UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended
July 31, 2000
Commission File Number: 0-26439
KidsToysPlus.com, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada, 98-0203927
----------------------- ------------------------
(Place of Incorporation) (IRS Employer ID Number)
1000-355 Burrard Street Vancouver, British Columbia V6C 2G8
-----------------------------------------------------------
(Address of registrant's principal executive office)
1-877-566-1212
-------------------------------
(Registrant's telephone number)
Indicate by check mark whether the registrant has (1) filed all reports required
to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Number of Shares of Common Stock, $0.001 Par Value,
Outstanding at July 31, 2000:
10,558,484
<PAGE>
KIDSTOYSPLUS.COM, INC.
For the Quarter Ended
July 31, 2000
INDEX TO FORM 10-QSB
Page
----
PART I - FINANCIAL INFORMATION 1
ITEM 1. FINANCIAL STATEMENTS: 1
Balance Sheets:
- January 31, 2000 and July 31, 2000 .................................1
Statements of Operations:
- For the Three Months Ended July 31, 2000 ...........................2
Statement of Changes in Stockholders' Equity
- For the Period Ended July 31, 2000 .................................3
Statements of Cash Flow:
- For the Three Months Ended July 31, 2000 ...........................4
Notes to Financial Statements ........................................5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS .................................14
PART II - OTHER INFORMATION .................................................18
ITEM 1. LEGAL PROCEEDINGS ...................................................18
ITEM 2. CHANGES IN SECURITIES ...............................................19
ITEM 3. DEFAULTS UPON SENIOR SECURITIES .....................................19
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS ...................19
ITEM 5. OTHER INFORMATION ...................................................20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ....................................20
SIGNATURES ..................................................................21
i
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
BALANCE SHEETS
(Expressed in United States Dollars)
(Unaudited)
<TABLE>
===============================================================================================================
July 31, January 31,
2000 2000
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current
Cash and cash equivalents $ 247,721 $ 11,372
Accounts receivable 9,622 -
Inventory 40,051 -
Prepaid expenses and deposits 8,502 8,017
Due from related parties (Note 5) 46,073 -
-------------- -----------
Total current assets 351,969 19,389
Capital assets (Note 6) 27,536 10,323
-------------- -----------
Total assets $ 379,505 $ 29,712
===============================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities $ 5,171 $ 56,419
-------------- -----------
Total current liabilities 5,171 56,419
-------------- -----------
Stockholders' equity
Capital stock (Note 7)
Authorized
25,000,000 common shares with a par value of $0.001
Issued and outstanding
10,558,484 common shares (January 31, 2000 - 9,968,084) 10,558 9,968
Additional paid-in capital 902,884 239,274
Stock subscriptions receivable - (5,500)
Deficit, accumulated during the development stage (539,108) (270,449)
-------------- -----------
Total stockholders' equity 374,334 (26,707)
-------------- -----------
Total liabilities and stockholders' equity $ 379,505 $ 29,712
===============================================================================================================
</TABLE>
History and organization of the Company (Note 1)
Commitments (Note 12)
Subsequent event (Note 15)
The accompanying notes are an integral part of these financial statements.
1
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Expressed in United States Dollars)
(Unaudited)
<TABLE>
==============================================================================================================================
Cumulative
Amounts
From Period From
February 4, Three Month Three Month Six Month February 4,
1999 Period Ended Period Ended Period Ended 1999 to
to July 31, July 31, July 31, July 31, July 31,
2000 2000 1999 2000 1999
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUE
Sales $ 1,709 $ 1,709 $ - $ 1,709 $ -
EXPENSES
Amortization 4,261 2,245 - 3,433 -
Consulting fees 244,196 57,404 30,197 127,343 36,297
Entertainment and promotion 12,374 2,102 714 6,140 714
Equipment rental 4,040 503 - 1,027 -
Investor relations 27,667 16,237 - 24,987 -
Legal and accounting 68,747 19,787 15,136 24,091 19,060
Management fees 2,800 - - - 2,800
Marketing and advertising 4,636 3,506 - 4,636 -
Office and miscellaneous 77,079 34,563 4,689 48,441 8,259
Rent and security 20,901 5,602 - 11,643 -
Telephone and utilities 19,915 6,578 544 10,614 1,311
Transfer agent and filing fees 7,080 934 - 1,372 -
Travel and automobile 26,760 4,263 2,399 11,918 2,399
Web-site design and maintenance 31,934 1,907 - 1,907 -
------------- ------------- ------------- ------------ -------------
552,390 155,631 53,679 277,552 70,840
------------- ------------- ------------- ------------ -------------
Loss before other item (550,681) (153,922) (53,679) (275,843) (70,840)
OTHER ITEM
Interest 11,573 5,077 1,951 7,184 2,506
------------- ------------- ------------- ------------ -------------
Loss for the period $ (539,108) $ (148,845) $ (51,728) $ (268,659) $ (68,334)
==============================================================================================================================
Basic and diluted loss per share $ (0.01) $ (0.01) $ (0.03) $ (0.01)
==============================================================================================================================
