to:
o inventory procurement or order fulfillment for our Kidstoysplus.com
Website inventory;
o securing the computer hardware and server capacity necessary to launch
the Kidstoysplus.com Website;
o credit card processing facilities;
o staffing distribution facilities or customer support and service
systems office; or
o procuring shipping labels, invoices or other materials to ship
products from our fulfillment vendors and our distribution facility to
our customers.
We will also need to (i) secure licensing to operate our distribution facility,
(ii) purchase computer systems and software required for the operation of our
distribution and customer service facilities and (iii) finalize our policies
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and procedures for inventory procurement, internal and outside order
fulfillment, inventory control, financing and accounting controls prior to the
Limited Launch Phase. We anticipate we will successfully enter into agreements
and establish the necessary systems to launch the Kidstoysplus.com Website
before the Limited Launch Phase begins. 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 the
Kidstoysplus.com Website and our policies and procedures for the Limited Launch
Phase in a timely manner, if at all, or that our projected cost and timing for
such development will be accurate. If we are unable to enter into such
arrangements or develop the Kidstoysplus.com Website or distribution systems
prior to November 1999, we may be unable to launch our Kidstoysplus.com Website
or the Limited Launch Phase may be delayed indefinitely. If the Limited Launch
Phase is delayed or abandoned, we may be forced to abandon our business plan,
which will have a material adverse effect on our business and results of
operations and the value of our common shares.
Industry Background
Growth of the Internet and E-commerce
The Internet is an increasingly significant global medium for communications,
content and online commerce. According to a June 1999 report published by the
U.S. Department of Commerce, NUA, an Internet strategy firm, estimated that 171
million people had access to the Internet, 97 million users of them in the
United States and Canada. The growth in Internet usage can likely be attributed
to factors such as:
i) the large and growing base of installed personal computers in the
workplace and at home,
ii) advances in the performance and speed of personal computers and
modems,
iii) improvements in network infrastructure, and
iv) easier and cheaper access to the Internet and increased awareness of
the Internet among businesses and consumers.
The Internet has become an attractive commercial medium for business as the
functionality, accessibility and overall usage has increased over the last few
years. The Internet and other online services are evolving into a unique sales
and marketing channel. In theory, electronic retailers are not limited by the
traditional constraints of physical shelf space and have the potential to offer
customers a vast selection of products through efficient search and retrieval
interfaces. Moreover, electronic retailers can interact directly with customers
by frequently adjusting their featured selections, editorial insights, shopping
interfaces, pricing and visual presentations.
Beyond the benefits of selection, purchasing can be more convenient than
shopping in a physical retail store as electronic shopping can be done 24 hours
a day and eliminates physical travel to a store. Web sites can present
advertising and marketing materials, display hundreds or thousand of products in
catalog form, process transactions and fulfill orders, provide customers with
rapid and accurate responses to their questions and gather customer feedback
efficiently. Generally the cost of publishing on the Internet is lower than
traditional advertising and marketing mediums and the Internet offers the
ability to reach and serve a large and global customer base electronically from
a central location.
As the field known as "e-commerce" develops, becomes more sophisticated and is
accepted by a wider range of consumers, we anticipate that the potential for
personalized low-cost customer interaction will provide additional economic
benefits and economies that are unique to the Internet. Additionally, e-commence
may eliminate several of the burdensome costs of managing and maintaining a
retail store infrastructure, the need for continuous printing and mailing costs
of catalog marketing and the costs of maintaining customer service personnel and
support in several locations. Based on these advantages over traditional
retailers, we believe that e-commence retailers have the potential to build
large, global customer bases quickly and to achieve superior economic returns
over the long term. Currently, there is an increasing number of products that
are being sold online, including computers, travel services, brokerage services,
automobiles, music, and books. We believe the number of products and services
sold over the Internet and the volume of products will increase substantially in
the future.
We believe that marketing children's toys and related products over the Internet
presents an excellent business opportunity. Our business strategy to compete
with traditional facilities based retailers using e-commerce marketing
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techniques. We intend to compete with other e-commerce marketers of children's
toys and related products by differentiating our offerings through focusing on
collectible toys and hobby items and by establishing a reputation for high
quality customer service. Despite our optimism about the future of e-commerce
and our ability to compete, we cannot assure you that we will successfully
implement our business plan or that we will be able to compete with established
retailers of children's toys and related products.
Our business is subject to considerable risks. See "Risk Factors."
The Traditional Toy Industry
The retail toy industry is large, growing and fragmented. Several large
retailers such as Toys-R-Us, Kay Bee Toys, Target Stores, Sears, Wal-Mart,
K-Mart and others dominate the toy industry and carry a large selection of toys.
Many retailers in this industry also carry specialty toy products. We believe
that most large retailers are located in metropolitan areas and that there is a
large potential e-commerce target markets for children's toys and related
products in customers that reside in suburban and rural areas.
According to Play Things Magazine, the International Council of Toy Industries
and the NDP Group estimate worldwide toy industry sales in 1998 totaled $67.8
billion, a 2.7 percent increase from 1997 sales of $66 billion. There can be no
assurance that we will directly or indirectly benefit from the growth of the
retail toy market or that growth of the toy market will continue. We cannot
assure you that we will successfully launch our web site or that consumers will
purchase toys from our web site in sufficient quantities to achieve
profitability, if at all.
The Traditional Distribution Channels
Toy manufacturers generally sell the toys directly to retailers and to a network
of distributors. Distributors serve as the primary vendors for most retailers
and generally carry 1,000-3,000 of the best-selling products. We believe a large
portion of all toys sold are sold by small independent toy retailers. These
small retailers generally sell products that fit into the market niche that each
store has created and carry a limited selection of toys at any given time. We
intend to compete with retailers that target the collectible toy and hobby item
markets. The toy market has several retail chains that dominate the large
superstore category. The largest U.S. retailers, including Wal-Mart, Toys-R-Us,
Kay Bee Toys, Target Stores, Sears and K-Mart, together are estimated to account
for over 25% of total United States toy sales. Toys R Us and Kay Bee Toys have
focused aggressively on superstore growth. Based on publicly available data, we
estimate that each superstore carries approximately 5,000 products, with the
largest stores carrying between 10,000 and 12,000 products on site. Independent
toy retailers typically carry a more limited selection of products in smaller
retailing spaces and we believe they face increasing competitive pressures from
the superstore format.
We believe that several characteristics of the traditional toy industry have
created inefficiencies that may be eliminated by e-commerce including:
(i) the capital intensive investments required for inventory, real
estate and personnel for each retail location;
(ii) limits in the amount of inventory that can be economically
carried in a retail location (we estimate that the average
superstore stocks less than 25% of the toy products available);
(iii) difficulties implementing uniform operating policies and managing
customer service levels, customer satisfaction programs and
customer expectations in all locations;
(iv) risks associated with managing demand and inventory for each
retail store;
(v) high cost of maintaining inventories spread across several retail
locations;
(vi) inability managing human and managerial resources;
(vii) inability to use customer specific information to develop unique
marketing communications to individual customers;
(viii) high costs of disseminating marketing materials to customers; and
(ix) high costs of offering individualized customer services.
We believe that we can use e-commerce marketing to build strategic relationships
with fulfillment vendors that will reduce these inefficiencies, while allowing
us to develop a distribution channel that will capitalize on opportunities for
direct marketing. We intend to develop strategic relationships with fulfillment
vendors that inventory collectible toy and hobby items. We may also offer
popular toys and children's products inventoried by our fulfillment vendors and
through participation in affiliate programs of other web retailers, which will
allow us to offer their
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inventory on our Website and to receive a fee for each transaction that we
originate. We cannot assure you that we will ever be able to offer the breadth
of products offered by facilities based superstores or that we will be capable
of achieving operating efficiencies to compete on the basis of price.
Competition
Retailing children's toys and entertainment products is intensely competitive.
We will compete with a variety of competitors with significantly greater
experience and with greater financial, human and technical resources than us.
These competitors include:
(i) traditional store-based toy and children's product retailers such
as Toys R Us, Kay-Bee Stores, FAO Schwarz, and others;
(ii) major discount retailers such as Wal-Mart, Target Stores, Sears,
Kmart and others;
(iii) independent and specialty children's toy stores including Disney,
Warner Bros. and others;
(iv) catalog retailers;
(v) Internet portals such as AOL and YAHOO etc;
(vi) specialty toy stores featuring collectable toys and hobby items
and
(vii) various online competitors such as etoys, Toys R Us, and
Amazon.com.
Marketing toys over the Internet is new, rapidly evolving and becoming intensely
competitive. Barriers to entry are minimal and new competitors can launch new
sites at a relatively low cost. In addition, traditional retailers have begun to
launch web sites and online services that are expected to compete directly with
us and our Kidstoysplus.com Website. Competitive pressures created by any one of
these companies, singularly or collectively, could have a material adverse
effect on our business, prospects, financial condition and results of
operations.
We believe that the principal competitive factors for on-line toy retailers are
brand recognition, selection, convenience, price, speed and accessibility,
customer service and reliability and speed of fulfillment.
Currently, we estimate that there are approximately 130 toy retailers with
Internet web sites. We believe that etoys.com and Toys R Us.com currently
dominate the on-line market for children's toys and related products and that
they are likely to face significant competition from Amazon.com and other major
on-line retailers in the future.
Toys R Us, Inc. is one of the world's largest toy resellers with gross revenues
of approximately $11 billion in 1998. Toys R Us launched its web site in 1997.
"etoys" is a toy retailer that markets its products exclusively through the
Internet. etoys launched its web site in 1997 and has sold toys through its
distribution and customer service system on a commercial basis since October
1997. etoys had gross sales revenues of approximately $22.9 million in 1998. We
believe that etoys has a significant competitive advantage over most on-line toy
retailers, including us, based on its established web site; brand name; and
customer base. etoys also has a competitive advantage in the marketplace because
it has penetrated the market and developed the infrastructure and technology
support systems required for marketing, distribution and customer service. etoys
has also established relationships with toy manufactures and distributors as
well as advertisers that purchase banner advertisements on the etoys web site.
We believe that most of toy retailers with Internet web sites are small
specialized companies marketing specific categories or lines of toys. We intend
to compete directly against these companies by offering a line of products that
features collectable toys and hobby items at competitive prices. We intend to
attract visitors and potential customers to our web site by offering special
content and information of interest to buyers of collectable toys and hobby
items. We also intend to offer popular toy products through strategic
relationships with fulfillment vendors and through affiliate programs that will
allow us to offer the inventory of other on line retailers to our visitors and
to receive a fee for transactions originated on our web site.
There can be no assurance we will be able to develop our Kidstoysplus.com
Website, the technologies and/or the distribution systems required to market
children's toys over the Internet in a timely manner, if at all. We also cannot
assure you that our business concepts will be accepted by our target market or
that we will successfully
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differentiate our web site and product offerings from those of our competitors.
We may be unable to enter into strategic relationships with fulfillment vendors
to procure a product line and mix that will appeal to our target markets or to
the marketplace. If we fail to develop our Kidstoysplus.com Website or any of
the technologies, systems, or strategic relationships necessary to implement our
business plan in a timely manner, we will not be able to successfully compete in
the marketplace and such failure will have a material adverse effect on our
business and results of operations.
We believe that the principal competitive factors in our market will be:
o ease in access to the web site;
o brand recognition;
o product selection and availability;
o personalized services and free services;
o user friendly shop and browse web features;
o a comprehensive easy to use search engine and tools;
o superior graphics and technical support;
o combination of entertainment and unique product offerings;
o quality of editorial and other site content;
o highly visible order buttons on every screen and easy to use ordering
systems;
o immediate access to a sales consultant either by phone or e-mail;
o customer focus with superior support and service;
o experienced knowledgeable management and personnel; and
o reliability and speed of order fulfillment.
