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
April 30, 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 Barrard 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 April 30, 2000:
10,558,484
<PAGE>
KIDSTOYSPLUS.COM, INC.
For the Quarter Ended
April 30, 2000
INDEX TO FORM 10-QSB
<TABLE>
Page
----
<S> <C> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Balance Sheets:
- January 31, 2000 and April 30, 2000..........................................................1
Statements of Operations:
- For the Three Months Ended April 30, 2000....................................................2
Statement of Changes in Stockholders' Equity
- For the Period February 4, 1999 to April 30, 2000............................................3
Statements of Cash Flow:
- For the Three Months Ended April 30, 2000...................................................4
Notes to Financial Statements...........................................................................5
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS...........................................................12
PART II - OTHER INFORMATION............................................................................16
ITEM 1 LEGAL PROCEEDINGS..............................................................................16
ITEM 2 CHANGES IN SECURITIES..........................................................................16
ITEM 3 DEFAULTS UPON SENIOR SECURITIES................................................................16
ITEM 4 SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS..............................................16
ITEM 5 OTHER INFORMATION..............................................................................16
ITEM 6 EXHIBITS AND REPORTS ON FROM 8-K...............................................................16
</TABLE>
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
BALANCE SHEETS
(Expressed in United States Dollars)
(Unaudited - Prepared by Management)
================================================================================
<TABLE>
April 30, January 31,
2000 2000
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current
Cash and cash equivalents $ 489,590 $ 11,372
Accounts receivable 4,484 -
Inventory 6,434 -
Prepaid expenses and deposits 8,163 8,017
------------- ------------
Total current assets 508,671 19,389
Capital assets (Note 5) 27,913 10,323
------------- ------------
Total assets $ 536,584 $ 29,712
=====================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities $ 13,405 $ 56,419
------------- ------------
Total current liabilities 13,405 56,419
------------- ------------
Stockholders' equity
Capital stock (Note 6)
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 (390,263) (270,449)
------------- ------------
Total stockholders' equity 523,179 (26,707)
------------- ------------
Total liabilities and stockholders' equity $ 536,584 $ 29,712
=====================================================================================================================
</TABLE>
History and organization of the Company (Note 1)
Commitments (Note 11)
On behalf of the Board:
Director Director
----------------------------- --------------------------------
The accompanying notes are an integral part of these financial statements.
1
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Expressed in United States Dollars)
(Unaudited - Prepared by Management)
================================================================================
<TABLE>
Cumulative
Amounts
From Period From
February 4, Three Month February 4,
1999 Period Ended 1999 to
to April 30, April 30, April 30,
2000 2000 1999
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME $ 6,496 $ 2,107 $ 555
------------- ----------- -----------
EXPENSES
Amortization 2,016 1,188 -
Consulting fees 186,792 69,939 6,600
Entertainment and promotion 10,272 4,038 -
Equipment rental 3,537 524 -
Investor relations 11,430 8,750 -
Legal and accounting 48,960 4,304 3,924
Management fees 2,800 - 2,800
Marketing and advertising 1,130 1,130 -
Office and miscellaneous 42,516 13,878 3,070
Rent and security 15,299 6,041 -
Telephone and utilities 13,337 4,036 767
Transfer agent and filing fees 6,146 438 -
Travel and automobile 22,497 7,655 -
Website design and maintenance 30,027 - -
------------- ----------- -----------
396,759 121,921 17,161
------------- ----------- -----------
Loss for the period $ (390,263) $ (119,814) $ (16,606)
=============================================================================================================================
Basic and diluted loss per share $ (0.01) $ (0.01)
=============================================================================================================================
Weighted average number of shares of common stock outstanding 10,118,964 4,767,001
=============================================================================================================================
</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 - Prepared by Management)
================================================================================
<TABLE>
Common Shares Additional Stock During the Total
------------------------------- Paid-in Subscriptions Development Shareholders'
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 - - - - (119,814) (119,814)
------------- ------------ ------------ ------------ ------------ ------------
Balance, April 30,
2000 10,558,484 $ 10,558 $ 902,884 $ - $ (390,263) $ 523,179
==============================================================================================================================