Weighted average number of
shares of common stock
Outstanding 10,558,484 9,968,084 10,376,822 7,455,201
==============================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Expressed in United States Dollars)
(Unaudited)
<TABLE>
===========================================================================================================================
Deficit,
Accumulated
Common Shares Additional Stock During the Total
-------------------------- Paid-in Subscriptions Development Stockholders'
Shares Amount Capital Receivable Stage Equity
-------------------------------------------------------------------------------------------------------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, February 4,
1999 - $ - $ - $ - $ - $ -
Shares issued for cash
at $0.001 per share 100,000 100 - - - 100
Shares subscribed for
cash at $0.001 per
share 5,500,000 5,500 - (5,500) - -
Shares issued for cash:
at $0.01 per share 3,960,000 3,960 35,640 - - 39,600
at $0.50 per share 408,084 408 203,634 - - 204,042
Loss for the period - - - - (270,449) (270,449)
----------- ---------- ---------- ------------ ----------- ------------
Balance, January 31,
2000 9,968,084 9,968 239,274 (5,500) (270,449) (26,707)
Shares issued for cash at
$1.25 per share 590,400 590 737,410 - - 738,000
Share issuance costs - - (73,800) - - (73,800)
Stock subscriptions
received - - - 5,500 - 5,500
Loss for the period - - - - (268,659) (268,659)
----------- ---------- ---------- ------------ ----------- ------------
Balance, July 31,
2000 10,558,484 $ 10,558 $902,884 $ - $ (539,108) $ 374,334
===========================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Expressed in United States Dollars)
(Unaudited)
<TABLE>
===============================================================================================================================
Cumulative
Amounts
From Period From
February 4, Six Month February 4,
1999 Period Ended 1999 to
to July 31, July 31, July 31,
2000 2000 1999
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the period $ (539,108) $ (268,659) $ (68,334)
Item not affecting cash:
Amortization 4,261 3,433 -
Changes in other operating assets and liabilities:
Increase in accounts receivable (9,622) (9,622) -
Increase in inventory (40,051) (40,051) -
Increase in prepaid expenses and deposits (8,502) (485) (10,000)
Increase in due from related parties (46,073) (46,073) -
Increase (decrease) in accounts payable and accrued liabilities 5,171 (51,248) 22,278
------------ ------------- ------------
Net cash used in operating activities (633,924) (412,705) (56,056)
------------ ------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital assets acquired (31,797) (20,646) -
------------ ------------- ------------
Net cash used in investing activities (31,797) (20,646) -
------------ ------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Stock subscriptions received 5,500 5,500 -
Capital stock issued for cash 981,742 738,000 243,742
Share issuance costs (73,800) (73,800) -
------------ ------------- ------------
Net cash provided by financing activities 913,442 669,700 243,742
------------ ------------- ------------
Change in cash and cash equivalents for the period 247,721 236,349 187,686
Cash and cash equivalents, beginning of period - 11,372 -
------------ ------------- ------------
Cash and cash equivalents, end of period $ 247,721 $ 247,721 $ 187,686
===============================================================================================================================
Cash paid during the period for interest $ - $ - $ -
===============================================================================================================================
Cash paid during the period for income taxes $ - $ - $ -
===============================================================================================================================
</TABLE>
Supplemental disclosure for non-cash operating,
financing and investing activities (Note 13)
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
(Unaudited)
JULY 31, 2000
================================================================================
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 is considered a development stage company, in
accordance with SFAS #7.
The Company is currently developing a retail web-site specializing in
children's toys and collectible products.
In the opinion of management, the accompanying financial statements contain
all adjustments necessary (consisting only of normal recurring accruals) to
present fairly the financial information contained therein. These
statements do not include all disclosures required by generally accepted
accounting principles and should be read in conjunction with the audited
financial statements of the Company for the year ended January 31, 2000.
The results of operations for the period ended July 31, 2000 are not
necessarily indicative of the results to be expected for the year ending
January 31, 2001.
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 equity financings.
<TABLE>
=================================================================================================
July 31, January 31,
2000 2000
-------------------------------------------------------------------------------------------------
<S> <C> <C>
Deficit accumulated during the development stage $ (539,108) $ (270,449)
Working capital (deficiency) 346,798 (37,030)
=================================================================================================
</TABLE>
3. SIGNIFICANT ACCOUNTING POLICIES
Cash and cash equivalents
Cash and cash equivalents include highly liquid investments with original
maturities of three months or less.
Stock-based compensation
Statement of Financial Accounting Standards 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.