We believe that we will differentiate the Kidstoysplus.com Website from our
competitors by considering these factors in developing marketing and systems
strategies and by offering a sufficiently differentiated product line featuring
non-mainstream toy products including collectable toys and hobby items, as well
as a mix of popular toys. We anticipate that our product mix will feature hobby
products, collectable toys and a wide range of unique imaginative toy products
manufactured by small toy manufactures across the country that are not carried
by current mainstream retailers.
Many of our current and potential competitors have experience in the retail toy
industry, experience in the e-commerce industry, longer operating histories,
customer bases, brand recognition and significantly greater financial, marketing
and other resources than us. We have no operations and no experience marketing
toys over the Internet. We have no developed systems or technologies, and there
can be no assurance that we are capable of developing such systems or
technologies.
In addition, online retailers may be acquired by, receive investments from or
enter into other commercial relationships with larger, well-established and
well-financed companies as use of the Internet and other online services
increases. Certain of our competitors may be able to secure merchandise from
vendors on more favorable terms, devote greater resources to marketing and
promotional campaigns, adopt more aggressive pricing or inventory availability
policies and devote substantially more resources to web site and systems
development than us. We cannot assurance you that we will be able to compete
successfully against current and future competitors, and competitive pressures
faced by us may have a material adverse effect on our business, prospects,
financial condition and results of operations. Further, as a strategic response
to changes in the competitive environment, we may from time to time make certain
pricing, service or marketing decisions that may affect our business. New
technologies and the expansion of existing technologies may increase the
competitive pressures on our business. In addition, companies that control
access to transactions through network access or Web browsers could promote our
competitors web sites or charge us a substantial fee for access through their in
their portals.
The Kidstoysplus Concept
We believe children's toy and entertainment products, like other consumer
products such as books, music CD's and movies, can be merchandised and sold over
the Internet in a commercially viable manner. As an online retailer, we
anticipate we will have some advantages over the traditional toy retailers
including the following:
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1) We will potentially have unlimited online shelf space at lower costs
incurred by traditional toy retailers who are typically restricted by
higher fixed overhead costs resulting from their locations in retail
leases in malls or popular urban shopping areas.
2) We anticipate we will have the potential to offer a vast selection of
toy and entertainment products via the Internet by developing
procurement, distribution and logistical strategies that will allow us
to fill orders using a variety of channels. Unlike traditional toy
retailers who are generally limited in their offerings because of
their physical space, we intend to inventory a select number of
popular items and establish purchasing, shipping and distribution
arrangements with strategic partners to enable us to offer and fill
orders for a broad range of merchandise.
3) We believe that the Internet provides a unique opportunity to market
toys and other children's products by providing efficient search and
browsing capabilities that are generally not available in a
traditional toy store. The Internet search capabilities is anticipated
to allow us to provide specific product data, reports and manufacturer
information related to a potentially large number of offerings on a
uniform and consistent platform. The delivery of this information can
generally be facilitated at reduced (per contact) personnel overhead
expense. We believe that the delivery of information in this manner
can more efficient and effective as the content is anticipated to be
specific to the product and the target audience. Moreover, we believe
this new form of product merchandising will make shopping for products
at our Kidstoysplus.com Website quick, easy and pleasurable
4) We anticipate that we will be able to bring products to market in a
more timely manner. By developing distribution channels that are not
dependent on our physical location, we believe we can disseminate
information to the marketplace faster than traditional retailers and
that we may have the capability of delivering products to consumers by
eliminating the traditional distribution channels and
warehousing/retailing facilities.
5) We believe our target market is larger than the target market for
traditional retailers who are generally limited in geographical scope.
We believe we can compete on a global basis and we can service our
clientele on a worldwide basis from one or more centralized
distribution and operation centers. We believe we can realize
structural cost advantages relative to traditional small, medium and
large toy merchandisers.
6) We believe we can offer superior customer support and information
services by offering uniform 24 hour per day service through a
centralized facility. We believe that we can implement internal
controls that will increase customer satisfaction, provide uniform
quality in our service delivery system and reduce incremental costs
generally attributable to the traditional retail customer service
systems. We believe that we can train our personnel to use information
systems to deliver superior customer service, to answer customer
questions and to respond to customer complaints. We believe that these
strategies can substantially reduce customer dissatisfaction and build
consumer confidence in the Kidstoysplus.com Website.
By offering customers a selection of collectible toys, hobby items and
entertainment products targeted at specific niches in the marketplace, at
competitive prices, though an easy to use and browse web site, we believe we
have the ability to become a top Internet collectible toy and hobby item
retailer. We intend to compete with both traditional facilities-based retailers
and on-line retailers. Unlike many established on-line retailers, we intend to
enter into arrangements with fulfillment vendors who we anticipate will own,
hold and ship products from their inventory directly to our customers. We
believe this strategy will, in time, allow us to offer a larger inventory of
products, reduce our inventory carrying costs and offer our products at lower
costs. As of September 8, 1999, we have not entered into any agreements with
fulfillment vendors, and we cannot assure you that our inventory will be
attractive to visitors to our web site or that we will be capable of offering a
selection of merchandise large enough to attract visitors to our site.
We also intend to participate in the affiliate programs of other on-line
retailers, which will allow us to offer their inventories on our web site and to
receive a fee for purchases originated by us. Some of these web sites may
compete directly or indirectly with our web site and we will not be able to
control packaging of the merchandise
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shipped by these parties, which may adversely affect our ability to develop our
brand name or differentiate our web site.
Kidstoysplus Marketing Strategy
Our marketing strategy is to market children's toys and related products to
niche market segments over the Internet. We initially plan to target the market
for (i) collectable toys, including die cast metal toys, limited edition
collectable dolls, collectable toy cars and other collectable items and (ii)
hobby items including train sets, remote control planes and cars, models and
other hobby products. Our initial target markets consist of Internet users that
are searching for collectable toys, hobby items or other related products, or
searching for information related to such products on the Internet. We intend to
market our products through our Kidstoysplus.com Website that is anticipated to
resemble a traditional toy store in a virtual setting. Our pricing strategy will
be to sell our products at prices that are competitive with or below the prices
charged by physical facilities based toy stores. We intend to process and
deliver orders for our products in one to three business days.
Shopping at the Kidstoysplus Virtual Store
We anticipate that our customers will enter the Kidstoysplus virtual store
through the Kidstoysplus.com Website and that upon entering our virtual store,
the visitor will be able to view a variety of toy and entertainment products,
obtain prices, order products and conduct targeted product searches. We
anticipate that the visitor will also be able to browse highlighted selections,
bestsellers, unique categories and other features, read and post reviews,
register for personalized services, participate in promotions and check order
status. We anticipate our Kidstoysplus.com Website will allow customers to
simply click on a button to add and subtract toy products to a virtual shopping
cart as they browse our inventory.
To execute orders, our Kidstoysplus ordering system will prompt customers to
click on the buy button and to supply shipping and credit card information.
Alternatively, we anticipate that customers may phone our 24 hour 1-800 customer
service line and speak to a qualified Kidstoysplus toy consultant for placing
orders and obtaining information about our products or our company.
We anticipate we will offer our customers a variety of delivery services,
including overnight and other shipping options. We also anticipate we will offer
a wide range of personalized services including free gift wrapping for select
items that are inventoried in our distribution warehouse, special shipping
instructions, a gift request service and an important-date (birthdays, special
occasions, etc.) reminder service. We also intend to provide access to a
separate 24 hour 1-800 customer service line and a satisfaction guarantee and
return policy. We intend to post full details of our policies relating to
pricing, sales tax, sales terms and conditions, credit card security, product
specials and our customer satisfaction guarantee on our Kidstoysplus.com
Website.
We anticipate that our Kidstoysplus.com Website will offer customers the
convenience of online research of a variety of children's merchandise and
entertainment products that are designed to allow customers to make educated
purchase decisions. We believe that collectable toys, hobby items and other
children's products are especially suited for online marketing because they
generally maintain or hold a consistent quality and consumers of these products
are often searching for specific brands of these products. We believe that
consumers often buy specific brands of collectibles, hobby items and toys as a
result of publicity, promotion and marketing programs launched by manufacturers
or collectors. We believe that the demand for popular toys is influenced by
heavy advertising and marketing by toy manufacturers. For example, popular toys
and entertainment products are often associated with popular children's
television programs or characters, or become popular as a result of heavy
promotional efforts by toy manufacturers. The most popular collectibles, hobby
items and toys may be difficult to find at traditional physical toy stores
because of limitations on the inventories of such stores or high demand and
limited availability for specific products. The Internet allows consumers to
efficiently search the inventories of a broad range of online toy retailers from
the convenience of home or office by brand name, model or title using search
tools, and to order or request products, subject to availability. We believe
that online toy retailing can potentially eliminate or mitigate critical
inefficiencies and problems faced by customers trying to find a specific
collectable, hobby item or toy. There can be no assurance that we will be able
to obtain inventories of the most popular items or that customers will buy such
products through our web site.
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We are in the process of developing the software and systems required to make
our virtual store operational. We have not established our 1-800 customer
service line or the physical support systems to implement our business plan.
There can be no assurance that we will successfully develop the software,
hardware or distribution systems contemplated in our business plan on a timely
basis, if at all. If we fail to develop the technology to launch our
Kidstoysplus.com Website or to establish support services to make our business
operational before November 1999, we may be unable to implement our business
plan and our business may be materially adversely affected. See "Note Regarding
Forward Looking Statements."
Our Technology
We intend to develop and use technology to deliver outstanding service and to
achieve the economies we believe are inherent in our online virtual store model.
Our strategy is to build strong brand recognition, customer loyalty and supplier
relationships, while creating an economic model that is superior to that of the
capital and real estate-intensive traditional toy retailing business. We believe
that our success will depend on our ability to develop technology to offer an
online experience that is easy to use, useful, functional, entertaining and
educational. We believe that our technology must meet or exceed the general
expectations of the virtual shopper who we believe will have experience shopping
with other online retailers and who will expect a high level of technical
sophistication from our Kidstoysplus.com Website.
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 November 1999. 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 with Retricular in late
October 1999 to complete the development of our web site. We estimate that we
will need to spend approximately $35,000 - $50,000 to complete development and
to successfully launch our web site for 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 process of negotiating with consultants to develop the
technologies, software and systems for the Kidstoysplus.com Website; however, 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 late
October 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. We anticipate that we will need to
complete the development of our Kidstoysplus.com Website and our support
services before November 1, 1999 to successfully launch our web site and that we
will require additional financing during the fourth quarter 1999 to provide
working capital for our operations. If we fail to develop our Kidstoysplus.com
Website or our support systems or fail to raise additional capital as planned,
our business and results of operations may be materially adversely affected. See
"Note Regarding Forward Looking Statements."
Web Site Marketing and Promotion
We intend to build customer loyalty by creatively applying technology to deliver
personalized programs and service. We also intend to be able to provide
increasingly targeted and customized services by using the customer preference
and behavioral data obtained as a result of our planned online retailing. We
believe that e-commerce allows rapid and effective experimentation and analysis,
instant user feedback and efficient "redecorating of the store" for each and
every customer, which we intend to incorporate in our merchandising. We plan to
use personalized notification services to send customers highly customized
notices at their request. By offering customers personalized messages and
services, we will seek to increase the number of visitors that make purchases,
to encourage repeat visits and purchases and to retain customers. We believe
that loyal, satisfied customers will generate word-of-mouth advertising and
awareness that will enable us to reach other potential customers. We
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intend to employ a variety of media, program and product development, business
development and promotional activities to achieve our goals.
Online Service and Internet Advertising
We intend advertise on various high-traffic Internet portals to build awareness
of our Kidstoyplus.com Website. We also intend to offer banner ads on our
Kidstoyplus.com Website that are anticipated to encourage readers to click
directly to a Kidstoysplus toy offering or one of our sponsoring toy
manufacturer's web site.