</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 - Prepared by Management)
================================================================================
<TABLE>
Cumulative
Amounts
From Period From
February 4, Three Month February 4,
1999 Period Ended 1999 to
to April 30, April 30, April 30,
2000 2000 1999
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the period $ (390,263) $ (119,814) $ (16,606)
Item not affecting cash:
Amortization 2,016 1,188 -
Changes in other operating assets and liabilities:
Increase in accounts receivable (4,484) (4,484) -
Increase in inventory (6,434) (6,434) -
Increase in prepaid expenses and deposits (8,163) (146) (8,312)
Increase in due to related party - - 1,100
Increase (decrease) in accounts payable and accrued liabilities 13,405 (43,014) 2,000
------------- ----------- -----------
Net cash used in operating activities (393,923) (172,704) (21,818)
------------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital assets acquired (29,929) (18,778) -
------------- ----------- -----------
Net cash used in investing activities (29,929) (18,778) -
------------- ----------- -----------
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 489,590 478,218 -
Cash and cash equivalents, beginning of period - 11,372 -
------------- ----------- -----------
Cash and cash equivalents, end of period $ 489,590 $ 489,590 $ 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 12)
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 - Prepared by Management)
APRIL 30, 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 April 30, 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>
================================================================================================
April 30, January 31,
2000 2000
-------------------------------------------------------------------------------- ---------------
<S> <C> <C>
Deficit accumulated during the development stage $ (390,263) $ (270,449)
Working capital (deficiency) 495,266 (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 - Prepared by Management)
APRIL 30, 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
April 30, 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 - Prepared by Management)
APRIL 30, 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.
Reporting on costs of start-up activities
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. The Company has adopted SOP
98-5.
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 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 - Prepared by Management)
APRIL 30, 2000
================================================================================
5. CAPITAL ASSETS
<TABLE>
====================================================================================================================
Net Book Value
--------------- --------------
Accumulated April 30, January 31,
Cost Amortization 2000 2000
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Computer equipment $ 19,676 $ 1,173 $ 18,503 $ 4,058
Furniture and fixtures 9,429 828 8,601 6,265
Camera equipment 823 14 809 -
------------- ------------ ------------ ------------
$ 29,928 $ 2,015 $ 27,913 $ 10,323
====================================================================================================================
</TABLE>
6. 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 share of common stock and one non-transferable share
purchase warrant. Each warrant entitles the holder to purchase one 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.
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 as at April 30, 2000, are 1,980,000 common
shares held in escrow pursuant to a pooling agreement dated April 6, 1999.
Under the terms of the agreement, 330,000 shares of common stock are being
released from escrow monthly.
7. WARRANTS
As at April 30, 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.
8
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
(Unaudited - Prepared by Management)
APRIL 30, 2000
================================================================================
8. STOCK OPTIONS
As at April 30, 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
===========================================================================
9. 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.
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, 350,000 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.
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.
9
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
(Unaudited - Prepared by Management)
APRIL 30, 2000
================================================================================
9. STOCK-BASED COMPENSATION (cont'd ...)
Following is a summary of stock option activity:
<TABLE>
====================================================================================================================
Weighted
Average
Number Exercise
Of Shares Price
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding, February 4, 1999 - $ -
Granted 2,000,000 0.17
------------ ------------
Outstanding, January 31, 2000 2,000,000 0.17
Granted 350,000 1.00
------------ ------------
Outstanding, April 30, 2000 2,350,000 $ 0.30
============ ============
Weighted average fair value of options granted during the period $ Nil
====================================================================================================================
</TABLE>
The weighted average fair value of options granted to directors and
employees during the period ended April 30, 2000 was $1.12 per share.