5
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
(Unaudited)
JULY 31, 2000
================================================================================
3. SIGNIFICANT ACCOUNTING POLICIES (cont'd.....)
Capital assets and amortization
Capital assets are recorded at cost. Amortization is provided over the
estimated useful life using the following methods:
Computer equipment 3 years straight-line
Furniture and fixtures 5 years straight-line
Camera equipment 5 years straight-line
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.
Inventory
Inventory is recorded at the lower of cost or net realizable value.
Income taxes
Income taxes are provided in accordance with Statement of Financial
Accounting Standards No. 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.
Use of 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
The Company adopted Statement of Financial Accounting Standards No. 130
("SFAS 130"), "Reporting Comprehensive Income". This statement establishes
rules for the reporting of comprehensive income and its components. The
adoption of SFAS 130 had no impact on total stockholders' equity as at July
31, 2000.
Disclosure about segments of an enterprise and related information
Statement of Financial Accounting Standards No. 131 ("SFAS 131"),
"Disclosure About Segments of an Enterprise and Related Information"
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. Currently, SFAS 131 has
no effect on the Company's financial statements as substantially all of the
Company's operations are conducted in one industry segment in Canada.
6
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
(Unaudited)
JULY 31, 2000
================================================================================
3. SIGNIFICANT ACCOUNTING POLICIES (cont'd.....)
Accounting for derivative instruments and hedging activities
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS 133"),"Accounting for
Derivative Instruments and Hedging Activities" 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. In June 1999, FASB issued SFAS 137 to defer
the effective date of SFAS No. 133 to fiscal quarters of fiscal years
beginning after June 15, 2000. 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 under Statement of
Financial Accounting Standards No. 52, "Foreign Currency Translation".
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
Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings
Per Share" requires basic and diluted earnings per share to be presented.
Basic earnings per share is computed by dividing income available to common
shareholders by the weighted average number of shares of common stock
outstanding during the period. Diluted earnings per share takes into
consideration shares of common stock outstanding (computed under basic
earnings per share) and potentially dilutive shares of common stock.
4. FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and cash equivalents,
accounts receivable, amounts due from related parties and accounts payable.
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.
7
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
(Unaudited)
JULY 31, 2000
================================================================================
5. DUE FROM RELATED PARTIES
===========================================================================
July 31, January 31,
2000 2000
---------------------------------------------------------------------------
Due from the president of the Company $ 29,189 $ -
Due from an officer of the Company 16,884 -
------------ ------------
$ 46,073 $ -
===========================================================================
Amounts due from related parties are unsecured, non-interest bearing with
no terms of repayment.
The fair value of amounts due from related parties is not determinable as
they have no specific repayment terms.
6. CAPITAL ASSETS
<TABLE>
=================================================================================================
Net Book Value
------------------------------
Accumulated July 31, January 31,
Cost Amortization 2000 2000
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Computer equipment $ 19,676 $ 2,812 $ 16,864 $ 4,058
Furniture and fixtures 11,297 1,393 9,904 6,265
Camera equipment 823 55 768 -
------------ -------------- -------------- -------------
$ 31,796 $ 4,260 $ 27,536 $ 10,323
=================================================================================================
</TABLE>
7. CAPITAL STOCK
On April 6, 1999, the Company issued 5,600,000 and 3,960,000 shares of
common stock under Rule 504 of Regulation D of the Securities Act of 1933
for total proceeds of $5,600 and $39,600, respectively.
On April 7, 1999, the Company issued 408,084 shares of common stock under
Rule 504 of Regulation D of the Securities Act of 1933 for total proceeds
of $204,042.
On April 7, 2000, the Company completed a private placement whereby it
issued 590,400 units under Rule 506 of Regulation D and S of the Securities
Act of 1933 at $1.25 per unit for total proceeds of $738,000. Each unit
consists of one restricted share of common stock and one non-transferable
share purchase warrant. Each warrant entitles the holder to purchase one
restricted share of common stock of the Company at a price of $1.625 per
common share until April 7, 2001.
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.
8
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
(Unaudited)
JULY 31, 2000
================================================================================
7. 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.
8. WARRANTS
As at July 31, 2000, the Company has 590,400 warrants outstanding Each
warrant entitles the holder to purchase one share of common stock of the
Company at $1.625 per common share until April 7, 2001.
9. STOCK OPTIONS
As at July 31, 2000, the following stock options were outstanding:
===========================================================================
Number Exercise
of Shares Price Expiry Date
---------------------------------------------------------------------------
1,000,000 $ 0.10 May 5, 2005
1,000,000 0.25 May 5, 2005
350,000 1.00 April 5, 2010
425,000 0.4375 July 15, 2010
120,000 0.21 July 27, 2010
===========================================================================
10. STOCK-BASED COMPENSATION
On May 1, 1999 pursuant to Consulting Agreements, the Company granted
options to directors and employees to acquire up to 1,000,000 shares of
common stock of the Company at an exercise price of $0.10 per share and up
to 1,000,000 shares of common stock of the Company at an exercise price of
$0.25 per share.