Advertising and Public Relations
We intend to engage in a coordinated program of print advertising through
specialized and general circulation newspapers and magazines. The Company may
also advertise in other media. As a result of our planned public relations
activities and current Internet e-commerce interest, we may receive publicity.
There can be no assurance that we will have sufficient resources to carry out
our promotional and advertising strategy or that we will receive any publicity.
Personalized Shopping Services
We plan to offer personalized notification and shopping services through an
automated email reminder service and gift wish list service. Visitors may be
allowed to request email reminders of specific dates (holidays, birthdays, etc.)
via email or have a toy wish list sent to an email address. We also intend to
add a match filtering service that can monitor editorials on children's toys and
the toy industry and email messages to visitors that request this information.
Customer Service
We believe that our ability to establish and maintain long-term relationships
with our customers and encourage repeat visits and purchases depends, in part,
on the strength of our customer support and service operations and staff.
Furthermore, we intend to use frequent communication with and feedback from our
customers in order to continually improve the store and our services. We intend
to offer an e-mail address to enable customers to request information and to
encourage feedback and suggestions. We also intend to establish a team of
customer support and service personnel who will be responsible for handling
general customer inquiries, answering customer questions about the ordering
process, and investigating the status of orders, shipments and payments.
We anticipate we will staff a toll-free line with "toy product consultants,"
personnel who we plan to train to provide product information, assurances to
customers related to their purchase decision and general customer support for
the Kidstoysplus.com Website. We anticipate we will automate certain tools used
by our customer support and service staff.
Warehouse and Fulfillment
We plan to source our products from a network of toy manufacturers and
distributors. We plan to carry minimal inventory and rely to a large extent on
"fulfillment vendors" to fill orders for the products we offer. We anticipate
that most of our inventory will owned and inventoried by these outside
fulfillment vendors and shipped directly from these vendors to our customers. We
intend to update our site daily with inventory information received from our
fulfillment vendors, which will enable customers to check the availability of
products before ordering. Our systems are expected to electronically transmit
orders to our fulfillment vendors at least once daily, and orders are
anticipated to be shipped by these vendors using Kidstoysplus.com labels and
invoices, in most cases within a day after an order is placed with us.
We plan to stock a limited "in-house" inventory of products including products
that are unavailable from our fulfillment vendors including certain
collectibles, limited edition toys, toys offered exclusively by manufacturers
through Kidstoysplus.com and merchandise that we obtain for special promotions.
We anticipate we will hire personnel that specialize in sourcing hard-to-find
"special request" toy products and fill special request orders, subject to
availability. We will ship our in-house inventory directly from our distribution
facility to our customers.
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We anticipate that we may require additional administrative, customer service,
warehouse and fulfillment space within the next 12 months, and that suitable
additional space will be available on commercially reasonable terms, although
there can be no assurance in this regard. We leased facilities to establish our
head office and central distribution center in a rural area setting that may
enable us to take advantage of less expensive commercial rent leases and provide
us access a workforce at reasonable hourly rates.
Kidstoysplus 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) initial strategic planning;
(ii) establishing strategic relationships with technology developers
and consultants, fulfillment vendors, toy manufacturers,
merchandisers and distributors;
(iii) development of the necessary computer infrastructure and systems
required to operate and develop the Kidstoysplus.com Website;
(iv) staffing and equipping our distribution facility;
(v) obtaining licenses and permits required for our operations;
(vi) securing a server for the Kidstoysplus.com Website;
(vii) installing internal system hardware and software for our
distribution and customer service facilities;
(viii) installing and equipping our customer service operations office;
(ix) installing communications support systems;
(x) developing and establishing an inventory management system;
(xi) selecting our initial product line for the Limited Launch Phase;
(xii) developing operating and management procedures and policies;
(xiii) arranging financing and establishing a credit facility;
(xiv) engaging logistical support for customer deliveries;
(xv) procuring packaging inventories;
(xvi) testing Kidstoysplus internal operating, distribution and
customer service systems;
(xvii) establishing our 1-800 service line;
(xviii) testing our web site software;
(xix) developing or licensing content for the Kidstoysplus.com Website;
(xx) promoting the initial launch of our web site;
(xxi) finalizing the Kidstoysplus virtual store concept; and
(xxii) hiring and training customer service and distribution personnel.
After the Initial Launch Phase, 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.
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In developing the Kidstoysplus.com Website, we will consider three major
considerations that we believe are essential to our success in e-commerce. The
considerations are as follows:
1. Developing back end system support for the Kidstoysplus.com Website.
2. Selection of the right initial product lines and strategic order
fulfillment vendors.
3. Timely launching the Kidstoysplus.com Website.
We believe that growth will be the key to our success and that developing and
managing growth will be a major challenge for us and our management. We cannot
assure you we will successfully implement our business plan or develop the
strategic relationships to make our web site competitive.
Back End System Support
Initially, we intend to design a software system that integrates and is capable
of managing all of the Kidstoysplus.com Website, marketing, distribution and
other information. This information is anticipated to cover product offerings,
consumer information on products and manufacturers, promotions, pricing, margin,
customer lists and customer data, shipping and handling data, customer support
information, our procedures and policies, credit information, inventory control,
procurement and distributor information, catalogues, news and other information
required to integrate our operations. We anticipate that we will develop a
system will allow us to collect and analyze information in a single cohesive
system that allows us to use and exchange information within our organization.
We may also integrate certain parts of our systems with strategic partners.
Initial Product Lines and Growth
We believe that a key to our online retailing strategy is to offer a select
inventory of collectable toys and hobby items and to avoid selling a large
selection of products immediately. After our Initial Launch Phase, we plan to
market approximately 1,000 to 1,500 of the most popular collectable toys and
hobby items that are available through fulfillment vendors or from our in-house
inventory. We believe that this strategy will allow us to ensure our internal
systems, especially the back-end platform, are performing correctly before
expanding our product lines. In the future, we intend to expand our product
offerings to offer a broader range of products that are made available through
fulfillment vendors or through affiliate relationships with other on-line
vendors. We believe that the typical customer may initially buy from a core
group of select products and later will seek a broader range of product
offerings.
Experienced on-line customers may become frustrated if they are unable to select
from a large inventory of products, are unable to locate specific products or
are forced to look for products in traditional stores. For the Kidstoysplus.com
Website to be successful, we believe it is critical that we increase our product
line rapidly once we are confident that it can support hundreds of transactions
concurrently and process thousands of orders daily. We believe that our larger
competitors have large extensive product offerings and currently have systems in
place to facilitate a large number of transactions. Consequently, we believe
that we must expand our inventory by offering products that appeal to niches in
the market including the collectable toy market, the hobby market, the
educational toy market and other specific product categories to successfully
compete with other on-line retailers. We believe our primary competition will be
from traditional physical based retailers that offer similar products. We plan
to compete by offering a broader selection to these target markets and by
offering our products at competitive or lower prices than those charged by
physical based retailers. See "Competition."
Initial Launch Phase of Our Kidstoysplus.com Website
We plan to launch the Kidstoysplus.com Website and establish our distribution
facility prior to the Christmas season of 1999. We anticipate that sales during
the end of 1999 will assist us in testing it internal operating systems, from
customer order entry and credit transaction processing to final fulfillment,
shipping and delivery of the products ordered. Provided adequate financing is
available, the year 2000 will be the Company's first full year of operations as
an Internet retailer. There can be no assurance that we will be able to launch
the Kidstoysplus.com Website as anticipated or that we will have sufficient
financing to implement our business plan. Any substantial delay in the launch of
Kidstoysplus.com Website will have a material adverse affect on our business and
results of operation.
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We have not purchased our in-house inventory or finalized any fulfillment vendor
agreements related to the products we will offer during the Initial Launch Phase
or the established the number of products we will offer. Based on our
discussions with potential fulfillment vendors, toy manufacturers and
distributors, we believe we will have access to a number of products offered by
fulfillment vendors, toy distributors and manufacturers during our Initial
Launch Phase. We anticipate that we will purchase our inventory and finalize
arrangements with fulfillment vendors in late October 1999. We also have not
completed development of the technology required to launch our web site or
entered into final agreements to do so. We believe that based on our
negotiations with potential developers, our technology will be developed in time
for our initial launch.
Capital Requirements
Capital requirements of a high technology start-up company are continuous,
especially in the early years, or until the company can establish a revenue
stream from product sales.
We have not entered into any arrangements or agreements to raise any additional
financing, and there can be no assurance that such financing will be available
on terms acceptable to us, if at all. If we are unsuccessful in raising the
financing required to implement our business plan, an investment in our common
shares may result in a loss of the investment made.
We completed two initial private placements of a total of 4,368,084 our common
shares providing us approximately $243,642. See "Unregistered Offerings by the
Company." The proceeds from the private placements will be used to establish a
the Kidstoysplus.com Website, offset some of the costs required to establish our
distribution and warehouse facility, purchase inventories of select and limited
toy lines during the Initial Launch Phase, offset the cost of establishing our
distribution and customer service systems; and begin to fund our brand identity
marketing activities. These proceeds will not be sufficient to establish all of
the systems that we will need to fully implement our business plan.
During the fourth calendar quarter 1999 and in 2000, we need additional
financing to develop our Kidstoysplus.com Website and distribution systems and
to continue our marketing activities. We anticipate we will need to raise
additional financing in the amount of at least $2 million during the first six
months of 2000 to increase and diversify our initial product offerings and to
maintain adequate inventory to satisfy customer expectations and to meet
customer demands. We intend to raise additional capital to fund our operations
through private equity and/or debt financings. We are in the process of
commencing a private placement offering of our common stock to raise up to $2.5
million at $1.25 per share. There can be no assurance that we will successfully
raise any additional capital. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Consultant
As of May 31, 1999, we had one consultant, Albert R. Timcke, a director and our
President, engaged in product research and development and two part-time
consultants, Brian C. Doutaz, a director and our Secretary and Treasurer, and
Gerald W. Williams, engaged in general and administrative and marketing
functions. Each of our consultants will assist us in the development our
business and our internal operating and information systems. We may also engage
additional consultants in the future to assist us with the development of
software and information systems and the implementation of our business plan.
We anticipate we will hire up to 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 employee.
Our success will depend in large part on our ability to attract and retain
skilled and experienced employees and consultants. We do not anticipate any of
our employees will be covered by a collective bargaining agreement. We do not
currently have any key man life insurance on any of our directors or executive
officers.
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Intellectual Property
We have not registered any trademarks in the United States or elsewhere. We
intend to submit an application to register the name "Kidstoysplus.com" as our
trademark in the first quarter 2000, provided we are able to obtain additional
financing for our operations. We currently have no technologies that are
patentable.
Risk Factors
Our business is subject to a number of risks that are generally associated with
start-up companies in the development stage of their business and companies
engaged in business through the Internet. These risks could cause our actual
results to differ materially from the results we project and any forward-looking
statement we make in this registration statement. Below is a description of some
of the risks that we anticipate will be associated with our business and an
investment in our company.
Our lack of an operating history makes future forecasting difficult.
We were incorporated on February 4, 1999, to engage in the business of marketing
children's toys and related products over the Internet. We are a development
stage company, which means we are in the process of developing our business and
have not generated any revenues from our operations. We intend to begin selling
products on our Kidstoysplus.com Website in the fourth calendar quarter 1999.
However, we have not entered into all of the agreements or arrangements that
will be required to conduct our business including, among others: agreements for
the development of all of the technologies required to operate our business;
arrangements to lease a server for our web site; agreements to equip and furnish
our warehouse, order processing center or any other physical facility that we
will require to market, sell and deliver products; agreements with fulfillment
vendors to provide merchandise to sell on our web site; agreements to procure
our inventory of in-house products; arrangements to hire employees; arrangements
for shipping and packaging of orders; or agreements for credit facility or other
financing. We cannot assure you that we will successfully enter into these
arrangements or agreements in a timely manner, if at all, and our failure to do
so will have a material adverse affect on out business and results of
operations.