Following is a summary of the status of options outstanding at April 30,
2000:
<TABLE>
====================================================================================================================
Outstanding Options Exercisable Options
------------------------------------------------------------------ ----------------------------------------
Weighed Average
Remaining Exercise Exercise
Number Contractual Life Price Number Price
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2,000,000 5.0 years $ 0.17 2,000,000 $ 0.17
350,000 4.9 years 1.00 350,000 1.00
====================================================================================================================
</TABLE>
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. 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:
10
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
(Unaudited - Prepared by Management)
APRIL 30, 2000
================================================================================
9. STOCK-BASED COMPENSATION (cont'd ...)
<TABLE>
Cumulative
Amounts
From Period From
February 4, Three Month February 4,
1999 Period Ended 1999 to
to April 30, April 30, April 30,
2000 2000 1999
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net loss
As reported $ (390,263) $ (119,814) $ (16,606)
Pro forma - (130,441) (16,606)
Basic and diluted loss per share
As reported $ (0.01) $ (0.01)
Pro forma $ (0.01) $ (0.01)
</TABLE>
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:
The assumptions used in calculating fair value are as follows:
==========================================================================
2000 1999
--------------------------------------------------------------------------
Risk-free interest rate 6.58% -
Expected life of options 2 years -
Expected volatility 0.864% -
Expected dividend yield 0.0% -
==========================================================================
10. RELATED PARTY TRANSACTIONS
During the period ended April 30, 2000, the Company entered into the
following transactions with related parties:
a) The Company paid consulting fees of $20,000 to the president, $10,000
to a director of the Company and $18,000 to a former director of the
Company.
b) The Company paid $Nil (April 30, 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.
11
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
(Unaudited - Prepared by Management)
APRIL 30, 2000
================================================================================
11. 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 8.
c) The Company is committed to future minimum lease payments for
operating leases for premises and office equipment of:
Year ended January 31, 2001 $ 20,365
Year ended January 31, 2002 1,485
--------------
$ 21,850
12. SUPPLEMENTAL DISCLOSURE FOR NON-CASH OPERATING, FINANCING AND INVESTING
ACTIVITIES
There were no significant non-cash transactions for the period ended April
30, 2000.
The significant non-cash transaction 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.
13. INCOME TAXES
The Company's total deferred tax asset is as follows:
<TABLE>
==============================================================================================
April 30, January 31,
2000 2000
----------------------------------------------------------------------------------------------
<S> <C> <C>
Tax benefits of net operating loss carryforward $ 148,300 $ 101,586
Valuation allowance (148,300) (101,586)
------------- ------------
$ - $ -
==============================================================================================
</TABLE>
The Company has a net operating loss carryforward of approximately
$390,263. The valuation allowance increased from $101,586 to $148,300 for
the period ended April 30, 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 2007 and 2008 fiscal years.
12
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Except for disclosures that report the Company's historical results, the
statements set forth in this section contain forward-looking statements. Words
or phrases "will likely result", "are expected to", "will continue", "is
anticipated", "estimate", "project or projected", or similar expressions are
intended to identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 (the Reform Act).
Actual results could differ materially form those projected in forward-looking
statements. Additional information and factors that could cause actual results
to differ materially from those in the forward-looking statements are set forth
in this Form 10-QSB, and in the section entitled "Risk Factors" in the Company's
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" or "us"), was organized and
incorporated under the laws of the State of Nevada on February 4, 1999. We
developed and 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 from February 1, 2000 to April 30, 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 April 30, 2000
Revenues. We unofficially launched our website during the quarter ended April
30, 2000. As of April 30, 2000, we had approximately 50 to 70 items in stock and
posted for sale on our website. We anticipate we will officially launch our
website on on before June 30, 2000. We anticipate that we will increase our
inventory to approximately 900 to 1,200 items when we officially launch our
site. During our fiscal quarter ending April 30, 2000, we did not generate any
significant revenues from our operations. We had interest income in the amount
of $2,107.