On April 5, 2000, pursuant to its Stock Option Plan, the Company granted
options to a director and an employee to acquire 350,000 shares of common
stock of the Company at an exercise price of $1.00 per share.
On June 15, 2000, pursuant to its Stock Option Plan, the Company granted
options to a director and employees to acquire 425,000 shares of common
stock of the Company at an exercise price of $0.4375 per share.
On July 27, 2000, pursuant to its Stock Option Plan, the Company granted
options to employees to acquire 120,000 shares of common stock of the
Company at an exercise price of $0.21 per share.
The Company's stock Option Plan has reserved 1,500,000 common shares of its
unissued share capital for officers, employees and consultants of the
Company. To date, 895,000 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.
9
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
(Unaudited)
JULY 31, 2000
================================================================================
10. STOCK-BASED COMPENSATION (cont'd.....)
The exercise price of options granted under the plan will be as follows:
i) not less than the fair market value per common share at the date
of grant.
ii) not less than 110% of the fair market value per common share at
the date of grant for options granted to shareholders owning
greater than 10% of the Company.
Options granted under the plan will expire the earlier of:
i) ten years from the date of grant.
ii) five years from the date of grant for options granted to
shareholders owning greater than 10% of the Company.
iii) the termination of the officer, employee or consultants upon
cause.
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.
Following is a summary of stock option activity:
==========================================================================
Weighted
Average
Number Exercise
Of Shares Price
--------------------------------------------------------------------------
Outstanding, February 4, 1999 - $ -
Granted 2,000,000 0.17
-----------
Outstanding, January 31, 2000 2,000,000 0.17
Granted 895,000 0.63
-----------
Outstanding, July 31, 2000 2,895,000 0.31
==========================================================================
The weighted average fair value of options granted to directors and
employees during the period ended July 31, 2000 was $0.74 per share.
Following is a summary of the status of options outstanding at July 31,
2000:
<TABLE>
=================================================================================================
Outstanding Options Exercisable Options
-------------------------------------------------------- ----------------------------------
Weighed Average Weighted Average Weighed Average
Remaining Exercise Exercise
Number Contractual Life Price Number Price
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2,000,000 4.79 years $ 0.17 2,000,000 $ 0.17
350,000 4.65 years 1.00 87,500 1.00
425,000 9.8 years 0.4375 106,250 0.4375
120,000 10.0 years 0.21 30,000 0.21
=================================================================================================
</TABLE>
10
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
(Unaudited)
JULY 31, 2000
================================================================================
10. STOCK-BASED COMPENSATION (cont'd.....)
Compensation
The Company applies Accounting Principles Board Opinion No. 25 in
accounting for its stock option plan which follows the intrinsic value
based method for accounting for compensation resulting from the granting of
options. There was no compensation cost incurred based on options granted.
Had compensation cost been recognized on the basis of fair value pursuant
to Statement of Financial Accounting Standards No. 123, net loss and loss
per share would have been adjusted as follows:
==========================================================================
Period From
Six Month February 4,
Period Ended 1999 to
July 31, July 31,
2000 1999
-------------------------------------------------------------------------
Net loss
As reported $ (268,659) $ (68,334)
============= =============
Pro forma $ (293,423) $ (68,334)
============= =============
Basic and diluted loss per share
As reported $ (0.03) $ (0.01)
============= =============
Pro forma $ (0.03) $ (0.01)
==========================================================================
The fair value of each option granted is estimated using the Black Scholes
option pricing model. The assumptions used in calculating fair value are as
follows:
=========================================================================
2000 1999
-------------------------------------------------------------------------
Risk-free interest rate 6.58% -
Expected life of the options 3 years -
Expected volatility 0.864% -
Expected dividend yield 0.0% -
=========================================================================
11
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
(Unaudited)
JULY 31, 2000
================================================================================
11. RELATED PARTY TRANSACTIONS
During the period ended July 31, 2000, the Company entered into the
following transactions with related parties:
a) The Company paid consulting fees of $39,000 (July 31, 1999 - $15,000)
to the president, $25,000 (July 31, 1999 - $Nil) to a director of the
Company and $18,000 (July 31, 1999 - $6,000) to a former director of
the Company.
b) The Company paid $Nil (July 31, 1999 - $2,800) in management fees to
the president of the Company.
Included in accounts payable is an amount of $Nil (January 31, 2000 -
$18,000) due to a director of the Company.
12. COMMITMENTS
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.