As a result of our lack of an operating history, it is difficult to accurately
forecast our net sales and we have limited meaningful historical financial data
upon which to base planned operating expenses. We base our current and future
expense levels on our operating plans and estimates of future net sales, and
several of our expenses are anticipated to be fixed because of the amount of
capital required to establish our business and the expenditures we anticipate
will be necessary to maintain a minimum level of capacity. Our sales and
operating results are difficult to forecast because they will generally depend
on the volume and timing of the orders we receive. As a result, we may be unable
to adjust our spending in a timely manner to compensate for any unexpected
revenue shortfall. This inability could cause our net losses in a given quarter
to be greater than expected.
We anticipate future losses and negative cash flow.
We expect operating losses and negative cash flow to continue for the
foreseeable future. We anticipate our losses will increase significantly from
current levels because we expect to incur additional costs and expenses related
to:
- brand development, marketing and other promotional activities;
- the expansion of our inventory management and distribution operations;
- the continued development of our Kidstoysplus.com Website, the systems
that we use to process customers' orders and payments, and our
computer network;
- increased marketing activities;
- increased inventory carrying costs;
- increased administrative costs;
- cost related to financings;
- the expansion of our product offerings and Kidstoysplus.com Website
content; and
- development of relationships with strategic business partners.
As of April 30, 1999, we had an accumulated deficit of $16,606. Our losses will
increase substantially in 2000 as we anticipate costs will increase due to a
number of factors including:
- an increase in the number of employees;
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- an increase in sales and marketing activities;
- addition of warehouse facilities and infrastructure;
- increased inventory carrying costs; - increase administrative costs;
and
- increased training costs.
Our ability to become profitable depends on our ability to generate and sustain
substantial net sales while maintaining reasonable expense levels. See "Selected
Financial Data" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations".
Our operating results are difficult to predict.
Our operating results are anticipated to fluctuate significantly due to a
variety of factors, many of which are outside of our control. Factors that may
harm our business or cause our operating results to fluctuate include the
following:
- our inability to obtain new customers at reasonable cost, retain
existing customers, or encourage repeat purchases;
- decreases in the number of visitors to our Kidstoysplus.com Website or
our inability to convert visitors into customers;
- the mix of toys and other products sold by us;
- our ability to offer products and content that appeals to our target
markets;
- seasonality of the toy industry and certain product lines;
- our inability to manage inventory levels;
- our inability to manage our distribution operations;
- our inability to adequately maintain, upgrade and develop our web
site, the systems that we use to process customers' orders and
payments or our computer network;
- the ability of our competitors to offer new or enhanced web sites,
services or products;
- price competition;
- an increase in the level of our product returns;
- fluctuations in the demand for children's products associated with
movies, television and other entertainment events;
- our inability to obtain popular children's toys, video games,
software, videos and music from our vendors;
- fluctuations in the amount of consumer spending on children's toys,
video games, software, videos and music;
- the failure to develop new marketing relationships with key business
partners;
- the extent to which we are not able to participate in advertising
campaigns such as those conducted by strategic partners;
- increases in the cost of online or offline advertising;
- the amount and timing of operating costs and capital expenditures
relating to expansion of our operations;
- unexpected increases in shipping costs or delivery times, particularly
during the holiday season;
- technical difficulties, system downtime or Internet brownouts;
- government regulations related to use of the Internet for commerce or
for sales and distribution of toys, video games, software, videos and
music; and
- economic conditions specific to the Internet, online commerce and the
children's toy and related product industries.
A number of factors will cause our gross margins to fluctuate in future periods,
including the mix of toys and other products sold by us, inventory management,
inbound and outbound shipping and handling costs, the level of product returns
and the level of discount pricing and promotional coupon usage. Any change in
one or more of these factors could reduce our gross margins in future periods.
We expect our sales to experience seasonal fluctuations that may affect our cash
flow and our ability to manage our inventory effectively.
We expect to experience seasonal fluctuations in our net sales, with the
heaviest demand for toys anticipated to be during the Christmas season. These
seasonal patterns will cause quarterly fluctuations in our operating results. In
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particular, a disproportionate amount of our net sales will be realized during
the fourth calendar quarter and we expect this trend to continue in the future.
In anticipation of increased sales activity during the fourth calendar quarter,
we anticipate that we will hire temporary employees to bolster our permanent
staff and we will significantly increase our inventory levels. For this reason,
if our net sales were below seasonal expectations during this quarter, our
annual operating results could be below our expectations.
Due to our lack of an operating history, it is difficult to predict the extent
that seasonal patterns will have on our sales or the impact such seasonality
will have on our business and financial results. In the future, trends in
seasonal sales patterns may be more pronounced than others, which may strain our
personnel and warehousing and order shipment activities and may cause a
shortfall in net sales as compared to expenses in a given period. Seasonal
fluctuations may have a material adverse effect on our ability to manage our
operations and inventories.
We may face significant inventory risk because consumer demand can change for
products between the time that we order products and the time that we receive
them.
We may carry a significant level of inventory if we are unable to enter into
arrangements with fulfillment vendors that offer merchandise that we elect to
offer on our web site or as our business grows. We may also inventory
merchandise that we believe will be popular to assure availability to our
customers. As a result, the changing trends in consumer tastes in the market for
collectable toys, hobby items and related products will subject us to
significant inventory risks. It is critical to our success that we accurately
predict these trends and to not overstock unpopular products. The demand for
specific products can change between the time the products are ordered and the
date of receipt. We are particularly exposed to this risk because we anticipate
that we will derive a majority of our net sales in the fourth calendar quarter
of each year. Our failure to sufficiently stock popular toys and other products
in advance of such fourth calendar quarter would harm our operating results for
the entire fiscal year.
In the event that one or more products do not achieve widespread consumer
acceptance, we may be required to take significant inventory markdowns, which
could reduce our net sales and gross margins. We anticipate that this risk may
be greatest in the first calendar quarter of each year, after we have
significantly increased inventory levels for the holiday season. We believe that
this risk will increase as we open new departments or enter new product
categories due to our lack of experience in purchasing products for these
categories. In addition, to the extent that demand for our products increase
over time, we may be forced to increase inventory levels. Any such increase
would subject us to additional inventory risks.
Because we do not intend to have long-term or exclusive vendor contracts, we may
not be able to obtain sufficient quantities of popular children's products in a
timely manner and we could lose sales and we could lose sales.
If we are not able to offer our customers sufficient quantities of toys or other
products in a timely manner, we could lose customers and our net sales could be
below our expectations. Our success depends on our ability to purchase or make
available products in sufficient quantities at competitive prices, particularly
for the holiday shopping season. Based on our discussions with potential
fulfillment vendors, distributors and suppliers, we believe it is common in the
industry not to have long-term or exclusive arrangements with any vendor or
distributor that will guarantee the availability of toys or other children's
products. In addition, popular collectable toys, hobby items, children's
merchandise and other toys are often ordered months in advance of delivery and
may not be available to us through fulfillment vendors or may require minimum
quantity orders that exceed our demand. Therefore, we will not have a
predictable or guaranteed supply of popular toys or other products on acceptable
terms. If our product selection is limited or the most popular merchandise is
unavailable through our web site, we may be unable to compete effectively.
If we are unable to obtain sufficient quantities of products from our key
vendors, our net sales will be adversely affected.
If we were unable to obtain sufficient quantities of products from our key
fulfillment vendors, we could lose customers and our net sales could be below
expectations. From time to time, we anticipate we may experience difficulty in
obtaining sufficient product allocations from key fulfillment vendors due to the
high demand for specific product selections or in the event our fulfillment
vendors are unable to obtain sufficient inventory to fill our
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orders. All of our fulfillment vendors are distributors to other retailers and,
from time to time, such vendors may receive firm orders for specific product
selections from our competitors, which may make the availability of such
selections unavailable to us. Because we anticipate our arrangements for order
fulfillment through our fulfillment vendors will initially be on a
"just-in-time" or "as ordered" basis, we may be unable to make available the
most popular products to our customers unless we place firm orders and accept
delivery for such products, which may increase our inventory carrying costs. The
unavailability of popular products or increases in carrying costs may have a
material adverse affect on our results of operations and our business.
In addition, we believe our key vendors will have established, and may continue
to expand, their own online retailing efforts, which may impact our ability to
get sufficient product allocations from such vendors. We currently have no
agreements or arrangements to acquire inventory from manufacturers or
distributors.
To manage our growth and expansion, we need to implement financial and
managerial controls and reporting systems and procedures, and our inability to
do so successfully will adversely affect our business.
Our anticipated growth in personnel and operations will place a significant
strain on our management, information systems and resources. In order to manage
this growth effectively, we need to develop financial and managerial controls
and reporting systems and procedures. If we experience a significant increases
in the number of our personnel, our existing management team will not be able to
effectively train, supervise and manage all of our personnel. In addition, our
information systems must be able to handle adequately the anticipated volume of
information and transactions that would result from our operations and our
anticipated growth. Our failure to successfully implement, improve and integrate
these systems and procedures would cause our results of operations to be below
expectations.
We may not be able to compete successfully against current and future
competitors.
The online commerce market is new, rapidly evolving and intensely competitive.
Increased competition is likely to result in price reductions, reduced gross
margins and loss of market share, any of which could seriously harm our net
sales and results of operations. We expect competition to intensify in the
future because current and new competitors can enter our market with little
difficulty and can launch new web sites at a relatively low cost. In addition,
should we decide to expand our product lines to offer video games, software,
videos and music, such retailing industries are intensely competitive.
We currently or potentially intend to compete with a variety of other companies,
including:
- traditional store-based retailers of collectable toys and hobby
products;
- traditional store-based toy and children's product retailers such as
Toys R Us, FAO Schwarz, Zany Brainy and Noodle Kidoodle;
- major discount retailers such as Wal-Mart, Kmart, Sears and Target
Stores;
- online stores operated by etoys, Toys R Us, Wal-Mart, FAO Schwarz and
Amazon.com;
- physical and online stores of entertainment entities that sell and
license children's products, such as The Walt Disney Company and
Warner Bros.;
- catalog retailers of children's products;
- vendors or manufacturers of children's products that currently sell
some of their products directly online, such as Mattel and Hasbro;
- other online retailers that include children's products as part of
their product offerings, such as Amazon.com, Barnesandnoble.com,
CDnow, Beyond.com and Reel.com;
- Internet portals and online service providers that feature shopping
services such as AOL, Yahoo!, Excite and Lycos; and
- various smaller online retailers of children's products, such as
BrainPlay.com, Red Rocket and Toysmart.com.
Many traditional store-based and online competitors have long operating
histories, large customer or user bases, brand recognition and loyalty and
significant financial, marketing and other resources. Many of our primary
competitors, including specialty toy stores that offer collectable toys and
hobby items, have knowledgeable personnel and substantial experience in
retailing collectable toys and hobby items. These competitors may establish
their own web sites and may devote substantially more resources to web site
development than we can, which may adversely affect our ability to attract
visitors to our web site. In addition, larger, well-established and
well-financed
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entities may join with online competitors or children's toy, video game,
software, video and music publishers or suppliers as the use of the Internet and
other online services increases.
Our competitors may be able to secure products from vendors on more favorable
terms, fulfill customer orders more efficiently and adopt more aggressive
pricing or inventory availability policies than we can. Traditional store-based
retailers also enable customers to see and feel products in a manner that is not
possible over the Internet.
We may expand our product lines and enter new business categories that may not
achieve market acceptance.
Any new department or product category that is launched or acquired by us, which
is not favorably received by consumers could damage our brand or reputation.