Expenses. During our fiscal quarter ended April 30, 2000, we incurred total
expenses of $121,921 related primarily to: (i) developing our website
technologies, (ii) establishing our warehouse and service center in Courtenay,
British Columbia, Canada, (iii) hiring staff and (iv) purchasing our opening
inventory. During the fiscal quarter, we paid consulting fees in the amount of
$69,939, which included fees paid to: (i) Reticular Consulting, our website
developer, (ii) Axel Miedbrodt our Operations Manager, (iii) Ian Martinovsky,
our corporate communications consultant, (iv) fees paid to a data entry clerk
and two internal programmers, (v) fees paid to Albert R. Timcke, our President,
(vi) fees paid to Gerry Williams (an external consultant) and (vii) fees paid to
Mr. Brian Doutaz, a former director, who resigned April 7, 2000. We paid legal
and accounting fees of $4,304 during the fiscal quarter ending April 30, 2000
related to the
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preparation of our filings with the Securities and Exchange Commission and other
legal and accounting matters. We incurred other expenses including: travel
expenses of $7,655, telephone expenses of $4,036, rent expenses of $6,041,
investor relations expenses of $8,750, entertainment and promotion expenses of
$4,038 and office and miscellaneous expenses of $13,878. During the quarter
ended April 30, 2000, we paid Mr. Brian Doutaz's office charges for 1999.
Several of the expenses related to establishing our warehouse and service
facilities and filing fees are non-reoccurring expenses. We anticipate, however,
that our operating and administrative expenses will increase during the second
quarter and third quarter of our fiscal year 2000 as we officially launch our
website and hire additional personnel for our operations.
Net Loss. We had a loss of $119,814 for the fiscal period ended April 30, 2000.
Plan of Operation
During our fiscal quarter ended April 30, 2000, we experienced delay in the
development of our website technologies and experienced a delay in our attempt
to officially launch the website. We successfully closed a portion of the
private placement that the Company planned in April of 2000, for gross proceeds
of $ 738,000.
We entered into arrangements to participate in the affiliate programs of other
Internet toy retailers such as Amazon.com, eToys and eHobbies. We believe that
this will allow us to supplement our inventory and will allow us to commercially
launch our website to the public on or before June 30, 2000. The affiliate
programs of Amazon.com, eToys and eHobbies pay us a transaction fee based on the
purchases orginated from our website.
After the official launch of our website, we intend to focus on (i) recruiting
and (ii) training additional qualified operational and sales personnel; (iii)
intensifying promotional efforts for the Kidstoysplus.com Website and brand
name; (iv) building market awareness and attracting customers to the
Kidstoysplus.com website; (v) refining our distribution and fulfillment
operations strategy; (vi) actively marketing merchandise through our
Kidstoysplus.com website; (vii) expanding the product line and mix of products
available on the Kidstoysplus.com website; (viii) developing strategic
relationships with additional fulfillment vendors; (ix) expanding the content on
the Kidstoysplus.com website to appeal to our target markets; and (x) developing
functional cross marketing programs and marketing information systems for our
client base.
Capital Requirements
We anticipate 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, will be as follows:
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<TABLE>
PERIOD
Fiscal Quarter Ended
------------------- -------------------- ------------------
DESCRIPTION July 31, October 30, January 31,
2000 2000 2001
------------------- -------------------- ------------------
<S> <C> <C> <C>
Accounting and legal expenses. $5,000 $15,000 $10,000
Office and administration $20,000 $40,000 $20,000
Website design and posting $10,000 $20,000 $20,000
Web maintenance and software upgrades Nil Nil Nil
Warehouse and office facilities $2,000 $5,000 $5,000
Company marketing expense Nil $100,000 $20,000
Selective product inventory for $50,000 $100,000 $20,000
beginning Inv. 2000
Working capital $10,000 $20,000 $30,000
------------------- -------------------- ------------------
Totals $97,000 $300,000 $125,000
</TABLE>
Liquidity and Capital Resources
As of April 30, 2000, we had working capital on hand in the amount of $495,266.