On April 7, 2000, the Company terminated one of the Consulting
Agreements, described above, with a director of the Company. The
agreement called for consulting fees totalling $2,000 per month to be
paid.
b) The Company has stock option plans as disclosed in Note 10.
c) The Company is committed to future minimum lease payments for
operating leases for premises and office equipment of:
Period ended January 31, 2001 $ 10,183
Year ended January 31, 2002 1,485
--------------
$ 11,668
13. SUPPLEMENTAL DISCLOSURE FOR NON-CASH OPERATING, FINANCING AND INVESTING
ACTIVITIES
There were no significant non-cash transactions for the period ended July
31, 2000.
The significant non-cash transaction for the period ended July 31, 1999
consisted of the Company issuing 5,500,000 common shares in the amount of
$5,500 in exchange for a stock subscription receivable.
12
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
(Unaudited)
JULY 31, 2000
================================================================================
14. INCOME TAXES
The Company's total deferred tax asset is as follows:
<TABLE>
========================================================================================
July 31, January 31,
2000 2000
----------------------------------------------------------------------------------------
<S> <C> <C>
Tax benefits of net operating loss carryforward $ 204,820 $ 101,586
Valuation allowance (204,820) (101,586)
------------- ------------
$ - $ -
========================================================================================
</TABLE>
The Company has a net operating loss carryforward of approximately
$539,000. The valuation allowance increased from $101,586 to $204,820 for
the period ended July 31, 2000 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, 2007 and 2008 fiscal years.
15. SUBSEQUENT EVENT
Subsequent to July 31, 2000, options to purchase 400,000 shares of common
stock at $0.10 per share and 22,500 shares of common stock at $0.25 per
share were exercised. Also, options to purchase 377,500 shares of common
stock at $0.25 per share were terminated.
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Except for disclosures that report the Company's historical results, the
statements set forth in this section contain forward-looking statements. Words
or phrases "will likely result", "are expected to", "will continue", "is
anticipated", "estimate", "project or projected", or similar expressions are
intended to identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 (the Reform Act).
Actual results could differ materially form those projected in forward-looking
statements. Additional information and factors that could cause actual results
to differ materially from those in the forward-looking statements are set forth
in this Form 10-QSB, and in the section entitled "Risk Factors" in the Company's
Annual Report on Form 10-KSB on file with the Securities and Exchange
Commission. The Company desires to take advantage of certain provisions in the
Private Securities Litigation Reform Act of 1995, which provide a safe harbor
for forward-looking statements made by or on behalf of the Company. The Company
hereby cautions stockholders, prospective investors in the Company, and other
readers to not place undue reliance on these forward-looking statements, which
can only address known events as of the date of this report.
General Overview
Kidstoysplus.com, Inc. (the "Company," "we," "our" or "us"), was organized and
incorporated under the laws of the State of Nevada on February 4, 1999. We
operate a retail website on the Internet specializing in marketing children's
products, including 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 website.
The following discussion and analysis explains our results of operations for the
three month fiscal quarter commencing May 1, 2000 and ended July 31, 2000 and
our financial condition. You should review our discussion and analysis of
financial condition in conjunction with our financial statements and the related
notes, as well as statements detailed in the Company's Securities and Exchange
Commission filings.
Results of Operations
Fiscal Quarter Ended July 31, 2000 Compared to Fiscal Quarter Ended July 31,
1999
Revenues. We officially launched our website for online sales on June 21, 2000.
Prior to that time we had no revenues from operations. As of June 30, 2000, we
had approximately 400 to 425 items in stock and posted for sale on our website.
We anticipate that we will increase our inventory to approximately 900 to 1,200
items by the middle of our third fiscal quarter that ends October 31, 2000.
During our fiscal quarter ending July 31, 2000, we generated revenues of $1,709
from our operations. This revenue was generated between June 21, 2000 and July
31, 2000. We had interest income in the amount of $5,077, compared to $1,951 in
1999.
On July 7, 2000, we announced our plans to implement a mailorder strategy and to
create a product catalog to be available for distribution in September 2000. We
intend to distribute our product catalog to persons who request our catalog on
our website.
Expenses. During our fiscal quarter ended July 31, 2000, we incurred expenses in
the aggregate of $155,631, compared to $53,679 during the same period in 1999.