This damage could impair our ability to attract new customers, which could cause
our net sales to fall below expectations. An expansion of our business into
other new departments or product categories will require significant additional
expenses, and strain our management, financial and operational resources. This
type of expansion would also subject us to increased inventory risk and could
aversely affect our levels of customer service. We may choose to expand our
operations by developing other new departments or product categories, promoting
new or complementary products, expanding the breadth and depth of products and
services offered or expanding our market presence through relationships with
third parties.
If we experience problems in our distribution operations, we could lose
customers.
We intend to primarily rely on fulfillment vendors to inventory, package and
ship products to our customers. We also intend to rely upon third-party carriers
for shipping our products to our customers and to ship products to and from our
distribution facility. Consequently, we are subject to the risks, including
employee strikes and inclement weather, associated with such carriers' ability
to provide delivery services to meet our shipping needs. In addition, failure to
deliver products to our customers in a timely manner would damage our reputation
and brand. We also intend to depend upon temporary employees to adequately staff
our distribution facility, particularly during the holiday shopping season. If
we do not have sufficient sources of temporary employees, we could lose
customers.
If we do not successfully establish our Kidstoysplus.com Website and the systems
that process customers' orders, we will be unable to implement our business
plan.
If we fail to establish our Kidstoysplus.com Website, we will be unable to carry
out our business plan. Furthermore, we must establish computer and information
systems that we will use to process and ship customer orders and process
payments or we may not be able to successfully distribute customer orders. Any
failure of our systems to act in an integrated manner could result in the loss
of customers and our net sales will be adversely affected.
In addition, our failure to rapidly upgrade our Kidstoysplus.com Website or
expand these computer systems without system downtime, particularly during the
fourth calendar quarter, would further reduce our net sales. We may experience
difficulty in improving and maintaining such systems if our employees or
contractors that develop or maintain our computer systems become unavailable to
us. We also expect periodic systems interruptions while enhancing and expanding
these computer systems that will affect the quality of our customer service.
The occurrence of a natural disaster or other unexpected problem, which affects
our facilities or systems, could damage our reputation and brand and adversely
affect our net sales.
The occurrence of an earthquake or other natural disaster or unanticipated
problems at our planned facility in British Columbia, or at the third-party that
we anticipate will house substantially all of our computer and communications
hardware systems, could cause interruptions or delays in our business, loss of
data or render us unable to accept and fulfill customer orders. Any such
interruptions or delays at either of these facilities would reduce our net
sales. In addition, we anticipate that our systems and operations will be
vulnerable to damage or interruption from fire, flood, power loss,
telecommunications failure, break-ins, earthquake and similar events. We have no
formal disaster recovery plan and our business interruption insurance may not
adequately compensate us for losses that may occur. In addition, the failure by
the third-party facility to provide the data communications capacity required by
us, as a result of human error, natural disaster or other operational
disruptions, could result in interruptions in our service. The occurrence of any
or all of these events could damage our reputation and brand and impair our
business.
Our net sales could decrease if our online security measures fail.
Our relationships with our customers may be adversely affected if the security
measures that we use to protect their personal information, such as credit card
numbers, are ineffective. If, as a result, we lose many customers, our net sales
could decrease. We intend to rely on security and authentication technology that
we intend to license from
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third parties. With this technology, we intend to perform real-time credit card
authorization and verification with our bank. We cannot predict that whether
events or developments will result in a compromise or breach of the technology
we use to protect a customer's personal information.
Furthermore, the servers we intend to rely on may be vulnerable to computer
viruses, physical or electronic break-ins and similar disruptions. We may need
to expend significant additional capital and other resources to protect against
a security breach or to alleviate problems caused by any breaches. We cannot
assure you that we can prevent all security breaches.
Our net sales will be adversely affected if we experience significant credit
card fraud.
A failure to adequately control fraudulent credit card transactions would reduce
our net sales and our gross margins because we do not intend to carry insurance
against this risk. We intend to use developed technology to help us to detect
the fraudulent use of credit card information. Nonetheless, we expect to suffer
losses as a result of orders placed with fraudulent credit card data even though
the associated financial institution approved payment of the orders. Under
currently contemplated credit card practices, we are liable for fraudulent
credit card transactions because we do not obtain a cardholder's signature.
If we do not respond to rapid technological changes, our services could become
obsolete and we could lose customers.
If we face material delays in introducing new services, products and
enhancements, our customers may forego the use of our services and use those of
our competitors. To remain competitive, we must continue to enhance and improve
the functionality and features of our online store. The Internet and the online
commerce industry are rapidly changing. If competitors introduce new products
and services embodying new technologies, or if new industry standards and
practices emerge, our Kidstoysplus.com Website and our proprietary technology
and systems may become obsolete.
The development of our Kidstoysplus.com Website and other proprietary technology
will entail significant technical and business risks. We may use new
technologies ineffectively or we may fail to adapt our Kidstoysplus.com Website,
systems that we use to process customers' orders and payments and our computer
network to customer requirements or emerging industry standards.
Intellectual property claims against us can be costly and could impair our
business.
Other parties may assert infringement or unfair competition claims against us.
We cannot predict whether third parties will assert claims of infringement
against us, or whether any assertions or prosecutions will harm our business. If
we are forced to defend against any such claims, whether they are with or
without merit or are determined in our favor, then we may face costly
litigation, diversion of technical and management personnel, or product shipment
delays. As a result of such a dispute, we may have to develop non-infringing
technology or enter into royalty or licensing agreements. Such royalty or
licensing agreements, if required, may be unavailable on terms acceptable to us,
or at all. If there is a successful claim of product infringement against us and
we are unable to develop non-infringing technology or license the infringed or
similar technology on a timely basis, it could impair our business.
If the protection of our trademarks and proprietary rights is inadequate, our
brand and reputation could be impaired and we could lose customers.
We intend to take steps to protect our proprietary rights, which may be
inadequate. We anticipate we intend to file an application to register our
"kidtoysplus" trademark for sales of toys, games and playthings during the first
quarter 2000 if we have sufficient financial resources to do so. We may also
file applications for patent protection of our technology, if patentable, and
additional trademarks in the future. We anticipate our future copyrights,
service marks, trademarks, trade dress, trade secrets and similar intellectual
property will be critical to our success. We intend to rely on trademark and
copyright law, trade secret protection and confidentiality or license agreements
with our employees, customers, partners and others to protect our proprietary
rights.
Effective trademark, service mark, copyright and trade secret protection may not
be available in every country in which we will sell our products and services
online. Furthermore, the relationship between regulations governing domain names
and laws protecting trademarks and similar proprietary rights is unclear.
Therefore, we may be
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unable to prevent third parties from acquiring domain names that are similar to,
infringe upon or otherwise decrease the value of our trademarks and other
proprietary rights.
The loss of the services of one or more of our key personnel, or our failure to
attract, assimilate and retain other highly qualified personnel in the future,
could disrupt our operations.
The loss of the services of one or more of our key personnel could seriously
interrupt our business. We depend on the continued services and performance of
our senior management and other key personnel, particularly Albert R. Timcke,
our President, Chief Executive Officer and Chairman of the Board, and Brian
Doutaz, our Secretary and Treasurer and a director of the company. Mr. Timcke is
a full-time consultant to the company and dedicates 100% of his attention to the
development of our business. Mr. Doutaz is a part-time consultant to the company
and dedicates a substantial portion of his time serving as President of Anina
International Capital Corp., which may affect his ability to dedicate
substantial efforts and time to the development of our business.
Our future success will also depend upon the service of other key sales,
marketing and support personnel, which we have not hired. Our relationships with
these officers and key employees are at will. We do not have "key person" life
insurance policies covering any of our employees.
We may be adversely impacted if the software, computer technology and other
systems we use are not year 2000 compliant.
Any failure of our material systems, our vendors' material systems or the
Internet to be year 2000 compliant would have material adverse consequences for
us. Such consequences would include difficulties in operating our
Kidstoysplus.com Website effectively, taking product orders, making product
deliveries or conducting other fundamental parts of our business. 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 will be year 2000
compliant and that all the technologies developed by Reticular Consulting 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 and financial
services used by consumers and of systems that make the Internet functional. We
cannot assure you that such 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.
A significant disruption in the ability of consumers to reliably access the
Internet or our ability to process transactions will have an adverse effect on
demand for our services and would have a material adverse effect on us. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
Executive officers and directors have substantial control over the company.
Executive officers, directors and entities affiliated with them, if acting
together, would be able to significantly influence all matters requiring
approval by our stockholders, including the election of directors and the
approval of mergers or other business combination transactions. These
stockholders, in the aggregate, beneficially own approximately 56.18% of our
outstanding common stock. See "Principal Stockholders".
Risks Related To the e-commence Industry
If we are unable to acquire the necessary web domain names, our brand and
reputation could be damaged and our business may be adversely affected.
We may be unable to acquire or maintain Web domain names relating to our brand
in the United States and other countries in which we may conduct business. As a
result, we may be unable to prevent third parties from acquiring and using
domain names relating to our brand. Such use could damage our brand and
reputation and take customers
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away from our Kidstoysplus.com Website. We currently hold various relevant
domain names, including the "Kidstoysplus.com" domain name. Governmental
agencies and their designees generally regulate the acquisition and maintenance
of domain names. The regulation of domain names in the United States and in
foreign countries is subject to change in the future. Governing bodies may also
establish additional top-level domains, appoint additional domain name
registrars or modify the requirements for holding domain names.
We may need to change the manner in which we intend to conduct our business if
government regulation increases, which may increase our costs of doing business
and adversely affect our ability to earn a profit.
The adoption or modification of laws or regulations relating to the Internet
could adversely affect the manner in which we currently conduct our business. In
addition, the growth and development of the market for online commerce may lead
to more stringent consumer protection laws, both in the United States and
abroad, that may impose additional burdens on us. Laws and regulations directly
applicable to communications or commerce over the Internet are becoming more
prevalent. The United States recently enacted Internet laws regarding children's
privacy, copyrights, taxation and the transmission of sexually explicit
material. The European Union recently enacted privacy regulations. The law of
the Internet, however, remains largely unsettled, even in areas where there has
been some legislative action. It may take years to determine whether and how
existing laws such as those governing intellectual property, privacy, libel and
taxation apply to the Internet. In order to comply with new or existing laws
regulating online commerce, we may need to modify the manner in which we do
business, which may result in additional expenses. We may need to spend time and
money revising the process by which we fulfill customers' orders to ensure that
each shipment complies with applicable laws. We may need to hire additional
personnel to monitor our compliance with applicable laws.
We may be subject to liability for the internet content that we publish, which
could adversely affect our business.
As a publisher of online content, we face potential liability for defamation,
negligence, copyright, patent or trademark infringement, or other claims based
on the nature and content of materials that we publish or distribute. If we face
liability, then our reputation and our business may suffer. In the past,
plaintiffs have brought these types of claims and sometimes successfully
litigated them against online services. Although we carry general liability
insurance, our insurance currently does not cover claims of these types.
However, this insurance is available, and we intend to obtain this insurance in
the near future. There can be no assurance that we will be able to obtain such
insurance or that it will be adequate to indemnify us for all liability that may
be imposed on us.
Our net sales could decrease if we become subject to sales and other taxes.
If one or more states or any foreign country successfully asserts that we should
collect sales or other taxes on the sale of our products, our net sales and
results of operations could be harmed. We do not currently intend to collect
sales or other similar taxes for physical shipments of goods. However, one or
more local, state or foreign jurisdictions may seek to impose sales tax
collection obligations on us. In addition, any new operation in states outside
Washington State could subject our shipments in such states to state sales taxes
under current or future laws. If we become obligated to collect sales taxes, we
will need to update our system that processes customers' orders to calculate the
appropriate sales tax for each customer order and to remit the collected sales
taxes to the appropriate authorities. These upgrades will increase our operating
expenses. In addition, our customers may be discouraged from purchasing products
from us because they have to pay sales tax, causing our net sales to decrease.