We had cash or cash equivalents of $489,590 and prepaid expenses and deposits in
the amount of $8,163. We had accounts payable and accrued liabilities in the
amount of $13,405.
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 fall of 2000 to allow the Company to expand
operations early in 2001. We anticipate that we will be required to raise at
least $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.
We closed a private placement of $738,000 during the fiscal quarter ended April
30, 2000. The private placement consisted of a sale of our Units, each such Unit
consisting of common stock and a nontransferable stock purchase warrant
exercisable to acquire one share of our common stock. We are attempting to raise
additional capital by closing the total portion of Units available in this
private placement. We cannot assure 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 in the process of finalizing the design of our website and
completing the development of our warehouse and customer service facility. We
began testing our website in mid-November 1999 and anticipate that we will
commercially launch our website to the public beginning on or before June 30,
2000. Reticular Consulting and our internal company programmers are currently in
the process of refining our website and internal operating systems for our
anticipated launch. 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. If we are unable to obtain financing to purchase inventory, we intend
to launch our website and offer the products of other Internet retailers through
their affiliate programs. There is a substantial risk that such a strategy will
adversely affect our ability to build value in our "Kidstoysplus" brand name,
which may have an adverse affect on our business and our ability to compete
effectively. We cannot assure you that we will successful launch our website or
that we will ever be able to successfully compete against estiablished
competitors.
Product Research and Development
Reticular Consulting of Victoria, British Columbia along with company
programmers are developing our Kidstoysplus.com website. Under the terms of our
agreement with Reticular Consulting, we pay Reticular a hourly consulting fee.
We also anticipate that we will spend approximately $25,000 - $50,000 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.
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 cannot assure you that we will successfully complete development and testing
of the technologies related to our website or our internal systems on a timely
basis, if at all.
Our Distribution Center and Customer Service Center
We leased a distribution and warehouse and a corporate office/customer service
facility in Courtenay on Vancouver Island, British Columbia. Our distribution
facility is approximately 7,200 square feet, including office, warehouse and
delivery space for our distribution operations. Our corporate office/customer
service facility is approximately 3,200 square feet. The rent for our
distribution facility is approximately $1,100 per month and the rent for our
corporate office/customer service facility is approximately $700 per month. We
anticipate that we will spend approximately $60,000 during the next twelve
months improving our distribution and customer service facilities.
We also intend to acquire additional computer systems and to develop or license
system software to support our distribution and warehouse and customer service
facility. We anticipate that the cost of such equipment and systems will be
approximately $15,000 - $20,000 during the next twelve months.
Personnel
As of April 30, 2000, we had 7 full time personnel. Albert R. Timcke, a director
and our President, assist with strategic corporate planning, financing
activities and product research and development. Axel Miedbrodt is our Vice
President of Operations and has been establishing our distribution and customer
service facilities. Ian Martinovsky assists with our corporate communications
and marketing, Marcow Miedbrodt and Parminder Kaila as website programmers and
Caroline Miskenack as respection and data entry. Trish Reader of Reticular
Consulting is a consultant that is designing our website and assisting us with
developing our internal distribution and customer service systems. For the
fiscal quarter ended April 30, 2000, we also had two part-time consultants,
Brian C. Doutaz, a former director and Gerald W. Williams, who assist us with
general administrative management and marketing functions. On April 7, 2000, Mr.
Doutaz resigned as a director and officer of the Company and no longer has any
formal involvement with us. In the near future, we may engage additional
consultants to assist us with the development or licensing of software and
information systems and the implementation of our business plan.
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.
Inflation
Our results of operations have not been affected by inflation and management
does not expect inflation to have a significant effect on our operations in the
future.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FROM 8-K
None.
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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: June 13, 2000
/s/ Albert R. Timcke
------------------------------
Albert R. Timcke, Chairman of the
Board of Directors, President, Secretary
(principal executive officer and director,
principal accounting officer)