Our expenses during the fiscal quarter ended July 31, 2000 related primarily to:
(i) developing our website technologies, (ii) establishing our warehouse and
service center in Courtenay, British Columbia, Canada, (iii) hiring staff, (iv)
purchasing our opening inventory, (v) design and layout of our fall toy catalog,
(vi) increased expenditures on website positioning programming, (vii) consulting
fees for corporate communications and financial services, and (viii) corporate
legal, accounting and shareholder communication costs related to the Company's
annual general
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shareholder meeting of June 23, 2000. During the fiscal quarter ended July 31,
1999, expenses were related primarily to consulting fees, professional fees and
office expenses related to developing our website and general corporate and
financing activities. During the fiscal quarter ended July 31, 2000, we paid
consulting fees in the amount of $57,404, which included fees paid to: (i)
Chandra Wright of Netwirx Holdings, our website positioning firm, (ii) Terry
Komm our design and layout consultant for our new product catalog, (iii) Axel
Miedbrodt, our Operations Manager, (iv) Ian Martinovsky, our corporate
communications consultant, (v) fees paid to our data entry clerk and three
programmers, (v) fees paid to Albert R. Timcke, our President, (vi) fees paid to
Gerry Williams, an business consultant, and (vii) fees paid to FJR Resources for
corporate communications. We paid legal and accounting fees of $19,787 during
our second fiscal quarter ending July 31, 2000, which expenses were generally
directly related to the preparation of our proxy filing with the Securities and
Exchange Commission and in preparation and publication of proxies for the annual
general meeting of our shareholders held in Seattle, Washington on July 23,
2000. We incurred other expenses including: travel and automobile expenses of
$4,263, telephone and utility expenses of $6,578, rent and security expenses of
$5,602, investor relations expenses of $16,237, entertainment and promotion
expenses of $2,102, office and miscellaneous expenses of $34,563, equipment
rental expenses of $503, transfer agent and filing fees of $934 and marketing
and advertising expenses of $3,506.
Several of the expenses incurred in the fiscal quarter ended July 31, 2000, were
non-reoccurring expenses on a quarterly basis, including expenses related to the
annual general meeting and related shareholder communications and mailings. We
anticipate, however, that our operating and administrative expenses will
increase during the third quarter of our fiscal year 2000 as we increase our
inventory, increase our advertising, hire additional personnel for our
operations in connection with the holiday retail surge and distribution of our
product catalogs.
Net Loss for fiscal quarter. We had a loss of $155,631 for the fiscal quarter
ended July 31, 2000, compared to $53,679 for the same period in 1999.
Loss per Share for fiscal quarter: We experienced a loss per share of $0.01 for
the fiscal quarter ended July 31, 2000, compared to $0.01 for the same period in
1999.
Six Months Ended July 31, 2000, Compared to Period from Inception (February 4,
1999) to July 31, 1999
We were organized and incorporated on February 4, 1999, and thus we were not in
operations during the entire corresponding period in 1999. Our cost during the
first five months of operation in 1999 reflected start-up costs associated with
starting our business, financing activities, and costs relating to design and
development of our website. Our loss for the period from February 4, 1999 to
July 31, 1999 was $70,840.
Revenues. We officially launched our website for online sales on June 21, 2000.
During our six month fiscal period ending July 31, 2000, we generated revenues
of $1,709 from our operations. This revenue was generated between June 21, 2000
and July 31, 2000, after the official launch of our web site. We had interest
income in the amount of $7,184 during the six month fiscal period ending July
31, 2000, compared to $2,506 in interest income for the period from our
inception on February 4, 1999 to July 31, 1999. We had no operations or revenues
from operations during the period from our inception on February 4, 1999 to July
31, 1999.
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Expenses. During our six month fiscal period ended July 31, 2000, we incurred
total expenses of $277,552 related primarily to: (i) developing our website
technologies, (ii) establishing our warehouse and service center in Courtenay,
British Columbia, Canada, (iii) hiring staff, (iv) purchasing our opening
inventory, (v) design and layout of our fall toy catalog, (vi) increased
expenditures on website positioning programming, (vii) consulting fees for
corporate communications and financial services, and (viii) corporate legal,
accounting and shareholder communication costs related to the Company's annual
general shareholder meeting of June 23, 2000. During the our six month fiscal
period July 31, 2000, we paid consulting fees in the amount of $127,343, which
included fees paid to: (i) Chandra Wright of Netwirx Holdings, our website
positioning firm, (ii) Terry Komm our design and layout consultant for our new
product catalog, (iii) Axel Miedbrodt, our Operations Manager, (iv) Ian
Martinovsky, our corporate communications consultant, (v) fees paid to our data
entry clerk and three programmers, (v) fees paid to Albert R. Timcke, our
President, (vi) fees paid to Gerry Williams, an business consultant, and (vii)
fees paid to FJR Resources for corporate communications. We paid legal and
accounting fees of $24,091 during our second fiscal quarter ending July 31,
2000, which expenses were generally directly related to the preparation of our
proxy filing with the Securities and Exchange Commission and in preparation and
publication of proxies for the annual general meeting of our shareholders held
in Seattle, Washington on July 23, 2000. We incurred other expenses including:
travel expenses of $11,918, telephone expenses of $10,614, rent expenses of
$11,643, investor relations expenses of $24,987, entertainment and promotion
expenses of $6,140, office and administration expenses of $48,441 and marketing
and advertising expenses of $4,636. During the period from our inception on
February 4, 1999 to July 31, 1999, we had expenses of $70,840 primarily related
to consulting fees, professional fees and office and miscellaneous expenses for
our corporate formation, financing activities and web site development
activities.