As a result, we may need to lower prices to retain these customers.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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.
This report discusses financial and organizational results from our inception to
April 30, 1999.
Except for statements of historical fact, certain information contained herein
constitutes "forward-looking statements," which involve known and unknown risks,
uncertainties and other factors which may cause our actual results or
achievements to be materially different from any future results or achievements
of the Company expressed or implied by such forward-looking statements.
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General Overview
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 financial condition for the
period from incorporation on February 4, 1999 to April 30, 1999, 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
made elsewhere in this Form 10-SB.
Period February 4, 1999 to April 30, 1999
Revenues. We anticipate we will not commence our operations until the fourth
quarter of 1999. We generated no revenues from operations since our inception on
February 4, 1999 to April 30, 1999. We had interest income in the amount of
$555.
Expenses. We incurred expenses of $17,161 related to the organization of our
corporation and the development of our business plan including $6,100 in
consulting fees, $2,800 in management fees (related to strategic planning
business development and market research and analysis) (paid to Albert R.
Timcke, our President, for services), $3,924 in legal and accounting expenses,
$3,070 in office and miscellaneous expenses, $500 in rent expenses and $767 in
phone expenses. We anticipate our 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 $16,606 for the period since our inception on
February 4, 1999 to April 30, 1999.
Liquidity and Capital Resources
On April 5, 1999, we issued for cash 3,960,000 shares of our common stock at a
price of $0.01 per share for proceeds to us of $39,600. On April 6, 1999, we
issued for cash 408,084 shares of our common stock at a price of $0.50 per share
for proceeds to us of $204,042. See "Recent Sales of Unregistered Securities."
As of April 30, 1999, we had working capital of approximately $227,136. In the
subsequent quarter, our expenses are expected to rise dramatically.
Plan of Operation
We anticipate our Kidstoysplus.com Website will be accessible for initial
viewing and testing in the fourth quarter 1999. We have leased and intend to
finish and equip our initial distribution site in Courtenay, British Columbia,
in the fourth quarter 1999. We intend to begin purchasing inventory and entering
into merchandising and procurement agreements with fulfillment vendors to supply
merchandise marketed on the Kidstoysplus.com Website during the fourth quarter
1999. We anticipate it will begin selling merchandise through our
Kidstoysplus.com Website during our Limited Launch Phase anticipated to begin
late in the fourth quarter 1999 for the purposes of testing our Kidstoysplus.com
Website, our customer service systems, our warehouse and facilities systems and
our internal record-keeping and billing systems. We anticipate that we will be
fully operational in the first half of 2000. Below is a summary of our plan of
operation through our second fiscal quarter ending July 31, 2000.
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.
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<TABLE>
PERIOD
------
Fiscal Quarter Ended
------------------------------------------------------------------
DESCRIPTION October 31, January 31, April 30, July 31,
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 fourth quarter 1999. 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 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."
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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.
See "Note Regarding Forward Looking Statements."
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
As of May 1, 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 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.
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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.
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:
-25-
<PAGE>
- 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.
ITEM 3 DESCRIPTION OF PROPERTY
Our corporate headquarters are currently located at 1000 - 355 Burrard Street,
Vancouver, British Columbia, V6C 2G8, Canada, which we currently rent on a
temporary basis for approximately $250 per month. Our principal office will be
relocated to 2924 Cliffe Avenue, Courtney, B.C., V9N 7J3 once our permanent
office space is finished and equipped in October 1999. Our principal office and
customer service facility is approximately 3,200 square feet and is leased for a
term of one year at approximately $700 per month.
We entered into a lease agreement for our distribution and warehouse facility at
4767 Headquarters Road, Courtney, B.C., V9N 7J3, effective September 1, 1999.
Our distribution facility is approximately 7,200 square feet and leased for a
term of one year at approximately $1,100 per month and renewable for an
additional one year term at approximately $1,250 per month.
ITEM 4 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the number of
shares of Common Stock owned beneficially as of May 31, 1999 by: (i) each person
known to us to own more than five percent (5%) of any class of our voting
securities; (ii) each of our directors; and (iii) all our directors and officers
as a group. Unless otherwise indicated, the shareholders listed possess sole
voting and investment power with respect to the shares shown.
<TABLE>
TITLE OF NAME AND ADDRESS OF AMOUNT AND NATURE PERCENT OF
CLASS BENEFICIAL OWNER OF BENEFICIAL OWNER CLASS(1)
- ----------------------- -------------------------------------------- ----------------------------- -----------------
<S> <C> <C> <C>
Common Stock Albert R Timcke, Director, President 6,600,000(2) 59.63%(2)
10300 Second Avenue, Richmond, BC V7E 1V7
Common Stock Brian C. Doutaz, Director 900,000(3) 8.36%(3)
35-12880 Railway Ave, Richmond, BC V7E 1V7
Common Stock All directors and officers as a group 7,500,000 shares(4) 63.19%(4)
</TABLE>
- ---------------------------
(1) Based on an aggregate 9,968,084 shares outstanding as of September 22,
1999.
(2) Includes Mr. Timcke's (i) options to acquire 500,000 shares of our common
stock at $0.10 per share and (ii) options to acquire 600,000 shares of our
common stock at $0.25 per share, which are exercisable within 60 days of
September 22, 1999. These options expire on the earlier of May 15, 2005;
thirty days after the termination (except for death or disability) of Mr.
Timcke as a consultant to the company; or one year after termination due to
death or disability.
(3) Includes Mr. Doutaz's (i) options to acquire 400,000 shares of our common
stock at $0.10 per share and (ii) options to acquire 400,000 shares of our
common stock at $0.25 per share, which are exercisable within 60 days of
September 22, 1999. These options expire on the earlier of May 15, 2005;
thirty days after the termination (except for death or disability) of Mr.
Doutaz as a consultant to the company; or one year after termination due to
death or disability.
-26-
<PAGE>
(4) Includes (i) Mr. Timcke's options to acquire 1,100,000 shares of our common
stock and (ii) Mr. Doutaz's options to acquire 800,000 shares of our common
stock, which are exercisable within 60 days of September 22, 1999.
We are not aware of any arrangement, which might result in a change in control
in the future.
ITEM 5 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS
Directors and Officers
All of our directors are elected annually by the shareholders and hold office
until the next annual general meeting of shareholders or until their successors
are duly elected and qualified, unless they sooner resign or cease to be
directors in accordance with our Articles of Incorporation. We have not held an
annual regular general meeting and the next regular meeting is anticipated to be
held in May 2000. Our executive officers are appointed by and serve at the
pleasure of our Board of Directors.
As at May 31, 1999, the following persons were our directors and/or executive
officers:
Name Age Position with the Registrant
- ---- --- ----------------------------
Albert R. Timcke 35 Director, President, CEO
Brian C. Doutaz 53 Director, Secretary, Treasurer
Members of our Board of Directors are elected by our shareholders to represent
the interests of all our shareholders. Our Board of Directors meets periodically
to review significant developments affecting us and our business and to act on
matters requiring Board approval. Although our Board of Directors may delegate
many matters to others, it reserves certain powers and functions to itself. The
only standing committee of the Board of Directors of the Registrant is an Audit
Committee. The Audit Committee currently consists of Albert R. Timcke and Brian
C. Doutaz. This committee is directed to review the scope, cost and results of
the independent audit of our books and records, the results of the annual audit
with management and the adequacy of our accounting, financial and operating
controls; to recommend annually to our Board of Directors the selection of the
independent auditors; to consider proposals made by our independent auditors for
consulting work; and to report to our Board of Directors, when so requested, on
any accounting or financial matters.
None of the our directors or executive officers are parties to any arrangement
or understanding with any other person pursuant to which the individual was
elected as a director or officer.
None of our directors or executive officers has any family relationship with any
other officer or director.
None of the officers or directors of the Registrant have been involved in the
past five years in any of the following: (1) bankruptcy proceedings; (2) subject
to criminal proceedings or convicted of a criminal act; (3) subject to any
order, judgment or decree entered by any court limiting in any way his or her
involvement in any type of business, securities or banking activities; or (4)
subject to any order for violation of federal or state securities laws or
commodities laws.
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<PAGE>
The following is a brief biographical information on each of the officers and
directors of listed:
Albert (Rick) Timcke
Mr. Timcke is a director and services as our President and CEO. Mr. Timcke's
work experience for the last few years includes serving as Vice President
Corporate Development for Impact Travel Technology Inc. (August 1998 - June 1,
1999); Vice President Corporate Development for International Panorama Resource
Corp. (December 1996 - July 1998); Owner and President of Markets West (Web
site) (October 1995 - December 1997); and Sales Executive (B.C. Region) (March
1990 - December 1996).
Brian Doutaz
Brian C. Doutaz is a Director and serves as our Secretary and Treasurer. Mr.
Doutaz is also President of Anina International Capital Corp., a private company
engaged in management consulting. For the past 15 years, Mr. Doutaz has also
provided consulting services to start-up and developing businesses in Canada and
the United States.
Advisory Board
We anticipate that we will appoint an advisory board to assist the company in
strategic development and Internet development as business develops.
ITEM 6 EXECUTIVE COMPENSATION
Compensation of Executive Officers
The following table sets forth compensation information for our fiscal period
ended April 30, 1999:
Summary Compensation Table
<TABLE>
All Other
Name and Fiscal Period Long Term Compensation
Principal Position Compensation Compensation ($)
Salary Bonus Other Securities
($) ($) Annual Under Options
Compensation (#)
($)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Albert R Timcke April 30, 1999 $2,800 Nil Nil Nil(1) Nil
Brian C. Doutaz April 30, 1999 Nil Nil Nil Nil(2) Nil
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Does not include Mr. Timcke's (i) options to acquire 500,000 shares of our
common stock at $0.10 per share and (ii) options to acquire 600,000 shares
of our common stock at $0.25 per share. These options were granted pursuant
to a consulting agreement between us and Mr. Timcke dated May 1, 1999.
These options expire on the earlier of May 15, 2005; thirty days after the
termination (except for death or disability) of Mr. Timcke as a consultant
to the company; or one year after termination due to death or disability.
(2) Does not include Mr. Doutaz's (i) options to acquire 400,000 shares of our
common stock at $0.10 per share and (ii) options to acquire 400,000 shares
of our common stock at $0.25 per share. These options were granted pursuant
to a consulting agreement between us and Mr. Doutaz dated May 1, 1999.
These options expire on the earlier of May 15, 2005; thirty days after the
termination (except for death or disability) of Mr. Doutaz as a consultant
to the company; or one year after termination due to death or disability.
-28-
<PAGE>
Material Consulting Agreements
We have entered into three consulting agreements with consultants engaged to
assist us with the development of our business strategy, internal operating
systems and marketing and sales strategies on a part- and full-time basis. Below
is a summary of the material terms of these consulting agreements.
We entered into a consulting agreement dated May 1, 1999, with Albert R. Timcke,
a director and the President and CEO of our company. Mr. Timcke agreed to
provide consulting services related to business and strategic development,
operations management, systems development, product research and development and
marketing functions. Mr. Timcke will provide such services on a full-time basis.
We agreed to pay Mr. Timcke a consulting fee in the amount of $5,000 per month
for up to 140 hours per month and $100 per hour thereafter. We also granted Mr.
Timcke options to acquire 1,100,000 shares of our common stock as follows (i)
options to acquire 500,000 shares of our common stock at $0.10 per share and
(ii) options to acquire 600,000 shares of our common stock at $0.25 per share.
These options expire on the earlier of May 15, 2005; thirty days after the
termination (except for death or disability) of Mr. Timcke as a consultant to
the company; or one year after termination due to death or disability.
We entered into a consulting agreement dated May 1, 1999, with Brian C. Doutaz,
a director and the Secretary and Treasurer of our company. Mr. Doutaz agreed to
provide consulting services related to business and strategic development,
operations management, systems development, product research and development and
marketing functions. Mr. Doutaz will provide such services on a part-time basis.
We agreed to pay Mr. Doutaz a consulting fee in the amount of $2,000 per month
for up to 80 hours per month and $100 per hour thereafter. We also granted Mr.
Doutaz options to acquire 800,000 shares of our common stock as follows (i)
options to acquire 400,000 shares of our common stock at $0.10 per share and
(ii) options to acquire 400,000 shares of our common stock at $0.25 per share.
These options expire on the earlier of May 15, 2005; thirty days after the
termination (except for death or disability) of Mr. Doutaz as a consultant to
the company; or one year after termination due to death or disability.
We entered into a consulting agreement dated May 1, 1999, with Gerald W.
Williams. Mr. Williams agreed to provide consulting services related to business
and strategic development. Mr. Williams will provide such services on a
part-time basis. We agreed to pay Mr. Williams a consulting fee in the amount of
$2,000 per month for up to 40 hours per month and $100 per hour thereafter. We
also granted Mr. Williams options to acquire 100,000 shares of our common stock
at $0.10 per share. These options expire on the earlier of May 15, 2005; thirty
days after the termination (except for death or disability) of Mr. Williams as a
consultant to the company; or one year after termination due to death or
disability.
We believe that the terms of these consulting agreements are no less favorable
to the Company than terms we would expect to negotiate with unrelated parties at
arms' length.
Compensation of Directors
As of September 7, 1999 we paid no compensation to our directors for their
services as directors. We have no standard arrangements to pay any such
compensation to our directors in their capacity as directors, other than
reimbursement for expenses incurred in connection with their services as
directors.
ITEM 7 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Except as otherwise disclosed herein, no director, senior officer, principal
shareholder, or any associate or affiliate thereof, had any material interest,
direct or indirect, in any transaction since our organization that had or is
anticipated to have a materially affect on us or our business, or any proposed
transaction that would materially affect us or our business, except for an
interest arising from the ownership of our shares where the member will receive
no extra or special benefit or advantage not shared on a pro rata basis by all
holders of shares in our capital.
We entered into indemnification agreements with our directors, Albert R. Timcke
and Brian C. Doutaz, pursuant to which we agreed to indemnify them for actions
taken in their capacity as officers and directors of our company. As previously
described, we also entered into consulting agreements with Mr. Timcke and Mr.
Doutaz.
-29-
<PAGE>
We issued 5,500,000 shares of our common stock as founders' shares to Albert R.
Timcke, our president, for $0.001 per share for which a cash receivable of
$5,500 was due. See "Recent Sales of Unregistered Securities."
We entered into consulting agreements with Albert R. Timcke, our president, and
Brian C. Doutaz, a director, pursuant to which we agreed to pay certain
consulting fees for services and pursuant to which we granted Mr. Timcke options
exercisable to acquire 1,100,000 of our common shares and Mr. Doutaz options
exercisable to acquire 800,000 of our common shares. See "Material Consulting
Agreements."
We believe that the terms of these transactions are no less favorable to the
Company than terms we would expect to negotiate with unrelated parties at arms'
length.
ITEM 8 DESCRIPTION OF SECURITIES
Our authorized capital consists of 25,000,000 shares of common stock, $0.001 par
value. At May 31, 1999, there were 9,968,084 shares issued and outstanding and
we reserved for issuance an additional 1,000,000 shares at $0.10 per share and
1,000,000 shares at $0.25 per share pursuant to consulting agreements entered
into between us and Albert R. Timcke, Brian Doutaz and Gerald W. Williams,
respectively. We have also reserved for issuance 1,500,000 shares of common
stock pursuant to our incentive stock option plan.
All shares are of the same class and have the same rights, preferences and
limitations. The holders of the shares are entitled to dividends in cash,
property or shares as and when declared by the Board of Directors out of funds
legally available therefor, to one vote per Share at meetings of our security
holders and, upon liquidation, to receive such assets as are distributable to
the holders of the shares. Upon any liquidation, dissolution or winding up of
our business proceeds, if any, after payment or provision for payment of all our
debts, obligations or liabilities shall be distributed to the holders of shares.
There are no pre-emptive rights or conversion rights attached to the Shares.
There are also no redemption or purchase for cancellation or surrender
provisions, sinking or purchase fund provisions, or any provisions as to
modification, amendment or variation of any such rights or provisions attached
to our shares.
Incentive Stock Option Plan
On May 19, 1999, we adopted an incentive stock option plan for the purposes of
providing incentives designed to obtain and retain officers, directors, key
employees, and consultants. We reserved 1,500,000 shares of our common stock for
issuance under the plan. Our incentive stock option plan provides for vesting
pro rata over four years from the date of the grant unless we agree otherwise.
We have not granted any options under the plan. We may register our incentive
stock option plan with the Securities and Exchange Commission in the future.
PART II
ITEM 1 MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER RELATED STOCKHOLDER MATTERS
There is no public market for our common stock. We currently intend to seek a
listing on the NASD OTC Bulletin Board in the United States. Our shares are not
and have not been listed or quoted on any exchange or quotation system.
At September 22, 1999, there were 9,968,084 shares of our common stock issued
and outstanding. In addition, we have reserved an additional 1,000,000 shares at
$0.10 per share and 1,000,000 shares at $0.25 per share for issuance pursuant to
consulting agreements entered into between us and Albert R. Timcke, Brian Doutaz
and Gerald W. Williams. We have also reserved for issuance 1,500,000 shares of
common stock pursuant to our incentive stock option plan.
-30-
<PAGE>
Effective on April 5, 1999, we issued for cash 3,960,000 shares of our common
stock at a price of $0.01 per share to 16 investors who agreed to pool their
shares pursuant to a pooling agreement by and between us pooling shareholders,
including (B.H. Holdings (Bermuda) Ltd.; Ridgeback Developments (Bermuda) Ltd.;
Old Head Financial Corp.; Tullamore Investments Ltd.; Cannon Bridge Ventures
Partners Ltd.; Valda Antonius; Niele Jiwan; New Coast Capital Group; Tony Chan;
Daniel Siu; Peter Chu; Jasson Aisenstat; S.D. Paquin; Leo Wong; Harley Mayers;
and Gus C. Wahlroth (the "Pooling Shareholders"). Under the terms of the pooling
agreement, the Pooling shareholders agreed to escrow their shares with Albert R.
Timcke, subject to release as follows: (i) 25% of the shares will be released on
October 5, 1999 (six months from the date of issuance) and the (ii) balance of
the shares will be released on the earlier of (a) pro rata over the next nine
(9) months until all shares are released, or (b) Kidstoysplus.com, Inc.,
completing a financing (after April 6, 1999) of not less than $3 million as
verified by the Company's auditors. The Pooling Shareholders agreed not to
assign, transfer, sell or otherwise convey any shares that are held in escrow.
We have never paid dividends on our shares. We currently intend to retain
earnings for use in our business and do not anticipate paying any dividends in
the foreseeable future.
As of September 22, 1999, we had 58 shareholders of record.
ITEM 2 LEGAL PROCEEDINGS
We are not a party to, and none of our property is subject to, any pending or
threatened legal proceeding.
ITEM 3 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None.
ITEM 4 RECENT SALES OF UNREGISTERED SECURITIES
On March 9, 1999, we issued 5,600,000 shares of our common stock to our
founders: 5,500,000 shares to Albert R. Timcke for which a cash receivable is
due and 100,000 shares to Brian C. Doutaz for cash. The shares were issued in
connection with the organization of our corporation at a price of $0.001 per
share pursuant. The aggregate offering price was $5,600. The offering was not
underwritten. The shares were issued in reliance on an exemption from
registration pursuant to Regulation S promulgated under the Securities Act. No
fees or commissions were paid in connection with the transactions.
On April 5, 1999, we issued for cash 3,960,000 shares of our common stock at a
price of $0.01 per share to 16 investors who agreed to pool their shares
pursuant to a pooling agreement. The shares were issued pursuant to an exemption
from registration under Rule 504 of Regulation D of the Securities Act to the
following investors: B.H. Holdings (Bermuda) Ltd.; Ridgeback Developments
(Bermuda) Ltd.; Old Head Financial Corp.; Tullamore Investments Ltd.; Cannon
Bridge Ventures Partners Ltd.; Valda Antonius; Niele Jiwan; New Coast Capital
Group; Tony Chan; Daniel Siu; Peter Chu; Jasson Aisenstat; S.D. Paquin; Leo
Wong; Harley Mayers; and Gus C. Wahlroth. We issued these shares in connection
with the initial seed capital investment. The aggregate offering price was
$39,600. The offering was not underwritten. This sale was exempt from
registration in reliance upon Rule 504 under Regulation D promulgated under the
Securities Act. The aggregate offering amount did not exceed $1,000,000. The
offering was made in compliance with the definitions set forth in Rule 501 and
certain applicable general conditions set forth in Rule 502, including (i)
limiting the aggregate amount of all offerings made within six months before the
start of the offering and six months after the completion of the offering to
$1,000,000 and (ii) taking reasonable measures to assure the that purchasers
were not underwriters by making reasonable inquiry to determine that the
investor was acquiring the securities for his or her own account without a view
towards distribution. We filed a Form D notice of sale with the Securities and
Exchange Commission within 15 days after the first sale.
On April 6, 1999, we issued for cash 408,084 shares of our common stock at a
price of $0.50 per share for proceeds to the company of $204,042. The shares
were issued to following investors: Kerris Edge; Henry Louie; Cory Parisien;
Erin Gibault; Marlon DeCaire; Rod Zyda; Strato Malamas; John Moffat; Steven
Doherty; David Doherty; Randy Doherty; Shafique Shivji; Terry Sklavenitis; Ivest
Capital Corp; Garry Henry; Paul B. Marley; 338888 B.C. Ltd.; Ray Urquhart; David
Watt; Ian Jackson; Bruce Newsome; Murray Borry; Eric Eastick; Leonard R. Danard;
-31-
<PAGE>
Rob Yates; Andrew Yates; Victor Ventures Ltd.; Paul Pigeon; Niele Jiwan; Kenneth
G. MacPherson; Robert J. Ginnetti; Michael Fedyna; Glenn Fedyna; Peter Andrew
Allard; Dale Knight; Richard Drayton; Ruth Townsend; Georgie Sideris; Paul
Guterres; and Contech Construction Ltd. The offering was not underwritten. This
sale was exempt from registration in reliance upon Rule 504 under Regulation D
promulgated under the Securities Act. The aggregate offering amount did not
exceed $1,000,000. The offering was made in compliance with the definitions set
forth in Rule 501 and certain applicable general conditions set forth in Rule
502, including (i) limiting the aggregate amount of all offerings made within
six months before the start of the offering and six months after the completion
of the offering to $1,000,000 and (ii) taking reasonable measures to assure the
that purchasers were not underwriters by making reasonable inquiry to determine
that the investor was acquiring the securities for his or her own account
without a view towards distribution. We filed a Form D notice of sale with the
Securities and Exchange Commission within 15 days after the first sale.
ITEM 5 INDEMNIFICATION OF DIRECTORS AND OFFICERS
We entered into indemnification arrangements with our directors, Albert R.
Timcke and Brian C. Doutaz, pursuant to which we agreed to indemnify them for
actions taken in their capacity as officers and directors of our company. Our
Articles of Incorporation and Bylaws require us to indemnify our officers and
directors to the full extent permitted by Nevada law.
Section 78.751 of the Nevada General Corporation Law permits a corporation,
under specified circumstances, to indemnify its directors, officers, employees
or agents against expenses, including attorney's fees, judgments, fines and
amounts paid in settlements actually and reasonably incurred by them in
connection with any action, suit or proceeding brought by third parties by
reason of the fact that they were or are directors, officers, employees or
agents of the corporation, if such directors, officers, employees or agents
acted in good faith and in a manner they reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reason to believe their conduct was
unlawful.