Several of the expenses incurred in our six month fiscal period ended July 31,
2000 were non-reoccurring expenses, including expenses related to the annual
general meeting and related shareholder communications and mailings. We
anticipate, however, that our operating and administrative expenses will
increase during the rest of our fiscal year 2000 as we increase our inventory,
increase our advertising, hire additional personnel for our operations in
connection with the holiday retail surge, and distribute our product catalogs.
Net Loss for the Six Month Period Ended July 31, 2000: We had a loss of $277,552
for the six-month period ended July 31, 2000. Our loss per share for the
six-month period ending July 31, 2000, was $0.03 per share.
Plan of Operation
During our fiscal quarter ending July 31, 2000, we experienced a significant
growth in cash dispersments. We began to purchase opening inventories at an
accelerated rate, increased spending on web site positioning programming,
internal website development programming, design and layout expenses for our
fall product catalog and in area's of financial consulting and corporate
communications services. These areas of expenditures will continue to grow into
our third fiscal quarter. An additional area of expenditure will be in the area
of advertising. We plan to target select printed media forms to advertise
Kidstoysplus.com for the upcoming holiday season.
We intend to focus on recruiting and training additional qualified operational
and sales personnel; intensifying promotional efforts for the Kidstoysplus.com
Website and brand name; building market awareness and attracting customers to
the Kidstoysplus.com Website; refining our distribution and fulfillment
operations strategy; actively marketing merchandise through our Kidstoysplus.com
Website; expanding the product line and mix of products available on the
Kidstoysplus.com Website; developing strategic relationships with additional
fulfillment vendors; expanding the content on the Kidstoysplus.com Website to
appeal to our target markets; anddeveloping functional cross marketing programs
and marketing information systems for our client base.
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Capital Requirements
We anticipate our operating budget to implement our business plan and to meet
our financial obligations during the remainder of our fiscal year ending January
31, 2001, and through to April 30, 2001, will be as follows:
<TABLE>
PERIOD
---------------------------------------------------------------------------------------------
Fiscal Quarter Ended
---------------------------------------------------------------------------------------------
DESCRIPTION October 31, January 31, April 30,
2000 2001 2001
--------------------------------------------------------- -------------------- --------------
<S> <C> <C> <C>
Accounting and legal expenses. $6,000 $6,000 $10,000
Office and administration $16,000 $16,000 $16,000
Website enhancements and posting $6,000 $6,000 $6,000
Web maintenance and software upgrades Nil Nil Nil
Warehouse and office facilities $5,000 $5,000 $5,000
Company marketing and mailing expense $100,000 $10,000 $20,000
Selective product inventory for $50,000 $10,000 $20,000
Beginning Inv. 2000
Working capital $20,000 $20,000 $20,000
---------- ---------- ----------
Totals $203,000 $73,000 $97,000
</TABLE>
Liquidity and Capital Resources
As of July 31, 2000, we had working capital on hand in the amount of $346,798.
We had cash or cash equivalents of $247,721 on hand. We had prepaid expenses and
deposits of $8,502. We had receivables due from related parties in the amount of
$46,073, including a receivable in the amount of $29,189 from Albert Timcke, our
President, and a receivable in the amount of $16,884 from Axel Miedbrodt, our
Vice President. We had accounts payable and accrued liabilities in the amount of
$5,171.
For the fiscal quarter ending July 31, 2000, we had total assets of $379, 505 as
compared to total assets of $29,712 for the fiscal year ended January 31, 2000.
We anticipate that our working capital is sufficient to satisfy our cash
requirements through January 31, 2001. We anticipate we will be required to
raise financing towards the end of 2000 to allow the Company to expand
operations early in 2001. We anticipate that we will be required to raise at
least $250,000 to $500,000 during fiscal year 2000 to meet our anticipated cash
requirements related to the possible expansion to Company operations selling
merchandise, including acquiring inventory, marketing expenses, hiring
additional personnel and refining our website and distribution center
technologies into 2001.
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 in the beginning stages of operating a online retail website. We are in
the process of finalizing our product lines and making arrangements to purchase
inventory. We are also exploring the possibility of obtaining a credit facility
and/or manufacturer/distributor financing to acquire inventory.
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We cannot assure you that we will be able to obtain financing, a line of credit
or manufacturer/distributor financing in a timely manner or on acceptable terms,
if at all. We cannot assure you that we will successful launch our website or
that we will ever be able to successfully compete against estiablished
competitors.
Product Research and Development
Major design and production changes on the website are nearing completion. Our
programmers will carry out all the required programming for the rest of the
fiscal year 2000 ending January 31, 2001. Some minor programming modifications
will be made to several categories on the website. Continous changes will occur
to product descriptions, pricing and the addition of new products offered for
sale on our website will occur throughout the current fiscal year ending January
31, 2001.