In a derivative action, that is, one by or in the right of the corporation,
indemnification may be made only for expenses actually and reasonably incurred
by directors, officers, employees or agents in connection with the defense or
settlement of an action or suit, and only with respect to a matter as to which
they shall have acted in good faith and in a manner they reasonably believed to
be in or not opposed to the best interests of the corporation, except that no
indemnification shall be made if such person shall have been adjudged liable to
the corporation, unless and only to the extent that the court in which the
action or suit was brought shall determine upon application that the defendant
directors, officers, employees or agents are fairly and reasonably entitled to
indemnity for such expenses despite such adjudication of liability.
Our Articles of Incorporation and Bylaws also contain provisions stating that no
director shall be liable to us or any of our stockholders for monetary damages
for breach of fiduciary duty as a director, except with respect to (1) a breach
of the director's duty of loyalty to the corporation or its stockholders, (2)
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (3) liability under Nevada law for unlawful payment of
dividends, or unlawful stock purchases or redemptions or (4) a transaction from
which the director derived an improper personal benefit. The intention of the
foregoing provisions is to eliminate the liability of our directors or our
stockholders to the fullest extent permitted by Nevada law.
-32-
<PAGE>
PART F/S
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
(Expressed in United States Dollars)
APRIL 30, 1999
<PAGE>
A Partnership of
Incorporated Professionals
DAVIDSON & COMPANY=========Chartered Accountants================================
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Directors of
Kidstoysplus.com, Inc.
(A Development Stage Company)
We have audited the accompanying balance sheet of Kidstoysplus.com, Inc. as at
April 30, 1999 and the related statements of operations, stockholders' equity
and cash flows for the period from incorporation on February 4, 1999 to April
30, 1999. These financial statements, expressed in United States dollars, are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
the significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Kidstoysplus.com, Inc. as at
April 30, 1999 and the results of operations and cash flows for the period from
incorporation on February 4, 1999 to April 30, 1999 in conformity with generally
accepted accounting principles in the United States of America.
The accompanying financial statements have been prepared assuming that
Kidstoysplus.com, Inc. will continue as a going concern. As discussed in Note 2
to the financial statements, unless the Company attains future profitable
operations and/or obtains additional financing, there is substantial doubt about
the Company's ability to continue as a going concern. Management's plans in
regards to these matters are discussed in Note 2. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
/s/ Davidson & Company
Vancouver, Canada Chartered Accountants
May 19, 1999
A Member of Accounting Group International
==========================================
Suite 1270, Stock Exchange Tower, 609 Granville Street, P.O. Box 10372,
Pacific Centre, Vancouver, B.C., Canada V7Y 1G6
Telephone (604) 687-0947 Fax (604) 687-6172
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
BALANCE SHEET
(Expressed in United States Dollars)
AS AT APRIL 30, 1999
================================================================================
<TABLE>
<S> <C>
ASSETS
Current
Cash and cash equivalents $ 221,924
Prepaid expenses 8,312
--------------
$ 230,236
=====================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities $ 2,000
Due to related party (Note 5) 1,100
--------------
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
Additional paid-in capital 239,274
Stock subscriptions receivable (Note 7) (5,500)
Deficit, accumulated during the development stage (16,606)
--------------
227,136
$ 230,236
=====================================================================================================
</TABLE>
History and organization of the Company (Note 1)
Subsequent events (Note 11)
On behalf of the Board:
Director Director
- ----------------------------- ---------------------------------
The accompanying notes are an integral part of these mfinancial statements.
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
(Expressed in United States Dollars)
PERIOD FROM INCORPORATION ON FEBRUARY 4, 1999 TO APRIL 30, 1999
================================================================================
<TABLE>
<S> <C>
INTEREST INCOME $ 555
--------------
EXPENSES
Consulting fees 6,100
Legal and accounting 3,924
Management fees 2,800
Office and miscellaneous 3,070
Rent 500
Telephone 767
--------------
17,161
Loss for the period $ (16,606)
====================================================================================================
Basic and fully diluted loss per share $ (0.01)
====================================================================================================
Weighted average shares outstanding 4,767,001
====================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Expressed in United States Dollars)
================================================================================
<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 03,634 - - 204,042
Loss for the period - - - - (16,606) (16,606)
-------------- -------------- -------------- ------------- -------------- --------------
Balance, April 30, 1999 9,968,084 $ 9,968 $ 239,274 $ (5,500) $ (16,606) $ 227,136
============================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
(Expressed in United States Dollars)
PERIOD FROM INCORPORATION ON FEBRUARY 4, 1999 TO APRIL 30, 1999
================================================================================
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the period $ (16,606)
Changes in other operating assets and liabilities
Increase in prepaid expenses (8,312)
Increase in accounts payable and accrued liabilities 2,000
Increase in due to related party 1,100
--------------
Net cash used in operating activities (21,818)
--------------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital stock issued for cash 243,742
Cash and cash equivalents, end of period $ 221,924
============================================================================================================
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.
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
APRIL 30, 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.
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.
---------------------------------------------------------------------------
1999
---------------------------------------------------------------------------
Deficit accumulated during the development stage $ (16,606)
Working capital surplus 227,136
===========================================================================
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.
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.
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
APRIL 30, 1999
================================================================================
3. SIGNIFICANT ACCOUNTING POLICIES (cont'd.....)
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.
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.
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 and 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.
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
APRIL 30, 1999
================================================================================
3. SIGNIFICANT ACCOUNTING POLICIES (cont'd.....)
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.
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. DUE TO RELATED PARTY
Amounts due to a director of the Company are non-interest bearing and have
no fixed terms of repayment.
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.
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
APRIL 30, 1999
================================================================================
6. CAPITAL STOCK (cont'd.....)
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 dated April 6, 1999. Under the terms of the
agreement, shares will be released from escrow as follows:
a) 25% of the shares on October 5, 1999.
b) the balance of the shares on the earlier of:
i) pro-rata over nine months, starting November 5, 1999
ii) the date when the Company has received $3,000,000 in
additional financing
7. STOCK SUBSCRIPTIONS RECEIVABLE
Pursuant to Stock Subscription Agreements dated March 9, 1999, the Company
issued 5,600,000 shares for proceeds of $5,600. As at April 30, 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 management fees of $2,800 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 April 30, 1999
consisted of the Company issuing 5,500,000 common shares in the amount of
$5,500 in exchange for a stock subscription receivable.
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
APRIL 30, 1999
================================================================================
10. INCOME TAXES
The Company's total deferred tax asset at April 30, 1999 is as follows:
Tax benefits of net operating loss carryforward $ 6,310
Valuation allowance (6,310)
---------------
$ -
===============
The Company has a net operating loss carryforward of approximately $16,606.
The valuation allowance increased to $6,310 for the period ended April 30,
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.
11. SUBSEQUENT EVENTS
The following transactions occurred subsequent to year end:
a) The Company entered into Consulting Agreements with directors and
employees of the Company, effective May 1, 1999, for terms of five
years. The agreements call for consulting fees totalling $9,000 per
month to be paid. Monthly hours worked by the directors or employees
in excess of the base hourly commitments in the agreements will be
paid at a rate of $100 per hour.
The Consulting Agreements also grant 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.
b) 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.
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
APRIL 30, 1999
================================================================================
11. SUBSEQUENT EVENTS (cont'd.....)
b) (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.
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.
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS
Exhibit
Number Description
- ------ -----------
Exhibit 2.1(1) Articles of Incorporation of Kidstoysplus.com, Inc. filed on
February 4, 1999.
Exhibit 2.2(1) Bylaws of Kidstoysplus.com, Inc.
Exhibit 6.1(1) Independent Contractor Agreement by and between Rick Timcke,
Kidstoysplus.com, Inc. and Trish Reader, Reticular
Consulting dated June 9, 1999, related to web site
development.
Exhibit 6.2(1) Consulting Agreement by and Between Kidstoysplus.com, Inc.
and Albert R. Timcke dated May 1, 1999.
Exhibit 6.3(1) Consulting Agreement by and between Kidstoysplus.com, Inc.
and Brian C. Doutaz dated May 1, 1999.
Exhibit 6.4(1) Consulting Agreement by and between Kidstoysplus.com, Inc.
and Gerald Wayne Williams dated May 1, 1999.
Exhibit 6.5(1) Form of Indemnification Agreement by and between
Kidstoysplus.com, Inc. and certain officers and directors of
Kidstoysplus.com, Inc.
Exhibit 6.6(1) Form of Founder Subscription Agreement dated March 9, 1999.
Exhibit 6.7(1) Form of Private Placement Subscription Agreement by and
between KIDSTOYSPLUS.COM, INC. and various subscribers.
Exhibit 6.8(1) Kidstoysplus.com, Inc. 1999 Stock Option Plan.
Exhibit 6.9(2) Commercial Lease dated September 1, 1999 by and between Mr.
Rick Timcke D.B.A. KidsToysPlus.com and Mr. W. Rautenberg.
Exhibit 6.10(2) Lease Agreement effective September 1, 1999 by and between
KidsToysPlus.com, Inc. and S.G. Mechanical Installations
Inc.
Exhibit 6.11(2) Form of pooling agreement by and among Kidstoysplus.com,
Inc., certain Kidstoysplus.com shareholders and Albert R.
Timcke effective April 6, 1999.
Exhibit 27.1(2) Financial data table.
(1) Previously filed on June 18, 1999
(2) Previously filed on September 23, 1999
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant certifies that it meets all of the requirements for filing
on Form 10-SB and has duly caused this Registration Statement to be signed on
our behalf by the undersigned, thereunto duly authorized.
KIDSTOYSPLUS.COM, INC.
Date: October 26, 1999 By: /s/ Albert R. Timcke
--------------------------------------
Albert R. Timcke, President
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
- ------ -----------
Exhibit 2.1(1) Articles of Incorporation of Kidstoysplus.com, Inc. filed on
February 4, 1999.
Exhibit 2.2(1) Bylaws of Kidstoysplus.com, Inc.
Exhibit 6.1(1) Independent Contractor Agreement by and between Rick Timcke,
Kidstoysplus.com, Inc. and Trish Reader, Reticular
Consulting dated June 9, 1999, related to web site
development.
Exhibit 6.2(1) Consulting Agreement by and Between Kidstoysplus.com, Inc.
and Albert R. Timcke dated May 1, 1999.
Exhibit 6.3(1) Consulting Agreement by and between Kidstoysplus.com, Inc.
and Brian C. Doutaz dated May 1, 1999.
Exhibit 6.4(1) Consulting Agreement by and between Kidstoysplus.com, Inc.
and Gerald Wayne Williams dated May 1, 1999.
Exhibit 6.5(1) Form of Indemnification Agreement by and between
Kidstoysplus.com, Inc. and certain officers and directors of
Kidstoysplus.com, Inc.
Exhibit 6.6(1) Form of Founder Subscription Agreement dated March 9, 1999.
Exhibit 6.7(1) Form of Private Placement Subscription Agreement by and
between KIDSTOYSPLUS.COM, INC. and various subscribers.
Exhibit 6.8(1) Kidstoysplus.com, Inc. 1999 Stock Option Plan.
Exhibit 6.9(2) Commercial Lease dated September 1, 1999 by and between Mr.
Rick Timcke D.B.A. KidsToysPlus.com and Mr. W. Rautenberg.
Exhibit 6.10(2) Lease Agreement effective September 1, 1999 by and between
KidsToysPlus.com, Inc. and S.G. Mechanical Installations
Inc.
Exhibit 6.11(2) Form of pooling agreement by and among Kidstoysplus.com,
Inc., certain Kidstoysplus.com shareholders and Albert R.
Timcke effective April 6, 1999.
Exhibit 27.1(2) Financial data table.
(1) Previously filed on June 18, 1999
(2) Previously filed on September 23, 1999