We also anticipate that we will spend approximately $5,000 to $10,000 to
complete development of our customer service and support systems, inventory
control systems, distribution and logistical facilitation systems, accounting
systems and other internal control systems.
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."
Our Distribution Center and Customer Service Center
We leased a distribution and warehouse and a corporate office/customer service
facility in Courtenay on Vancouver Island, British Columbia. Our distribution
facility is approximately 7,200 square feet, including office, warehouse and
delivery space for our distribution operations. Our corporate office/customer
service facility is approximately 3,200 square feet. The rent for our
distribution facility is approximately $1,100 per month and the rent for our
corporate office/customer service facility is approximately $700 per month. We
anticipate that we will spend approximately $30,000 during the next twelve
months improving our distribution and customer service facilities.
Personnel
As of July 31, 2000, we had 9 full-time personnel. Albert R. Timcke, a director
and our President and corporate secretary, assists us with strategic corporate
planning, financing activities and product research and development. Axel
Miedbrodt is our Vice President of Operations and has been establishing our
distribution and customer service facilities. Ian Martinovsky and FJR Resources
assist us with our corporate communications and marketing. Marcow Miedbrodt,
Parminder Kaila and Booker Bennett assist us as website programmers. Caroline
Miskenack aids us with respect to inspection and data entry and Gerald W.
Williams, assists us with general administrative management and marketing
functions.
As of July 31, 2000, we also have two part-time consultants, Chandra Wright of
Netwirx Holdings, which is a website positioning firm, Terry Komm of Ewire
Design, which is a design and layout consultant firm that has been assisting us
in developing our product catalog for printing in September 2000. In the near
future, we may engage additional consultants to assist us with the development
of our website or technology or in the licensing of software and information
systems, as well as with the implementation of our business plan.
For the fiscal year 2000, we anticipate that we will employ additional staff to
provide 1-800 consumer support services and to staff our distribution warehouse
and to provide assist us with administration functions as the Company expands.
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Our success will depend in large part on our ability to attract and retain
skilled and experienced employees. We do not anticipate any of our employees
will be covered by a collective bargaining agreement. We do not maintain key man
life insurance on any of our directors or executive officers.
Option Grants to Directors and Employees
During the fiscal quarter ended July 31, 2000, we granted options exercisable to
acquire in aggregate a total of 545,000 of our common shares. We granted options
to two directors and one employee on July 15, 2010 and we granted options to
three different employees on July 27, 2010. Our stock option grants are more
fully described in note 9 and note 10 of the accompanying financial statements.
Inflation
Our results of operations have not been affected by inflation and management
does not expect inflation to have a significant effect on our operations in the
future.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
As reported in Part I of our 10-QSB for the fiscal quarter ended April 30,
2000, we sold securities that were not registered under the Securities Act of
1933, as amended, for the six month period ended July 31, 2000 as follows:
We issued 590,400 units at $1.25 per unit in a private placement for gross
proceeds of $738,000 during the fiscal quarter ended April 30, 2000. Each Unit
consisted of one common stock and a nontransferable stock purchase warrant
exercisable to acquire one additional share of our common stock. No fees or
commissions were paid to any party in connection with the sale of such Units.
The Units were issued outside the United States pursuant to an exemption
from registration under Regulation S of the Securities Act of 1933, as amended.
The Units were purchased by non U.S. persons located outside the United States.
None of the warrants issued pursuant to the private placement have been
exercised. While all sales of securities by us have a potentially dilutive
effect on existing shareholders, the Units offered by us pursuant to Regulation
S had no limiting, modifying, or qualifying effect on our existing securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
On June 23, 2000, we held our general annual meeting of shareholders in
Seattle, Washington.
At our annual general meeting, 6,091,042 of our 10,558,484 shares
outstanding were present either in person or by proxy. Each share present voted
for the appointment of our auditors, Davidson & Company, chartered accountants,
for the fiscal year 2001. Additionally, each share present voted for the
election of our directors.
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Our Board of Directors consists of three members. Our directors are elected
for a one year term. At our annual general meeting of June 23, 2000, the
following persons were nominated and elected to serve as our directors by the
vote of all shares present at our annual general meeting.
* Timothy J. Anderson
* Mark McFarland
* Albert R. Timcke
Each nominee for the office of director was elected by the vote of the
6,091,042 shares present at the annual general shareholders meeting.
ITEM 5. OTHER INFORMATION
We filed a registration statement on Form S-8 during the fiscal quarter
ended July 31, 2000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description
------ -----------
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
KIDSTOYSPLUS.COM, INC.
----------------------
(Registrant)
Date: September 14, 2000
/s/ Albert R. Timcke
----------------------------------
Albert R. Timcke, Chairman of the
Board of Directors,
President and Secretary
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EXHIBIT INDEX
Exhibit
Number Description
------ -----------
27.1 Financial Data Schedule
